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EXHIBIT 1.1
BOREALIS TECHNOLOGY CORPORATION
0000 Xxxxxx Xxxx Xxxxx
Xxxxxx Xxxx, Xxxxxx 00000
UNDERWRITING AGREEMENT
__________, 1997
X.X. Xxxxxx & Co., Inc.
0000 Xx. Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
BOREALIS TECHNOLOGY CORPORATION, a Delaware corporation (the
"Company"), proposes to issue and sell pursuant to this Underwriting Agreement
(the "Agreement"), an aggregate of 1,600,000 shares of Common Stock, $0.001 par
value per share (the "Shares"), commencing on the effective date of the
Registration Statement (the "Effective Date"). In addition, the Company
proposes to grant the option referred to in Section 2(b) to purchase all or any
part of an aggregate of 240,000 additional Shares.
The aggregate of 1,600,000 Shares, together with all or any part of
the 240,000 Shares which you have the option to purchase, are herein called the
"Shares." The Common Stock of the Company to be outstanding after giving
effect to the sale of the Shares (including the 240,000 Shares that the
Underwriter has the option to purchase) is herein called the "Common Stock."
You have advised the Company that you desire to purchase the Shares.
The Company confirms the agreements made by it with respect to the purchase of
the Shares by you, as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with you
that:
(a) A registration statement (File No. 333-27299) on Form
SB-2 relating to the public offering of the Shares, including a preliminary
form of prospectus, copies of which have heretofore been delivered to you, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission under the Act.
"Preliminary Prospectus" shall mean each prospectus filed pursuant to Rule 430
of the Rules and Regulations. The registration statement (including all
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financial schedules and exhibits) as amended at the time it becomes effective
and the final prospectus included therein are respectively referred to as the
"Registration Statement" and the "Prospectus", except that (i) if the
prospectus first filed by the Company pursuant to Rule 424(b) or Rule 430A of
the Rules and Regulations or otherwise utilized and not required to be so filed
shall differ from said prospectus as then amended, the term "Prospectus" shall
mean the prospectus first filed pursuant to Rule 424(b) or Rule 430A or so
utilized from and after the date on which it shall have been filed or utilized,
and (ii) if such registration statement or prospectus is amended or such
prospectus is supplemented, after the effective date of such registration
statement and prior to the Option Closing Date (as defined in Section 2(b)),
the term "Registration Statement" shall include such registration statement as
so amended, and the term "Prospectus" shall include the prospectus as so
amended or supplemented, or both, as the case may be.
(b) At the time the Registration Statement becomes
effective and at all times subsequent thereto up to the Option Closing Date (as
defined below), (i) the Registration Statement and Prospectus will in all
material respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus
will include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were
made; provided, however, that the Company makes no representations, warranties
or agreements as to information contained in or omitted from the Registration
Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of you specifically for
use in the preparation thereof. It is understood that the statements set forth
in the last paragraph on the cover page of the Prospectus, set forth in the
Prospectus with respect to stabilization, the fourth and fifth paragraphs under
the caption "Risk Factors -- Possible Illiquidity of Trading Market; Xxxxx
Stock; Pending SEC Investigation of Underwriter; Recently Settled NASD
Investigation Regarding Underwriter," the material set forth under the heading
"Underwriting" and the identity of counsel to you under the heading "Legal
Matters" constitute the only information furnished in writing by you for
inclusion in the Registration Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation, with full power and authority (corporate and other) to
own its properties and conduct its business as described in the Prospectus and
is duly qualified to do business as a foreign corporation and is in good
standing in all other jurisdictions in which the nature of its business or the
character or location of its properties requires such qualification, except
where failure to so qualify is not reasonably likely to materially adversely
affect the Company's business, properties or financial condition.
(d) The authorized capital stock of the Company as of the
Effective Date was as set forth under "Capitalization" in the Prospectus. The
shares of issued and outstanding capital stock of the Company set forth
thereunder have been duly authorized, validly issued and are fully paid and
non-assessable; except as set forth in the Prospectus, no options, warrants or
other rights to purchase, agreements or other obligations to issue, or
agreements or other rights to convert any obligation into, any shares of
capital stock of the Company have been granted or entered into by the Company.
The Shares and Underwriter's Warrant conform in all material respects to all
statements relating thereto contained in the Registration Statement and
Prospectus.
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(e) The Shares are duly authorized and, when issued,
delivered and paid for pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights of
any security holder of the Company. The certificates evidencing the Shares are
and will be in valid and proper legal form. The Underwriter's Warrant (as
defined in Section 12) will be exercisable for shares of Common Stock of the
Company in accordance with the terms of the Underwriter's Warrant and at the
prices therein provided for. The shares of Common Stock have been duly
authorized and reserved for issuance upon such exercise, and such shares, when
issued upon such exercise in accordance with the terms of the Underwriter's
Warrant and when the price is paid, shall be fully paid and non- assessable.
Neither the filing of the Registration Statement nor the offering or sale of
the Shares as contemplated in this Agreement gives rise to any rights, other
than those which have been waived or satisfied, for or relating to the
registration of any securities of the Company, except as described in the
Registration Statement.
(f) This Agreement and the Underwriter's Warrant have
been duly and validly authorized, executed and delivered by the Company, and
assuming due execution by the other party or parties hereto and thereto,
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as rights to
indemnity and contribution hereunder may be limited by applicable law and
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally or by general equitable principles.
The Company has full power and lawful authority to authorize, issue and sell
the Shares to be sold by it hereunder on the terms and conditions set forth
herein, and no consent, approval, authorization or other order of any
governmental authority is required in connection with such authorization,
execution and delivery or with the authorization, issue and sale of the Shares
or the Underwriter's Warrant, except such as may be required under the Act or
state securities laws.
(g) Except as described in the Prospectus, the Company is
not in material violation, breach or default of or under, and consummation of
the transactions herein contemplated and the fulfillment of the terms of this
Agreement and the Underwriter's Warrant will not conflict with, or result in a
breach of, any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
pursuant to the terms of, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the property or assets of
the Company are subject, which would have a material adverse effect on the
business, properties or financial condition of the Company, nor will such
action result in any violation of the provisions of the certificate of
incorporation or the By-laws of the Company, as amended, or any statute or any
order, rule or regulation applicable to the Company of any court or of any
regulatory authority or other governmental body having jurisdiction over the
Company, which would have a material adverse effect on the business, properties
or financial condition of the Company.
