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EXHIBIT 1.1
900,000 Units
DAYTON GENERAL SYSTEMS, INC.
AMENDED AND RESTATED
UNDERWRITING AGREEMENT
▇.▇. ▇▇▇▇▇▇▇ & Associates
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Dayton General Systems, Inc., a Pennsylvania corporation ("DGS" or the
"Company"), together with certain of its shareholders executing this Agreement
(the "Selling Shareholders"), propose to publicly offer and sell through ▇.▇.
▇▇▇▇▇▇▇ & Associates (the "Underwriter"), certain units (the "Units") at a
public offering price of $10.00 per Unit, with each Unit consisting of (i) two
shares of the Company's common stock, no par value ("Common Stock") and (ii) a
warrant to purchase one share of Common Stock from the Company at an exercise
price of $6.50 per share ("Offering Warrants"). The offering will consist of (a)
an initial 550,000 Units (the "Initial Units") to be provided by the Company and
to be offered for sale on a $5,500,000 minimum proceeds, "best efforts,
all-or-none" basis and (b) up to an additional 350,000 Units (the "Additional
Units") including up to 320,000 Units to be provided by the Company and up to
30,000 Units consisting of Common Stock to be provided by the Selling
Shareholders (in the individual amounts listed beside their names on the
signature pages hereto) and Offering Warrants to be provided by the Company,
which shall be offered for sale ratably by the Company and the Selling
Shareholders on a "best efforts" basis.
The Company and the Selling Shareholders wish to confirm as follows
their respective agreements with you in connection with the offering of Units
through the Underwriter:
1. OFFERING AND SALE OF THE UNITS.
1.1 AGENCY. The Company and the Selling Shareholders hereby
appoint the Underwriter as their exclusive agent for a period (the "Offering
Period") of 90 days from the Effective Date (as such term is defined in Section
3 below), which period may be extended for not more than an additional 90 days
upon the mutual written agreement of the Underwriter and the Company, to sell
the Initial Units on a "best efforts, all-or-none" basis and to sell the
Additional Units on a "best efforts" basis at an offering price of $10.00 per
Unit and the terms hereinafter set forth.
1.2 UNDERWRITER'S COMPENSATION.
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1.2.1 Investment Banking Fee. The Underwriter shall
be entitled to an investment banking fee equal to 2% of the public offering
price, or $.20 per Unit, payable on the Closing Date.
1.2.2 Commission. The Underwriter shall be entitled
to a commission equal to 8% of the public offering price, or $.80 per Unit,
payable at the relevant Closing Date(s).
1.2.3 Expense Allowance. The Company shall pay the
Underwriter as a nonaccountable expense allowance an amount equal to 3% of the
gross offering proceeds of the Initial Units and the Additional Units, if any,
payable on the Initial Closing Date less a credit of $___________ (the "Credit")
representing advances previously paid by the Company. In the event the offering
is not consummated for any reason (i) the Underwriter shall be entitled to be
reimbursed only for its actual accountable out-of-pocket expenses, and (ii) if
such actual accountable expenses are less than the amount of the Credit, the
excess of the Credit over such actual accountable expenses shall be returned to
the Company.
1.2.4 Warrant. The Company shall issue and deliver to
the Underwriter a warrant (the "Warrant") to purchase Units in an amount equal
to 8.07% of the number of Initial Units and Additional Units, if any, placed by
the Underwriter hereunder, such Warrant to be dated as of the Effective Date and
to be in the form appended hereto as Annex A. The Company represents and
warrants that the Warrant has been duly authorized and, when issued and
delivered in accordance with the terms hereof, will be a valid, binding and
enforceable obligation of the Company.
2. DELIVERY AND PAYMENT.
2.1 ESCROW PROCEDURES. The Underwriter and the Company shall
enter into an escrow agreement (the "Escrow Agreement") in substantially the
form appended hereto as Annex B with The National Bank of Southern California,
Newport Beach, California (the "Escrow Agent") pursuant to which the Underwriter
will deposit subscription funds it receives on behalf of the Company for Units
prior to the Closing Date with the Escrow Agent, to be released by the Escrow
Agent as provided in the Escrow Agreement. The Underwriter and/or any
broker/dealers which are members of the selling group shall transmit any checks
received from subscribers directly to the Escrow Agent by noon, California time,
of the next business day after receipt of such checks.
2.2 CLOSING DATE. Delivery by the Company and the Selling
Shareholders, if applicable, of the Units and the Additional Units, if any, and
the release of funds from escrow to the Company in same day funds to the Company
and to the Selling Shareholders, if applicable, shall take place at the offices
of the Underwriter's counsel, ▇▇▇▇▇▇▇▇ & Shohl LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, at 10:00 am. Eastern Time, on the third full business
day (the "Closing Date") following the date on which the Underwriter and the
Company notify the Escrow Agent to release the offering proceeds held by the
Escrow Agent, provided that the conditions to release specified in the Escrow
Agreement have then been satisfied.
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2.3 REGISTRATION AND AVAILABILITY OF CERTIFICATES.
Certificates representing the Units shall be registered in such names and shall
be in such denominations as the Underwriter shall request at least three full
business days before the Closing Date and shall be made available to the
purchasers of Units one full business day after the Closing Date.
3. REGISTRATION STATEMENT AND PROSPECTUS; PUBLIC OFFERING.
3.1 REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared in conformity with the requirements of the Securities Act of 1933 (the
"Securities Act"), and the published rules and regulations adopted by the
Securities and Exchange Commission (the "Commission") thereunder (the "Rules"),
a registration statement on Form SB-2 (No. 333-33597), including a prospectus
subject to completion relating to the Units, and has filed with the Commission
the registration statement and such amendments thereof as have been required to
the date of this Agreement. Copies of such registration statement (including all
amendments thereof) and of the related prospectus subject to completion relating
to the Units have heretofore been delivered by the Company to you. The term
"Registration Statement" as used in this Agreement means such registration
statement (including all financial schedules and exhibits), as amended or
supplemented at the time it becomes effective, or, if it becomes effective prior
to the execution of this Agreement, as supplemented or amended prior to the
execution of this Agreement. If it is contemplated, at the time this Agreement
is executed, that a post-effective amendment to the Registration Statement will
be filed and must be declared effective before the offering of the Units may
commence, the term "Registration Statement" as used in this Agreement means the
registration statement as amended by such post-effective amendment. The term
"Effective Date" as used in this Agreement means the time and date upon which
the Commission shall declare the Registration Statement to be effective. The
term "Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement. The Company will not file any amendment
of the Registration Statement or supplement to the Prospectus to which you shall
reasonably object in writing after being furnished with a copy thereof.
3.2 PUBLIC OFFERING. The Company understands that the
Underwriter proposes to make a public offering of the Units, as set forth in and
pursuant to the Prospectus, as soon after the Effective Date as the Underwriter
and the Company deem advisable. The Company hereby confirms that the Underwriter
has been authorized to distribute or cause to be distributed the Prospectus (as
from time to time amended or supplemented if the Company furnishes amendments
thereof or supplements thereto to the Underwriter).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Underwriter as follows:
4.1 COMPLIANCE OF REGISTRATION STATEMENT AND PROSPECTUS. The
Prospectus, at the time of filing thereof, contained all material statements
which were required to be stated
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therein in accordance with the Securities Act and the Rules, and conformed in
all material respects with the requirements of the Securities Act and the Rules,
and did not include 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. The Commission has not issued any order suspending or preventing the
use of Prospectus. When the Registration Statement shall become effective, when
the Prospectus is first filed pursuant to Rule 424(b) of the Rules, when any
post-effective amendment of the Registration Statement shall become effective,
when any supplement to or preeffective amendment of the Prospectus is filed with
the Commission and at the Closing Date, the Registration Statement and the
Prospectus (and any amendment thereof or supplement thereto) will comply with
the applicable provisions of the Securities Act and the Securities Exchange Act
of 1934 (the "Exchange Act"), and the respective rules and regulations of the
Commission thereunder, and neither the Registration Statement nor the
Prospectus, nor any amendment thereof or supplement thereto, will contain any
untrue statement of a material fact or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representation or
warranty as to the information contained in or omitted from the Registration
Statement or the Prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of and with respect to the Underwriter, specifically for
use in connection with the preparation thereof.
