750,000 UNITS
BIOSHIELD TECHNOLOGIES, INC.
(a Georgia corporation)
Each Unit Consisting of
Two Shares of Common Stock and
One Redeemable Common Stock Purchase Warrant
August ___, 1998
UNDERWRITING AGREEMENT
TEJAS SECURITIES GROUP, INC.
REDSTONE SECURITIES, INC.
SEABOARD SECURITIES, INC.
As Representatives of the Several Underwriters
c/o Tejas Securities Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
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1. INTRODUCTION. BioShield Technologies, Inc., a Georgia corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
Schedule A attached hereto (the "Underwriters") for whom you are acting as
representatives (the "Representatives") pursuant to this Underwriting Agreement
(this "Agreement") an aggregate of Seven Hundred Fifty Thousand (750,000) Units
(the "Units") consisting of (i) two shares (the "Shares") of common stock, no
par value (the "Common Stock"), and (ii) one redeemable warrant to purchase one
share of Common Stock (the "Redeemable Warrants") at a price of __________
Dollars ($_____) per Unit. The Redeemable Warrants are subject to redemption, in
certain instances, commencing one (1) year from the date of the Prospectus (as
hereinafter defined). The Shares and Redeemable Warrants included in the Units
(including the Units) are herein collectively called the "Firm Securities." In
addition, the Company proposes to grant to the Underwriters an option to
purchase all or any part of an aggregate of One Hundred Twelve Thousand Five
Hundred (112,500) additional Units consisting of 225,000 shares of Common Stock
owned by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the founders and senior
management of the Company (the "Selling Shareholders") and 112,500 Redeemable
Warrants, at a price of ___________ Dollars ($_____) per Unit, solely for
covering over-allotments, if any (the "Option Securities"). The Firm Securities
and the Option Securities are hereinafter sometimes referred to as the "Offered
Securities." The 862,500 shares of Common Stock issuable upon exercise of the
Redeemable Warrants included as part of the Offered Securities are hereinafter
referred to as the "Public Warrant Shares"; and the Offered Securities and
Public Warrant Shares are sometimes hereinafter referred to collectively as the
"Public Securities."
The Shares and Redeemable Warrants may not be separately traded until
six (6) months after the date of the Prospectus (as hereinafter defined) unless
earlier separated upon ten (10) days' prior written notice from Tejas Securities
Group, Inc. to the Company. Each Redeemable Warrant shall be exercisable after
the Redeemable Warrants become separately tradeable and until five (5) years
from the date of the Prospectus, and shall entitle the holder to purchase one
share of Common Stock at a price equal to $7.80 per share, which price is
subject to adjustment in certain circumstances to prevent dilution. Commencing
twelve (12) months from the date of the Prospectus, the Company shall have the
right, at any time, to call each of the Redeemable Warrants for redemption upon
not less than thirty (30) days' prior written notice at any time at a redemption
price of $.05 per Redeemable Warrant, subject to adjustment, provided that the
closing bid quotation of the Common Stock as reported on The Nasdaq Stock Market
or the last sales price if quoted on a national securities exchange for a period
of ten (10) consecutive trading days, exceeds $13.00 per share, subject to
adjustment in certain circumstances to prevent dilution. The Redeemable Warrants
will be issued pursuant to a warrant agreement dated the date hereof between the
Company and ___________________ (the "Public Warrant Agreement"), a form of
which has been filed as Exhibit ____ to the Registration Statement.
The Company also proposes to issue and sell to the Representatives,
pursuant to the terms of a warrant agreement, dated as of the First Closing Date
(as hereinafter defined), between you and the Company (the "Underwriters'
Warrant Agreement"), warrants (the "Underwriters' Warrants") to purchase up to
75,000 Units for One Hundred Dollars ($100). The Underwriters' Warrants shall be
exercisable during the four-year period commencing twelve (12) months from the
Effective Date, at a price per unit of 120% of the initial public offering
price, subject to adjustment in certain events to protect against dilution. The
75,000 Units issuable upon exercise of the Underwriters' Warrants are
hereinafter referred to as the "Underwriters' Units"; the 75,000 shares of
Common Stock underlying the Underwriters' Units are hereinafter referred to as
the "Underwriters' Shares"; the 75,000 Redeemable Warrants underlying the
Underwriters' Units are hereinafter referred to as the "Underwriters' Redeemable
Warrants"; the 75,000 shares of Common Stock issuable upon exercise of the
Underwriters' Redeemable Warrants are hereinafter referred to as the
"Underwriters' Warrant Shares"; and the Underwriters' Warrants, the
Underwriters' Units, the Underwriters' Shares, the Underwriters' Redeemable
Warrants and the Underwriters' Warrant Shares are sometimes hereinafter referred
to collectively as the "Underwriters' Securities." The Public Securities and the
Underwriters' Securities are sometimes hereinafter referred to collectively as
the "Registered Securities."
The Registered Securities are more fully described in the Registration
Statement and the Prospectus referred to below.
The several Underwriters have advised the Company that they desire to
purchase the Units. The Company confirms the agreements made by it with respect
to the purchase of the Units by the Underwriters as follows:
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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to, and agrees with, the several Underwriters:
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(a) A registration statement (File No. 333-57767) on Form SB-2 relating to the
public offering of the Units, including a form of prospectus subject to
completion, 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 and one or more
amendments to such registration statement may have been so filed. The Company
will not, so long as any Redeemable Warrants, Underwriter's Warrants or
Underwriters' Redeemable Warrants remain outstanding and exercisable, file any
amendment thereto or any amendment or supplement to the Preliminary Prospectus
or the Prospectus (as those terms are defined below) unless the Company has
given reasonable and prior notice thereof to the Representatives and counsel for
the Underwriters and none of which shall have reasonably objected within a
reasonable period of time prior to the filing thereof. As used in this Agreement
and unless the context indicates otherwise, the term "Registration Statement"
refers to and means said registration statement, including any exhibit,
financial statement and prospectus included therein, as finally amended and
revised on or prior to the effective date (the "Effective Date") of said
registration statement. The term "Preliminary Prospectus" refers to and means
any prospectus filed with the Commission and included in said registration
statement before it becomes effective, and the term "Prospectus" refers to and
means the prospectus included in the Registration Statement, except that if the
prospectus first filed by the Company pursuant to Rule 424(b) of the Rules and
Regulations shall differ from the Prospectus, the term "Prospectus" shall refer
to the prospectus filed pursuant to Rule 424(b). If the Registration Statement
or the Prospectus is amended or supplemented after the Effective Date and prior
to or on the Closing Dates (as hereinafter defined), then the terms
"Registration Statement" and "Prospectus" shall refer to such documents as so
amended or supplemented. For purposes of this Agreement, all references to the
Registration Statement, any Preliminary Prospectus or any amendment or
supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("▇▇▇▇▇"). Each Preliminary Prospectus and the Prospectuses
delivered to the Underwriters for use in connection with this offering was
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation S-T.
The terms used herein shall have the same meaning as in the Prospectus
unless the context hereof otherwise requires.
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(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary
Prospectus, nor has the Commission or any such authority instituted or, to the
best knowledge of the Company, threatened to institute any proceedings with
respect to such an order. At the
time the Registration Statement becomes effective and at all times subsequent
thereto up to and on the First Closing Date (as hereinafter defined) or the
Option Closing Date (as hereinafter defined), as the case may be,
(i) the Registration Statement and Prospectus will in all 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 statements therein not misleading; 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 the
Underwriters specifically for use in the
preparation thereof.
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(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 Registration Statement
and 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 will not have a material
adverse effect the Company's business, properties, assets, condition (financial
or other) or results of operations (a "Material Adverse Effect"). The Company
holds all authorizations, approvals, licenses, certificates, franchises and
permits from state, federal or other regulatory authorities necessary for the
conduct of its business as presently conducted and as described in or
contemplated by the Registration Statement and is in compliance with all laws
and regulations and all orders and decrees applicable to it or to such business
or assets except where the absense of such authorizations, approvals, licenses,
certificates, franchises and permits will not have a Material Adverse Effect,
and there are no proceedings pending or, to the best knowledge of the Company,
threatened, seeking to cancel, terminate or limit such authorizations,
approvals, licenses, certificates, franchises or permits.
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(d) The authorized, issued and outstanding capital stock of the Company as of
__________, 1998 is as set forth in the Prospectus under "Capitalization"; all
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; and the
capital stock conforms to all statements relating thereto contained in the
Registration Statement and Prospectus. The issuances and sales of all such
capital stock complied in all respects with applicable federal and state
securities laws; 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.
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(e) This Agreement, the Public Warrant Agreement and the Underwriters' Warrant
Agreement have been duly and validly authorized by the Company, and this
Agreement constitutes, and the Public Warrant Agreement and the Underwriters'
Warrant Agreement, when executed and delivered pursuant to this Agreement
(assuming due execution by the Underwriters and/or the appropriate parties to
such agreements), will each constitute, a valid and binding agreement of the
Company, enforceable against the Company in accordance with their respective
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally, (ii) as enforceability of any
indemnification, contribution or exculpation provision may be limited under
applicable federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought ((i), (ii) and (iii) are hereinafter
referred to as the "Enforceability Exceptions").
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(f) The Company has full power and lawful authority to authorize, issue and sell
the Registered Securities to be sold by it hereunder on the terms and conditions
set forth herein, and no consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or agency
is required in connection with such authorization, execution and delivery or
with the authorization, issue and sale of the Registered Securities, except such
as may be required under the Act, state securities or blue sky laws and from the
National Association of Securities Dealers, Inc. ("NASD").
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(g) The Units and the Shares have been duly authorized and, when issued and
delivered pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable. The Redeemable Warrants have been duly authorized
and, when issued and delivered pursuant to this Agreement, will constitute valid
and legally binding obligations of the Company enforceable in accordance with
their terms, subject to the Enforceability Exceptions, and will be entitled to
the benefits provided by the Public Warrant Agreement. The Public Warrant Shares
have been reserved for issuance upon exercise of the Redeemable Warrants and,
when issued in accordance with the terms of the Redeemable Warrants and Public
Warrant Agreement, will be duly authorized, validly issued, fully paid and
non-assessable. The Underwriters' Warrants have been duly authorized and, when
issued and delivered pursuant to this Agreement and the Underwriters' Warrant
Agreement, will constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms, subject to the Enforceability
Exceptions, and will be entitled to the benefits provided by the Underwriters'
Warrant Agreement. The Underwriters' Shares have been reserved for issuance upon
exercise of the Underwriters' Warrants and, when issued in accordance with the
terms of the Underwriters' Warrants and Underwriters' Warrant Agreement, will be
duly authorized, validly issued, fully paid and non-assessable. The
Underwriters' Redeemable Warrants, when issued in accordance with the terms of
the Underwriters' Warrants and Underwriters' Warrant Agreement, will be duly
authorized and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms, subject to the
Enforceability Exceptions, and will be entitled to the benefits provided by the
Public Warrant Agreement. The Underwriters' Warrant Shares have been reserved
for issuance upon exercise of the Underwriters' Redeemable Warrants and, when
issued in accordance with the terms of the Underwriters' Redeemable Warrants and
the Public Warrant Agreement, will be duly authorized, validly issued, fully
paid and non-assessable. The issuance of any of the Registered Securities will
not violate or otherwise be subject to the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company, and none of the holders of any of the Registered Securities will be
subject to personal liability by reason of being such holders.
