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700,000 Units
Each Unit Consisting of
One (1) Share of Common Stock and
Two (2) Class A Common Stock Purchase Warrants
XXXX'S ORIGINAL, INC.
UNDERWRITING AGREEMENT
New York, New York
________ __, 1997
IAR Securities Corp.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxx Xxxxxxxxxx
President
Ladies and Gentlemen:
Xxxx's Original, Inc., a Delaware corporation (the "Company"), confirms
its agreement with IAR Securities Corp. ("IAR") and each of the underwriters
named in Schedule A hereto (collectively, the "Underwriters", which term shall
also include any underwriter substituted as hereinafter provided in Section 14),
for whom IAR is acting as representative (in such capacity, IAR shall
hereinafter be referred to as "you" or the "Representative"), with respect to
the sale by the Company and the purchase by the Underwriters, acting severally
and not jointly, of the respective numbers of units (the "Units"), each Unit
consisting of one (1) share (the "Shares") of the Company's common stock, $0.001
par value per share (the "Common Stock"), and two (2) Redeemable Common Stock
Class A Purchase Warrants (the "Warrants") set forth in said Schedule A. The
700,000 Units, consisting of a total of 700,000 Shares together with the
1,400,000 Warrants and 1,400,000 Shares of Common Stock underlying the Warrants
(the "Warrant Shares") are hereinafter collectively referred to as the "Firm
Securities". The Common Stock and Warrants comprising each Unit will not trade
separately from the Unit until the earlier of 90 days from the date of the
Prospectus or the determination by Millennium Securities Corp. ("Millennium"),
in its sole discretion, to permit such separate trading. Each Warrant is
exercisable commencing the date of this Agreement until three years after the
date of this Agreement, unless previously redeemed by the Company, at an initial
exercise price of $4.00
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for one share of Common Stock. For a period of three (3) years from the date of
this Agreement, the Warrants may be redeemed by the Company, upon ten (10)
business days' prior written notice to IAR, if the Company shall have given not
less than thirty (30) days' and not more than sixty (60) days' prior written
notice to the holders thereof at a redemption price of $0.01 per Warrant at any
time, provided, the average reported closing bid quotation of the Common Stock
equals or exceeds $10.00 per share (subject to adjustment as provided in the
Warrant Agreement dated ___________ 1997 between the Company and American Stock
Transfer & Trust Company) for a period of twenty (20) consecutive trading days
ending on the third trading day prior to the date of the notice of redemption.
Any redemption prior to one year from the effective date shall require the
consent of Millennium. (The Firm Securities are sometimes collectively referred
to herein as the "Securities"). The Company also proposes to issue and to sell
to you for the sum of $250.00 an Option (the "RPO") for the purchase of up to an
additional 70,000 Shares and 140,000 Warrants. The Shares, Warrants and Warrant
Shares issuable upon exercise of the RPO are hereinafter referred to as the
"Representative's Securities." Neither the Representative's Securities nor any
of the securities underlying the Representative's Securities shall be redeemable
by the Company but the Representative's Securities and the securities underlying
the Representative's Securities shall otherwise be identical to the Firm
Securities. The RPO will be exercisable between the first and fifth anniversary
dates of the Effective Date as below defined (the "RPO Exercise Term"). You
agree that during the one year period from the Effective Date, IAR will not
transfer the Representative's Securities except to IAR's officers or partners or
to any underwriters or selected dealers or their officers or partners. The RPO
shall be exercisable at a price per Share equal to 130% of the public offering
price of the Units and for the Warrants, at a price per Warrant equal to 130% of
the public offering price of the Shares and shall be exercisable at any time and
from time to time, in whole or in part, during the RPO Exercise Term. The RPO
contains the terms and conditions substantially as set forth in Exhibit 4.4 to
the Registration Statement. The shares of the Common Stock issuable upon
exercise of the Warrants (including the Warrants issuable upon exercise of the
RPO) are hereinafter referred to as the "Warrant Shares." The Firm Securities,
the Shares, the Warrants, the Representative's Securities and the Warrant Shares
are more fully described in the Registration Statement and the Prospectus
referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and the Closing Date as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission"), a registration statement, and an
amendment or amendments thereto, on Form SB-2, including any related preliminary
prospectus (the "Preliminary Prospectus"), for the registration of the Firm
Securities, Representative Securities as well as the Shares more fully described
in the Prospectus under the heading "Selling Security holders", under the
Securities Act of 1933, as amended (the "Act"), which registration statement and
amendment or amendments have been prepared by the Company in conformity with the
requirements of the Act, and the Rules and Regulations, as defined below. The
Company will promptly file a further amendment to the registration statement in
the form heretofore delivered to the Underwriters but will not file any other
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amendment thereto to which the Underwriters shall have objected in writing after
having been furnished with a copy thereof. Except as the context may otherwise
require, the registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein (including, but not limited to those
documents or information incorporated by reference therein) and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule
430(A) of the Regulations) and as further amended by any post effective
amendment declared effective prior to the Closing Date, is hereinafter called
the "Registration Statement", and the form of prospectus in the form first filed
with the Commission pursuant to Rule 424(b) of the Regulations, is hereinafter
called the "Prospectus." For purposes hereof, "Rules and Regulations" shall mean
the rules and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
The Preliminary Prospectus, Registration Statement and Prospectus are sometimes
referred to herein as the "Offering Documents".
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been instituted
or are pending or threatened. Each of the Preliminary Prospectus, the
Registration Statement and the Prospectus at the time of filing thereof
conformed with the requirements of the Act and the Rules and Regulations, and
none of the Preliminary Prospectus, the Registration Statement or the Prospectus
at the time of filing thereof contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto until the Closing Date and any Additional Closing
Date (as defined in Section 5 hereof) and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriters or a dealer, the Registration Statement and the Prospectus
contained, and as amended by any amendment or supplement thereto, will contain,
all statements which are required to be stated therein in accordance with the
Act and the Rules and Regulations, and will conform to the requirements of the
Act and the Rules and Regulations; neither the Registration Statement nor the
Prospectus, as amended or supplemented by any amendment or supplement thereto,
nor any such amendment or supplement thereto, will contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation. The Company does not own an interest in any firm, association,
corporation, partnership, trust, joint venture or other business entity. The
Company is duly qualified and licensed for the transaction of business and in
good standing as
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a foreign corporation in each jurisdiction in which its ownership or leasing of
any properties or the conduct of its business ("Business") requires such
qualification or licensing, except for jurisdictions where the failure to be so
registered or qualified would not have a material adverse effect on the
Company's Business, assets, prospects, earnings, properties, condition
(financial or otherwise) or results of operation of the Company (herein referred
to as a "Material Adverse Effect"). The Company has all requisite power and
authority (corporate and other), and has obtained any and all necessary and
material authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all government or regulatory officials and bodies
(including, without limitation, those having jurisdiction over building,
factory, environmental or similar matters) to own or lease its properties and
conduct its Business (collectively, the "Approvals"); the Company is and has
been doing business in, and on each Closing Date will be in, compliance with all
such Approvals, and all Federal, state, local and foreign laws, rules and
regulations; and the Company has not received any notice of proceedings relating
to the revocation or modification of any such Approval, which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, which
would have a Material Adverse Effect.