4.2 DESCRIPTIONS IN AND EXHIBITS TO REGISTRATION STATEMENT AND
PROSPECTUS. All contracts and other documents required to be described in or
filed as exhibits to the Prospectus or the Registration Statement have been
described in or filed with the Commission as exhibits to the Prospectus or the
Registration Statement in accordance with the Securities Act and the Rules.
4.3 FINANCIAL INFORMATION. The financial statements of the
Company (including all notes and schedules thereto) included in the Registration
Statement and the Prospectus fairly present, respectively, the financial
position, the results of operations, the changes in financial position and the
changes in shareholders' equity of the Company at the respective dates and for
the respective periods to which they apply; such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved, and all adjustments
necessary for a fair presentation of the results for such periods have been
made; and the other financial and statistical information and data included in
the Registration Statement and the Prospectus (and any amendment or supplement
thereto) are accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
4.4 INDEPENDENT ACCOUNTANTS. To the best knowledge of the
Company, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose certified reports are filed with the
Commission as part of the Registration Statement, are, and during the periods
covered by their respective reports were, independent public accountants as
required by the Securities Act and the Rules.
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4.5 ORGANIZATION AND AUTHORITY OF COMPANY. The Company has
been duly organized and is validly existing as a corporation in good standing
under the laws of the Commonwealth of Pennsylvania. The Company is duly
qualified and in good standing as a foreign corporation in each jurisdiction,
including Ohio, in which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business makes such
qualification necessary and where such failure to be qualified would have a
Material Adverse Effect (as hereinafter defined). Except as described in the
Prospectus, the Company has no subsidiaries. Except as described in the
Prospectus, the Company does not own, lease or license any material property or
conduct any material business outside the United States of America. Except as
described in the Prospectus, the Company has all requisite power and authority,
and all necessary material authorizations, approvals, consents, orders,
licenses, certificates and permits of and from all federal, state and foreign
governmental or regulatory officials, bodies and tribunals, to own, lease,
license and operate its properties and conduct its business as now being
conducted and as described in the Prospectus; the Company has fulfilled and
performed all of its material obligations with respect to such permits and no
event has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material impairment of
the rights of the holder of any such permit; no such authorization, approval,
consent, order, license, certificate or permit contains a materially burdensome
restriction other than as disclosed in the Prospectus; and the Company has all
such power, authority, authorizations, approvals, consents, orders, licenses,
certificates and permits (except such as may be necessary to make the
Registration Statement effective and to qualify the Shares for public offering
by the Underwriter under state securities or "Blue Sky" laws) to enter into,
deliver and perform this Agreement and to issue and sell the Units.
4.6 INTANGIBLES. Except as described in the Prospectus, the
Company owns, or possesses adequate and enforceable rights to use, all patents,
patent applications, trademarks, trademark applications, service marks,
copyrights, copyright applications, licenses, inventions, trade secrets and
other similar rights (collectively, "Intangibles") necessary for the conduct of
the material aspects of its business in the United States as described in the
Prospectus and has not to the knowledge of the Company infringed, is not to the
knowledge of the Company infringing, or has not received any notice of
infringement of, any Intangibles of any other person which is reasonably likely
to have a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the Company or on
the transactions contemplated hereby (a "Material Adverse Effect"), and the
Company does not know of any basis therefor.
4.7 PROPERTY. The Company has good and marketable title to all
of the items of real property and good title to all of the items of personal
property which are reflected in the financial statements referred to in Section
4.3 or are referred to in the Prospectus as being owned by it and valid and
enforceable leasehold estates in each of the items of real and personal property
which are referred to in the Prospectus as being leased by it, in each case free
and clear of all liens, encumbrances, claims, security interests and defects,
other than those properly described in the Prospectus and those which do not and
will not have a Material Adverse Effect.
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4.8 PROCEEDINGS AND INVESTIGATIONS. Except as described in the
Prospectus, there are no material legal or governmental or other proceedings or
investigations pending before any court or before or by any public body or board
or, to the Company's knowledge, threatened (or any reasonable basis therefor)
against, or involving the properties or business of, the Company.
4.9 TAXES. The Company has filed all federal, state, local and
foreign tax returns required to be filed by it, which returns are complete and
correct in all material respects, and has paid all taxes shown due on such
returns as well as all other taxes, assessments and governmental charges which
have become due; no deficiency with respect to any such return has been assessed
or proposed; except in each case where the failure to file, failure to pay or
deficiency would not be reasonably likely to have a Material Adverse Effect.
4.10 MATERIAL CHANGES. Subsequent to the respective dates as
of which information is given in the Registration Statement and the Prospectus,
except as set forth in or contemplated by the Registration Statement and the
Prospectus, the Company has not (i) issued any securities, (ii) incurred any
liability or obligation, direct or contingent, or entered into any transaction,
not in the ordinary course of business, or (iii) declared or paid any dividend
or made any distribution on any shares of its stock or redeemed, purchased or
otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares
of its stock. In addition, subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as
set forth in or contemplated by the Registration Statement and the Prospectus,
there has not been any change in the capital stock and there has not been any
material adverse change, or any development involving or which may reasonably be
expected to involve, a prospective material adverse change, in the condition
(financial or other), earnings, business, properties, net worth, results of
operations or prospects of the Company, whether or not arising from transactions
in the ordinary course of business.
4.11 NO DEFAULT: AGREEMENTS. No default exists, and no event
has occurred which with notice or lapse of time, or both, would constitute a
default in the due performance and observance of any material term, covenant or
condition, by the Company, or, to the best of the Company's knowledge, any other
party, of any indenture, mortgage, deed of trust, note or any other agreement or
instrument to which the Company is a party or by which it or any of its
properties or businesses may be bound or affected and where such default would
be reasonably likely to have a Material Adverse Effect.
4.12 NO DEFAULT: ARTICLES AND BYLAWS; PERMITS, JUDGMENTS, AND
REGULATIONS. The Company is not in violation of any term or provision of its
Articles of Incorporation or Bylaws. The Company is not in violation of, nor is
it required to take any action to avoid any violation of, any franchise,
license, permit, judgment, decree, order, statute, rule or regulation, where the
consequences of such violation or prospective violation is reasonably likely to
have a Material Adverse Effect.
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4.13 NO DEFAULT: EXECUTION AND PERFORMANCE OF THIS AGREEMENT.
Except for instances which do not and will not have a Material Adverse Effect,
neither the execution, delivery and performance of this Agreement by the
Company, nor the consummation of the transactions contemplated hereby
(including, without limitation, the issuance and sale by the Company of the
Units), will give rise to a right to terminate or accelerate the due date of any
payment due under, or conflict with or result in the breach of any term or
provision of, or constitute a default (or an, event which with notice or lapse
of time, or both, would constitute a default) under, or require any consent
under, or result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company pursuant to the terms
of, any indenture, mortgage, deed of trust, note or other agreement or
instrument to which the Company is a party or by which it or any of its
properties or businesses is bound or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation or violate any provision of the
Articles of Incorporation or Bylaws of the Company.