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(h) Except as described in the Prospectus, the Company is not in violation of
any term or provision of its Amended and Restated Articles of Incorporation or
Bylaws or of any contract or agreement or of any statute or any order, rule or
regulation or of any other regulatory authority or other governmental body
having jurisdiction over the Company, which violation may have a Material
Adverse Effect on the Company. Neither the execution and delivery of this
Agreement, nor the issuance and/or sale of any of the Registered Securities, nor
the consummation of any of the transactions contemplated herein, nor the
compliance by the Company with the terms and provisions hereof, has conflicted
with or will conflict with, or has resulted in or will result in a breach of,
any of the terms and provisions, or has constituted or will constitute a default
under, or has resulted in or will result in the creation or imposition of any
lien, charge or encumbrance upon the property or assets of the Company pursuant
to the terms of, any indenture, mortgage, deed of trust, note, loan or credit
agreement or any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument towhich 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 is subject; nor will such actions result in any violation
of the provisions of the Amended and Restated Articles of Incorporation or the
Bylaws of the Company or of any contract or agreement, or of any statute or any
order, rule or regulation applicable to the Company or of any other regulatory
authority or other governmental body having jurisdiction over the Company, which
conflict, breach, default or violation would have a Material Adverse Effect on
the Company.
-1- (i) Except as described in the Prospectus, no default exists in the due
performance and observance of any term, covenant or condition of any license,
contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or
any other agreement or instrument to which the Company is a party or by which
the Company may be bound or to which any of the property or assets of the
Company are subject, which default would have a Material Adverse Effect on the
Company.
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(j) Except as described 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 with
respect to any of the terms or provisions of any of such leases or subleases,
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; 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.
(k) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who have audited and given their reports on certain
financial statements filed and to be filed with the Commission as a part of the
Registration Statement, which are incorporated in the Prospectus, are, with
respect to the Company, independent public accountants as required by the Act
and the Rules and Regulations.
(l) The financial statements, 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 cash flow 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 related notes
have been prepared in accordance with generally accepted accounting principles
applied on a basis which is consistent during the periods involved, except as
otherwise stated therein, and all adjustments necessary for a fair presentation
of results for such periods have been made. The information set forth under the
captions "Dilution," "Capitalization," and "Selected Consolidated Financial
Information" in the Prospectus fairly present, on the basis stated in the
Prospectus in all material respects, the information included therein.
(m) Subsequent to the respective dates as of which information is given in the
Registration Statement and Prospectus, (i) the Company has not incurred any
material liabilities or obligations, direct or contingent, or entered into any
material transactions other than in the ordinary course of business; (ii) there
has not been any change in the capital stock, funded debt (other than regular
repayments of principal and interest on existing indebtedness) or other
securities of the Company; (iii) there has not been any adverse change in the
condition (financial or otherwise), business, operations, income, net worth or
properties, including any loss or damage to the properties, of the Company
(whether or not such loss is insured against); (iv) the Company has not paid or
declared any dividend or other distribution on its Common Stock or its other
securities or redeemed or repurchased any of its Common Stock or other
securities; and (v) the Company has not become a 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.
(n) Except as set forth in the Prospectus, there is not now pending or, to the
knowledge of the Company, threatened, any action, suit or proceeding to which
the Company or any of the respective officers, directors or securityholders
thereof is a party before or by any court or governmental agency or body, which
might result in any material adverse change in the condition (financial or
otherwise), operations, business prospects, income, net worth, or properties of
the Company, or which might materially adversely affect the properties or assets
thereof, or prevent consummation of the transactions contemplated hereby; nor
are there any actions, suits or proceedings related to environmental matters or
related to discrimination on the basis of age, sex, religion or race; and there
are no labor disputes involving the employees of the Company exist or are
imminent which might be expected to adversely affect the conduct of the
business, property or operations or the financial condition or results of
operations of the Company.
-1- (o) There is no contract or other document which is required by the Act or
by the Rules and Regulations to be filed as an exhibit to the Registration
Statement which has not been so filed. Each contract which is filed as an
exhibit to the Registration Statement is and shall be in full force and effect
at each of the Closing Dates or shall have been terminated in accordance with
its terms or as set forth in the Registration Statement and Prospectus. No party
to any such contract has given notice to the Company of the cancellation of or,
to the best knowledge of the Company, shall have threatened to cancel, any such
contract, and, except as set forth in the Prospectus, the Company is not or
shall not be in default thereunder, which termination, cancellation or default
would have a Material Adverse Effect on the Company.
(p) Except as disclosed in the Prospectus, the Company has filed all necessary
federal, state, local and foreign income and franchise tax returns and has paid
all taxes shown as due thereon; there is no tax deficiency which has been or to
the best knowledge of the Company might be asserted against the Company; and the
Company has established adequate reserves for such taxes which are not yet due
and payable.
(q) To the best knowledge of the Company, none of the activities or business
of the Company are in violation of, or cause the Company to violate, any law,
rule, regulation or order of the United States, any state, county or locality,
or of any agency or body of the United States or of any state, county or
locality, the violation of which would have a material adverse impact upon the
condition (financial or otherwise), business, property, prospective results of
operations, or net worth of the Company.
(r) The Company maintains insurance, which is in full force and effect, of the
types and in the amounts currently adequate for its business, including but not
limited to personal injury and product liability insurance, insurance covering
all personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against.
The Company has not (i) 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
timely manner, (ii) had 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 (iii) failed to comply with all conditions contained in
such insurance policies and surety bonds. To the best knowledge of the Company,
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.
(s) The Company owns or possesses adequate rights to use all patents, patent
rights, inventions, trademarks, service marks, trade names, copyrights ,
know-how (including all other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), technology, trade secrets,
designs, processes, works of authorship, computer programs and technical data
and information (collectively, "Intellectual Property") necessary for the
conduct of its business as described in the Prospectus or that are material to
the development, manufacture, operation and sale of all products and services
sold or proposed to be sold by the Company, and the Company has not received any
notice of infringement of or conflict with, and the Company, to the best of the
Company's knowledge, is not infringing or in conflict with asserted rights of
others with respect to, any Intellectual Property.
(t) Except as set forth in the Prospectus, the Company 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 Intellectual
Property, with respect to the use thereof or in connection with the conduct of
its business or otherwise. In addition, the Company owns and has the
unrestricted right to use all Intellectual Property free and clear of and
without violating any right, lien, or claim of others, including without
limitation, former employers of its employees. The Company is not aware of any
development by any other person or entity of trade secrets or items of technical
information similar to those of the Company. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
its Intellectual Property in all material aspects.
(u) The Company is not obligated to pay and has not paid within the past twelve
(12) months, and has not obligated, and will not obligate, the Underwriters to
pay, any finder's fee in connection with the underwriting contemplated hereby or
any other fee (cash, securities or otherwise) in consideration of financial,
consulting or investment banking services.
(v) No officer or director of the Company or any "affiliate" or "associate" (as
such terms are defined in Rule 405 promulgated under the Rules and Regulations)
of the Company or any such officer or director has taken, and each officer or
director has agreed that he will not take, directly or indirectly, any action
designed to or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security issued by the
Company.
(w) No officer, director or greater than 5% stockholder of the Company, or any
affiliate or associate of any of the foregoing persons or entities has or has
had, either directly or indirectly, (i) an interest (other than ownership of an
immaterial number of shares of capital stock of an entity whose securities are
publicly traded) in any person or entity which (A) furnishes or sells products
or services which are furnished or sold or are proposed to be furnished or sold
by the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, or (ii) a beneficial interest in any contract or agreement to
which the Company is a party or by which it may be bound or affected. Except as
set forth in the Prospectus under "Certain Transactions," there are no existing
agreements, arrangements, or transactions, between or among the Company and any
officer or director of the Company, or any partner, affiliate or associate of
any of the foregoing persons or entities.
(x) The minute books of the Company have been made available to the
Representatives and contain a complete summary of all meetings and actions of
the directors and shareholders of the Company since the time of its date of
organization, and reflect all transactions referred to in such minutes
accurately in all respects.
(y) The Company is not aware of any bankruptcy, labor disturbance or other event
affecting any of its principal suppliers or customers which is reasonably likely
to result in a material adverse change in the condition, financial or otherwise,
prospects, business or results of operation of the Company.
(z) The Registered Securities and all the other securities of the Company
conform to all statements in relation thereto in the Registration Statement.
(aa) Except for the registration rights granted under the Underwriters' Warrant
Agreement or disclosed in the Prospectus, no holder of any securities of the
Company has the right to require that the Company include such securities in the
Registration Statement or any registration statement to be filed by the Company;
and the current holders of registration rights have agreed not to exercise such
registration rights for a period of twelve (12) months from the completion of
the offering contemplated hereby and to waive any right which such person or
entity may have to include any of such holder's securities in the Registration
Statement.
(bb) The Units, Shares and Redeemable Warrants are eligible for quotation on The
Nasdaq SmallCap Market. The Company has filed a registration statement with the
Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and has used its best efforts to have same
declared effective by the Commission on an accelerated basis on the Effective
Date.
(cc) Neither the Company nor any officer, director or other agent thereof has,
acting on behalf of the Company, at any time (i) made any contributions to any
candidate for political office in violation of law, or failed to disclose fully
any such contributions in violation of law, (ii) made any payment to any state,
federal or foreign governmental officer or official, or any other person charged
with similar public or quasi-public duties, other than payments required or not
prohibited by law or (iii) made any payment of funds of the Company or received
or retained any funds in violation of any law, rule or regulation and under
circumstances requiring the disclosure of such payment, receipt or retention of
funds in the Prospectus. 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.
(dd) On the Closing Dates (as hereinafter defined) 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 Units to the Underwriters hereunder will have
been fully paid or provided for by the Company and all laws imposing such taxes
will have been fully complied with.
(ee) The Company has no subsidiaries.
(ff) Except as previously disclosed in writing by the Company to
the Representatives, no officer, director or stockholder of the Company
has any affiliation or association with any member of the NASD.
(gg) The Company is not, and upon receipt of the proceeds from the sale of the
Units will not be, an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and the rules and regulations thereunder.
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(hh) The Company has not distributed and will not distribute prior to the First
Closing Date any offering material in connection with the offering and sale of
the Units other than the Preliminary Prospectus, Prospectus, the Registration
Statement or the other materials permitted by the Act, if any.
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(ii) The employment agreements between the Company and its respective officers,
as disclosed in the Registration Statement, are or will be on or before the
First Closing Date binding and enforceable obligations upon the respective
parties thereto in accordance with their respective terms, subject to the
Enforceability Exceptions.
