Exhibit 1.1
[Form of Underwriting Agreement - Subject to Additional Review]
Units consisting of 1,500,000 Shares of
10% Senior Convertible Redeemable Preferred Stock
and 1,500,000 Redeemable Warrants and
Units consisting of 1,500,000 Shares of Common Stock
and 1,500,000 Redeemable Warrants
COMMODORE SEPARATION TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
New York, New York
, 1997
NATIONAL SECURITIES CORPORATION
As Representative of the
Several Underwriters listed on Schedule A hereto
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▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Commodore Separation Technologies, Inc., a Delaware corporation (the
"Company"), confirms its agreement with National Securities Corporation
("National") and each of the 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 National is acting
as representative (in such capacity, National shall hereinafter be referred to
as "you" or the "Representative"), with respect to the sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of the
respective number of shares ("Preferred Shares") of the Company's 10% Senior
Convertible Redeemable Preferred Stock, par value $.001 per share ("Convertible
Preferred Stock"), shares ("Common Shares") of the Company's common stock, par
value $.001 per share ("Common Stock"), and redeemable common stock purchase
warrants (the "Redeemable Warrants"), each to purchase one share of Common
Stock, set forth in Schedule A hereto. The aggregate 1,500,000 Preferred Shares,
1,500,000 Common Shares and 3,000,000 Redeemable Warrants will initially be sold
as units consisting of 1,500,000 Preferred Shares and 1,500,000 Redeemable
Warrants and units consisting of 1,500,000 Common Shares and 1,500,000
Redeemable Warrants but will be separately tradeable upon issuance and are
hereinafter referred to as the "Firm Securities." Each Redeemable Warrant is
exercisable commencing on ____________, 1998 [12 months from the date of this
Agreement] until ____________, 2002 [60 months from the date of this Agreement],
unless previously redeemed by the Company, at an initial exercise price of
$_______ [140% of the initial public offering price per Common Share] per share
of Common Stock. The Redeemable Warrants may be redeemed by the Company at a
redemption price of $.10 per Redeemable Warrant at any time after _____________,
1998 [18 months from the date of this Agreement] on thirty (30) days' prior
written notice, provided that the closing bid price of the Common Stock equals
or exceeds 300% of the initial public offering price per Common Share, for any
twenty (20) trading days within a period of thirty (30) consecutive trading days
ending on the fifth trading day prior to the date of the notice of redemption,
all in accordance with the terms and conditions of the Warrant Agreement (as
hereinafter defined).
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriters, acting severally and not
jointly, up to an additional 225,000 shares of Convertible Preferred Stock,
225,000 shares of Common Stock and/or 450,000 Redeemable Warrants for the
purpose of covering over-allotments, if any. Such 225,000 shares of Convertible
Preferred Stock, 225,000 shares of Common Stock and/or 450,000 Redeemable
Warrants are hereinafter collectively referred to as the "Option Securities."
The Company also proposes to issue and sell to you warrants (the
"Representative's Warrants") pursuant to the Representative's Warrant Agreement
(the "Representative's Warrant Agreement") for the purchase of an additional
150,000 shares of Convertible Preferred Stock, 150,000 shares of Common Stock
and/or 300,000 Redeemable Warrants. The shares of Convertible Preferred Stock,
shares of Common Stock and Redeemable Warrants issuable upon exercise of the
Representative's Warrants are hereinafter referred to as the "Representative's
Securities." The Firm Securities, the Option Securities, the Representative's
Warrants and the Representative's Securities (hereinafter collectively 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, each
of the Underwriters as of the date hereof, and as of the Closing Date (as
hereinafter defined) and each Option Closing Date (as hereinafter defined), if
any, as follows:
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(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 S-1 (No. 333-11813), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Firm Securities, the Option Securities, the
Representative's Warrants and the Representative's Securities under the
Securities Act of 1933, as amended (the "Act"), which registration
statement and amendment or amendments have been prepared by the Company
in conformity with the requirements of the Act, and the rules and
regulations (the "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 Underwriters and will
not file any other amendment thereto to which the Underwriters 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 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 threatened. Each of
the Preliminary Prospectus, the Registration Statement and Prospectus
at the time of filing thereof conformed with the requirements of the
Act and the Rules and Regulations, and none of the Preliminary
Prospectus, the Registration Statement or Prospectus at the time of
filing thereof contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
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 or any amendment thereof or
supplement thereto.
(iii) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date (as defined herein)
and each Option Closing Date (as defined herein), if any, and during
such longer period as the Prospectus may
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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 strict
conformity with information furnished to the Company in writing by or
on behalf of any Underwriter 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. Except as set forth in the Prospectus, the
Company does not own an interest in any corporation, partnership,
trust, joint venture or other business entity. The Company is duly
qualified and licensed and in good standing as a foreign corporation in
each jurisdiction in which its ownership or leasing of any properties
or the character of its operations requires such qualification or
licensing. The Company has all requisite power and authority (corporate
and other), and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of
and from all governmental or regulatory officials and bodies
(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 applicable federal, state, local and foreign 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, local, and foreign laws, rules and
regulations on the Company's business as currently conducted and as
contemplated are correct in all material respects and do not omit to
state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading in light of the
circumstances under 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 each Option
Closing Date, if any, based upon the assumptions set forth therein, and
the Company is
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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
Warrant 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 Firm Securities, the Option
Securities, the Representative's Warrants and the Representative's
Securities are not and will not be subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and will conform
to the 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 Firm Securities, the Option Securities, the
Representative's Warrants and the Representative's Securities has been
duly and validly taken; and the certificates representing the Firm
Securities, the Option Securities, the Representative's Warrants and
the Representative's Securities will be in due and proper form. Upon
the issuance and delivery pursuant to the terms hereof of the Firm
Securities, the Option Securities, the Representative's Warrants and
the Representative's Securities to be sold by the Company hereunder,
the Underwriters or the Representative, as the case may be, will
acquire good and marketable title to such Firm Securities, Option
Securities, Representative's Warrants and Representative's 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 of the Company, together with
the related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly
present the financial position, income, changes in cash flow, changes
in stockholders' equity and the results of operations of the Company at
the respective dates and for the respective periods to which they apply
and such financial statements have been prepared in conformity with
generally accepted accounting principles and the Rules and Regulations,
consistently applied throughout the periods involved and such financial
statements as are audited have been examined by ▇▇▇▇▇▇ + Co., who are
independent certified public accountants within the meaning of the Act
and the Rules and Regulations, as indicated in their reports filed
therewith. There has been no adverse change or development involving a
prospective adverse 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
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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 (including, without limitation, any
pro forma financial information) set forth in the Prospectus under the
headings "Summary Financial Data", "Selected Financial Data,"
"Capitalization," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," fairly present, on the
basis stated in the Prospectus, the information set forth therein, and
have been derived from or compiled on a basis consistent with that of
the audited financial statements included in the Prospectus; and, in
the case of pro forma financial information, if any, the assumptions
used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions and
circumstances referred to therein. The amounts shown as accrued for
current and deferred income and other taxes in such financial
statements are sufficient for the payment of all accrued and unpaid
federal, state, local and foreign income taxes, interest, penalties,
assessments or deficiencies applicable to the Company, whether disputed
or not, for the applicable period then ended and periods prior thereto;
adequate allowance for doubtful accounts has been provided for
unindemnified losses due to the operations of the Company; and the
statements of income do not contain any items of special or
nonrecurring income not earned in the ordinary course of business,
except as specified in the notes thereto.
(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, as amended (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 Firm Securities, the Option Securities,
the Representative's Warrants or the Representative's Securities, (ii)
the purchase by the Underwriters of the Firm Securities and the Option
Securities from the Company and the purchase by the Representative of
the Representative's Warrants from the Company, (iii) the consummation
by the Company of any of its obligations under this Agreement, or (iv)
resales of the Firm Securities and the Option Securities in connection
with the distribution contemplated hereby.
(ix) The Company maintains insurance policies, including, but
not limited to, general and product liability, environmental 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 any
insurance policy or surety bond in a due and
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timely manner, (B) does not have any disputes or claims against any
underwriter of such insurance policies or surety bonds or has failed to
pay any premiums due and payable thereunder, or (C) has not failed to
comply with all conditions contained in such insurance policies and
surety bonds. There are no facts or circumstances under any such
insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company.
(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, the Warrant 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, the Warrant 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 Firm Securities, the Option
Securities, the Representative's Warrants and the Representative's
Securities, enter into this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement and to consummate the transactions
provided for in this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement; and this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement have each been
duly and properly authorized, executed and delivered by the Company.
