OH&S Draft
1,000,000 Shares of Common Stock
VCS TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
New York, New York
, 1998
Gilford Securities Incorporated
As Representative of the
Several Underwriters listed
on Schedule A hereto
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
VCS Technologies, Inc., a Delaware corporation (the "Company")
confirms its agreement with Gilford Securities Incorporated ("Gilford") and
each of the several underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 11) for whom Gilford is acting as
representative (in such capacity, Gilford shall hereinafter be referred to as
"you" or the "Representative"), with respect to the sale by the Company and
the purchase by the Representative of 1,000,000 shares of the Company's common
stock, $.001 par value per share ("Common Stock"). Such shares of Common Stock
are hereinafter referred to as the "Firm Shares."
Upon the Representative's request, as provided in Section 2(b) of
this Agreement, the Company shall also sell to the Underwriters up to an
additional 150,000 shares of Common Stock for the purpose of covering
over-allotments, if any (the "Option Shares"). The Firm Shares and the Option
Shares are sometimes hereinafter referred to as the "Shares." The Company also
proposes to issue and sell warrants to the Representative (the
"Representative's Warrants") pursuant to the Representative's Warrant
Agreement (the "Representative's Warrant Agreement") for the purchase of an
additional 100,000 shares of Common Stock. The shares of Common Stock issuable
upon exercise of the Representative's Warrants are hereinafter referred to as
the "Representative's Shares." The Firm Shares, the Option Shares, the
Representative's Warrants and the Representative's Shares (collectively,
hereinafter referred to as the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties.
(a) The Company represents and warrants to, and agrees with, the
Representative as of the date hereof, and as of the Closing Date (hereinafter
defined) and the Option Closing Date (hereinafter defined), if any, as
follows:
(i) The Company has prepared and filed with the Securities
and Exchange Commission (the "Commission") a registration statement,
and an amendment or amendments thereto, on Form SB-2 (No. 333- ),
including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Firm Shares and the Option
Shares under the Securities Act of 1933, as amended (the "Act"),
which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Regulations") of the
Commission under the Act. The Company will promptly file a further
amendment to said registration statement in the form heretofore
delivered to the Representative and will not, file any other
amendment thereto to which the Representative shall have objected in
writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein (including, but not limited to
those documents or information incorporated by reference therein) and
all information deemed to be a part thereof as of such time pursuant
to paragraph (b) of Rule 430(A) of the Regulations), is hereinafter
called the "Registration Statement", and the form of prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of
the 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.
(ii) 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 the
Prospectus or any part of any thereof and no proceedings for a stop
order suspending the effectiveness of the Registration Statement or
any of the Company's securities have been instituted or are pending
or to the Company's knowledge, threatened. Each of the Preliminary
Prospectus, Registration Statement and Prospectus at the time of
filing thereof conformed with the requirements of the Act and the
Rules and Regulations, and none of the Preliminary Prospectus,
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 in reliance upon and in
conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
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(iii) When the Registration Statement becomes effective and
at all times subsequent thereto up to the Closing Date and each
Option Closing Date, if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales
by the Underwriters or a dealer, the Registration Statement and the
Prospectus will contain all statements which are required to be
stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the
Rules and Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, provided, however, that this
representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of
any Underwriters expressly for use in the Preliminary Prospectus,
Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(iv) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the
state of its incorporation. The Company does not own an interest in
any corporation, partnership, trust, joint venture or other business
entity. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its
operations requires such qualification or licensing. The Company has
all requisite corporate power and authority, and the Company has
obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing
business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all
federal, state and local laws, rules and regulations; and the Company
has not received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the condition, financial or
otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company. The
disclosures in the Registration Statement concerning the effects of
federal, state and local 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.
(v) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, under
"Capitalization" and "Description of Securities" and will have the
adjusted capitalization set forth therein on the Closing Date and the
Option 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 it to issue
any capital stock, rights, warrants, options or other securities,
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except for this Agreement, the Representative's Warrant Agreement and
as described in the Prospectus. The Securities 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 are fully paid and
non-assessable and the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued
in violation of the preemptive rights of any holders of any security
of the Company or similar contractual rights granted by the Company.
The Securities are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable and
will conform to the description thereof contained in the Prospectus;
the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities has been duly and
validly taken; and the certificates representing the Securities will
be in due and proper form. Upon the issuance and delivery pursuant to
the terms hereof of the Securities to be sold by the Company
hereunder, the Underwriters 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.
(vi) The financial statements, including the related notes
and schedules thereto, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus fairly present the
financial position, income, changes in cash flow, changes in
stockholders' equity, and the results of operations of the Company at
the respective dates and for the respective periods to which they
apply and the pro forma financial information included in the
Registration Statement and Prospectus presents fairly on a basis
consistent with that of the audited financial statements included
therein, what the Company's pro forma capitalization would have been
for the respective periods and as of the respective dates to which
they apply after giving effect to the adjustments described therein.
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 adverse change or development involving a material
prospective change in the condition, financial or otherwise, or in
the earnings, position, prospects, value, operation, properties,
business, or results of operations of the Company whether or not
arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the
Prospectus 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 the Prospectus. Financial information set forth in the
Prospectus under the headings "Summary Financial Information,"
"Selected Financial Data," "Capitalization," and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," fairly present, on the basis stated in the Prospectus,
the information set forth therein, have been derived from or compiled
on a basis consistent with that of the audited financial statements
included in the Prospectus.
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(vii) 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 amounts payable under Chapters 21 through
24 of the Internal Revenue Code of 1986 (the "Code"), and has
furnished all information returns it is required to furnish pursuant
to the Code, (ii) has established adequate reserves for such taxes
which are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(viii) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i)
the issuance by the Company of the Securities, (ii) the purchase by
the Underwriters of the Securities from the Company, (iii) the
consummation by the Company of any of its obligations under this
Agreement or the Representative's Warrant Agreement, or (iv) resales
of the Shares in connection with the distribution contemplated
hereby.
(ix) The Company maintains insurance policies, including,
but not limited to, general liability and property insurance, which
insures the Company and its employees, against such losses and risks
generally insured against by comparable businesses. The Company (A)
has not failed to give notice or present any insurance claim with
respect to any matter, including but not limited to the Company's
business, property or employees, under the insurance policy or surety
bond in a due and timely manner, (B) does not have any disputes or
claims against any underwriter of such insurance policies or surety
bonds or has not failed to pay any premiums due and payable
thereunder, or (C) has not failed to comply with all conditions
contained in such insurance policies and surety bonds. There are no
facts or circumstances under any such insurance policy or surety bond
which would relieve any insurer of its obligation to satisfy in full
any valid claim of the Company.