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(jj) Except as set forth in the Prospectus, the Company has no employee benefit
plans (including, without limitation, profit sharing and welfare benefit plans)
or deferred compensation arrangements that are subject to the provisions of the
Employee Retirement Income Security Act of 1974.
(kk) Except as disclosed in the Prospectus, there are no voting or other
shareholder agreements between the Company and any shareholders of the Company
or between or by and among any shareholders of the Company.
(ll) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance with all federal, state,
local, and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours. There are no
pending investigations involving the Company by the U.S. Department of Labor or
any other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or, to the Company's best knowledge, threatened against or involving the
Company, 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 to which the Company is or was a party. No
labor dispute with the employees of the Company exists, or is imminent.
(mm) The statements in the Prospectus under "Risk Factors," "Business," "Certain
Transactions," "Management" and "Description of Securities," insofar as they
refer to statements of law, descriptions of statutes, licenses, regulations or
legal conclusions are correct in all material respects.
(nn) The conditions for use of Form SB-2, as set forth in the General
Instructions thereto, have been satisfied.
(oo) There are no business relationships or related-party transactions of the
nature described in Item 404 of Regulation S-B involving the Company and any
person described in such Item that are required to be disclosed in the
Prospectus and that have not been so disclosed.
(pp) Any certificate signed by an officer of the Company in his capacity as such
and delivered to the Representatives or counsel for the Underwriters shall be
deemed a representation and warranty by the Company to the Representatives as to
the matters covered thereby.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each Selling
Shareholder represents, warrants and covenants to each Underwriter as follows:
(a) This Agreement has been duly and validly authorized by or on behalf of such
Selling Shareholder and when executed and delivered will constitute a valid and
binding agreement of such Selling Shareholder, enforceable against such Selling
Shareholder in accordance with its terms, except as such enforceability may be
limited by the Enforceability Exceptions.
(b) Each of the (i) Custody Agreement signed by such Selling Shareholder and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., as custodian (the "Custodian"), relating to the
deposit of the Shares to be sold by such Selling Shareholder (the "Custody
Agreement") and (ii) Power of Attorney appointing certain individuals named
therein as such Selling Shareholder's attorneys-in-fact (each, an
"Attorney-in-Fact") to the extent set forth therein relating to the transactions
contemplated hereby and by the Prospectus (the "Power of Attorney"), of such
Selling Shareholder has been duly and validly authorized, executed and delivered
by such Selling Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable against such Selling Shareholder in accordance with its
terms, except as such enforceability may be limited by the Enforceability
Exceptions.
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(c) Such Selling Shareholder has, and on the Option Closing Date (as hereinafter
defined) will have, good and valid title to all of the Shares that may be sold
by such Selling Shareholder pursuant to this Agreement on such date and the
legal right and power, and all authorizations and approvals required by law to
enter into this Agreement and its Custody Agreement and Power of Attorney, to
sell, transfer and deliver all of the Shares that may be sold by such Selling
Shareholder pursuant to this Agreement and to comply with its other obligations
hereunder and thereunder.
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(d) Delivery of the Shares that are sold by such Selling Shareholder pursuant to
this Agreement will pass good and valid title to such Shares, free and clear of
any security interest, mortgage, pledge, lien, encumbrance or other claim.
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(e) The execution and delivery by such Selling Shareholder of, and the
performance by such Selling Shareholder of its obligations under, this
Agreement, the Custody Agreement and the Power of Attorney will not contravene
or conflict with, result in a breach of, or constitute a default under, or
require the consent of any other party to any agreement or instrument to which
such Selling Shareholder is a party or by which it is bound or under which it is
entitled to any right or benefit, any provision of applicable law or any
judgment, order, decree or regulation applicable to such Selling Shareholder of
any court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over such Selling Shareholder. No consent,
approval, authorization or other order of, or registration or filing with, any
court or other governmental authority or agency, is required for the
consummation by such Selling Shareholder of the transactions contemplated in
this Agreement, except as may be required under the Act, applicable state
securities or blue sky laws and from the NASD.
(f) Such Selling Shareholder does not have any registration or other similar
rights to have any equity or debt securities registered for sale by the Company
under the Registration Statement or included in the offering contemplated by
this Agreement, except for such rights as are being exercised in the offering
contemplated by this Agreement or such rights as have been duly waived.
(g) Except for the
(i) consent of such Selling Shareholder to the respective number of Shares to be
sold by all of the Selling Shareholders pursuant to this Agreement and (ii)
waiver by certain other holders of Common Stock of certain registration rights,
no consent, approval or waiver is required under any instrument or agreement to
which such Selling Shareholder is a party or by which it is bound or under which
it is entitled to any right or benefit, in connection with the offering, sale or
purchase by the Underwriters of any of the Shares which may be sold by such
Selling Shareholder under this Agreement or the consummation by such Selling
Shareholder of any of the other transactions contemplated hereby.
(h) All information furnished by or on behalf of such Selling Shareholder in
writing expressly for use in the Registration Statement and Prospectus is, and
on the Closing Dates will be, true, correct, and complete in all material
respects, and does not, and on the Closing Dates will not, contain any untrue
statement of a material fact or omit to state any material fact necessary to
make such information not misleading. Such Selling Shareholder confirms as
accurate the number of shares of Common Stock set forth opposite such Selling
Shareholder's name in the Prospectus under the caption "Principal and
Selling Shareholders" (both prior to and after giving effect to the sale of
the Shares).
(i) Such Selling Shareholder has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(j) Such Selling Shareholder has no reason to believe that the
representations and warranties of the Company contained in Section 2 hereof
are not true and correct, is familiar with the Registration Statement and
the Prospectus and has no knowledge of any material fact, condition or
information not disclosed in the Registration Statement or the Prospectus
that has had or may have a material adverse effect on the business,
properties, financial condition or operations of the Company and is not
prompted to sell shares of Common Stock by any information concerning the
Company that is not set forth in the Registration Statement and the
Prospectus.
(k) Such Selling Shareholder has not, at any time (i) made any
contributions to any candidate for political office in violation of law, or
failed to disclose fully any such contributions in violation of law, (ii)
made any payment to any state, federal or foreign governmental officer or
official, or any other person charged with similar public or quasi-public
duties, other than payments required or not prohibited by law or (iii) made
any payment of funds or received or retained any funds in violation of any
law, rule or regulation and under circumstances requiring the disclosure of
such payment, receipt or retention of funds in the Prospectus. Any
certificate signed by or on behalf of any Selling Shareholder and delivered
to the Underwriters or to counsel for the Underwriters shall be deemed to
be a representation and warranty by such Selling Shareholder to each
Underwriter as to the matters covered thereby.
4. PURCHASE, DELIVERY AND SALE OF THE UNITS.
(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 the Underwriters, and each
Underwriter agrees, severally and not jointly, to buy from the Company at
$13.00 per Unit, at the place and time hereinafter specified, the number of
Units set forth opposite the name of such Underwriter in Schedule A
attached hereto (the "First Units") plus any additional Units which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 13 hereof. The First Units shall consist of Seven Hundred Fifty
Thousand (750,000) Units to be purchased from the Company. Delivery of the
First Units against payment therefor shall take place at the offices of
________________, [ADDRESS] (or at such other place as may be designated by
agreement between the Representatives and the Company) at 10:00 a.m.,
Dallas time, on [__], 1998, or at such later time and date as the
Representatives may designate, such time and date of payment and delivery
for the First Units being herein called the "First Closing Date".
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(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, with respect to the Redeemable Warrants, and the
Selling Shareholders, with respect to the Shares, hereby grant an option
(the "Over-Allotment Option") to the Underwriters to purchase all or any
part of an aggregate of an additional One Hundred Twelve Thousand Five
Hundred (112,500) Units at $15.60 per Unit (such additional Units being
referred to herein as the "Option Units"). This option may be exercised
within forty-five (45) days after the Effective Date upon notice by the
Representatives to the Company advising as to the amount of Option Units as
to which the option is being exercised, the names and denominations in
which the certificates for such Option Units are to be registered and the
time and date when such certificates are to be delivered. Such time and
date shall be determined by the Representatives, but shall not be earlier
than four (4) nor later than ten (10) 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 Units against payment therefor shall take place at the
offices of ________________, [ADDRESS]. The number of Option Units to be
purchased by each Underwriter, if any, shall bear the same percentage to
the total number of Option Units being purchased by the several
Underwriters pursuant to this Section 4(b) as the number of Units such
Underwriter is purchasing bears to the total number of the First Units
being purchased pursuant to Section 4(a), as adjusted, in each case by the
Representatives in such manner as the Representatives may deem appropriate.
The Over-Allotment Option granted hereunder may be exercised only to cover
over-allotments in the sale by the Underwriters of First Units referred to
in Section 4(a), and the Underwriters shall have no obligation to make any
over-allotments. No Option Securities shall be delivered and paid for
unless the Firm Securities shall be simultaneously delivered or shall
theretofore have been delivered and paid for as herein provided. In the
event the Company declares or pays a dividend or distribution on its Common
Stock, whether in the form of cash, shares of Common Stock or any other
consideration, prior to the Option Closing Date, such dividend or
distribution shall also be paid on the Option Units on the Option Closing
Date.
(c) On the First Closing Date, the Company shall issue and sell to the
Underwriters the Underwriters' Warrants. The total purchase price of the
Underwriters' Warrants shall be $75.00. The Underwriters' Warrants shall be
exercisable for a period of four (4) years commencing twelve (12) months
from the Effective Date, to purchase 75,000 Units at $15.60 per Unit. The
Underwriters' Warrant Agreement, including the forms of Underwriters'
Warrant Certificates, shall be substantially in the form filed as Exhibit
___ to the Registration Statement. Payment for the Underwriters' Warrants
shall be made to the Company on the First Closing Date.
(d) The Company will make the certificates for the securities comprising
the Units to be purchased by the Underwriters hereunder available to the
Representatives for checking at least two (2) full business days prior to
the First Closing Date or the Option Closing Date (which are collectively
referred to herein as the "Closing Dates"). The certificates shall be in
such names and denominations as the Representatives may request, at least
two (2) full business days prior to the Closing Dates. Time shall be of the
essence and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Underwriters. Definitive
certificates in negotiable form for the Units to be purchased by the
Underwriters hereunder will be delivered by the Company to the
Representatives for the accounts of the Underwriters against payment of the
respective purchase prices by the Underwriters, by certified or bank
cashier's checks or, at the option of Representatives, by wire transfer of
immediately available funds, payable to the order of the Company. In
addition, in the event the Underwriters exercise the option to purchase
from the Company all or any portion of the Option Units pursuant to the
provisions of Section 4(b) above, payment for such Units shall be made to
or upon the order of the Company, with respect to the Redeemable Warrants,
and the Selling Shareholders, with respect to the Shares, by certified or
bank cashier's checks or, at the option of Representatives, by wire
transfer payable in immediately available funds at the offices of Tejas
Securities Group, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
at the time and date of delivery of such Units as required by the
provisions of Section 4(b), against receipt of the certificates for such
Units by the Representatives for the respective accounts of the
Underwriters registered in such names and in such denominations as the
Representatives may request. It is understood that each of the
Representatives, each individually and not as representatives of the
several Underwriters, may (but shall not be obligated to) make any and all
payments required pursuant to this Section 4 on behalf of any Underwriters
whose check or checks shall not have been received by the Representatives
at the time of delivery of the Units to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such
Underwriter or Underwriters of any of its or their obligations hereunder.
