1,100,000 SHARES OF COMMON STOCK
AND
1,100,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
BALTIA AIR LINES, INC
UNDERWRITING AGREEMENT
New York, New York
June __, 0000
Xxxxxxxxxx & Weeks Inc.
(As Representative of the Several Underwriters
Named in Schedule I as Attached Hereto)
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs/Madams:
BALTIA AIR LINES, INC., a New York corporation (the "Company"),
proposes to issue and sell to Hornblower & Weeks Inc. ("you" or the
"Representative") and the other underwriters named in Schedule I hereto (you
and such other underwriters, each being herein individually referred to as
an "Underwriter" and collectively referred to as the "Underwriters", which
term shall also include any waiver), pursuant to this Underwriting
Agreement (the "Agreement"), an aggregate of 1,100,000 shares of common
stock par value $.01 per share(the "Shares" or "Common Stock"), of the
Company, and 1,100,000 redeemable common stock purchase warrants (the
"Warrants")(collectively the "Securities"). Each Warrant shall entitle the
holder thereof to purchase one share (a "Warrant Share") of Common Stock on
the terms and subject to the conditions of that certain Warrant Agreement,
of even date herewith (the "Warrant Agreement"), among the Company and you.
The Warrant Agreement is incorporated herein by reference hereto. In
addition, solely to cover over-allotments, if any, the Company proposes to
grant to the Underwriters the option (the "Over-Allotment Option") referred
to in Paragraph 2(b) hereof to purchase all or any part of an aggregate of
150,000 additional Securities on the terms and subject to the conditions
therein provided
For the purposes of this Agreement, the "Company" shall mean
BALTIA AIR LINES, INC., a New York corporation, together with each
subsidiary of the Company, and the term "Representative" shall mean
Hornblower & Weeks.
You have advised the Company that, as Representative of the
several Underwriters named in Schedule I hereto, the Underwriters, acting
severally and not jointly, desire to purchase the Securities in the amounts
set forth opposite their respective names in Schedule I hereto. The Company
confirms the agreements made by the Company with respect to the purchase of
the Securities by the Underwriters, as follows:
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with the Representative and the
several Underwriters thatt:
(a) A registration statement (File No.: 333-37409) on Form
SB-2 relating to the public offering of the Securities, including a
preliminary form of prospectus, copies of which have heretofore been
delivered to the Underwriters, 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. The Company has prepared
in the same manner and proposes to file, prior to the effective date of such
registration statement, one or more additional amendments to such
registration statement, including a final form of prospectus, copies of
which shall be delivered to you. For purposes of this Agreement,
"Preliminary Prospectus" shall mean each prospectus filed pursuant to Rule
430 of the Rules and Regulations. For purposes of this Agreement, the
registration statement (including all financial schedules and exhibits) as
amended at the time it becomes effective and the final prospectus included
therein are respectively referred to herein as the "Registration Statement"
and the "Prospectus", except that (i) if the prospectus first filed by the
Company pursuant to Rule 424(b) of the Rules and Regulations shall differ
from said prospectus as then amended, the term "Prospectus" shall mean the
prospectus first filed pursuant to Rule 424(b), and (ii) if such
registration statement or prospectus is amended or such prospectus is
supplemented, after the effective date of such registration statement and
prior to the Option Closing Date (as hereinafter defined), the terms
"Registration Statement" and "Prospectus" shall include such registration
statement and prospectus as so amended, and the term "Prospectus" shall
include the Prospectus as so supplemented, or both, as the case may be.
(b) At the time the Registration Statement becomes effective
and at all times subsequent thereto up to the Option Closing Date:
(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, it being understood and agreed that the statements set forth in the
Prospectus on page __ with respect to stabilization, under the heading
"Underwriting," ["RISK FACTOR -- LACK OF EXPERIENCE OF REPRESENTATIVE"] and
the identity of counsel to the Underwriters under the heading "Legal
Matters" constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Registration Statement and
Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate
and other) to own its properties and conduct its business as described in
the Prospectus and is duly qualified to do business as a foreign corporation
and is in good standing in all other jurisdictions in which the nature of
its business or the character or location of its properties requires such
qualification, except where failure to so qualify will not, singly or in the
aggregate, materially affect the Company's business, properties or financial
condition.
(d) The authorized, issued and outstanding capital stock of
the Company as of December 31, 1997 is as set forth in the Prospectus under
"Capitalization;" all of the shares of issued and outstanding capital stock
of the Company set forth thereunder have been duly authorized, validly
issued and are fully paid and non-assessable; except as set forth in the
Prospectus, no securities have been issued and 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, except as described in the Registration Statement; and the Common
Stock and Warrants conform to all statements relating thereto contained in
the Registration Statement and Prospectus.
(e) The Shares and Warrants Shares are duly authorized, and
when issued and delivered pursuant to this Agreement and/or Warrant
Agreement, as the case may be, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights of any security
holder of the Company or any other third party, and the holders of any of
the Shares or Warrant Shares are not and will not be subject to personal
liability by reason of being such holders. Neither the filing of the
Registration Statement nor the offering or sale of the Securities as
contemplated in this Agreement gives rise to any rights, other than those
which have been waived or satisfied, for or relating to the registration of
any shares of Common Stock or other securities of the Company, except as
described in the Registration Statement.
(f) This Agreement has been duly and validly authorized,
executed and delivered by the Company and, assuming due execution of this
Agreement by the other parties hereto, constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms; and the Over-Allotment Option, Warrant Agreement, [LIST OTHER
AGREEMENTS HERE] have been duly and validly authorized, by the Company and,
assuming due execution of the Over-Allotment Option, Warrant Agreement,
[LIST OTHER AGREEMENTS HERE] by the Company, Representative and all other
parties to each of said agreements, will constitute valid and binding
obligations of the Company enforceable against the Company in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the rights of creditors
generally and the application of general principals of equity and equitable
remedies. The Company has full power and lawful authority to authorize,
issue and sell the Securities, and the Shares and Warrants comprising the
Securities (including the Warrant Shares issuable upon exercise of the
Warrants included in the Securities) to be sold by it hereunder on the terms
and conditions set forth herein, and no consent, approval, authorization or
other order of any governmental authority is required in connection with
such authorization, execution and delivery, except such as may be required
under the Act or state securities laws.
(g) Except as described in the Prospectus, the Company is not
in violation, breach or default of or under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach of, any of the terms
or provisions of, or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any of the property or
assets of the Company pursuant to the terms of, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company is a party or by which the Company 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 action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the Company, as
amended to the date hereof, or any statute or any order, rule or regulation
applicable to the Company of any court or regulatory authority or other
governmental body having jurisdiction over the Company.
(h) Subject to the qualifications stated in the Prospectus,
the Company has good and marketable title to all properties and assets
described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not, singly or in
the aggregate, materially significant or important in relation to its
business; all of the material 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 in any material respect 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.
(i) JR Xxxx, P.A. CPA who have given their report on certain
financial statements filed and to be filed with the Commission as a part of
the Registration Statement, which are incorporated in the Prospectus, are
with respect to the Company, independent public accountants as required by
the Act and the Rules and Regulations.
(j) The financial statements of the Company, together with
related notes and schedules, set forth in the Registration Statement and
Prospectus present fairly the financial position and results of operations
and changes in financial position of the Company on the basis stated in the
Registration Statement, at the respective dates and f or 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. No other
financial statements are required by Form SB-2 or otherwise to be included
in the Registration Statement and Prospectus.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, the Company has not
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business, or entered into any transaction not in the
ordinary course of business, which is material to the business of the
Company, and there has not been any change in the capital stock of, or any
incurrence of long-term debt by, the Company or any issuance of options,
warrants or other rights to purchase the capital stock of the Company or any
adverse change or any development involving, so far as the Company can now
reasonably foresee, a prospective adverse change in the condition (financial
or otherwise), net worth, results of operations, business, key personnel or
properties of the Company which would be material to the business or
financial condition of the Company and the Company has not become a party
to, and neither the business nor the property of the Company have become the
subject of, any material litigation whether or not in the ordinary course of
business.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company 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), business prospects, net
worth, or properties of the Company, 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 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 earnings of the Company.
(m) Except as disclosed in the Prospectus, the Company has
filed all necessary federal, state and foreign income, corporate and
franchise tax returns and has paid all taxes shown as due thereon; and there
is no tax deficiency which has been or to the knowledge of the Company could
reasonably be asserted against the Company.