(x) There is no action, suit, proceeding, inquiry,
arbitration, 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, this
Agreement or the Representative's Warrant Agreement or of any action
taken or to be taken by the Company pursuant to or in connection with
this Agreement or the Representative's Warrant Agreement, (ii) is
required to be disclosed in the Registration Statement which is not
so disclosed (and such proceedings as are summarized in the
Registration Statement are accurately summarized in all material
respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties,
business or results of operations of the Company.
(xi) The Company has full legal right, power and authority
to authorize, issue, deliver and sell the Securities, enter into this
Agreement and the Representative's Warrant Agreement and to
consummate the transactions provided for in such agreements; and this
Agreement and the Representative's Warrant Agreement have each been
duly and properly authorized, executed and delivered by the Company.
Each
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of this Agreement and the Representative's Warrant Agreement
constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except
(i) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification or contribution provisions may
be limited under applicable laws or the public policies underlying
such laws and (iii) that the remedies of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which
any proceedings may be brought. None of the Company's issue and sale
of the Securities, execution or delivery of this Agreement or the
Representative's Warrant Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein
and therein, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions
of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of
any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (i) the
certificate 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 it is or may be bound or to which any of its properties or
assets (tangible or intangible) is or may be subject, or any
indebtedness, or (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.
(xii) Except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court,
regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Shares pursuant to the
Prospectus and the Registration Statement, the issuance of the
Representative's Warrants, the performance of this Agreement and the
Representative's Warrant Agreement and the transactions contemplated
hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person
may have for the issue and/or sale of any of the Shares, or the
Representative's Warrants, except such as have been or may be
obtained under the Act or may be required under state securities or
Blue Sky laws in connection with the Representative's purchase and
distribution of the Shares, and the Representative's Warrants to be
sold by the Company hereunder.
(xiii) All executed agreements, contracts or other documents
or copies of executed agreements, contracts or other documents filed
as exhibits to the Registration Statement to which the Company is a
party or by which it may be bound or to which any of its assets,
properties or business may be subject have been duly and validly
authorized, executed and delivered by the Company, and constitute the
legal, valid and binding agreements of the Company, enforceable
against the Company, in
6
accordance with their respective terms. The descriptions in the
Registration Statement of agreements, contracts and other documents
are accurate in all material respects and fairly present the
information required to be shown with respect thereto by Form SB-2,
and there are no contracts or other documents which are required by
the Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not described or
filed as required, and the exhibits which have been filed are in all
material respects complete and correct copies of the documents of
which they purport to be copies.
(xiv) 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, (ii) entered into any transaction other than in the
ordinary course of business, or (iii) declared or paid any dividend
or made any other distribution on or in respect of its capital stock
of any class, and there has not been any change in the capital stock,
or any material change in the debt (long or short term) or
liabilities or material adverse change in or affecting the general
affairs, management, financial operations, stockholders' equity or
results of operations of the Company.
(xv) No default exists in the due performance and observance
of any term, covenant or condition of any license, contract,
indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, stockholders agreement, partnership
agreement, note, loan or credit agreement, purchase order, or any
other agreement or instrument evidencing an obligation for borrowed
money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which
the property or assets (tangible or intangible) of the Company is
subject or affected.
(xvi) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in
compliance with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours. There are no pending
investigations involving the Company by the U.S. Department of Labor,
or any other governmental agency responsible for the enforcement of
such federal, state, local, or foreign laws and regulations. There is
no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or
threatened against or involving the Company or any predecessor
entity, and none has ever occurred. No representation question exists
respecting the employees of the Company, and no collective bargaining
agreement or modification thereof is currently being negotiated by
the Company. No grievance or arbitration proceeding is pending under
any expired or existing collective bargaining agreements of the
Company. No labor dispute with the employees of the Company exists,
or is imminent.
(xvii) Except as described in the Prospectus, the Company
does not maintain, sponsor or contribute to any program or
arrangement that is an "employee
7
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"). The Company does
not maintain or contribute, now or at any time previously, to a
defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA
Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code, which could subject the Company to any tax penalty
on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all reporting,
disclosure and other requirements of the Code and ERISA as they
relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA
Plan which is intended to comply with Code Section 401(a), stating
that such ERISA Plan and the attendant trust are qualified
thereunder. The Company has never completely or partially withdrawn
from a "multiemployer plan."
(xviii) Neither the Company nor any of its employees,
directors, stockholders, partners, or affiliates (within the meaning
of the Rules and Regulations) of any of the foregoing has taken or
will take, directly or indirectly, any action designed to or which
has constituted or which might be expected to cause or result in,
under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Securities or otherwise.
(xix) Except as otherwise disclosed in the Prospectus, none
of the patents, patent applications, trademarks, service marks,
service names, trade names and copyrights and none of the licenses
and rights to the foregoing presently owned or held by the Company
are in dispute or are in any conflict with the right of any other
person or entity. The Company (i) owns or has the right to use, free
and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, patent applications, trademarks,
service marks, service names, 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) is not obligated or
under any liability whatsoever to make any payment by way of
royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any patent, patent application, trademark, service ▇▇▇▇,
service names, 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. There is no action,
suit, proceeding, inquiry, arbitration, investigation, litigation or
governmental or other proceeding, domestic or foreign, pending or
threatened (or circumstances that may give rise to the same) against
the Company which challenges the exclusive rights of the Company with
respect to any trademarks, trade names, service marks, service names,
copyrights, patents, patent applications or licenses or rights to the
foregoing used in the conduct of its business, or which challenge the
right of the Company to use any technology presently used or
contemplated to be used in the conduct of its business.
8
(xx) The Company owns and has the unrestricted right to use
all trade secrets, know-how (including all other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), inventions, technology, designs, processes, works of
authorship, computer programs and technical data and information
(collectively herein "intellectual property") that are material to
the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company, free and clear
of and without violating any right, lien, or claim of others,
including without limitation, former employers of its employees;
provided, however, that the possibility exists that other persons or
entities, completely independently of the Company, or its employees
or agents, could have developed trade secrets or items of technical
information similar or identical to those of the Company. The Company
is not aware of any such development of similar or identical trade
secrets or technical information by others.
(xxi) The Company has good and marketable title to, or valid
and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus, to be owned or leased by it free
and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects, or other restrictions or equities of any
kind whatsoever, other than those referred to in the Prospectus and
liens for taxes not yet due and payable.
(xxii) KPMG Peat Marwick LLP ("KPMG"), whose report is filed
with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act and
the Rules and Regulations.