(e) The Company has a fully authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the capitalization set forth therein
on the Closing Date after giving effect to the Closing, and the Company is not a
party to or bound by any instrument, agreement or other arrangement providing
for the issuance of any capital stock, rights, warrants, options or other
securities, except for this Agreement and as described in the Prospectus. The
offers and sales of all securities of the Company outstanding on the date hereof
and/or immediately prior to the Closing Date were at all relevant times either
registered under the Securities Act and the applicable state securities or Blue
Sky laws, or exempt from such registration. No holder of any of the Company's
securities has any rights, "demand," "piggyback" or otherwise, to have such
securities registered (including without limitation on the Registration
Statement) or to demand the filing of a registration statement except as
specifically described in the Prospectus. No holder of any outstanding
securities of the Company has any rights of rescission with respect to the
offering and sale of such securities. The Firm Securities and the
Representative's Securities (collectively, hereinafter sometimes referred to as
the "Securities") and all other securities issued or issuable by the Company
conform or, when issued and paid for, will conform, in all respects to all
statements with respect thereto contained in the Offering Documents. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable, and the holders thereof are not
subject to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company. The Securities are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable; the holders thereof will not be
subject to any personal liability solely by reason of being such holders; all
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken, and the certificates
representing the Securities will be in due and proper form. Upon the issuance
and delivery pursuant to the terms hereof of the Securities
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to be sold by the Company hereunder, the Underwriters or the Representative, as
the case may be, will acquire good and marketable title to such securities free
and clear of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or right of equity of any kind whatsoever.
(f) The financial statements of the Company are true and
complete and fairly present the financial position of the Company at the
respective dates and for the respective periods to which they apply and such
financial statements have been prepared in conformity with generally accepted
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved and are in accordance with the books and records
of the Company. No other financial statements are required by Form SB-2 or
otherwise to be included in the Registration Statement or the Prospectus. The
outstanding debt, the property, both tangible and intangible, and the business
of the Company conform in all respects to the descriptions thereof contained in
the Registration Statement and the Prospectus. Financial information set forth
in the Prospectus under the headings "Selected Financial Data,"
"Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in the
Prospectus, the information set forth therein and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus. Except as otherwise stated in the Offering
Documents, since December 31, 1996, (I) 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 security or other instrument which by
its terms is convertible into, exercisable for or exchangeable for capital stock
of the Company and (ii) there has not occurred any Material Adverse Effect or
any development involving a prospective Material Adverse Effect. The Company has
not become a party to, and neither the business nor the property of the Company
has become the subject of, any litigation which, if adversely determined, would
have a Material Adverse Effect whether or not in the ordinary course of
business.
(g) The Company has filed all federal tax returns and all
state and municipal and local tax returns (whether relating to income, sales,
franchise, real or personal property or other types of taxes) required to be
filed under the laws of the United States and applicable states, and has paid in
full all taxes which have become due pursuant to such returns or claimed to be
due by any taxing authority or otherwise due and owing; provided, however, that
the Company has not paid any tax, assessment, charge, levy or license fee that
it contests in good faith and by proper proceedings, which it has disclosed in
writing to the Representative and for which adequate reserves for the accrual of
same are maintained if required by generally accepted accounting principles.
Each of the tax returns heretofore filed by the Company correctly and accurately
reflects the amounts of its tax liability thereunder. The Company has withheld,
collected and paid all other levies, assessments, license fees and taxes
(including, without limitation, employment withholding taxes, FICA/social
security and similar employee taxes) to the extent required and, with respect to
payments, to the extent that the same have become due and payable.
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(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (I) the issuance
by the Company of the Securities; (ii) the purchase by the Underwriters of the
Securities from the Company and the purchase by the Representative of the
Representative's Securities from the Company; (iii) the consummation by the
Company of any of its obligations under this Agreement, or (iv) resales of the
Securities in connection with the distribution contemplated hereby.
(i) The Company has, and at the Closing will have, good and
marketable title to, or valid and enforceable leasehold estates in, all items of
real property owned or leased by it, and good and marketable title to, or valid
and enforceable leases with respect to, all items of personal property (tangible
and intangible), free and clear of all liens, encumbrances, claims, security
interests, defects of title, and restrictions of any nature whatsoever, other
than those referred to in the Offering Documents and liens for taxes not yet due
and payable. The Company has adequately insured its tangible and/or real
properties, other than its intellectual properties, against loss or damage by
fire or other casualty (other than earthquake and flood) and maintains such
insurance in adequate amounts (such adequacy being measured by such types and
levels of insurance as are carried by companies conducting comparable volumes of
business of the nature carried on and proposed to be carried on by the Company),
on terms generally offered by reputable insurance carriers in New York State.
The Company (I) has not failed to give notice or present any insurance claims
with respect to any matter, including but not limited to the Company's business
and property under any such insurance policy in a due and timely manner; (ii)
does not have any disputes or claims against any underwriter of such insurance
policies or has not failed to pay any premiums due and payable thereunder, or
(iii) has not failed to comply with all conditions contained in such insurance
policies. To the best of the Company's knowledge, there are no facts or
circumstances under any such insurance policy which would relieve any insurer of
its obligation to satisfy in full any valid claim of the Company.
(j) There is no action, suit, proceeding, injury, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or, to the best knowledge of the Company,
threatened against, or involving the properties or business of, the Company in
or before any court, agency, tribunal, arbitrator, governmental authority or
other person with jurisdiction over the Company and/or its properties
(including, without limitation, those having jurisdiction over environmental or
similar matters) which (I) questions the validity of the capital stock of the
Company, this Agreement, the RPO, or the Warrant Agreement (as defined herein)
or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement or the Warrant Agreement, or (ii) is required
under the Act or the Rules and Regulations to be disclosed in the Registration
Statement and/or the Prospectus which is not so disclosed (and such proceedings
as are summarized in the Registration Statement and/or the Prospectus are
accurately summarized in all material respects).
(k) The Company is not in violation of its Certificate of
Incorporation or By-
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Laws. The Company has full legal right, power and authority to issue, deliver
and sell the Securities, to execute and deliver this Agreement, the Warrant
Agreement, and the RPO and to consummate the transactions provided for in each
such agreement; and this Agreement, the Warrant Agreement, and the RPO have each
been duly and properly authorized, executed and delivered by the Company. Each
of this Agreement, the Warrant Agreement, and the RPO constitutes a legal, valid
and binding agreement of the Company enforceable against the Company in
accordance with its respective terms, and none of the Company's issue and sale
of the RPO, the Securities or the execution, delivery or performance of this
Agreement, the Warrant Agreement or the RPO, the consummation of the
transactions contemplated herein and therein or the conduct of its current or
proposed business as described in the Offering Documents and any amendments or
supplements thereto, conflicts with or with the lapse of time will conflict
with, or results or with the lapse of time will result in, any breach or
violation of any of the terms or provisions of, or constitutes a default under,
or result in the creation or imposition of any lien, charge, claim, encumbrance,
pledge, security interest defect or other restriction or right of equity of any
kind whatsoever upon , any property or assets (tangible or intangible) of the
Company pursuant to or under the terms of, (I) the certificate of incorporation
or By-Laws of the Company; (ii) any license, contract, indenture, mortgage, deed
of trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which it is or may be bound or to which its properties or assets (tangible
or intangible) is or may be subject, or any indebtedness; (iii) any statute,
judgment, decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties; or (iv)
any permit, certification, registration, approval, consent, license or franchise
necessary for the Company to own or lease and operate any of its properties and
to conduct its business or the ability of the Company to make use thereof.
(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities or the RPO
as described in the Prospectus and the Registration Statement, the performance
of this Agreement, the Warrant Agreement or the RPO and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Securities, except such as (I) have been
made or obtained prior to the date hereof or (ii) may be obtained under the Act
or may be required under state securities or Blue Sky laws in connection with
the Underwriters' purchase and distribution of the Securities or the clearance
of such purchase, distribution and sale by the National Association of
Securities Dealers, Inc. (the "NASD").
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or business may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company enforceable
against the Company
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in accordance with their respective terms. There are no contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be copies.
The descriptions in the Registration Statement of such agreements, contracts and
other documents are accurate and fairly present the information required to be
disclosed in conformity with the Act and the Rules and Regulations. The
contracts so described are in full force and effect and the Company is not in
breach of any such agreement.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(I) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money; (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any other distribution in respect of its capital stock of any class, and there
has not been any change in the capital stock or any change in the debt (long or
short term) or liabilities or material change in or affecting the general
affairs, management, financial operations, stockholders' equity or results of
the operations of the Company.
