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Exhibit 1.1
600,000 Units, each Unit Consisting of
Two (2) Shares of Common Stock and
One (1) Class A Redeemable
Common Stock Purchase Warrant
of
▇▇▇▇▇ ▇▇▇▇, INC.
UNDERWRITING AGREEMENT
New York, New York
February , 1997
▇▇▇▇▇ ▇▇▇▇▇▇▇ Securities, LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇▇ ▇▇▇▇, Inc., a Delaware corporation (the "Company"), confirms its
agreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇ Securities, LLC ("▇▇▇▇▇ ▇▇▇▇▇▇▇"), with respect to
the sale by the Company and the purchase by the Underwriter, of 600,000 units
("Units"), each Unit consisting of two (2) shares (the "Shares") of the
Company's common stock, par value $.01 per share ("Common Stock"), and one (1)
Class A Redeemable Common Stock Purchase Warrant (the "Redeemable Warrants"),
each of which Redeemable Warrants entitles the holder thereof to purchase one
share of Common Stock at an exercise price of $7.00 per share pursuant to a
warrant agreement (the "Warrant Agreement") between the Company and the warrant
agent, set forth in Schedule I annexed hereto, and with respect to the grant by
the Company to the Underwriter of the option described in Section 2(b) hereof to
purchase all or any part of 90,000 additional Units for the purpose of covering
over-allotments, if any. The aforesaid 600,000 Units, 1,200,000 Shares and
600,000 Redeemable Warrants (the "Firm Securities") and together with all or any
part of the Units, Shares and Redeemable Warrants subject to the overallotment
option described in Section 2(b) hereof (the "Overallotment
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Securities") are hereinafter collectively referred to as the "Securities". The
Company also proposes to issue and sell to the Underwriter, an option (the "Unit
Purchase Option") pursuant to the Underwriter's Unit Purchase Option Agreement
(the "Underwriter's Unit Purchase Option Agreement") for the purchase of an
aggregate of 60,000 additional Units consisting of 120,000 Shares (the
"Underwriter's Unit Shares") and 60,000 Common Stock Purchase Warrants (the
"Underwriter's Unit Warrants"). The shares of Common Stock issuable upon
exercise of the Redeemable Warrants and the Underwriter's Unit Warrants are
hereinafter sometimes referred to as the "Warrant Shares." The Shares, the
Redeemable Warrants, the Unit Purchase Option, Underwriters' Unit Shares,
Underwriters' Unit Warrants, and the Warrant Shares are more fully described in
the Registration Statement (as defined in Subsection 1(a) hereof) and the
Prospectus (as defined in Subsection 1(a) hereof) referred to below. Unless the
context otherwise requires, all references to the "Company" shall include all
subsidiaries and entities acquired by the Company on or prior to the Closing
Date (defined in Subsection 2(c) hereof). All representations, warranties and
opinions of counsel shall cover any such subsidiaries and acquired entities.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriter as of the
date hereof, and as of the Closing Date and any Overallotment Closing Date (as
defined in Subsection 2(c) hereof), if any, as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form S-1 (No. 333-11979) including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Securities under the Securities Act of 1933, as amended (the "Act"), which
registration statement and any amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act and the rules and
regulations of the Commission under the Act. Following execution of this
Agreement, the Company will promptly file (i) if the Registration has been
declared effective by the Commission, (A) a Term Sheet (as defined in the Rules
and Regulations) (as hereinafter defined) pursuant to Rule 434 under the Act or
(B) a Prospectus under Rules 430A and/or 424(b) under the Act, in either case in
form satisfactory to the Underwriter or (ii) in the event the Registration
Statement has not been declared effective, a further amendment to said
registration statement in the form heretofore delivered to the Underwriter and
will not, before the registration statement becomes effective, file any other
amendment thereto unless the Underwriter shall have consented thereto 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,
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schedules, exhibits and all other documents filed as a part thereof and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430A of the Rules and Regulations)(as hereinafter defined), 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 thereof and no proceedings
for a stop order have been instituted or are pending or, to the best knowledge
of the Company, threatened. Each of the Preliminary Prospectus, the Registration
Statement and Prospectus at the time of filing thereof conformed in all material
respects with the requirements of the Act and the Rules and Regulations, and
neither 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, except 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 and each Overallotment Closing
Date (as hereinafter defined) 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 material
statements which are required to be stated therein in compliance with the Act
and the Rules and Regulations, and will in all material respects conform to the
requirements of the Act and the Rules and Regulations; neither the Registration
Statement, nor any amendment thereto, at the time the Registration Statement or
such amendment is declared effective under the Act, 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, not misleading, and
the Prospectus at the time the Registration Statement becomes effective, at the
Closing Date and at any Overallotment Closing Date, will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of
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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 supplied
to the Company in writing by or on behalf of the Underwriter expressly for use
in the Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(d) The Company has been duly organized and is now, and at the
Closing Date and any Overallotment Closing Date will be, validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company does not own, directly or indirectly, an interest in any corporation,
partnership, trust, joint venture or other business entity; provided, that the
foregoing shall not be applicable to the investment of the net proceeds from the
sale of the Securities in short-term, low-risk investments as set forth under
"Use of Proceeds" in the Prospectus except to the extent that any failure of the
Company to comply with the foregoing does not have a material adverse effect on
the Company. 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
its properties or the character of its operations require such qualification or
licensing, except where the failure to so qualify would not have a material
adverse effect on the Company. The Company has all requisite power and authority
(corporate and other), and has obtained any and all necessary applications,
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; 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, local and foreign laws, rules and
regulations except where the failure to comply would not have a material adverse
effect upon the Company; and the Company has not received any written 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 and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operation of the Company.
The disclosures, if any, 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.
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(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption "Capitalization"
and will have the adjusted capitalization set forth therein on the Closing Date
and the Overallotment Closing Date, if any, 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 the Company to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement and as
otherwise described in the Prospectus. The Shares, Redeemable Warrants, the Unit
Purchase Option, Underwriter's Unit Shares, the Underwriter's Unit Warrants, and
the Warrant Shares and all other securities issued or issuable by the Company
conform or, when issued and paid for, 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 all shares of Common Stock are fully paid and
non-assessable; 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, the Unit Purchase Option, the
Underwriter's Unit Shares, and the Underwriter's Unit Warrants to be issued and
sold by the Company hereunder, and the Warrant Shares issuable upon exercise of
the Redeemable Warrants and the Underwriter's Unit Warrants and payment
therefor, are not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when issued, paid for
and delivered in accordance with the terms hereof and thereof, will be validly
issued, and all shares of Common Stock will be fully paid and non-assessable and
will conform to the descriptions 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, the Unit Purchase Option, the Underwriter's Unit Shares, and the
Underwriter's Unit Warrants, and the Warrant Shares has been duly and validly
taken; and the certificates representing the Securities, the Underwriter's Unit
Warrants, and the Warrant Shares will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof of the Securities to be sold
to the Underwriter 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 or
equity of any kind whatsoever except as contained in the Securities or disclosed
in the Prospectus.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of
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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 accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved. There has
been no material adverse change or development involving a prospective change in
the condition, financial or otherwise, or in the earnings, business affairs,
position, prospects, value, operation, properties, business, or results of
operation of the Company, whether or not arising in the ordinary course of
business, since the dates of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company, conform
in all material respects to the descriptions thereof contained in the
Registration Statement and in the Prospectus.