(xxiii) The Company has caused to be duly executed legally
binding and enforceable agreements pursuant to which all of the
officers and directors of the Company, all holders of the Common
Stock and holders of securities exchangeable or exercisable for or
convertible into shares of Common Stock have agreed not to, directly
or indirectly, offer to sell, sell, grant any option for the sale of,
assign, transfer, pledge, hypothecate, distribute or otherwise
encumber or dispose of any shares of Common Stock or securities
convertible into, exercisable or exchangeable for or evidencing any
right to purchase or subscribe for any shares of Common Stock (either
pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein for a period of not less
than thirteen (13) months following the effective date of the
Registration Statement (except for publicly held shares of Common
Stock of the Company acquired after the effective date of the
Registration Statement in the open market and sold through Gilford)
without the prior written consent of the Representative and the
Company. The Company will cause the Transfer Agent, as defined below,
to ▇▇▇▇ an appropriate legend on the face of stock certificates
representing all of such securities and to place "stop transfer"
orders on the Company's stock ledgers.
(xxiv) Except as described in the Prospectus under
"Underwriting," there are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for services
in the nature of a finder's or origination fee with respect to the
sale of the Securities hereunder or any other arrangements,
agreements, understandings, payments or issuance with respect to the
Company or any of its officers, directors,
9
stockholders, partners, employees or affiliates that may affect the
Underwriters' compensation, as determined by the National Association
of Securities Dealers, Inc. ("NASD").
(xxv) The Common Stock has been approved for quotation on
the Nasdaq SmallCap Market ("NSM").
(xxvi) Neither the Company nor any of its 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 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,
or (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.
(xxvii) 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 of the foregoing persons or
entities has, either directly or indirectly, (i) an interest in any
person or entity which (A) furnishes or sells services or products
which are furnished or sold or are proposed to be furnished or sold
by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, or (ii) a 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 (as such
term is defined in the Prospectus) of the Company or any partner,
affiliate or associate of any of the foregoing persons or entities.
(xxviii) Any certificate signed by any officer of the
Company, and delivered to the Representative or to Underwriters'
Counsel (as defined herein) shall be deemed a representation and
warranty by the Company to the Representative as to the matters
covered thereby.
(xxix) The minute books of the Company have been made
available to the Representative and contain a complete summary of all
meetings and actions of the directors, stockholders, audit committee,
compensation committee and any other
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committee of the Board of Directors of the Company, respectively,
since the time of its incorporation, and reflects all transactions
referred to in such minutes accurately in all material respects.
(xxx) Except and to the extent described in the Prospectus,
no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the
Company have the right to include any securities issued by the
Company in the Registration Statement or any registration statement
to be filed by the Company or to require the Company to file a
registration statement under the Act and no person or entity holds
any anti-dilution rights with respect to any securities of the
Company.
(xxxi) The Company has as of the effective date of the
Registration Statement [(i)] entered into an employment agreement
with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, III, in the form filed as Exhibits to the
Registration Statement [and (ii) purchased term key-man insurance on
the life of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, III in the amount of $1,000,000, which
policy names the Company as the sole beneficiary thereof].
2. Purchase, Sale and Delivery of the Securities and Representative's
Warrants.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each
Underwriter agrees to purchase from the Company at a price of $____ per share
[90% of the initial public offering price] of Common Stock, that number of
Firm Shares set forth in Schedule A opposite the name of such Underwriter,
subject to adjustment as the Representative in its sole discretion shall make
to eliminate any sales or purchases of fractional shares, plus any additional
number of Firm Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 11 hereof.
(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
Underwriters to purchase all or any part of an additional 150,000 shares of
Common Stock at a price of $___ per share of Common Stock [90% of the initial
public offering price]. The option granted hereby will expire 45 days after
(i) the date the Registration Statement becomes effective, if the Company has
elected not to rely on Rule 430A under the Rules and Regulations, or (ii) the
date of this Agreement if the Company has elected to rely upon Rule 430A under
the Rules and Regulations, and may be exercised in whole or in part from time
to time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Firm Shares upon notice
by the Representative to the Company setting forth the number of Option Shares
as to which Representative is then exercising the option and the time and date
of payment and delivery for any such Option Shares. Any such time and date of
delivery (an "Option Closing Date") shall be determined by the Representative,
but shall not be later than seven full business days after the exercise of
said option, nor in any event prior to the Closing Date, as hereinafter
defined, unless otherwise agreed upon by the Representative and the Company.
Nothing herein contained shall obligate the Underwriters to make any
over-allotments. No Option Shares shall be delivered
11
unless the Firm Shares 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 Shares shall be made at the offices of Gilford at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, or at such other place as shall be agreed
upon by the Representative and the Company. Such delivery and payment shall be
made at 10:00 a.m. (New York City time) on __________, 1998 or at such other
time and date as shall be agreed upon by the Representative and the Company,
but not less than three (3) nor more than seven (7) full business days after
the effective date of the Registration Statement (such time and date of
payment and delivery being herein called "Closing Date"). In addition, in the
event that any or all of the Option Shares are purchased by the Underwriters,
payment of the purchase price for, and delivery of certificates for, such
Option Shares shall be made at the above-mentioned office of the
Representative or at such other place as shall be agreed upon by the
Representative and the Company on each Option Closing Date as specified in the
notice from the Representative to the Company. Delivery of the certificates
for the Firm Shares and the Option Shares, if any, shall be made to the
Underwriters against payment by the Underwriters of the purchase price for the
Firm Shares and the Option Shares, if any, to the order of the Company for the
Firm Shares and the Option Shares, if any, by New York Clearing House funds.
Certificates for the Firm Shares and the Option Shares, 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 Representative
may request in writing at least two (2) business days prior to the Closing
Date or the relevant Option Closing Date, as the case may be. The certificates
for the Firm Shares and the Option Shares, if any, shall be made available to
the Representative at such office or such other place as the Representative
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 Option Closing
Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative, Representative's Warrants at a purchase price of $.0001 per
warrant, which warrants shall entitle the holders thereof to purchase an
aggregate of 100,000 shares of Common Stock. The Representative's Warrants
shall be exercisable for a period of four years commencing one year from the
effective date of the Registration Statement at a price equaling one hundred
twenty percent (120%) of the initial public offering price of the shares of
Common Stock. The Representative's Warrant Agreement and form of Warrant
Certificate shall be substantially in the form filed as Exhibit __ to the
Registration Statement. Payment for the Representative's Warrants shall be
made on the Closing Date.
3. Public Offering of the Shares. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Shares (other than to
residents of or in any jurisdiction in which qualification of the Shares is
required and has not become effective) at the price and upon the other terms
set forth in the Prospectus. The Representative may from time to time increase
or decrease the public offering price after distribution of the Shares has
been completed to such extent as the Representative, in its discretion deems
advisable. The Underwriters may enter into one of more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or
more broker-dealers who shall act as dealers in connection with such public
offering.