(o) No default by the Company (or to the Company's knowledge
by any other party) exists in the due performance of any term, covenant or
condition of any license, contract, indenture, mortgage, installment sale
agreement, license, permit, franchise, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, purchase
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which the Company is a
party or by which the Company may be bound or to which the property or assets
(tangible or intangible) of the Company is subject or affected.
(p) The Company is in compliance with all Federal, state,
local, and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours. To the best
of the Company's knowledge, there are no pending investigations involving the
Company by the United States Department of Labor or any other governmental
agency responsible for the enforcement of such Federal, state, local, or foreign
laws and regulations. There is no unfair labor practice charge or complaint
against the Company pending before the National Labor Regulations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or, to the
best of the Company's knowledge, threatened against or involving the Company, or
any predecessor entity, and none has ever occurred. No representation question
exists respecting the employees of the Company, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company. No labor dispute with the
employees of the Company exists or, to the best of the Company's knowledge, is
imminent.
(q) The Company does not maintain, sponsor or contribute to
any program or
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arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multiemployer plan" as such terms are defined in sections
32(2) and 3(1) and 3(37), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") ("ERISA" Plans") The Company does not
maintain or contribute, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA. The Company has never completely or
partially withdrawn from a "multiemployer plan."
(r) None of the Company, any of its employees, directors,
shareholders, or affiliates (within the meaning of the Rules and Regulations) of
any of the foregoing has taken or will take, directly or indirectly, any action
designed to or which has constituted or which might be expected to cause or
result in, under the Exchange Act, stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Securities
or otherwise.
(s) The Company owns or possesses the requisite licenses
and/or enforceable rights to use, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions of any
kind whatsoever, all trademarks, trademark applications, service marks, service
names, trade names, patents and patent applications, copyrights and other rights
(collectively, "Intangibles") described as owned or used by it in the Offering
Documents and/or which are necessary for the conduct of its current business and
the business it proposes to conduct as described in the Offering Documents.
There is no proceeding or action by any person pertaining to, or proceeding or
claim pending or, to the best knowledge of the Company, threatened, and the
Company has not received any claim alleging, infringement directly or indirectly
attributable to the Company's use of its Intangibles with the rights of any
third party or any notice of conflict with the asserted rights of others which
challenges the exclusive right of the Company with respect to, any Intangibles
used in the conduct of the Company's present or proposed business. The Company's
current products, services and processes do not and to the best knowledge of the
Company its proposed products, services and processes do not, infringe on any
Intangibles of any third party. The Company has direct ownership and title, free
and clear of any liens, security interests, encumbrances or claims of others, to
all intellectual property (including all United States patents and United States
and foreign patent applications) and other proprietary rights, confidential
information and know-how. Except as set forth in the Offering Documents, the
Company is not obligated or under any liability whatsoever to make any payments
by way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any patent, trademark, service mark, trade name, copyright,
know-how, technology or other intangible asset, with respect to the use thereof
or in connection with the conduct of the Company's business as now (or currently
proposed to be) conducted or otherwise. No unresolved claims or notices have
been asserted or given during the past three years by any person challenging the
use by the Company of any Intangible or challenging or questioning the validity,
enforceability or effectiveness of or the title to any Intangible or agreement
relating thereto nor to the Company's knowledge is there any action, suit,
investigation or proceeding by or before any court or other governmental entity
reasonably likely to have a Material Adverse Effect on the validity or
enforceability of, or the title or right of the Company to use, any Intangible.
(t) Xxxxx Xxxxxxxx LLP, whose report is filed with the
Commission as a part of
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the Registration Statement, are independent certified public accountants as
required by the Act and the Rules and Regulations.
(u) The Company is not obligated to pay a finder's or broker's
fee to anyone in connection with the introduction of the Company to the
Representative or the consummation of the offering contemplated hereunder, other
than payments to the Representative. The Company has not paid or issued any
monies, securities or other compensation to any member of the National
Association of Securities Dealers, Inc. ("NASD"), or to any affiliate of such a
member during the previous twelve (12) months, except payments made to
Millennium Securities Corp. in connection with the Second Private Placement
Financing.
(v) The Securities have been approved for quotation on the OTC
Bulletin Board.
(w) Neither the Company nor any of its officers, employees,
agents or any other person acting on behalf of the Company, has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
employee of any governmental agency (domestic or foreign) or instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the current or proposed business of the Company (or
assist the Company in connection with any actual or proposed transaction) which
(a) might subject the Company, or any other such person to any damage or penalty
in any civil, criminal or governmental litigation or proceeding (domestic or
foreign); (b) if not given in the past, might have had a Material Adverse
Effect, or (c) if not continued in the future, might cause a Material Adverse
Effect. The Company's internal accounting controls are sufficient to cause the
Company to comply with the Foreign Corrupt Practices Act of 1977, as amended.
(x) 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 any goods or services, or (ii) a beneficial interest
in any contract or agreement to which the Company is a party or by which it may
be bound or affected, which in any such case is required to be so disclosed.
Except as set forth in the offering documents, 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 owning 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.
(y) 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
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reflect all transactions referred to in such minutes accurately in all respects.
(z) 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.
(aa) The Company has entered into an agreement substantially
in the form filed as Exhibit 4.3 to the Registration Statement (the "Warrant
Agreement") with American Stock Transfer & Trust Company in form and substance
satisfactory to the Representative, with respect to the Warrants. 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 provision 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 therefor may be brought.
(bb) 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 Title 39, United States
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 Title 39, United States 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)
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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
Title 39, United States 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 Title 39,
United States Code.
(cc) The Company is not, and the Closing will not be, in
violation of any law, rule, regulation, judgment or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its properties or Business other than any violation which individually or
in the aggregate would not have a Material Adverse Effect.
(dd) None of the Company's obligations to any third party are
secured by any of the Company's outstanding securities.
(ee) Any certificate signed by any officer of the Company, and
delivered to the Underwriters or the Underwriters's Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly agrees to purchase from the Company, at a price of
$5.58 per Unit, that number of Firm Securities set forth in Schedule A opposite
the name of such Underwriter, subject to such adjustment as the Representative
in its discretion shall make to eliminate any sales or purchases of fractional
shares, plus any additional numbers of Firm Securities which such Underwriter
may become obligated to purchase pursuant to the provisions of Section 14
hereof. The initial public offering price per Unit shall be $6.20, comprising of
one Share and two Warrants.
(b) Payment of the purchase price and delivery of certificates
for the Firm Securities shall be made at the offices Xxxxxxx & Xxxxxxx, P.C.,
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as shall be
agreed upon by the Representative and the Company. Such delivery and payment
shall be made at 10:00 a.m. (New York City time) on the third business day
following the date on which the Registration Statement has been declared
effective (the "Effective Date") or at such earlier time and date or other time
and date as shall be agreed upon by the Representative and the Company not later
than third business days after such third business day (such time and date of
payment and delivery being herein called the "Closing Date"). Delivery of the
certificates for the Firm Securities shall be made to you, for the respective
accounts of the
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Underwriters, against payment by you, for the respective accounts of the
Underwriters, of the purchase price for the Firm Securities by certified or
official bank checks payable in same day funds or by wire transfer of
immediately available funds, to the order of the Company. Certificates for the
Firm Securities shall be in definitive, fully registered form, shall bear no
restrictive legends (except with respect to Blue Sky resale restrictions) and
shall be in such denominations and registered in such names as the Underwriters
may request in writing at least two business days prior to the Closing Date. The
certificates for the Firm Securities shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to the Closing Date.