(g) ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, LLP, whose report is filed with the
Commission as a part of the Registration Statement, is an independent certified
public accountant as required by the Act and the Rules and Regulations.
(h) The Company (i) has paid all federal, state, local, and foreign
taxes for which it is liable, including, but not limited to, withholding taxes
and taxes payable under Chapters 21 through 24 of the Internal Revenue Code of
1986 (the "Code"), (ii) has furnished all tax and information returns it is
required to furnish pursuant to the Code, and has established reasonable
reserves for such taxes which are not due and payable, and (iii) does not have
knowledge of any tax deficiency or claims outstanding, proposed or assessed
against it.
(i) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts which it reasonably believes to be
adequate for its business, including, but not limited to, personal injury and
product liability insurance covering all personal and real property owned or
leased by the Company against fire, theft, damage and all risks customarily
issued against.
(j) Except as disclosed in the Prospectus, there is no action, suit,
proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or 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 or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this 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
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accurately summarized in all respects); or (iii) might materially affect the
condition, financial or otherwise, or the earnings, business affairs, position,
prospects, value, operation, properties, business or results of operations of
the Company.
(k) The Company has full legal right, power and authority to enter
into this Agreement, the Underwriter's Unit Purchase Option Agreement and the
Warrant Agreement and to consummate the transactions provided for in such
agreements; and this Agreement, the Underwriter's Unit Purchase Option Agreement
and the Warrant Agreement have each been duly and properly authorized, executed
and delivered by the Company. Each of this Agreement, the Underwriter's Unit
Purchase Option Agreement or the Warrant Agreement, constitutes a legally valid
and binding agreement of the Company, subject to due authorization, execution
and delivery by the Underwriter and/or the Underwriter, 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). Neither the Company's execution or delivery of this
Agreement, the Underwriters' Unit Purchase Option Agreement, and the Warrant
Agreement, its performance hereunder and thereunder, its consummation of the
transactions contemplated herein and therein, nor 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 material 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 By-Laws of the Company; (ii) any
license, contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which the Company is bound or
to which any of its properties or assets (tangible or intangible) is or may be
subject; 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.
(l) 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
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the Securities pursuant to the Prospectus and the Registration Statement, the
performance of this Agreement and the transactions contemplated hereby, 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 (i) the Underwriter's
purchase and distribution of the Firm Securities and Overallotment Securities to
be sold by the Company hereunder; or (ii) the issuance and delivery of the Unit
Purchase Option, the Underwriter's Unit Shares, the Underwriter's Unit Warrants,
the Redeemable Warrants or the Warrant Shares.
(m) All executed agreements or copies of executed agreements
(whether electronically scanned or otherwise) filed as exhibits to the
Registration Statement to which the Company is a party or by which the Company
may be bound or to which any of its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company, and constitute legally valid and binding agreements of the Company,
enforceable against it in accordance with its respective terms except to the
extent there is no material adverse effect upon the Company, in each case except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors generally and
except as the enforceability of such agreements is subject to the application of
general principals of equity (regardless of whether considered in a proceeding
in equity or at law), including without limitation (in) the possible
unavailability of specific performance, injunctive relief or any other equitable
remedy and (ii) concepts of materiality, reasonableness, good faith and fair
dealing. The descriptions contained in the Registration Statement of contracts
and other documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by the Rules and
Regulations and there are no material contracts or other documents which are
required by the Act or the Rules and Regulations 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 materially or substantially 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 herein or therein, the Company has not:
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money in any material amount; (ii) entered into any
transaction other than in the ordinary course of business; (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock, material changes in debt (long
or short term) or liabilities other than in the ordinary course of business,
material changes in or affecting the general affairs, management, financial
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operations, stockholders equity or results of operations of the Company.
(o) No default exists in the due performance and observance of any
material term, covenant or condition of any license, contract, indenture,
mortgage, installment sales agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which any of
the Company may be bound or to which any of its property or assets (tangible or
intangible) of the Company is subject or affected except where such default does
not, and will not, have a material adverse effect upon the Company.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance in all
material respects with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours.
(q) Since its inception, the Company has not incurred any liability
arising under or as a result of the application of the provisions of the Act.
(r) Except as disclosed in the Prospectus, the Company does not
presently maintain, sponsor or contribute to, and never has maintained,
sponsored or contributed to, any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan " or a "multiemployer
plan" as such terms are defined in Sections 3(2), 3(1) and 3(37) respectively of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"). Except as disclosed in the Prospectus, 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.
(s) The Company is not in violation in any material respect of any
domestic or foreign laws, ordinances or governmental rules or regulations to
which it is subject.
(t) No holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for 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
within eighteen (18) months of the date hereof or to require the Company to file
a registration statement under the Act during such eighteen (18) month period,
except such registration rights as have been waived or disclosed in the
Prospectus.
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(u) Neither the Company, nor, to the Company's best knowledge, any
of its employees, directors, stockholders or affiliates (within the meaning of
the Rules and Regulations) has taken, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected to
cause or result in, under the Exchange Act, or otherwise, stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities or otherwise.
(v) Except as described in the Prospectus, to the best of the
Company's knowledge, none of the patents, patent applications, trademarks,
service marks, trade names and copyrights, or licenses and rights to the
foregoing presently owned or held by the Company is in dispute or are in any
conflict with the right of any other person or entity within the Company's
current area of operations nor has the Company received notice of any of the
foregoing. To the best of the Company's knowledge, 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 set forth in the Prospectus, is not obligated
or under any liability whatsoever to make any payments by way of royalties, fees
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service ▇▇▇▇ trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(w) To the best of its knowledge, the Company owns and has the
unrestricted right to use all material trade secrets, trade-marks, trade names,
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") required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company, 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, or employees or agents, could have developed trade secrets or items
of technical information similar or identical to those of the Company.
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(X) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property 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 or assessments not yet due and payable.