(n) The Company has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its
business or the ownership of its property as described in the Prospectus and
is in all material respects complying therewith and owns or possesses
adequate rights to use all material patents, patent applications,
trademarks, service marks, trade-names, trademark registrations, service
xxxx registrations, copyrights and licenses necessary for the conduct of
such business and has not received any notice of conflict with the asserted
rights of others in respect thereof. No default exists, and no event has
occurred which, with notice or lapse of time or both, would constitute a
default in the due performance and observance of any material term, covenant
or condition of any material license, indenture, mortgage, deed of trust,
lease or other agreement or instrument to which the Company is a party or by
which the Company or any of its properties is bound or may be affected in
any material adverse respect with regard to the property, business or
operations of the Company. 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, province, county or locality, or of any agency or body of the
United States, or of any state, province, county or locality, or any
jurisdiction in which it operates or does business, the violation of which
would have a material adverse impact, singly or in the aggregate, upon the
condition (financial or otherwise) , business, property, prospective results
of operations, or net worth of the Company.
(o) The Company has not, directly or indirectly, at any time:
(i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in
violation of law; or
(ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments or contributions required
or allowed by applicable law. The Company's internal accounting controls
and procedures are sufficient to cause the Company to comply in all material
respects with the Foreign Corrupt Practices Act of 1977, as amended.
(p) On the Closing Dates (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 Securities, and the
Shares and Warrants comprising the Securities, 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.
(q) All contracts and other documents of the Company which
are, under the Rules and Regulations, required to be filed as exhibits to
the Registration Statement have been so filed.
(r) The Company has not, directly or indirectly, taken any
action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the
sale or resale of the Securities offered hereby and/or the Shares and
Warrants comprising the Securities.
(s) The Company has no subsidiaries.
(t) The Company is in compliance with all federal and state
laws, rules and regulations relating to consumer protection, occupational
safety and health and to the storage, handling or transportation of
hazardous or toxic materials and the Company has received all permits,
licenses or other approvals required of the Company under applicable federal
and state occupational safety and health and environmental laws and
regulations to conduct its business and the Company is in compliance with
all terms and conditions of any such permit, license or approval, except any
such violation of law or regulation, failure to receive required permits,
licenses or other approvals which would not, singly or in the aggregate,
result in a material adverse change in the condition (financial or
otherwise), business, net worth or results of operations of the Company,
except as may be described in or contemplated by the Prospectus.
(u) No labor dispute with the employees of the Company exists
or is threatened or imminent that could result in a material adverse change
in the condition (financial or otherwise), business, net worth or results of
operations of the Company, except as may be described in or contemplated by
the Prospectus.
(v) Except as may be disclosed in the Prospectus, the Company
has not maintained or contributed to any deferred compensation, profit
sharing, savings, retirement, pension or other benefit plan or arrangement
with or for the benefit of any person resulting from a relationship with the
Company ("Pension Plans"); there has been no violation of the reporting and
disclosure requirements imposed either under the Employees Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Internal Revenue Code of
1986, as amended (the "Code"), for which a penalty has been or may be
imposed with respect to such Pension Plan, if any exists; there is no
litigation, arbitration, claim, governmental or other proceeding (formal or
informal), or investigation pending, threatened, or in prospect (or any
reasonable basis therefore known to the Company) with respect to any of such
Pension Plan or with respect to any fiduciary, administrator, or sponsor (in
its capacity as such) of any of such Pension Plans, if any exists; each of
such Pension Plans, if any exists, is in compliance with ERISA and the Code
and there is no material pending or threatened litigation relating to said
plan and the Company has not engaged in any transaction with respect to any
of such Pension Plans which could subject the Company to a tax or penalty
under the Code or ERISA; and no liability under ERISA has been or is
expected to be incurred by the Company with respect to any of such Pension
Plans.
(w) The Company has not entered into any agreement pursuant to
which any person is entitled either directly or indirectly to compensation
from the Company for services as a finder in connection with the proposed
public offering.
(x) The Securities, Shares and Warrants have been approved for
quotation on the Nasdaq Small Cap Market ("Nasdaq") and Boston Stock
Eschange ("BSE").
(y) Except as disclosed in the Prospectus, no officer,
director or shareholder of the Company, or any "affiliate" or "associate"
(as these terms are defined in Rule 405 promulgated under the Rules and
Regulations) of any of the foregoing persons or entities has or has had,
either directly or indirectly, (i) an interest in any person or entity which
(A) currently furnishes or sells services or products which are furnished or
sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company and 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, which in any
such case is required to be so disclosed. There are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company
on the one hand, and any officer, director or shareholder owing in excess
of 5% of the Common Stock of the Company, or any affiliate or associate of
any of the foregoing persons or entities, on the other hand, required by the
Rules and Regulations to be disclosed in the Prospectus, except as disclosed
therein.
(z) The minute books of the Company contain a complete summary
of all meetings, and actions of the directors and shareholders of the
Company, since the time of its incorporation, and reflect all transactions
referred to in such minutes accurately in all respects and true and complete
copies of such minutes have been delivered to the representative.
(aa) No holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of the
Company has any anti-dilution rights with respect to any securities of the
Company except as described in the Prospectus.
(bb) The Company has entered into the Warrant Agreement
substantially in the form filed as an exhibit to the Registration Statement
with American Stock Transfer and Trust Company (the "Warrant Agreement").
The Warrant Agreement has been duly and validly authorized by the Company
and, assuming due execution by the parties thereto other than the Company,
constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except (i) as
such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; (ii) as
enforceability of any indemnification provisions may be limited under the
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 therefore may be brought.
(cc) The Company (i) has not filed a registration statement
which is the subject of any pending proceeding or examination under Section
8 of the Securities Act, or is the subject of any refusal order or stop
order thereunder; (ii) is not subject to any pending proceeding under Rule
261 of the Securities Act or any similar rule adopted under Section 3(b) of
the Securities Act, or to an order entered thereunder; (iii) has not been
convicted of any felony or misdemeanor in connection with the purchase or
sale of any security or involving the making of any false filing with the
Commission; (iv) is not subject to any order, judgment, or decree of any
court of competent jurisdiction temporarily, preliminarily or permanently
restraining or enjoining, the Company from engaging in or continuing any
conduct or practice in connection with the purchase or sale of any security
or involving the making of any false filing with the Commission; or (v) is
not subject to a United States Postal Service false representation order
entered under Section 3005 of Xxxxx 00, Xxxxxx Xxxxxx Code; or a temporary
restraining order or preliminary injunction entered under Section 3007 of
Title 39, United States Code, with respect to conduct alleged to have
violated Section 3005 of Xxxxx 00, Xxxxxx Xxxxxx Code. None of the
Company's directors, officers, or beneficial owners of five percent (5%) or
more of any class of its equity securities (i) has been convicted of any
felony or misdemeanor in connection with the purchase or sale of any
security involving the making of a false filing with the Commission, or
arising out of the conduct of the business of an underwriter, broker,
dealer, municipal securities dealer, or investment advisor; (ii) is subject
to any order, judgment, or decree of any court of competent jurisdiction,
temporarily, preliminarily or permanently enjoining or restraining, such
person from engaging in or continuing any conduct or practice in connection
with the purchase or sale of any security, or involving the making of a
false filing with the Commission, or arising out of the conduct of the
business of an underwriter, broker, dealer, municipal securities dealer, or
investment adviser; (iii) is subject to an order of the Commission entered
pursuant to section 15(b), 15B (a) or 15B (c) of the Securities Exchange Act
of 1934 (the "1934 Act"), or is subject to an order of the Commission
entered pursuant to Section 203 (e) or (f) of the Investment Advisers Act of
1940; (iv) is suspended or expelled from membership in, or suspended or
barred from association with a member of, an exchange registered as a
national securities exchange pursuant to Section 6 of the 1934 Act, an
association registered as a national securities association under Section
15A of the 1934 Act, or a Canadian securities exchange or association for
any act or omission to act constituting conduct inconsistent with just and
equitable principles of trade; or (v) is subject to a United States Postal
Service false representation order entered under Section 3005 of Xxxxx 00,
Xxxxxx Xxxxxx Code; or is subject to a restraining order or preliminary
injunction entered under Section 3007 of Title 39, United States Code, with
respect to conduct alleged to have violated Section 3005 of Xxxxx 00, Xxxxxx
Xxxxxx Code.