(c) The Additional Securities shall be purchased by the
Underwriter from the Company as provided herein. This option may be exercised
only to cover over-allotments in the sale of Shares and Warrants by the
Underwriter. This option may be exercised by you on the basis of the
representations, warranties, covenants, and agreements herein contained, but
subject to the terms and conditions herein set forth, at any time and from time
to time on or before the forty-fifth day following the date that the
Registration Statement is declared effective by the Commission, by written
notice by you to the Company. Such notice shall set forth the aggregate number
of Additional Securities as to which the option is being exercised, the name or
names in which the certificates for the Shares and Warrants (the "Additional
Securities") underlying such Additional Securities are to be registered, the
authorized denominations in which such Additional Securities are to be issued,
and the time and date, as determined by the Underwriter, when such Additional
Securities are to be delivered (each such time and date are herein called an
"Additional Closing Date") (references herein to the Closing Date shall mean the
Closing Date referred to in section 5(a) hereof and/or any Additional Closing
Date, if any, as the context requires, unless otherwise specifically provided
herein); provided, however, that no Additional Closing Date shall be earlier
than the Closing Date nor earlier than the second business day after the date on
which the notice of the exercise of the option shall have been given nor later
than the eighth business day after the date on which such notice shall have been
given.
(d) Payment of the purchase price of $5.58 per Unit and
delivery of certificates for the Additional Securities shall be made at the
offices Xxxxxxx & Xxxxxxx, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or
at such other place as shall be agreed upon by the Representative and the
Company. Delivery of the certificates for the Additional Securities shall be
made to you, for the respective accounts of the Underwriters, against payment by
you, for the respective accounts of the Underwriters, of the purchase price for
the Additional Securities by certified or official bank checks payable in same
day funds or by wire transfer of immediately available funds, to the order of
the Company. Certificates for the Additional Securities shall be in definitive,
fully registered form, shall bear no restrictive legends (except with respect to
Blue Sky resale restrictions) and shall be in such denominations and registered
in such names as the Underwriters may request in writing at least two business
days prior to the Closing Date. The certificates for the Additional Securities
shall be made available to the Representative at such office or such other place
as the Representative may designate for inspection, checking and packaging no
later than 9:30 a.m. on the last business day prior to the Additional Closing
Date.
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You have advised the Company that each Underwriter has
authorized you to accept delivery of its Securities, to make payment and to
deliver a receipt therefor. 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.
3. Public Offering of the Securities. 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 of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. Covenants of the Company. The Company covenants and agrees
with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
Effective Date, file any amendment to the Registration Statement or supplement
to the Prospectus or file any document under the Act or Exchange Act before
termination of the offering of the Securities by the Underwriters of which the
Representative shall not previously have been advised and furnished with a copy,
to which the Representative shall have reasonably objected or which is not in
compliance with the Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing (I) when the Registration Statement as amended, becomes effective or, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said rule 430A and when any
post effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose; (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or the initiation, or the threatening, of any proceeding for
that purpose; (iv) of the receipt of any comments from the Commission, and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission or authority shall enter a
stop order or suspend such
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qualification at any time, the Company will make every effort to obtain promptly
the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance reasonably satisfactory to the Representative) or transmit the
Prospectus by a means reasonably calculated to result in filing with the
Commission pursuant to Rule 424(b) not later than the Commission's close of
business on the earlier of (I) the second business day following the execution
and delivery of this Agreement, and (ii) the third business day after the
Effective Date.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding Prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Representative with copies of any such amendment or
supplement within a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file any such amendment to which the
Representative shall reasonably object.
(e) The Company shall use its best efforts, in cooperation
with the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdiction as the Representative may designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications, file
such documents and furnish such information as may be required for such purpose.
In each jurisdiction where such qualification shall be effected, the Company
will, unless the Representative agrees that such action is not at the time
necessary or advisable, use best efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use best efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities or the Representative's Securities is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
judgment of the Company, or in the opinion of counsel to the Underwriters, the
Prospectus, as then amended or supplemented, included an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, the Company will notify the
Representative promptly and prepare and file with the Commission an appropriate
amendment or supplement (in form and substance satisfactory to the Underwriters)
to correct such statement or omission or to
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effect such compliance, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
(g) As soon as practicable, but in any event not later
than 45 days after the end of the 12-month period beginning on the day after the
end of the fiscal quarter of the Company during which the Effective Date occurs
(90 days in the event that the end of such fiscal quarter is the end of the
Company's fiscal year), the Company shall make generally available to its
security holders, in the manner specified in Rule 158(b) of the Rules and
Regulations, and to the Representative, an earnings statement which will be in
the detail required by, and will otherwise comply with, the provisions of
Section 11(a) of the Act and Rule 158(a) of the Rules and Regulations, which
statement need not be audited unless required by the Act, covering a period of
at least 12 consecutive months after the Effective Date.
(h) During the period of three years after the date
hereof, the Company will furnish to its shareholders, as soon as practicable,
annual reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Representative:
(i) concurrently with furnishing such quarterly
reports to its shareholders, statements of
income of the Company for each quarter in
the form furnished to the Company's
shareholders and certified by the Company's
principal financial or accounting officer;
(ii) concurrently with furnishing such annual
reports to its shareholders, a balance sheet
of the Company as at the end of the
preceding fiscal year, together with
statements of operations, shareholders'
equity, and cash flows of the Company for
such fiscal year, accompanied by a copy of
the certification thereof by the Company's
independent certified public accountants;
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to
shareholders;
(iv) as soon as practicable after the filing
thereof, copies of all reports and financial
statements furnished to or filed with the
Commission, the NASD or any securities
exchange, and
(v) every press release and every material news
item or article of interest to the financial
community in respect of the Company or its
affairs which was released or prepared by or
on behalf of the Company.
(i) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the
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transfer agent) for its Common Stock and Warrants.
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, and all amendments and
supplements thereto, including any Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus and all amendments and supplements thereto, including any prospectus
prepared after the Effective Date, in each case as soon as available and in such
quantities as the Representative may request.
(k) On or before the Effective Date, the Company shall provide
the Representative with true copies of duly executed, legally binding and
enforceable agreements pursuant to which for a period of 24 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 Selling Security holders agrees that it or he or she 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
which are registered in the Registration Statement (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.
(l) None of the Company, any of its officers, directors,
shareholders or affiliates (within the meaning of the Rules and Regulations)
will take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(m) The Company shall 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.
(n) The Company shall furnish to the Representative as early
as practicable prior to each of the date hereof, and the Closing Date but not
later than two business days prior thereto, a copy of the latest available
unaudited interim financial statements of the Company (which in no event shall
be as of a date more than 30 days prior to the effective date of the
Registration Statement) which have been read by the Company's independent public
accountants, as stated in their letters to be furnished pursuant to Section 9(g)
hereof.
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(o) The Company shall cause the Securities to be quoted on OTC
Bulletin Board for a period of five years from the date hereof shall use its
best efforts to maintain such quotation of the Securities.
(p) For a period of three years from the Closing Date, at the
Representative's request, the Company shall furnish to the Representative at the
Company's sole expense, daily consolidated transfer sheets relating to the
Common Stock and Warrants.
(q) Until the completion of the distribution of the Securities
but in no event more than 25 days after the Effective Date, 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.
(r) Until the earlier to occur of (I) the seventh anniversary
of the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form S-1 (or other appropriate form) for the
registration under the Act of the Representative's Securities.
(s) For a period of not less than two years from the Closing
Date, the Company will recommend and use its best efforts to elect the
Representative's designee (the "Designee") at the Representative's option,
either as a member of or a non-voting observer to the Company's Board of
Directors; such Designee, if elected or appointed, shall attend meetings of the
Board and receive no more or less compensation than is paid to other directors
of the Company and shall be entitled to receive reimbursement for all reasonable
expenses 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 the Designee for the actions of
such Designee as a director of the Company. The Company shall include each of
the Representative and the Designee as an insured under the insured policy
referred to in Section 7(gg) of this agreement. If the Representative does not
exercise its option to designate a member of or an advisor 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,
although the Representative shall endeavor to send the same representative to
each meeting to observe such meeting of the Board of Directors. The Company
agrees to give the Representative notice of each such meeting not later than it
gives such notice and provides such items to the other directors.
(t) The Company agrees 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.