It is understood that the Underwriters propose to offer the Units to be
purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement becomes
effective.
5. PUBLIC OFFERING BY THE UNDERWRITER. The Representatives agree to cause
the Firm Securities to be offered to the public initially at the prices and
under the terms set forth in the Prospectus as soon, on or after the
effective date of this Agreement, as the Representatives deem advisable,
but no more than five (5) full business days after such effective date. The
Representatives may allow such concessions and discounts upon sales to
other dealers as set forth in the Prospectus. The Representatives agree to
notify the Company in writing when the such offering is first made and when
it is completed. After the completion of the initial public offering, the
public offering prices, the concessions and the allowances may be changed
by the Representatives.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective as promptly as possible. If required, the
Company will file the Prospectus and any amendment or supplement thereto
with the Commission in the manner and within the time period required by
Rules 434 and 424(b) under the Act. Upon notification from the Commission
that the Registration Statement has become effective, the Company will so
advise you and will not at any time, whether before or after the Effective
Date, file the Prospectus or 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 the Representatives or
counsel to the Underwriters shall have objected in writing or which is not
in compliance with the Act and the Rules and Regulations. At any time prior
to the later of (i) the completion by all of the Underwriters of the
distribution of the Units contemplated hereby (but in no event more than
nine (9) months after the Effective Date) and (ii) twenty-five (25) days
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 opinion, may be
necessary or advisable in connection with the distribution of the Units. As
soon as the Company is advised thereof, the Company will advise you, and
confirm the advice in writing, of 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
order or other order or threat thereof suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of any
Preliminary Prospectus, or of the suspension of the qualification of any of
the Offered Securities for offering in any jurisdiction, or of 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 the Underwriters and
dealers to use the Prospectus in connection with the sale of the Units for
such period as in the opinion of counsel to the Underwriters 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
securities of the Company, or which in the opinion of counsel for the
Company or counsel for the Underwriters should be set forth in an amendment
of 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 Units or in case it shall be necessary to
amend or supplement the Prospectus to comply with law 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
Underwriters, except that in case any Underwriter is required, in
connection with the sale of the Units to deliver a Prospectus nine (9)
months or more after the Effective Date, the Company will upon request of
and at the expense of the applicable Underwriter, amend or supplement the
Registration Statement and Prospectus and furnish the applicable
Underwriter with reasonable quantities of prospectuses complying with
Section 10(a)(3) of the Act. The Company will comply with the Act, the
Rules and Regulations and the Exchange Act and the rules and regulations
thereunder in connection with the offering and issuance of the Units.
Within the time during which the Prospectus is required to be delivered
under the Act, or pursuant to the undertakings of the Company in the
Registration Statement, the Company will comply, at its own expense, with
all requirements imposed upon it by the Act, the Rules and Regulations, the
Exchange Act or the rules and regulations of the Commission promulgated
under the Exchange Act, each as now or hereafter amended or supplemented,
and by any order of the Commission so far as necessary to permit the
continuance of sales of, or dealings in, the Registered Securities.
(b) The Company will use its best efforts to qualify to register the Units
for sale under the securities or "blue sky" laws of such jurisdictions as
the Representatives may designate and will make such applications and
furnish such information as may be required for that purpose and to comply
with such laws, provided the Company shall not be required to qualify as a
foreign corporation or a dealer in securities or to execute a general
consent of service of process in any jurisdiction in any action other than
one arising out of the offering or sale of the Units. 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 the Representatives may reasonably request.
(c) Prior to the completion of this offering, the Company will make all
filings required to (i) cause a registration statement under the Exchange
Act to be declared effective concurrently with the completion of this
offering and will notify the Representative in writing immediately upon the
effectiveness of such registration statement, (ii) obtain a listing of the
Units, Common Stock and Redeemable Warrants on the Nasdaq Small Cap Market
and will use its best efforts to maintain such listing for at least five
(5) years from the date of this Agreement, and (iii) if requested by the
Representatives, to obtain and keep current a listing in the Standard &
Poors or ▇▇▇▇▇'▇ Industrial OTC Manual.
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(d) For so long as the Company is a reporting company under either Section
12(g) 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 the Representatives during the period
ending five (5) years from the date hereof, (i) copies of each annual
report of the Company; (ii) as soon as practicable and in any event upon
filing such report with the Commission, a financial report of the Company,
which will include a balance sheet as of the end of the preceding fiscal
year, a statement of operations, a statement of stockholders' equity
(deficit) and a statement of cash flows covering such fiscal year, such
report being in reasonable detail and audited by independent public
auditors; (iii) for each fiscal quarter of the Company other than the last
fiscal quarter in any fiscal year, as soon as practicable and in any event
upon filing such report with the Commission, a financial report of the
Company, which will include a balance sheet as of the end of the fiscal
quarter, a statement of operations, a statement of stockholders' equity
(deficit) and a statement of cash flows covering such fiscal quarter,
together with notes thereto, for such fiscal quarter and, with respect to
the statement of operations, for the fiscal year to date, setting forth in
each case in comparative form the corresponding figures for the preceding
year, such report being in reasonable detail and certified by the Chief
Financial Officer of the Company to be correct and complete to the best of
such officer's knowledge, to fairly present the financial condition of the
Company at the date thereof and the results of operations for the period
then ending and to have been prepared in accordance with generally accepted
accounting principles consistently applied, except for normal year end
adjustments; (iv) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4
received or filed by the Company from time to time; (v) a copy of any
report filed by the Company pursuant to the Exchange Act; (vi) copies of
all statements, documents or other information which the Company shall mail
or otherwise make available to any class of its security holders, or shall
file with the Commission or with any exchange upon which the securities
issued by the Company shall then be listed or registered; and (vii) such
other publicly available information as the Representatives may from time
to time request. If, and so long as, the Company has an active subsidiary
or subsidiaries, the Company's financial statements 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
shareholders generally. Separate financial statements shall be furnished
for all subsidiaries whose accounts are not consolidated but which at the
time are significant subsidiaries as defined by the Rules and Regulations.
With respect to each consolidated and unconsolidated significant subsidiary
and affiliate, if any, the financial reports shall be in sufficient detail
to show the basis of any consolidated reports required hereunder.
Notwithstanding the foregoing, the Company's financial statements shall be
deemed to comply with the requirements of this paragraph if they comply
with the Rules and Regulations.
(e) The Company will deliver to the Representatives at or before the First
Closing Date two (2)signed copies of the Registration Statement including
all financial statements and exhibits filed therewith, and of all
amendments thereto, and will deliver to the Underwriters such number of
conformed copies of the Registration Statement, including such financial
statements but without exhibits, and of all amendments thereto, as the
Underwriters may reasonably request. The copies of the Registration
Statement and each amendment thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation
S-T. The signed copies of the Registration Statement so furnished to the
Representatives will include signed copies of any and all consents and
reports of the independent public auditors as to the financial statements
included in the Registration Statement and Prospectus, and signed copies of
any and all consents and certificates of any other person whose profession
gives authority to statements made by them and who are named in the
Registration Statement or Prospectus as having prepared, certified or
reviewed any parts thereof.
The Company will deliver to or upon the order of the Underwriters, 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
Underwriters may reasonably request. The Company will deliver to the
Underwriters 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 the Underwriters may from time to time reasonably request.
The Company, not later than (i) 5:00 p.m., New York City time, on the date
of determination of the public offering price, if such determination
occurred at or prior to 12:00 noon, New York City time, on such date or
(ii) 6:00 p.m., New York City time, on the business day following the date
of determination of the public offering price, if such determination
occurred after 12:00 noon, New York City time, on such date, will deliver
to the Underwriters, without charge, as many copies of the Prospectus and
any amendment or supplement thereto as the Underwriters may reasonably
request for purposes of confirming orders that are expected to settle on
the First Closing Date. The Prospectus and each Prelimarily Prospectus and
any amendments or supplements thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation
S-T.
(f) The Company will make generally available to its security holders and
to the registered holders of its Redeemable Warrants and deliver to the
Representatives as soon as it is practicable to do so but in no event later
than ninety (90) days after the end of twelve (12) months after its current
fiscal quarter, an earnings statement (which need not be audited) covering
a period of at least twelve (12) consecutive months beginning after the
Effective Date, which shall satisfy the requirements of Section 11(a) of
the Act.
(g) The Company will apply the net proceeds from the sale of the Units for
the purposes set forth under "Use of Proceeds" in the Prospectus, and will
file such reports with the Commission with respect to the sale of the Units
and the application of the proceeds therefrom as may be required pursuant
to Rule 463 under the Act.
(h) The Company on the First Closing Date will sell to the Underwriter the
Underwriters' Warrants according to the terms specified in Section 4(c)
hereof. The Company has reserved and shall continue to reserve a sufficient
number of shares of Common Stock for issuance upon exercise of the
Underwriters' Warrants and the Underwriters' Redeemable Warrants.
(i) For the five (5) year period following the First Closing Date, the
Company agrees that the Representatives shall have the right to designate
for nomination, and the Company shall use its best efforts to cause the
election of, one member of the Company's Board of Directors (the "Board"),
who shall be reasonably acceptable to the Company; alternatively, the
Representatives may designate an observer, who shall be entitled to attend
all meetings of the Board, which observer would be entitled to the same
cash compensation and reimbursement of expenses as the Company affords its
directors who are not also officers or employees of the Company (and would,
in any event, be reimbursed for all reasonable costs incurred in attending
Board meetings, including but not limited to, food, lodging and
transportation) and to receive all copies of all notices and other
documents distributed to the members of the Board (including, but not
limited to, any unanimous consents prepared and advance notices of all
proposed Board actions or consents), as if such observer were a member of
the Board. To the extent permitted by law, the Company agrees to indemnify
and hold the designee (as a director or advisor) and the Representatives
harmless against any and all claims, actions, awards and judgments arising
out of such designee's service. The Company shall immediately after the
First Closing Date use its reasonable best efforts to obtain directors' and
officers' liability insurance in amounts reasonable and customary for
similarly situated companies, at a premium that the Company can reasonably
afford. In the event the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, it will, if
possible, include the Representatives and their designee (as a director) as
insureds under such policy. The rights and benefits of such indemnification
and the benefits of such insurance shall, to the extent possible, extend to
the Representatives insofar as they may be, or be alleged to be,
responsible for such advisor. The Company will deliver, on or before the
date hereof, the agreements of each of its officers, directors and holders
of 5% or more of its Common Stock to vote, during the five (5) year period
commencing on the First Closing Date, for the election of the
Representatives' designee for director, if any.