(dd) None of the Company's obligations to any third party are
secured by any of the Company's outstanding securities.
2. Purchase, Delivery and Sale of the Securities.
(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 several Underwriters,
and the Underwriters, severally and not jointly, agree to buy from the
Company the number of Securities set forth opposite their respective names
of Schedule I hereto, at $5.50 per Share (less a discount/commission of ten
(10%) percent), at the place and time hereinafter specified, an aggregate of
1,100,000 Shares (the "First Shares") and $.10 per Warrant (less a
discount/commission of ten (10%) percent), at the place and time hereinafter
specified, an aggregate of 1,100,000 Warrants (the "First
Warrants")(collectively "First Securities").. The initial Public Offering
price shall be $5.50 per Share.
Delivery of the First Securities, against payment therefore, shall
take place at the offices of the Representative, 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 (or at such other place as may be designated by agreement
between you and the Company) at 10:00 a.m., New York time, on June __, 1998,
or at such later time and date as you may designate, but in no event later
than 10:00 a.m. on June ____, 1998, such time and date of payment and
delivery for the First Securities being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and
agreements herein contained, the Company hereby grants the Over-Allotment
Option to the several Underwriters to purchase, severally and not jointly,
all or any part of an aggregate of an additional 150,000 Securities (the
"O/A Option Securities") at the same price per Securities as the
Underwriters shall pay for the First Securities being sold pursuant to the
provisions of Paragraph 2(a) hereof. The Over-Allotment Option may be
exercised within 45 days after the effective date of the Registration
Statement upon notice by the Representative to the Company advising as to
the amount of O/A Option Securities as to which the Over-Allotment Option is
being exercised, the names and denominations in which the certificates for
the Shares and Warrants constituting such O/A Option Securities 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 Representative but shall not
be earlier than four nor later than ten full business days after the
exercise of the Over-Allotment Option, nor in any event prior to the First
Closing Date, and such time and date is referred to herein as the "O/A
Option Closing Date." Upon exercise of the Over-Allotment Option as
provided herein, the Company shall become obligated to sell to the
Underwriters and, subject to the terms and conditions herein set forth, the
Underwriters shall become obligated to purchase from the Company the same
percentage of the total number of the O/A Option Securities as to which the
Underwriters are then exercising the Over-Allotment Option as such
Underwriters are obligated to purchase of the aggregate number of First
Securities, as adjusted by the Representative in such manner as the
Representative deems advisable to avoid fractional Securities. If the
Over-Allotment Option is exercised as to all or any portion of the O/A
Option Securities, one or more certificates in definitive form for the
Shares and Warrants constituting such O/A Option Securities, and payment
therefore, shall be delivered on the related O/A Option Closing Date in the
manner, and upon the terms and conditions, set forth in Paragraph 2(a)
hereof, except that reference therein to the First Securities and the First
Closing Date shall be deemed, for purposes of this Paragraph 2(b), to refer
to such O/A Option Securities and O/A Option Closing Date, respectively.
Delivery of the O/A Option Securities, against payment therefore, shall take
place at the offices of the Representative, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000. The Over-Allotment Option granted hereunder may be exercised
only to cover over-allotments in the sale by the Underwriters of the First
Securities referred to in Paragraph 2(a) above.
(c) The Company will make the certificates for the Shares and
warrants comprising the Securities to be purchased by the Underwriters
hereunder available to the Representative for checking at least one full
business days prior to the First Closing Date or O/A Option Closing Date
(which are collectively referred to herein as the "Closing Dates"). The
certificates shall be in such names and denominations as you may request,
provided that such request is given at least three full business days prior
to the respective 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 representing the Shares
and Warrants comprising the Securities to be purchased by the Underwriters
hereunder will be delivered by the Company to you for the Underwriters'
respective accounts on the Closing Dates, against payment of the applicable
purchase price by the respective Underwriters, by certified or bank
cashier's checks in New York Clearing House funds, payable to the order of
the Company.
You have advised the Company that each Underwriter has authorized
you to accept delivery of the Securities such Underwriter has agreed to
purchase hereunder, to make payment and to deliver a receipt therefore.
You, individually and not as the Representative of the Underwriters, may
(but shall not be obligated to) make payment for any Securities to be
purchased by any Underwriter whose funds shall not have been received by you
by the Closing Date for the account of such Underwriter, but any such
payment shall not relieve such Underwriter from any of its obligations under
this Agreement.
It is understood that the Underwriters propose to offer the
Securities to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement becomes effective. Immediately upon effectiveness of the
Registration Statement, the Underwriters shall make a public offering of the
Securities (other than to residents of or in any jurisdiction in which
qualification of the Securities is required and has not become effective) at
the price and upon the other terms set forth in the Prospectus. The
Representative may from time to time increase or decrease the public
offering price after distribution of the Securities has been completed to
such extent as the Representative, in its sole discretion deems advisable.
The Underwriters may enter into one or more agreements as the Underwriters,
in each of their sole discretion, deem advisable with one or more Board of
Directors who shall act as dealers in connection with such public offering.
3. Covenants of the Company. The Company covenants and agrees with
the Representative and Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and upon notification from the
Commission that the Registration Statement has become effective, will so
advise you and will not at any time, whether before or after the effective
date, file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you or your 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 the Underwriters of the
distribution of the Securities contemplated hereby (but in no event more
than nine months after the date on which the Registration Statement shall
have become or been declared effective) and (ii) 25 days after the date on
which the Registration Statement shall have become or been declared
effective, the Company will prepare and file with the Commission, promptly
upon the request of the Representative, any amendments or supplements to the
Registration Statement or Prospectus which, in the Representative's opinion,
may be necessary or advisable in connection with the distribution of the
Securities.
(b) As soon as the Company is advised thereof, the Company
will advise you, and confirm the advice in writing, of (i) the receipt of
any comments of the Commission, (ii) the effectiveness of any post-effective
amendment to the Registration Statement, (iii) the filing of any supplement
to the Prospectus or any amended Prospectus, (iv) any request made by the
Commission for amendment of the Registration Statement, supplementing of the
Prospectus or additional information with respect to the Registration
statement or Prospectus, or (v) the issuance by the Commission or any state
or regulatory body of any stop order or other order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or the suspension of the
qualification of the 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 or withdrawal thereof.
(c) The Company has caused to be delivered to the
Underwriters 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 Securities 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 any of the Underwriters or a 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 Securities or the Shares or Warrants, 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 the
Underwriters promptly and forthwith prepare and furnish to the Underwriters
copies of such amended Prospectus or of such supplement to be attached to
the Prospectus, in such quantities as each of the Underwriters 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 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. The Company will comply with the Act, the
Rules and Regulations and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations thereunder in connection
with the offering and issuance of the Securities.
(d) The Company will use its best efforts to qualify to
register the Securities, and the Shares and Warrants comprising the
Securities, for sale under the securities or "blue sky" laws of such
jurisdictions as the Representative 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 for any
action other than one arising out of the offering or sale of the Securities.
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 Representative may reasonably request.
(e) If the sale of the Securities provided for herein is not
consummated for any reason caused by the Company, the Company shall pay all
costs and expenses incident to the performance of the Company's obligations
hereunder, including, but not limited to, all of the expenses itemized in
Section 8 hereof, including the accountable expenses of the Representative.
(f) The Company will use its best efforts to cause a
registration statement under the Exchange Act to be declared effective
concurrently with the effectiveness of the Registration Statement.
(g) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Exchange Act, the Company will, at its
expense, furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail
and, at its expense, will furnish to you, during the period ending five
years from the date hereof, (i) as soon as practicable after the end of each
fiscal year, a balance sheet of the Company and any of its subsidiaries as
at the end of such fiscal year, together with statements of operations,
stockholders' equity, cash flows, surplus and source and application of
funds of the Company and any subsidiaries for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report
thereon of independent accountants; (ii) as soon as they are available, a
copy of all reports (financial or other) mailed to security holders; (iii)
as soon as they are available, a copy of all non-confidential reports and
financial statements furnished to or filed with the Commission; (iv) copies
of every press release and every material news item or article of interest
to the financial community in respect of the Company or its affairs which
was released or prepared by or on behalf of the Company; (v) such other
information as you may from time to time reasonably request; and (vi) as
soon as practicable after the end of each fiscal quarter, quarterly
unaudited financial statements including both a balance sheet and statement
of income of the Company and its subsidiaries consolidated. Additionally,
during the period ending five years from the First Closing Date, the Company
will pay all stock transfer fees assessed by the Company's transfer agent on
all stock transfers which may be made by any of the holders of the Common
Stock.