(u) Until the offering contemplated hereby has been completed
or terminated, if there shall occur any event relating to or affecting, among
other things, the Company or any affiliate
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thereof, or the operations of the Company as described in the Offering
Documents, as a result of which it is necessary, in the opinion of counsel for
the Representative or counsel for the Company, to amend or supplement the
Offering Documents in order that the Offering Documents will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, the Company shall immediately prepare and
furnish to the Representative a reasonable number of copies of an appropriate
amendment of or supplement to the Offering Documents, in form and substance
satisfactory to counsel for the Representative.
(v) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, substantially as
set forth under "Use of Proceeds" in the Prospectus.
(w) The Company shall be responsible for, and shall pay, all
expenses directly and necessarily incurred in connection with this Offering,
including, but not limited to, the costs of preparing, printing, mailing and
filing, where necessary, the Offering Documents and all amendments and
supplements thereto; the Company's legal and accounting fees, transfer agent
fees and the blue sky fees, filing fees and disbursements of the
Representative's counsel in connection with blue sky matters, as well as the
fees and expenses of the Representative as set forth in Section 8(b) hereof.
(x) Except as disclosed in the Offering Documents the Company
has not prior to the date hereof issued and irrespective of such disclosure will
not hereafter issue, any of the Company's Common Stock, or Preferred Stock(as
defined in the Offering Documents) or securities exercisable or convertible into
any of such securities or enter into any agreement therefor in satisfaction of
any obligation or indebtedness of the Company arising out of any agreement to
which the Company is a party or by which the Company is bound now or for a
period of one year after the Effective Date.
(aa) Until one (1) year from the date hereof, the maximum
number of shares of capital stock of the Company issuable under its 1995 Long
Term Incentive Plan and 1996 Non-Qualified Stock Option Plan shall not exceed
2,000,000 without the prior written consent of the Representative.
(bb) Except as contemplated hereby during the period
commencing on the date hereof and ending on the Closing Date, the Company shall
not, without prior notice to and consent of the Representative, (a) issue any
securities or incur any liability or obligation except the purchase of
inventory, equipment and machinery for the Company's manufacturing operations as
described in the Offering Documents, (b) enter into any transaction not in the
ordinary course of business, or (c) declare or pay any dividend on its capital
stock.
(cc) The Company shall for a period of no less than five years
from the date hereof cause and/or take all action necessary to maintain no less
than two (2) outside directors on the Company's Board of Directors.
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(dd) For a period of three (3) years from the date hereof, the
Company shall register with and remain covered by the Corporation Records
Service published by Standard and Poors Corporation.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on the first Closing Date
all expenses and fees (other than fees of Underwriters' counsel, except as
provided in subclause (iv) of this section 8(a)) incident to the performance of
the obligations of the Company under this Agreement and the Warrant Agreement,
including, without limitation, (I) the fees and expenses of accountants and
counsel for the Company; (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing (including mailing and handling charges),
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the duplication, mailing (including the payment of
postage with respect thereto) and delivery of this Agreement, the Agreement
Among Underwriters, the Selected Dealer Agreement, the Powers of Attorney, and
related documents, including the cost of all copies thereof and of the
Preliminary Prospectus and of the Prospectus and any amendments thereof or
supplements thereto supplied to the Underwriters and such dealers as the
Underwriters may request; (iii) the printing, engraving, issuance and delivery
of the Securities; (iv) the qualification of the Securities under state
securities or "Blue Sky" laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" if
any, and disbursements and fees of counsel to the Underwriters in connection
therewith (such fees and disbursements to be so reimbursed not to exceed $35,000
in the aggregate; (v) the fees and disbursements of Underwriter's counsel in
connection with the qualification with the NASD of the terms of the transaction
relating to underwriting compensation; (vi) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show," information meetings and presentations, and "tombstone" advertisement
expenses; (vii) fees and expenses of the transfer agent and registrar, and
(viii) the fees payable to the Commission, the NASD and OTC Bulletin Board
including the fees and expenses incurred in connection with the listing of the
Securities on the OTC Bulletin Board.
(b) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 8, it will pay to
the Representative on the Closing Date by certified or bank cashier's check or,
at the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Securities, it being acknowledged that $50,000 of said amount has already been
delivered to the Representative.
6. Conditions of the Underwriters' Obligations. The obligations
of the Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of each Closing Date, as if they had been made on and as of each Closing
Date, the accuracy on and as of each Closing Date of the statements of officers
of the Company made pursuant to the provisions hereof, and the performance by
the Company on
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and as of each Closing Date of its covenants and obligations hereunder and to
the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m. New York time, on the date subsequent to the date of this
Agreement or such later date and time as shall be consented to in writing by the
Representative, and, at the Closing Date no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of the Representative. If the Company has elected to rely upon Rule
430A of the Rules and Regulations, the price of the Shares and Warrants and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Representative of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Registration Statement, or any amendment thereto,
shall not contain an untrue statement of a material fact or omit to state a
material fact which is required to be stated therein or is necessary to make the
statements therein not misleading, or the Prospectus, or any supplement thereof,
shall not contain an untrue statement of a material fact, or omit to state a
material fact which is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) At each of the Effective Date and each Closing Date, the
Underwriters shall have received the opinion of Xxxx, Xxxxxx, Xxxxxxx &
Xxxxxxxxx, P.C. (the "Firm") counsel to the Company, dated the Effective Date
and each Closing Date, respectively, addressed to the Underwriters and in form
and substance satisfactory to IAR, to the effect that:
(i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing
under the laws of the jurisdiction of its
incorporation; (B) is duly qualified and licensed for
the transaction of business and in good standing as a
foreign corporation in every jurisdiction in which
its ownership, leasing, licensing or use of property
and assets or the conduct of its Business makes such
qualification necessary except where the failure to
be so qualified does not now have and will not in the
future have a Material Adverse Effect; and (c) has
all requisite corporate power and authority, has
obtained any and all material authorizations,
approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or
regulatory officials and bodies, to own or lease its
properties and conduct its Business. The disclosures
in the
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Registration Statement concerning the
effects of Federal, state and local laws,
rules and regulations on the Company's
business as currently conducted and as
contemplated are accurate in all respects
and do not omit to state a fact necessary to
make the statements contained therein not
misleading in light of the circumstances in
which they were made;
(ii) the Firm has not been engaged to perform
legal services in connection with any
transaction whereby the Company would
acquire an interest in any corporation,
partnership, joint venture, trust or other
business entity;
(iii) the Company has a duly authorized, issued
and outstanding capitalization as set forth
in the Prospectus (and any amendment or
supplement thereto) under the heading
"Capitalization" and except as set forth in
the Prospectus, the Company is not a party
to or bound by any instrument, agreement or
other arrangement providing for it to issue
any capital stock, rights, warrants, options
or other securities. The Securities and all
other securities issued or issuable by the
Company have been duly authorized; all
outstanding shares of Common Stock have been
fully paid for and are non-assessable, and
the Securities when issued, paid for and
delivered in accordance with the terms
hereof and of the Warrant Agreement, will be
validly issued fully paid and
non-assessable. The Securities conform to
the description thereof in the Prospectus.
All corporate action required to be taken
for the authorization, issue and sale of the
Securities has been duly and validly taken.