(y) The Company has obtained duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers and
directors and any person or entity owning 5% or more of the Company's securities
(except with respect to the Company's Series A Preferred Stock) has agreed not
to, directly or indirectly, offer to sell, sell, grant any option for the sale
of, assign, transfer, pledge, hypothecate or otherwise encumber any of their
shares of Common Stock or other securities of the Company (either pursuant to
Rule 144 of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein for a period of not less than 18 months following the effective
date of the Registration Statement without the prior written consent of the
Underwriter. The Company will cause the Transfer Agent, as defined below, to
▇▇▇▇ an appropriate legend on the face of stock certificates representing all of
such shares of Common Stock and other securities of the Company. With respect to
the Company's Series A Preferred Stock, the Company has obtained agreements from
the holders thereof that all shares of Common Stock issuable upon conversion of
the Series A Preferred Stock shall be subject to a lockup until October 31,
1997.
(z) Except as disclosed in the Prospectus, the Company has not
incurred any liability and there are no arrangements or understandings for
services in the nature of a finder's or origination fee with respect to the sale
of the Securities or any other arrangements, agreements, understandings,
payments or issuances with respect to the Company or any of its officers,
directors, employees or affiliates that may adversely affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
(aa) The Firm Securities, other than the Units, have been approved
for quotation on the Nasdaq National Market of the Nasdaq Stock Market, Inc.
subject to official notice of issuance.
(bb) Neither the Company nor any of its respective officers,
employees, agents or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or
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foreign) or other person who was, is, or may be in a position to help or hinder
the business of the Company (or assist the Company in connection with any actual
or proposed transaction) which: (a) might subject the Company, or any other such
person to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign); (b) if not given in the past,
might have had a materially adverse effect on the assets, business or operations
of the Company; and (c) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Company. The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
(cc) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any such
person or entity or the Company, 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, except with respect to the beneficial ownership of not more
than 1% of the outstanding shares of capital stock of any publicly-held entity;
or (ii) a beneficial interest in any contract or agreement to which the Company
is a party or by which it may be bound or affected. Except as set forth in the
Prospectus under "Certain Transactions", there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company, and
any officer, director, or principal stockholder of the Company, or any affiliate
or associate of any such person or entity.
(dd) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriters' counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
(ee) The Company has entered into employment agreements with
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ as described in the Prospectus. The Company
has obtained a key-man life insurance policy in the amount of not less than
$1,000,000 on the life of ▇▇. ▇▇▇▇▇▇, which policy is owned by the Company and
names the Company as the sole beneficiary thereunder.
(ff) No securities of the Company have been sold by the Company
since its inception, except as disclosed in Part II of the Registration
Statement.
(gg) The minute books of the Company have been made available to
Underwriter's Counsel and contain a complete summary
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of all meetings and actions of the Board of Directors and Stockholders of the
Company since the date of its incorporation.
(hh) Except as disclosed in writing to the Underwriter, and based
upon questionnaires prepared by the Underwriter and collected by the Company, no
officer, or director or stockholder of the Company has any affiliation or
association with any member of the NASD.
(ii) The Registration Statement includes the 1,000,000 Common stock
purchase warrants issued by the Company in its private placement in August 1996
("Bridge Warrants") and upon effectiveness thereof, the Bridge Warrants and
underlying shares of Common Stock shall be registered for sale under the Act,
subject to any lockup or other restrictions disclosed in the Prospectus. The
Bridge Warrants have been "reset" so that the terms thereof are the same, in all
respects, to the Redeemable Warrants.
2. Purchase, Sale and Delivery of the Securities and Agreement to
Issue Underwriters' Unit Purchase Option.
(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 the Units (or component parts thereof with respect
to the Overallotment Securities) at the price per Unit as set forth below and
each of Mssrs ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ agree to sell to the
Underwriter, and the Underwriter agrees to purchase from them, the Shares at the
prices set forth below.
(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 up to an additional 90,000 Units, each Unit consisting
of two (2) Shares and one (1) Redeemable Warrant at the prices per Unit set
forth below; provided, however, that with respect to such additional Units, the
Underwriter shall obtain such Units by first purchasing 90,000 Shares from
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ (or less if the Overallotment Option is
exercised for less than 90,000 Units) and by the Company providing up to 45,000
Redeemable Warrants. The option granted hereby will expire 45 days after the
date of this Agreement, 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 Firm Securities upon notice
by the Underwriter to the Company setting forth the number of Overallotment
Securities as to which the Underwriter are then exercising the option and the
time and date of payment and delivery for such Overallotment Securities. Any
such time and date of delivery shall be determined by the Underwriter,
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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 defined in paragraph (c)
below, unless otherwise agreed to between the Underwriter and the Company.
Nothing herein contained shall obligate the Underwriter to make any
over-allotments. No Overallotment Securities shall be delivered unless the Firm
Securities shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Securities shall be made at the offices of the Underwriter, ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, 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 City time) on _____ __, 1997 or at such other
time and date as shall be designated by the Underwriter but not less than three
(3) nor more than five (5) business days after the effective date of the
Registration Statement (such time and date of payment and delivery being
hereafter called "Closing Date"). In addition, in the event that any or all of
the Overallotment 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 office or at such other place and at such
time (such time and date of payment and delivery being hereinafter called
"Overallotment Closing Date") as shall be agreed upon by the Underwriter and the
Company on each Overallotment Closing Date as specified in the notice from the
Underwriter to the Company. Delivery of the certificates for the Firm Securities
and the Overallotment Securities, if any, shall be made to the Underwriter
against payment by the Underwriter of the purchase price for the Firm Securities
and the Overallotment Securities, if any, to the order of the Company as the
case may be by certified check in New York Clearing House funds, certificates
for the Firm Securities and the Overallotment 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 Closing Date or the
relevant Overallotment Closing Date, as the case may be. The certificates for
the Firm Securities and the Overallotment Securities, if any, shall be made
available to the Underwriter at the above-mentioned 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 Closing Date or the relevant
Overallotment Closing Date, as the case may be.
