600,000 Units (each Unit consisting of two (2) shares of
Common Stock, no par value per share and two (2)
Warrants for Common Stock)
ALL COMMUNICATIONS CORPORATION
UNDERWRITING AGREEMENT
New York, New York
__________, 1997
▇▇▇▇▇▇ ▇▇▇▇▇▇ Securities, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
All Communications Corporation, a New Jersey corporation (the
"Company"), proposes to issue and sell to you (the "Underwriter"), an aggregate
of 600,000 Units ("Units"), each Unit consisting of two (2) shares of Common
Stock, no par value per share ("Common Stock"), and two (2) Class A Redeemable
Purchase Warrants for Common Stock ("Warrants"). The Units, Common Stock and
Warrants may be collectively referred to hereinafter as the "Securities". Each
Warrant entitles the registered holder thereof to purchase one (1) share of
Common Stock at an exercise price of $4.25 per share for a period of three (3)
years, commencing __________, 1998 (one (1) year from the Effective Date)
through __________, 2001. The Warrants are subject to redemption by the Company
upon not less than thirty (30) days' notice at any time after ___________, 1998
(eighteen (18) months from the Effective Date) or earlier with the consent of
the Underwriter, at $.10 per warrant, if the closing sale price per share of
Common Stock has equaled or exceeded 250% of the then exercise price of the
Warrants on all 20 business days ending on the third day prior to the written
notice of redemption. In addition, the Company proposes to grant to the
Underwriter the option referred to in Section 2(b) to purchase all or any part
of an aggregate of 90,000 additional Units.
Unless the context otherwise requires, the aggregate of 600,000 Units
to be sold by the Company (together with the additional Units sold pursuant to
Section 2(b)) and the shares of Common Stock and the Warrants comprising the
Units, are herein called the "Units." The Common Stock to be outstanding after
giving effect to the sale of the Units are also called the "Shares."
You have advised the Company that you desire to purchase the Units.
The Company confirms the agreements made by it with respect to the purchase of
the Units by the Underwriter as follows:
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with you that:
(a) A registration statement (File No. 333-_______) on Form
SB-2 relating to the public offering of the Units, including a form of
prospectus subject to completion, copies of which have heretofore been delivered
to you, has been prepared in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission under the Act and one or more
amendments to such registration statement may have been so filed. After the
execution of this Agreement, the Company will file with the Commission either
(i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a prospectus in the
form most recently included in an amendment to such registration statement (or,
if no such amendment shall have been filed in such registration statement), with
such changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been provided to and approved
by you prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the Commission
to be effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been furnished to
and approved by you prior to the execution of this Agreement. As used in this
Agreement, the term "Company" means All Communications Corporation and/or each
of its subsidiaries ("Subsidiaries"); the term "Registration Statement" means
such registration statement, as amended at the time when it was or is declared
effective, including all financial schedules and exhibits thereto and including
any information omitted therefrom pursuant to Rule 430A under the Act and
included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); and the term
"Prospectus" means the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Act, or, if no prospectus is required to be filed pursuant
to said Rule 424(b), such term means the prospectus included in the Registration
Statement; except that if such registration statement or prospectus is amended
or such prospectus is supplemented, after the effective date of such
registration statement and prior to the Option Closing Date (as hereinafter
defined), the terms "Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term "Prospectus"
shall include the prospectus as so supplemented, or both, as the case may be.
2
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time the Registration
Statement becomes effective and at all times subsequent thereto up to and on the
First Closing Date (as hereinafter defined) or the Option Closing Date, as the
case may be, (i) the Registration Statement and Prospectus will in all respects
conform to the requirements of the Act and the Rules and Regulations; and (ii)
neither the Registration Statement nor the Prospectus will include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make statements therein not misleading; provided,
however, that the Company makes no representations, warranties or agreements as
to information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Underwriter specifically for use
in the preparation thereof. It is understood that the statements set forth in
the Prospectus with respect to stabilization, under the heading "Underwriting",
the Risk Factor entitled "Underwriter's Limited Underwriting Experience" and the
identity of counsel to the Underwriter under the heading "Legal Matters"
constitute for purposes of this Section and Section 6(b) the only information
furnished in writing by or on behalf of the Underwriter for inclusion in the
Registration Statement and Prospectus, as the case may be.