The Representative's Securities constitute
valid and binding obligations of the Company
to issue and sell, upon exercise thereof and
payment therefor, the number and type of
securities of the Company called for
thereby. Upon the issuance and delivery
pursuant to this Agreement, the Warrant
Agreement and the RPO of the Securities and
Representative's Securities, as applicable,
the Underwriters will acquire title to the
Firm Securities, and the Representative will
acquire title to the Representative's
Securities, free and clear of any pledge,
lien, charge, claim, encumbrance, pledge,
security interest, or other restriction or
equity of any kind whatsoever. No transfer
tax is payable by or on behalf of the
Underwriters in connection with (A) the
issuance by the Company of the Securities;
(B) the purchase by the Underwriters and the
Representative of the Firm Securities and
the Representative's Securities,
respectively, from the Company;(C)the
consummation by the Company of any of its
obligations under this Agreement, the
Warrant Agreement or the RPO or (D) resales
of the Firm Securities
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in connection with the distribution
contemplated hereby;
(iv) the Registration Statement has become
effective under the Act, and, if applicable,
filing of all pricing information has been
timely made in the appropriate form under
Rule 430A, and to counsel's knowledge no
stop order suspending the effectiveness of
the Registration Statement or preventing the
use of the preliminary prospectus or any
part of any thereof has been issued and no
proceeding for that purpose has been
instituted or is pending, or is threatened
or contemplated under the Act;
(v) counsel does not know of any agreements,
contracts or other documents required by the
Act to be described in the Registration
Statement and the Prospectus or to be filed
as exhibits to the Registration Statement
(or required to be filed under the Exchange
Act if upon such filing they would be
incorporated, in whole or in part, by
reference therein) which are not so
described or filed; the descriptions in the
Registration Statement and the Prospectus
and any supplement or amendment thereto of
contracts and other documents to which the
Company is a party or by which it is bound,
incorporated by reference into the
Prospectus and any supplement or amendment
thereto, are accurate and fairly present in
all material respects the information
required to be presented therein; to
counsel's knowledge there is no action,
arbitration, suit, proceeding, inquiry,
investigation, litigation, governmental,
legal or other proceeding (including,
without limitation those having jurisdiction
over environmental or similar matters),
domestic or foreign, pending or threatened
against the Company, or involving the
properties or business of the Company which
is required to be disclosed in the
Registration Statement which is not so
disclosed. No Federal, state or local
statute or regulation required to be
described in the Prospectus is not described
as required;
(vi) the Company has full corporate power and
authority to enter into each of this
Agreement, the RPO and the Warrant Agreement
and to consummate the transactions
contemplated therein; and each of this
Agreement, the RPO and the Warrant Agreement
has been duly authorized, executed and
delivered by or on behalf of the Company.
Each of this Agreement, the RPO and the
Warrant Agreement, assuming due
authorization, execution and delivery by
each other party thereto, constitutes a
legal, valid and binding agreement of the
Company enforceable against the Company in
accordance with its respective terms (except
as such enforceability may be limited by
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applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of
general application relating to or affecting
enforcement of creditors' rights generally
and the application of general equitable
principles in any action, legal or
equitable, and except as to those provisions
relating to indemnity or contribution as to
which no opinion is expressed). None of the
Company's execution, delivery or performance
of this Agreement, the Warrant Agreement,
the RPO, or the conduct of its Business will
result in any breach or violation of any of
the terms or provisions of, or conflicts or
will conflict with or constitutes or will
constitute a default under, or result in the
creation or imposition of any lien, charge,
claim, encumbrance, pledge, security
interest, defect or other restriction or
equity of any kind whatsoever upon, any
property or assets (tangible or intangible)
of the Company pursuant to the terms of (A)
the articles of incorporation or by-laws of
the Company; (B) any material license,
contract, indenture, mortgage, deed of
trust, voting trust agreement, shareholders
agreement, note, loan or credit agreement or
any other agreement or instrument to which
the Company is a party or by which it is or
may be bound or to which any of its
properties or assets (tangible or
intangible) is or may be subject; (c) any
Federal, state or local statute, judgment,
decree, order, rule or regulation applicable
to the Company of any arbitrator, court,
regulatory body or administrative agency or
other governmental agency or body, domestic
or foreign, having jurisdiction over the
Company or any of its properties, or (D)
have any Material Adverse Effect on any
permit, certification, registration,
approval, consent, license or franchise
necessary for the Company to own or lease
and operate any of its properties and to
conduct its Business or the ability of the
Company to make use thereof;
(vii) the Firm has not been engaged to provide
legal services with respect to, nor does the
Firm have any knowledge of, any breach of or
a default under, any term or provision of
any license, contract, indenture, mortgage,
installment sale agreement, deed of trust,
lease, voting trust agreement, shareholders'
agreement, note, loan or credit agreement or
any other agreement or instrument evidencing
any obligation for borrowed money, or any
other agreement or instrument to which the
Company is a party or by which the Company
may be bound or to which the property or
assets (tangible or intangible) of the
Company is subject or affected. The Company
is not in violation of any term or provision
of its certificate of incorporation or
by-laws or, to counsel's knowledge in
violation of any franchise, license, permit,
judgment, decree, order, statute, rule or
regulation;
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(viii) the statements in the Prospectus under the
headings "THE COMPANY", "BUSINESS",
"MANAGEMENT," "PRINCIPAL STOCKHOLDERS,
"SELLING SECURITY HOLDERS", "CERTAIN
TRANSACTIONS", "DESCRIPTION OF SECURITIES",
and "SHARES ELIGIBLE FOR FUTURE SALE" have
been reviewed by such counsel, and insofar
as they refer to statements of law,
descriptions of statutes, licenses, rules or
regulations or legal conclusions, except for
any of the foregoing opined upon to the
underwriters by counsel to the Company other
than Xxxx, Xxxxxx, Xxxxxxx & Xxxxxxxxx,
P.C.; are correct in all material respects;
(ix) the Firm Securities have been accepted for
quotation on the OTC Bulletin Board;
(x) to counsel's knowledge, there are no claims,
payments, issuances, arrangements or
understandings for services in the nature of
a finder's or origination fee with respect
to the sale of the Securities hereunder or
financial consulting arrangement or any
other arrangements, agreements,
understandings, payments or issuances that
may affect the Underwriters' compensation,
as determined by the NASD;
(xi) to counsel's knowledge, the Company is not
party to any ERISA plans or defined benefit
plan, as defined in Section 3(35) of ERISA;
and
(xii) The Securities, when issued in accordance
with the terms of this Agreement, will be
duly and validly issued. The stock
certificates and warrants comprising the
Securities are in due and proper legal form.
To the knowledge of such counsel and except
as disclosed in the Prospectus, no holder of
any of the Company's securities has any
rights, "demand," "piggyback" or otherwise,
to have such securities registered or to
demand the filing of a registration
statement. Except as set forth in the
Prospectus, there are no preemptive or other
rights to subscribe for or purchase, or any
restriction upon the voting or transfer of,
any shares of Common Stock, under the
Certificate of Incorporation or By-Laws of
the Company or under the General Corporation
Law of the State of Delaware, or, to the
knowledge of such counsel, under any
agreement or other outstanding instrument to
which the Company is a party or by which it
is bound.
(xiii) To such counsel's knowledge, no approval or
consent of any court, board or governmental
agency, instrumentality or authority of the
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United States or of any state having
jurisdiction or authority over the Company
or of any other third party, not duly
obtained (other than any approval or consent
required under any state securities or Blue
Sky laws) is required for the valid
authorization, issuance, sale and delivery
of the Securities and the consummation of
the transactions contemplated by this
Agreement, the Warrant Agreement, the RPO or
the Offering Documents.
(xiv) To such counsel's knowledge, there are no
claims, actions, suits, hearings,
investigations, inquiries or proceedings of
any kind or nature, before or by any court,
governmental authority, tribunal or
instrumentality pending or threatened
against the Company or involving the
properties of the Company which could
materially and adversely affect the Business
of the Company, or which would reasonably be
expected to materially adversely affect the
transactions or other acts contemplated by
this Agreement, the Warrant Agreement, the
RPO or the validity or enforceability of
such agreements.
(xv) To such counsel's knowledge, there are no
material licenses, permits, certificates,
registrations, approvals or consents of any
governmental agency, commission, board,
instrumentality or department that are
required to be obtained by the Company in
order to conduct its current or presently
proposed business as described in the
Offering Documents which have not been so
obtained and the failure to so obtain which
would have a Material Adverse Effect.
(xvi) To such counsel's knowledge and except as
disclosed in the Prospectus, the issuance of
the Securities will not give any holder of
any of the Company's outstanding securities
or rights to purchase shares of the
Company's Common Stock, the right to
purchase any additional shares of Common
Stock and/or the right to purchase shares at
a reduced price.