(h) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in Paragraph 2(g) above
will be on a consolidated basis to the extent the accounts of the Company
and its subsidiary or subsidiaries are consolidated in reports furnished to
its stockholders generally.
(i) The Company will deliver to the Representative at or
before the First Closing Date two 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 copies of the Registration Statement, including such financial
statements but without exhibits, and of all amendments thereto, as the
Underwriters may reasonably request. The Company will deliver to or upon
the order of each of the several Underwriters, from time to time until the
effective date of the Registration Statement, as many copies of any
Preliminary Prospectus filed with the Commission prior to the effective date
of the Registration Statement as each of the several Underwriters may
reasonably request. The Company will deliver to each of the several
Underwriters on the effective date of the Registration Statement 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 each of the several Underwriters
may from time to time reasonably request.
(j) The Company will make generally available to its security
holders and deliver to you as soon as it is practicable to do so, but in no
event later than 45 days following the end of the twelve month period
beginning on the day after the end of its current fiscal quarter (90 days,
in the event that the end of the current quarter is the end of the Company's
fiscal year), an earnings statement (which need not be audited) covering a
period of at least twelve consecutive months beginning after the effective
date of the Registration Statement, which shall satisfy the requirements of
Section 11(a) of the Act.
(k) The Company will apply the net proceeds from the sale of
the Securities solely 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 Securities and the application of the proceeds therefrom
as may be required pursuant to Rule 463 under the Act.
(l) The Company will, promptly upon request of the
Representative, 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
Xxxxxxxx & Associates, counsel to the Underwriters, may be necessary or
advisable in connection with the distribution of the Securities, and will
use its best efforts to cause the same to become effective as promptly as
possible.
(m) The Company will maintain, for a minimum period of one
year, its "Key Man" Life Insurance on the life of Igor Dmitrowsky in the
coverage amount of no less than $5,000,000, naming the Company as
beneficiary of such insurance policy(ies).
(n) For a period of [TWO YEARS] from the [EFFECTIVE DATE] or
such longer period of time as may be required by any state, authority or
agency, no executive officer, director or five (5%) percent or greater
stockholder of the Company, other than the Representative and the Chairman
of the Board of Directors of the Representative, will offer, sell or dispose
of, directly or indirectly, any of the Company's securities without the
prior written consent of the Representative.
(o) Upon the earlier of the First Closing Date or the
effective date of the Registration Statement, the Company will make all
filings required, including registration of the Common Stock under the
Exchange Act, to obtain and effect the listing of the Securities, Common
Stock and Warrants on the Nasdaq Market ("Nasdaq"), and will effect and
maintain, so long as the Company meets Nasdaq's maintenance requirements,
such registration and listings for at least five years from the date of this
Agreement.
(p) The Company represents that it has not taken and agrees
that it will not take, directly or indirectly, any action designed to or
which has constituted or which might reasonably be expected to cause or
result in the stabilization or manipulation of the price of the Securities,
Common Stock of Warrants or to facilitate the sale or resale of the
Securities, Shares or Warrants.
(q) On the First Closing Date and simultaneously with the
delivery of the Securities, the Company shall grant to the Representative,
individually and not as Representative of the Underwriters, the RPO Option
to purchase up to 100,000 Securities and, in connection therewith, execute
and deliver to the Representative the RPO Agreement substantially in the
form of the RPO Agreement filed as an exhibit to the Registration Statement.
(r) Prior to and during the 180 day period commencing on the
First Closing Date, the Company will not, without the prior written consent
of the Representative, grant options to purchase shares of Common Stock at a
per share exercise price less than the greater of: (i) the initial public
offering price of a Share as set forth on the cover page of the Prospectus
(assigning, for the purposes of this Paragraph (r) only, no value to the
warrants included in a Security) and (ii) the per share market price of the
Common stock on the date of grant of such options.
(s) For a period of twelve months following the First Closing
Date, the Company shall make no amendments, supplements or other changes to
such employment agreements, or supersede any of such employment agreements,
except with the consent of the Representative.
(t) On the First Closing Date and simultaneously with the
delivery of the Securities, the Company shall execute and deliver to the
Representative, individually and not as Representative of the Underwriters,
the M/A Agreement regarding mergers, acquisitions, joint ventures and
certain other forms of transactions, substantially in the form of the M/A
Agreement filed as an exhibit to the Registration Statement.
(u) On the Effective Date and for a period of five years
thereafter, the Company's Board of Directors will include two persons
reasonably acceptable to the Representative and who shall not otherwise be
affiliated or associated with the Company. For the purposes of this
Paragraph 3(u) [LIST PERSONS] are deemed to be acceptable to the
Representative.
(v) For a period of four years from the Effective Date, the
Company, at its cost and 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 fiscal quarters
of each fiscal year of the Company prior to the announcement of quarterly
financial information, the filing of the Company's Quarterly Report on Form
10-Q with the SEC and Nasdaq and the mailing of any quarterly financial
information to stockholders and the Representative.
(w) For a period of three years from the Effective Date, the
Company, will not engage in, permit, agree, consent or cooperate with any
offering of any of the Company's securities pursuant to Regulation S under
the Act nor will it take any action to facilitate any such an offering.
(x) As soon as practicable following the Effective Date, the
Company shall secure, at its own cost and expense, the Company's listing in
those manuals published by Standard & Poor's and such other reporting
manuals (the "Reporting Manuals") as the Representative may designate
containing the information required by the Uniform Securities Act for use of
the manual exemption in non-issuer, secondary trading transactions. The
Company shall use its best efforts to maintain such listing for a period of
not less than four years after the initial publications in such manuals.
(y) For at least three years following the First Closing Date
and if requested in writing by the Representative, the Company will engage a
financial public relations firm acceptable to the Representative.
(z) On the First Closing Date, the Company will engage counsel
acceptable to the Representative to prepare and provide the Underwriters
with a Blue Sky Memorandum setting forth those jurisdiction in which shares
of Common Stock and Warrants may be traded in the "after-market" based upon
publication of Company information in the Reporting Manuals.
(aa) For a period of four years from the Effective Date, the
Company, as to clause (iv) below, will:
(i) furnish the Representative and the Company's
stockholders with Annual Reports meeting the requirements of the Exchange Act;
(ii) furnish the Representative with copies of the daily
transfer sheets prepared by the Company's transfer agent and warrant agent;
(iii) furnish the Representative with lists of the
Company's stockholders and warrant holders, promptly upon request; and
(iv) recommend and use each of their best efforts to
elect or appoint, as the case may be, [A] [_____] DESIGNEE[S] of the
Representative as a member of or, at the sole option of the Representative,
a nonvoting advisor to the Company's Board of Directors; such designee[S],
if elected or appointed, shall be entitled to attend all meetings of the
Board of Directors. The Representative's designee[S] shall receive no more
or less compensation than is paid to other non-management directors of the
Company and shall be entitled to receive reimbursement for all reasonable
costs incurred in attending such meetings including, but not limited to,
food, lodging and transportation. To the extent permitted by law, the
Company will agree to indemnify the Representative and its designee[S] for
the actions of such designee[S] as [A] director[S] or advisor[S] of the
Company, as the case may be. In the event the Company maintains a liability
insurance policy affording coverage for the acts of its officers and
directors, it will agree, if possible, to include each of the Representative
and its Board designee[S] as an insured under such policy. If the
Representative does not exercise its option to designate [A] member[S] of or
[AN] advisor[S] to the Company's Board of Directors, the Representative
shall nevertheless have the right to send a representative (who need not be
the same individual from meeting to meeting) to observe each meeting of the
Board of Directors. The Company agrees to give the Representative notice of
each such meeting and to provide the Representative with an agenda, all
documents prepared for and distributed in connection with and the minutes of
such meetings no later than the Company gives such notice and provides such
items to all other directors of the Company.