The purchase price of the Units to be paid by the Underwriter to the
Company for the Units purchased under Clauses (a) and (b) above will be $9.1125
per Unit (which price is net of the Underwriter's discount and commissions). The
purchase price of the Shares to be purchased from Mssrs. ▇▇▇▇▇▇ and ▇▇▇▇▇ in
connection with the Overalotment Option shall be $4.50 per Share
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(which price is net of the Underwriter's discount and commissions) and the
Redeemable Warrants to be purchased from the Company shall be $.125 per
Redeemable Warrant. The Company shall not be obligated to sell any Securities
hereunder unless all Firm Securities to be sold by the Company are purchased
hereunder. The Company agrees to issue and sell 600,000 Units to the Underwriter
in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriter, the Underwriter's Unit Purchase Option at a purchase price of
$60.00 which Unit Purchase Option shall entitle the holders thereof to purchase
an aggregate of 60,000 Units. The Underwriter's Unit Purchase Option shall be
exercisable for a period of three (3) years commencing one (1) year from the
effective date of the Registration Statement at an initial exercise price equal
to one hundred sixty-five percent (165%) of the initial public offering price of
the Units. The Underwriter's Unit Purchase Option Agreement and form of Unit
Purchase Option Certificate shall be substantially in the form filed as an
Exhibit to the Registration Statement. Payment for the Underwriter's Unit
Purchase Option shall be made on the Closing Date. The Company has reserved and
shall continue to reserve a sufficient number of Shares for issuance upon
exercise of the Underwriter's Unit Purchase Option and the Underwriter's Unit
Warrants contained in the Underwriter's Unit Purchase Option.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective and as the Underwriter deem advisable, but in no
event more than five (5) business days after such effective date, 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 other terms set
forth in the Prospectus and otherwise in compliance with the Rules and
Regulations. The Underwriter may allow such concessions and discounts upon sales
to other dealers as set forth in the Prospectus. In connection with its market
making activities, the Underwriter may from time to time increase or decrease
the public offering price after the public distribution of the Securities has
been completed to such extent as the Underwriter, in its sole discretion deems
advisable.
4. Covenants 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 Exchange Act (i)
before termination of the offering of the
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Securities by the Underwriter which the Underwriter shall not previously have
been advised and furnished with a copy, or (ii) to which the Underwriter shall
have objected or (iii) 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 by 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 thereto, or the
institution or proceeding for that purpose; (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the qualification
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 or regulatory authority shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
(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),
will furnish the Underwriter with copies of any such amendment or supplement a
reasonable amount of
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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 ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
("Underwriter's Counsel"), shall
reasonably object.
(e) The Company shall cooperate in good faith with the Underwriter,
and Underwriters' Counsel, at or prior to the time the Registration Statement
becomes effective, in endeavoring to qualify the Securities for offering and
sale under the securities laws of such jurisdictions as the Underwriter may
reasonably designate, and shall cooperate with the Underwriter and Underwriters'
Counsel in the making of such applications, and filing such documents and shall
furnish such information as may be required for such purpose; provided, 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 agree 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.
(f) During the time when the Prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts 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 the Prospectus
relating to the 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 a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period commencing 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
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Company's fiscal year), the Company shall make generally available to its
security holders, in the manner specified in Rule 158(b) of the Rules and
Regulations, and to the Underwriter, an earnings statement which will be in such
form and 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 12 consecutive months after the effective date of the Registration
Statement.
(h) During a period of three (3) years after the date hereof and
provided that the Company is required to file reports with the Commission under
Section 12 of the Exchange Act, the Company will furnish to its stockholders, as
soon as practicable, annual reports (including financial statements audited by
independent public accountants), and will deliver to the Underwriter:
(i) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD or any
securities exchange;
(iii) every press release and every material news item or
article of interest to the financial community in respect of the Company and any
future subsidiaries or their affairs which was released or prepared by the
Company;
(iv) any additional information of a public nature concerning
the Company and any future subsidiaries or their respective businesses which the
Underwriter may reasonably request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4
received or filed by the Company from time to time.
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 subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) For as long as the Company is required to file reports with the
Commission under Section 12 of the Exchange Act, the Company will maintain a
Transfer Agent and Warrant Agent, which may be the same entity, and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer and Warrant Agent) for its Common
Stock and Redeemable Warrants.
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(j) The Company will furnish to the Underwriter or pursuant to the
Underwriter's direction, 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) Neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the provisions, set forth under the
caption "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.
(m) 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.
(n) The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the Closing Date and each
Overallotment Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited consolidated interim
financial statements of the Company (which in no event shall be as of a date
more than forty-five (45) 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 6(k) hereof.
(o) For a period of two (2) 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 Securities upon the Underwriter's
reasonable request; (ii) a list of holders of Securities upon the Underwriter's
reasonable request; (iii) a list of, if any, the securities positions of
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participants in the Depository Trust Company upon the Underwriter's reasonable
request.
(p) For a period of two (2) years after the effective date of the
Registration Statement, the Company shall use its best efforts to cause one (1)
individual selected by the Underwriter to be elected to the Board of Directors
of the Company (the "Board"), if requested by the Underwriter and provided such
individual is reasonably acceptable to and approved by the Company.
Alternatively, the Underwriter shall be entitled to appoint an individual who
shall be permitted to attend all meetings of the Board and to receive all
notices and other correspondence and communications sent by the Company to
members of the Board. The Company shall reimburse the Underwriter's designee for
his or her out-of-pocket expenses reasonably incurred and authorized in advance
by the Company in connection with his or her attendance of the Board meetings.
To the extent permitted by law, the Company agrees to indemnify and hold the
designee (as a director or observer) and the Underwriter harmless against any
and all claims, actions, awards and judgements arising out of his or her service
as a director or an observer and, provided that the Underwriter has exercised
its right to appoint a designee to the Board of Directors, the Company shall
maintain a liability insurance policy in an amount of not less than $5,000,000
affording coverage for the action of its officer and directors, to include such
designee and the Underwriter as an insured under such policy.
(q) For a period equal to the lesser of (i) five (5) years from the
date hereof, or (ii) the sale to the public of the Warrant Shares, the Company
will not take any action or actions which may prevent or disqualify the
Company's use of Forms S-1 or, if applicable, S-2 and S-3 (or other appropriate
form) for the registration under the Act of the Warrant Shares and the
Underwriter's Unit Warrants.
(r) For a period of five (5) years from the date hereof, use its
best efforts at its cost and expense to maintain the listing of the Securities
on the Nasdaq Market System.
(s) (i) As soon as practicable, but in no event more than 5 business
days after the effective date of the Registration Statement, file a Form 8-A
with the Commission providing for the registration under the Exchange Act of the
Securities.
(t) Following the Effective Date of the Registration Statement and
for a period of two (2) years thereafter, the Company shall, at its sole cost
and expense, prepare and file such blue sky trading applications with such
jurisdictions as the Underwriter may reasonably request after consultation with
the Company, and on the Underwriter's request, furnish the Underwriter with a
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secondary trading survey prepared by securities counsel to the Company.
(u) The Company shall not amend or alter any term of any written
employment agreement between the Company and any executive officer, during the
term of such written employment agreement, in a manner more favorable to such
employee, without the express written consent of the Underwriter.
(v) Until the completion of the distribution of the Securities, the
Company shall not without the prior written consent of the Underwriter and
Underwriters' Counsel, which consent shall not be unreasonably withheld, 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.
