1
EXHIBIT 1
1,200,000 UNITS, EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK,
ONE CLASS A WARRANT AND ONE CLASS B WARRANT
DYNAMIC INTERNATIONAL, LTD.
UNDERWRITING AGREEMENT
New York, New York
__________, 1997
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Dynamic International, Ltd., a Nevada corporation (the "Company")
confirms its agreement with ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc. ("▇▇▇▇▇▇▇▇▇" or the
"Underwriter") with respect to the sale by the Company and the purchase by the
Underwriter of an aggregate of 1,200,000 Units ("Units"), each consisting of one
share of Common Stock, par value $.001 per share, of the Company ("Common
Stock") and one Class A Redeemable Common Stock Purchase Warrant ("Class A
Warrants") and one Class B Redeemable Common Stock Purchase Warrant ("Class B
Warrants" and collectively with the Class A Warrants, the "Warrants"). The Class
A Warrants, upon exercise, entitles the holder thereof to purchase one share of
Common Stock during the eighteen months following the date hereof at a price of
$6.00 per share from the Company. The Class B Warrants, upon exercise, entitles
the holder thereof to purchase one share of Common Stock during the three years
following the date hereof at a price of $10.00 per share from the Company. The
Common Stock and Warrants are hereinafter collectively referred to as the
"Securities."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also sell to the Underwriter up to an aggregate of 180,000 Units
(the "Option
1
2
Securities") for the purpose of covering over-allotments, if any. The Company
also proposes to issue and sell to you warrants (the "Underwriter's Warrants")
pursuant to the Underwriter's Warrant Agreement (the "Underwriter's Warrant
Agreement") for the purchase of an additional 120,000 Units. The Common Stock,
Warrants and Common Stock underlying the Warrants issuable upon exercise of the
Underwriter's Warrants are hereinafter referred to as the "Underwriter's
Securities." The Securities, the Option Securities, the Underwriter's Warrants
and the Underwriter's Securities are more fully described in the Registration
Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter as of the date
hereof, and as of the Closing Date (hereinafter defined) and the Option Closing
Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (No. 333-____), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Securities, the Option Securities, the Underwriter's Warrants and the
Underwriter's Securities (collectively, hereinafter referred to as the
"Securities"), under the Securities Act of 1933, as amended (the "Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the rules and
regulations (the "Rules and Regulations") of the Commission under the Act. 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 in writing after
having been furnished with a copy thereof. Except as the context may otherwise
require, such registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein (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." For purposes hereof, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part of any thereof
and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the
2
3
Company's securities have been instituted or are pending or threatened. Each of
the Preliminary Prospectus, the Registration Statement and Prospectus at the
time of filing thereof conformed with the requirements of the Act and the Rules
and Regulations, and none of the Preliminary Prospectus, the Registration
Statement or Prospectus at the time of filing thereof contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriter by or on behalf of the
Underwriter expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date (as defined herein) and each
Option Closing Date (as defined herein), if any, and during such longer period
as the Prospectus may be required to be delivered in connection with sales by
the Underwriter or a dealer, the Registration Statement and the Prospectus will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and will conform to the requirements
of the Act and the Rules and Regulations; neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with information furnished
to the Company in writing by or on behalf of the Underwriter expressly for use
in the Preliminary Prospectus, Registration Statement or Prospectus or any
amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of
Nevada. Except as set forth in the Prospectus, the Company does not own an
interest in any corporation, partnership, trust, joint venture or other business
entity. The Company is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which its ownership or leasing of
any properties or the character of its operations require such qualification or
licensing. The Company has all requisite power and authority (corporate and
other), and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies, to own or lease its properties
and conduct its business as described in the Prospectus; the Company is and has
been doing business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits; and the Company has not
received any notice of proceedings relating to the revocation or modification of
any such authorization, approval, order, license, certificate, franchise, or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling
3
4
or finding, would materially and adversely affect the condition, financial or
otherwise, or the earnings, position, prospects, value, operation, properties,
business or results of operations of the Company. The disclosures in the
Registration Statement concerning the effects of federal, state, local, and
foreign laws, rules and regulations on the Company's business as currently
conducted and as contemplated are correct in all material respects and do not
omit to state a material fact necessary to make the statements contained therein
not misleading in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date based upon the assumptions set forth therein, and
the Company is not a party to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement, the Underwriter's
Warrant Agreement and as described in the Prospectus. The Securities and all
other securities issued or issuable by the Company conform or, when paid for and
issued, will conform, in all respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable and the holders thereof have no
rights of rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company. The Securities
are not and will not be subject to any preemptive or other similar rights of any
shareholder, have been duly authorized and, when paid for, issued and delivered
in accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and will conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities will be in due and proper form. Upon
the issuance and delivery pursuant to the terms hereof of the Securities to be
sold by the Company hereunder, the Underwriter will acquire good and marketable
title to such Securities free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction of any kind whatsoever.
(f) The financial statements of the Company together with the
related notes and schedules thereto, included in the Registration Statement,
each Preliminary Prospectus and the Prospectus fairly present the financial
position, income, changes in cash flow, changes in shareholders' equity and the
results of operations of the Company at the respective dates and for the
respective periods to which they apply and such financial statements have been
prepared in conformity with generally accepted
4
5
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved. There has been no adverse change or development
involving a material prospective change in the condition, financial or
otherwise, or in the earnings, position, prospects, value, operations,
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 and the
outstanding debt, the property, both tangible and intangible, and the businesses
of the Company conform in all respects to the descriptions thereof contained in
the Registration Statement and the Prospectus. Financial information set forth
in the Prospectus under the headings "Summary Financial Information," "Selected
Financial Data," "Capitalization," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," fairly present, on the basis
stated in the Prospectus, the information set forth therein, and have been
derived from or compiled on a basis consistent with that of the audited and
unaudited financial statements included in the Prospectus.
(g) The Company (i) has paid, accrued or otherwise reserved
for, all federal, state, local, and foreign taxes required to be paid,
including, but not limited to, withholding taxes and amounts payable under
Chapters 21 through 24 of the Internal Revenue Code of 1986 (the "Code"), and
has furnished all information returns it is required to furnish pursuant to the
Code, (ii) has established adequate reserves for such Taxes which are not due
and payable, and (iii) does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriter in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Underwriter of the
Securities from the Company and the purchase by the Underwriter of the
Underwriter's Warrants from the Company, (iii) the consummation by the Company
of any of its obligations under this Agreement, or (iv) resales of the
Securities in connection with the distribution contemplated hereby.