(h) The Company owns no real property and, subject to the
qualifications stated in the Prospectus, the Company has good and marketable
title to all properties and assets described in the Prospectus as owned by it,
free and clear of all liens, charges, encumbrances or restrictions, except such
as are not materially significant or important in relation to its business; all
of the leases and subleases under which the Company is the lessor or sublessor
of properties or assets or under which the Company holds properties or assets
as lessee or sublessee as described in the Prospectus are in full force and
effect, and, except as described in the Prospectus, the Company is not in
default
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in any respect with respect to any of the terms or provisions of any of such
leases or subleases which would have a material adverse effect on the business,
properties or financial condition of the Company, and no claim has been
asserted by anyone adverse to rights of the Company as lessor, sublessor,
lessee or sublessee under any of the leases or subleases mentioned above, or
affecting or questioning the right of the Company to continued possession of
the leased or subleased premises or assets under any such lease or sublease
except as described or referred to in the Prospectus, which would have a
material adverse effect on the business properties or financial condition of
the Company; and the Company owns or leases all such properties described in
the Prospectus as are necessary to its operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted as set forth
in the Prospectus.
(i) Ernst & Young LLP, who have given their report on
certain financial statements filed and to be filed with the Commission as a
part of the Registration Statement, which are included in the Prospectus, are
with respect to the Company independent public accountants as required by the
Act and the Rules and Regulations.
(j) The financial statements and schedules, together with
related notes, set forth in the Prospectus or the Registration Statement
present fairly the financial position and results of operations and changes in
financial position of the Company on the basis stated in the Registration
Statement, at the respective dates and for the respective periods to which they
apply. Said statements and schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a basis
which is consistent during the periods involved.
(k) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, the Company
has not incurred any liabilities or obligations, direct or contingent, not in
the ordinary course of business, or entered into any transaction not in the
ordinary course of business, which is material to the business of the Company,
and there has not been any change in the capital stock of, or any incurrence of
long-term debt by, the Company or any issuance of options, warrants or other
rights to purchase the capital stock of the Company or any adverse change or
any development involving, so far as the Company can now reasonably foresee, a
prospective adverse change in the condition (financial or other), net worth,
results of operations, business, key personnel or properties of it which would
be material to the business or financial condition of the Company, and the
Company has not become party to, and neither the business nor the property of
the Company has become the subject of, any material litigation whether or not
in the ordinary course of business.
(l) Except as set forth in the Prospectus, there is not
now pending nor, to the knowledge of the Company, threatened, any action, suit
or proceeding (including those related to environmental matters or
discrimination on the basis of age, sex, religion or race) to which the Company
is a party before or by any court or governmental agency or body, which, if
adversely determined, would result in any material adverse change in the
condition (financial or other), business prospects, net worth or properties of
the Company; and, except as set forth in the Prospectus, no labor disputes
involving the employees of the Company exist which, if adversely determined,
would result in any material adverse change in the condition (financial or
otherwise), business prospects, net worth or property of the Company.
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(m) Except as disclosed in the Prospectus, the Company
has filed all necessary federal, state and foreign income and franchise tax
returns and has paid all taxes shown as due thereon; and there is no tax
deficiency which has been or to the knowledge of the Company might be asserted
against the Company which has not been adequately reserved for on the Company's
balance sheet.
(n) The Company has sufficient licenses, permits and
other governmental authorizations currently required for the conduct of its
business or the ownership of its property as described in the Prospectus and is
in all material respects complying therewith and owns or possesses adequate
rights to use all material patents, patent applications, trademarks, xxxx
registrations, copyrights and licenses necessary for the conduct of such
business and has not received any notice of conflict with the asserted rights
of others in respect thereof. To the best knowledge of the Company, none of
the activities or business of the Company is in violation of, or causes the
Company to violate, any law, rule, regulation or order of the United States,
any state, county or locality, or of any agency or locality, the violation of
which would have a material adverse effect upon the condition (financial or
otherwise), business prospects, net worth or properties of the Company.
(o) The Company has not, directly or indirectly, at any
time (i) made any contributions to any candidate for foreign political office,
or if made, failed to disclose fully any such contribution made in violation of
law, (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or
quasi-public duties, other than payments or contributions required or allowed
by applicable law, (iii) made any payment outside the ordinary course of
business to any purchasing or selling agent or person charged with similar
duties of any entity to which the Company sells or from which the Company buys
products for the purpose of influencing such agent or person to buy products
from or sell products to the Company, or (iv) except as set forth in the
Prospectus, engaged in any transaction, maintained any bank account or used any
corporate funds except for transactions, bank accounts and funds which have
been and are reflected in the normally maintained books and records of the
Company. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(p) On the Closing Dates (as defined in Section 2(c)),
all transfer or other taxes (including franchise, capital stock or other tax,
other than income taxes imposed by any jurisdiction), if any, which are
required to be paid in connection with the sale and transfer of the Shares to
the Underwriter hereunder will have been fully paid or provided for by the
Company and all laws imposing such taxes will have been fully complied with.
(q) All contracts and other documents of the Company
which are, under the Rules and Regulations, required to be filed as exhibits to
the Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Shares or to facilitate the
sale or resale of the Shares.
(s) The Company has no subsidiaries.
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(t) Except for this Agreement and other agreements with
you, the Company has not entered into any agreement pursuant to which any
person is entitled either directly or indirectly to compensation from the
Company for services as a finder in connection with the proposed public
offering.
(u) The Company's Common Stock is registered with the
Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(v) The Company is not in violation of any law,
ordinance, governmental rule or regulation or court decree to which it may be
subject which violation would have a material adverse effect on the financial
condition, results of operations, business or prospects of the Company.
2. Purchase, Delivery and Sale of the Shares.
(a) Subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company agrees to issue and sell to you, and you agree to
buy from the Company at $______ per Share at the place and time hereinafter
specified, the number of Shares set forth opposite your name in Schedule I
hereto (the "Firm Shares").