4.14 CAPITAL STOCK; SHARES. All of the outstanding shares of
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and none of them was issued in violation of any preemptive or
other right. The issuance, sale and delivery of the Units have been duly
authorized by all necessary corporate action by the Company and, when issued,
sold and delivered against payment therefor pursuant to this Agreement, will be
duly and validly issued, fully paid and nonassessable and none of them will have
been issued in violation of any preemptive or other right. Except as disclosed
in the Prospectus, there is no outstanding option, warrant or other right
calling for the issuance of, and no commitment, plan or arrangement to issue,
any share of stock of the Company or any security convertible into or
exchangeable for stock of the Company. The capital stock of the Company conforms
in all material respects to all statements in relation thereto contained in the
Registration Statement and the Prospectus.
4.15 EXCHANGE ACT; NASDAQ. The Company has filed a Form 8-A
registration statement under the Exchange Act and the Common Stock will be
registered with the Commission pursuant to Section 12 of the Exchange Act as of
the Effective Date. The Company has applied to have both the Common Stock and
the Offering Warrants designated for trading on the National Association of
Securities Dealers, Inc. Nasdaq SmallCap Market, which application will be
effective on the Effective Date (subject, however, to compliance with all
listing criteria at the time of issuance).
4.16 REGISTRATION RIGHTS. No holder of any security of the
Company has the right or, because of the filing of the Registration Statement or
the consummation of the transactions contemplated in this Agreement, will have
the right, which right has not been waived, to (i) have any security owned by
such holder included in the Registration Statement or (ii) require any other
registration statement to be filed in connection with any capital stock of the
Company within 180 days from the date of the Prospectus.
4.17 AUTHORIZATION; ENFORCEABILITY. This Agreement and the
performance by the Company of its obligations under this Agreement, has been
duly and validly authorized,
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executed and delivered by the Company and is the legal, valid and binding
agreement and obligation of the Company, enforceable against the Company in
accordance with its terms, except as (i) the enforceability hereof may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, or other laws relating to creditors, rights generally, (ii) the
remedy of specific performance and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the courts before
which the proceeding may be brought, and (iii) rights to indemnity and
contribution hereunder may be limited by federal or state securities laws or
principles of public policy.
4.18 PROHIBITED ACTIVITIES. Neither the Company nor, to the
Company's knowledge, any director, officer, agent, employee or other person
authorized to act on behalf of the Company has (i) used any funds of the Company
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity, (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from funds of
the Company, (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977 in respect of the Company, or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment in respect
of the Company.
4.19 BOOKS AND RECORDS. The Company makes and keeps accurate
books and records reflecting its assets and maintains internal accounting
controls which provide reasonable assurance that (i) transactions are executed
with management's authorization, (ii) transactions are recorded as necessary to
permit preparation of the Company's consolidated financial statements and to
maintain accountability for the assets of the Company, (iii) access to the
assets of the Company is permitted only in accordance with management's
authorization, and (iv) the reported accountability of the assets of the Company
is compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
4.20 STABILIZATION AND MANIPULATION. Neither the Company nor,
to the Company's knowledge, any affiliate of the Company has taken, and the
Company will not take, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of the
Common Stock in order to facilitate the sale or resale of any of the Shares.
4.21 AFFILIATED TRANSACTIONS. No transaction has occurred
between or among the Company and any of its officers or directors or any of the
shareholders holding 10% or more of the outstanding shares of any class of the
Company's stock or any affiliate or affiliates of any such officer, director or
shareholder, that is required to be described in and is not described in the
Prospectus.
4.22 INVESTMENT COMPANY. The Company is not now, and after the
sale of the Shares to be sold by it hereunder and application of the net
proceeds from such sale as described in the Prospectus under the caption "Use of
Proceeds" will not be, an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
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4.23 GOVERNMENTAL AUTHORITIES AND REGULATIONS. Except as set
forth in the Registration Statement and the Prospectus, to the Company's
knowledge (i) the Company is not in violation of any order of any governmental
authority directing the Company to make any material change in the method of
conducting its business, (ii) the Company has conducted and is conducting its
business so as to comply in all material respects with all applicable statutes
and regulations, (iii) neither the Company nor any affiliated persons thereof is
a party or directly or indirectly subject to any supervisory agreement or other
similar operating restrictions imposed by any governmental authority which have
had or may be expected to have a material effect on the conduct of any of the
business of the Company.
4.24 LOCK-UP ARRANGEMENTS. The Company has obtained from all
of its officers and directors and their written letters of agreement that for a
period beginning on the Closing Date and ending on the close of business 12
months thereafter they will not, without the prior written consent of the
Underwriter, offer, sell, contract to sell or grant any option for the sale of
or otherwise dispose of, directly or indirectly, any shares of Common Stock of
the Company (or any securities convertible into or exercisable for such shares
of Common Stock) owned by them, except as provided herein or in the Registration
Statement, and except for bona fide gifts to persons who agree in writing with
the Underwriter to be bound by this clause.
4.25 LABOR DISPUTES. The Company is not involved in any labor
dispute which would have a Material Adverse Effect and no such dispute is
threatened.
4.26 CONSENTS AND APPROVALS. Except for the order of the
Commission declaring the Registration Statement effective and permits and
similar authorizations required under the securities or Blue Sky laws of certain
jurisdictions, no consent, authorization, or approval is required from any
federal, state or local governmental agency or body or from any other third
party in connection with this Agreement and the transactions contemplated hereby
other than such consents, authorizations or approvals as have been obtained.
4.27 EQUITY INTERESTS. The Company does not own any shares of
stock or any securities of any corporation and does not have any equity interest
in any firm, partnership, association or other entity that is required to be
disclosed, and is not disclosed, in the Registration Statement and the
Prospectus.
4.28 DISTRIBUTION OF OFFERING MATERIALS. The Company has not
distributed and, prior to the later to occur of (i) the Closing Date and (ii)
the completion of the distribution of the Units, will not distribute any
offering material in connection with the offering and sale of the Units other
than the Registration Statement, the Prospectus or other materials, if any,
permitted by the Securities Act and the Rules.
4.29 ENVIRONMENTAL MATTERS. The Company (i) is in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants
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or contaminants ("Environmental Laws"), (ii) has received all permits, licenses
or other approvals required of it under applicable Environmental Laws to conduct
its business, and (iii) is in compliance with all terms and conditions of any
such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or approvals
or, failure to comply with the terms and conditions of such permits, licenses or
approvals would not, singly or in the aggregate, have a Material Adverse Effect.
4.30 DOING BUSINESS WITH CUBA. The Company has complied with
all provisions of Florida Statutes, Section 517.075, relating to issuers doing
business with Cuba.