(j) The Company will maintain insurance in full force and effect of the
types and in the amounts adequate for its business and in line with
insurance maintained by similar companies and businesses, including but not
limited to, personal injury and product liability insurance and insurance
covering all personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks
customarily insured against.
(k) During the course of the distribution of the Offered Securities, the
Company will not 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 prices of the Units, Common Stock
and/or Redeemable Warrants. During the so-called "quiet period" in which
delivery of a prospectus is required, if applicable, the Company will not
issue press releases or engage in any other publicity regarding the
Company, its business or any terms of the offering contemplated hereby,
without the prior written consent of the Representatives. During such
period, copies of all documents which the Company or its public relations
advisors intend to distribute will be provided to the Representatives for
review prior to such distribution.
(l) 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 reasonable opinion of counsel to the Underwriters, may be reasonably
necessary or advisable in connection with the distribution of the Offered
Securities, and will use its best efforts to cause the same to become
effective as promptly as possible.
(m) The Company will reserve and keep available the maximum number
of its authorized but unissued securities which are issuable upon exercise
of the Unit Purchase Option outstanding from time to time.
(n) On the Closing Dates, all transfer or other taxes (other than income
taxes) which are required to be paid in connection with the sale and
transfer of the Registered Securities will have been fully paid by the
Company and all laws imposing such taxes will have been fully complied
with.
-1- (o) Subsequent to the dates as of which information is given in the
Registration Statement and Prospectus and prior to the Closing Dates,
except as disclosed in or contemplated by the Registration Statement and
Prospectus, (i) the Company will not have incurred any liabilities or
obligations, direct or contingent, or entered into any material
transactions other than in the ordinary course of business; (ii) there
shall not have been any change in the capital stock, funded debt (other
than regular repayments of principal and interest on existing indebtedness)
or other securities of the Company, any adverse change in the condition
(financial or otherwise), business, operations, income, net worth or
properties, including any loss or damage to the properties of the Company
(whether or not such loss is insured against), which could adversely affect
the condition (financial or otherwise), business, operations, income, net
worth or properties of the Company; and (iii) the Company shall not have
paid or declared any dividend or other distribution on its Common Stock or
its other securities or redeemed or repurchased any of its Common Stock or
other securities. The Company shall furnish to the Underwriter as early as
practicable prior to each of the date hereof, the First 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 sixty (60) days prior to the date of the Registration
Statement) which have been reviewed by the Company's independent public
accountants, as stated in their letters to be furnished pursuant to Section
8(g) hereof
(p) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall be Co-Chairman of the Board and Chief Executive
Officer of the Company on the Closing Dates, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall be
Co-Chairman of the Board and Executive Vice President of the Company on the
Closing Dates. The Company will obtain key person life insurance on the
lives of Messrs. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ in an amount of not less than One
Million Dollars ($1,000,000) for each of them and will use its best efforts
to maintain such insurance during the five (5) year period commencing with
the First Closing Date unless his employment with the Company is earlier
terminated. In such event, the Company will obtain a comparable policy on
the life of his successor for the balance of the five (5) year period. For
a period of twelve(12) months from the First Closing Date, the compensation
of the executive officers of the Company shall not be increased from the
compensation levels disclosed in the Prospectus.
-1- (q) So long as any Redeemable Warrants are outstanding, the Company
shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such
post-effective amendments and cause a copy of each Prospectus, as then
amended, to be delivered to each holder of record of a Redeemable Warrant
and to furnish to each Underwriter and dealer as many copies of each such
Prospectus as such Underwriter or dealer may reasonably request. The
Company shall not call for redemption any of the Redeemable Warrants unless
a registration statement covering the securities underlying the Redeemable
Warrants has been declared effective by the Commission and remains current
at least until the date fixed for redemption. In addition, for so long as
any Redeemable Warrant is outstanding, the Company will promptly notify the
Representative of any material change in the business, financial condition
or prospects of the Company.
(r) Upon the exercise of any Redeemable Warrants after one (1) year from
the Effective Date, the Company will pay the Representatives, each
individually and not as representatives of the Underwriters, a fee of 5% of
the aggregate exercise price of the Redeemable Warrants, of which a portion
may be reallowed to the dealer who solicited the exercise (which may also
be a Representative) if (i) the market price of the Company's Common Stock
is greater than or equal to the exercise price of the Redeemable Warrants
on the date of exercise; (ii) the exercise of the Redeemable Warrants was
solicited by a member of the NASD, (iii) the holder of the Redeemable
Warrants so exercised designates in writing that the exercise of the
Redeemable Warrant was solicited by a member of the NASD and designates in
writing the Representative or other broker-dealer to receive compensation
for such exercise; (iv) the Redeemable Warrants are not held in a
discretionary account (except where prior specific approval for exercise is
received from the customer exercising the Redeemable Warrants); (v) the
disclosure of compensation arrangements has been made in documents provided
to customers, both as part of the original offering and at the time of
exercise, and (vi) the solicitation of exercise of the Redeemable Warrants
was not in violation of Regulation M promulgated under the Exchange Act.
The Company agrees not to solicit the exercise of any Redeemable Warrants
other than through the Representatives and will not authorize any other
dealer to engage in such solicitation without the prior written consent of
the Representatives.
(s) For a period of five (5) years from the Effective Date the Company, at
its expense, shall cause its regularly engaged independent certified public
accountants to review (but not audit) the Company's financial statements
for each of the first three (3) fiscal quarters prior to the announcement
of quarterly financial information, the filing of the Company's 10-Q
quarterly report and the mailing of quarterly financial information
to shareholders.
(t) The Company maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary in
order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(u) The Company agrees that for so long as the Common Stock is registered
under the Exchange Act, the Company will hold an annual meeting of
shareholders for the election of directors within 180 days after the end of
each of the Company's fiscal years and, within 150 days after the end of
each of the Company's fiscal years, will provide the Company's shareholders
with the audited financial statements of the Company as of the end of the
fiscal year just completed prior thereto. Such financial statements shall
be those required by applicable rules under the Exchange Act and shall be
included in an annual report pursuant to the requirements thereof.
(v) 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 Underwriters' Securities, the
Company will not take any action or actions which may prevent or disqualify
the Company's use of Form S-1 or Form SB-2 (or other appropriate form) for
the registration under the Act of the Underwriters' Redeemable Warrants,
the Underwriters' Shares or the Underwriters' Warrant Shares.
(w) The Company shall cause each director and officer of the Company and
certain other shareholders, including the Selling Shareholders, to enter
into an agreement with the Underwriter pursuant to which he, she or it will
agree not to sell or otherwise transfer any securities of the Company for a
period of one (1) year following the Effective Date without the prior
consent of the Representatives.
(x) As promptly as practicable after the Closing Date, the Company will
prepare, at its own expense, hard cover "bound volumes" relating to the
offering, and will distribute at least four (4) of such volumes to the
individuals designated by the Representatives or counsel to the
Underwriters.
(y) The Company shall, for a period of six (6) years after date of this
Agreement, submit such reports to the Secretary of the Treasury and to
shareholders, as the Secretary may require, pursuant to Section 1202 of the
Internal Revenue Code, as amended, or regulations promulgated thereunder,
in order for the Company to qualify as a "small business" so that
stockholders may realize special tax treatment with respect to their
investment in the Company.
7. COVENANTS OF THE SELLING SHAREHOLDERS. Each Selling Shareholder further
covenants and agrees with each Underwriter:
(a) Such Selling Shareholder will not, without the prior written consent of
the Representatives (which consent may be withheld in their sole
discretion), directly or indirectly, sell, offer, contract or grant any
option to sell (including without limitation any short sale), pledge,
transfer, establish an open "put equivalent position" within the meaning of
Rule 16a-1(h) under the Exchange Act, or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock, or
securities exchangeable or exercisable for or convertible into shares of
Common Stock currently or hereafter owned either of record or beneficially
(as defined in Rule 13d-3 under the Exchange Act) by such Selling
Shareholder, or publicly announce suchSelling Shareholder's intention to do
any of the foregoing, for a period commencing on the date hereof and
continuing through the close of trading on the date ninety (90) days after
the date of the Prospectus.
-1-
(b) Such Selling Shareholder will deliver to the Underwriters prior to the
First Closing Date a properly completed and executed United States Treasury
Department Form W-8 (if the Selling Shareholder is a non-United States
person) or Form W-9 (if the Selling Shareholder is a United States Person).
The Representatives may, in their sole discretion, waive in writing the
performance by the Company or any Selling Shareholder of any one or more of
the foregoing covenants or extend the time for their performance.
-1-
8. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of
the Underwriters to purchase and pay for the Units which it has 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:
-1-
(a) The Registration Statement shall have become effective and you shall
have received notice thereof not later than 10:00 A.M., Dallas time, on the
date on which the amendment to the registration statement originally filed
with respect to the Offered Securities or to the Registration Statement, as
the case may be, containing information regarding the initial public
offering price of the Units has been filed with the Commission, or such
later time and date as shall have been agreed to by the Representatives; if
required, the Prospectus and any amendment or supplement thereto shall have
been filed with the Commission in the manner and within the time period
required by Rule 434 and 424(b) under the Act; on or prior to the Closing
Dates no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that or a similar
purpose shall have been instituted or shall be pending or, to the best
knowledge of the Representatives and the Company, shall be contemplated by
the Commission; qualification under the securities laws of such states as
the Representatives may designate of the issue and sale of the Offered
Securities upon the terms and conditions herein set forth or contemplated
and containing no provision unacceptable to the Representatives shall have
been secured; and no stop order shall be in effect denying or suspending
effectiveness of such qualifications, nor shall any stop order proceedings
with respect thereto be instituted or pending or, to the best knowledge of
the Company and the Representatives, threatened under such laws. If the
Company has elected to rely upon Rule 430A of the Rules and Regulations,
the price of the Units 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 First Closing Date the Company shall have provided evidence
satisfactory to the Representatives 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; any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters;
-1-
(b) No amendments to the Registration Statement, any Preliminary Prospectus
or the Prospectus to which the Representatives or counsel for the
Underwriters shall have objected, after having received reasonable notice
of a proposal to file the same, shall have been filed.