12
4. Covenants and Agreements of the Company. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective
date of the Registration Statement, file any amendment to the Registration
Statement or supplement to the Prospectus or file any document under the Act
or Exchange Act before termination of the offering of the Shares by the
Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representative and confirm the notice in writing,
(i) when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or
the threatening, of any proceeding, suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of the
Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution of proceedings for that purpose, (iii) of the
issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Securities
for offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose, (iv) of the receipt of any
comments from the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities commission authority shall enter a stop order or suspend such
qualification at any time, the Company will make every effort to obtain
promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) 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 Representative,
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 fifteenth business day after the
effective date of the Registration Statement.
(d) The Company will give the Representative 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
Representative in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Representative with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
13
which the Representative or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP ("Underwriters'
Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications, file
such documents and furnish such information 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 or limited consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification shall
be effected, the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all reasonable efforts
to file and make such statements or reports at such times as are or may
reasonably be required by the laws of such jurisdiction to continue such
qualification.
(f) During the time when a 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 a prospectus
relating to the Securities or the Representative's Shares 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 Underwriters' 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 Representative 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 satisfactory to
Underwriters' Counsel, and the Company will furnish to the Representative
copies of such amendment or supplement as soon as available and in such
quantities as the Representative may request.
(g) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period beginning on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such
fiscal quarter is the end of the Company's fiscal year), the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) of the Rules and Regulations, and to the Representative, an
earnings statement which will be in the detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least 12 consecutive months after the
effective date of the Registration Statement.
(h) During a period of seven years after the date hereof, the Company
will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements
14
audited by independent public accountants) and unaudited quarterly reports of
earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly reports to
its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders and
certified by the Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
certified public accountants;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) 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;
(v) every press release and every material news item or
article of interest to the financial community in respect of the
Company, or its affairs which was released or prepared by or on
behalf of the Company; and
(vi) any additional information of a public nature
concerning the Company (and any future subsidiary) or its businesses
which the Representative may request.
(vii) During such seven-year period, if the Company has an
active subsidiary, the foregoing financial statements will be on a
consolidated basis to the extent that the accounts of the Company and
its subsidiary are consolidated, and will be accompanied by similar
financial statements for any significant subsidiary which is not so
consolidated.
(i) The Company will maintain a Transfer Agent and, if necessary
under the jurisdiction of incorporation of the Company, a Registrar (which may
be the same entity as the Transfer Agent) for its Common Stock.
(j) The Company will furnish to the Representative or on
Representative's order, without charge, at such place as the Representative
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
Representative may request.
15
(k) On or before the effective date of the Registration Statement,
the Company shall provide the Representative with true copies of duly
executed, legally binding and enforceable agreements pursuant to which for a
period of thirteen (13) months from the effective date of the Registration
Statement, the officers and directors of the Company, holders of all shares of
Common Stock and holders of securities exchangeable or exercisable for or
convertible into shares of Common Stock, agree that it or he or she will not
directly or indirectly, issue, offer to sell, sell, grant an option for the
sale of, assign, transfer, pledge, hypothecate, distribute or otherwise
encumber or dispose of any shares of Common Stock or securities convertible
into, exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144 of the
Rules and Regulations or otherwise) or dispose of any beneficial interest
therein without the prior written consent of the Representative and the
Company (collectively, the "Lock-up Agreements"). During the thirteen (13)
month period commencing with the effective date of the Registration Statement,
the Company shall not, without the prior written consent of the
Representative, sell, contract or offer to sell, issue, transfer, assign,
pledge, hypothecate, distribute, or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any options, rights or warrants with
respect to any shares of Common Stock, except as set forth in clause(s) of
Section 4 hereof. On or before the Closing Date, the Company shall deliver
instructions to the Transfer Agent authorizing it to place appropriate legends
on the certificates representing the securities subject to the Lock-up
Agreements and to place appropriate stop transfer orders on the Company's
ledgers.
(l) Neither the Company, nor any of its officers, directors,
stockholders, nor any of their respective affiliates (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.
(m) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use
of Proceeds" in the Prospectus. Except as described in the Prospectus, no
portion of the net proceeds will be used, directly or indirectly, to acquire
any securities issued by the Company.
(n) 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.
(o) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in its letter to be
furnished pursuant to Section 6(j) hereof.
16
(p) The Company shall use cause the Common Stock to be quoted on NSM
and for a period of seven (7) years from the date hereof, use its best efforts
to maintain the NSM quotation of the Common Stock to the extent outstanding.
(q) For a period of five (5) years from the Closing Date, the Company
shall furnish to the Representative at the Representative's request and at the
Company's sole expense, (i) daily consolidated transfer sheets relating to the
Common Stock (ii) the list of holders of all of the Company's securities and
(iii) a Blue Sky "Trading Survey" for secondary sales of the Company's
securities prepared by counsel to the Company.
(r) As soon as practicable, (i) but in no event more than 5 business
days before the effective date of the Registration Statement, file a Form 8-A
with the Commission providing for the registration under the Exchange Act of
the Securities and (ii) but in no event more than 30 days from the effective
date of the Registration Statement, take all necessary and appropriate actions
to be included in Standard and Poor's Corporation Descriptions and ▇▇▇▇▇'▇ OTC
Manual and to continue such inclusion for a period of not less than seven (7)
years.
(s) The Company hereby agrees that it will not for a period of
thirteen (13) months from the effective date of the Registration Statement,
adopt, propose to adopt or otherwise permit to exist any employee, officer,
director, consultant or compensation plan or arrangement permitting the grant,
issue or sale of any shares of Common Stock or other securities of the Company
(i) in an amount greater than an aggregate of 500,000 shares, (ii) at an
exercise or sale price per share less than the greater of (a) the initial
public offering price of the Shares set forth herein and (b) the fair market
value of the Common Stock on the date of grant or sale, (iii) to any direct or
indirect beneficial holder on the date hereof of more than 10% of the issued
and outstanding shares of Common Stock, (iv) with the payment for such
securities with any form of consideration other than cash, (v) upon payment of
less than the full purchase or exercise price for such shares of Common Stock
or other securities of the Company on the date of grant or issuance, or (vi)
permitting the existence of stock appreciation rights, phantom options or
similar arrangements.
(t) Until the completion of the distribution of the Shares, the
Company shall not without the prior written consent of the Representative and
Underwriters' Counsel, issue, directly or indirectly, any press release or
other communication or hold any press conference with respect to the Company
or its activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent
with past practices with respect to the Company's operations.
(u) For a period equal to the lesser of (i) three (3) years from the
date hereof, and (ii) the sale to the public of the Representative's Shares,
the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form SB-2 or Form S-1 (or other appropriate
form) for the registration under the Act of the Representative's Shares.