Each of this Agreement, the Warrant 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, and none of the Company's issue and sale of the Firm Securities,
the Option Securities, the Representative's Warrants and the
Representative's Securities, execution or delivery of this Agreement,
the Warrant Agreement or the Representative's Warrant Agreement, its
performance hereunder and thereunder, its consummation of the
transactions contemplated herein and therein, or the conduct of its
business as described in the Registration Statement, the Prospectus,
and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company pursuant to the terms of
(i) the certificate of incorporation or by-laws of the Company, (ii)
any license, contract,
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collective bargaining agreement, indenture, mortgage, deed of trust,
lease, voting trust agreement, stockholders agreement, note, loan or
credit agreement or any other agreement or instrument to which the
Company is a party or by which the Company is or may be bound or to
which either 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, which in any event could have a material adverse effect
on the condition (financial or otherwise), business, properties,
financial position or results of operations of the Company.
(xii) 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 Firm
Securities, the Option Securities, the Representative's Warrants and
the Representative's Securities pursuant to the Prospectus and the
Registration Statement, the performance of this Agreement, the Warrant
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 Firm Securities, the Option Securities, the Representative's
Warrants and the Representative's Securities, 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 Underwriters'
purchase and distribution of the Firm Securities and the Option
Securities, 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 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
accordance with their respective terms. The descriptions in the
Registration Statement of agreements, contracts and other documents are
accurate and fairly present the information required to be shown with
respect thereto by Form S-1, and there are no contracts or other
documents which are required by the Act to be described in the
Registration Statement or filed as exhibits to the Registration
Statement which are not described or filed as required, and the
exhibits which have been filed are complete and correct copies of the
documents of which they purport to be copies.
(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
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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 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, collective
bargaining agreement, 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
in all material respects with all federal, state, local, and foreign
laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours. 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 lockout,
strike, picketing, boycott, dispute, slowdown or stoppage pending or
threatened against or involving the Company, or any predecessor entity,
and none has ever occurred. No representation question exists
respecting the employees of the Company, and no collective bargaining
agreement or modification thereof is currently being negotiated by the
Company. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company. No
labor dispute with the employees of the Company exists, or, to its
knowledge, is imminent.
(xvii) The Company does not maintain, sponsor or contribute to
any program or arrangement that is an "employee pension benefit plan,"
an "employee welfare benefit plan," or a "multiemployer plan" as such
terms are defined in Sections 3(2), 3(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
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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, trade
names and copyrights, and licenses and rights to the foregoing
presently owned or held by the Company are in dispute so far as known
by the Company or are in any conflict with the right of any other
person or entity. The Company (i) owns or has the right to use, free
and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, trademarks, service marks, trade names
and copyrights, technology and licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted or
proposed to be conducted without infringing upon or otherwise acting
adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing and (ii)
except as disclosed in the Prospectus, is not obligated or under any
liability whatsoever to make any payment by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any
patent, trademark, service ▇▇▇▇, trade name, copyright, know-how,
technology or other intangible asset, with respect to the use thereof
or in connection with the conduct of its business or otherwise, except
where failure to obtain any such patents, trademarks, service marks,
trade names, copyrights, know how, technology or other intangible
assets would not have a material adverse effect on the financial
condition, business or results of operations of the Company.
(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, 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
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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 taken reasonable security measures to
protect the secrecy, confidentiality and value of its intellectual
property in all material respects.
(xxii) 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.
(xxiii) ▇▇▇▇▇▇ + Co., 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.
(xxiv) The Company has caused to be duly executed legally
binding and enforceable agreements pursuant to which each of the
Company's officers, directors, stockholders and holders of securities
exchangeable or exercisable for or convertible into shares of Common
Stock has agreed (i) not to, directly or indirectly, issue, offer,
offer to sell, sell, grant any option for the sale or purchase of,
assign, transfer, pledge, hypothecate 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 without the
prior written consent of the Representative and the Company and (ii) to
waive all rights to request or demand the registration pursuant to the
Act of any securities of the Company which are registered in the name
of or beneficially owned by any such holder. During the 13 month period
commencing on 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, 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. The Company will
cause the Transfer Agent (as hereinafter defined) 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.
(xxv) 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, stockholders, partners, employees or
affiliates, that may affect the
- 11 -
Underwriters' compensation, as determined by the National Association
of Securities Dealers, Inc. ("NASD").
(xxvi) The Convertible Preferred Stock, Common Stock and
Redeemable Warrants have been approved for quotation on the Nasdaq
SmallCap Market ("Nasdaq"), subject to official notice of issuance.
(xxvii) 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 material 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, condition, financial or
otherwise, earnings, position, properties, value, 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.
(xxviii) Except as set forth in the Prospectus, no officer,
director, stockholder or partner of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under
the Rules and Regulations) of any of the foregoing persons or entities
has or has had, either directly or indirectly, (i) an interest in any
person or entity which (A) furnishes or sells services or products
which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company
any goods or services, or (ii) a beneficiary interest in any contract
or agreement to which the Company is a party or by which it may be
bound or affected. Except as set forth in the Prospectus under "Certain
Relationships and Related 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 5% or greater
securityholder of the Company, or any partner, affiliate or associate
of any of the foregoing persons or entities.
(xxix) Any certificate signed by any officer of the Company,
and delivered to the Underwriters or to Underwriters' Counsel (as
defined herein) shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
- 12 -
(xxx) The minute books of the Company have been made available
to the Underwriters and contain a complete summary of all meetings and
actions of the directors (including committees thereof) and
stockholders of the Company, since the time of its incorporation, and
reflect all transactions referred to in such minutes accurately in all
material respects.
(xxxi) 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.
(xxxii) (A) The Company is in compliance in all material
respects with all federal, state, local or foreign laws, common law,
rules, codes, administrative orders or regulations relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including without limitation
all laws, common law, rules, codes, administrative orders and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws") and (B) to the best of
the Company's knowledge, there are no events or circumstances that
could form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or
agency, against or affecting the Company relating to any Hazardous
Materials or the violation of any Environmental Laws, which order or
action, suit or proceeding could have a material adverse effect on the
condition (financial or otherwise), business, properties, financial
position or results of operations of the Company. The Company has no
reason to believe that it will not receive all necessary and required
approvals, authorizations, validations and certifications from
applicable regulatory authorities to enable the Company to commence
full operations as contemplated in the Registration Statement and the
Prospectus.
(xxxiii) In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the
business, operations and properties of the Company, in the course of
which it identifies and evaluates associated costs and liabilities
(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties). On the basis of such review, the Company has reasonably
concluded that such associated costs and liabilities would not, singly
or in the aggregate, have a material adverse effect on the Company.
- 13 -
(xxxiv) The Company has as of the effective date of the
Registration Statement (i) entered into an employment agreement with
each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Ph.D.
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the forms filed as Exhibits 10.2, 10.3, 10.4
and 10.5, respectively, to the Registration Statement and Commodore
Environmental Services, Inc., a Delaware corporation and the majority
stockholder of the Parent (as hereinafter defined) ("Commodore"), has
entered into an employment agreement with ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in the form
filed as Exhibit 10.6 to the Registration Statement and (ii) purchased
term key person insurance on the lives of Messrs. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
and Kilambi in the amount of $1 million each, which policies name the
Company as the sole beneficiary thereof.
(xxxv) As of the date hereof, the Company does not have more
than 10,000,000 shares of Common Stock issued and outstanding
(including securities with equivalent rights as the Common Stock and
shares of Common Stock, or such equivalent securities, issuable upon
exercise of any and all options, warrants and other contract rights and
securities convertible directly or indirectly into shares of Common
Stock or such equivalent securities, but excluding up to 1,177,250
shares of Common Stock issuable upon the exercise of options granted
under the Company's 1996 Stock Option Plan at prices not less than the
initial public offering price per Common Share).
(xxxvi) The Company confirms as of the date hereof that it is
in compliance with all provisions of Section 1 of Laws of Florida,
Chapter 92-198, An Act Relating to Disclosure of Doing Business with
Cuba, and the Company further agrees that if it or any affiliate
commences engaging in business with the government of Cuba or with any
person or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with
the Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported or incorporated
by reference in the Prospectus, if any, concerning the Company's, or
any affiliate's, business with Cuba or with any person or affiliate
located in Cuba changes in any material way, the Company will provide
the Department notice of such business or change, as appropriate, in a
form acceptable to the Department.