(bb) For a period of five years from the effective date of the
Registration Statement, the Company shall grant, and shall obtain the
agreement of each of its then executive officers and directors and those
other stockholders owning as of the effective date of the Registration
Statement, beneficially or otherwise, five (5%) percent or more of the
outstanding Common Stock granting, the Representative, individually and not
as Representative of the Underwriters, a right of first refusal with respect
to the public or private sales of any securities of the Company to be made
by the Company, any of its subsidiaries or such executive officers,
directors and five (5%) percent or greater stockholders. In connection with
such right, the Company covenants and agrees to furnish the Representative
with the terms and conditions of any bona fide proposed sale of securities
to be made by it, its subsidiaries or any of the other foregoing identified
persons, and the name and address of the underwriter, broker or dealer
proposing to effectuate such sale, together with all compensation terms.
The Representative shall have the right within 30 days from such
notification by the Company to notify the Company or the security holders,
as the case may be, whether the Representative will exercise its right to
effect such proposed financing. In the event the Representative declines to
exercise its right of first refusal, such action shall only relate to the
financing and terms and conditions contained in the specific notice
furnished to the Representative and not to any other proposed financing
thereafter.
(cc) In addition to the provisions of Paragraph 4(bb) above,
during the two-year period following the date hereof, the Representative,
individually and not as the representative of the Underwriters, shall have
the right to purchase for the Representative's account or to sell for the
account of the Company's officers and directors any securities sold pursuant
to Rule 144 under the Act. Each of the officers and directors (each a "144
Seller") has agreed to consult with the Representative with regards to any
such sales and to offer the Representative the exclusive opportunity to
purchase or sell such securities on terms at least as favorable to the 144
Sellers as they can secure elsewhere. If the Representative fails to accept
in writing any such proposal for sale by the 144 Sellers within five
business days after receipt of a copy of the proposal, you shall be deemed
to have released any claim or right with respect to any such sales contained
in the proposal. If thereafter, the proposal is modified in any material
respect, the 144 Sellers shall adopt the procedure set forth in this
Paragraph 4(cc) with respect to the modified proposal.
(dd) During the period of time commencing on the date hereof
and terminating on the fifth anniversary of the effective date of the
Registration Statement, excluding any commitments or obligations of the
Company existing on the date of this Agreement, the Company shall not sell,
transfer or otherwise dispose of any shares of its Common Stock, issue any
securities convertible into or exchangeable for shares of Common Stock for a
consideration per share less than eighty percent of the fair market value
(as defined in the next following sentence) of said securities on the date
the Board of Directors authorizes the issuance or sale without the
affirmative vote of three-fourths (3/4ths) of the members of the Company's
Board of Directors, including the affirmative vote of the Company's Director
selected by the Representative as its designee[S] pursuant to Paragraph aa
above, unless said designee-director[S] fail[S] to attend or participate in
such a meeting following five business day's written notice of such a
meeting. For the purposes of this Paragraph Section 3(cc) , "fair market
value" shall mean the average of the last reported sale prices for the sixty
trading days preceding the date of the relevant action taken by the
Company's Board of Directors, as officially reported by the national
securities exchange on which the Common Stock is principally trading, or, if
the Common Stock is not listed or admitted to trading on any national
securities exchange or if any such exchange on which the Common Stock is
listed is not its principal trading market, then by the National Association
of Securities Dealers, Inc. ("NASD") if the Common Stock is principally
traded on the Nasdaq Small Cap Market System ("Nasdaq/SCM), or if the Common
Stock is not principally traded on either a national securities exchange or
Nasdaq/SCM, then the average bid quotation on such days as furnished by the
NASD through its Automated Quotation System.
(ee) On or before the effective date of this Registration
Statement, the Company shall provide the Representative with true copies of
duly executed, legally binding and enforceable agreements pursuant to which
for a period of 18 months from the effective date of the Registration
Statement (or for such longer period not to exceed 36 months as may be
required under applicable state blue sky laws) each of the Company's
[shareholders] owning at least two percent (2%) of the Common Stock
outstanding prior to the public offering, agrees that he, she or it will not
directly or indirectly, issue, offer to sell, grant an option for the sale
of, assign, transfer, pledge, hypothecate or otherwise encumber or dispose
of any shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any
shares of Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein
without the prior written consent of the Representative (collectively, the
"Lock-up Agreements"). On or before the Closing Date, the Company shall
deliver instructions to the transfer agent authorizing it to place
appropriate legends on the certificates representing the securities subject
to the Lock-up Agreements and to place appropriate stop transfer orders on
the Company's ledgers.
(ff) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to a Form SR
as may be required pursuant to Rule 463 under the Act) from time to time,
under the Act, the Exchange Act, and the Rules and Regulations, and all such
reports, forms and documents filed will comply as to form and substance with
the applicable requirements under the Act, the Exchange Act, and the Rules
and Regulations.
(gg) Until the completion of the distribution of the
Securities but in no event more than 25 days after the effective date of the
Registration Statement, the Company shall not without prior written consent
of the Representative, issue, directly or indirectly any press release or
other communication or hold any press conference with respect to the Company
or its activities or the offering contemplated hereby.
(hh) That any and all future transactions between the Company
and its officers, directors, principal shareholders and the affiliates of
the foregoing persons will be on terms no less favorable to the Company than
could reasonably be obtained in arm's length transactions with independent
third parties, and that any such transactions also be approved by a majority
of the Company's outside independent directors disinterested in the
transaction, if any.
[INSERT OTHER CONDITIONS AS PROVIDED IN LETTER OF INTENT]
4. Conditions of Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Securities which the Underwriters
have agreed to purchase hereunder, are subject to the accuracy (as of the
date hereof, and as of the Closing Dates) of and compliance with the
representations and warranties of the Company herein, to the performance by
the Company of its obligations hereunder, and to the following conditions:
(a) (i) The Registration Statement shall have become effective
and you shall have received notice thereof not later than 4:00 p.m., New
York time, on the date of this Agreement, or at such later time or on such
later date as to which you may agree in writing; (ii) 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 similar
purpose shall have been instituted or shall be pending or, to your knowledge
or to the knowledge of the Company, shall be contemplated by the commission;
(iii) any request on the part of the Commission for additional information
shall have been complied with to the reasonable satisfaction of Xxxxxxxx &
Associates, counsel to the Underwriters, and (iv) no stop order shall be in
effect denying or suspending effectiveness of such qualification nor shall
any stop order proceedings with respect thereto be instituted or pending or
threatened under such law.