Delivery of the Firm Shares against payment therefor
shall take place at the offices of X.X. Xxxxxx & Co., Inc., 0000 Xx. Xxxx
Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 (or at such other place as may be designated
by agreement between you and the Company) at 9:30 a.m. New York time on
______________, 1997, or at such other time and date, not later than three
business days thereafter (or four business days if the Registration Statement
is declared effective after the close of the business day), as you may
designate, such time and date of payment and delivery for the Firm Shares being
herein called the "First Closing Date." Time shall be of the essence and
delivery at the time and place specified in this subsection (a) is a further
condition to your obligations hereunder.
(b) In addition, subject to the terms and conditions of
this Agreement, and upon the basis of the representations, warranties and
agreements herein contained, the Company hereby grants you an option to
purchase all or any part of an aggregate of 240,000 additional Shares at the
same price per Share as you shall pay for the Shares being sold pursuant to the
provisions of subsection (a) of this Section 2 (such additional Shares being
referred to herein as the "Option Shares"). This option may be exercised on
one occasion within 30 business days after the Effective Date upon notice by
you to the Company advising it as to the amount of Option Shares as to which
the option is being exercised, the names and denominations in which the
certificates for such Option Shares are to be registered and the time and date
when such certificates are to be delivered. Such time and date shall be
determined by you but shall not be earlier than four and not later than ten
full business days after the exercise of said option, nor in any event prior to
the First Closing Date, and such time and date is referred to herein as the
"Option Closing Date." Delivery of the Option Shares against payment therefor
shall take place at the offices of X.X. Xxxxxx & Co., Inc., 0000 Xx. Xxxx
Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000. Time shall be of the essence and delivery
at the time and place specified in this subsection (b) is a further condition
to your obligations hereunder.
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The Option granted hereunder may be exercised only to
cover over-allotments in the sale by you of Firm Shares referred to in
subsection (a) above.
(c) The Company will make the certificates for the Shares
to be purchased by you hereunder available to you for checking at least one
full business day prior to the First Closing Date or the Option Closing Date
(which are collectively referred to herein as the "Closing Dates" and
individually as a "Closing Date"), as the case may be. The certificates shall
be in such names and denominations as you may request, at least two full
business days prior to the relevant Closing Dates. Time shall be of the
essence and the availability of the certificates at the time and place
specified in this Agreement is a further condition to your obligations.
Definitive engraved certificates in negotiable form
for the Shares to be purchased by you hereunder will be delivered by the
Company to you for your account against payment of the purchase price by you,
at your option, by certified or bank cashier's checks in New York Clearing
House funds or by wire transfer, payable to the order of the Company.
In addition, in the event you exercise the option to
purchase from the Company all or any portion of the Option Shares pursuant to
the provisions of subsection (b) above, payment for such Option Shares shall be
made to or upon the order of the Company by you, at your option, by certified
or bank cashier's checks payable in New York Clearing House funds or by wire
transfer, at the offices of X.X. Xxxxxx & Co., Inc. at the time and date of
delivery of such Option Shares as required by the provisions of subsection (b)
above, against receipt of the certificates for such Option Shares by you,
registered in such names and in such denominations as you may request.
It is understood that you propose to offer the Shares
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement becomes
effective.
3. Covenants of the Company.
The Company covenants and agrees with you that:
(a) Company will use its best efforts to cause the
Registration Statement to become effective and, upon notification from the
Commission that the Registration Statement has become effective, will so advise
you and will not at any time, whether before or after the Effective Date, file
any amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously have been advised and furnished with a copy or
to which you or your counsel shall have reasonably objected in writing or which
is not in compliance with the Act and the Rules and Regulations. At any time
prior to the completion by you of the distribution of the Shares contemplated
hereby (but in no event more than nine months after the Effective Date) the
Company will prepare and file with the Commission, promptly upon your request,
any amendments or supplements to the Registration Statement or Prospectus
which, in your reasonable opinion, may be necessary or advisable in connection
with the distribution of the Shares.
Promptly after you or the Company is advised thereof,
you will advise the Company or the Company will advise you, as the case may be,
and confirm the advice in writing, of
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the receipt of any comments of the Commission, of the effectiveness of any
post-effective amendment to the Registration Statement, of the filing of any
supplement to the Prospectus or any amended Prospectus, of any request made by
the Commission for amendment of the Registration Statement or for supplementing
of the Prospectus or for additional information with respect thereto, of the
issuance by the Commission or any state or regulatory body of any stop orders
or other order suspending the effectiveness of the Registration Statement or
any order preventing or suspending the use of any preliminary prospectus or the
Prospectus, or of the suspension of the qualification of the Shares for
offering in any jurisdiction, or the institution of any proceedings for any of
such purposes, and will use its best efforts to prevent the issuance of any
such order and, if issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies
of each Preliminary Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes you and selected dealers to use the Prospectus in connection
with the sale of the Shares for such period not to exceed nine months from the
Effective Date as in the reasonable opinion of counsel for you the use thereof
is required to comply with the applicable provisions of the Act and the Rules
and Regulations. In case of the happening, at any time within such period as a
Prospectus is required under the Act to be delivered in connection with sales
by an underwriter or dealer, of any event of which the Company has knowledge
and which materially affects the Company or the Shares, or which in the opinion
of counsel for the Company or counsel for you should be set forth in an
amendment to the Registration Statement or a supplement to the Prospectus in
order to make the statements therein not then misleading, in light of the
circumstances existing at the time the Prospectus is required to be delivered
to a purchaser of the Shares, or in case it shall be necessary to amend or
supplement the Prospectus to comply with the Act or with the Rules and
Regulations, the Company will notify you promptly and forthwith prepare and
furnish to you copies of such amended Prospectus or of such supplement to be
attached to the Prospectus, in such quantities as you may reasonably request,
in order that the Prospectus, as so amended or supplemented, will not contain
any untrue statement of a material fact or omit to state any material facts
necessary in order to make the statements in the Prospectus, in the light of
the circumstances under which they are made, not misleading. The preparation
and furnishing of any such amendment or supplement to the Registration
Statement or amended Prospectus or supplement to be attached to the Prospectus
shall be without expense to the Underwriter, except that in case you are
required, in connection with the sale of the Shares, to deliver a Prospectus
nine months or more after the Effective Date, the Company will upon request of
and at your expense, amend or supplement the Registration Statement and
Prospectus and furnish you with reasonable quantities of prospectuses complying
with Section 10(a)(3) of the Act.
(b) The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations thereunder in connection with the offering
and issuance of the Shares.