(v) For a period of five (5) years after the effective date of the
Registration Statement, the Representative shall have the right to designate
for election one (1) individual to the Company's Board of Directors (the
"Board"). In the event the Representative elects not to exercise such right,
then it may designate one (1) individual to attend meetings of the Company's
17
Board. The Company shall notify the Representative of each meeting of the
Board and the Company shall send to such individual all notices and other
correspondence and communications sent by the Company to members of the Board.
Such individual shall be reimbursed for all out-of-pocket expenses incurred in
connection with his attendance of meetings of the Board.
(w) For a period of thirteen (13) months after the effective date of
the Registration Statement, the Company shall not restate, amend or alter any
term of any written employment, consulting or similar agreement entered into
between the Company and any officer, director or key employee as of the
effective date of the Registration Statement in a manner which is more
favorable to such officer, director or key employee, without the prior written
consent of the Representative.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date and
the Option Closing Date (to the extent not paid at the Closing Date) all
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 and the Representative's Warrant Agreement,
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection
with the preparation, duplication, printing, (including mailing and handling
charges) filing, delivery and mailing (including the payment of postage with
respect thereto) of the Registration Statement and the Prospectus and any
amendments and supplements thereto and the printing, mailing (including the
payment of postage with respect thereto) and delivery of this Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreements, and related
documents, including the cost of all copies thereof and of the Preliminary
Prospectuses and of the Prospectus and any amendments thereof or supplements
thereto supplied to the Underwriters and such dealers as the Underwriters may
request, in quantities as hereinabove stated, (iii) the printing, engraving,
issuance and delivery of the Securities including, but not limited to, (x) the
purchase by the Underwriters of the Shares and the purchase by the
Representative of the Representative's Warrants from the Company, (y) the
consummation by the Company of any of its obligations under this Agreement and
the Representative's Warrant Agreement, and (z) resale of the Shares by the
Underwriters in connection with the distribution contemplated hereby, (iv) 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, and disbursements and fees of counsel in
connection therewith, (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with the "road show", information
meetings and presentations, bound volumes and prospectus memorabilia and
"tomb-stone" advertisement expenses, (vi) costs and expenses in connection
with due diligence investigations, including but not limited to the fees of
any independent counsel or consultant retained, (vii) fees and expenses of the
transfer agent and registrar, (viii) applications for assignments of a rating
of the Securities by qualified rating agencies, (ix) the fees payable to the
Commission and the NASD, and (x) the fees and expenses incurred in connection
with the quotation of the Securities on NSM and any other exchange.
18
(b) If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 6 or Section 11, (i) the Company shall
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel, less
any amounts already paid pursuant to Section 5(c) 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
Representative on the Closing Date by certified or bank cashier's check or, at
the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds received by the Company from the sale
of the Firm Shares, $50,000 of which has been paid to date. In the event the
Representative elects to exercise the over-allotment option described in
Section 2(b) hereof, the Company agrees to pay to the Representative on the
Option Closing Date (by certified or bank cashier's check or, at the
Representative's election, by deduction from the proceeds of the Option
Shares) a non-accountable expense allowance equal to three percent (3%) of the
gross proceeds received by the Company from the sale of the Option Shares.
6. Conditions of the Underwriters' Obligations. The obligations of
the Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, with respect to
the Company as if it had been made on and as of the Closing Date or each
Option Closing Date, as the case may be; the accuracy on and as of the Closing
Date or Option Closing Date, if any, of the statements of the 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 Option Closing Date, if any, of
its covenants and obligations hereunder and to the following further
conditions:
(a) The Registration Statement shall have become effective not later
than 12:00 Noon, New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Representative, and,
at Closing Date and each Option Closing Date, if any, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission
for additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Shares 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 Representative 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 Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state
a fact which, in the Representative's opinion, is material and is required to
be stated therein or is necessary to make the statements
19
therein not misleading, or that the Prospectus, or any supplement thereto,
contains an untrue statement of fact which, in the Representative's opinion,
is material, or omits to state a fact which, in the Representative's 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.
(c) On or prior to the Closing Date, the Representative shall have
received from Underwriters' Counsel, such opinion or opinions with respect to
the organization of the Company, the validity of the Securities, the
Representative's Warrants, the Registration Statement, the Prospectus and
other related matters as the Representative may request and Underwriters'
Counsel shall have received such papers and information as they request to
enable them to pass upon such matters.
(d) At Closing Date, the Underwriter shall have received the
favorable opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the Company,
dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction, (B) is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership
or leasing of any properties or the character of its operations
requires such qualification or licensing, and (C) has all requisite
corporate power and authority; and the Company has obtained any and
all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those
having jurisdiction over environmental or similar matters), to own or
lease its properties and conduct its business as described in the
Prospectus; the Company is and has been doing business in material
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state and local
laws, rules and regulations; the Company has not received any notice
of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially adversely
affect the business, operations, condition, financial or otherwise,
or the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the
Company. The disclosures in the Registration Statement concerning the
effects of federal, state and local laws, rules and regulations on
the Company's business as currently conducted and as contemplated are
correct in all material respects and do not omit to state a fact
necessary to make the statements contained therein not misleading in
light of the circumstances in which they were made;
(ii) to the best of such counsel's knowledge, the Company
does not own an interest in any other corporation, partnership, joint
venture, trust or other business entity;
20
(iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization" and
"Description of Securities," and the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for
it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement, the Representative's Warrant
Agreement and as described in the Prospectus. The Securities, and all
other securities issued or issuable by the Company conform in all
material respects to all statements with respect thereto contained in
the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; the holders
thereof have no rights 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. The
Shares, the Representative's Warrants and the Representative's Shares
to be sold by the Company hereunder and under the Representative's
Warrant Agreement are not and will not be subject to any preemptive
or other similar rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable and
conform to the description thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely as such
holders; all corporate action required to be taken for the
authorization, issue and sale of the Shares, the Representative's
Warrants and the Representative's Shares has been duly and validly
taken; and the certificates representing the Shares and the
Representative's Warrants are in due and proper form. The
Representative's Warrants constitute valid and binding obligations of
the Company to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the Company called for
thereby. Upon the issuance and delivery pursuant to this Agreement
and the Representative's Warrant Agreement of the Shares and the
Representative's Warrants, respectively, to be sold by the Company,
the Representative and the Representative, respectively, will acquire