(w) Commencing one (1) year from the date hereof, upon the exercise
of any Redeemable Warrant, the exercise of which was solicited by the
Underwriter in accordance with the applicable rules and regulations of the NASD
prevailing at the time of such solicitation (including Rule 2710(c)(6)(B)(xi)
thereof), the Company shall pay to the Underwriter a fee of 5% of the aggregate
exercise price of such Warrant (provided that the Underwriter has been
designated by the Warrantholder as having solicited the Redeemable Warrant)
within five (5) business days of such exercise and receipt of the exercise
price. The Company further agrees that it will not solicit the exercise of any
Warrant other than through the Underwriter, unless either: (i) the Underwriter
cannot legally solicit the exercise of the Redeemable Warrants at the time of
such solicitation; (ii) the Underwriter declines, in writing, to solicit the
exercise of the Warrants within five (5) business days of such a written request
by the Company; or (iii) the Underwriter consents to the solicitation of the
exercise of the Warrants by the Company or another entity.
(x) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of five (5) years
from the Closing Date.
(y) On the Closing Date, the Company and the Underwriter shall enter
into a financial consulting agreement, in the form filed as an Exhibit to the
Registration Statement, pursuant to which the Underwriter will provide financial
consulting services to the Company for a two (2) year period for an aggregate
fee of $90,000, all of which will be paid on the Closing Date (the "Financial
Consulting Agreement").
(z) For a period of 18 months commencing on the Closing Date, except
with the written consent of the Underwriter, which
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consent shall not be unreasonably withheld, the Company will not issue or sell,
directly or indirectly, any shares of its capital stock, or sell or grant
options, or warrants or rights to purchase any shares of its capital stock,
except pursuant to (i) this Agreement, (ii) the Unit Purchase Option and the
Underwriters' Unit Warrants, (iii) warrants and options of the Company
heretofore issued and described in the Prospectus, and (iv) the grant of options
and the issuance of shares issued upon exercise of options issued or to be
issued under the Company's 1996 Stock Option Plan as contemplated by the
Prospectus ("Stock Option Plan") up to the maximum number of options per year
permitted in such Plan; except that, during such period, the Company may issue
securities in connection with an acquisition, merger or similar transaction,
provided that such securities are not publicly registered and the acquirer of
the securities is not granted registration rights with respect thereto which are
effective prior to 24 months after the Closing Date. Except as discussed in the
Prospectus, prior to the Closing Date, the Company will not issue any options or
warrants without the prior written consent of the Underwriter.
(aa) The Company will not file any registration statement relating
to the offer or sale of any of the Company's securities, including any
registration statement on Form S-8, during the 18 months following the Closing
Date without the Underwriter's prior written consent which consent shall not be
unreasonably withheld.
(bb) Subsequent to the dates as of which information is given in the
Registration Statement and Prospectus and prior to the Closing Dates, except as
disclosed in or contemplated by the Registration Statement and Prospectus, (i)
the Company will not have incurred any liabilities or obligations, direct or
contingent, or entered into any material transactions other than in the ordinary
course of business; (ii) there shall not have been any change in the capital
stock, funded debt (other than regular repayments of principal and interest on
existing indebtedness and ongoing factoring of its account receivables) or other
securities of the Company, any material adverse change in the condition
(financial or other), business, operations, income, net worth or properties,
including any material loss or damage to the properties of the Company (whether
or not such loss is insured against), which could materially adversely affect
the condition (financial or other), business, operations, income, net worth or
properties of the Company; and (iii) the Company shall not pay or declare any
dividend or other distribution on its Common Stock or its other securities or
redeem or repurchase any of its Common Stock or other securities.
(cc) Except as disclosed in or contemplated by the Registration
Statement and Prospectus, the Company, for a period of 18 months following the
Closing Date, shall not redeem any of its securities, and shall not pay any
dividends or make any other cash
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distribution in respect of its securities in excess of the amount of the
Company's current or retained earnings derived after the Closing Date without
obtaining the Underwriter's prior written consent, which consent shall not be
unreasonably withheld. The Underwriter shall either approve or disapprove such
contemplated redemption of securities or dividend payment or distribution within
seven (7) business days from the date the Underwriter receives written notice of
the Company's proposal with respect thereto; a failure of the Underwriter to
respond within the seven (7) business day period shall be deemed approval of the
transaction.
(dd) The Company maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(ee) For a period of the longer of two (2) years or as long as the
Underwriter is a market maker in the Company's Common Stock, but in no event
longer than three (3) years, the Company agrees and undertakes to consult with
the Underwriter prior to distribution to third parties of any financial
information, news releases, and/or other publicity regarding the Company, its
business, or any terms of the proposed offering.
(ff) The Company shall not, for a period of two years, change or
modify the terms of the Company's 401(k) plan as in effect on the date hereof,
except as required by law or regulation, without the consent of the Underwriter.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date and
the Overallotment Closing Date (to the extent not paid at the Closing Date) all
its expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this 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 and filing of
the Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing and delivery of this Agreement, the Selected
Dealer Agreements and related documents, including the cost of all copies
thereof and of the Preliminary Prospectuses and of the
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Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriter in quantities as hereinabove stated; (iii) the printing, engraving,
issuance and delivery of the Securities including any transfer or other taxes
payable thereon; (iv) disbursements and fees of Underwriter's Counsel in
connection with the qualification of the Securities under state or foreign
securities or "Blue Sky" laws and determination of the status of such securities
under legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and
"Legal Investments Survey," if any, which Underwriters' Counsel fees (exclusive
of filing fees and disbursements) shall equal $20,000 and of which $10,000 has
previously been paid; (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with one information meeting held in
New York, New York, one tombstone advertisement, four bound volumes for the
Underwriter and prospectus memorabilia, all of which costs and expenses shall be
approved in advance by the Company; (vi) fees and expenses of the transfer
agent; (vii) the fees payable to the NASD; and (viii) the fees and expenses
incurred in connection with the listing of the Securities on the Nasdaq National
Market and all fees and expenses payable to the Underwriter shall be payable at
the Closing Date or Overallotment Closing Date, as applicable. The Underwriter
shall be responsible for all of its own mailing and delivery costs and costs of
counsel.
(b) If this Agreement is terminated by the Underwriter in accordance
with the provisions of Section 6, Section 10(a) or Section 12, the Company shall
reimburse and indemnify the Underwriter for up to $50,000 out-of-pocket actual
documented expenses reasonably incurred in connection with the transactions
contemplated hereby including the fees and disbursements of counsel for the
Underwriter of which the Underwriter acknowledges $35,000 has been paid prior to
the date hereof.