The Company will use its best efforts to qualify or
register the Shares for sale under the securities or "blue sky" laws of such
jurisdictions as you may have designated in writing prior to the execution
hereof and will make such applications and furnish such information to counsel
for you as may be required for that purpose and to comply with such laws,
provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to
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execute a general consent to service process in any jurisdiction. The Company
will, from time to time, prepare and file such statements and reports as are or
may be required to continue such qualification in effect for so long a period
as you may reasonably request. Legal fees for such qualifications shall be
itemized based on the time expended and costs incurred, shall be reasonable and
shall not in any event exceed [$35,000.00], exclusive of filing fees (unless
otherwise agreed).
(c) The Company will instruct its transfer agent to
provide you with copies of the Depository Trust Company stock transfer sheets
on a weekly basis for a period of six months from the First Closing Date and on
a monthly basis thereafter for six additional months.
(d) For so long as the Company is a reporting company
under either Section 12(g), 13 or 15(d) of the Exchange Act, the Company, at
its expense, will furnish to its shareholders an annual report (including
financial statements audited by independent public accountants), in reasonable
detail and at its expense, will furnish to you during the period ending five
years from the date hereof, (i) as soon as practicable after the end of each
fiscal year, a balance sheet of the Company and any subsidiaries as at the end
of such fiscal year, together with statements of income, stockholders, equity
and cash flows of the Company and any subsidiaries as at the end of such fiscal
year, all in reasonable detail and accompanied by a copy of the certificate or
report thereon of independent accountants; (ii) as soon as they are available,
a copy of all reports (financial or other) mailed to security holders; (iii) as
soon as they are available, a copy of all non- confidential reports and
financial statements furnished to or filed with the Commission; and (iv) such
other information of a public nature as you may from time to time reasonably
request.
(e) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(f) The Company will deliver to you at or before the
First Closing Date one signed copy of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto. The Company will deliver to or upon your order, from time to time
until the Effective Date as many copies of any Preliminary Prospectus filed
with the Commission prior to the Effective Date as the Underwriter may
reasonably request. The Company will deliver to you on the Effective Date and
thereafter for so long as a Prospectus is required to be delivered under the
Act, from time to time, as many copies of the Prospectus, in final form, or as
thereafter amended or supplemented, as you may from time to time reasonably
request.
(g) The Company will make generally available to its
security holders and deliver to you as soon as it is practicable to do so, but
in no event later than 90 days after the end of 12 months after its current
fiscal quarter, an earnings statement (which need not be audited) covering a
period of at least 12 consecutive months beginning after the Effective Date
which shall satisfy the requirements of Section 11(a) of the Act.
(h) The Company will apply the net proceeds from the sale
of the Shares substantially for the purposes set forth under "Use of Proceeds"
in the Prospectus, and will file such
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reports with the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required pursuant to Rule 463
of the Rules and Regulations.
(i) The Company will, promptly upon your request, prepare
and file with the Commission any amendments or supplements to the Registration
Statement, preliminary Prospectus or Prospectus and take any other action,
which in the opinion of Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, counsel to
you may be reasonably necessary or advisable in connection with the
distribution of the Shares and will use its best efforts to cause the same to
become effective as promptly as possible.
(j) Prior to the Effective Date, the Company will use its
best efforts to cause all the Directors and officers of the Company to enter
into a written agreement with you, which, among other things, shall provide
that for a period of 13 months following the closing date of the offering, such
Directors and officers will not sell, assign, hypothecate or pledge any of the
shares of Common Stock of the Company owned by them on the Effective Date, or
subsequently acquired by the exercise of any options or warrants or conversion
of any convertible security of the Company held by them on the Effective Date
directly or indirectly, except with your prior written consent and such
Directors and officers will permit all certificates evidencing those shares to
be stamped with an appropriate restrictive legend, and will cause the transfer
agent for the Company to note such restrictions on the transfer books and
records of the Company.
(k) The Company shall, upon the initial filing of the
Registration Statement, make all filings required to obtain approval for the
quotation of the Shares on the Nasdaq Smallcap Market ("NASDAQ") and will use
its best efforts to effect and maintain the aforesaid approval for at least
five (5) years from the date of this Agreement. Within ten (10) business days
after the Effective Date, the Company shall cause the Company to be listed in
the Standard & Poor's Corporate Records and cause such listing to be maintained
for five years from the date of this Agreement.
(l) The Company represents that it has not taken, and
agrees that it will not take, directly or indirectly, any action designed to or
which has constituted or which might reasonably be expected to cause or result
in the stabilization or manipulation of the price of the Shares or to
facilitate the sale or resale the Shares.
(m) During the period of the offering, and for a period
of twelve (12) months from the Effective Date, the Company will not sell or
otherwise dispose of any securities of the Company (except for shares of Common
Stock issuable upon exercise of options or warrants or conversion of
convertible securities outstanding on the Effective Date or upon exercise of
options granted or the grant of options under said plan less any options to
purchase shares granted prior to the Effective Date, pursuant to the Company's
Stock Option Plans) without your prior written consent, which consent shall not
be unreasonably withheld. For a period of twenty-four (24) months from the
Effective Date, the Company will not issue, sell or otherwise dispose of any
securities of the Company pursuant to Regulation S under the Act without your
prior written consent.
(n) Prior to the filing of the Registration Statement,
the Company shall retain a public relations firm acceptable to you, and shall
continue to retain such firm, or any alternate firm acceptable to you, for a
minimum period of two (2) years.
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(o) The Company will reserve and keep available that
maximum number of its authorized but unissued securities which are issuable
upon exercise of the Underwriter's Warrant outstanding from time to time.
(p) The Company shall deliver to you, at the Company's
expense, three (3) bound volumes in form and content acceptable to you,
containing the Registration Statement and all exhibits filed therewith, and all
amendments thereto, and all other material correspondence, filings,
certificates and other documents filed and/or delivered in connection with this
offering. The Company shall use its best efforts to deliver such volumes with
one hundred eighty (180) days of the First Closing Date.