(c) The Company and its Subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation with full corporate
power and authority to own their properties and conduct their business as
described in the Prospectus and are duly qualified or licensed to do business as
foreign corporations and are in good standing in each other jurisdiction in
which the nature of their business or the character or location of their
properties require such qualification, except where the failure to so qualify
will not materially adversely affect the Company's or Subsidiaries' business,
properties or financial condition.
(d) The authorized, issued and outstanding capital stock of
the Company and its Subsidiaries, including the predecessors of the Company, is
as set forth the Company's financial statements contained in the Registration
Statement; the shares of issued and outstanding capital stock of the Company and
its Subsidiaries set forth therein have been duly authorized, validly issued and
are fully paid and nonassessable; except as set forth in the Prospectus, no
options, warrants, or other rights to purchase, agreements or other obligations
to issue, or agreements or other rights to convert any obligation into, any
shares of capital stock of the Company or its Subsidiaries have been granted or
entered into by the Company or its Subsidiaries; and the capital stock conforms
to all statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Units and the shares of Common Stock, when paid for,
issued and delivered pursuant to this Agreement, will have been duly authorized,
issued and delivered and will constitute valid and legally binding obligations
of the Company enforceable in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the right of creditors generally or by general equitable principles, and
entitled to
3
the rights and preferences provided by the Certificate of Incorporation, which
will be in the form filed as an exhibit to the Registration Statement. The terms
of the Common Stock conform to the description thereof in the Registration
Statement and Prospectus.
The Warrants, when paid for, issued and delivered pursuant to
this Agreement, will have been duly authorized, issued and delivered and will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the right of creditors generally
or by general equitable principles, and entitled to the benefits provided by the
warrant agreement pursuant to which such Warrants are to be issued (the "Warrant
Agreement"), which will be substantially in the form filed as an exhibit to the
Registration Statement. The shares of Common Stock issuable upon exercise of the
Warrants have been reserved for issuance upon the exercise of the Warrants and
when issued in accordance with the terms of the Warrants and Warrant Agreement,
will be duly and validly authorized validly issued, fully paid and
non-assessable and free of preemptive rights. The Warrant Agreement has been
duly authorized and, when executed and delivered pursuant to this Agreement,
assuming due authorization, execution and delivery by the transfer agent, will
have been duly executed and delivered and will constitute the valid and legally
binding obligation of the Company enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally or by general equitable principles.
The Warrants and Warrant Agreement conform to the respective descriptions
thereof in the Registration Statement and Prospectus.
The Purchase Option (as defined in the Registration
Statement), when paid for, issued and delivered pursuant to this Agreement will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms and entitled to the benefits provided by the
Purchase Option, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors generally or by
general equitable principles. The Securities issuable upon exercise of the
Purchase Option (and the shares of Common Stock issuable upon exercise of the
Warrants) when issued and paid for in accordance with this Agreement, the
Purchase Option and the Warrant Agreement, will be duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights.
(f) This Agreement has been duly and validly authorized,
executed and delivered by the Company. The Company has full power and authority
to authorize, issue and sell the Units to be sold by it hereunder on the terms
and conditions set forth herein, and no consent, approval, authorization or
other order of any governmental authority is required in connection with such
authorization, execution and delivery or in connection with the authorization,
issuance and sale of the Units or the Purchase Option, except such as may be
required under the Act or state securities laws.
(g) Except as described in the Prospectus, or which would not
have a material adverse effect on the condition (financial or otherwise),
business prospects, net worth
4
or properties of the Company and the Subsidiaries taken as a whole (a "Material
Adverse Effect"), the Company and its Subsidiaries are not in violation, breach
or default of or under, and consummation of the transactions herein contemplated
and the fulfillment of the terms of this Agreement will not conflict with, or
result in a breach or violation of, any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the property or assets of the Company or its
Subsidiaries pursuant to the terms of any material indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
its Subsidiaries is a party or by which the Company or its Subsidiaries may be
bound or to which any of the property or assets of the Company or its
Subsidiaries is subject, nor will such action result in any violation of the
provisions of the certificate of incorporation or the by-laws of the Company or
its Subsidiaries, as amended, or any statute or any order, rule or regulation
applicable to the Company or its Subsidiaries of any court or of any regulatory
authority or other governmental body having jurisdiction over the Company or its
Subsidiaries.