-1- (c) The Representatives shall not have discovered and disclosed to the
Company prior to the respective Closing Dates that the Registration
Statement or the Prospectus, or any amendment or supplement thereto,
contains an untrue statement of fact which, in the reasonable opinion of
counsel for the Underwriters, is material, or omits to state a fact which,
in the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(d) At the First Closing Date, the Representatives shall have received the
opinion, together with copies of such opinion for each of the other
Underwriters, dated as of the First Closing Date, of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ &
▇▇▇▇▇ LLP, counsel for the Company, in form and substance satisfactory to
counsel for the Underwriters, to the effect that:
-1-
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Georgia, with full
corporate power and authority to own its properties and conduct its business as
described in the Registration Statement and 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 the failure to so
qualify will not have a material adverse affect on the Company's business,
properties or financial condition;
-1- (ii) to the best knowledge of such counsel, (a) the Company has
obtained all licenses, permits and other governmental authorizations
necessary to the conduct of its business as described in the Prospectus,
(b) such licenses, permits and other governmental authorizations obtained
are in full force and effect, and (c) the Company is in all material
respects complying therewith;
-1- (iii) the authorized capitalization of the Company as of
__________________, 1998 is as set forth in the Prospectus under
"Capitalization"; all 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 and conform to the description thereof
contained in the Prospectus; to the best of such counsel's knowledge, the
outstanding shares of Common Stock of the Company have not been issued in
violation of the preemptive rights of any shareholder and the shareholders
of the Company do not have any statutory preemptive rights to subscribe for
or to purchase, nor are there any restrictions upon the voting or transfer
of any of the Stock; the Registered Securities, the Public Warrant
Agreement and the Underwriters' Warrant Agreement conform as to legal
matters in all material respects to the respective descriptions thereof
contained in the Prospectus; the Shares have been, and the Public Warrant
Shares and Underwriters' Warrant Shares upon issuance in accordance with
the terms of the Public Warrants and the Public Warrant Agreement and the
Underwriters' Warrants and the Underwriters' Warrant Agreement,
respectively, have been duly authorized and, when issued and delivered,
will be duly and validly issued, fully paid, non-assessable, free of
preemptive rights and no personal liability will attach to the ownership
thereof; a sufficient number of shares of Common Stock has been reserved
for issuance upon exercise of the Redeemable Warrants, Underwriters'
Warrants and Underwriters' Redeemable Warrants, and to the best of such
counsel's knowledge, neither the filing of the Registration Statement nor
the offering or sale of the Registered Securities as contemplated by this
Agreement gives rise to, any registration rights or other rights, other
than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock;
-1-
(iv) this Agreement, the Public Warrant Agreement and the Underwriters'
Warrant Agreement have been duly and validly authorized, executed and
delivered by the Company and, assuming due execution by each other party
hereto or thereto, each constitutes a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its
respective 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;
-1-
(v) the certificates evidencing the shares of Common Stock are in valid and
proper legal form; the Public Warrants and the Underwriters' Warrants will
be exercisable for shares of Common Stock in accordance with their terms
and at the prices therein provided for;
-1-
(vi) delivery of certificates for the Shares and Redeemable Warrants
underlying the Units, upon payment therefor by the Underwriters as provided
in this Agreement, will transfer valid title to such securities to the
Underwriters; and, upon payment for such securities, the Underwriters will
acquire such securities free and clear of any liens;
-1-
(vii) such counsel knows of no pending or threatened legal or governmental
proceedings to which the Company is a party which could materially
adversely affect the business, property, financial condition or operations
of the Company; or which question the validity of the Registered
Securities, this Agreement, the Public Warrant Agreement or the
Underwriters' Warrant Agreement, or of any action taken or to be taken by
the Company pursuant to such agreements; and no such proceedings are known
to such counsel to be contemplated against the Company; to such counsel's
knowledge there are no governmental proceedings or regulations required to
be described or referred to in the Registration Statement which are not so
described or referred to;
-1-
(viii) to such counsel's knowledge the Company is not in violation of or
default under, nor will the execution and delivery of this Agreement, the
Public Warrant Agreement or the Underwriters' Warrant Agreement, and the
incurrence of the obligations herein and therein set forth and the
consummation of the transactions herein or therein contemplated, result in
a breach or violation of, or constitute a default under the Amended and
Restated Articles of Incorporation or Bylaws, in the performance or
observance of any material obligations, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of indebtedness or
in any material contract, indenture, mortgage, loan agreement, lease, joint
venture or other agreement or instrument to which the Company is a party or
by which it or any of its properties may be bound or in violation of any
material order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality or court, domestic or foreign, the
effect of which default, breach or violation would be material to the
Company;
-1-
(ix) the Registration Statement has become effective under the Act, and to
the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in effect, and no
proceedings for that purpose have been instituted or are pending before, or
threatened by, the Commission; the Registration Statement and the
Prospectus (except for the financial statements and other financial 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;
-1-
(x) such counsel has participated in the preparation of the Registration
Statement and the Prospectus and, although such counsel did not
independently verify and is not passing upon and does not assume any
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus,
based upon such participation (relying as to materiality to a large extent
upon the certificates of officers and other representatives of the
Company), nothing has come to the attention of such counsel to cause 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 required to be stated therein 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
(1) financial statements, notes thereto and other financial information and
schedules contained therein or (2) matters relating to government
regulatory matters relating to the development and potential marketing and
sale of the Company's products as to all of which such counsel need express
no opinion);
-1-
(xi) all descriptions in the Registration Statement and the Prospectus, and
any amendment or supplement thereto, of contracts and other documents are
accurate and fairly summarize in all material respects 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;
-1-
(xii) 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 Registered
Securities by the Company, in connection with the execution, delivery and
performance of this Agreement by the Company or in connection with the
taking of any action contemplated herein, other than registrations or
qualifications of the Registered Securities under applicable state or
foreign securities or blue sky laws and registration under the Act;
(xiii) such counsel is unaware of another entity or individual having any
right or claim in any of the Intellectual Property of the Company by virtue
of any contract, license or other agreement and (1) such counsel has no
reason to believe, except as discussed in the Prospectus, that the Company
lacks or will be unable to obtain rights to use all Intellectual Property
necessary to conduct the business now or proposed to be conducted by the
Company and (2) such counsel is unaware of any material facts which form a
basis for a finding of unenforceability or invalidity of any of the
Intellectual Property owned, licensed or used by the Company;
(xiv) the Company has not received notice of any claim of infringement or
violation of or conflict with the rights or claims of others with respect
to any Intellectual Property owned, licensed or used by the Company and (1)
such counsel is not aware of any agreements or proprietary rights of others
which are literally infringed by the Company's products, processes or
operations and (2) the Company conducts its business without willful
infringement of the Intellectual Property of others;
-1-
(xv) there are no material legal or governmental proceedings pending, or,
to the best knowledge of such counsel, threatened or contemplated by
governmental authorities related to the Intellectual Property of the
Company; and
-1-
(xvi) the statements in the Registration Statement under the captions
"Business," "Management," "Shares Eligible for Future Sale," "Certain
Transactions," and "Description of Securities" have been reviewed by such
counsel and insofar as they refer to descriptions of agreements, statements
of law, descriptions of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects;
-1-
(xvii) based solely upon advice of representatives of Nasdaq, the Units,
the Common Stock and the Warrants have been duly authorized for quotation
on the Nasdaq Small Cap Market; and
-1-
(xviii) to such counsel's knowledge, there are no business relationships or
related-party transactions of the nature described in Item 404 of
Regulation S-B involving the Company and any person described in such Item
that are required to be disclosed in the Prospectus and which have not been
so disclosed.
Such counsel need express no opinion with respect to the financial
statements and other financial data included in or omitted from the
Registration Statement or Prospectus nor to matters pertaining to
government regulatory matters relating to the development and potential
marketing and sale of the Company's products. Such opinion shall also cover
such matters incident to the transactions contemplated hereby as the
Representatives or counsel for the Underwriters shall reasonably request.
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 may
rely as to all matters of law other than the law of the United States or of
the State of Georgia 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.
-1-
(e) On the Option Closing Date the Representatives shall have received the
opinion, together with copies of such opinion for each of the other
Underwriters, dated as of the Option Closing Date, of _______________,
counsel for the Selling Shareholders in form and substance satisfactory to
the counsel for the Underwriters.
-1-
(f) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus and other related
matters shall be satisfactory to or approved by counsel to the
Underwriters.
-1- (g) The Representatives shall have received two letters from ▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, independent public accounts for the Company, one dated and
delivered on the Effective Date and one dated and delivered on the First
Closing Date, in form and substance satisfactory to the Representatives,
and including estimates of the Company's revenues and results of operations
for the period ending at the end of the month immediately preceding the
Effective Date and results of the comparable period during the prior fiscal
year.
-1-
(h) The Representatives shall have received a certificate, dated
and delivered as of the date of the First Closing Date, of the Chief
Executive Officer and Secretary of the Company stating that:
-1-
(i) The Company and such officers have complied with all the agreements and
satisfied all the conditions on their respective part to be performed or
satisfied hereunder at or prior to such date, including but not limited to
the agreements and covenants of the Company set forth in Section 6 hereof.
-1-
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or are pending, contemplated or threatened under the Act.
-1-
(iii) Such officers have carefully examined the Registration Statement and
the Prospectus and any supplement or amendment thereto, each of which
contains all statements required to be stated therein or necessary to make
the statements therein not misleading and does not contain any untrue
statement of a material fact, and since the Effective Date there has
occurred no event required to be set forth in the amended or supplemented
prospectus which has not been set forth.
-1-
(iv) As of the date of such certificate, the representations and warranties
contained in Section 2 hereof are true and correct as if such
representations and warranties were made in their entirety on the date of
such certificate, and the Company has complied with all its agreements
herein contained as of the date hereof.
-1-
(v) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, and except as contemplated in
the Prospectus, the Company has not incurred any liabilities or
obligations, direct or contingent, or entered into any material
transactions and there has not been any change in the Common Stock or
funded debt of the Company or any adverse change in the condition
(financial or otherwise), business, operations, income, net worth,
properties or prospects of the Company.
-1-
(vi) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, the Company shall have not
sustained any material loss of or damage to its properties, whether or not
insured, and since such respective dates, no dividends or distributions
whatever shall have been declared or paid, or both, on or with respect to
any security (except interest in respect of loans) of the Company.
-1-
(vii) Neither the Company nor any of its officers or affiliates shall have
taken, and the Company, its officers and affiliates will not take, directly
or indirectly, any action designed to, or which might reasonably be
expected to, cause or result in the stabilization or manipulation of the
price of the Company's securities to facilitate the sale or resale of the
Offered Securities.
-1-
(viii) No action, suit or proceeding, at law or in equity, shall be pending
or, to the knowledge of such officers, threatened against the Company, or
affecting any of its properties, before or by any commission, board or
other administrative agency, except as otherwise set forth in the
Registration Statement.
-1-
(i) All of the Units shall have been tendered for delivery in accordance
with the terms and provisions of this Agreement.
-1-
(j) On the date hereof, the Company and the Selling Shareholders shall have
furnished for review by the Representatives copies of the Powers of
Attorney and Custody Agreements executed by each of the Selling
Shareholders and such further information, certificates and documents as
the Representatives may reasonably request.
-1-
(k) On the date hereof, the Company and the Selling Shareholders
shall have furnished for review by the Representatives copies of the Powers
of Attorney and Custody Agreements executed by each of the Selling
Shareholders and such further information, certificates and documents as the
Representatives may reasonably
request.
-1-
(l) The Underwriter shall have received each of the lock-up agreements
referred to in Section 6(bb) hereof.