5. REPRESENTATION AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
Selling Shareholder represents and warrants, as to such Selling Shareholder only
and not as to the other Selling Shareholders, severally and not jointly, to the
Underwriter (a) that such Selling Shareholder now has, and on the Closing Date
will have valid title to such of the shares of Common Stock as are to be sold by
such Selling Shareholder pursuant to this Agreement, free and clear of any
security interests, claims, liens, equities and other encumbrances, (b) that
such Selling Shareholder now has, and on the Closing Date will have, the legal
right and power, and all consents, approvals and authorizations required by law,
to enter into this Agreement and to sell, transfer and deliver such shares of
Common Stock in the manner provided in this Agreement and that no such action
will contravene any provision of applicable law or any material agreement or
other instrument binding upon such Selling Shareholder, (c) that all information
furnished in writing by or on behalf of such Selling Shareholder for use in the
Registration Statement and Prospectus is, and on the Closing Date will be, true,
correct and complete in all material respects, and (d) without having undertaken
to determine the accuracy or completeness of the information contained in the
Registration Statement (except as provided by such Selling Shareholder), nothing
has come to the attention of such Selling Shareholder which leads it to believe
that the Registration Statement contains any untrue statement of a material fact
or omits to state any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
6. CONDITIONS TO CLOSING. The Closing shall be subject to each of the
following terms and conditions:
6.1 EFFECTIVENESS OF REGISTRATION STATEMENT; NO STOP ORDER.
The Registration Statement shall have become effective not later than 5:00 P.M.,
Eastern Time, on the date of this Agreement or on such later date and time as
shall be consented to in writing by the Underwriter. At the Closing Date, if
any, no stop order shall have been issued or proceedings therefor initiated or
threatened by the Commission and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to your satisfaction.
6.2 OPINION OF COMPANY COUNSEL. At each Closing Date, you
shall have received the favorable opinion of ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
counsel for the Company, dated the
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Closing Date and addressed to the Underwriter and in form and scope satisfactory
to counsel for the Underwriter, to the effect that:
(i) The Company is a corporation duly incorporated
and validly existing in good standing under the laws of the Commonwealth of
Pennsylvania, is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which the character or location of its properties (owned,
leased or licensed), the maintenance of an office or the nature of its business
makes such qualification necessary, except where the failure so to qualify would
not have a Material Adverse Effect, and has full corporate power and authority
and, to the best of such counsel's knowledge after due inquiry, all necessary
and material authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental regulatory officials and bodies, to own,
lease, license and operate its properties and to conduct its business in the
United States as now being conducted as described in the Registration Statement
and Prospectus;
(ii) The Company has authorized and outstanding
capital stock as set forth under the caption "Capitalization" in the
Registration Statement and the Prospectus; all the shares of capital stock of
the Company outstanding prior to the issuance of the Units to be issued and sold
by the Company hereunder have been duly authorized and validly issued and are
fully paid and nonassessable and none of them were issued in violation of any
preemptive or other right; the Units to be issued and sold by the Company
hereunder have been duly authorized and, when issued, sold and delivered against
payment therefor pursuant to this Agreement, will be validly issued, fully paid
and nonassessable, and none of them will have been issued in violation of any
preemptive or, to the knowledge of such counsel after due inquiry, similar
rights that entitle or will entitle any person to acquire any shares of Common
Stock upon the issuance of the Units by the Company (other than upon exercise of
the Offering Warrants contained in the Units); and the Units and the other
capital stock of the Company conform as to legal matters to the description
thereof contained under the caption "Description of Securities" in the
Registration Statement and the Prospectus;
(iii) To such counsel's knowledge after due inquiry,
the Company does not own any shares of stock or any securities of any
corporation or have any equity interest in any firm, partnership, association or
other entity that is required to be disclosed, and is not disclosed, in the
Registration Statement and the Prospectus;
(iv) The certificates evidencing the Shares are in
the form approved by the Board of Directors of the Company and comply with the
Bylaws and the Articles of Incorporation of the Company and the laws of the
Commonwealth of Pennsylvania.
(v) The Company has the corporate power and authority
to enter into this Agreement and to issue, sell and deliver the Units to be sold
by it as provided herein, and this Agreement has been duly and validly
authorized, executed and delivered by the Company, and is a valid, legal and
binding agreement and obligation of the Company, enforceable against the Company
in accordance with its terms, except as enforcement of rights to indemnity and
contribution hereunder may be limited by federal or state securities laws or
principles of public
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policy and subject to the qualification that the enforceability of the Company's
obligations hereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles;
(vi) To the best of such counsel's knowledge after
due inquiry, there are (A) no contracts or other documents which are required to
be described in or filed as exhibits to the Registration Statement or the
Prospectus other than those described in or filed as exhibits thereto, (B) no
legal or governmental or other proceedings or investigations pending or
threatened against, or involving the assets, properties or business of, the
Company, of a character required to be disclosed in the Registration Statement
and Prospectus, which have not been so disclosed and properly described therein,
and (C) no statutes or regulations applicable to the Company, or material
certificates, permits, grants or other consents, approvals, orders, licenses or
authorizations from regulatory officials or bodies, required to be obtained or
maintained by the Company, of a character required to be disclosed in the
Registration Statement and Prospectus, which have not been so disclosed and
properly described therein;
(vii) Neither the execution, delivery and performance
of this Agreement by the Company, nor the consummation of the transactions
herein contemplated (including, without limitation, the issuance and sale by the
Company of the Units), will give rise to a right to terminate or accelerate the
due date of any payment due under, or conflict with or result in a breach of any
term or provision of, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or require consent
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or asset of the Company pursuant to the terms of
any agreement or instrument known to such counsel (having made due inquiry with
respect thereto) to which the Company is a party or by which the Company or any
of the properties or business of the Company is bound, nor will such action
result in any violation of the provisions of the Articles of Incorporation or
Bylaws of the Company or, to the knowledge of such counsel, any statute or any
order, rule, or regulation applicable to the Company or, to the knowledge of
such counsel, any court or any federal, state, local or other regulatory
authority or other governmental body having jurisdiction over the Company;
(viii) To the best of such counsel's knowledge after
due inquiry, no consent, approval, authorization or order of, or registration or
filing with, any court or governmental agency or body, domestic or foreign, is
required to be obtained by or on behalf of the Company in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby (including, without limitation, the issuance
and sale by the Company of the Units), except such as may be required under the
Securities Act, by the National Association of Securities Dealers, Inc. or under
state securities or Blue Sky laws;
(ix) To the best of such counsel's knowledge after
due inquiry, and except for those instances which do not and will not have a
Material Adverse Effect, the
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Company (a) is not in default (nor has an event occurred which, with notice or
lapse time or both, would constitute a default) under, any indenture, mortgage,
deed of trust, note, bank loan or credit agreement or any other material
agreement or instrument to which the Company is a party or by which it or any of
its properties or assets may be bound or affected, (b) is not in violation of
any term or provision of its Articles of Incorporation or Bylaws, and, (c) is
not in violation of any material franchise, license, grant, permit, judgment,
decree, order, statute, rule or regulation or has received any notice of
conflict with the asserted rights of others in respect of Intangibles necessary
for the conduct of its business, where, in each case, such matter is required to
be described in the Registration Statement and the Prospectus and is not
described therein;
(x) The Registration Statement and the Prospectus and
any amendments or supplements thereto (other than the financial statements, the
forecasts 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 Securities Act and the Rules;
(xi) The Registration Statement (including all
post-effective amendments, if any) is effective under the Securities Act and the
Rules, and, to the best of such counsel's knowledge after due inquiry, no stop
order suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose are pending or threatened under the
Securities Act; and any required filing of the Prospectus pursuant to Rule
424(b) has been made in accordance with Rule 424(b);
(xii) To the best of such counsel's knowledge after
due inquiry, (A) the Company has good and marketable title to, or valid and
enforceable leasehold estates in, the items of real and personal property stated
in the Prospectus to be owned or leased by it, in each case free and clear of
all liens, encumbrances, and security interests, other than those referred to in
Prospectus and those which do not have a Material Adverse Effect, and (B) the
Company owns, or possesses adequate and enforceable rights to use, the
Intangibles (subject, with respect to copyrights owned by the Company, to
registration of those copyrights in the U.S. Copyright Office, upon which
registration the Company will be entitled to ▇▇▇ for infringement of those
copyrights), except as described in the Prospectus or where the lack of such
ownership or possession would not have a Material Adverse Effect; and
(xiii) The Company is not, after giving effect to the
sale of the Units sold by it hereunder and application of the net proceeds from
such sale as described in the Prospectus under the caption "Use of Proceeds", an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
In addition, such counsel will state that, in the course of preparation
of the Registration Statement and the Prospectus, (X) such counsel had
conferences with officials of the Company, its independent auditors, and with
representatives of the Underwriter and its counsel, and also had discussions
with such officials of the Company with a view toward a clear understanding on
their part of the requirements of the Securities Act and the Rules with
reference to the preparation of
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registration statements and prospectuses, and (Y) such counsel's examination of
the Registration Statement and Prospectus and its discussions in the
above-mentioned conferences did not disclose to it any information which gives
it reason to believe that the Registration Statement or the Prospectus (other
than the schedules, financial statements, forecasts and other financial and
statistical information as to which such counsel need express no comment or
opinion) at the time the Registration Statement became effective contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus (other than the schedules, financial
statements, forecasts and other financial and statistical information as to
which such counsel need express no comment or opinion) contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
Such opinion shall be to such further effect with respect to other
legal matters relating to this Agreement and the sale of the shares as counsel
for the Underwriter may reasonably request.