(q) For a period of thirty-six (36) months from the First
Closing Date, the Company shall allow an observer designated by the Underwriter
and acceptable to the Company, to receive notice of and to attend all meetings
of the Board of Directors of the Company. Such observer shall have no voting
rights and may be excluded from an executive session of the Board of Directors
for confidential matters, such observer shall be reimbursed for all
out-of-pocket expenses incurred in attending such meetings. The Company shall
hold at least nine (9) meetings per year and the observer will be indemnified
by the Company against any claims arising out of his participation at Board
meetings. In addition, for a period of thirty-six (36) months from the closing
of the offering, the Underwriter shall have the right to designate two members
of the Board of Directors provided that the designees are acceptable to the
Company. Such members shall be entitled to the same compensation,
reimbursements and indemnification as other members of the Company's Board of
Directors.
(r) For a period of thirty-six (36) months from the First
Closing Date, the Company shall not (i) implement a "poison pill" or other
device designed to prevent a hostile takeover of the Company, (ii) increase the
size of the Company's Board of Directors, without the approval of those members
of the Company's Board of Directors who are not employees of the Company or
(iii) increase the compensation of or introduce severance packages for, its
Directors and officers, without the consent of the Compensation Committee of
the Company's Board of Directors.
4. Conditions of Obligations of X.X. Xxxxxx & Co., Inc.
Your obligations to purchase and pay for the Shares which you
have agreed to purchase hereunder are subject to the accuracy (as of the date
hereof, and as of the Closing Dates) of and compliance with the representations
and warranties of the Company herein, to the performance by the Company of its
obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become
effective and you shall have received notice thereof not later than 10:00 a.m.,
New York time, on the date of this Agreement, or at such later time or on such
later date as to which you may Agree in writing; on the Closing Dates, no stop
order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that or any similar purpose shall have been
instituted or shall be pending or, to the knowledge of any Underwriter or to
the knowledge of the Company, shall be contemplated by the Commission; any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Freshman, Marantz,
Orlanski, Xxxxxx & Xxxxx, counsel to you; and no stop order shall be in effect
denying or suspending effectiveness of the
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Registration Statement nor shall any stop order proceedings with respect
thereto be instituted or pending or threatened under the Act.
(b) At the First Closing Date, you shall have received
the opinion, dated as of the First Closing Date, of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, counsel for the Company, in form and
substance reasonably satisfactory to counsel for you, to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Delaware and is duly qualified or licensed to do business
as a foreign corporation in good standing in each other jurisdiction
in which the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where failure to so
qualify will not have a material adverse effect in the business,
properties or financial condition of the Company;
(ii) the authorized capitalization of the Company
as of the date of the Prospectus was as set forth in the Prospectus;
all of the shares of the Company's outstanding stock requiring
authorization for issuance by the Company's Board of Directors have
been duly authorized and validly issued, are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock of the Company to
such counsels knowledge, have not been issued in violation of the
preemptive rights of any stockholder and the stockholders of the
Company do not have any preemptive rights or other rights to subscribe
for or to purchase; except for the transfer restrictions regarding
"affiliates" contained in Rule 144 promulgated under the Act, there
are no restrictions upon the voting or transfer of, any of the Shares;
the Common Stock and the Underwriter's Warrant conform in all material
respects to the respective descriptions thereof contained in the
Prospectus; the Shares to be issued as contemplated in the
Registration Statement and this Agreement have been duly authorized
and, when paid, will be validly issued, fully paid and non-assessable
and free of preemptive rights contained in the Company's certificate
of incorporation or By-laws, or any other document, instrument or
agreement known to counsel; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the
Underwriter's Warrant; to such counsels knowledge, neither the filing
of the Registration Statement nor the offering or sale of the Shares
as contemplated by this Agreement gives rise to any registration
rights or other rights, other than those contemplated by the
Underwriter's Warrant or which have been waived or satisfied, for or
relating to the registration of the Shares;
(iii) this Agreement and the Underwriter's Warrant
(sometimes hereinafter collectively referred to as the "Underwriter
Agreements") have been duly and validly authorized, executed and
delivered by the Company, and assuming due execution and delivery of
this Agreement by you, such agreements are, or when duly executed will
be, the valid and legally binding obligations of the Company except as
enforceability may be limited by bankruptcy, insolvency, moratorium or
other laws affecting the rights of creditors, or by general equitable
principles; provided that no opinion need be expressed as to the
enforceability of the indemnity provisions contained in Section 6 or
the contribution provisions contained in Section 7 of this Agreement;
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(iv) the certificates evidencing the Shares are in
valid and proper legal form; the Underwriter's Warrant will be
exercisable for shares of Common Stock of the Company in accordance
with the terms of the Underwriter's Warrant and at the prices therein
provided for; the shares of Common Stock of the Company issuable upon
exercise of the Underwriter's Warrant have been duly authorized and
reserved for issuance upon such exercise, and such shares, when issued
upon such exercise in accordance with the terms of the Underwriter's
Warrant and when the price is paid shall be fully paid and
non-assessable;
(v) Such counsel knows of no pending or
threatened legal or governmental proceedings to which the Company is a
party which are required to be described or referred to in the
Registration Statement which are not so described or referred to;
(vi) The execution and delivery of this Agreement
and the Underwriter's Warrant and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions
herein or therein contemplated will not result in a violation of, or
constitute a default under, the certificate or articles of
incorporation or By-laws of the Company, or in a violation of or
default under any obligation, agreement, covenant or condition
contained in any material bond, debenture, note or other evidence of
indebtedness or in any of the material contracts, indentures,
mortgages, loan agreements, leases, joint ventures or other agreements
or instruments to which the Company is a party that are filed as
Exhibits to the Registration Statement or otherwise known to counsel;
(vii) Based upon a telephone conversation from a
member of the Staff of the Commission, the Registration Statement has
become effective under the Act, and to such counsels knowledge, no
stop order suspending the effectiveness of the Registration Statement
is in effect, no proceedings for that purpose have been instituted or
are pending before, or threatened by, the Commission and the
Registration Statement and the Prospectus (except, in the case of both
the Registration Statement and any Amendment thereto, and the
Prospectus and any supplement thereto for the financial statements and
notes and schedules thereto, and other financial information or
statistical data contained therein, or omitted therefrom, as to which
such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Rules and Regulations;
(viii) All descriptions in the Registration
Statement and the Prospectus, and any amendment or supplement thereto,
of contracts and other documents are accurate and fairly present the
information required to be shown, and such counsel is familiar with
all contracts and other documents referred to in the Registration
Statement and the Prospectus and any such amendment or supplement, or
filed as exhibits to the Registration Statement, and such counsel does
not know of any contracts or documents of a character required to be
summarized or described therein or to be filed as exhibits thereto