(i) The Company has, including, but not limited to, general
liability, product and property insurance, which insures the Company and its
employees against such losses and risks generally insured against by comparable
businesses. The Company (A) has not failed to give notice or present any
insurance claim with respect to any matter, including but not limited to the
Company's business, property or employees, under the insurance policy or surety
bond in a due and timely manner, (B) has no disputes or claims against any
underwriter of such insurance policies or surety bonds or has failed to pay any
premiums due and payable thereunder, or (C) has not failed to comply with all
conditions contained in such insurance policies and surety bonds. There are no
facts or circumstances under any such insurance policy or surety bond which
would relieve any insurer of its obligation to satisfy in full any valid claim
of the Company.
5
6
(j) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding, domestic or
foreign, pending or, to its knowledge, threatened against (or circumstances that
may give rise to the same), or involving the properties or business of, the
Company which (i) questions the validity of the capital stock of the Company,
this Agreement or the Underwriter's Warrant Agreement, or of any action taken or
to be taken by the Company pursuant to or in connection with this Agreement or
the Underwriter's Warrant Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
respects), or (iii) might materially and adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, shareholders'
equity, value, operations, properties, business or results of operations of the
Company.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, Option Securities,
Underwriter's Warrants, and the Underwriter's Securities, enter into this
Agreement and the Underwriter's Warrant Agreement and to consummate the
transactions provided for in such agreements; and this Agreement, and the
Underwriter's Warrant Agreement have each been duly and properly authorized,
executed and delivered by the Company. Each of this Agreement and the
Underwriter's Warrant Agreement constitutes a legal, valid and binding agreement
of the Company enforceable against the Company in accordance with its terms
subject to bankruptcy, insolvency, and creditor's rights and the application of
equitable principles in any action, legal or equitable, and none of the
Company's issue and sale of the Securities, Option Securities, Underwriter's
Warrants, and the Underwriter's Securities, execution or delivery of this
Agreement or the Underwriter's Warrant Agreement its performance hereunder and
thereunder, its consummation of the transactions contemplated herein and
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 breach or violation
of any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (i) the articles of
incorporation or bylaws of the Company, (ii) any license, contract, indenture,
mortgage, deed of trust, voting trust agreement, shareholders agreement, note,
loan or credit agreement or any other agreement or instrument to which the
Company is a party or by which it is or may be bound or to which its properties
or assets (tangible or intangible) is or may be subject, or any indebtedness, or
(iii) any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
6
7
(l) Except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court, regulatory
body, government agency or other body, domestic or foreign, is required for the
issuance of the Securities pursuant to the Prospectus and the Registration
Statement, the issuance of the Underwriter's Warrants, the performance of this
Agreement and the Underwriter'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, or the Underwriter's Warrants,
except such as have been or may be obtained under the Act or may be required
under state securities or Blue Sky laws in connection with the Underwriter'
purchase and distribution of the Securities, and the Underwriter's Warrants to
be sold by the Company hereunder.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which they may
be bound or to which its assets, properties or business 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, as the case may be, in accordance with 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.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated therein, the Company has not (i) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money, (ii) entered into any transaction other than in the ordinary
course of business, or (iii) declared or paid any dividend or made any other
distribution on or in respect of its capital stock of any class, and there has
not been any material change in or affecting the general affairs, management,
financial operations, shareholders equity or results of operations of the
Company.
(o) 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, shareholders agreement, partnership agreement, note, loan or credit
agreement, purchase order, or any other material agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
instrument to which the Company is a party
7
8
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.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in material compliance
with all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours. There are, to the Company's knowledge, no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is, to the Company's
knowledge, no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company, or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company, and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company.
No labor dispute with the employees of the Company exists, or to the Company's
knowledge, is imminent.
(q) Except as described in the Prospectus, the Company does
not maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan" or a
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute,
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 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 "multi-employer
plan."
(r) The Company, nor any of its officers, directors, partners,
"affiliates" or "associates" (as these terms are defined in Rule 405 promulgated
under the Rules and Regulations) has ever 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
8
9
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 or
otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of
the patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held by
the Company are in dispute so far as known by the Company or are in any conflict
with the right of any other person or entity. The Company (i) owns or has the
right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, 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 (ii) except as disclosed in the Prospectus is not obligated
or under any liability whatsoever to make any payment 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.
(t) The Company owns and has the unrestricted right to use all
trade secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
designs, processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual property") that are material
to the development, manufacture, operation and sale of all products and services
sold or proposed to be sold by the Company free and clear of and without
violating any right, lien, or claim of others, including without limitation,
former employers of its employees; provided, however, that the possibility
exists that other persons or entities, completely independently of the Company,
as the case may be, or its employees or agents, could have developed trade
secrets or items of technical information similar or identical to those of the
Company. The Company is not aware of any such development of similar or
identical trade secrets or technical information by others.
(u) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all its intellectual property
in all material aspects.
(v) 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.
9
10
(w) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, P.C. and Hoberman ▇▇▇▇▇▇ & Co., P.C.,
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 and have been retained by the Company as its
auditors.
(x) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuances
with respect to the Company, or any of its officers, directors, shareholders,
partners, employees or affiliates that may affect the Underwriter' compensation,
as determined by the National Association of Securities Dealers, Inc. ("NASD");
additionally, the Company further represents that no payments of consideration
of any type have been made by it over the twelve (12) months prior to the
execution of this letter to any person or entity who has had an affiliation with
an NASD brokerage firm.
(y) The Common Stock and Warrants have been approved for
quotation on the National Association of Securities Dealers Automated Quotation
System as a small cap issue ("NASDAQ/SmallCap").
(z) To the Company's best knowledge, no funds or assets of the
Company have been used for illegal purposes; no unrecorded funds or assets of
the Company been established for any purpose; no accumulation or use of the
Company's corporate funds or assets have been made without being properly
accounted for in the respective books and records of the Company; all payments
by or on behalf of the Company have been duly and properly recorded and
accounted for in the Company's books and records; no false or artificial entry
has been made in the books and records of the Company for any reason; no payment
has been made by or on behalf of Company with the understanding that any part of
such payment is to be used for any purpose other than that described in the
documents supporting such payments; the Company has not made, directly or
indirectly, any illegal contributions to any political party or candidate. The
Company's internal accounting controls are sufficient to cause the Company to
comply with the Foreign Corrupt Practices Act of 1977, as amended.
(i) Except as set forth in the Prospectus, no officer,
director, shareholder or partner 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
"Management" or "Certain
10
11
Transactions," there are no existing material agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company, and any officer,
director, Principal Shareholder (as such term is defined in the Prospectus) of
the Company, or any partner, affiliate or associate of any of the foregoing
persons or entities.