(b) At the First Closing Date, you shall have received the
opinion dated as of the First Closing Date, of the International Business
Law Firm (the "Company Counsel"), counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation 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 or licensed to do business as
a foreign corporation and is in good standing in each other jurisdiction in
which the ownership or leasing of its properties or conduct of its business
requires such qualification;
(ii) To the best knowledge of the Company 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;
(iii) (A) The authorized capitalization of the Company as
of December 31, 1997 is as set forth under "Capitalization" in the
Prospectus; (B) all shares of the Company's outstanding stock have been duly
authorized, validly issued, are fully paid and non-assessable and conform to
the description thereof contained in the Prospectus; (c) the outstanding
shares of Common Stock and other capital stock of the Company have not been
issued in violation of the preemptive rights of any stockholder and the
stockholders of the Company do not have any preemptive rights or other
rights to subscribe for or to purchase the Securities or the Shares and
Warrants constituting the Securities, nor are there any restrictions upon
the voting or transfer of any of the Shares; (D) the Securities, Shares,
Common Stock, Warrants, Warrant Agreement [LIST ALL OTHER AGREEMENTS]
conform to the respective descriptions thereof contained in the Prospectus;
(E) the Securities, Shares and Warrants and the Warrant Shares to be issued
upon exercise Warrants (including Underwriter Warrants and Shares), upon
issuance in accordance with the respective terms, 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; (F) the application for the Securities,
Common Stock and Warrants for quotation on Nasdaq has been duly authorized
by the Company; (G) a sufficient number of shares of Common Stock have been
reserved for issuance upon exercise of the Underwriter Warrants and all of
the Warrants; and (H) to the best of the Company Counsel's knowledge,
neither the filing of the Registration Statement nor the offering or sale of
the 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 capital
stock of the Company, except as may be described in the Registration Statement;
(iv) This Agreement and all other agreements, including,
[LIST OTHER AGREEMENTS] have been duly and validly authorized, executed and
delivered by the Company and, assuming due execution and delivery of this
Agreement by the Representative, are the valid and legally binding
obligations of the Company subject to bankruptcy, insolvency or other laws
affecting the rights of creditors generally and the application of general
principles of equity, except that no opinion need be expressed as to the
enforceability of Paragraph 3(cc), the indemnity provisions contained in
Section 6 and the contribution provisions contained in Section 7 of this
Agreement;
(v) The certificates evidencing the Shares and Warrants
are in valid and proper legal form;
(vi) The Company Counsel knows of no (A) pending or
threatened legal proceeding or (B) pending or threatened governmental
proceeding to which the Company is a party which could materially adversely
affect the business, property, financial condition or operations of the
Company; which question the validity of the Securities, Shares, Warrants,
this Agreement, the Warrant Agreement [LIST OTHER AGREEMENTS] or of any
action taken or to be taken by the Company pursuant to this Agreement, and
no such proceedings are known to the Company Counsel to be contemplated
against the Company;
(vii) The Company Counsel knows of no governmental
proceedings or regulations required to be described or referred to in the
Registration Statement which are not so described or referred to;
(viii) The Company is not in violation of or in default
under, nor will the execution and delivery of this Agreement, the Warrant
Agreement, [LIST OTHER AGREEMENTS] and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions herein
or therein contemplated, result in a violation of, or constitute a default
under, the Certificate of Incorporation or By-laws of the Company, or, to
the best knowledge of the Company Counsel, in the performance or observance
of any material obligation, agreement, covenant or condition contained in
any bond, debenture, note or other evidence of indebtedness or in any
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;
(ix) (A) The Registration Statement has become effective
under the Act, and to the best of the Company 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; and (B) the Registration
Statement and the Prospectus (except for the financial statements and other
financial data contained therein, or omitted therefrom, as to which the
Company 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;
(x) All descriptions in the Registration Statement and
the Prospectus, and any amendment or supplement thereto, of contracts and
other documents are accurate in all material respects, and the Company
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 the
Company 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, pursuant to Item 601(a) of Regulation SB, which are not so
summarized, described or filed;
(xi) To the best of the Company Counsel's knowledge, no
default exists, and no event has occurred which, with notice or lapse of
time or both, would constitute a default in the due performance and
observance of any term, covenant or condition of any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which the Company
is a party or by which the Company or its properties is bound or which could
reasonably be expected to result in any material adverse affect on the
property, business or operations of the Company;
(xii) to the best of the Company Counsel's knowledge, the
Company owns, possesses or has the right to use all licenses, patents,
patent applications, trademarks, service marks, trade names, trademark
registrations, service xxxx registrations, copyrights, licenses and
confidential information currently employed in connection with the business
of the Company, contemplated to be employed in connection with the Company's
business or necessary in order to conduct the Company's business as
presently conducted, or as proposed, and the Company has not received, or
has no reason to believe that it may receive, any notice of infringement of
or conflict with asserted rights of any third party or otherwise with
respect to any of the foregoing which, singly or in the aggregate, could
reasonably be expected to result in a material adverse change in the
condition (financial or otherwise), business prospects, net worth or results
of operations of the Company, except as described in or contemplated by the
Prospectus;
(xiii) 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 Securities by the Company, in connection with the execution, delivery
and performance of this Agreement and the Warrant Agreement [LIST OTHER
AGREEMENTS] by the Company or in connection with the taking of any action
contemplated herein, or the issuance of the Warrants or Underwriter
Warrants, or the securities underlying the Warrants, other than
registrations or qualifications under applicable state or foreign securities
or Blue Sky laws and registration under the Act;
(xiv) The Company is in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating
to the protection of consumers, human health and safety, the storage,
handling or transportation of hazardous or toxic substances or wastes,
pollutants or contaminants, except to the extent failure to comply would not
have a material adverse effect on the Company;
(xv) (A) The Company is not subject to ERISA or the
Company has not violated the reporting or disclosure requirements imposed
either under ERISA or the Code with respect to the Pension Plans, if any;
(B) there is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal, or investigation pending, threatened, or in
prospect (or any basis therefore known to such counsel) with respect to such
Pension Plans or with respect to any fiduciary, administrator, or sponsor
(in its capacity as such) of such Pension Plans; (C) such Pension Plans are
in compliance with ERISA and the Code and there is no material pending or
threatened litigation relating to such Pension Plans and, to the best of the
Company Counsel's knowledge the Company has not engaged in any transaction
with respect to such Pension Plans which could subject the Company to a tax
or penalty under the Code or ERISA; (D) no liability under ERISA has been or
is expected to be incurred by the Company with respect to such Pension Plan;
and
(xvi) The statements in the Registration Statement under
the captions "the Company," "Use of Proceeds," "Business," "Management's
Discussion and Analysis of Financial Condition and Results of operations,"
"Management," "Principal stockholders," "Selling Stockholders," "Shares
Eligible for Resale," "Certain Transactions" and "Description of Securities"
have been reviewed by the Company 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 and
complete in all material respects; and
(xvii) The Securities, Common Stock and Warrants have
been accepted for quotation on the Nasdaq and BSE.
The Company Counsel shall also state that it has participated in
the preparation of the Registration Statement and the Prospectus and nothing
has come to the attention of the Company Counsel, to cause the Company
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 not
misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other financial information and
statistical data contained therein or omitted therefrom, as to which such
counsel need express no opinion);
The foregoing opinion shall also cover such matters incident to
the transactions contemplated hereby as the Underwriters or counsel for the
Underwriters shall reasonably request. In rendering such opinion, the
Company 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, the State of New York or upon
opinions of counsel satisfactory to you. A separate opinion relating to all
matters subject to clause 4(b)(xii) above shall be rendered by Company
Counsel or such other counsel as the Representative may agree to, provided
in either event such counsel is named in and consents to be so named in the
Registration Statement and the Prospectus, and in which case the opinion of
the Company Counsel shall state that they have no reason to believe that you
are not entitled to so rely.
(c) At the First Closing Date and the Option Closing Date,
Xxxxxxxx & Associates, counsel for the Underwriters, shall furnish to the
Underwriters their written opinion, dated as of the date of its delivery,
with respect to the sufficiency of all such corporate proceedings and other
legal matters relating to this Agreement, the Warrant Agreement and the
transactions contemplated hereby and thereby as the Underwriters and such
counsel may agree upon, and the Company shall have furnished to Xxxxxxxx &
Associates such documents as they may have reasonably requested for the
purpose of enabling them to pass upon such matters.
(d) You shall have received a letter prior to the effective
date of the Registration Statement and again on and as of the First Closing
Date from JR Xxxx, P.A. CPA, independent public accountants for the Company,
substantially in the form approved by you, counsel to the Underwriters.
(e) At the First Closing Date:
(i) the representations and warranties of the Company
contained in this Agreement shall be true and correct with the same effect
as if made on and as of the First Closing Date and the Company shall have
performed all of its obligations hereunder and satisfied all the conditions
on its part to be satisfied at or prior to such First Closing Date;
(ii) the Registration Statement and the Prospectus and any
amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement or the Prospectus, or 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 respective dates as of
which information is given, no material adverse change in the business,
properties, condition (financial or otherwise), results of operations,
capital stock, long-term or short-term debt or general affairs of the
Company from that set forth in the Registration Statement and the
Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the effective date of the Registration Statement,
and the Company shall not have incurred any material liabilities or entered
into any agreement not in the ordinary course of business other than as
referred to in the Registration Statement and Prospectus;
(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 would 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 would materially and adversely affect the business, property,
condition (financial or otherwise) , results of operations or general
affairs of the Company; and
(v) you shall have received a certificate signed by each of
the Chairman of the Board or the President and the principal financial or
accounting officer of the Company, dated as of the First Closing Date,
evidencing compliance with the provisions of this Paragraph 4(e).
(f) Upon exercise of the Over-Allotment Option, the obligation of the
Underwriters to purchase and pay for the Option Shares referred to therein
will be subject (as of the date hereof and as of the O/A Option Closing
Date) to the following additional conditions:
(i) The Registration Statement shall be 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 knowledge of the
Representative and to the knowledge of the Company, shall be contemplated by
the Commission, and any reasonable request on the part of the Commission for
additional information shall have been complied with to the satisfaction of
Xxxxxxxx & Associates, counsel to the Underwriters;
(ii) At the O/A Option Closing Date, there shall have
been delivered to you the signed opinion of the Company Counsel, dated as of
the O/A Option Closing Date, in form and substance satisfactory to Xxxxxxxx
& Associates, counsel to the Underwriters, which opinion shall be
substantially the same in scope and substance as the opinion furnished to
you at the First Closing Date pursuant to Paragraph 4(b) above, except that
such opinion, where appropriate, shall cover the O/A Securities;
(iii) At the O/A Option Closing Date, there shall have
been delivered to you a certificate of the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the O/A Option Closing Date, in form and substance satisfactory to
counsel to the Underwriters, substantially the same in scope and substance
as the certificate furnished to you at the First Closing Date pursuant to
Clause 4(e)(v) above.