(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 a non-accountable expense allowance equal to three percent (3%) of
the gross proceeds received by the Company from the sale of the Firm Securities
$35,000 of which has been paid to date to the Underwriter. The Company will pay
the remainder of the non-accountable expense allowance on the Closing Date by
certified or bank cashier's check or, at the election of the Underwriter, by
deduction from the proceeds of the offering contemplated herein. In the event
the Underwriter elects to exercise the over-allotment option described in
Section 2(b) hereof, the Company further agrees to pay to the Underwriter on the
Overallotment Closing Date (by certified or bank cashier's check or, at the
Underwriter's election, by deduction from the proceeds of the offering) a
non-accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Overallotment Securities.
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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 Closing Date and
each Overallotment Closing Date, if any, as if they had been made on and as of
the Closing Date or each Overallotment Closing Date, as the case may be; the
accuracy on and as of the Closing Date or Overallotment Closing Date, if any, of
the statements of officers of the Company made pursuant to the provisions
hereof; and the performance by the Company on and as of the Closing Date and
each Overallotment Closing Date, if any, of each of its covenants and
obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 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 Closing
Date and each Overallotment 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 to the knowledge of the Company 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 Underwriters' 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 and 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 the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Underwriter's opinion, and the opinion of its counsel, is
material or omits to state a fact which, in the Underwriter's opinion and the
opinion of its counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading, or that the Prospectus,
or any supplement thereto, contains an untrue statement of fact which, in the
Underwriter's reasonable opinion, and the opinion of its counsel, is material,
or omits to state a fact which, in the Underwriter's reasonable opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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(c) At the Closing Date, and the Overallotment Closing Date the
Underwriter shall have received the favorable opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇, counsel
to the Company, dated the Closing Date, or Overallotment Closing Date, as the
case may be, addressed to the Underwriter and in form and substance 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 the State of
Delaware with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; (B) to the best of counsel's knowledge, the Company is
duly licensed or qualified as a foreign corporation in all jurisdictions in
which by reason of maintaining an office in such jurisdiction or by owning or
leasing real property in such jurisdiction it is required to be so licensed or
qualified except where failure to be so qualified or licensed would have no
material adverse effect; and (C) to the best of counsel's knowledge, the Company
has not received any written notice of proceedings relating to the revocation or
modification of any such license or qualification which revocation or
modification would have a material adverse effect upon the Company.
(ii) The Registration Statement, each Preliminary Prospectus
that has been circulated and the Prospectus and any post-effective amendments or
supplements thereto (other than the financial statements, schedules 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 Regulations and the conditions for use of a registration statement
on Form S-1 have been satisfied by the Company. Such counsel shall state that
such counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company and representatives of the Underwriter at which the
contents of the Registration Statement, the Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus, and has not been
obligated to complete any independent investigation thereof, on the basis of the
foregoing, 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
Prospectus 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 to make the statements therein in light of the circumstances under which they
were made, not misleading (it being understood that such counsel need express no
opinion with respect to (A) the financial statements and
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schedules and other financial and statistical data included in the Registration
Statement or Prospectus or (B) with respect to statements or omissions made
therein in reliance upon information furnished in writing to the Company on
behalf of Underwriter regarding the Underwriter or information concerning the
Underwriter expressly for use in the Registration Statement or the Prospectus or
(C) with respect to any promoter of the Company who is no longer affiliated with
the Company).
(iii) To the best of such counsel's knowledge, without independent
investigation, except as described in the Prospectus, the Company does not own
an interest of a character required to be disclosed in the Registration
Statement in any corporation, partnership, joint venture, trust or other
business entity;
(iv) To the best of such counsel's knowledge, the Company has a
duly authorized, issued and outstanding capitalization as set forth in the
Prospectus as of the date indicated therein, under "Capitalization". The Units,
Shares, Redeemable Warrants, the Unit Purchase Option, the Underwriter's Unit
Warrants, the Bridge Warrants and the Warrant Shares conform or upon issuance
will 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 all shares of Common Stock are fully paid and non-assessable; the
holders thereof, to counsel's best knowledge, are not, except by reason of their
own conduct or acts, subject to personal liability by reason of being such
holders, and to the best of such counsel's knowledge, none of such securities
were issued in violation of the preemptive rights of any holder of any security
of the Company. The Securities to be sold by the Company hereunder, the Unit
Purchase Option to be sold by the Company under the Underwriter's Unit Purchase
Option Agreement and Underwriter's Unit Warrant and the Warrant Shares are not,
to the best of such counsel's knowledge, subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when issued,
paid for and delivered in accordance with the terms hereof, will be validly
issued, and the Shares will be fully paid and non-assessable and all Securities
will conform or upon issuance will conform to the description thereof contained
in the Prospectus; that, to such counsel's knowledge, the holders of the Common
Stock shall not be personally liable for the payment of the Company's debts
solely by reason of being such holders except as they may be liable by reason of
their own conduct or acts; and that the certificates, if any, representing the
Units, Shares, Redeemable Warrants, Unit Purchase Option, the Underwriter's Unit
Shares, and the Underwriter's Unit Warrants are in due and proper legal form.
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(v) The issuance of the Shares, Redeemable Warrants and the
Warrant Shares have been duly authorized and when issued and paid for in
accordance with this Agreement and the Warrant Agreement, respectively, will be
validly issued, and the Shares will be fully paid and non-assessable securities
of the Company. To the knowledge of such counsel, the holders of the Securities
when issued and paid for, will not be subject to personal liability by reason of
being such holders except by reason of their own conduct or acts. To the
knowledge of such counsel, the Securities are not and will not be subject to the
preemptive or similar contractual rights of any shareholder of the Company. All
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken. The certificates, if any,
representing the Units, Shares and Redeemable Warrants are in due and proper
form. Upon delivery of the Shares and Redeemable Warrants to the Underwriter
against payment therefor as provided for in this Agreement, the Underwriter
(assuming they are bona fide purchasers within the meaning of the Uniform
Commercial Code) will acquire good title to the Firm Securities, free and clear
of all liens, encumbrances, equities, security interests and claims.
(v) The Registration Statement is effective under the Act, and, if
applicable, filing of all pricing information has been timely made in the
appropriate form under Rule 430A, and, to the best of such counsel's knowledge,
no stop order suspending the effectiveness of the Registration Statement has
been issued and to the best of such counsel's knowledge, no proceedings for that
purpose have been instituted or are pending or threatened or contemplated under
the Act;
(vi) To the best of such counsel's knowledge, (A) there are no
material contracts or other documents required to be described in the
Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
and the Prospectus and filed as exhibits thereto, and (B) the descriptions in
the Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be shown by Form S-1
and the Rules and Regulations;
(vii) This Agreement, the Underwriter's Unit Purchase Option
Agreement, the Warrant Agreement, and the Financial Consulting Agreement have
each been duly and validly authorized, executed and delivered by the Company,
and assuming that it is a valid and binding agreement of the Underwriter, as the
case may be, constitutes a legal, valid and binding agreement of the Company
enforceable as against the Company in accordance with its respective terms
(except as such enforceability may be limited by
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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
or pursuant to public policy).