(bb) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to 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.
(cc) The minute book of the Company has been made available to
the Underwriter and contains a complete summary of all meetings and actions of
the directors and shareholders of the Company since the time of its
incorporation, and reflects all transactions referred to in such minutes
accurately in all respects.
(dd) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to include
any securities issued by the Company 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.
(ee) The Company has as of the effective date of the
Registration Statement (i) entered into a bonus agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
in the form filed as Exhibit 10.06 to the Registration Statement, and (ii)
purchased, or will purchase within thirty (30) days of the Closing Date term
keyman life insurance on the life of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. The policy shall provide
for coverage in the amount of $_________, and the policy shall name the Company
as the sole beneficiary thereof.
2. Purchase, Sale and Delivery of the Securities and Underwriter's
Warrants.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriter, and the Underwriter
agrees to purchase from the Company at a price of $4.50 (90% of the public
offering price) per Unit, 1,200,000 Units.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase all or any part of the Option Securities (up to an
aggregate of an additional 180,000
11
12
Units) at a price of $4.50 (90% of the public offering price) per Unit. The
option granted hereby will expire 45 days after (i) the date the Registration
Statement becomes effective, if the Company has elected not to rely on Rule 430A
under the 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, and
may be exercised in whole or in part from time to time only for the purpose of
covering over-allotments which may be made in connection with the offering and
distribution of the Securities upon notice by the Underwriter to the Company
setting forth the number of Option Securities as to which the Underwriter is
then exercising the option and the time and date of payment and delivery for any
such Option Securities. Any such time and date of delivery (an "Option Closing
Date") shall be determined by the Underwriter, but shall not be later than seven
full business days after the exercise of said option, nor in any event prior to
the Closing Date, as hereinafter defined, unless otherwise agreed upon by the
Underwriter and the Company. Nothing herein contained shall obligate the
Underwriter to make any over-allotments. No Option Securities shall be delivered
unless the Securities shall be simultaneously delivered or shall theretofore
have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
securities for, the Securities shall be made at the offices of the Underwriter
at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as
shall be agreed upon by the Underwriter and the Company. Such delivery and
payment shall be made at 10:00 a.m. (New York time) on __________, 1997, or at
such other time and date as shall be agreed upon by the Underwriter and the
Company, but not less than three (3) nor more than seven (7) full business days
after the effective date of the Registration Statement (such time and date of
payment and delivery being herein called "Closing Date"). In addition, in the
event that any or all of the Option Securities are purchased by the Underwriter,
payment of the purchase price for and delivery of certificates for, such Option
Securities shall be made at the above-mentioned firm office of the Underwriter
or at such other place as shall be agreed upon by the Underwriter and the
Company on the Option Closing Date as specified in the notice from the
Underwriter to the Company. Delivery of the certificates for the Securities and
the Option Securities, if any, shall be made to the Underwriter against payment
by the Underwriter of the purchase price for the Securities and the Option
Securities, if any, by New York Clearing House funds. Certificates for the
Securities and the Option Securities, if any, shall be in definitive, fully
registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriter may request in
writing at least two (2) business days prior to the Closing Date or the Option
Closing Date, as the case may be. The certificates for the Securities and the
Option Securities, if any, shall be made available to the Underwriter at such
office or such other place as the Underwriter may designate for inspection,
checking and packaging no later than 9:30 a.m. on the last business day prior to
the Closing Date or the Option Closing Date, as the case may be.
12
13
(d) On the Closing Date, the Company shall issue and sell to
the Underwriter the Underwriter's Warrants at an aggregate purchase price of
$120, which warrants shall entitle the holders thereof to purchase an aggregate
of 120,000 Units. The Underwriter's Warrants shall be exercisable for a period
of five years commencing one year following the effective date of the
Registration Statement at a price equaling one hundred sixty five percent (165%)
($8.25 per Unit) of the initial public offering price of the Securities. The
Underwriter's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit 1.2 to the Registration Statement.
Payment for the Underwriter's Warrants shall be made on the Closing Date.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective as the Underwriter deems advisable, the Underwriter
shall make a public offering of the Securities (other than to residents of or in
any jurisdiction in which qualification of the Securities is required and has
not become effective) at the price and upon the terms set forth in the
Prospectus. The Underwriter may from time to time increase or decrease the
public offering price after distribution of the Securities has been completed to
such extent as the Underwriter, in its sole discretion deems advisable. The
Underwriter may enter into one or more agreements as it, in its sole discretion,
deems advisable with one or more broker-dealers who shall act as dealers in
connection with such public offering.
4. Covenants and Agreements of the Company. The Company covenants and
agrees with the Underwriter as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the
Securities by the Underwriter of which the Underwriter shall not previously have
been advised and furnished with a copy, or to which the Underwriter shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement
13
14
thereto, or the institution of proceedings for that purpose; (iii) of the
issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose; (iv) of the receipt of any comments from the
Commission; and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information. If the Commission or any state securities commission
authority shall enter a stop order or suspend such qualification at any time,
the Company will make every effort to obtain promptly the lifting of such order.
(c) 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, if applicable and if consented to by the Underwriter, pursuant to
Rule 424(b)(4)) 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.
(d) The Company will give the Underwriter notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriter in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations) and will furnish the Underwriter with copies of any such amendment
or supplement a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file any such prospectus to which the
Underwriter or ▇▇▇▇▇ ▇▇▇▇▇, Esq. ("Underwriter's Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Underwriter, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Underwriter may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information; however, the Company shall not be required to
qualify as a foreign corporation or file a general consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Underwriter agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
14
15
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable effort to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities or the Underwriter's Securities is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or Underwriter's Counsel, the Prospectus, as
then amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company will notify the Underwriter
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act, each such amendment or
supplement to be reasonably satisfactory to Underwriter's Counsel, and the
Company will furnish to the Underwriter copies of such amendment or supplement
as soon as available and in such quantities as the Underwriter may reasonably
request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its securityholders, in the manner specified in Rule
158(b) of the Rules and Regulations, and will deliver to the Underwriter, an
earnings statement which will be in the detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least twelve (12) consecutive months after the
effective date of the Registration Statement.