(iv) At the Option Closing Date there shall have been
delivered to you letters in form and substance satisfactory to you from JR
Xxxx, P.A. CPA dated the Option Closing Date and addressed to the
Underwriters confirming the information in their letter referred to in
Section 4(d) hereof and stating that nothing has come to their attention
during the period from the ending date of their review referred to in said
letter to a date not more than five 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;
(vi) All proceedings taken at or prior to the O/A Option
Closing Date in connection with the sale and issuance of the [O/A Option
Securities] shall be satisfactory in form and substance to the Underwriters,
and the Underwriters and Xxxxxxxx & Associates, counsel to the Underwriters,
shall have been furnished with all such documents, certificates, and
opinions as the Underwriters may request in connection with this transaction
in order to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company or its compliance
with any of the covenants or conditions contained herein.
(g) No action shall have been taken by the Commission or 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 Common Stock or Warrants 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 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.
(h) By the Effective Date, the Underwriters will have received
clearance form the NASD as to the amount of compensation allowable or
payable to the Underwriters.
(i) At the date this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters
in form and substance satisfactory in all respects (including the
non-material nature of the changes or increases, if any, referred to in
clause (iii) below) to the Underwriters and Underwriters' counsel, from JR
Xxxx, P.A. CPA.
(i) confirming that they are independent certified
public accountants with respect to the Company within the meaning of the Act
and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules and footnotes thereto of the Company
included in the Registration Statement comply as to the form in all material
respects with the applicable accounting requirements of the Act and the
Rules and Regulations thereunder and that the Representatives may rely upon
the opinion JR Xxxx, P.A. CPA with respect to the financial statements and
supporting schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of meetings of the shareholders and board of directors and
the various committees of the board of directors of the Company,
consultations with officers and other employees of the Company responsible
for financial and accounting matters and other specified procedures and
inquiries, nothing has come to their attention which would lead them to
believe that (A) the unaudited financial statements and supporting schedules
of the company included in the Registration Statement, if any, do not comply
as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration Statement,
or (B) at a specified date not more than five days prior to the Effective
Date, there has been any change in the capital stock or long-term debt of
the Company, or any decrease in the shareholders' equity or net current
assets or net assets of the Company as compared with amounts shown in
December 31, 1997 balance sheet included in the Registration Statement,
other than as set forth in or contemplated by the Registration Statement,
or, if there was any change or decrease, setting forth the amount of such
change or decrease;
(iv) setting forth, at a date not later than five days
prior to the date of the Registration Statement, the amount of liabilities
of the Company (including a breakdown of commercial paper and notes payable);
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company and excusing any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the
letter and found them to be in agreement, and
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
(j) On or prior to each Closing Date, the Underwriters shall
have received from JR Xxxx, P.A. CPA a letter, dated each Closing Date to
the effect that they reaffirm that statements made in the letter furnished
pursuant to Paragraph ___ except that the specified date referred to shall
be a date not more than three days prior to each Closing Date and, if the
Company has elected to rely on Rule 430A of the Rules and Regulations, to
the further effect that they have carried out procedures as specified in
clause (v) of subsection (g) of this section with respect to certain
amounts, percentages and financial information as specified by the
Representative and deemed to be a part of the Registration Statement
pursuant to Rule 430(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
(k) On or before first Closing Date, the Securities shall have
been duly approved for quotation on the Nasdaq and BSE.
(l) On or before first Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements, in form and
substance satisfactory to Underwriters' counsel.
(m) On or before first Closing Date, the Company shall have
executed and delivered the Consulting Agreement and Warrant Agreement,
substantially in the forms thereof filed as exhibits to the Registration
Statement.
(n) On or before the effective date on the Registration
Statement the Company shall deliver to the Representative satisfactory
results of UCC, lien and title searches effected in all appropriate
jurisdictions, showing that the Company's assets, including all of its
intellectual properties, are unencumbered, and satisfactory evidence,
including trademark and copyright searches, of its unencumbered title to its
owned intellectual properties.
(o) If any of the conditions herein provided for in this
Section 4 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 of the Closing Dates by the
Representative notifying the Company of such cancellation in writing or by
telegram at or prior to the applicable Closing Date. Any such cancellation
shall be without liability of the Underwriters to the Company.
5. Conditions of the Obligations of the Company. The obligation of
the Company to sell and deliver the Securities is subject to the following
conditions:
(a) The Registration Statement shall have become effective not
later than [4:30] p.m., New York time, on the day following the date of this
Agreement, or on such later date as the Company and the Representative may
agree in writing.
(b) At the Closing Dates, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued under the
Act or any proceedings therefore initiated or threatened by the Commission.
(c) At the Closing Dates, 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 Securities, Shares or warrants
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 to the
knowledge of the Company, shall be contemplated by the Commission or the NASD.
If the conditions to the obligations of the Company provided for
in this Section 5 have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the O/A Option Closing
Date, then only the obligation of the Company to sell and deliver the
Securities, on exercise of the O/A Option provided for in Paragraph 2(b)
hereof shall be affected.
6. Indemnification.
(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 any Underwriter, or such controlling person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in (I) the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, (ii) 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 Securities, Shares and warrants 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 or any
such amendment or supplement thereof or any such Blue Sky Application or any
such Preliminary Prospectus or the Prospectus or any such amendment or
supplement thereto. This indemnity will be in addition to any liability
which the Company may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company and each of the Company's directors, each nominee (if
any) for director of the Company named in the Prospectus, each of the
Company's 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, any Preliminary 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, in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter or through the Representative specifically for
use in the preparation thereof. This indemnity agreement will be in
addition to any liability which each Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 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 6, 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 6. 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 6 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 participation in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of the indemnifying
party if the indemnifying party has assumed the defense of the action with
counsel reasonably satisfactory to the indemnified party; provided that, if
the indemnified party is an Underwriter or a person who controls such
Underwriter within the meaning of the Act, the fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the
employment of such counsel has been specifically authorized in writing by
the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the indemnifying party and, in the judgment of such
Underwriter, it is advisable for such Underwriter or controlling persons to
be represented by separate counsel (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of
such Underwriter or such controlling person, it being understood, however,
that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate
firm of attorneys for such Underwriter and controlling persons, which firm
shall be designated in writing by you, as the case may be, and reasonably
acceptable to the Company). No settlement of any action against an
indemnified party shall be made without the consent of the indemnified
party, which shall not be unreasonably withheld in light of all factors of
importance to such indemnified party unless such settlement provides for a
full release of the indemnified party and the payment of money damages
solely by the indemnifying party.
7. Contribution. In circumstances in which indemnity provided for
in Section 6 above is unavailable or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages or liabilities
(or actions in respect thereof), each indemnifying party, in order to
provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (a) the relative benefits received
by the indemnifying party or parties on the one hand and the indemnified
party on the other from the offering of the Securities, or (b) if the
allocation provided by the foregoing clause (a) is not permitted by
applicable law, not only such relative benefits but also the relative fault
of the indemnifying party or parties on the one hand and the indemnified
party on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative benefit received
by the Company on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company bears to the total
underwriting discounts and commissions received by the Underwriters. The
relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters, the parties,
relative intents, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company and
Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this Section 7.