which are not so summarized, described or filed;
(ix) No authorization, approval, consent or
license of any governmental or regulatory authority or agency is
necessary in connection with the authorization, issuance, transfer,
sale or delivery of the Shares by the Company, in connection with the
execution, delivery and performance of this Agreement or the
Underwriter's Warrant by the Company
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or in connection with the taking of any action contemplated herein or
therein, or the issuance of the Underwriter's Warrant or the Shares
underlying the Underwriter's Warrant, other than registration or
qualification of the Shares under applicable state or foreign
securities or blue sky laws (as to which such counsel need express no
opinion) and registration under the Act; and
(x) The statements in the Registration Statement
under the caption "Description of Capital Stock," to the extent that
such statements constitute a matter of law or legal conclusion have
been reviewed by such counsel and are correct in all material
respects; and
Such counsel has participated in the preparation of
the Registration Statement and the Prospectus and although such counsel has not
reviewed the accuracy or completeness of the statements contained in the
Registration Statement or Prospectus nothing has come to the attention of such
counsel that caused such counsel to have reason to believe that the
Registration Statement or any amendment thereto at the time it became effective
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus or any supplement thereto
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make statements therein in light of the
circumstances under which they were made not misleading (except, in the case of
both the Registration Statement and any amendment thereto and the Prospectus
and any supplement thereto, for the financial statements, notes and schedules
thereto and other financial information and statistical data contained therein,
as to which such counsel need express no opinion);
In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact; and in rendering such opinion may either (i) rely as to all matters of
law other than the law of the United States or of the State of California upon
opinions of counsel satisfactory to you, in which case the opinion shall state
that they have no reason to believe that you and they are not entitled to so
rely or (ii) assume that the laws of any state other than the State of
California are identical to the laws of the State of California, in rendering
such opinion.
(c) All corporate proceedings and other legal matters
relating to this Agreement, the Registration Statement, the Prospectus, and
other related matters shall be reasonably satisfactory to or approved by
Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, counsel to you, and you shall have
received from such counsel a signed opinion, dated as of the First Closing
Date, with respect to the validity of the issuance of the Shares, the form of
the Registration Statement and Prospectus (other than the financial statements
and other financial data contained therein), the execution of this Agreement
and other related matters as you may reasonably require. The Company shall
have furnished to counsel for you such documents as they may reasonably request
for the purpose of enabling them to render such opinion.
(d) You shall have received a letter on and as of the
Effective Date and again on and as of the First Closing Date, in each instance
describing procedures carried out to a date within five (5) days of the date of
the letter, from Ernst & Young LLP, independent public accountants for the
Company, substantially in the form approved by you.
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(e) At each of the Closing Dates, (i) the representations
and warranties of the Company contained in this Agreement shall be true and
correct with the same effect as if made on and as of such Closing Date, and the
Company shall have performed all of its obligations hereunder and satisfied all
the conditions on its part to be satisfied at or prior to such Closing Date;
(ii) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be
stated therein in accordance with the Act and the Rules and Regulations, and
shall in all material respects conform to the requirements thereof, and neither
the Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statements of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made; (iii) there shall have been, since the respective dates as of
which information is given, no material adverse change in the business,
properties, condition (financial or otherwise), results of operations, capital
stock, long-term or short-term debt or general affairs of the Company from that
set forth in the Registration Statement and the Prospectus, except changes
which the Registration Statement and Prospectus indicate might occur after the
Effective Date and the Company shall not have incurred any material liabilities
nor entered into any agreement not in the ordinary course of business other
than as referred to in the Registration Statement and Prospectus; and (iv)
except as set forth in the Prospectus, no action, suit or proceeding at law
shall be pending or threatened against the Company which would be required to
be disclosed in the Registration Statement, and no proceedings shall be pending
or threatened against the Company before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company. In addition, you shall have received, at the First
Closing Date, a certificate signed by the President and the principal financial
or accounting officer of the Company, dated as of the First Closing Date,
evidencing compliance with the provisions of this subsection (e).
(f) At the First Closing Date, you shall have received from
the Company written evidence of the agreement of Xxxxxx Xxxxx to vote his
shares for the representatives' designees to the Company's Board of Directors
as described in the Prospectus.
(g) Upon exercise of the option provided for in Section
2(b) hereof, your obligations to purchase and pay for the Option Shares
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain
effective at the Option Closing Date, no stop order suspending the
effectiveness thereof shall have been issued, and no proceedings for
that purpose shall have been instituted or shall be pending, or, to
your knowledge or the knowledge of the Company, shall be contemplated
by the Commission, and any reasonable request on the part of the
Commission for additional information shall have been complied with to
the reasonable satisfaction of Freshman, Marantz, Orlanski, Xxxxxx &
Xxxxx, counsel to you.
(ii) At the Option Closing Date there shall have
been delivered to you the signed opinion of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, counsel for the Company, dated as of
the Option Closing Date, in form and substance reasonably
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satisfactory to Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, counsel
to you, which opinion shall be substantially the same in scope and
substance as the opinion furnished to you at the First Closing Date
pursuant to Section 4(b) hereof, except that such opinion, where
appropriate, shall cover the Option Shares rather than the Firm
Shares. If the First Closing Date is the same as the Option Closing
Date, such opinions may be combined.
(iii) At the Option Closing Date, there shall have
been delivered to you a certificate of the President and the Chairman
of the Board of the Company dated the Option Closing Date, in form and
substance reasonably satisfactory to Freshman, Marantz, Orlanski,
Xxxxxx & Xxxxx, counsel to you, substantially the same in scope and
substance as the certificate furnished to you at the First Closing
Date pursuant to Section 4(e) hereof.
(iv) At the Option Closing Date, there shall have
been delivered to you a letter in form and substance satisfactory to
you from Ernst & Young LLP, dated the Option Closing Date and
addressed to you, confirming the information in their letter referred
to in Section 4(d) hereof as of the date thereof and stating that,
without any additional investigation required, nothing has come to
their attention during the period from the ending date of their review
referred to in said letter to a date not more than five (5) days prior
to the Option Closing Date which would require any change in said
letter if it were required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the
Option Closing Date in connection with the sale and issuance of the
Option Shares shall be reasonably satisfactory in form and substance
to you, and you and Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx,
counsel to you, shall have been furnished with all such documents and
certificates as you may request in connection with this transaction in
order to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained therein.