(h) During a period of three years after the date hereof, the
Company will furnish to its shareholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
will deliver to the Underwriter:
i) Concurrently with furnishing such quarterly
reports to its shareholders, statements of income of the Company for
each quarter in the form furnished to the Company's shareholders and
certified by the Company's principal financial or accounting officer;
15
16
ii) concurrently with furnishing such annual reports
to its shareholders, a balance sheet of the Company as at the end of
the preceding fiscal year, together with statements of operations,
shareholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
certified public accountants;
iii) as soon as they are available, copies of all
reports (financial or other) mailed to shareholders;
iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the
Commission, the NASD, NASDAQ/SmallCap or any other securities exchange;
v) every press release and every material news item
or article of interest to the financial community in respect of the
Company, or its affairs which was released or prepared by or on behalf
of the Company; and
vi) any additional information of a public nature
concerning the Company or its business which the Underwriter may
request.
During such three-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 subsidiary are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) The Company will maintain a Transfer Agent 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.
(j) 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 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 reasonably
request.
(k) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. No portion of the net proceeds will be
used, directly or indirectly, to acquire any securities issued by the Company.
16
17
(l) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the 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.
(m) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two full business days prior thereto, a
copy of the latest available unaudited interim financial statements of the
Company (which in no event shall be as of a date more than thirty (30) days
prior to the date of the Registration Statement) which have been read by the
Company's independent public accountants, as stated in their letters to be
furnished pursuant to Section 7(1) hereof.
(n) The Company shall cause the Common Stock and Warrants to
be quoted on NASDAQ SmallCap and for a period of three years from the date they
are separated from the Unit, use its best efforts to maintain the NASDAQ
SmallCap quotation of the Common Stock, as well as the Warranta during their
lifetime or, upon the written consent of the Underwriter, quotation on a
principal stock exchange.
(o) For a period of three years from the Closing Date, the
Company shall furnish to the Underwriter at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Common Stock if such transfer
sheets have been furnished to the Company by its transfer agent at no additional
cost, (ii) the list of holders of all of the Company's securities and (iii) a
Blue Sky "Trading Survey" for secondary sales of the Company's securities
prepared by counsel.
(p) As soon as practicable, 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 to continue such inclusion for a period of not less than five
(5) years.
(q) Until the completion of the distribution of the
Securities, the Company shall not without the prior written consent of the
Underwriter and Underwriter's Counsel, issue, directly or indirectly any press
release or other communication or hold any press conference with respect to the
Company or its activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent with
past practices with respect to the Company's operations.
(r) For a period equal to the lesser of (i) five (5) years
from the date hereof, and (ii) the sale to the public of the Underwriter's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of
17
18
Form SB-2 (or other appropriate form) for the registration under the Act of the
Underwriter's Securities.
(s) For a period of two (2) years after the effective date of
the Registration Statement, the Company shall timely notify the Underwriter of
each meeting of the Company's Board of Directors (the "Board") and an individual
selected by the Underwriter shall be permitted to attend all meetings of the
Board. In addition, the Company shall send to the Underwriter's designee all
notices and other correspondence and communications sent by Company to members
of the Board at least two (2) days before any meeting, if applicable. The
Company shall reimburse the Underwriter's designee for all reasonable expenses
incurred in connection with his service on, or attendance of, meetings of the
Board to the same extent as is provided to all non-employee members of the Board
of Directors.
(t) On or before the effective date of the Registration
Statement, the Company shall have an authorized capital stock acceptable to the
Underwriter including, without limitation, any stock option plans of the
Company.
(u) On or before the effective date of the Registration
Statement, the Company shall have (i) entered into a bonus agreement with ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ in the form filed as Exhibit 10.06 to the Registration Statement, and
(ii) purchased, or will purchase within thirty (30) days of the Closing Date
term keyman life insurance on the life of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. The policy shall
provide for coverage in the amount of $_________, and the policy shall name the
Company as the sole beneficiary thereof.
(v) If the transactions contemplated by this Agreement are
consummated, during the three (3) year period from the Effective Date, the
Underwriter and its successors will have the right of first refusal (the "Right
of First Refusal") to act (1) as underwriter, placement agent or investment
banker for any and all public or private offerings of the securities, whether
equity, debt or a combination of equity and debt of the Company, or any
successor to or any current or future subsidiary of the Company (collectively
referred to in this Section (w) as the "Company") by the Company (the
"Subsequent Company Offerings") or any secondary offering (the "Secondary
Offering") of the Company's securities by any principal shareholder of the
Company (the "Principal Shareholders") and (2) to act as the Company's
investment banker on such other transactions as may arise from time to time,
including without limitation, acting as financial advisor or intermediary in
connection with merger and acquisition opportunities "introduced to the Company"
by ▇▇▇▇▇▇▇▇▇. Accordingly, if during such period the Company intends to make a
Subsequent Company Offering, the Company receives notification from any of the
such Principal Shareholders of its securities of such holders' intention to make
a Secondary Offering, or the Company proposes a merger, acquisition or
disposition of assets, the Company shall notify the Underwriter in writing of
such intention and of the proposed terms of the offering or transaction. The
Company shall
18
19
thereafter promptly furnish the Underwriter with such information concerning the
business, condition and prospects of the Company as the Underwriter may
reasonably request. If, within thirty (30) business days of the receipt of such
notice of intention and statement of terms, the Underwriter does not accept in
writing such offer to act as underwriter, placement agent or investment banker
with respect to such offering upon the terms proposed, the Company and each of
the Principal Shareholders shall be free to negotiate terms with other
underwriters with respect to such offering and to effect such offering on such
proposed terms within six (6) months after the end of such ten (10) business
days. Before the Company and/or any of the Principal Shareholders shall accept
any modified proposal from such other underwriter, placement agent or investment
banker, the Underwriter's preferential right shall be reinstated in the same
procedure with respect to such modified proposal as provided above shall be
adopted. The failure by the Underwriter to exercise its Right of First Refusal
in any particular instance shall not affect in any way such right with respect
to any other Subsequent Company Offering or Secondary Offering.
(w) The Underwriter and its successors will have a Right of
First Refusal for a period of three (3) years from the Effective Date to
purchase for the Underwriter's account or to sell for the account of the
Company's principal stockholders any securities sold pursuant to Rule 144 under
the Act. Each of the principal stockholders agrees to consult with the
Underwriter with respect to any such sales and will offer the Underwriter the
exclusive opportunity to purchase or sell such securities on terms at least as
favorable to such principal stockholders as they can secure elsewhere. If the
Underwriter fails to accept in writing any such proposal for sale by such
principal stockholders within three (3) business days after receipt of a notice
containing such proposal, then the Underwriter shall have no claim or right with
respect to any such sales contained in any such notice. If, thereafter, such
proposal is modified in any material respect, such principal stockholders shall
adopt the same procedure as with respect to the original proposal.