(xxxvii) The Company has furnished the Representative and
Underwriters' Counsel with a true and complete copy of the Commodore
SEC Documents. As used herein, the "Commodore SEC Documents" shall mean
all documents (other than preliminary material) that Commodore has
filed or has been required to file with the Commission since January 1,
1994. As of its filing date (and, with respect to any registration
statement, the date on which it or any post-effective amendment was
declared effective) other than with respect to changes that may be
necessitated by virtue of comments made by the Commission related to
the Registration Statement that may be applicable to Commodore, each
Commodore SEC Document was in compliance, in all material respects,
with the applicable requirements of the Act and the Exchange Act,
contained no untrue statement of a material fact and did not omit any
statement of a material fact required to be stated therein or necessary
to make the statements therein,
- 14 -
in light of the circumstances under which they were made, not
misleading. The financial statements of Commodore included in the
Commodore SEC Documents complied, at the time of filing with the
Commission (and, with respect to any registration statement, at the
time it was declared effective), as to form, in all material respects,
with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved and fairly present, in all
material respects, the consolidated financial position of Commodore and
its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations for the periods presented.
Since January 1, 1996, there has not been any change in the business,
assets, condition, financial or otherwise, or results of operations of
Commodore or any of its subsidiaries which 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.
(xxxviii) The Company is not, and upon the issuance and sale
of the Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus under the caption
"Use of Proceeds" will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xxxix) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparations of financial statements in conformity with
generally accepted accounting principles and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorizations; and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(xl) The Company has entered into a warrant agreement
substantially in the form filed as Exhibit 4.2 to the Registration
Statement (the "Warrant Agreement") with the Representative and The
Bank of New York, as Warrant Agent, in form and substance satisfactory
to the Representative, with respect to the Redeemable Warrants and
providing for the payment of the commission contemplated by Section
4(a)(xxii).
(xli) None of the directors or officers of the Company have
ever been an officer of Wico Holding Corp., Wico Corp., Wico Gaming
Supply Corp. or Conquest Industries.
(b) Commodore Applied Technologies, Inc., a Delaware corporation
and the sole stockholder of the Company ("Parent"), represents and warrants to,
and agrees with, each of the
- 15 -
Underwriters as of the date hereof, and as of the Closing Date and each Option
Closing Date, if any, as follows:
(i) Parent has full legal right, power and authority to enter
into this Agreement, and to consummate the transactions provided for in
this Agreement; and this Agreement has been duly and properly
authorized, executed and delivered by the Parent. This Agreement
constitutes a legal, valid and binding agreement of Parent enforceable
against Parent in accordance with its terms, and none of the Parent's
execution or delivery of this Agreement, its performance hereunder, or
its consummation of the transactions contemplated herein, 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 Parent pursuant to
the terms of (i) the certificate of incorporation or by-laws of the
Parent, (ii) any license, contract, collective bargaining agreement,
indenture, mortgage, deed of trust, lease, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Parent is a party or by which the
Parent is or may be bound or to which either 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 Parent 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
Parent or any of its activities or properties which in any event could
have a material adverse effect on the condition (financial or
otherwise), business, properties, financial position or results of
operations of the Parent.
(ii) 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 delivery and sale of the
Securities pursuant to the Prospectus and the Registration Statement,
the performance of this Agreement, and the transactions contemplated
hereby, including without limitation, any waiver of any preemptive,
first refusal or other rights that any entity or person may have for
the delivery and sale of any of the Securities, 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 Underwriters'
purchase and distribution of the Firm Securities and the Option
Securities.
(iii) The Parent has not breached any of the representations
and warranties contained in Section 1 of the Underwriting Agreement
dated June 28, 1996 by and among the Parent, National and Bentley ▇.
▇▇▇▇ (the "Parent Underwriting Agreement"), and is in compliance with
all covenants and agreements contained in Section 4 of the Parent
Underwriting Agreement.
- 16 -
(iv) At the time when the Registration Statement becomes or
became effective, and at all times subsequent thereto up to and
including the Closing Date and the Option Closing Date, the
Registration Statement and any amendments thereto will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading, and the Prospectus (and any
supplements thereto) (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) will not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(v) Neither the Parent 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.
(vi) There is not pending or, to the Parent's knowledge,
threatened against the Parent any action, suit or proceeding which (A)
questions the validity of this Agreement or of any action taken or to
be taken by the Parent pursuant to or in connection with this
Agreement, or (B) is required to be disclosed in the Registration
Statement which is not so disclosed, and such actions, suits or
proceedings as are summarized in the Registration Statement, if any,
are accurately summarized.
(vii) The Parent has furnished the Representative and
Underwriters' Counsel with a true and complete copy of the Parent SEC
Documents. As used herein, the "Parent SEC Documents" shall mean all
documents (other than preliminary material) that the Parent has filed
or has been required to file with the Commission since January 1, 1996.
As of its filing date (and, with respect to any registration statement,
the date on which it or any post-effective amendment was declared
effective) other than with respect to changes that may be necessitated
by virtue of comments made by the Commission related to the
Registration Statement that may be applicable to the Parent, each
Parent SEC Document was in compliance, in all material respects, with
the applicable requirements of the Act and the Exchange Act, contained
no untrue statement of a material fact and did not omit any statement
of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Parent
included in the Parent SEC Documents complied, at the time of filing
with the Commission (and, with respect to any registration statement,
at the time it was declared effective), as to form, in all material
respects, with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto, were
prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved and fairly
present, in all material respects, the consolidated financial position
of the
- 17 -
Parent and its consolidated subsidiaries as of the dates thereof and
the consolidated results of their operations for the periods presented.
Since January 1, 1996, there has not been any change in the business,
assets, condition, financial or otherwise, or results of operations of
the Parent or any of its subsidiaries which 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.
(viii) The Parent does not have any registration rights or
other similar rights with respect to any securities of the Company; and
the Parent does not have any right of first refusal or other similar
right to purchase any securities of the Company upon the issuance or
sale thereof by the Company or upon the sale thereof by any other
stockholder of the Company.
(ix) The Parent has not since the filing of the initial
Registration Statement (i) sold, bid for, purchased, attempted to
induce any person to purchase, or paid anyone any compensation for
soliciting purchases of Common Stock, or (ii) paid or agreed to pay to
any person any compensation for soliciting another to purchase any
securities of the Company (except as otherwise permitted by law).
(x) Any certificate signed by or on behalf of the Parent and
delivered to the Underwriters shall be deemed a representation and
warranty by the Parent to the Underwriters as to the matters covered
thereby.
2. Purchase, Sale and Delivery of the Securities.
(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,
severally and not jointly, agrees to purchase from the Company at a price of
$_______ [92% of the public offering price] per Preferred Share, $_______ [92%
of the public offering price] per Common Share and $_______ [92% of the public
offering price] per Redeemable Warrant, that number of Firm Securities set forth
in Schedule A opposite the name of such Underwriter, subject to such 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 Securities
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, severally and not jointly, to purchase all or any part of an
additional 225,000 shares of Convertible Preferred Stock at a price of $_______
[92% of the public offering price] per share of Convertible Preferred Stock,
225,000 shares of Common Stock at a price of $_______ [92% of the public
offering price] per share of Common Stock and/or 450,000 Redeemable Warrants at
a price of $______ [92% of the
- 18 -
public offering price] per Redeemable Warrant. The option granted hereby will
expire forty-five (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 Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for any such Option Securities. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Representative, but shall not
be later than three (3) 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
Securities shall be delivered unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Securities shall be made at the offices of the Representative 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 ______________, 1997 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
five (5) full business days after the effective date of the Registration
Statement (such time and date of payment and delivery being herein called the
"Closing Date"). In addition, in the event that any or all of the Option
Securities are purchased by the Underwriters, payment of the purchase price for,
and delivery of certificates for, such Option Securities 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 Securities and the Option Securities, if any, shall be
made to the Underwriters against payment by the Underwriters, severally and not
jointly, of the purchase price for the Firm Securities and the Option
Securities, if any, to the order of the Company for the Firm Securities and the
Option Securities, if any, by New York Clearing House funds. In the event such
option is exercised, each of the Underwriters, acting severally and not jointly,
shall purchase that proportion of the total number of Option Securities then
being purchased which the number of Firm Securities set forth in Schedule A
hereto opposite the name of such Underwriter bears to the total number of Firm
Securities, subject in each case to such adjustments as the Representative in
its discretion shall make to eliminate any sales or purchases of fractional
shares. Certificates for the Firm Securities and the Option Securities, if any,
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Underwriters 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 Securities and the Option Securities, 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
- 19 -
a.m. on the last business day prior to the 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 Representative's Warrants shall entitle the holders thereof to
purchase an aggregate of 150,000 shares of Convertible Preferred Stock, 150,000
shares of Common Stock and/or 300,000 Redeemable Warrants. The Representative's
Warrants shall be exercisable for a period of four (4) years commencing one (1)
year from the effective date of the Registration Statement at a price equaling
one hundred twenty percent (120%) of the respective initial public offering
price of the Preferred Shares, the Common Shares and the Redeemable Warrants.