Notwithstanding any other provision of this Section 7, no Underwriter shall
be obligated to make contributions hereunder that in the aggregate exceed
the total public offering price of the Securities purchased by such
Underwriter under this Agreement shall not be obligated to make
contributions hereunder that in the aggregate exceed the total fee paid,
less the aggregate amount of any damages that such Underwriter has otherwise
been required to pay in respect of the same or any substantially similar
claim, and no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 7, each person, if any, who controls an Underwriter
within the meaning of the Act shall have the same rights to contribution as
such Underwriter and each director of the Company, each officer of the
Company who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Act, shall have the same
rights to contribution as the Company.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the
sale of the Securities 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 (i) the fees and expenses of all
counsel to the Company and of the Company's accountants; (ii) 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, in such quantity
and quality as the Representative directs; (iii) the fees of the NASD in
connection with the filing required by the NASD relating to the offering of
the Securities contemplated hereby and the qualifications of said shares on
Nasdaq and BSE; (iv) all expenses, including reasonable fees and
disbursements of counsel to the Underwriter in connection therewith in
connection with the qualification of the Securities, Shares and warrants
under the state securities or blue sky laws which the Representative shall
designate; (v) the cost of printing and furnishing to each of the several
Underwriters copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus, the Agreement Among Underwriters, Selected
Dealer Agreement, all Powers of Attorney, this Agreement, the Selling
Agreement, and the Blue Sky Memorandum(s) [LIST OTHER AGREEMENTS]; (vi) the
cost of printing the certificates representing the Shares and Warrants;
(vii) the cost of publication of a one-quarter page "tombstone"
advertisement in the National Edition of the Wall Street Journal or smaller
advertisement of aggregate equivalent cost; (viii) the cost of due diligence
meetings at locations to be designated by the Representative; (ix) the cost
of preparing and delivering to the Representative and counsel to the
Underwriters four bound volumes; each bound volume containing copies of all
documents and appropriate correspondence filed with or received from the
Commission and the NASD and all closing documents; (x) the Registration fee
for the Registration Statement to the SEC; (xi) the cost of commemorative
Lucite cubes in a reasonable number requested by the Representative; and
(xii) the fees and disbursements of the Company's transfer agent and warrant
agent. In addition, 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 Paragraph 3(a)
above, except as otherwise set forth therein.
(b) In addition to the expenses set forth in Paragraph 8(a)
above, at the First Closing Date, the Company shall pay to the
Representative a non-accountable expense allowance equal to three (3%)
percent of the gross proceeds received by the Company from the sale of the
Securities, of which $10,000.00 has been paid prior to the filing of the
Registration Statement and an additional $40,000.00 of which was paid on
filing of the Registration Statement. In the event the Over-Allotment
Option is exercised, the Company shall pay to the Representative at the O/A
Option Closing Date an additional amount as a non-accountable expense
allowance which is equal to three (3%) percent of the gross proceeds
received by the Company 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 not be liable for the actual accountable out-of-pocket
expenses of the Underwriters, including legal fees. 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
actual accountable out-of-pocket expenses of the Underwriters, including
legal fees.
(c) No person is entitled either directly or indirectly to
compensation from the Company, Underwriters, or any other person for
services as a finder in connection with the proposed offering, and the
Company agrees to indemnify and hold harmless each of the 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, she 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.
9. Effective Date. This Agreement shall become effective upon its
execution, except that the Representative may, at the Representative's
option, delay its effectiveness until 9:30 a.m., New York time, on the first
full business day following the effective date of the Registration
Statement, or at such earlier time after the effective date of the
Registration Statement as you in your discretion shall first commence the
initial public offering by the Underwriters of any of the Securities. The
time of the initial public offering shall mean the time of release by you of
the first newspaper advertisement with respect to the Securities, or the
time when the Securities are first generally offered by the Underwriters to
dealers by letter or telegram, whichever shall first occur. This Agreement
may be terminated by you at any time before it becomes effective as provided
above, except that Paragraph 3(c) and Sections 6, 7, 8, 12, 13, 14, and 15
shall remain in effect notwithstanding such termination.
10. Termination.
(a) This Agreement, except for Paragraph 3(c) and Sections 6, 7,
8, 12, 13, 14, and 15 hereof, may be terminated at any time prior to the
First Closing Date, and the Over-Allotment Option referred to in Section
2(b) hereof, if exercised, may be canceled at any time prior to the O/A
Option Closing Date, by the representative if, in the Representative's
judgment it is impracticable to offer for sale or to enforce contracts made
by the Underwriters for the resale of the Securities 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 or the Nasdaq Small-Cap Market having been
suspended or limited;
(iii) material governmental restrictions (not in force and
effect on the date hereof) having been imposed on trading in securities
generally;
(iv) a banking moratorium having been declared by federal or
New York State authorities;
(v) an outbreak of major international hostilities, an
escalation of current international hostilities raising such hostilities to
the level of a major international hostility, or other national or
international calamity 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) 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 of similar impact, of any act or measure, or the
adoption of any orders, rules or regulations by any governmental body or any
authoritative accounting institute or board, or any governmental executive,
which is reasonably likely to have a material adverse impact on the
business, financial condition or financial statements of the Company;
(ix) any material 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.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10, the
Company shall be promptly notified by you, by telephone or telegram,
confirmed by letter.
11. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements representations, warranties and
other statements of the Company, the Company's officers, directors and the
agreements, covenants and undertakings of the parties hereto set forth or
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the several
Underwriters, the Company, or any of their respective officers, directors or
any controlling person, and will survive delivery of and payment of the
Securities and the termination of this Agreement.
12. Notice. All notices and other communications hereunder, unless
otherwise specifically provided, shall be in writing and shall be deemed to
have been duly given (a) three days following the day when mailed by prepaid
certified mail, return receipt requested, (b) one day following facsimile
transmission providing for written confirmation of transmission with a copy
thereof mailed by prepaid regular mail, or (c) on the day of personal
deliver against written receipt therefore. Notices and other communications
to any Underwriter shall in care of Hornblower & Weeks Inc., 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile number: 212/361-2273, with a
copy sent to Xxxxxxxx & Associates, 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx, 00000, facsimile number: 212/635-6190; to the Company at
______________________________________, facsimile number:
___________________, with a copy to The International Business Law Firm,
0000 X.00xx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, facsimile number:
703/522-1197; and, to the __________________________________________,
facsimile number: ____________________, with a copy to
________________________, facsimile number: ________________________.
14. Parties in Interest. You represent that you are authorized to
act on behalf of the several Underwriters named in Schedule I hereto, and
the Company shall be entitled to act and rely on any request, notice,
consent, waiver, or agreement purportedly given on behalf of the
Underwriters when the same shall be given by you on such behalf. The
Agreement herein set forth is made solely for the benefit of the several
Underwriters, the Company, any person controlling the Company or any of the
Underwriters, and directors of the Company, nominees for directors (if any)
of the Company named in the Prospectus, the Company's officers who have
signed the Registration Statement, and each of their respective executors,
administrators, successors, 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 a purchaser, from an
Underwriter of the Securities.
15. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify
the termination of this Agreement under the provisions of Section ___
hereof) to purchase the Securities which it or they are obligated to
purchase on the Closing Dates under this Agreement (the "Defaulted
Securities"), the Representative shall have the right, within 24 hours
thereafter, to make arrangement for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed upon and
upon the terms herein set forth and if any such underwriter is willing to so
purchase the Defaulted Securities, then notwithstanding Clause __ (ii)
below, the Representative shall be obligated to effect such arrangement; if,
however, the Representative shall not have completed such arrangement within
such 24-hour period, then:
(i) if the number of Defaulted Securities does not
exceed 10% of the total number of Securities to be purchased on such Closing
Date, the non-defaulting Underwriters shall be obligated to purchase the
full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(ii) if the number of Defaulted Securities exceeds 10% of
the total number of Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section ___ shall relieve any
defaulting Underwriter from liability in respect of any default by such
Defaulting Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period of not exceeding ten days in order to
effect any required changes in the Registration Statement or Prospectus or
in any other documents or arrangements.
16. Applicable Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of New York applicable
to agreements made and to be entirely performed within New York without
regard to the conflicts of laws provisions thereof or the actual domicile of
the parties hereto.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
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18. Entire Agreement; Amendments. This Agreement, the Warrant
Agreement and the Consulting Agreement constitute the entire agreements
between the parties hereto, and supersede all prior written or oral
agreement, understandings and negotiations, with respect to the subject
matter hereof, except as herein expressly provided. This Agreement may not
be amended except in writing, signed by the Representative and the Company.
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.
Very truly yours,
BALTIA AIR LINES, INC.
By: ______________________________
Igor Dmitrowsky, President
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above written.
HORNBLOWER & WEEKS INC.
[As Representative for the Several Underwriters
Named in Schedule I attached hereto]
By: __________________________________________
Xxxx Xxxxxxxxx, CEO
______________________________
[As Qualified Independent Underwriter]
By: __________________________________________
Authorized Officer
SCHEDULE I
Name of Underwriter Total Number of Securities to be
Purchased