(x) The Company agrees to pay the Underwriter a warrant
solicitation fee of 10.0% (or the maximum amount permissible under NASD rules)
of the exercise price of any of the Warrants exercised if (a) the market price
of the Company's Common Stock on the date the Warrant is exercised is greater
than the exercise price of the Warrant, (b) the exercise of the Warrant was
solicited by the Underwriter, (c) the Warrant is not held in a discretionary
account, (d) disclosure of the compensation arrangement is made upon the sale
and exercise of the Warrants, (e) soliciting the exercise is not in violation of
Rule 10b-6 under the Exchange Act, and (f) solicitation of the exercise is in
compliance with the NASD Notice to Members 81-38 (September 22, 1981), including
without limitation, the designation of the soliciting agent in writing by a
warrantholder.
(y) The Company shall on the Closing Date, enter into a
financial advisory agreement ("Consulting Agreement") with the Underwriter for a
term of three
19
20
(3) years commencing on the Effective Date which will provide that the
Underwriter will be paid a consulting fee of $_________ per annum, payable in
full ($______) on the Closing Date.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not paid as fees of
Underwriter's Counsel, except as provided in (iv) below) incident to the
performance of the obligations of the Company under this Agreement and the
Underwriter's Warrant Agreement, including, without limitation, (i) the fees and
expenses of accountants and counsel for the Company, (ii) all costs and expenses
incurred in connection with the preparation, duplication, printing, filing,
delivery and mailing (including the payment of postage with respect thereto) of
the Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing and delivery of this Agreement, the Agreement
Among Underwriter, the Selected Dealer Agreements, if any, the Selling
Agreements, if any, and related documents, including the cost of all copies
thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Underwriter and such
dealers as the Underwriter may request, in quantities as hereinabove stated,
(iii) the printing, engraving, issuance and delivery of the Securities
including, but not limited to, (x) the purchase by the Underwriter of the
Securities and the purchase by the Underwriter of the Underwriter's Warrants
from the Company, and (y) the consummation by the Company of any of its
obligations under this Agreement and the Underwriter's Warrant Agreement, (iv)
the qualification of the Securities under state or foreign securities or "Blue
Sky" laws and determination of the statues of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum," "Legal Investments
Survey," if any, and the "Final Blue Sky Memorandum" and disbursements and fees
of counsel in connection therewith, it being agreed that Underwriter's Counsel
shall perform the required "Blue Sky" legal services for the account of the
Company, (v) advertising costs and expenses, consisting of the Company's travel
costs and preparation expenses in connection with the "road show," information
meetings and presentations, bound volumes and prospectus memorabilia and one
"tomb-stone" advertisement in The Wall Street Journal, (vi) fees and expenses of
the transfer agent and registrar, (vii) the fees payable to the Commission and
the NASD, and (viii) the fees and expenses incurred in connection with the
listing of the Securities with the NASDAQ/SmallCap and any other exchange.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6 or Section 12, the Company shall
reimburse and indemnify the Underwriter for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriter's Counsel, less
any amounts already paid pursuant to Section 5(c) hereof.
20
21
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriter on the Closing Date by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Securities and Option Securities, if any. The Company also agrees to pay certain
due diligence fees and expenses incurred by the Underwriter in connection with
(i) background investigation of officers, directors and the shareholder of the
Company, pursuant to judgment, UCC and Commission searches and (ii) due
diligence meetings for syndicate members and others.
6. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, with respect to the
Company as if they had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date of
the statements of the officers of the Company made pursuant to the provisions
hereof; and the performance by the Company and on and as of the Closing Date and
each Option Closing Date, if any, of its covenants and obligations hereunder and
to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 P.M., New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Underwriter, and,
at the Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriter's Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the Securities
and any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing pursuant to Rule 424(b) of the Rules of Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Underwriter of such timely filing, or
a post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that
either the Registration Statement, or any amendment thereto, or the Prospectus,
contains an untrue statement of fact which, in the Underwriter's opinion, is
material, or omits to state a fact which, in the Underwriter's opinion, is
material and is required to be stated therein
21
22
or is necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriter shall
have received from Company's Counsel (as defined below), and shall have used its
best efforts to cause such counsel to deliver such opinion or opinions with
respect to the organization of the Company, the validity of the Securities, the
Underwriter's Warrants, the Registration Statement, the Prospectus and other
related matters as the Underwriter may request and Underwriter's Counsel shall
have received such papers and information as they request to enable them to pass
upon such matters.
(d) At the Closing Date, the Underwriter shall have received
the favorable opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, P.C. ("Company's Counsel"),
dated the Closing Date, addressed to the Underwriter and in form and substance
reasonably satisfactory to Underwriter's Counsel, to the effect that:
i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing under the laws of
its jurisdiction, (B) is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction where the nature
of its properties or the conduct of its business requires such
registration and the failure to register or so qualify would have a
material adverse effect on the Company, (C) has all requisite corporate
power and authority, and has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; (D) the Company is
and has been doing business in material compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises
and permits and all federal, state and local laws, rules and
regulations; and, (E) the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially adversely
affect the business, condition, financial or otherwise, or the
earnings, affairs, position, prospects, value, operation, properties,
business or results of operations of the Company. The disclosures in
the Registration Statement concerning the effects of federal, state and
local laws, rules and regulations on the Company's business as
currently conducted and as contemplated are correct in all material
respects or do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the
circumstances in which they were made.
22
23
ii) the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business
entity;
iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization", and to our
knowledge, the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this
Agreement and the Underwriter's Warrant Agreement and as described in
the Prospectus. The Securities, the Underwriter's Warrants and all
other securities issued or issuable by the Company conform in all
material respects to all statements with respect thereto contained in
the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; the holders
thereof have no rights to rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and none
of such securities were issued in violation of the preemptive rights of
any holders of any security of the Company. The Securities and the
Underwriter's Securities to be sold by the Company hereunder and under
the Underwriter's Warrant Agreement are not and will not be subject to
any preemptive or other similar rights of any shareholder, 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 conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability
solely as such holders; all corporate action required to be taken for
the authorization, issue and sale of the Securities and the
Underwriter's Securities has been duly and validly taken; and the
certificates representing the Securities and the Underwriter's Warrants
are in due and proper form. Subject to compliance with the registration
provisions of the Act and applicable state registration and
qualification provisions, the Underwriter's Warrants constitute valid
and binding obligations of the Company to issue and sell, upon exercise
thereof and payment therefor, the number and type of securities of the
Company called for thereby. Upon the issuance and delivery pursuant to
this Agreement of the Securities and the Underwriter's Warrants to be
sold by the Company, and upon payment in full therefor, the Underwriter
will acquire good and marketable title to the Securities and
Underwriter Warrants free and clear of any pledge, lien, charge, claim,
encumbrance, security interest, or other restriction (excluding
securities law restrictions) or equity of any kind whatsoever, except
with respect to any actions that may have been taken or omitted to be
taken by the Underwriter after the date hereof. No transfer tax is
payable by or on behalf of the Underwriter in connection with (A) the
issuance by the Company of the Securities, (B) the purchase by the
Underwriter of the Securities and the Underwriter's Securities, from
the Company, (C) the consummation by the Company of any of its
23
24
obligations under this Agreement or the Underwriter's Warrant
Agreement, or (D) resales of the Securities in connection with the
distribution contemplated hereby.