(h) Subject to the qualifications stated in the Prospectus,
the Company and its Subsidiaries have good and marketable title to all
properties and assets described in the Prospectus as owned by them, free and
clear of all liens, charges, encumbrances or restrictions, except such as are
not materially significant or important in relation to their business; all of
the material leases and subleases under which the Company or its Subsidiaries is
the lessor or sublessor of properties or assets or under which the Company and
its Subsidiaries holds properties or assets as lessee or sublessee as described
in the Prospectus are in full force and effect, and, except as described in the
Prospectus, the Company and its Subsidiaries are not in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and, to the best knowledge of the Company, no claim has been asserted
by anyone adverse to rights of the Company or its Subsidiaries as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company or its Subsidiaries
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus; and
the Company and its Subsidiaries own or lease all such properties described in
the Prospectus as are necessary to their operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted as set forth
in the Prospectus.
(i) ________________, which has given its report on certain
financial statements filed with the Commission as a part of the Registration
Statement, is with respect to the Company, independent public accountants as
required by the Act and the Rules and Regulations.
(j) The financial statements, and schedules together with
related notes, set forth in the Prospectus or the Registration Statement present
fairly the financial position and results of operations and changes in cash flow
position of the Company and its Subsidiaries on the basis stated in the
Registration Statement, at the respective dates and for the respective
5
periods to which they apply. Said statements and schedules and related notes
have been prepared in accordance with generally accepted accounting principles
applied on a basis which is consistent during the periods involved except as
disclosed in the Prospectus and Registration Statement.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus and except as otherwise
disclosed or contemplated therein, the Company and its Subsidiaries have 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 would have a Material Adverse Effect, and there has
not been any change in the capital stock of, or any incurrence of short-term or
long-term debt by, the Company or its Subsidiaries or any issuance of options,
warrants or other rights to purchase the capital stock of the Company or its
Subsidiaries or any material adverse change or any development involving, so far
as the Company or its Subsidiaries can now reasonably foresee a prospective
adverse change in the condition (financial or otherwise), net worth, results of
operations, business, key personnel or properties of it which would have a
Material Adverse Effect.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company or its Subsidiaries is a party before or by any
court or governmental agency or body, which might result in any material adverse
change in the financial condition, business prospects, net worth, or properties
of the Company or its Subsidiaries, nor are there any actions, suits or
proceedings related to environmental matters or related to discrimination on the
basis of age, sex, religion or race; and no labor disputes involving the
employees of the Company or its Subsidiaries exist or to the knowledge of the
Company, are threatened which might be expected to have a Material Adverse
Effect.
(m) Except as disclosed in the Prospectus, the Company and its
Subsidiaries have filed all necessary federal, state and foreign income and
franchise tax returns required to be filed as of the date hereof and have paid
all taxes shown as due thereon; and there is no tax deficiency which has been,
or to the knowledge of the party, may be asserted against the Company or its
Subsidiaries.
(n) Except as disclosed in the Registration Statement or
Prospectus, the Company and its Subsidiaries have sufficient licenses, permits
and other governmental authorizations currently necessary for the conduct of
their business or the ownership of their properties as described in the
Prospectus and is in all material respects complying therewith and owns or
possesses adequate rights to use all material patents, patent applications,
trademarks, service marks, trade-names, trademark registrations, service ▇▇▇▇
registrations, copyrights and licenses necessary for the conduct of such
businesses and have not received any notice of conflict with the asserted rights
of others in respect thereof. To the best knowledge of the Company, none of the
activities or business of the Company and its Subsidiaries are in
6
violation of, or cause the Company or its Subsidiaries to violate, any law,
rule, regulation or order of the United States, any state, county or locality,
or of any agency or body of the United States or of any state, county or
locality, the violation of which would have a Material Adverse Effect.
(o) The Company and its Subsidiaries have not, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in violation
of law or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments or contributions required or allowed by applicable
law. The Company's and Subsidiaries' internal accounting controls and procedures
are sufficient to cause the Company and its Subsidiaries to comply in all
material respects with the Foreign Corrupt Practices Act of 1977, as amended.