(g) If any of the conditions herein provided for in this
Section shall not have been completely fulfilled as of the date indicated, this
Agreement and all obligations of the Underwriter under this Agreement may be
canceled at, or at any time prior to, each Closing Date by your notifying the
Company of such cancellation in writing or by telegram at or prior to the
applicable Closing Date. Any such cancellation shall be without liability of
any Underwriter to the Company, except as otherwise provided herein.
5. Conditions of the Obligations of the Company.
The obligation of the Company to sell and deliver the Shares
is subject to the following conditions:
(a) The Registration Statement shall have become
effective not later than 9:00 a.m. New York time, on the date of this Agreement,
or on such later date or time as you and the Company may agree in writing.
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(b) on the Closing Dates, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
Act or any proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided
for in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Option Shares
on exercise of the option provided for in Section 2(b) hereof shall be
affected.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless you
and each person, if any, who controls you, within the meaning of the Act, from
and against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys, fees), to
which you or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment thereof
or supplement thereto, (B) any blue sky application or other document executed
by the Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Shares under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, or any supplement thereto, or
in any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that the Company will not be liable in any such case to the extent, but only to
the extent, that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company through you specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such Preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto and provided
further, that the indemnity agreement provided in this Section 6(b) with
respect to any preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any losses, claims, charges,
liabilities or litigation based upon any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state therein a
material fact purchased Shares, if a copy of the Prospectus in which such
untrue statement or alleged untrue statement or omission or alleged omission
was corrected has not been sent or given to such person within the time
required by the Act and the Rules and Regulations thereunder. This indemnity
will be in addition to any liability which the Company may otherwise have.
(b) You agree to indemnify and hold harmless the Company,
each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement,
and each person, if any, who controls the Company, within the meaning of the
Act, from and against any losses, claims, damages or liabilities (which shall,
for all purposes of this Agreement, shall include, but not be limited to, all
reasonable costs of defense and investigation
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and all reasonable attorneys, fees) to which the Company or any such director,
nominee, officer or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged untrue statement or omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or omission or alleged untrue statement or omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company through you specifically for use
in preparation thereof. This indemnity agreement will be in addition to any
liability which you may otherwise have.
(c) Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify in writing the indemnifying party
of the commencement thereof, but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section. In case any such action
is brought against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate in and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, subject
to the provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that if the indemnified party is any Underwriter or a person who controls any
Underwriter within the meaning of the Act, the fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the employment
of such counsel has been specifically authorized in writing by the indemnifying
party or (ii) the named parties to any such action (including any impleaded
parties) include both such Underwriter or such controlling person and the
indemnifying party, and in your judgment, upon advice of counsel, it is
advisable for such Underwriter or controlling persons to be represented by
separate counsel (in which case the indemnifying party shall not have the right
to assume the defense of such action on behalf of such Underwriter or such
controlling person, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys). No settlement of any
action against an indemnified party shall be made without the consent of the
indemnified party, which shall not be unreasonably withheld.
7. Contribution.
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In order to provide for just and equitable contribution under
the Act in any case in which (i) the indemnified party makes claims for
indemnification pursuant to Section 6 hereof 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 Section 6 provide for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of you, then the Company and each person who controls the
Company, in the aggregate, and you shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) in
either such case (after contribution from others) in such proportions that such
Underwriter is responsible in the aggregate for that portion of such losses,
claims, damages or liabilities represented by the percentage that the
underwriting discount per Share appearing on the cover page of the Prospectus
bears to the public offering price per Share appearing thereon, and the Company
shall be responsible for the remaining portion, provided, however, that if such
allocation is not permitted by applicable law, then the relative fault of the
Company and you and controlling persons, in the aggregate, in connection with
the statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case of an
untrue statement of a material fact or the omission to state a material fact,
such statement or omission relates to information supplied by the Company or
you, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
Company and the Underwriter agree (a) that it would not be just and equitable
if the respective obligations of the Company and you to contribute pursuant to
this Section 7 were to be determined by pro rata or per capita allocation of
the aggregate damages (even if the Underwriter has to be treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the first sentence of
this Section 7 and (b) that the contribution of any Underwriter shall not be in
excess of its proportionate share of the portion of such losses, claims,
damages or liabilities for which you are responsible. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. As used in this paragraph, the word "Company"
within the meaning of Section 15 of the Act. Your obligations to contribute
pursuant to this Section 7 are several in proportion to their respective
underwriting obligations and not joint. If the full amount of the contribution
specified in this paragraph is not permitted by law, then you and each person
who controls you shall be entitled to contribution from the Company to the full
extent permitted by law. The foregoing contribution agreement shall in no way
affect the contribution liabilities of any persons having liability under
Section 11 of the Act other than the Company and you. No contribution shall be
requested with regard to the settlement of any matter from any party who did
not consent to the settlement; provided, however, that such consent shall not
be unreasonably withheld.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or
the sale of the Shares to you is consummated, the Company will pay all costs
and expenses incident to the performance of this Agreement by the Company,
including but not limited to the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation,
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printing, filing and distribution under the Act of the Registration Statement
(including the financial statements therein and all amendments and exhibits
thereto), each Preliminary Prospectus and the Prospectus, as amended or
supplemented, the fee of the National Association of Securities Dealers, Inc.
("NASD") in connection with the filing required by the NASD relating to the
offering of the Shares contemplated hereby; all expenses, including reasonable
fees (but not in excess of the amount set forth in Section 3(b)) and
disbursements of counsel to you, in connection with the qualification of the
Shares under the State Securities or Blue Sky Laws which you shall designate;
the cost of printing and furnishing to you copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Warrant Agreement and the Blue Sky Memorandum; the cost of printing the
certificates representing the Shares, the expenses of Company due diligence
meetings and presentations, (but not of you or your counsel in connection
therewith) and the expense (which shall not exceed [$10,000]) of placing one or
more "tombstone" advertisements as directed by you. The Company and shall pay
any and all taxes (including any transfer, franchise, capital stock or other
tax imposed by any jurisdiction) on sales to you hereunder. The Company will
also pay all costs and expenses incident to the furnishing of any amended
Prospectus or of any supplement to be attached to the Prospectus as called for
in Section 3(a) of this Agreement except as otherwise set forth in said
Section.