(ix) Neither the execution or delivery by the Company of this
Agreement, the Underwriter's Unit Purchase Option Agreement, the Financial
Consulting Agreement, and the Warrant Agreement, nor its performance hereunder
or thereunder, nor its consummation of the transactions contemplated herein or
therein, nor the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, nor the
issuance of the Securities conflicts with or will conflict with or results or
will result in any material breach or violation of any of the terms or
provisions of, or constitutes or will constitute a material default under, or
result in the creation imposition of any material 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, except to the extent such event will not have a material adverse effect
upon the Company or as disclosed in the Prospectus, pursuant to the terms of:
(A) the Certificate of Incorporation or By-Laws of the Company, (B) to the best
knowledge of such counsel, any indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any other
agreement or instrument that is material to the Company to which the Company is
a party or by which it is bound or to which its properties or assets (tangible
or intangible) are subject, or any indebtedness, or (C) to the best knowledge of
such counsel, and except to the extent it would not have a material adverse
effect on the Company, any statute, judgment, decree, order, rule or regulation
applicable to the Company (except with respect to environmental laws and/or
regulations which are expressly excluded from such counsel's opinion) or any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, having jurisdiction over the Company or any of its
activities or properties.
(x) 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 state securities laws, as to which no opinion need
be rendered) is required in connection with the issuance by the Company of the
Securities pursuant to the Prospectus and the Registration Statement, the
performance of this Agreement, the Underwriters' Unit Purchase Option Warrant
Agreement, the Financial Consulting Agreement and the Warrant Agreement by the
Company, and the taking of any action by the Company contemplated hereby or
thereby, which has not been obtained;
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(xi) Except as described in the Prospectus, to the best knowledge
of such counsel, the Company is not in breach of, or in default under, any
material term or provision of any indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets (tangible or intangible) of the
Company is subject or affected; and the Company is not in violation of any
material term or provision of its Certificate of Incorporation or By-Laws or in
violation of any material franchise, license, permit, judgment, decree, order,
statute, rule or regulation material to the Company business;
(xii) The statements in the Prospectus under the captions "THE
COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES ELIGIBLE FOR FUTURE
SALE" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects;
(xiii) To the best of such counsel's knowledge, except as described
in the Prospectus, no person, corporation, trust, partnership, association or
other entity holding securities of the Company has the contractual right to
include 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 for eighteen months from
the date hereof;
(xiv) the Securities, other than the Units, Bridge Warrants (and
underlying shares of Common Stock) are eligible for listing on the Nasdaq
National Market.
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, the
corporate laws of Delaware and New York and jurisdictions in which they are
admitted, to the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriter's Counsel) of other counsel reasonably
acceptable to Underwriter's Counsel, familiar with the applicable laws of such
other jurisdictions, and (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 Underwriters' Counsel if
requested. The opinion of such counsel
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for the Company shall state that the opinion of any such other counsel is in
form satisfactory to such counsel and, in their opinion, the Underwriter and
they are justified in relying thereon.
(e) At each Overallotment Closing Date, if any, the Underwriter
shall have received the favorable opinion of counsel to the Company, each dated
the Overallotment Closing Date, addressed to the Underwriter and in form and
substance satisfactory to Underwriter's Counsel confirming as of Overallotment
Closing Date the statements made by such firm, in their opinion, delivered on
the Closing Date.
(f) On or prior to each of the Closing Date and the Overallotment
Closing Date, Underwriter's Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require and request 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 herein contained.
(g) Prior to the Closing Date and each Overallotment Closing Date,
if any: (i) there shall have been no material adverse change nor development
involving a prospective change in the condition, financial or otherwise,
prospects or 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; (ii) there shall have
been no transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which is materially
adverse to the Company; (iii) the Company shall not be in material default under
any provision of any instrument relating to any outstanding indebtedness for
money borrowed; (iv) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement and
Prospectus; (v) no action, suit or proceeding, at law or in equity, shall have
been pending or to its knowledge threatened against the Company, or affecting
any of its properties or businesses 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 (vi) no stop order
shall have been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(h) At the Closing Date and each Overallotment Closing Date, if any,
the Underwriter shall have received a certificate
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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
Overallotment Closing Date, as the case may be, to the effect that:
(i) The representations and warranties of the Company in
this Agreement are, in all material respects, true and correct, as if made on
and as of the Closing Date or the Overallotment 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 Overallotment Closing Date, as the
case may be;
(ii) No stop order 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 each of such person's
knowledge, are contemplated or threatened under the Act;
(iii) 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 none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and neither the
Preliminary Prospectus or any supplement thereto included any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading except to the extent
any such material fact may be corrected in the Final Prospectus; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and except
as otherwise contemplated therein: (A) the Company has not incurred up to and
including the Closing Date or the Overallotment 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 material transactions not in the ordinary course of
business; (D) there has not been any change in the capital stock or any increase
in long-term debt or any 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 against the Company
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which is required to be set forth in an amended or supplemented Prospectus which
has not been set forth;
(v) Neither the Company nor any of its officers or
affiliates shall have taken, and the Company, its officers and affiliates will
not take, directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in the stabilization or manipulation
of the price of the Company's securities to facilitate the sale or resale of the
Shares.
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.
(i) By the Closing Date, the Underwriter shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriter, as described in the Registration Statement.
(j) 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 in all respects (including the non-material nature of
the changes or decreases, if any, referred to in clause (iii) below) to the
Underwriter, from ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, LLP:
(i) confirming that they are independent 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 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, LLP with respect to the financial statements
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 stockholders and board of directors and the various
committees of the boards of directors of 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 their attention which would lead them 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
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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 (5) 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 stockholders' equity or
net current assets or net assets of the Company as compared with amounts shown
in the financial statements 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 January 1, 1997 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, in each case as compared with the corresponding
period beginning October 1, 1995 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;
(iv) setting forth, at a date not later than five (5) days prior to
the Effective Date of the Registration Statement, the amount of liabilities of
the Company (including a breakdown of commercial paper and notes payable to
banks);
(v) stating that they have compared specific dollar amounts,
numbers of Securities, 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; and
(vi) stating that they have not during the immediately preceding
five (5) year period brought to the attention of the Company's management any
"material weakness", as defined in Statement of Auditing Standard No. 60
"Communication of Internal Control Structure Related Matters Noted in an Audit",
in the Company's internal controls;
(vii) stating that they have in addition carried out certain
specified procedures, not constituting an audit, with respect to certain pro
forma financial information which is included in the Registration Statement and
the Prospectus and that
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nothing has come to their attention as a result of such procedures that caused
them to believe such unaudited pro forma financial information does not comply
in form in all material respects with the applicable accounting requirements of
Rule ll-02 of Regulation S-X or that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of that
information; and
(viii) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may reasonably request.