iv) the Registration Statement has become effective
under the Act, and, if applicable, filing of all pricing information
has been timely made in the appropriate form under Rule 430A, and no
stop order suspending the use of the Preliminary Prospectus, the
Registration Statement or Prospectus or any part of any thereof or
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or, to the best of such counsel's knowledge, threatened or
contemplated under the Act.
v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments a
statements or supplements thereto (other than the financial statements
and the notes thereto and other financial and statistical data included
therein, as to which no opinion need be rendered) comply as to form in
all material respects with the requirements of the Act and the Rules
and Regulations.
vi) to the best of such counsel's knowledge, (A)
there are no agreements, contracts or other documents required by the
Act to be described in the Registration Statement and the Prospectus
and filed as exhibits to the Registration Statement other than those
described in the Registration Statement (or required to be filed under
the Exchange Act if upon such filing they would be incorporated, in
whole or in part, by reference therein) and the Prospectus and filed as
exhibits thereto, and 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 and fairly represent the information
required to be shown by Form S-1; or (C) there is not pending or
threatened against the Company any action, arbitration, suit,
proceeding, inquiry, investigation, litigation, legal, statutory,
regulatory, governmental or other proceeding (including, without
limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against, or
involving the properties or business of the Company which (x) is
required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects), (y) questions the
validity of the capital stock of the Company or this Agreement or the
Underwriter's Warrant Agreement, or of any action taken or to be taken
by the Company pursuant to or in connection
24
25
with any of the foregoing; (D) no statute or regulation or legal or
governmental proceeding required to be described in the Prospectus is
not described as required; and (E) there is no action, suit or
proceeding, pending or threatened, against or affecting the Company
before any court or arbitrator or governmental body, agency or official
(or any basis thereof known to such counsel) which in any manner draws
into question the validity or enforceability of this Agreement or the
Underwriter's Warrant Agreement;
vii) the Company has full legal right, power and
authority to enter into each of this Agreement and the Underwriter's
Warrant Agreement, and to consummate the transactions provided for
therein; and each of this Agreement and the Underwriter's Warrant
Agreement has been duly authorized, executed and delivered by the
Company. Each of this Agreement and the Underwriter'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 (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action, legal
or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's execution or
delivery of this Agreement and the Underwriter'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 breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company pursuant to the terms
of, (A) the articles of incorporation or by-laws of the Company; (B)
any license, contract, indenture, mortgage, deed of trust, voting trust
agreement, shareholders agreement, note, loan or credit agreement or
any other agreement or instrument to which the Company is a party or by
which it is or may be bound or to which any of its properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or
(C) any statute, judgment, decree, order, rule or regulation applicable
to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the
Company or any of its activities or properties.
25
26
viii) no consent, approval, authorization or
order,and no filing with, any court, regulatory body, government agency
or other body (other than such as may be required under Blue Sky laws,
as to which no opinion need be rendered) is required in connection with
the issuance of the Securities pursuant to the Prospectus, the issuance
of the Underwriter's Warrants, and the Registration Statement, the
performance of this Agreement and the Underwriter's Warrant Agreement,
and the transactions contemplated hereby and thereby;
ix) the properties and business of the Company
conform in all material respects to the description thereof contained
in the Registration Statement and the Prospectus;
x) the Company is not in breach of, or in default
under, any term or provision of any material license, contract,
indenture, mortgage, installment sale agreement, deed of trust, lease,
voting trust agreement, shareholders' agreement, agreement with any
shareholder, partnership agreement, note, loan or credit agreement or
any other material 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 any of the Company may be bound or
to which the property or assets (tangible or intangible) of any of the
Company is subject or affected; and the Company is not in violation of
any term or provision of its Articles of Incorporation or by-laws or in
violation of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation;
xi) the statements in the Prospectus under
"PROSPECTUS SUMMARY - THE COMPANY," "BUSINESS," "MANAGEMENT," "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS," "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT," and "DESCRIPTION OF SECURITIES," and
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;
xii) the Securities have been accepted for listing on
NASDAQ/ SmallCap.
xiii) the person listed under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the
Prospectus are the respective "beneficial owners" (as such phrase is
defined in Regulation 13d-3 under the Exchange Act) of the securities
set forth opposite their respective names thereunder as and to the
extent set forth therein;
xiv) except as described in the Prospectus, no
person, corporation, trust, partnership, association or other entity
has the right to include
26
27
and/or register any securities of the Company in the Registration
Statement, require the Company to file any registration statement or,
if filed, to include any security in such registration statement;
xv) except as described in the Prospectus, there are
no claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's or origination fee with respect to
the sale of the Securities hereunder or financial consulting
arrangement or any other arrangements, agreements, understandings,
payments or issuances that may affect the Underwriter' compensation, as
determined by the NASD;
xvi) except as described in the Prospectus, the
Company does not (A) maintain, sponsor or contribute to any ERISA
Plans, (B) maintain or contribute, now or at any time previously, to a
defined benefit plan, as defined in Section 3(35) of ERISA, and (C) has
never completely or partially withdrawn from a "multi-employer plan;"
xvii) except as set forth in the Prospectus, no
officer, director of shareholder 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, (A) an interest in the
person or entity which (x) furnishes or sells services or products
which are furnished or sold or are proposed to be furnished or sold by
the Company, or (y) purchases from or sells or furnishes to the Company
any goods or services, or (B) a beneficial interest in any contract or
agreement to which the Company is a party or by which they may be bound
or affected. Except as set forth in the Prospectus under "Management"
or "Certain Transactions," there are no existing material agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the
Company, and any officer, director, or Principal Shareholder of the
Company, or any affiliate or associate of any such person or entity.
Such counsel shall state that during the course of its participation in
the preparation of the Registration Statement and the Prospectus and the
amendments thereto, no facts have come to the attention of such counsel which
lead them to believe that either the Registration Statement or any amendment
thereto, at the time such Registration Statement or amendment became effective
or the Preliminary Prospectus or Prospectus or amendment or supplement thereto
as of the date of such opinion 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 (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus).