The opinion shall also state that the Registration Statement,
the Prospectus and each amendment thereto or supplement thereof (except for the
financial statements and schedules and other financial information included
therein, as to which such counsel will express no opinion) comply as to form in
all material respects with the applicable requirements of the Act and the Rules
and Regulations.
Such counsel's opinion shall also include a statement to the
effect that it has participated in conferences with officers and other
representatives of the Company representatives of the independent public
accountants of the Company and representatives of the Representative at
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27
which the contents of the Registration Statement and the Prospectus were
discussed and, although such counsel is not passing upon and does not assume
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of
officers and other representatives of the Company), nothing has come to such
counsel's attention that causes it to believe that the Registration Statement at
the time the Registration Statement became effective contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus at the date of the Prospectus and as supplemented or amended
at all times up to and including the date of such opinion, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein, in light of circumstances under which they were made, not
misleading (it being understood that such counsel expresses no opinion or belief
with respect to the financial statements and schedules, statistical information
or other financial information included in the Registration Statement or
Prospectus, or as to information set forth in the Registration Statement under
the captions "Risk Factors -- Government Regulation", "Business -- Intellectual
Properties Patent, Patents Pending and Products", "Business -- Government
Regulation" and "Business -- Legal Proceedings").
(d) On or prior to each Closing Date, the Representative
shall receive from the President and chief financial officer of the Company a
certificate dated the date of each Closing Date stating that:
(i) the representations and warranties of the
Company in this Agreement are true and
correct in all material respects, on and as
of each Closing Date, and the Company has
complied with all agreements and covenants
and satisfied all conditions contained in
this Agreement on its part to be performed
or satisfied at or prior to each Closing
Date;
(ii) no stop order suspending the effectiveness
of the Registration Statement or any part
thereof has been issued, and no proceedings
for that purpose have been instituted or are
pending or, to the best of each of such
person's knowledge, after due inquiry, are
contemplated or threatened under the Act;
(iii) the Registration Statement and Prospectus
contain all statements and information
required to be included therein, and neither
of the Registration Statement or the
Prospectus includes any untrue statement of
a material fact or omits to state any
material fact required to be stated therein
or necessary to make statements therein not
misleading and neither the Preliminary
Prospectus or any supplement thereto
includes any untrue statement of a material
fact or omits to state any material fact
required to be stated therein or necessary
to make the statements therein, in light of
the circumstances under
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which they were made, not misleading, and
(iv) subsequent to the respective dates as of
which information is given in the
Registration Statement and the Prospectus,
(A) the Company has not incurred up to and
including each Closing Date, other than in
the ordinary course of its business, any
material liabilities or obligations, direct
or contingent; (B) the Company has not paid
or declared any dividends or other
distributions on its capital stock;(C)the
Company has not entered into any
transactions not in the ordinary course of
business; (D) there has not been any change
in the capital stock or long-term debt or
any increase in the short-term borrowings of
the Company; (E) the Company has not
sustained any loss or damage to its property
or assets, whether or not insured; (F) there
is no litigation which is pending or
threatened (or circumstances giving rise to
same) against the Company or any affiliated
party or any of the foregoing which is
required to be set forth in an amended or
supplemental Prospectus which has not been
set forth, and (G) there has occurred no
event required to be set forth in an amended
or supplemental Prospectus which has not
been set forth.
(References to the Registration Statement and the Prospectus in this subsection
are to such documents as amended and supplemented at the date of such
certificate.)
(e) By the Effective Date, the Underwriters will have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriters.
(f) 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 decreases, if any, referred to in clause
(iii) below) to the Underwriters and Underwriters' counsel, from Xxxxx Xxxxxxxx
LLP.
(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 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 of
Xxxxx Xxxxxxxx LLP with respect to the
financial statements and supporting
schedules included in the Registration
Statement;
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(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 the June 30, 1996
balance sheet included in the Registration
Statement, other than as set forth in or
contemplated by the Registration Statement,
or, if there was any change or decrease,
setting forth the amount of such change or
decrease;
(iv) setting forth, at a date not later than five
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
excluding any questions requiring an
interpretation by legal counsel, with the
results obtained from the application of
specified readings, inquiries and other
appropriate procedures (which procedures do
not constitute an examination in accordance
with generally accepted auditing standards)
set forth in the letter and found them to be
in agreement, and
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(vi) statements as to such other matters incident
to the transaction contemplated hereby as
the Representative may request.
(g) On each Closing Date, there shall have been duly
tendered to the Representative for the several Underwriters' accounts, the
certificates in the names and denominations requested by the Representative for
the Securities.
(h) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 7 hereof shall have been issued on the Closing Date and no proceedings
for that purpose shall have been instituted or shall be contemplated.
(i) On or before each Closing Date and upon exercise of
the RPO and payment of the exercise price therefor, if applicable, the Company
shall have executed and delivered to the Representative, the Representative's
Securities in the such denominations and to such designees as shall have been
provided to the Company.
(j) On or before Closing Date, the Securities shall have
been duly approved for quotation on the OTC Bulletin Board.
(k) On or before Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements, in form and
substance satisfactory to Underwriters' counsel.
(l) On or before Closing Date, the Company shall have
executed the RPO and the Warrant Agreement, substantially in the forms thereof
filed as exhibits to the Registration Statement.
(m) On or before the Effective Date 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, except as set forth in the
offering documents, are unencumbered, and satisfactory evidence, including
trademark and copyright searches, of its unencumbered title to its owned
intellectual properties.
If any condition to the Underwriters' obligations hereunder to
be fulfilled prior to or at the Closing Date is not so fulfilled, the
Representative may terminate this Agreement on notice to the Company or, if the
Representative so elects, it may waive any such conditions which have not been
fulfilled or extend the time for their fulfillment, and proceed with the
transactions contemplated by this Agreement.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each of the Underwriters (for purposes of this Section 7 "Underwriters" shall
include the officers, directors, partners,
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employees, agents and counsel of the Underwriters), including specifically each
person who may be substituted for an Underwriter (a "controlling person") within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from
and against any and all losses, claims, damages, expenses or liabilities, joint
or several (and actions in respect thereof), whatsoever (including but not
limited to any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever), as such are incurred, to which the Underwriters or such
controlling person may become subject under the Act, the Exchange Act or any
other statute or at common law or otherwise or under the laws of foreign
countries, arising out of based upon any untrue statement or alleged untrue
statement of a material fact contained (I) in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included securities of the
Company issued or issuable upon exercise of the Securities, or (iii) in any
application or other document or written communication (in this Section 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, OTC Bulletin Board or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in light of the circumstances
under which they were made) unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, or in
any application, as the case may be.
The indemnity agreement above referred to shall be in addition
to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its officers and
directors who has signed the Registration Statement, and each other person, if
any, who controls the Company, within the meaning of the Act, to the same extent
as the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company by such Underwriter expressly
for use in such Preliminary Prospectus, the Registration Statement or Prospectus
or any amendment thereof or supplement thereto or any such application. The
Company acknowledges that the statements with respect to the public offering of
the securities set forth under the heading "Underwriting," the risk factor
entitled "Experience of the Underwriter" and the stabilization legend in the
Prospectus have been furnished by the Underwriters expressly for use therein and
constitute the only information furnished in writing by or on behalf of the
Underwriters for inclusion in the Prospectus.
(c) Promptly after receipt of an indemnified party under this
Section 7 of notice
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of the commencement of any action, suit or proceeding, such indemnified party
shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of the
indemnified party or parties unless (I) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party; (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
Anything is this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent, provided, such consent was not unreasonably
withheld.