In rendering the foregoing opinion, such counsel may rely (A) as to
matters not governed by federal law or the laws of jurisdictions in which they
are admitted on opinions of other legal counsel reasonably satisfactory to the
Underwriter and its counsel and upon which, in such counsel's opinion, such
counsel is justified in relying, and (B) as to matters of fact upon certificates
of public officials and officers of the Company. Where such opinion shall state
that a matter is to the best of such counsel's knowledge after due inquiry, it
shall mean actual knowledge of those attorneys who have provided substantive
services in connection with the matters contemplated by this Agreement and may
be based upon certificates of a responsible officer of the Company and letters
received by the Company or such counsel from other legal counsel to the Company.
Copies of all such opinions and certificates shall be furnished to counsel to
the Underwriter on the Closing Date.
6.3 OPINION OF COUNSEL TO SELLING SHAREHOLDERS. At the Closing Date you
shall have received the opinion of ▇▇▇▇, Stettinius & Hollister, counsel to the
Selling Shareholders, to the effect that:
(i) This Agreement has been duly authorized, executed
and delivered by or on behalf of each of the Selling Shareholders and is a valid
and binding agreement of each of the Selling Shareholders, except as rights to
indemnity hereunder may be limited under applicable law;
(ii) To the best of such counsel's knowledge in
reliance upon one or more certificates from the Selling Shareholders, without
independent verification, (A) the execution, delivery and performance of this
Agreement will not contravene any material agreement or other instrument binding
upon any Selling Shareholder or any writ, order of injunction of any court or
other governmental body and (B) no consent, approval, authorization or order of,
or registration or filing with, any court or governmental body or agency is
required for the performance of this Agreement by any Selling Shareholder,
except such as are specified
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and have been obtained and such as may be required by the securities or Blue Sky
laws of the various states in connection with the offering of the Shares by the
Underwriter (as to which such counsel need not express any opinion);
(iii) Each of the Selling Shareholders has good,
valid and marketable title to the shares of Common Stock to be sold by such
Selling Shareholder and has the legal right and power, and all authorization and
approval required by law, to enter into this Agreement and to sell, transfer and
deliver such shares to be sold by such Selling Shareholder pursuant to the terms
of this Agreement.
(iv) To the best knowledge of such counsel, the
delivery of the certificates representing the shares of Common Stock to be sold
by each Selling Shareholder pursuant to this Agreement against payment therefor
as provided in this Agreement will pass valid title to such shares to the
purchase thereof free and clear of any security interests, claims, liens,
equities and other encumbrances, assuming that such purchasers are each "bona
fide purchasers (as defined under Pennsylvania Law).
6.4 REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Company and the Selling Shareholders contained in this
Agreement shall be true and correct on and as of the date of this Agreement and
on and as of the Closing Date as if made on and as of the Closing Date.
6.5 PERFORMANCE. Neither the Company nor any of the Selling
Shareholders shall have failed at or prior to the Closing Date to have performed
or complied with any of its or their agreements herein contained and required to
be performed or complied with by it or them hereunder at or prior to the Closing
Date.
6.6 OFFICER'S CERTIFICATE. At each Closing Date, the
Underwriter shall have received a certificate of the principal executive officer
of the Company dated the Closing Date, stating that (i) the Company shall not
have failed at or prior to the Closing Date to have performed or complied with
any of its agreements herein required to be performed or complied with it
hereunder at or prior to the Closing Date, and (ii) all of the representations
and warranties of the Company contained in this Agreement are be true and
correct on and as of the date of this Agreement and on and as of the Closing
Date, as if made on and as of the Closing Date.
6.7 ACCOUNTANT'S LETTER. At the time this Agreement is
executed and at the Closing Date, you shall have received a letter, addressed to
the Underwriter and in form and substance satisfactory to the Underwriter in all
respects (including the nonmaterial nature of the changes or decreases, if any,
referred to in clause 6.7 (iii) below), from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP dated as of the
date of this Agreement and as of the Closing Date:
(i) Confirming that they are independent public
accountants with respect to the Company within the meaning of the Securities Act
and the applicable published Rules and
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stating that the answer to Item 13 of Part I of Registration Statement is
correct insofar as it relates to them;
(ii) Stating that, in their opinion, the financial
statements of the Company examined by them and included in the Registration
Statement and in the Prospectus comply as to form in all material respects with
the applicable accounting requirements of the Securities Act and the related
published Rules as they relate to small business issuers;
(iii) Stating that, on the basis of procedures used,
including a formal review, made in accordance with generally accepted auditing
standards but not an examination, 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 of the Company and committees of such boards and inquiries to
certain officers and other employees of the Company responsible for financial
and accounting matters and other specified procedures and inquiries, nothing has
come to their attention that would cause them to believe that: (A) the unaudited
financial statements and related schedules of the Company, included in the
Registration Statement and Prospectus, if any, (1) do not comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act and the related Rules, or (2) were not fairly presented in
conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements included
in the Registration Statement and Prospectus; (B) at a specified date not more
than five business days prior to the date of such letter, there was any change
in the capital stock or long-term debt of the Company as compared with the
amounts shown on the balance sheet of the Company included in the Registration
Statement and Prospectus, other than as set forth in or contemplated by the
Registration Statement and Prospectus or, if there was any change or decrease,
setting forth the amount of such change or decrease; and (C) during the period
from _______, 1997 to a specified date not more than five business days prior to
the date of such letter, there was any decrease in total revenues, operating
income, net income or earnings per share of the Company, as compared with the
corresponding period beginning _______, 1996 other than as set forth in or
contemplated by the Registration Statement and Prospectus, or, if there was any
such decrease, setting forth the amount of such decrease; and
(iv) Stating that they have compared the selected
financial data, specific dollar amounts, numbers of shares, percentages of
revenues and earnings and other financial information pertaining to the Company
set forth in the Prospectus, which have been specified by the Underwriter prior
to the date of this Agreement, to the extent that such amounts, numbers,
percentages and information may be derived from the general accounting records
of the Company, and excluding the forecasts and 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.