(k) At the Closing Date and each Overallotment Closing Date, the
Underwriter shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, LLP, a letter,
dated as of the Closing Date, or Overallotment Closing Date, as the case may be,
to the effect that they reaffirm that statements made in the letter furnished
pursuant to Subsection (j) of this Section, except that the specified date
referred to shall be a date not more than five days prior to Closing Date 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 clause
(iii) of subsection (j) 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 clause (iii).
(l) On each of Closing Date and Overallotment Closing Date, if any,
there shall have been duly tendered to the Underwriter for its account the
appropriate number of Securities against payment therefore.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to subsection (e) of Section
4 hereof shall have been issued on either the Closing Date or the Overallotment
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or to its knowledge or that of the Company shall be contemplated.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Overallotment Closing
Date, as the case may be, is not so fulfilled, the Underwriter may terminate
this Agreement or, if the Underwriter so elect, 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, including specifically each person who may be
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substituted for an Underwriter as provided in Section 11 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, 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 such 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, except that the
indemnification contained in this paragraph with respect to any preliminary
prospectus shall not inure to the benefit of the Underwriter or to the benefit
of any person controlling the Underwriter on account of any loss, claim, damage,
liability or expense arising from the sale of the Firm Securities by the
Underwriter to any person if a copy of the Prospectus, as amended or
supplemented, shall not have been delivered or sent to such person within the
time required by the Act, and the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus, as amended and supplemented, and
such correction would have eliminated the loss, claim, damage, liability or
expense), 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 Underwriter's Unit Purchase
Option; or (iii) in any application or other document or written communication
(in this Section 8 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 Stock Market,
Inc. or any other securities exchange, if reviewed by the Company prior to
filing or effectiveness of the Registration Statement; 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 in any case above such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company with respect
to any Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, in any post-effective amendment, new
registration statement or prospectus or in any application, as the case may be.
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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, each of its officers who has signed the
Registration Statement, and each other person, if any, who controls the Company
within the meaning of the Act to the same extent as the foregoing 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 filings with the NASD or any amendment thereof or supplement
thereto in any post-effective amendment, new registration statement or
prospectus, or in any application made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
the Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any post-effective amendment, new registration
statement or prospectus, 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 or any amendment thereof or
supplement thereto, in any post-effective amendment, new registration statement
or prospectus or in any such application, provided, further, that the liability
of each Underwriter to the Company shall be limited to the amount of the net
proceeds of the Offering received by the Company. The Company acknowledges that
the statements with respect to the public offering of the Firm Securities set
forth under the heading "Underwriting" and the stabilization legend and the last
paragraph of the cover page in the Prospectus have been furnished by the
Underwriter expressly for use therein and any information furnished by or on
behalf of the Underwriter filed in any jurisdiction in order to qualify the
Securities under State Securities laws or filed with the Commission, the NASD or
any securities exchange constitute the only information furnished in writing by
or on behalf of the Underwriter for inclusion in the Prospectus and the
Underwriter hereby confirm that such statements and information are true and
correct and shall be on each Closing Date and Overallotment Closing Date.
(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
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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 indemnifying party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to 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 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 of any claim or action 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 provide 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
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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
the 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 and commissions 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 amount of the net
proceeds of the Offering received by the Company. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. 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), or to the extent that such party or
parties were not 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.
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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 Overallotment Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the Underwriter
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 the Underwriter, the Company, or any controlling person, and
shall survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriter for a period of the latter of two (2) years or the
applicable statute of limitations without regard to tolling.
9. Effective Date.
This Agreement shall become effective at _____ a.m., New York City
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 Securities for offering or the release by the Underwriter
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. Termination.
(a) The Underwriter shall have the right to terminate this
Agreement: (i) if any calamitous domestic or international event or act or
occurrence has materially disrupted, or in the Underwriters' opinion will in the
immediate future materially disrupt general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities; or (iv) if a banking moratorium has been declared by a New
York State or federal authority; or (v) if a moratorium in foreign exchange
trading has been declared; or if the Company shall have sustained a material
loss, whether or not insured, by reason of fire, flood, accident or other
calamity; or (vii) if there shall have been such material
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adverse change in the conditions or prospects of the Company, involving a change
not contemplated by the Registration Statement, or (viii) if there shall have
been such material adverse general market conditions as in the Underwriter's
reasonable judgment would make it inadvisable to proceed with the offering, sale
and/or delivery of the Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 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. In the
event of termination of this Agreement by the Underwriter as a result of the
underwriter's actions, then in such event the Company shall have no liability to
the Underwriter or be required to indemnify the Underwriter hereunder.
11. Default by the Company. If the Company shall fail at the Closing
Date or any Overallotment Closing Date, as applicable, 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 Overallotment Closing Date, the
Underwriter may at the Underwriter's option, by notice from the Underwriter to
the Company, terminate the Underwriter's obligations to purchase Securities from
the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to Section 5 and Section 7 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 (i) if mailed by first class mail, within three days of mailing
or (ii) if transmitted by any standard form of telecommunication upon receipt if
followed by delivery by first class mail or (ii) upon receipt if sent by
overnight courier. Notices to the Underwriter shall be directed to the
Underwriter at ▇▇▇▇▇ ▇▇▇▇▇▇▇ Securities, LLC, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. Notices to the
Company shall be directed to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, with a copy to the Law Offices of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, 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
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referred to in Section 7 hereof, and their respective successors, legal
Underwriters and assigns, and their respective heirs and legal Underwriters 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.
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. Waiver. The waiver by either party of the breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach.
17. Assignment. Except as otherwise provided within this Agreement,
neither party hereto may transfer or assign this Agreement without prior written
consent of the other party.
18. Titles and Captions. All article, section and paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the context nor affect the interpretation of this Agreement.
19. Pronouns and Plurals. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons may require.
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20. Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
21. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
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,
▇▇▇▇▇ ▇▇▇▇, INC.
By:___________________________
Name:
Title:
_____________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
_____________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
Confirmed and accepted as of the date first above written.
▇▇▇▇▇ ▇▇▇▇▇▇▇ SECURITIES, LLC
By:_____________________________
Name:
Title:
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SCHEDULE I
Warrant Agent - American Stock Transfer & Trust Company
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