good and marketable title to the Shares and Representative's Warrants
free and clear of any pledge, lien, charge, claim, encumbrance,
pledge, security interest, or other restriction or equity of any kind
whatsoever. No transfer tax is payable by or on behalf of the
Underwriters in connection with (A) the issuance by the Company of
the Shares, (B) the purchase by the Underwriters of the Shares and
the Representative's Warrants, respectively, from the Company, (C)
the consummation by the Company of any of its obligations under this
Agreement or the Representative's Warrant Agreement, or (D) resales
of the Shares in connection with the distribution contemplated
hereby;
(iv) 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 no stop order
suspending the use of the Preliminary Prospectus, the Registration
Statement or Prospectus or any part of any thereof or suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or,
to the best of such counsel's knowledge, threatened or contemplated
under the Act;
(v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial
21
statements and other financial and statistical data included therein,
as to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations;
(vi) to the best of such counsel's knowledge, (A) there are
no agreements, contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus and filed
as exhibits to the Registration Statement other than those described
in the Registration Statement (or required to be filed under the
Exchange Act if upon such filing they would be incorporated, in whole
or in part, by reference therein) and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are correct
copies of the documents of which they purport to be copies; (B) the
descriptions in the Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and other documents to
which the Company is a party or by which it is bound, including any
document to which the Company is a party or by which it is bound,
incorporated by reference into the Prospectus and any supplement or
amendment thereto, are accurate in all material respects and fairly
represent the information required to be shown by Form SB-2; (C)
there is not pending or threatened against the Company any action,
arbitration, suit, proceeding, inquiry, investigation, litigation,
governmental or other 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 (x) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are
accurately summarized in all material respects), (y) questions the
validity of the capital stock of the Company or this Agreement or the
Representative's Warrant Agreement, or of any action taken or to be
taken by the Company pursuant to or in connection with any of the
foregoing; (D) no statute or regulation or legal or governmental
proceeding required to be described in the Prospectus is not
described as required; and (E) there is no action, suit or proceeding
pending, or threatened, against or affecting the Company before any
court or arbitrator or governmental body, agency or official (or any
basis thereof known to such counsel) in which there is a reasonable
possibility of an adverse decision which may result in a material
adverse change in the condition, financial or otherwise, or the
earnings, position, prospects, stockholders' equity, value,
operation, properties, business or results of operations of the
Company, which could adversely affect the present or prospective
ability of the Company to perform its obligations under this
Agreement or the Representative's Warrant Agreement or which in any
manner draws into question the validity or enforceability of this
Agreement or the Representative's Warrant Agreement;
(vii) the Company has full legal right, power and authority
to enter into each of this Agreement and the Representative's Warrant
Agreement and to consummate the transactions provided for herein and
therein; and each of this Agreement and the Representative's Warrant
Agreement has been duly authorized, executed and delivered by the
Company. Each of this Agreement and the Representative's Warrant
Agreement, assuming due authorization, execution and delivery by each
other party thereto constitutes a legal, valid and binding agreement
of the Company enforceable against the Company in accordance with its
terms (except as such enforceability may be
22
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
rights to indemnity or contribution may be limited by applicable
law), and none of the Company's execution or delivery of this
Agreement and the Representative's Warrant Agreement, its performance
hereunder or thereunder, its consummation of the transactions
contemplated herein or therein, or the conduct of its business as
described in the Registration Statement, the Prospectus, and any
amendments or supplements thereto, conflicts with or will conflict
with or results or will result in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company pursuant to the
terms of, (A) the certificate of incorporation or by-laws of the
Company, (B) 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 it is or may be bound or to which any
of its respective properties or assets (tangible or intangible) is or
may be subject, or any indebtedness, or (C) any statute, judgment,
decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic
or foreign, having jurisdiction over the Company or any of its
activities or properties;
(viii) except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court,
regulatory body, government agency or other body (other than such as
may be required under Blue Sky laws, as to which no opinion need be
rendered) is required in connection with the issuance of the Shares
pursuant to the Prospectus, the issuance of the Representative's
Warrants, and the Registration Statement, the performance of this
Agreement and the Representative's Warrant Agreement, and the
transactions contemplated hereby and thereby;
(ix) the properties and business of the Company conform in
all material respects to the description thereof contained in the
Registration Statement and the Prospectus; and the Company has good
and marketable title to, or valid and enforceable leasehold estates
in, all items of real and personal property stated in the Prospectus
to be owned or leased by it, in each case free and clear of all
liens, charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus and liens for taxes
not yet due and payable.
(x) to the best knowledge of such counsel, the Company is
not in breach of, or in default under, any term or provision of any
license, contract, indenture, mortgage, installment sale agreement,
deed of trust, lease, voting trust agreement, stockholders'
agreement, partnership 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
23
may be bound or to which the property or assets (tangible or
intangible) of the Company is subject or affected; and the Company is
not in violation of any term or provision of its certificate of
incorporation by-laws, or in violation of any franchise, license,
permit, judgment, decree, order, statute, rule or regulation;
(xi) the statements in the Prospectus under "BUSINESS,"
"MANAGEMENT," "PRINCIPAL SHAREHOLDERS," "CERTAIN TRANSACTIONS,"
"DESCRIPTION OF SECURITIES," and "SHARES ELIGIBLE FOR FUTURE SALE"
have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all material
respects;
(xii) the Shares have been accepted for quotation on NSM;
(xiii) the persons listed under the caption "PRINCIPAL
SHAREHOLDERS" in the Prospectus are the respective "beneficial
owners" (as such phrase is defined in regulation 13d-3 under the
Exchange Act) of the securities set forth opposite their respective
names thereunder as and to the extent set forth therein;
(xiv) except as described in the Prospectus, no person,
corporation, trust, partnership, association or other entity has the
right to include and/or register any securities of the Company in the
Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration
statement;
(xv) except as described in the Prospectus, there are no
claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's or origination fee with respect
to the sale of the Securities hereunder or financial consulting
arrangement or any other arrangements, agreements, understandings,
payments or issuances that may affect the Underwriters' compensation,
as determined by the NASD;
(xvi) assuming due execution by the parties thereto other
than the Company, the Lock-up Agreements are legal, valid and binding
obligations of parties thereto, enforceable against the party and any
subsequent holder of the securities subject thereto in accordance
with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting
enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law); and
(xvii) except as described in the Prospectus, the Company
does not (A) maintain, sponsor or contribute to any ERISA Plans, (B)
maintain or contribute, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA, and (C) has never
completely or partially withdrawn from a "multiemployer plan".
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company at which
conferences such counsel made inquiries of such officers,
24
representatives and accountants and discussed the contents of the Preliminary
Prospectus, 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 Preliminary Prospectus, the Registration Statement
and Prospectus, 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 Preliminary Prospectus or
Prospectus or amendment or supplement thereto as of the date of such opinion
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and schedules and
other financial and statistical data included in the Preliminary Prospectus,
the Registration Statement or Prospectus).