The Representative's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit 4.4 to the Registration Statement.
Payment for the Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Preferred Shares, Common Shares and
Redeemable Warrants. As soon after the Registration Statement becomes effective
as the Representative deems advisable, the Underwriters shall make a public
offering of the Preferred Shares, the Common Shares and the Redeemable Warrants
(other than to residents of or in any jurisdiction in which qualification of the
Preferred Shares, the Common Shares and the Redeemable Warrants 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
respective public offering price after distribution of the Preferred Shares, the
Common Shares and the Redeemable Warrants has been completed to such extent as
the Representative, in its sole 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.
4. Covenants and Agreements of the Company and the Parent.
(a) The Company covenants and agrees with each of the Underwriters
as follows:
(i) 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 Preferred Shares, the Common Shares and the
Redeemable Warrants 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 reasonably objected or which is not
in compliance with the Act, the Exchange Act or the Rules and
Regulations.
(ii) 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
- 20 -
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 shall
enter a stop order or suspend such qualification at any time, the
Company will use its best efforts to obtain promptly the lifting of
such order.
(iii) 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 fifth business day after the effective date of
the Registration Statement.
(iv) 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 Underwriters 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 which the Representative or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ &
Sutcliffe LLP ("Underwriters' Counsel") shall reasonably object.
(v) 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
- 21 -
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.
(vi) 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 is required to be delivered under the Act,
any event shall have occurred as a result of which, in the reasonable
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 reasonably
satisfactory to Underwriters' Counsel, and the Company will furnish to
the Underwriters copies of such amendment or supplement as soon as
available and in such quantities as the Underwriters may reasonably
request.
(vii) As soon as practicable, but in any event not later than
forty-five (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 (ninety (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 twelve (12)
consecutive months after the effective date of the Registration
Statement.
(viii) During a period of seven (7) years after the date hereof,
the Company will furnish to its stockholders, as soon as practicable,
annual reports (including financial statements audited by independent
public accountants) and unaudited quarterly reports of earnings, and
will deliver to the Representative:
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(A) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(B) 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;
(C) 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
(D) any additional information of a public nature
concerning the Company (and any future subsidiary) or its
businesses which the Representative may reasonably request.
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
any of its subsidiaries are consolidated, and will be accompanied by
similar financial statements for any significant subsidiary which is
not so consolidated.
(ix) The Company will maintain a transfer agent and warrant
agent ("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 Convertible Preferred Stock, Common
Stock and Redeemable Warrants.
(x) The Company will furnish to the Representative or on the
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
reasonably request.
(xi) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true
original 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, each of the Company's
stockholders and holders of securities exchangeable or exercisable for
or convertible into shares of Common Stock agrees that it or he or she
(i) will not, directly or indirectly, issue, offer to sell, sell, grant
an option for the sale or purchase of, assign, transfer, pledge,
hypothecate 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
- 23 -
the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein without the prior consent of the Representative
(collectively, the "Lock-up Agreements") and (ii) waives, during such
thirteen (13) month period, any and all rights to request or demand the
registration pursuant to the Act, of any securities of the Company
which are registered in the name of or beneficially owned by it or he
or she, respectively. During the thirteen (13) month period commencing
on 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, 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. 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.
(xii) Neither the Company nor any of its officers, directors,
stockholders, nor any of its 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.
(xiii) The Company shall apply the net proceeds from the sale
of the Firm Securities and the Option Securities, if any, in the
manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. No portion of the net proceeds will be
used, directly or indirectly, to acquire any securities issued by the
Company or any of its Affiliates (as defined herein).
(xiv) 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.
(xv) 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 their letters to be
furnished pursuant to Sections 6(l) and 6(m) hereof.
(xvi) The Company shall cause the Convertible Preferred Stock,
the Common Stock and the Redeemable Warrants to be quoted on Nasdaq or
listed on a comparable
- 24 -
national securities exchange and, for a period of seven (7) years from
the date hereof, use its best efforts to maintain the Nasdaq quotation
or other such exchange listing of the Convertible Preferred Stock, the
Common Stock and the Redeemable Warrants to the extent outstanding.
(xvii) For a period of five (5) years from the Closing Date,
the Company shall furnish to the Representative at the Representative's
reasonable request and at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Convertible Preferred
Stock, the Common Stock and the Redeemable Warrants (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.
(xviii) As soon as practicable, (i) but in no event more than
five (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 thirty (30) days after the effective date of the
Registration Statement, take all necessary and appropriate actions to
be included in Standard and Poor's Corporation Records and ▇▇▇▇▇'▇ OTC
Manual and to continue such inclusion for a period of not less than
seven (7) years.
(xix) The Company hereby agrees that it will not, without the
prior written consent of the Representative 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 similar
arrangement permitting (i) the grant, issue, sale or entry into any
agreement to grant, issue or sell any option, warrant or other contract
right (x) at an exercise price that is less than the greater of the
initial public offering price of the Common Shares set forth herein and
the fair market value on the date of grant or sale or (y) to any of its
executive officers or directors or to any holder of 5% or more of the
Common Stock, except as provided in subsection (ii) of this
subparagraph; (ii) the maximum number of shares of Common Stock or
other securities of the Company purchasable at any time pursuant to
options or warrants issued by the Company to exceed the aggregate
1,700,000 shares reserved for future issuance under the Company's 1996
Stock Option Plan described in the "Executive Compensation-Stock
Options" section of the Prospectus; (iii) the payment for such
securities with any form of consideration other than cash; or (iv) the
existence of stock appreciation rights, phantom options or similar
arrangements.
(xx) Until the completion of the distribution of the
Securities, 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.
- 25 -
(xxi) For a period equal to the lesser of (i) seven (7) years
from the date hereof, and (ii) the sale to the public of the
Representative's Securities, the Company will not take any action or
actions which may prevent or disqualify the Company's use of Form S-1
(or other appropriate form) for the registration under the Act of the
Representative's Securities. The Company further agrees to use its best
efforts to file such post-effective amendments to the Registration
Statement, as may be necessary, in order to maintain its effectiveness
and to keep such Registration Statement effective while any of the
shares of Convertible Preferred Stock, Redeemable Warrants or
Representative's Warrants remain outstanding.
(xxii) Commencing one year and one day from the date hereof,
if the Company engages the Representative as a warrant solicitation
agent under the terms of the Warrant Agreement, the Company shall pay
the Representative a commission equal to five percent (5%) of the
exercise price of the Redeemable Warrants, payable on the date of the
exercise thereof on the terms provided in the Warrant Agreement;
provided, however, the Representative shall be entitled to receive the
commission contemplated by this Section 4(a)(xxii) only if: (i) the
Representative has provided actual services in connection with the
solicitation of the exercise of a Redeemable Warrant by a Warrantholder
and (ii) the Warrantholder exercising a Redeemable Warrant
affirmatively designates in writing on the exercise form on the reverse
side of the Redeemable Warrant Certificate that the exercise of such
Warrantholder's Redeemable Warrant was solicited by the Representative.
(xxiii) Prior to the Closing Date, the Company shall have
converted all short-term debt payable to the Parent (including any
additional cash advances made by the Parent to the Company prior to the
Closing Date which are not (or would not be) reflected as debt on the
Company's balance sheet) into equity as partial consideration for the
Company's previous issuance of 10,000,000 shares of Common Stock to the
Parent.