(b) In addition to the foregoing expenses, the Company
shall at the First Closing Date pay to you the balance of a non- accountable
expense allowance 3% of the gross proceeds of the offering, of which $[15,000]
has been paid. In the event the over-allotment option is exercised in part or
in full, the Company shall pay to you at the Option Closing Date an additional
amount equal to 3% of the gross proceeds received upon exercise of the
overallotment option. In the event the transactions contemplated hereby are
not consummated for any reason, the Company shall be liable for your actual
accountable out-of-pocket expenses (with credit given to the $[15,000] paid),
including legal fees, provided however, that any portion of the $[15,000] paid
by the Company that has not been utilized by you in connection with the
offering on an accountable basis shall be refunded by you to the Company; and
further provided that if the contemplated transactions are not consummated by
reason of breach by the Company of this Agreement or of any representation,
warranty, covenant or condition contained herein, the Company shall be liable
for your accountable out-of-pocket expenses.
(c) No person is entitled either directly or indirectly
to compensation from the Company, from any Underwriter or from any other person
for services as a finder in connection with the proposed offering, and the
Company agrees to indemnify and hold harmless you, and you agree to indemnify
and hold harmless, the Company from and against any losses, claims, damages or
liabilities, (which shall, for all purposes of this Agreement, include, but not
be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees), to which the indemnified party may become subject
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon the claim of any person (other than an
employee of the party claiming indemnity) or entity that he or it is entitled
to a finder's fee in connection wit the proposed offering by reason of such
person's or entity's influence or prior contact with the indemnifying party.
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9. Effective Date.
The Agreement shall become effective upon its execution,
except that you may, at your option, delay its effectiveness until the earlier
to occur of 10:00 A.M., New York time on the first full business day following
the Effective Date as you in your discretion shall first commence the public
offering by you of any of the Shares. The time of the public offering shall
mean the time of release by you of the first newspaper advertisement with
respect to the Shares, or the time when the Shares are first generally offered
by you to dealers by letter or telecopier, whichever shall first occur. This
Agreement may be terminated by you at any time before it becomes effective as
provided above, except that Sections 3(c), 6, 7, 8, 12, 13, 14 and 15 shall
remain in effect notwithstanding such termination.
10. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8,
12, 13, 14 and 15, may be terminated at any time prior to the First Closing
Date, and the option referred to in Section 2(b), if exercised, may be
canceled, at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
you for the resale of the Shares agreed to be purchased hereunder, by reason of
(i) the Company having sustained a material loss, whether or not insured, by
reason of fire, earthquake, flood, accident or other calamity, or from any
labor dispute or court or government action, order or decree, (ii) trading in
securities on the New York Stock Exchange or the American Stock Exchange having
been suspended or limited, (iii) material governmental restrictions having been
imposed on trading in securities generally which are not in force and effect on
the date hereof, (iv) a banking moratorium having been declared by federal of
New York State authorities, (v) an outbreak of major international hostilities
or other national or international calamity having occurred, (vi) the passage
by the Congress of the United States or by any state legislative body of
similar impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
you to have a material adverse impact on the business, financial condition or
financial statements of the Company, (vii) any material adverse change in the
financial or securities markets beyond normal fluctuations in the United States
having occurred since the date of this Agreement, or (viii) any material
adverse change having occurred, since the respective dates for which
information is given in the Registration Statement and Prospectus, in the
earnings, business, prospects or general condition of the Company, financial or
otherwise, whether or not arising in the ordinary course of business.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10 or in
Section 9, the Company shall be promptly notified by you, by telephone or
facsimile transmission, confirmed by letter.
11. Underwriter's Warrant.
On the First Closing Date, the Company will issue to you, for
a consideration of $5.00 and upon the terms and conditions set forth in the
form of Underwriter's Warrant annexed as an exhibit to the Registration
Statement, an Underwriter's Warrant to purchase 160,000 Shares. In the
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event of conflict in the terms of this Agreement and the Underwriter's Warrant,
the language of the Underwriter's Warrant shall control.
12. Representations, Warranties and Agreements to Survive
Delivery.
The respective indemnities, agreements, representations,
warranties and other statements of the Company and you, set forth in or made
pursuant to this Agreement will remain in full force and effect regardless of
any investigation made by or on behalf of you, the Company or any of its
officers or directors or any controlling persons and will survive delivery of
and payment for the Shares and the termination of this Agreement.
13. Notice.
All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to you, will be mailed, delivered
or telecopied and confirmed to it at X.X. Xxxxxx & Co., Inc., 0000 Xx. Xxxx
Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000-0000, with a copy sent to Xxxxxx X. Xxxxxxx,
Esq. at Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, 0000 Xxxxxxxx Xxxxxxxxx,
0xx Xxxxx Xxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000, or if sent to the
Company, will be mailed, delivered, or facsimiled and confirmed to Xxxxxx Xxxxx
of Borealis Technology Corporation, 0000 Xxxxxx Xxxx Xxxxx, Xxxxxx Xxxx, Xxxxxx
00000, with copy sent to Xxxxxx X. Xxxxxxx, Esq. of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx
00000-0000.
14. Parties in Interest.
The Agreement herein set forth is made solely for your
benefit, the Company and, to the extent expressed, the Existing Shareholders,
any person controlling the Company, or you, and directors of the Company,
nominees for directors of the Company (if any) named in the Prospectus, the
officers of the Company who have signed the Registration Statement, and their
respective executors, administrators, successors and assigns, and no other
person shall acquire for have any right under or by virtue of this Agreement.
The term "successors and assigns" shall not include any purchaser, as such
purchaser, from you of the Shares.
15. Applicable Law.
This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.
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If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this Underwriting Agreement, whereupon it
will become a binding agreement between the Company and you in accordance with
its terms.
Very truly yours,
Borealis Technology Corporation
Dated: _____________, 1997 By:________________________________
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written. X.X. Xxxxxx & Co., Inc.
Dated: _____________, 1997 By:________________________________
Authorized Officer
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SCHEDULE I
Underwriting Agreement dated ___________, 1997
Number of Firm
Shares
Underwriter to be Purchased
---------------
X.X. Xxxxxx & Co., Inc. 1,600,000
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