Such opinion shall not state that it is to be governed or qualified
by, or that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991), or any comparable
State bar accord.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the
applicable laws; (B) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of the Company,
and certificates or other written statements of officers of departments of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company, provided that copies of any such
statements or certificates shall be delivered to Underwriters' Counsel if
requested. The opinion shall also state that the Underwriters' Counsel is
entitled to rely thereon. The opinion of such counsel for the Company shall
state that the opinion of any such other counsel is in form satisfactory to
such counsel and that the Underwriters and they are justified in relying
thereon.
(e) At the Closing Date, the Underwriters shall have received the
favorable opinion, satisfactory in form and substance to Underwriters'
Counsel, from [ ], intellectual property counsel to the Company, to the
effect set forth in Exhibit A.
At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to
the Company, and [ ], intellectual property counsel to the Company,
each dated the Option Closing Date, addressed to the Underwriters and in form
and substance satisfactory to Underwriters' Counsel confirming as of Option
Closing Date the statements made by each of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP and
[ ] in their respective opinions delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the Option Closing
Date, if any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions
25
as they may reasonably require for the purpose of enabling them to review or
pass upon the matters referred to in subsection (c) of this Section 6, or in
order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions of the Company, or herein contained.
(g) Prior to each of the Closing Date and each Option 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, stockholders' equity 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 default under any provision of any instrument relating
to any outstanding indebtedness; (iv) the Company shall not have issued any
securities (other than the Securities); the Company shall not have declared or
paid any dividend or made any distribution in respect of its capital stock of
any class; and there has not been any change in the capital stock of the
Company, or any material change in the debt (long or short term) or
liabilities or obligations of the Company (contingent or otherwise); (v) 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;
(vi) no action, suit or proceeding, at law or in equity, shall have been
pending or threatened (or circumstances giving rise to same) against the
Company, or affecting any of its properties or business before or by any court
or federal, state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may 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
(vii) 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 each of the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a certificate of the Company signed by
the principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined
the Registration Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the
Company has complied with all agreements and covenants and satisfied
all conditions contained in this Agreement on its part to be
performed or satisfied at or prior to such Closing Date or Option
Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, after due inquiry are
contemplated or threatened under the Act;
26
(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 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; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) the Company has not incurred up to and including the
Closing Date or the Option Closing Date, as the case may be, other
than in the ordinary course of its business, any material liabilities
or obligations, direct or contingent; (b) the Company has not paid or
declared any dividends or other distributions on its capital stock;
(c) the Company has not entered into any transactions not in the
ordinary course of business; (d) there has not been any change in the
capital stock of the Company or any material change in the debt (long
or short-term) of the Company; (e) the Company has not sustained any
material loss or damage to its property or assets, whether or not
insured; (g) there is no litigation which is pending or threatened
(or circumstances giving rise to same) against the Company, or any
affiliated party of any of the foregoing which is required to be set
forth in an amended or supplemented Prospectus which has not been set
forth; and (h) there has occurred no event required to be set forth
in an amended or supplemented Prospectus which has not been set
forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable
to the Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters shall
have received a letter, dated such date, addressed to the Underwriters in form
and substance satisfactory (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) in all respects to
the Underwriters and Underwriters' Counsel, from KPMG;
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act
and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects
with the applicable accounting requirements of the Act and the Rules
and Regulations thereunder and that the Underwriters may rely upon
the opinion of KPMG with respect to such financial statements and
supporting schedules included in the Registration Statement;
27
(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, 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 pro forma financial
information contained in the Registration Statement and Prospectus
does not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or is not fairly presented in conformity with generally
accepted accounting principles applied on a basis consistent with
that of the audited financial statements of the Company or the
unaudited pro forma financial information included in the
Registration Statement, (B) the unaudited financial statements and
supporting schedules of the Company included in the Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the
Company included in the Registration Statement, or (C) 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 of the Company, any change in the long-term debt of the
Company, or any decrease in the stockholders' equity of the Company
or any decrease in the net current assets or net assets of the
Company as compared with amounts shown in the _____, 1998 balance
sheets 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 (D) during the period from ______, 1998 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 or net earnings of the Company or increase in net earnings
per common share of the Company, in each case as compared with the
corresponding period beginning _____, 1997 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 date of the Registration Statement, the amount of
liabilities of the Company (including a break-down of commercial
paper and notes payable to banks);
(v) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth
in the Prospectus in each case to the extent that such amounts,
numbers, percentages, statements and information may be derived from
the general accounting records, including work sheets, of the Company
and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter and
found them to be in agreement; and
28
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may request.
(k) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from KPMG a letter, dated as of the Closing
Date or the Option Closing Date, as the case may be, to the effect that they
reaffirm the statements made in the letter furnished pursuant to subsection
(j) of this Section hereof except that the specified date referred to shall be
a date not more than five days prior to the Closing Date or the Option Closing
Date, as the case may be, and, if the Company has elected to rely on Rule 430A
of the Rules and Regulations, to the further effect that they have carried out
procedures as specified in clause (v) of subsection (j) of this Section with
respect to certain amounts, percentages and financial information as specified
by the Underwriters 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 (v).
(l) The Company shall have delivered to the Representative a letter
from KPMG addressed to the Company stating that they have not during the
immediately preceding two year period brought to the attention of the
Company's management any "weakness" as defined in Statement of Auditing
Standards No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit," in any of the Company's internal controls.
(m) On each of the Closing Date and Option Closing Date, if any,
there shall be duly tendered to the Underwriters the appropriate number of
Securities.
(n) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriters pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the
Option Closing Date, if any, and no proceedings for that purpose shall have
been instituted or shall be contemplated.
(o) On or before the Closing Date, the Company shall have executed
and delivered to the Representative, (i) the Representative's Warrant
Agreement substantially in the form filed as Exhibit __ to the Registration
Statement in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(p) On or before the Closing Date, the Shares shall have been duly
approved for quotation on NSM, subject to official notice of issuance.
(q) On or before the Closing Date, there shall have been delivered to
the Representative all of the Lock-up Agreements, in form and substance
satisfactory to Representative's Counsel.