(xxiv) The Company will not, and will not permit any of its
future subsidiaries to, directly or indirectly, enter into any
transaction or series of related transactions (including, but not
limited to, the sale, purchase, exchange, lease, transfer or other
disposition of any properties, assets or services to, or the purchase
of any property, assets or services from, or the entry into any
contract, agreement, undertaking, loan, advance or guarantee) with, or
for the benefit of, an Affiliate (an "Affiliate Transaction"), or
extend, renew, waive or otherwise modify the terms of any Affiliate
Transaction entered into prior to the date of issuance of the
Securities unless (i) such Affiliate Transaction is between or among
the Company and its wholly-owned subsidiaries, or (ii) the terms of
such Affiliate Transaction are fair and reasonable and at least as
favorable to the Company or such subsidiary, as the case may be, as
those that could have been obtained in a comparable arm's length
transaction by the Company or such subsidiary with an unrelated person,
and such Affiliate Transaction is entered into in the ordinary course
of business of the parties thereto; provided, however, notwithstanding
anything to the contrary contained herein, the Company may issue
- 26 -
securities pursuant to the exercise of outstanding options and warrants
on the terms in effect and described in the Prospectus relating to the
Securities. All Affiliate Transactions must be approved in good faith
by the Board of Directors of the Company and a minimum of three
disinterested and independent outside directors thereof, and such
approval evidenced by a Board Resolution that such transaction meets
the criterion set forth in (i) or (ii) above. Affiliate includes
Commodore and the Parent, each of their respective principal
stockholders and subsidiaries, Bentley ▇. ▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇.
(b) The Parent covenants and agrees with each of the Underwriters
as follows:
(i) The Parent will not, directly or indirectly, without the
prior written consent of the Company and the Representative, offer,
offer to sell, sell, grant an option for the sale or purchase of,
assign, transfer, pledge, hypothecate or otherwise encumber or dispose
of any shares of Common Stock or any securities convertible into,
exchangeable or exercisable 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 thirteen (13) months after the date
hereof, except pursuant to this Agreement, and neither the Parent nor
any of its officers, directors, stockholders, nor any of its 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.
(ii) The Parent consents to the use of the Prospectus and any
amendment or supplement thereto by the Underwriters and all dealers to
whom the Securities may be sold, both in connection with the offering
or sale of the Securities and for such period of time thereafter as the
Prospectus is required by law to be delivered in connection therewith.
(iii) The Parent will review the Prospectus and will comply
with all agreements and satisfy all conditions on its part to be
complied with or satisfied pursuant to this Agreement at or prior to
any Closing Date or Option Closing Date, if any, and will advise the
Company and the Representative prior to any Closing Date or Option
Closing Date, if any, if any statement to be made on behalf of the
Parent in the certificates contemplated by Section 6(j) hereof would be
inaccurate if made as of such Closing Date or Option Closing Date, if
any.
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 and
the Parent under this Agreement, the Warrant Agreement and
- 27 -
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 Warrant Agreement, the Representative's Warrant
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 Firm Securities and the
Option Securities from the Company, and the purchase by the Representative of
the Representative's Warrants from the Company, (y) the consummation by each of
the Company and the Parent of any of its obligations under this Agreement, the
Warrant Agreement and the Representative's Warrant Agreement, and (z) resale of
the Firm Securities and the Option Securities 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 reasonable disbursements and fees of counsel in connection
therewith, (v) sales and marketing 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 reasonable fees of any
independent counsel, expert or consultant retained, (vii) fees and expenses of
the Transfer Agent and registrar and all issue and transfer taxes, if any,
(viii) applications for assignment of a rating of the Securities by qualified
rating agencies, (ix) the reasonable fees payable to the Commission and the
NASD, and (x) the fees and expenses incurred in connection with the quotation of
the Securities on Nasdaq and any other exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6 or Section 12, the Company shall
reimburse and indemnify the Underwriters for all of their actual out-of-pocket
expenses, including the reasonable 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 Securities, $50,000 of which has been paid to date. In the event the
Representative elects to exercise the
- 28 -
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 offering) a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Option Securities.
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 and the Parent herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any, as
if they had been made on and as of the Closing Date or each Option Closing Date,
as the case may be; the accuracy on and as of the Closing Date or each Option
Closing Date, if any, of the statements of the officers of the Company and the
Parent made pursuant to the provisions hereof; and the performance by each of
the Company and the Parent on and as of the Closing Date and each Option Closing
Date, if any, of its covenants and obligations hereunder and to the following
further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 P.M., New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Representative,
and, at the Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the Preferred
Shares, the Common Shares and the Redeemable Warrants 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 the Closing Date, the Company shall have
provided evidence reasonably 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 reasonable opinion, is material, or omits
to state a fact which, in the Representative's reasonable opinion, is material
and is required to be stated therein or is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's reasonable opinion, is
material, or omits to state a fact which, in the Representative's reasonable
opinion, is material and is required to be stated therein or is necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
- 29 -
(c) On or prior to each of the Closing Date and each Option Closing
Date, if any, 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 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 the Closing Date, the Underwriters shall have received the
favorable opinion of Greenberg, Traurig, Hoffman, Lipoff, ▇▇▇▇▇ & ▇▇▇▇▇▇▇,
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 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 adversely affect the business, operations,
condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, 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 required to be stated therein or necessary to make
the statements contained therein not misleading in light of the
circumstances in which they were made.
(ii) the Company does not own an interest in any other
corporation, partnership, joint venture, trust or other business
entity;
(iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "CAPITALIZATION", and, to the
knowledge of such counsel, the Company is not a party to or bound by
any instrument, agreement or other arrangement providing for it to
issue, sell, transfer, purchase or redeem any capital stock, rights,
warrants, options or
- 30 -
other securities, except for this Agreement, the Warrant Agreement and
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 or any similar rights granted by the Company. The
Securities to be sold by the Company hereunder and under the Warrant
Agreement and the Representative's Warrant Agreement are not and will
not, to the knowledge of such counsel, 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 Securities has been duly and
validly taken; and the certificates representing the Securities are in
due and proper form. The Representative's Warrants and the Redeemable
Warrants constitute valid and binding obligations of the Company to
issue and sell, upon exercise thereof and payment therefor, the number
and type of securities of the Company called for thereby. Upon the
issuance and delivery pursuant to this Agreement of the Firm Securities
and the Option Securities and the Representative's Warrants to be sold
by the Company, the Underwriters and the Representative, respectively,
will acquire good and marketable title to the Firm Securities and the
Option Securities and the 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 Securities, (B)
the purchase by the Underwriters of the Firm Securities and the Option
Securities from the Company, and the purchase by the Representative of
the Representative's Warrants from the Company (C) the consummation by
the Company of any of its obligations under this Agreement, the Warrant
Agreement or the Representative's Warrant Agreement, or (D) resales of
the Firm Securities and the Option Securities 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, to the best of such
counsel's knowledge, 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;
- 31 -
(v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements thereto
(other than the financial 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 and fairly represent the information required to be shown by
Form S-1; (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 respects), (y) questions the validity of
the capital stock of the Company or this Agreement, the Warrant
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 a 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, the Warrant
Agreement or the Representative's Warrant Agreement or which in any
manner draws into question the validity or enforceability of this
Agreement, the Warrant Agreement or the Representative's Warrant
Agreement;
(vii) the Company has full legal right, power and authority to
enter into each of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement,
- 32 -
and to consummate the transactions provided for therein; and each of
this Agreement, the Warrant Agreement and the Representative's Warrant
Agreement has been duly authorized, executed and delivered by the
Company. Each of this Agreement, the Warrant 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 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, the
Warrant 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, collective bargaining agreement, indenture,
mortgage, deed of trust, lease, 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 (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) no consent, approval, authorization or order, and no
filing with, any court, regulatory body, government agency or other
body (other than such as may be required under Blue Sky laws, as to
which no opinion need be rendered) is required in connection with the
issuance of the Firm Securities and the Option Securities pursuant to
the Prospectus and the Registration Statement, the issuance of the
Representative's Warrants, the performance of this Agreement, the
Warrant 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,
- 33 -
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 of such counsel's knowledge, the Company is
not in breach of, or in default under, any term or provision of any
license, contract, collective bargaining agreement, 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 may
be bound or to which the properties 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 Articles of Incorporation or
By-Laws or in violation of any franchise, license, permit, judgment,
decree, order, statute, rule or regulation;
(xi) the statements in the Prospectus under "RISK FACTORS,"
"BUSINESS," "MANAGEMENT," "EXECUTIVE COMPENSATION," "PRINCIPAL
STOCKHOLDERS," "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,"
"DESCRIPTION OF SECURITIES," "SHARES ELIGIBLE FOR FUTURE SALE" and
"CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" have been reviewed by such