27
28
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriter' Counsel) of
other counsel acceptable to Underwriter's Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to Underwriter' Counsel if requested. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and that the Underwriter and they are
justified in relying thereon.
(e) At each Option Closing Date, if any, the Underwriter shall
have received the favorable opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, P.C., counsel to
the Company, dated the Option Closing Date, addressed to the Underwriter and in
form and substance satisfactory to Underwriter's Counsel confirming as of such
Option Closing Date the statements made by ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, P.C., in the
opinion delivered on the Closing Date with respect to the Option Securities.
(i) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriter's Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company, or herein contained.
(ii) Prior to each of the Closing and each Option Closing
Date, if any (1) there shall been no adverse change or development involving a
prospective change in the condition, financial or otherwise, prospects,
shareholder's equity with the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (2) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
adverse to the Company; (3) the Company shall not be in default under any
provision of any instrument relating to any outstanding indebtedness; (4) other
than as contemplated in the Prospectus, the Company shall not have issued any
securities (other than Securities and the Underwriter Warrants) or declared or
paid any dividend or made any distribution in respect of its capital stock of
any class and there has not been any change in the capital stock or change in
the debt (long or short term) or liabilities or obligations of the Company
(contingent or otherwise); (5) no material amount of the
28
29
assets of the Company shall have been pledged or mortgaged, except as set forth
in the Registration Statement and Prospectus; (6) no action, suit or proceeding,
at law or in equity, shall have been pending or threatened (or circumstances
giving rise to same) against the Company or affecting any of its properties or
business before or by any court or federal, state or foreign commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus; and (7) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
(f) At each of the Closing Date and each Option Closing Date,
if any, the Underwriter shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
i) The representations and warranties of the Company
in this Agreement are true and correct in all material respects, as if
made on and as of the Closing Date or the Option Closing Date, as the
case may be, and the Company has complied with all agreements and
covenants and satisfied all conditions contained in this Agreement on
its part to be performed or satisfied at or prior to such Closing Date
or Option Closing Date, as the case may be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or, to
the best of each of such person's knowledge, after due inquiry are
contemplated or threatened under the Act;
iii) Each Preliminary Prospectus, the Registration
Statement and the Prospectus and, if any, each amendment and each
supplement thereto, contain all statements and information required to
be included therein; and
iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
(a) the Company has not incurred up to and including the Closing Date
or the Option Closing Date, as the case may be, other than in the
ordinary course of its business, any material liabilities or
obligations, direct or contingent; (b) the Company has not paid or
declared any dividends or other distributions on its capital stock; (c)
the Company has not entered into any transactions not in the ordinary
course of business; (d) there has not been any change in the capital
stock or long-term debt or any
29
30
increase in the short-term borrowings (other than any increase in the
short-term borrowings in the ordinary course of business) of the
Company; (e) the Company has not sustained any material loss or damage
to its property or assets, whether or not insured; (f) there is no
litigation which is pending or threatened (or circumstances giving rise
to same) against the Company or any affiliated party of the foregoing
which is required to be set forth in an amended or supplemented
Prospectus which has not been set forth; and (g) there has occurred no
event required to be set forth in an amended or supplemented
Prospectus, which has not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(i) are to such documents as amended and supplemented at the date of such
certificate.
(g) The Underwriter shall have the obligation to satisfy the
requirements set forth by the rules and regulations of the NASD as to the amount
of compensation allowable or payable to the Underwriter and, accordingly, by the
Closing Date, the Underwriter will have received clearance from the NASD as to
the amount of compensation allowable or payable to the Underwriter, as described
in the Registration Statement.
(h) At the time this Agreement is executed, the Underwriter
shall have received a letter, dated such date, addressed to the Underwriter in
form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriter and Underwriter's Counsel, from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, P.C.;
i) confirming that they are independent certified
public accountants with respect to the Company within the meaning of
the Act and the applicable Rules and Regulations;
ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company included
in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Rules and Regulations thereunder and that the Underwriter may rely upon
the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, P.C. with respect to the financial
statements and supporting schedules included in the Registration
Statement;
iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim
financial statements of the Company (with an indication of the date of
the latest available unaudited interim financial statements), a reading
of the latest available minutes of the shareholders and board of
directors and the various committees of the boards of directors of
30
31
the Company, consultations with officers and other employees of the
Company responsible for financial and accounting matters and other
specified procedures and inquiries, nothing has come to its attention
which would lead it to believe that (A) the unaudited financial
statements and supporting schedules of the Company included in the
Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Rules and Regulations or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
of the Company included in the Registration Statement, or (B) at a
specified date not more than five days prior to the effective date of
the Registration Statement, there has been any change in the capital
stock or long-term debt of the Company, or any decrease in the
shareholder's equity or net assets of the Company as compared with
amounts shown in the ____________, 1996 balance sheet included in the
Registration Statement, other than as set forth in or contemplated by
the Registration Statement, or, if there was any change or decrease,
setting forth the amount of such change or decrease; and (C) during the
period from _________, 1996, to a specified date not more than five (5)
days prior to the effective date of the Registration Statement, there
was any decrease in net revenues, net earnings or increase in net
earnings per common share of the Company, as compared with the
corresponding period beginning ______________, 1996, other than as set
forth in or contemplated by the Registration Statement, or, if there
was any such decrease, setting forth the amount of such decrease;
setting forth, at a date not later than five (5) days prior to the date
of the Registration Statement, the amount of liabilities of the Company
(including a break-down of commercial paper and notes payable to
banks).
iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company
set forth in the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may be
derived from the general accounting records, including work sheets, of
the Company and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter and
found them to be in agreement;
v) stating that they have not during the immediately
preceding five-year period brought to the attention of any of the
Company's management any "weakness," as defined in Statement of
Auditing Standard No. 60 "Communication of Internal Control Structure
Related Matters Noted in an Audit," in any of the Company's internal
controls;
31
32
vi) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriter may reasonably
request.
(i) At Closing Date and each Option Closing Date, if any, the
Underwriter shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, P.C. a letter, dated as of
the Closing Date or the Option Closing Date, as the case may be, to the effect
that they reaffirm those statements made in the letter furnished pursuant to
subsection (l) of this Section, except that the specified date referred to shall
be a date not more than five days prior to Closing Date or the Option Closing
Date, as the case may be, and, if the Company has elected to rely on Rule 430A
of the Rules and Regulations, to the further effect that they have carried out
procedures as specified in subsection (l) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Underwriter and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such subsection (l).
(j) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Underwriter the appropriate number of
Securities.