-1-
(m) At each of the Closing Dates, (i) the representations and warranties of
the Company (and the Selling Shareholders at the Option Closing Date)
contained in this Agreement shall be true and correct with the same effect
as if made on and as of the Closing Dates and the Company shall have
performed all its obligations due to be performed prior thereto; (ii) the
Registration Statement and the Prospectus and any amendment or supplement
thereto shall contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations and
conform in all material respects to the requirements thereof, and neither
the Registration Statement nor the Prospectus nor any amendment or
supplement thereto shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading; (iii) there shall have been,
since the date as of which information is given, no material adverse change
in the condition, business, operations, properties, business prospects,
securities, long-term or short-term debt or general affairs of the Company
from that set forth in the Registration Statement or the Prospectus, except
changes which the Registration Statement and the Prospectus indicate will
occur after the Effective Date and prior to such Closing Date, and the
Company shall not have incurred any material liabilities or obligations,
direct or contingent, or entered into any material transaction, contract or
agreement not in the ordinary course of business other than as referred to
in the Registration Statement and the Prospectus; and (iv) except as set
forth in the Prospectus, no action, suit or proceeding, at law or in
equity, shall be pending or threatened against the Company which might be
required to be set forth 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 might
adversely affect the condition, business, operations, properties, prospects
or general affairs of the Company.
-1-
(n) Upon exercise of the Over-Allotment Option provided for in Section 4(b)
hereof, the obligations of the Underwriter to purchase and pay for the
Option Shares and/or the Redeemable Warrants will be subject to the
following additional conditions:
-1-
(i) The Registration Statement shall remain effective at the Option Closing
Date, and 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 the best knowledge of the Underwriter or the
Company, shall be contemplated by the Commission, and any request on the
part of the Commission for additional information shall have been complied
with to the satisfaction of counsel for the Underwriters.
-1-
(ii) At the Option Closing Date there shall have been delivered to the
Representatives the signed opinion of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel
for the Company, in form and substance reasonably satisfactory to counsel
for the Underwriters, which opinion shall be substantially the same in
scope and substance as the opinions furnished to the Representatives by
such counsel at the First Closing Date pursuant to Section 8(d).
-1-
(iii) At the Option Closing Date there shall have been delivered to the
Representatives a certificate of the Chief Executive Officer and the
Secretary of the Company dated the Option Closing Date, in form and
substance satisfactory to counsel for the Underwriters, substantially the
same in scope and substance as the certificates furnished to the
Representatives at the First Closing Date pursuant to Section 8(h).
-1-
(iv) At the Option Closing Date there shall have been delivered to the
Representatives a letter, in form and substance satisfactory to the
Representatives, from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, dated the Option Closing Date and
addressed to the Representatives, confirming the information in its letter
referred to in Section 8(g) hereof and stating that nothing has come to
their attention during the period from the ending date of their review
referred to in said certificate or letter to a date not more than five (5)
business 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.
-1-
(v) At the Option Closing Date there shall have been delivered to the
Representatives a certificate executed by the Attorney-in-Fact of each
Selling Shareholder, dated as of the Option Closing Date, to the effect
that:
(A) the representations, warranties and covenants of
such Selling Shareholder set forth in Section 3 of this Agreement are
true and correct with the same force and effect as though expressly
made by such Selling Shareholder on and as of the Option Closing Date;
and
(B) such Selling Shareholder has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied under this Agreement at or prior to the Option
Closing Date.
-1-
(vi) All proceedings taken at or prior to the Option Closing Date in
connection with the sale and transfer of the Option Securities shall be
satisfactory in form and substance to the Representatives, and the
Representatives and counsel for the Underwriters, shall have been furnished
with all such documents, certificates, affidavits and opinions as the
Representatives and counsel for the Underwriters may reasonably 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 the Selling Shareholders or compliance by the Company or the
Selling Shareholders with any of the covenants or conditions contained
herein.
-1-
(o) The Company shall have executed and delivered the Public
Warrant Agreement and the Underwriters' Warrant Agreement, and
shall have issued the Underwriters' Warrants.
-1-
(p) The Company and the Selling Shareholders shall have furnished to the
Representatives such other certificates, documents, and opinions as the
Representatives may have reasonably requested (including certificates from
officers of the Company and from the Selling Shareholders) as to the
accuracy, at the Closing Dates, of the representations and warranties of
the Company and the Selling Shareholders herein, as to the performance by
the Company and the Selling Shareholders of their respective obligations
hereunder and as to other conditions concurrent and precedent to the
obligations of the Underwriters hereunder.
The opinions and certificates mentioned above or elsewhere in this
Agreement will be deemed to be in compliance with the provisions hereof
only if they are reasonably satisfactory to the Representatives and to
counsel for the Underwriters.
Any certificate signed by an officer of the Company delivered to the
Representatives or to counsel for the Underwriters, will be deemed a
representation and warranty by the Company to the Representatives as to the
statements made therein.
-1-
(q) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing
Dates, for members of the NASD to execute transactions (as principal or
agent) in the Registered Securities and no proceedings for the taking of
such action shall have been instituted or shall be pending, or, to the
knowledge of the Underwriters or the Company, shall be contemplated by the
Commission or the NASD. The Company represents that at the date hereof it
has no knowledge that any such action is in fact contemplated by the
Commission or the NASD. The Company shall have advised the Representatives
of any NASD affiliation of any of its officers, directors, stockholders or
their affiliates.
-1-
(r) If any of the conditions herein provided for in this Section 8 shall
not have been fulfilled as of the date indicated, this Agreement and all
obligations of the Underwriters under this Agreement may be canceled at, or
at any time prior to, each Closing Date by the Representatives. Any such
cancellation shall be without liability of the Underwriters to the Company.
-1-
9. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligation of the
Company to sell and deliver the Units, the Shares, the Redeemable Warrants
and the Underwriters' Warrants, is subject to the condition that at the
Closing Dates, no stop orders 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
condition to the obligations of the Company provided for in this Section 9
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 Units on exercise of the
Over-Allotment Option shall be affected.
-1-
10. INDEMNIFICATION.
-1-
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the
Act against any losses, claims, damages or liabilities, joint or several
(which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all
attorneys' fees), to which such Underwriter or such controlling person may
become subject, under the Act or otherwise, and will reimburse, as
incurred, such Underwriter and such controlling persons for any legal or
other expenses reasonably incurred in connection with investigating,
defending against or appearing as a third party witness in connection with
any losses, claims, damages or liabilities, 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 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 Units 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, any Preliminary Prospectus, Prospectus, or any
amendment or 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 by or on behalf of the Underwriters specifically
for use in the preparation of the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or any
such Blue Sky Application. This indemnity will be in addition to any
liability which the Company may otherwise have.
-1-
(b) Each Underwriter, severally, but not jointly, will 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, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all
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, anyPreliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged 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 such
untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto (i) in
reliance upon and in conformity with written information furnished to the
Company any Underwriter specifically for use in the preparation thereof and
(ii) relates to the transactions effected by the Underwriters in connection
with the offer and sale of the Public Securities contemplated hereby. This
indemnity agreement will be in addition to any liability which the
Underwriters may otherwise have.
-1-
(c) Promptly after receipt by an indemnified party under this Section 10 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 10, 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 10. 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 10 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 ifthe indemnifying party has assumed the defense of the action with
counsel reasonably satisfactory to the indemnified party; provided that if
the indemnified party is an Underwriter or a person who controls an
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 the Underwriter or such
controlling person and the indemnifying party and in the judgment of the
applicable Underwriter, it is advisable for the applicable 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 the applicable 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 for the applicable
Underwriter and controlling persons, which firm shall be designated in
writing by the applicable Underwriter). No settlement of any action against
an indemnified party shall be made without the consent of the indemnifying
party, which shall not be unreasonably withheld in light of all factors of
importance to such indemnifying party.
-1-
11. CONTRIBUTION. In order to provide for just and equitable contribution
under the Act in any case in which (i) an Underwriter makes claim for
indemnification pursuant to Section 10 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 10 provide for indemnification in such case, or (ii) contribution
under the Act may be required on the part of any Underwriter, then the
Company and each person who controls the Company, in the aggregate, and any
such Underwriter 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 all
such Underwriters are only responsible for that portion of such losses,
claims, damages or liabilities represented by the percentage that the
underwriting discount per Unit appearing on the cover page of the
Prospectus bears to the public offering price appearing thereon, and the
Company shall be responsible for the remaining portion, provided, however,
that (a) if such allocation is not permitted by applicable law then the
relative fault of the Company and the applicable Underwriter 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 the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Underwriters agree (a) that it
would not be just and equitable if the respective obligations of the
Company and the Underwriters to contribute pursuant to this Section 11 were
to be determined by pro rata or per capita allocation of the aggregate
damages 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 11 and (b) that the contribution of each contributing Underwriter
shall not be in excess of its proportionate share (based on the ratio of
the number of Units purchased by such Underwriter to the number of Units
purchased by all contributing Underwriters) of the portion of such losses,
claims, damages or liabilities for which the Underwriters 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
Section 11, the word "Company" includes any officer, director, or person
who controls the Company within the meaning of Section 15 of the Act. If
the full amount of the contribution specified in this Section 11 is not
permitted by law, then the applicable Underwriter and each person who
controls the applicable Underwriter shall be entitled to contribution from
the Company, its officers, directors and controlling persons 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 the Underwriters. 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 in light of all
factors of importance to such party.
-1- 12. COSTS AND EXPENSES.
-1-
(a) Whether or not this Agreement becomes effective or the sale of the
Units to the Underwriters 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, printing, filing and distribution under the Act of the
Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), Preliminary Prospectus and the
Prospectus, as amended or supplemented; the fee of the NASD in connection
with the filing required by the NASD relating to the offering of the Units
contemplated hereby; all expenses, including reasonable fees and
disbursements of counsel to the Underwriters, in connection with the
qualification of the Units under the state securities or blue sky laws
which the Representatives shall designate; the out-of-pocket travel
expenses of the Underwriters and counsel to the Underwriters or other
professionals designated by the Underwriters to visit the Company's
facilities for purposes of discharging due diligence responsibilities; the
cost of printing and furnishing to the Underwriters copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus, this
Agreement, the Public Warrant Agreement, the Underwriters' Warrant
Agreement, the Agreement Among Underwriters, Selling Agreement,
Underwriters' Questionnaire, and the Blue Sky Memorandum; any fees relating
to the listing of the Units, Common Stock and Redeemable Warrants on the
Nasdaq Small Cap Market or any other securities exchange; the cost of
printing the certificates representing the securities comprising the Units;
the fees of the transfer agent and warrant agent the cost of publication of
at least three (3) "tombstones" of the offering (at least one of which
shall be in national business newspaper and one of which shall be in a
major New York newspaper); and the cost of preparing at least four (4) hard
cover "bound volumes" relating to the offering, in accordance with the
Representatives' request. The Company shall pay any and all taxes
(including any transfer, franchise, capital stock or other tax imposed by
any jurisdiction) on sales to the Underwriters 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 6(a) of this Agreement except as otherwise set forth in said
Section 6(a).