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6.8 SATISFACTORY OFFERING PROCEEDINGS; OPINION OF
UNDERWRITER'S COUNSEL. All proceedings taken in connection with the sale of the
Shares as herein contemplated shall be reasonably satisfactory in form and
substance to the Underwriter and to counsel for the Underwriter, and the
Underwriter shall have received from said counsel for the Underwriter a
favorable opinion, dated as of each Closing Date, with respect to such of the
matters set forth under subsection 6.2, and with respect to such other related
matters, as the Underwriter may reasonably require.
6.9 NO STOP ORDER. No order suspending the sale of the Units,
in any jurisdiction designated by the Underwriter pursuant to subsection 7.4
hereof, shall have been issued on the Closing Date, and no proceedings for that
purpose shall have been instituted or, to the Underwriter's knowledge or that of
the Company, shall be contemplated.
6.10 NASD REVIEW. The National Association of Securities
Dealers (the "NASD"), upon review of the terms of the public offering of the
Units, shall not have objected to the Underwriter's participation in the same.
6.11 NASDAQ. The Common Stock and the Offering Warrants each
shall have been designated or approved for designation upon notice of issuance
on the Nasdaq SmallCap Market without waiver of any quantitative criterion for
such designation.
6.12 LOCK-UP LETTERS. You shall have received on or before the
Closing Date all "lock-up" letters described in subsections 4.24 and 7.9 hereof.
6.13 OTHER. The Company shall have furnished or caused to be
furnished to you such further certificates and documents as you shall have
reasonably requested.
Any certificate signed by any officer of the Company and delivered to
the Underwriter or to counsel for the Underwriter shall be deemed a
representation and warranty by the Company to the Underwriter as to the
statements made therein. If any condition to the Underwriter's obligations
hereunder to be fulfilled prior to or at the Closing Date is not so fulfilled,
the Underwriter may terminate this Agreement or, if the Underwriter so elects,
waive any such conditions which have not been fulfilled or extend the time of
their fulfillment.
7. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Underwriter as follows:
7.1 REGISTRATION STATEMENT. The Company will use its best
efforts to cause the Registration Statement to become effective and will notify
the Underwriter immediately, and confirm the notice in writing, (i) when the
Registration Statement and any post-effective amendment thereto becomes
effective, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceedings for that purpose, and (iii)
of the receipt of any comments from the Commission. The Company will make every
reasonable effort to
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prevent the issuance of a stop order, and, if the Commission shall enter a stop
order at any time, the Company will make every reasonable effort to obtain the
lifting of such order at the earliest possible moment.
7.2 DELIVERY OF PROSPECTUS; AMENDMENTS AND SUPPLEMENTS. During
the time when a prospectus is required to be delivered under the Securities Act,
the Company will comply so far as it is able with all requirements imposed upon
it by the Securities Act, as now and hereafter amended, and by the Rules, from
time to time in force, so far as necessary to permit the continuance of sales of
or dealings in the Units in accordance with the provisions hereof and the
Prospectus. If at any time when a prospectus relating to the Units is required
to be delivered under the Securities Act any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriter, the Registration Statement or 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 or supplement
the Registration Statement or Prospectus to comply with the Securities Act, the
Company will notify the Underwriter promptly and prepare and file with the
Commission an appropriate amendment or supplement in form satisfactory to the
Underwriter. The cost of preparing, filing and delivering copies of such
amendment or supplement shall be paid by the Company.
7.3 DELIVERY AND USE OF PROSPECTUS. The Company will deliver
to the Underwriter one copy of the Registration Statement, including exhibits,
and all post-effective amendments thereto and such number of copies of the
Prospectus as the Underwriter may reasonably request for the purposes
contemplated by the Securities Act.
7.4 BLUE SKY QUALIFICATION. The Company will endeavor in good
faith, in cooperation with the Underwriter and its counsel, at or prior to the
time the Registration Statement becomes effective, to qualify the Units for
offering and sale under the securities laws relating to the offering or sale of
the Units of such jurisdictions as the Underwriter may reasonably designate and
will file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
no such qualification shall be required in any jurisdiction in which such
qualification will require the Company to qualify to do business as a foreign
corporation where it is not now so qualified or to take action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Units, in any jurisdictions where it is not now so
subject. 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, file and make such statements or reports at such times
as are or may reasonably be required by the laws of such jurisdiction.
7.5 DOCUMENTS TO BE FURNISHED TO THE UNDERWRITER. For a period
of three years from the effective date of the Registration Statement, the
Company will furnish to the Underwriter the following:
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(i) As soon as practicable after they have been sent
to shareholders of the Company or filed with the Commission, three copies of
each annual and interim financial and other report or communication sent by the
Company to its shareholders or filed with the Commission; and
(ii) As soon as practicable, three copies of every
press release and every material news item and article in respect of the Company
or the affairs of the Company which was released by the Company.
7.6 APPLICATION OF NET PROCEEDS. The Company will apply the
net proceeds from the sale of the Units sold by it hereunder in the manner set
forth under "Use of Proceeds" in the Prospectus.
7.7 UNAUDITED INTERIM FINANCIAL STATEMENTS. The Company will
furnish to the Underwriter as early as practicable prior to the Closing Date,
but not later than two full business days prior thereto, a copy of the latest
available unaudited interim financial statements of the Company which have been
read by the Company's independent public accountants as stated in their letters
to be furnished pursuant to subsection 6.7 hereof.
7.8 SECURITIES ACT AND EXCHANGE ACT REQUIREMENTS. The Company
will use its best efforts to comply with all registration, filing and reporting
requirements of the Securities Act or the Exchange Act, which may from time to
time be applicable to the Company.
7.9 LOCK-UP ARRANGEMENTS. The Company will not, without the
prior written consent of the Underwriter offer, sell, contract to sell or grant
any option for the sale or otherwise dispose of, directly or indirectly, any
shares of Common Stock of the Company (or any securities convertible into or
exercisable for such shares of Common Stock) or register with the Commission any
securities of the Company prior to the close of business on the date 12 months
from the Effective Date, except for (i) the registration of the Units pursuant
to the Registration Statement, (ii) shares issuable upon the exercise of options
granted under the Company's 1997 Stock Option Plan, (iii) the exercise of
Warrants associated with the Units, and (iv) the exercise of outstanding
warrants.
7.10 STABILIZATION AND MANIPULATION. Except as stated in this
Agreement and in the Preliminary Prospectus and Prospectus, the Company has not
taken, nor will it take, directly or indirectly, any action designed to or that
might reasonably by expected to cause or result in stabilization or manipulation
of the price of the Common Stock to facilitate the sale or resale of the Units.
7.11 SECONDARY TRADING QUALIFICATIONS. Until such time as the
Common Stock becomes eligible for trading on the Nasdaq National Market or a
registered stock exchange reasonably acceptable to the Underwriter, the Company
shall use its best efforts to maintain the listing of the Common Stock on the
Nasdaq SmallCap Market for at least five years from the Effective Date.
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7.12 KEY MAN INSURANCE. The Company shall obtain and maintain
in full force and effect a key man life insurance policy in the amount of at
least $500,000 on the life of the Company's President, ▇▇▇▇▇▇ ▇. ▇▇▇▇, for a
minimum period of the longer of (a) three years from the Effective Date, or (b)
the term of any employment agreement between ▇▇. ▇▇▇▇ and the Company.