(k) No order suspending the sale of the Securities in any
jurisdiction, which in the judgment of the Underwriter is material to Closing of
the transaction, designated by the Underwriter pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(l) On or before the Closing Date, the Company shall have
executed and delivered to the Underwriter, (i) the Underwriter's Warrant
Agreement substantially in the form filed as Exhibit 1.2 to the Registration
Statement in final form and substance satisfactory to the Underwriter, and (ii)
the Underwriter's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(m) On or before Closing Date, the Securities and the
Underwriter's Securities shall have been duly approved for quotation on
NASDAQ/SmallCap, subject to official notice of issuance.
(n) On or before the Closing Date, the Company shall have
executed and delivered to the Underwriter the Consulting Agreement substantially
in the form filed as Exhibit 1.3.
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 may be, is not so fulfilled, the Underwriter may terminate
this Agreement or, if the Underwriter so
32
33
elects, it may waive any such conditions which have not been fulfilled or extend
the time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriter (for purposes of this Section 7 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in Section 12 hereof), and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriter or such controlling person may become subject
under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in any Preliminary Prospectus, the Registration Statement or the Prospectus
(as from time to time amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included securities of the Company issued or issuable upon exercise of
the Securities; or (iii) in any application or other document or written
communication (in this Section 7 collectively called "application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
NASDAQ/SmallCap or any other securities exchange; or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading (in the case of the Prospectus, in
the light of the circumstances under which they were made), unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriter by or on
behalf of the Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, proposed directors, each of its officers who has
signed the Registration Statement, counsel for the Company, and each other
person, if any, who controls the Company within the meaning of the Act, to the
same extent as the foregoing
33
34
indemnity from the Company to the Underwriter but only with respect to
statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or Prospectus directly
relating to the transactions effected by the Underwriter in connection with this
Offering. The Company acknowledges that the statements with respect to the
public offering of the Securities set forth under the heading "Underwriting" and
the stabilization legend in the Prospectus have been furnished by the
Underwriter expressly for use therein and constitute the only information
furnished in writing by or on behalf of the Underwriter for inclusion in the
Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action at the
expense of the indemnifying party, (ii) the indemnifying parties shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded, based upon an opinion of counsel, that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel, in addition to any local counsel,
separate from
34
35
their own counsel for all indemnified parties in connection with any one action
or separate but similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances. Anything in this Section 7 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement effected without its written consent; provided, however, that such
consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of this Section 7 provides for indemnification in such
case or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
a contributing party and the Underwriter is the indemnified party, the relative
benefits received by the Company on the one hand, and the Underwriter, on the
other, shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities (before deducting expenses) bear to the
total underwriting discounts received by the Underwriter hereunder, in each case
as set forth in the table on the Cover Page of the Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Underwriter, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this subdivision (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this subdivision (d), the Underwriter shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriter hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to
35
36
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), except to the extent that such party
or parties were adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company or any controlling person of the Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriter.
9. Effective Date. This Agreement shall become effective at 10:00 a.m.,
New York time, on the next full business day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as the
Underwriter, in its discretion, shall release the Securities for the sale to the
public; provided however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Underwriter of telegrams to securities
dealers releasing such shares for offering or the release by the Underwriter for
publication of the first newspaper advertisement which is subsequently published
relating to the Securities.
36
37
10. Termination.
(i) Subject to subsection (b) of this Section 10, the
Underwriter shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has disrupted, or in the
Underwriter's opinion will in the immediate future disrupt the financial
markets, and such events have a material and adverse impact on the market for
the Securities; or (ii) any material adverse change in the financial markets
shall have occurred; or (iii) if trading on the New York Stock Exchange, the
American Stock Exchange, or the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction; or (iv) if the United States shall
have become involved in a war or major hostilities, or if there shall have been
an escalation in an existing war or major hostilities or a national emergency
shall have been declared in the United States; or (v) if a banking moratorium
has been declared by a state or federal authority; or (vi) if the Company shall
have sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in the
Underwriter's opinion, make it inadvisable to proceed with the delivery of the
Securities; or (vii) if there shall have been such a material adverse change in
the conditions or prospects of the Company as in the Underwriter's judgment
would make it inadvisable to proceed with the offering, sale and/or delivery of
the Securities; or (viii) if there shall have been a material adverse change in
the general market, political or economic conditions, in the United States or
elsewhere, that have a material and adverse impact on the securities market
generally
(ii) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 10(a), the Company shall promptly
reimburse and indemnify the Underwriter for all of its actual and reasonable
out-of-pocket expenses, including the fees and disbursements of counsel for the
Underwriter (less amounts previously paid pursuant to Section 5(c) above).
Notwithstanding any contrary provision contained in this Agreement, if this
Agreement shall not be carried out within the time specified herein, or any
extension thereof granted to the Underwriter, by reason of any failure on the
part of the Company to perform any undertaking or satisfy any condition of this
Agreement by it to be performed or satisfied (including, without limitation,
pursuant to Section 6 or Section 11) then, the Company shall promptly reimburse
and indemnify the Underwriter for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriter (less
amounts previously paid pursuant to Section 6(d) above). In addition, the
Company shall remain liable for all reasonable Blue Sky counsel fees and
expenses and Blue Sky filing fees. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement (including, without limitation, pursuant to Sections 6, 10, and 11
hereof), and
37
38
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Default by the Company. If the Company shall fail at the Closing
Date at any Option Closing Date, to sell and deliver the number of Securities
which it is obligated to sell hereunder on such date, then this Agreement shall
terminate (or, if such default shall occur with respect to any Option Securities
to be purchased on an Option Closing Date, the Underwriter may by notice to the
Company, terminate the Underwriter' obligation to purchase Option Securities
from the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to Section 5, Section 7 and Section 10
hereof. No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect of such default.
12. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ with a copy to ▇▇▇▇▇ ▇▇▇▇▇, Esq. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇. Notices to the Company shall be directed to the Company at ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President,
with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
13. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
14. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles. The parties hereto
agree that any action, proceeding or claim against it arising out of or in any
way related to this Agreement shall be brought and enforced in the courts of the
State of New York or the United States of America for the Southern District of
New York and irrevocably submit to such exclusive jurisdiction, and hereby
irrevocably waive any objection to such exclusive jurisdiction or inconvenient
forum.
38
39
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
16. Entire Agreement; Amendments. This Agreement and the Underwriter's
Warrant Agreement constitute the entire agreement of the parties hereto and
supersede all prior written or oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may not be amended
except in a writing, signed by the Underwriter and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
DYNAMIC INTERNATIONAL, LTD.
By:_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
Confirmed and accepted as of
the date first above written.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, INC.
By:_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
39