counsel, and insofar as they refer to statements of law, descriptions
of statutes, licenses, rules or regulations or legal conclusions, are
correct in all material respects;
(xii) the Securities have been accepted for quotation on
Nasdaq, subject to official notice of issuance;
(xiii) the persons listed under the caption "PRINCIPAL
STOCKHOLDERS" 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) neither the Company nor any of its officers,
stockholders, employees or agents, nor 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 or instrumentality of
any government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who is or
may be in a position to help or hinder the business of the Company (or
assist it in connection with any actual or proposed transaction) which
(A) might subject the Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (B) if not given in
the past, might have had an adverse effect on the assets, business or
operations of the Company, as reflected in any of the financial
statements
- 34 -
contained in the Registration Statement, or (C) if not continued in the
future, might adversely affect the assets, business, operations or
prospects of the Company;
(xv) to the knowledge of such counsel, 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;
(xvi) except as described in the Prospectus, to the knowledge
of such counsel, 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 arrangements or any other arrangements,
agreements, understandings, payments or issuances that may affect the
Underwriters' compensation, as determined by the NASD;
(xvii) assuming due execution by the parties thereto other
than the Company, the Lock-up Agreements are legal, valid and binding
obligations of the 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);
(xviii) 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";
(xix) the minute books of the Company have been made available
to the Underwriters and contain a complete summary of all meetings and
actions of the directors and stockholders of the Company since the time
of its incorporation and reflect all transactions referred to in such
minutes accurately in all material respects;
(xx) the Company is not, and upon the issuance and sale of the
Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus under the caption
"USE OF PROCEEDS" will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act");
(xxi) the Company has furnished the Representative and
Underwriters' Counsel with a true and complete copy of the Affiliate
SEC Documents. As used herein, the "Affiliate SEC Documents" shall mean
all documents (other than preliminary material) that each of Commodore
Applied Technologies, Inc., a Delaware corporation and the
- 35 -
sole stockholder and parent corporation of the Company (the "Parent"),
and Commodore Environmental Services, Inc., a Delaware corporation and
the majority stockholder of Parent ("Commodore"), has filed or has been
required to file with the Commission since January 1, 1994. As of its
filing date (and, with respect to any registration statement, the date
on which it or any post-effective amendment was declared effective),
each Affiliate SEC Document was in compliance, in all material
respects, with the applicable requirements of the Act and the Exchange
Act, contained no untrue statement of a material fact and did not omit
any statement of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of
the Parent or Commodore, as the case may be, included in the Affiliate
SEC Documents complied, at the time of filing with the Commission (and,
with respect to any registration statement, at the time it was declared
effective), as to form, in all material respects, with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
during the periods involved and fairly present, in all material
respects, the consolidated financial position of the Parent or
Commodore, as the case may be, and its consolidated subsidiaries as of
the dates thereof and the consolidated results of their operations for
the periods presented. Since January 1, 1996, there has not been any
change in the business, assets, condition, financial or otherwise, or
results of operations of the Parent or Commodore, as the case may be,
or any of its subsidiaries which 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.
(xxii) except as set forth in the Prospectus and to the best
knowledge of such counsel, 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 or has had, either directly or
indirectly, (A) an interest in any person or entity which (x) furnishes
or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (y) purchases from
or sells or furnishes to the Company any goods or services, or (B) a
beneficial interest in any contract or agreement to which the Company
is a party or by which it may be bound or affected. Except as set forth
in the Prospectus under "CERTAIN RELATIONSHIPS AND RELATED
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 5% or greater securityholder of the Company, or
any affiliate or associate of any such person or entity;
(xxiii) the Company is in compliance with all provisions of
Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to
Disclosure of Doing Business with Cuba;
- 36 -
(xxiv) to the best of such counsel's knowledge, (A) the
Company is in compliance with all federal, state, local or foreign
laws, common law, rules, codes, administrative orders or regulations
relating to pollution or protection of human health, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including
without limitation all laws, common law, rules, codes, administrative
orders and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws") and (B) there are no
events or circumstances that could form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company relating to any Hazardous Materials or the violation of any
Environmental Laws;
(xxv) to the knowledge of such counsel, the Company has
obtained all necessary and required approvals, authorizations,
franchises, licenses, orders, permits, validations and certifications
from regulatory authorities to permit the commencement of its
commercial operations as contemplated in the Prospectus, and none of
such approvals, authorizations, franchises, licenses, orders, permits,
validations and certifications have been revoked, restricted or limited
in any manner and all of such approvals, authorizations, franchises,
licenses, orders, permits, validations and certifications are in full
force and effect; and
(xxvi) to the best of such counsel's knowledge, there is no
action, suit, proceeding, inquiry, investigation, litigation or
governmental proceeding, domestic or foreign, pending or threatened (or
circumstances that may give rise to the same) involving the Company's
production, use, testing, manufacturing or marketing of any products or
services, which (i) questions the authority of the Company to produce,
use, test, manufacture or market any products or services as described
in the Prospectus, (ii) questions the completeness or accuracy of data
generated by any trials, tests or studies being conducted by or on
behalf of the Company, (iii) is required to be disclosed in the
Prospectus which is not so disclosed, or (iv) might materially and
adversely affect the condition, financial or otherwise, or the
earnings, prospects, value, operations or business of the Company.
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, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus, and related matters 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
- 37 -
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 any 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 the
Prospectus). Such counsel shall further state that its opinions may be relied
upon by Underwriters' Counsel in rendering its opinion to the Underwriters.
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 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 Representative,
Underwriters' Counsel and they are each justified in relying thereon. Any
opinion of counsel for the Company 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 accord.
(e) At the Closing Date, the Underwriters shall have received the
favorable opinion of Kremblas, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special counsel to the
Company, dated the Closing Date, addressed to the Underwriters, in form and
substance satisfactory to Underwriters' Counsel, and in substantially the form
of Schedule B attached hereto.
(f) At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinions of each of Greenberg, Traurig, Hoffman,
Lipoff, ▇▇▇▇▇ & Quentel, counsel to the Company, and Kremblas, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, special counsel to the Company, dated such Option Closing Date,
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel confirming as of such Option Closing Date the statements
made by each of Greenberg, Traurig, Hoffman, Lipoff, ▇▇▇▇▇ & Quentel and
Kremblas, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ in their respective opinions delivered on
the Closing Date.
(g) On or prior to each of the Closing Date and each Option Closing
Date, if any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6, or in order to evidence the accuracy, completeness
- 38 -
or satisfaction of any of the representations, warranties or conditions of the
Company or the Parent, or herein contained.
(h) 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,
earnings, position, value, properties, results of operations, 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 material provision of any instrument relating to any outstanding
indebtedness; (iv) the Company shall not have issued any securities (other than
the Securities) or declared or paid any dividend or made any distribution in
respect of its capital stock of any class and there has not been any material
change in the capital stock 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, to the knowledge of the Company, threatened (or circumstances giving rise to
same) against the Company or affecting any of its properties or businesses
before or by any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, earnings, position, value,
properties, results of operations, prospects or financial condition or income of
the Company; and (vii) no stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated or, to the knowledge of the
Company, threatened or contemplated by the Commission.
(i) 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 in all material respects, as if made on
and as of the Closing Date or the Option Closing Date, as the case may
be, and the Company has complied in all material respects 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
- 39 -
instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all statements
and information required to be included therein, and none of the
Registration Statement, the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein 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 material change in the
capital stock or long-term debt or any increase in the short-term
borrowings (other than any increase in the short-term borrowings in the
ordinary course of business) of the Company; (e) the Company has not
sustained any material loss or damage to its properties or assets,
whether or not insured; (f) there is no litigation which is pending or,
to the knowledge of the Company, 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 (g) there has
occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at the date of
such certificate.
(j) At each of the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received a certificate from the Parent, dated
the Closing Date, to the effect that the Parent has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
(A) The representations and warranties of the Parent in this
Agreement are true and correct in all material respects, as if made at
and as of the Closing Date or the Option Closing Date, as the case may
be, and the Parent has complied in all material respects with all
agreements and covenants and satisfied all conditions contained in this
Agreement to be performed or satisfied by the Parent at or prior to the
Closing Date or the Option Closing Date, as the case may be; and
- 40 -
(B) The Registration Statement and 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 a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
References to the Registration Statement and the Prospectus in this
subsection (j) are to such documents as amended and supplemented at the date of
such certificate.
(k) 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.