7.13 BOARD OF DIRECTORS. For a period of three years from the
Effective Date, the Company shall take all necessary actions to secure the
election or appointment to its Board of Directors of two persons designated by
the Underwriter, or the appointment of two such persons as advisors to the Board
provided any such designees are subject to the approval of the Company's Board
of Directors.
7.14 PUBLIC RELATIONS. For a period of three years from the
Effective Date, the Company shall retain, at its expense, and utilize a public
relations firm acceptable to the Underwriter.
7.15 ANALYST. At the expiration of the "quiet period"
applicable to the Registration Statement under the Securities Act, and again six
months thereafter, the Company shall retain, at its expense, a securities
analyst acceptable to the Underwriter who shall then prepare research reports on
the Company.
7.16 CERTAIN RECORDS. For a period of three years from the
Effective Date, the Company at its expense, shall provide the Underwriter with
copies of the Company's daily stock transfer sheets, which the Company shall
send to the Underwriter at least weekly.
7.17 RIGHT OF FIRST REFUSAL. If at any time during the period
ending on the third anniversary of the Effective Date, the Company proposes to
effect a public or private offering of equity or debt securities, prior to
commencing such offering, the Company shall notify the Underwriter in writing of
such proposed offering. Such notice shall include a complete description of the
proposed offering, including the amount and nature of the security to be
offered, the total dollar amount of anticipated or desired proceeds, the price
per share or other investment unit, the type of offering, the proposed
underwriting or other placement consideration and all other material details.
The Underwriter shall have the exclusive right, for a period of 30 days from the
date of such notice, to enter into an agreement to act as the Company's
exclusive underwriter, placement agent or financial advisor with respect to such
proposed offering on the proposed terms and conditions as set forth in the
notice.
Upon the earlier of the Company's receipt of a
written notice from the Underwriter that the Underwriter will not exercise such
right of first refusal, or the expiration of such 30-day period, the Company may
effect the proposed offering with an underwriter, placement agent or financial
advisor other than the Underwriter on the same terms and conditions contained in
the notice to the Underwriter. The foregoing right of first refusal shall
terminate on the earlier of (i) successful completion of the proposed offering
on the terms proposed, (ii)
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expiration of the three year period set forth above, or (iii) the Company's
payment of a Termination Fee, as described below, to the Underwriter. The
Termination Fee shall be an amount in cash equal to the greater of 1% of the
total offering proceeds of the public offering to which this Agreement relates
or 5% of the underwriting discount or commission that would be payable under an
offering proposed by the Company under this Section 7.18.
8. INDEMNIFICATION AND CONTRIBUTION.
8.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Underwriter and each person, if any, who
controls the Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities, joint or several (including any reasonable
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they or any of them, may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a 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 such indemnity shall not inure to the benefit of the Underwriter (or any
person controlling the Underwriter) on account of any losses, claims, damages or
liabilities arising from the sale of the Shares if such untrue statement or
omission or alleged untrue statement or omission was made in the Registration
Statement or the Prospectus, or such amendment or supplement, in reliance upon
and in conformity with information furnished in writing to the Company by the
Underwriter specifically for use therein. The Company shall not be liable
hereunder to the Underwriter, or any controlling person thereof, to the extent
that any loss, claim, damage or other liability incurred by the Underwriter
arises from the Underwriter's fraudulent act or omission.
8.2 INDEMNIFICATION BY THE UNDERWRITER. The Underwriter agrees
to indemnify and hold harmless the Company, the Selling Shareholders, each
person, if any, who controls the Company or any Selling Shareholder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
each director of the Company and each officer of the Company who signs the
Registration Statement, to the same extent as the foregoing indemnity from the
Company to the Underwriter, but only insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or omission or
alleged untrue statement or mission which was made in the Registration Statement
or the Prospectus, or any amendment thereof or supplement thereto, in reliance
upon and in conformity with information furnished in writing to the Company by
the Underwriter specifically for use therein. The Underwriter shall not be
liable hereunder to the Company or any Selling Shareholder (including any
controlling person, director or officer thereof) to the extent that any loss,
claim, damage or other liability incurred by the Company arises from a
fraudulent act or omission by the Company or such Selling Shareholder.
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8.3 INDEMNIFICATION BY THE SELLING SHAREHOLDERS. Each Selling
Shareholder, severally and not jointly, agrees to indemnify and hold harmless
the Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
against any losses, claims, damages or liabilities to which any such person may
become subject under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement of any material
fact contained in the Registration Statement, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or alleged omission to state therein a
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, and will reimburse such person for any legal or other expenses
reasonably incurred by such person in connection with investigating or defending
any such loss, claim, damage, liability, action or proceeding; provided,
however, that a Selling Shareholder will only be liable in any such case and to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement, or alleged untrue statement, or omission or
alleged omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any such amendment or supplement, in conformity with written
information furnished by or on behalf of such Selling Shareholder specifically
for use in the preparation thereof. In no event, however, shall the liability of
any Selling Shareholder for indemnification under this Section exceed an amount
equal to the offering price of the Common Stock sold by such Selling
Shareholder, less applicable underwriting discounts and commissions.
8.4 PROCEDURES. Any party that proposes to assert the right to
be indemnified under this Section 8 shall, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party or parties under this
Section 8, notify each such indemnifying party of the commencement of such
action, suit or proceeding, but the omission so to notify such indemnifying
party of any such action, suit or proceeding shall not relieve it from any
liability that it may have to any indemnified party otherwise than under this
Section. In the event any such action, suit or proceeding is brought against any
indemnified party and such indemnified party notifies the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and the approval by the indemnified party of such counsel, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses, except as provided below and except for the reasonable costs
of investigation subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the right to employ
its counsel in any such action, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the employment of counsel
by such indemnified party has been authorized in writing by the indemnifying
parties, (ii) the indemnified party shall have reasonably concluded that,
because of the existence of different or additional defenses available to the
indemnified party or of other
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reasons, there may be a conflict of interest between the indemnifying parties
and the indemnified party in the conduct of the defense of such action (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 (iii) the indemnifying
parties shall not have employed counsel to assume the defense of such action
within a reasonable time after notice of the commencement thereof, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying parties, provided that the Company shall not be required to pay the
fees and expenses of more than one additional law firm representing the
Underwriter. An indemnifying party shall not be liable for any settlement of any
action, suit, proceeding or claims effected without its written consent, and no
settlement shall be made without including a full and complete release of the
indemnifying parties in form and content reasonably satisfactory to such
indemnifying party.
8.5 CONTRIBUTION. If the indemnification provided for herein
is unavailable to an indemnified party under subsections 8.1, 8.2 or 8.3 hereof
in respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Selling shareholders, and the Underwriter respectively, from the
offering of the Units, or (ii) if the allocation provided by clause (i) 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 the Company, the Selling Shareholders, and the Underwriter,
respectively, in connection with the statements or omissions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, the Selling Shareholders and the Underwriter, respectively, shall be
deemed to be in the same proportion as the total net proceeds from the offering
and sale of the Units contemplated hereby (before deducting expenses) received
by the Company and the Selling Shareholders bear to the total underwriting
discounts and commissions received by the Underwriter, in each case as set forth
in the table on the cover page of the Prospectus. The relative fault of the
Company, the Selling Shareholders and the Underwriter, respectively, 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, the Selling
Shareholders, or the Underwriter, respectively, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, the Selling Shareholders, and the Underwriter agree that
it would not be just and equitable if contribution pursuant to this Section 8
were determined by a pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in this
subsection 8.5. The amount paid or payable to an indemnified party as a result
of the losses, claims, damages, liabilities and expenses referred to in this
subsection 8.5 shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, the Underwriter
shall not be required to contribute any amount in excess of the amount by which
the investment banking fees, underwriting commissions, and expense allowance
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amounts applicable to the Units offered by the Underwriter hereunder exceeds the
amount of any damages which the Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission and, notwithstanding any other provision of this Agreement, no Selling
Shareholder shall be required to contribute any amount in excess of the product
of the number of shares sold by such Selling Shareholder times the price per
share paid to such Selling Shareholder pursuant hereto. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11 of the Securities
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
Any party entitled to contribution shall, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties under this Section 8, notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
from whom contribution may be sought shall not relieve the party or parties from
whom contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this Section except to the extent that such
party has been harmed materially by the failure to receive such notice. No party
shall be liable for contribution with respect to any action, suit, proceeding or
claim settled without its written consent.