If any condition to the Representative's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
29
7. Indemnification.
(a) The Company, agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7 "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be 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, from and against any and
all losses, claims, damages, expenses or liabilities, joint or several (and
actions, proceedings, investigations, inquiries, and suits in respect
thereof), whatsoever (including but not limited to any and all costs and
expenses whatsoever reasonably incurred in investigating, preparing or
defending against such action, proceeding, investigation, inquiry or suit,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which the Underwriter or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law or otherwise or
under the laws of foreign countries, arising out of or based upon (A) any
untrue statement or alleged untrue statement of a material fact contained (i)
in any Preliminary Prospectus, the Registration Statement or the Prospectus
(as from time to time amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included securities of the Company issued or issuable upon exercise
of the Securities; or (iii) in any application or other document or written
communication (in this Section 7 collectively called "application") executed
by the Company or based upon written information furnished by the Company
filed, delivered or used 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, NSM or any other securities exchange,
(B) 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), or (C) any breach of any representation, warranty, covenant
or agreement of the Company contained herein or in any certificate by or on
behalf of the Company or any of its officers delivered pursuant hereto unless,
in the case of clause (A) or (B) 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 Underwriters
expressly for use in any Preliminary Prospectus, the Registration Statement or
any Prospectus, or any amendment thereof or supplement thereto, or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition
to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, 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 any amendment thereof
or supplement thereto or in any application made in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to any 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 such application, provided
that such written
30
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering.
The Company acknowledges that the statements with respect to the public
offering of the Securities set forth under the heading "Underwriting" and the
stabilization legend in the Prospectus have been furnished by the Underwriter
expressly for use therein and constitute the only information furnished in
writing by or on behalf of the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in addition
to any liability which the Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against
one or more indemnifying parties under this Section 7, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve
it from any liability which it may have under this Section 7 except to the
extent that it has been prejudiced in any material respect by such failure or
from any liability which it may have otherwise). In case any such action,
investigation, inquiry, suit or proceeding is brought against any indemnified
party, and it notifies an indemnifying party or parties of the commencement
thereof, the indemnifying party or parties will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the
indemnifying party, (ii) the indemnifying parties shall not have employed
counsel reasonably satisfactory to such indemnified party to have charge of
the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded 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, investigation, inquiry, suit
or proceeding 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, investigation, inquiry, suit or proceeding or separate but
similar or related actions, investigations, inquiries, suits or proceedings 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. An indemnifying party will not, without
the prior written consent of the indemnified parties, settle compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, investigation, inquiry, suit or proceeding in respect of which
indemnification or contribution may be sought
31
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party form
all liability arising out of such claim, action, suit or proceeding and (ii)
doe snot include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party.
(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, investigations, inquiries, suits or proceedings in
respect thereof) (A) in such proportion as is appropriate to reflect the
relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. In any
case where the Company is the contributing party and the Underwriters are the
indemnified party, the relative benefits received by the Company on the one
hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities
(before deducting expenses) bear to the total underwriting discounts received
by the Underwriters 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 Underwriters, 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, investigations, inquiries, suits or
proceedings 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, claim, investigation, inquiry, suit or proceeding. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. 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,
inquiry, investigation or proceeding against such party in respect to which a
claim for contribution may
32
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.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant
hereto, shall be deemed to be representations, warranties and agreements at
the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the indemnity
agreements contained in Section 7 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter, the Company, any controlling person of any Underwriter or the
Company, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriters.
9. Effective Date.
(a) This Agreement shall become effective at 10:00 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
Representative, in its discretion, shall release the Shares for 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
Shares to be purchased hereunder shall be deemed to have been so released upon
the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such shares for offering or the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Shares.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the Representative
shall have the right to terminate this Agreement, after the date hereof, (i)
if any domestic or international event or act or occurrence has materially
disrupted, or in the Representative's opinion will in the immediate future
materially adversely disrupt the financial markets; or (ii) any material
adverse change in the financial markets shall have occurred; or (iii) if
trading generally shall have been suspended or materially limited on or by, as
the case may be, any of the New York Stock Exchange, the American Stock
Exchange, the National Association of Securities Dealers, Inc., the Boston
Stock Exchange, the Chicago Board of Trade, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Commission or any other
government authority having jurisdiction; or (iv) if trading of any of the
securities of the Company shall have been suspended, or any of the securities
of the Company shall have been delisted, on any exchange or in any
over-the-counter market; or (v) if the United States shall have become
involved in a war or major hostilities, or if there shall have been an
escalation in an existing war or major hostilities or a national emergency
shall have been declared in the United States; or (vi) if a banking moratorium
has been declared by a state or federal authority; or (vii) if a moratorium
33
in foreign exchange trading has been declared; or (viii) if the Company shall
have sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
delivery of the Securities; or (viii) if there shall have occurred any
outbreak or escalation of hostilities or any calamity or crisis or there shall
have been such a material adverse change in the conditions or prospects of the
Company, or such material adverse change in the general market, political or
economic conditions, in the United States or elsewhere as in the
Representative's judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) the Company shall promptly
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to Section 5(c) above). Notwithstanding
any contrary provision contained in this Agreement, if this Agreement shall
not be carried out within the time specified herein, or any extension thereof
granted to the Representative, by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement
by it to be performed or satisfied (including, without limitation, pursuant to
Section 6 or Section 12) then, the Company shall promptly reimburse and
indemnify the Underwriter for all of their actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriter (less
amounts previously paid pursuant to Section 5(c) above). In addition, the
Company shall remain liable for all Blue Sky counsel fees and expenses and
filing fees. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 6, 10 and 12 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail otherwise than for a reason sufficient to justify the
termination of this Agreement (under the provisions of Section 6, Section 10
or Section 12 hereof) to purchase the Securities which it or they are
obligated to purchase on such date under this Agreement (the "Defaulted
Securities"), the Representative shall have the right, within 24 hours
thereafter, to make arrangement for one or more of the non-defaulting
Underwriters, or any other Underwriters, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Representative shall not
have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Firm Shares to be purchased on such date, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear to
the underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Shares, this Agreement shall terminate without liability on the
part of any non-defaulting Underwriters.
34
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing
Date or at any Option Closing Date, as applicable, to sell and deliver the
number of Shares 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 Shares to be purchased on an Option Closing Date, the
Underwriters may at their option, by notice from the Underwriters or the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Shares from the Company on such date) without any liability on
the part of any non-defaulting party other than pursuant to Section 5, Section
7 and Section 10 hereof. No action taken pursuant to this Section shall
relieve the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication. Notices to the Representative shall be directed to the
Representative at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Esq. Notices to the Company shall be directed to the Company at ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, III, with a
copy to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or
claim under or in respect of or by virtue of this Agreement or any provisions
herein contained. No purchaser of Securities from the Underwriters shall be
deemed to be a successor by reason merely of such purchase.
15. 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.
16. 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.
17. Entire Agreement; Amendments. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter
35
hereof. This Agreement may not be amended except in a writing, signed by the
Representative and the Company.
36
If the foregoing correctly sets forth the understanding between the
Underwriters 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,
VCS TECHNOLOGIES, INC.
By:
----------------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written.
GILFORD SECURITIES INCORPORATED
By:
----------------------------
Name:
Title:
SCHEDULE A
Underwriter Number of Firm Shares
----------- ---------------------
Gilford Securities Incorporated
TOTAL 1,000,000