(l) 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 ▇▇▇▇▇▇ + Co.:
(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 Representative may rely upon the
opinion of ▇▇▇▇▇▇ + Co. with respect to the financial statements and
supporting schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company, a reading of the latest available minutes of
the stockholders and board of directors and the various committees of
the boards of directors of the Company, consultations with officers and
other employees of the Company responsible for financial and accounting
matters and other specified procedures and inquiries, nothing has come
to their attention which would lead them to believe that (A) the
unaudited financial statements and supporting schedules of the Company
included in the Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the Rules and Regulations or are not fairly presented in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial
statements of the Company included in the Registration Statement, or
(B) at a
- 41 -
specified date not more than five (5) days prior to the effective date
of the Registration Statement, there has been any change in the capital
stock or long-term debt of the Company, or any decrease in the
stockholders' equity or net current assets or net assets of the Company
as compared with amounts shown in the September 30, 1996 balance sheet
included in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any change
or decrease, setting forth the amount of such change or decrease;
(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;
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
(m) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from ▇▇▇▇▇▇ + Co. a letter, dated as of the
Closing Date or the Option Closing Date, as the case may be, to the effect that
they reaffirm that statements made in the letter furnished pursuant to
subsection (l) of this Section, except that the specified date referred to shall
be a date not more than five (5) 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 (l) of this
Section with respect to certain amounts, percentages and financial information
as specified by the Representative 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).
(n) On each of the Closing Date and each Option Closing Date, if
any, there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Securities.
(o) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (a)(v) of
Section 4 hereof shall have been issued on
- 42 -
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.
(p) 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 4.4 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.
(q) On or before the Closing Date, the Firm Securities and Option
Securities shall have been duly approved for quotation on Nasdaq, subject to
official notice of issuance.
(r) 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 Underwriters' Counsel.
(s) On or before the Closing Date, the Company shall have executed
and delivered to the Representative and the Transfer Agent the Warrant Agreement
substantially in the form filed as Exhibit 4.2 to the Registration Statement, in
final form and substance satisfactory to the Representative.
If any condition to the Underwriters' 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.
- 43 -
7. Indemnification.
(a) The Company and the Parent, jointly and severally, agree to
indemnify and hold harmless each of the Underwriters (for purposes of this
Section 7 "Underwriter" shall include the officers, directors, partners,
employees, agents and counsel of the Underwriter, including specifically each
person who may be substituted for an Underwriter as provided in Section 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, suits and litigation in respect thereof), whatsoever (including but
not limited to any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any such claim, action,
proceeding, investigation, inquiry, suit or litigation, commenced or threatened,
or any claim whatsoever), as such are incurred, to which the Underwriter or such
controlling person may become subject under the Act, the Exchange Act or any
other statute or at common law or otherwise or under the laws of foreign
countries, arising out of or based upon (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 or the Parent in any jurisdiction in order
to qualify the Securities under the securities laws thereof or filed with the
Commission, any state securities commission or agency, Nasdaq 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 or the Parent
contained herein or in any certificate by or on behalf of the Company or any of
its officers or the Parent delivered pursuant hereto, unless, in the case of
clause (A) or (B) above, such statement or omission was made in reliance upon
and in strict conformity with written information furnished to the Company with
respect to any Underwriter by or on behalf of such Underwriter expressly for use
in any Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be.
The foregoing indemnity with respect to any untrue statement contained
in or omission from a Preliminary Prospectus shall not inure to the benefit of
the Underwriter (or any person controlling such Underwriter) from whom the
person asserting any such loss, liability, claim, damage or expense purchased
any of the Firm Securities and/or Option Securities which are the subject
thereof if (1) the Company and/or the Parent sustains the burden of proving that
such asserting person did not receive a copy of the Prospectus (or the
Prospectus as amended or supplemented) (in each case exclusive of the documents
from which information is incorporated by reference) at or prior to the written
confirmation of the sale of such Firm Securities and/or
- 44 -
Option Securities to such person and the untrue statement contained in or
omitted from such Preliminary Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented) and (2) the Company shall have complied
with its covenant pursuant to Section 4(a)(vi) of this Agreement.
Notwithstanding anything to the contrary contained herein, the Parent
shall not be required to make any payment in respect to any indemnification
obligation hereunder unless and until and then only to the extent that the
Representative shall determine, in its sole judgment, that the Company is unable
to make the subject indemnification payment.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company or the Parent 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 and the Parent to the Underwriters
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 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. Each of the Company and the Parent acknowledges that the
statements with respect to the public offering of the Firm Securities and the
Option Securities set forth under the heading "Underwriting" and the
stabilization legend in the Prospectus have been furnished by the Underwriters
expressly for use therein and constitute the only information furnished in
writing by or on behalf of the Underwriters for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any claim, action, suit,
investigation, inquiry, proceeding or litigation, 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 claim, action, suit, investigation, inquiry,
proceeding or litigation 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
- 45 -
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 thereof 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 thereof within a reasonable
time after notice of commencement thereof, 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 thereof 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 claim, action, suit,
investigation, inquiry, proceeding or litigation or separate but similar or
related claims, actions, suits, investigations, inquiries, proceedings or
litigation 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, action,
suit, investigation, inquiry, proceeding or litigation 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, suit,
investigation, inquiry, proceeding or litigation in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim, action, suit,
investigation, inquiry, proceeding or litigation), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit, investigation,
inquiry, proceeding or litigation and (ii) does not 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 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 Firm Securities and the Option 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
- 46 -
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 and/or the Parent is the contributing party and the
Underwriters are the indemnified party, the relative benefits received by the
Company and/or the Parent, 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 Firm Securities and the Option 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 the Parent, 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 in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Firm Securities and the Option
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, (i) 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 and (ii) each
person, if any, who controls an Underwriter within the meaning of the Act shall
have the same rights to contribution as such Underwriter, subject in each case
to this subsection (d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect to which a claim for contribution may be made against another
party or parties under this subsection (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 subsection (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 or the Parent 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
Parent, as the case may be, 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,
- 47 -
the Company, the Parent, any controlling person of any Underwriter or the
Company or the Parent, and shall survive termination of this Agreement or the
issuance and delivery of the Securities to the Underwriters and the
Representative, as the case may be.
9. Effective Date. 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 Securities 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
Securities 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 securities for offering or the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has materially adversely
disrupted, or in the Representative's opinion will in the immediate future
materially adversely disrupt, the financial markets; or (ii) if 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, Nasdaq, the NASD, the Boston Stock
Exchange, the Commission or any governmental authority having jurisdiction over
such matters; 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; (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 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
offering, sale and/or delivery of the Securities; or (ix) if 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, that, in each case, in
the Representative's judgment, would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities or (x) if any of ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Ph.D. shall
no longer serve the Company in their present capacity.
(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 reasonable fees and
- 48 -
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 by the
Representative, by reason of any failure on the part of the Company or the
Parent 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 Representative for all of its actual out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to Section 5(c) above). In addition, the
Company shall remain liable for all Blue Sky counsel fees and disbursements,
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, 11 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 twenty-four (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 Securities 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 Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters (or, if such
default shall occur with respect to any Option Securities to be
purchased on an Option Closing Date, the Underwriters may at the
Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option
Securities from the Company on such date).
No action taken pursuant to this Section 11 shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
- 49 -
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 or the Option Closing Date, as the case may be, for a period not
exceeding seven (7) 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 Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5,
Section 7 and Section 10 hereof. No action taken pursuant to this Section 12
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 Underwriters shall be directed to the
Representative at National Securities Corporation, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman, with
a copy to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Notices to the Company shall be
directed to the Company at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and Chief Executive Officer, with a
copy to Greenberg, Traurig, Hoffman, Lipoff, ▇▇▇▇▇ & Quentel, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. Notices to
the Parent shall be directed to the Parent at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Bentley ▇. ▇▇▇▇, Chairman, with a copy to
Greenberg, Traurig, Hoffman, Lipoff, ▇▇▇▇▇ & Quentel, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company, the Parent and the
controlling persons, directors and officers referred to in Section 7 hereof, and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained. No purchaser of Securities from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
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.
- 50 -
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, the Warrant 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 hereof. This
Agreement may not be amended except in a writing, signed by the Representative,
the Parent and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters, the Parent 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,
COMMODORE SEPARATION
TECHNOLOGIES, INC.
By: _______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
COMMODORE APPLIED
TECHNOLOGIES, INC.
By: _______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chief Executive Officer
Confirmed and accepted as of
the date first above written.
NATIONAL SECURITIES CORPORATION
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By: ___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman
- 51 -
SCHEDULE A
----------
Number of
Shares of Number of Number of
Convertible Shares of Redeemable
Preferred Stock Common Stock Warrants
Name of Underwriters to Be Purchased to be Purchased to be Purchased
-------------------- --------------- --------------- ---------------
National Securities Corporation...............