-1-
(b) In addition to the foregoing expenses the Company shall at the First
Closing Date pay to the Representatives, each individually and not as
representatives of the Underwriters, a non-accountable expense allowance
equal to two percent (2%) of the gross proceeds derived from the sale of
Units offered hereby, of which $75,000 has been paid. In the event the
Over-Allotment Option is exercised, the Company shall pay to the
Representatives at the Option Closing Date an additional amount equal to
two percent (2%) of the gross proceeds received upon exercise of the
Over-Allotment Option. In the event the transactions contemplated hereby
are not consummated by reason of any action by the Underwriters (except if
such prevention is based upon a breach by the Company of any covenant,
representation or warranty contained herein or because any other condition
to the Underwriters' obligations hereunder required to be fulfilled by the
Company is not fulfilled) the Company shall be liable for the accountable
out-of-pocket expenses of the Representative, including "blue sky" legal
fees up to a maximum of $25,000. In the event the transactions contemplated
hereby are not consummated by reason of any action of the Company or
because of a breach by the Company of any covenant, representation or
warranty herein, the Company shall be liable for the accountable
out-of-pocket expenses of the Representative, including legal fees, up to a
maximum of $25,000.
-1-
(c) If at any time prior to the First Closing Date, (i) the Company will
not or cannot expeditiously proceed with the sale of the Registered
Securities, including without limitation as a result of the Company taking
or not taking actions, (ii) any of the representations, warranties or
covenants of the Company contained in this Agreement or any agreement
contemplated hereby are not true and correct or cannot be complied with,
(iii) in the judgment of the Representatives, there occurs a material
adverse change in the Company's financial condition, business, prospects or
obligations, and the Underwriters shall not commence or continue the
underwriting, or (v) in the judgment of the Representatives, reasonably
exercised, market conditions are unsuitable for the offering contemplated
hereby and the Underwriters shall not commence or continue the
underwriting, then the Company shall reimburse the Underwriter in full for
its actual out-of-pocket expenses (including, without limitation, its legal
fees and disbursements), up to $25,000 (in each case inclusive of any
portion of the non-accountable expense allowance paid pursuant to Section
12(b).
-1-
(d) The Representatives shall determine in which states or jurisdictions
the Offered Securities shall be registered or qualified for sale, provided
that such states or jurisdictions do not require the Company to qualify as
a foreign business corporation or to file a general consent to service of
process. Immediately prior to the Effective Date, counsel for the
Underwriters shall advise counsel for the Company in writing of all states
in which the offering has been registered or qualified for sale or has been
canceled, withdrawn or denied and the number of Offered Securities
registered or qualified for sale in each such state.
-1-
(e) No person is entitled either directly or indirectly to compensation
from the Company, from the Underwriters 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 the Representatives and the
other Underwriters, against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include,
but not be limited to, all costs of defense and investigation and all
attorneys' fees), to which the Underwriters or person 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 with the proposed
offering by reason of such person's or entity's influence or prior contact
with the indemnifying party.
-1-
13. SUBSTITUTION OF UNDERWRITERS. If any Underwriters shall for any reason
not permitted hereunder cancel their obligations to purchase the First
Units hereunder, or shall fail to take up and pay for the number of First
Units set forth opposite their respective names in Schedule A hereto upon
tender of such First Units in accordance with the terms hereof, then:
-1-
(a) If the aggregate number of First Units which such Underwriter or
Underwriters agreed but failed to purchase does not exceed ten percent
(10%) of the total number of First Units, the other Underwriters shall be
obligated severally, in proportion to their respective commitments
hereunder, to purchase the First Units which such defaulting Underwriter or
Underwriters agreed but failed to purchase.
-1-
(b) If any Underwriter or Underwriters so default and the agreed number of
First Units with respect to which such default or defaults occurs is more
than ten percent (10%) of the total number of First Units, the remaining
Underwriters shall have the right to take up and pay for (in such
proportion as may be agreed upon among them) the First Units which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If
such remaining Underwriters do not, at the First Closing Date, take up and
pay for the First Units which the defaulting Underwriter or Underwriters
agreed but failed to purchase, the time for delivery of the First Units
shall be extended to the next business day to allow the several
Underwriters the privilege of substituting within twenty-four (24) hours
(including non-business hours) another underwriter or underwriters
satisfactory to the Company. If no such underwriter or underwriters shall
have been substituted as aforesaid, within such twenty-four (24) hour
period, the time of delivery of the First Units may, at the option of the
Company, be again extended to the next following business day, if
necessary, to allow the Company the privilege of finding within twenty-four
(24) hours (including non-business hours) another underwriter or
underwriters to purchase the First Units which the defaulting Underwriter
or Underwriters agreed but failed to purchase. If it shall be arranged for
the remaining Underwriters or substituted Underwriters to take up the First
Units of the defaulting Underwriter or Underwriters as provided in this
Section 13, (i) the Company or the Representatives shall have the right to
postpone the time of delivery for the period of not more than seven (7)
business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus
which may thereby be made necessary, and (ii) the respective numbers of
First Units to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken at the basis of the underwriting obligation for
all purposes of this Agreement.
If in the event of a default by one or more Underwriters and the remaining
Underwriters shall not take up and pay for all the First Units agreed to be
purchased by the defaulting Underwriters or substitute another underwriter
or underwriters as aforesaid, the Company shall not find or shall not elect
to seek another underwriter or underwriters for such First Units as
aforesaid, then this Agreement shall terminate.
If, following exercise of the Over-Allotment Option, any Underwriter or
Underwriters shall for any reason not permitted hereunder cancel their
obligations to purchase Option Units at the Option Closing Date, or shall
fail to take up and pay for the number of Option Units, which they become
obligated to purchase at the Option Closing Date upon tender of such Option
Units in accordance with the terms hereof, then the remaining Underwriters
or substituted Underwriters may take up and pay for the Option Units of the
defaulting Underwriters in the manner provided in Section 13(b) hereof. If
the remaining Underwriters or substituted Underwriters shall not take up
and pay for all such Option Units, the Underwriters shall be entitled to
purchase the number of Option Units for which there is no default or, at
their election, the option shall terminate, the exercise thereof shall be
of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 13. In the event of
termination, there shall be no liability on the part of any nondefaulting
Underwriter to the Company, provided that the provisions of this Section 13
shall to in any event affect the liability of any defaulting Underwriter to
the Company arising out of such default.
-1-
14. EFFECTIVE DATE. This Agreement shall become effective upon its
execution except that the Representatives may, at their option, delay its
effectiveness until 11:00 A.M., New York time on the first full business
day following the Effective Date, or at such earlier time after the
Effective Date of as the Representatives in their discretion shall first
commence the initial public offering by the Underwriters of any of the
Units. The time of the initial public offering shall mean the time of
release by the Representatives of the first newspaper advertisement with
respect to the Units, or the time when the Units are first generally
offered by the Representatives to dealers by letter or telegram, whichever
shall first occur. This Agreement may be terminated by the Representatives
at any time before it becomes effective as provided above, except that
Sections 10, 11, 12, 17, 18 and 19 shall remain in effect notwithstanding
such termination.
-1-
15. TERMINATION.
-1-
(a) This Agreement, except for Sections 10, 11, 12, 16, 17, 18 and 19, may
be terminated at any time prior to the First Closing Date, and the
Over-Allotment Option, if exercised, may be canceled at any time prior to
the Option Closing Date, by the Representatives if in their judgment it is
impracticable to offer for sale or to enforce contracts made by the
Underwriters for the resale of the Units 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, the
American Stock Exchange, the Nasdaq SmallCap Market or the Nasdaq National
Market having been suspended or limited; (iii) material governmental
restrictions having been imposed on trading in securities generally (not in
force and effect on the date hereof); (iv) a banking moratorium having been
declared by federal or New York state authorities; (v) an outbreak of
international hostilities or other national or international calamity or
crisis or change in economic or political conditions having occurred; (vi)
a pending or threatened legal or governmental proceeding or action relating
generally to the Company's business, or a notification having been received
by the Company of the threat of any such proceeding or action, which could
materially adversely affect the Company; (vii) except as contemplated by
the Prospectus, the Company is merged or consolidated into or acquired by
another company or group or there exists a binding legal commitment for the
foregoing or any other material change of ownership or control occurs;
(viii) the passage by the Congress of the United States or by any state
legislative body or federal or state agency or other authority of any act,
rule or regulation, 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 the Representative to have a material impact on the
business, financial condition or financial statements of the Company or the
market for the securities offered pursuant to the Prospectus; (ix) any
adverse change in the financial or securities markets beyond normal market
fluctuations having occurred since the date of this Agreement, or (x) any
material adverse change having occurred, since the respective dates of
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.
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(b) If the Representatives elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
15 or in Section 14 hereof, the Company shall be promptly notified by
the Representatives, by telephone or telegram, confirmed by letter, in
accordance with Section 17 hereof.
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16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers, directors, stockholders and the
Selling Shareholders and the undertakings 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 the Underwriters, the Company or any
of its officers or directors or any controlling person or any of the
Selling Shareholders and will survive delivery of and payment of the Units
and the termination of this Agreement.
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17. NOTICE. Any communications specifically required hereunder to be in
writing, if sent to the Underwriters, will be mailed, delivered and
confirmed to the Representatives at ____________________________, with a
copy sent to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇; or if sent to the Company, will be mailed,
delivered and confirmed to it at BioShield Technologies, Inc., ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy
sent to ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇; or if sent to the
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, as a Selling Shareholder, will be mailed, delivered and
confirmed to it c/o BioShield Technologies, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy sent to
_________________________, ________________________________; or if sent to
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as a Selling Shareholder, will be mailed, delivered and
confirmed to it c/o BioShield Technologies, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy sent to
_________________________, --------------------------------.
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18. PARTIES IN INTEREST. This Agreement is made solely for the benefit of
the Underwriters, the Representatives, each on an individual basis, the
Company, the Selling Shareholders, any person controlling the Company or
the Underwriters, directors of the Company, nominees for directors of the
Company (if any) named in the Prospectus, officers of the Company who have
signed the Registration Statement and each of their respective executors,
administrators, successors and assigns and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "Successors
and Assigns" shall not include any purchaser, as such purchaser, from the
Underwriters of the Units. All of the obligations of the Underwriters
hereunder are several and not joint.
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19. APPLICABLE LAW. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Texas
applicable to agreements made and to be entirely performed within
Texas.
G:\TEJASC~1\DEALS\SB2\BIOSHI~1\AMENDM~1\1T9_308!.WPD0871998
192:18662-5
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding agreement among the Company, the Selling Shareholders and the
Underwriters in accordance with its terms.
Very truly yours,
BIOSHIELD TECHNOLOGIES, INC.
By:
Name:
Title:
As to the Selling Shareholders Solely to Sections 3 and 7 Hereof
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
TEJAS SECURITIES GROUP, INC.
By:
Name:
Title:
REDSTONE SECURITIES, INC.
By:
Name:
Title:
SEABOARD SECURITIES, INC.
By:
Name:
Title:
SCHEDULE A
UNDERWRITERS
Number of
Underwriters First Units
to be Purchased
Tejas Securities Group, Inc.
Redstone Securities, Inc.
Seaboard Securities, Inc.
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750,000