(d) In order to provide for just and equitable contribution in
any case in which (I) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand from the offering of the
Securities, or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (I) above but also the relative
fault of each of the contributing parties, on the one hand, and the party
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to be indemnified on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. In any case
where the Company is a contributing party and the Underwriters are the
indemnified party, the relative benefits received by the Company on the one
hand, and the Underwriters on the other, shall be deemed to be in the same
proportions as the total net proceeds from the offering of the Securities
(before deducting expenses) bear to the total underwriting discounts received by
the Underwriters hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission of alleged omission to state a material fact relates to
information supplied by the Company, or by the Underwriters, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expense or
liabilities (or actions in respect thereof) referred to above in this
subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claims. Notwithstanding the provisions of this
subdivision (d) the Underwriters shall not be required to contribute any amount
in excess of the underwriting discount applicable to the Securities purchased by
the Underwriters hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 12(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants and agreements contained in this
Agreement or contained in certificates of officers of the Company submitted
pursuant hereto, shall be deemed to be representations warranties and agreements
of the Company at the Closing Date and such representations, warranties and
agreements of the Company including without limitation the respective indemnity
agreements contained in Sections 4 and 7 hereof, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter, the Company, any controlling person of either the Underwriter
or the Company and shall survive the execution and/or termination of this
Agreement or the issuance and delivery of the Securities to the Underwriters and
the Representative, as the case may be.
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9. Effective Date. This Agreement shall become effective at 9:00
a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Representative, in its discretion, shall release the Securities
for the sale to the public, provided, the provisions of Sections 7, 8 and 10 of
this Agreement shall at all times be effective. For purposes of this Section 9,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Representative of telegrams to
securities dealers releasing such shares for offering or the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) The Representative shall have the right to terminate this
Agreement by giving written notice to the Company at any time prior to the
Closing Date if (I) market conditions are unsuitable for the offering
contemplated hereby at the price per Share and Warrant set forth in Section 5(a)
hereof and the Company and the Representative cannot agree on another price or
structure; or (ii) the Company shall have failed, refused, or been unable to
perform any of its obligations hereunder, or breached any of its representations
or warranties hereunder or there shall be a failure of a closing condition to
the Representative's obligations hereunder; (iii) information comes to the
Representative's attention subsequent to the date hereof relating to the
Company, its financial operations and status, its management, its prospects or
its position in the industry which would preclude a successful offering on the
terms set forth herein; (iv) a material adverse change has occurred in the
financial condition, business or prospects of the Company; (v) the Company has
failed to comply with all applicable statutes, laws, rules and regulations; (vi)
the Company cannot expeditiously proceed with the offering contemplated hereby;
(vii) an action, suit or proceeding at law or in equity is commenced or brought
against the Company by any Federal, state or other commission, board or agency,
where any unfavorable decision would materially adversely affect the business
property, financial condition, prospects or income of the Company; (viii) any
domestic or international event or act or occurrence shall have disrupted the
financial markets; (ix) minimum or maximum prices shall have been established by
the New York Stock Exchange, by the American Stock Exchange or in the
over-the-counter market by the NASD (but not in the discretion of any
Underwriter), or trading in securities generally shall have been suspended or
materially limited by either stock exchange or in the over-the-counter market by
the NASD; (x) the United States shall have become involved in a war or major
hostilities, or if there shall have been an escalation in an existing war or
major hostilities in which the United States is a participant, or a national
emergency shall have been declared in the United States; (xi) a general banking
moratorium shall have been declared by New York or Federal authorities, or (xii)
there shall have been a material adverse change in the general market, political
or economic conditions in the United States, such that in any such case, in the
Representative's judgment it would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities.
(b) If the Representative exercises its rights to terminate
this Agreement and not proceed with the Offering as a result of the
circumstances enumerated in subclauses (ii) through (xi)
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of the previous sentence, the Company shall reimburse the Representative in full
for its accountable out-of-pocket expenses (including the Representative's
counsel fees and disbursements), minus any amounts previously paid pursuant to
Section 5 hereof. If the Representative exercises its rights to terminate this
Agreement as a result of the circumstances enumerated in subclause (I) of such
sentence, the Company shall reimburse the Representative in full for its
accountable out-of-pocket expenses (including the Representative's counsel fees
and disbursements) up to a maximum of $75,000 minus the amount previously paid
pursuant to Section 5 hereof.
(c) In the event the Representative elects not to proceed with
the offering contemplated hereby as a result of any condition enumerated in
Section 10(a) above, then the Company agrees that it will not negotiate with or
engage any investment banking firm or underwriter other than the Representative
with respect to any private or public financing for the Company during the
12-month period commencing on the date of such termination.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 8 or Section 11
hereof) to purchase the Securities which it or they are obligated to purchase on
such date under this Agreement (the "Defaulted Securities"), the Representative
shall have the right, within 24 hours thereafter, to make arrangement for one or
more of the non-defaulting Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth and if any such underwriter
is willing to so purchase the Defaulted Securities, then notwithstanding Section
14(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 Firm
Securities to be purchased on such date, the
non-defaulting Underwriters shall be
obligated to purchase the full amount
thereof in the proportions that their
respective underwriting obligations
hereunder bear to the underwriting
obligations of all non-defaulting
Underwriters, or
(ii) if the number of Defaulted Securities
exceeds 10% of the total number of Firm
Securities, this Agreement shall terminate
without liability on the part of any
non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period 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.
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12. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given three days following the day when mailed by prepaid first class
mail, or upon the day of personal delivery. Notices to the Underwriters shall be
directed to the Representative, IAR Securities Corp., 00 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Att: Xxxxx Xxxxxxxxxx, President, with a copy to Xxxxxxx &
Xxxxxxx, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Att: Xxxxxxx Xxxxxxx, Esq.
Notices to the Company shall be directed to the Company at 000 Xxxxxxx Xxxxxxxx,
Xxxxxxx, XX 00000, with a copy to Blau, Xxxxxx, Wactlar & Xxxxxxxxx, P.C., 000
Xxxxxxx Xxxxxxxxxx, Xxxxxxx, XX 00000, Att: Xxxxx X. Xxxxxxxxx, Esq.
13. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers and their respective successors, legal
representatives and assigns, and no person shall have or be construed to have
any legal or equitable right, remedy or claim under or in respect of by virtue
of this Agreement or any provisions herein contained. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
14. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the law of the State of New York without giving
effect to the choice of law or conflict of laws principles.
15. 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.
16. Entire Agreement; Amendments. This Agreement and the Warrant
Agreement constitute the entire agreement 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.
17. Law. This Agreement shall be deemed to have been made and delivered
in New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company and you (I) agree that any legal suit, action or
proceeding arising out or relating to this letter shall be instituted
exclusively in New York State Supreme Court, County of New York or in the United
States District Court for the Southern District of New York, and the United
States District Court for the Southern District of New York; (ii) waive any
objection to the venue of any such suit, action or proceeding, and (iii)
irrevocably consent to the jurisdiction of the New York State Supreme Court,
County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. The Company and you
further agree to accept and acknowledge service of any and all process which may
be served in any such suit, action or proceeding in the New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New
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York and agree that service of process upon it mailed by certified mail to its
address shall be deemed in every respect effective service of process upon it in
any such suit, action or proceeding.
18. No Assignment. Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the prior written consent of
the other party, and any attempted assignment without such consent shall be void
and of no effect.
19. Schedules. Any disclosure made on any schedule hereto shall be
deemed as also having been made on any other schedule hereto as to which such
disclosure is also responsive.
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If the foregoing correctly sets forth the understanding
between the Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
XXXX'S ORIGINAL, INC.
By:__________________________________
Xxxxxxx Xxxxx
President
Confirmed and accepted as of
the date first above written
IAR Securities Corp.
For itself and as Representative
of the other Underwriters named
in Schedule A hereto.
By: _______________________________
Xxxxx Xxxxxxxxxx
President
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SCHEDULE A
Number of Shares to Number of Warrants to
Underwriter be Purchased be Purchased
----------- ------------------- ---------------------
IAR Securities Corp. ------------ ------------
Millennium Securities Corp. ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
TOTAL $
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