Total......................................... 1,500,000 1,500,000 3,000,000
========= ========= =========
SCHEDULE B
[FORM OF INTELLECTUAL PROPERTY OPINION]
___________________, 1997
NATIONAL SECURITIES CORPORATION
As Representative of the several
Underwriters named in Schedule A
to the Underwriting Agreement
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Initial Public Offering of Units consisting of
1,500,000 Shares of 10% Senior Convertible Redeemable
Preferred Stock and 1,500,000 Redeemable Common Stock
Purchase Warrants and Units consisting of 1,500,000
Shares of Common Stock and 1,500,000 Redeemable Common
Stock Purchase Warrants of Commodore Separation
Technologies, Inc.
------------------------------------------------------
Gentlemen:
We have acted as special counsel to Commodore Separation
Technologies, Inc., a Delaware corporation (the "Company"), in connection with
the entering into by the Company of that certain Underwriting Agreement by and
among National Securities Corporation (as representative of the several
underwriters named therein) (the "Representative"), Commodore Applied
Technologies, Inc. and the Company, dated _______________, 1997 (the
"Underwriting Agreement"). This opinion is provided to you pursuant to Section
6(e) of the Underwriting Agreement.
For the purpose of rendering the opinions set forth below we
have reviewed the following (collectively, the "Documents"):
(i) the Underwriting Agreement;
(ii) that certain registration statement on Form S-1 as filed
by the Company with the Securities and Exchange Commission on
September 12, 1996, together
-2- _____________, 1997
with any and all exhibits and schedules and all heretofore
filed amendments thereto (collectively, the "Registration
Statement");
(iii) the Company's prospectus dated _______________, 1997
(the "Prospectus");
(iv) a search of the United States Patent and Trademark
Office records relevant to ownership of any and all:
patents and patent applications (including, without
limitation, the patents and patent applications listed
on Schedule A annexed hereto and hereby incorporated
by reference herein (collectively, the "Patents")),
and trademarks, trademark applications, service marks
and service ▇▇▇▇ applications (collectively, the
"Marks") (including, without limitation, the Marks
listed on Schedule B annexed hereto and hereby
incorporated by reference herein (collectively, the
"Trademarks")),
owned, purportedly owned or licensed by the Company or the
Company d/b/a Commodore Membrane Technologies, Inc.
("Commodore Membrane") (including, those patents, patent
applications and Marks licensed, without limitation, pursuant
to the licenses listed on Schedule C annexed hereto and hereby
incorporated by reference herein (collectively, the
"Licenses")), conducted by ______________________________ and
certified as true and correct as of _______________________,
1997 (no earlier than 5 days prior to the effective date of
the Registration Statement);
(v) a search of the United States Copyright Office records
relevant to ownership of any and all copyrighted material
(including, without limitation, the copyright in, or license
permitting the Company's actual use of, the material licensed
or otherwise distributed by the Company or Commodore Membrane
and listed on Schedule D annexed hereto and hereby
incorporated by reference herein (collectively, the
"Copyrighted Material")), owned, purportedly owned or licensed
by the Company or Commodore Membrane conducted by
_____________________ and certified as true and correct as of
__________________, 1997 (no earlier than 5 days prior to the
effective date of the Registration Statement);
(vi) an intellectual property litigation search with respect
to all Patents, Trademarks, Licenses and Copyrighted Material,
listed on Schedules A, B, C and D, respectively;
-3- _____________, 1997
(vii) a search of the Uniform Commercial Code ("UCC")
recordation offices, in the following jurisdictions --
Delaware, Tennessee, New York and Ohio, with respect to the
following two categories of general intangibles:
(a) the intellectual property general intangibles of
the Company or Commodore Membrane, including, without
limitation, the patents, patent applications,
inventions, know how, trademarks, service marks,
copyrights, service and trade names, intellectual
property licenses and other rights of the Company
and/or Commodore Membrane, and
(b) the intellectual property general intangibles
licensed to the Company or Commodore Membrane,
including, without limitation, the patents, patent
applications, inventions, know how, trademarks,
service marks, copyrights, service and trade names and
other intellectual property rights licensed to the
Company or Commodore Membrane pursuant to the Licenses
(listed on Schedule C),
said search certified to us as complete and accurate by
________________ and current through ________________________,
1997 (no earlier than 5 days prior to the effective date of
the Registration Statement) and said jurisdictions being the
only jurisdictions in which filing of UCC financing statements
or other documents may be filed to effectively evidence a
security or other interest in said general intangibles; and
(viii) any and all records, documents, instruments and
agreements in our possession or under our control relating to
the Company or Commodore Membrane.
We have also examined such corporate records, documents,
instruments and agreements, and inquired into such other matters, as we have
deemed necessary or appropriate as a basis for the opinions set forth herein.
Whenever our opinion herein is qualified by the phrase "to the best of our
knowledge" or "to the best of our knowledge, after due inquiry," such language
means that, based upon (i) our inquiries of officers of the Company, (ii) our
review of the Documents, and (iii) our review of such other corporate records,
documents, instruments and agreements described in the first sentence of this
paragraph, we believe that such opinions are factually correct.
To the best of our knowledge, as to all matters of fact
represented to you by the Company, we advise you that nothing has come to our
attention that would cause us to believe that such facts are incorrect,
incomplete or misleading or that reliance thereon is not warranted under the
circumstances. We call to your attention that our opinion is limited to such
facts as
-4- _____________, 1997
they exist on the date hereof and do not take into account any change of
circumstances, fact or law subsequent thereto.
Based upon and subject to the foregoing, we are of the opinion
that:
1. To the best of our knowledge, after due inquiry,
except as described in the Prospectus, the Company owns or has
the right to use, free and clear of all liens, encumbrances,
pledges, security interests, defects or other restrictions or
equities of any kind whatsoever,
(i) all patents and patent applications (including,
without limitation, the Patents),
(ii) all trademarks and service marks (including,
without limitation, the Trademarks),
(iii) all copyrights (including, without limitation,
the Copyrighted Material),
(iv) all service and trade names, and
(v) all intellectual property licenses (including,
without limitation, the Licenses),
used in, or required for, the conduct of the Company's
business.
2. To the best of our knowledge, after due inquiry,
the Company possesses all material intellectual property
licenses or rights used in, or required for, the conduct of
its business (including, the Licenses and without limitation,
any such licenses or rights described in the Prospectus as
being owned, possessed or licensed by the Company) and such
licenses and rights are in full force and effect.
3. To the best of our knowledge, after due inquiry,
there is no claim or action, pending, threatened or potential,
which affects or could affect the rights of the Company with
respect to any trademarks, service marks, copyrights, service
names, trade names, patents, patent applications or licenses
used in, or required for, the conduct of the Company's
business.
4. To the best of our knowledge, after due inquiry,
there is no intellectual property based claim or action,
pending, threatened or potential, which affects or could
affect the rights of the Company with respect to any products,
services,
-5- _____________, 1997
processes or licenses, including, without limitation, the
Licenses used in the conduct of the Company's business.
5. To the best of our knowledge, after due inquiry,
except as described in the Prospectus, the Company is not
under any obligation to pay royalties or fees to any third
party with respect to any material, technology or intellectual
properties developed, employed, licensed or used by the
Company.
6. To the best of our knowledge, after due inquiry,
the statements in the Prospectus under the headings, "Risk
Factors - Unpredictability of Patent Protection and
Proprietary Technology," "Risk Factors-Royalty Obligation" and
"Business - Intellectual Property", are accurate in all
material respects, fairly represent the information disclosed
therein and do not omit to state any fact necessary to make
the statements made therein complete and accurate.
7. To the best of our knowledge, after due inquiry,
the statements in the Registration Statement and Prospectus do
not contain any untrue statement of a material fact with
respect to the intellectual property position of the Company
or omit to state any material fact relating to the
intellectual property position of the Company which is
required to be stated in the Registration Statement and the
Prospectus or is necessary to make the statements therein not
misleading.
We call your attention to the fact that the members of this
firm are licensed to practice law in the State of ______________ and before the
United States Patent and Trademark Office as Registered Patent Attorneys.
Accordingly, we express no opinion with respect to the laws, rules and
regulations of any jurisdictions other than the State of ___________ and the
United States of America.
The opinions expressed herein are for the sole benefit of, and
may be relied upon only by, the several Underwriters named in Schedule A to the
Underwriting Agreement and ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP.
Very truly yours,