8.6 SCOPE. The obligations of the Company under this Section 8
shall be in addition to any liability which the Company may otherwise have and
obligations of the Underwriter under this Section 8 shall be in addition to any
liability which the Underwriter may otherwise have. In addition a successor to
the Underwriter or any person controlling the Underwriter or to the Company, its
directors or officers who signed the Registration Statement, or any person
controlling the Company shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
8.7 PAYMENTS. Any losses, claims, damages, liabilities or
expenses for which an indemnified party is entitled to indemnification or
contribution under this Section 8 shall be paid by the indemnifying party to the
indemnified party as such losses, claims, damages, liabilities or expenses are
incurred, subject to the agreement of such indemnified party to return any
amounts paid to it if it should be determined ultimately that the indemnified
party is not entitled to indemnification under this Section 8.
9. EFFECTIVENESS AND TERMINATION.
9.1 EFFECTIVENESS. This Agreement shall become effective on
the later of (i) the execution and delivery hereof by the parties hereto, or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the Registration Statement or a post-effective amendment thereto to be
declared effective by the Commission before the offering of the Shares may
commence, notification of the effectiveness of the Registration Statement or
such post-effective amendment by the Commission.
9.2 TERMINATION. This Agreement may be terminated by the
Underwriter by notifying the Company at any time prior to the Closing Date in
the Underwriter's sole and
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absolute discretion. If this Agreement is terminated pursuant to any of its
provisions, except as otherwise provided in this Agreement, the Company shall
not be under any liability to the Underwriter, and the Underwriter shall be
under no liability to the Company, except that if this Agreement is terminated
by the Underwriter because of any failure, refusal or inability on the part of
the Company to comply with the terms or to fulfill any of the conditions of this
Agreement, the Company will reimburse the Underwriter for all reasonable
out-of-pocket expenses (including the fees and disbursements of its counsel)
reasonably incurred by it in connection with the proposed offering of the Units
or in contemplation of performing its obligations hereunder.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates, and such representations, warranties and
agreements of the Company and the Underwriter, including the indemnity and
contribution agreements contained in Section 8, shall remain operative and in
full force and effect regardless of (i) any investigation made by or an behalf
of the Underwriter or any person controlling the Underwriter or the Company, its
directors or officers or any person controlling the Company and (ii) any
termination of this Agreement.
11. INFORMATION FURNISHED BY UNDERWRITER. The information set forth in
the last paragraph of the cover page and the section captioned "Underwriting" in
the Prospectus constitute the only information furnished by or on behalf of the
Underwriter as such information is referred to in this Agreement, including,
without limitation, as such information is referred to in subsection 4.1 and
Section 8 hereof.
12. EXPENSES. The Company agrees to pay whether or not the transactions
contemplated hereby are consummated or this Agreement is terminated, all costs
and expenses incident to the performance of the obligations of the Company under
this Agreement, including those relating to (i) the preparation, printing,
filing and delivery of the Registration Statement, including all exhibits
thereto, the Prospectus, all amendments of and supplements to the Registration
Statement and the Prospectus, and any duplicating of the Underwriting Agreement,
(ii) the issuance of the Units and the preparation and delivery of certificates
for the Common Stock and Offering Warrants, (iii) the registration or
qualification of the Units for offer and sale under the securities or "Blue Sky"
laws of the various jurisdictions referred to in subsection 7.4, including the
fees and disbursements of counsel for the Underwriter in connection with such
registration and qualification and the preparation and printing of preliminary
and supplemental Blue Sky memoranda, (iv) the furnishing (including costs of
shipping and mailing) to the Underwriter of copies of the Prospectus and all
amendments of or supplements to the Prospectus, and of the several documents
required by this Section to be so furnished, (v) the filing requirements of the
NASD in connection with its review of the terms of the public offering, (vi) the
furnishing (including costs of shipping and mailing) to the Underwriter of
copies of all reports and information required by subsection 7.5, (vii) the
inclusion of the Common and Stock and Offering Warrants on the Nasdaq SmallCap
Market, (viii) the transportation and other expenses of the Company in
connection with presentations to prospective purchasers of the Units, (ix) the
fees and expenses of the Company's accountants, and (x) all other incidental
costs of the offering not specifically assumed by the Underwriter.
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13. MISCELLANEOUS.
13.1 PARTIES IN INTEREST. This Agreement has been and is made
for benefit of the Underwriter, the Company, the Selling Shareholders, and their
respective successors and assigns, and, to the extent expressed herein, for the
benefit of persons controlling any of the Underwriter or the Company, and
directors and certain officers of the Company, and their respective successors
and assigns, and no other person, partnership, association or corporation shall
acquire or have any right under or by virtue of this Agreement.
13.2 NOTICES. All notices and communications hereunder shall
be in writing and mailed, telecopied or delivered or given by telephone or
verbally if subsequently confirmed in writing as follows:
(i) To the Underwriter: ▇.▇. ▇▇▇▇▇▇▇ & Associates, ▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Chairman and CEO (with a copy to ▇▇▇▇▇▇▇▇ & Shohl LLP, 1900 Chemed
Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇., Esq.);
(ii) To the Company: Dayton General Systems, Inc.,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇,
President (with copies to ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, 1800 Star Bank Center,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Esq.)
13.3 COUNTERPARTS. This Agreement may be executed by any one
or more of the parties hereto in any number of counterparts, each of which shall
be deemed an original, but all such counterparts shall together constitute one
and the same instrument.
13.4 CAPTIONS. The captions of the sections and subsections
have been inserted as a matter of convenience and reference only and shall not
control or affect the meaning or construction of this Agreement.
13.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to principles of conflicts of laws.
13.6 ENTIRE AGREEMENT. This Agreement is the entire agreement
and understanding of the parties and shall supercede any prior agreement of the
parties, whether oral or written.
If the foregoing correctly sets forth your understanding of the
agreement between us, please sign and return to us the enclosed copies hereof,
whereupon it will become a binding agreement by and among the Company and the
several Underwriter in accordance with its terms.
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Very truly yours,
DAYTON GENERAL SYSTEMS, INC.
By______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇, President
SELLING SHAREHOLDERS:
CHURCH STREET FINANCIAL CORP.
By___________________________________
Name:
No. of Shares Offered: 8,000
_____________________________________
Name: ▇.▇. ▇▇▇▇▇▇▇
No. of Shares Offered: 20,000
_____________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
No. of Shares Offered: 8,000
The foregoing Agreement is hereby confirmed and accepted by the undersigned.
▇.▇. ▇▇▇▇▇▇▇ & ASSOCIATES
By:__________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chairman and CEO
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EXHIBITS
Annex A - Form of Common Stock Warrant
Annex B - Form of Escrow Agreement
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