(p) On the Closing Dates (hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Securities to the Underwriter
hereunder will have been fully paid or provided for by the Company and all laws
imposing such taxes will have been complied with in all material respects.
(q) All contracts and other documents of the Company which
are, under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) Except as disclosed in the Registration Statement, the
Company has no Subsidiaries.
(s) Except as disclosed in the Registration Statement, the
Company has not entered into any agreement pursuant to which any person is
entitled either directly or indirectly to compensation from the Company for
services as a finder in connection with the proposed public offering.
(t) Except as previously disclosed in writing by the Company
to the Underwriter or as disclosed in the Registration Statement, no officer,
director or stockholder of the Company has any National Association of
Securities Dealers, Inc. (the "NASD") affiliation.
(u) No other firm, corporation or person has any rights to
underwrite an offering of any of the Company's securities.
7
2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties, and agreements herein
contained, the Company agrees to issue and sell to the Underwriter and the
Underwriter agrees to buy from the Company at $6.30 per Unit, at the place and
time hereinafter specified, 600,000 Units (the "First Units").
Delivery of the First Units against payment therefor shall
take place at the offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ (or at such other place as may be designated by agreement between
the Underwriter and the Company) at 10:00 a.m., New York time, on __________,
1997, or at such later time and date as the Underwriter may designate in writing
to the Company at least two business days prior to such purchase, but not later
than __________, 1997 such time and date of payment and delivery for the First
Units being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter (the
"Over-Allotment Option") to purchase all or any part of an aggregate of an
additional 90,000 Units to cover over allotments at the same price per Unit as
the Underwriter shall pay for the First Units being sold pursuant to the
provisions of subsection (a) of this Section 2 (such additional Units being
referred to herein as the "Option Units"). This option may be exercised within
45 days after the effective date of the Registration Statement upon written
notice by the Underwriter to the Company advising as to the amount of Option
Units as to which the option is being exercised, the names and denominations in
which the certificates for such Option Units are to be registered and the time
and date when such certificates are to be delivered. Such time and date shall be
determined by the Underwriter but shall not be earlier than four nor later than
ten full business days after the exercise of said option (but in no event more
than 55 days after the Effective Date), nor in any event prior to the First
Closing Date, and such time and date is referred to herein as the "Option
Closing Date." Delivery of the Option Units against payment therefor shall take
place at the offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇ (or at such other place as may be designated by agreement between the
Underwriter and the Company). The option granted hereunder may be exercised only
to cover over-allotments in the sale by the Underwriter of First Units referred
to in subsection (a) above. No Option Units shall be delivered unless all First
Units shall have been delivered to the Underwriter as provided herein.
(c) The Company will make the certificates for the Units to be
purchased by the Underwriter hereunder available to you for checking at least
two full business days prior to the First Closing Date or the Option Closing
Date (which are collectively referred to herein as the "Closing Dates"). The
certificates shall be in such names and denominations as you may request, at
least three full business days prior to the Closing Dates. Delivery of the
8
certificates at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Units to be
purchased by the Underwriter hereunder will be delivered by the Company to you
for the account of the Underwriter against payment of the respective purchase
prices by the Underwriter, by wire transfer or certified or bank cashier's
checks in New York Clearing House funds, payable to the order of the Company.
In addition, in the event the Underwriter exercises the option
to purchase from the Company all or any portion of the Option Units pursuant to
the provisions of subsection (b) above, payment for such Units shall be made to
or upon the order of the Company by wire transfer or certified or bank cashier's
checks payable in New York Clearing House funds at the offices of ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, N.Y., at the time and date of
delivery of such Units as required by the provisions of subsection (b) above,
against receipt of the certificates for such Units by you for your account
registered in such names and in such denominations as you may reasonably
request.
It is understood that the Underwriter proposes to offer the
Units to be purchased hereunder to the public upon the terms and conditions set
forth in the Registration Statement, after the Registration Statement becomes
effective.
3. Covenants of the Company. The Company covenants and agrees
with the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective. If required, the Company will file
the Prospectus and any amendment or supplement thereto with the Commission in
the manner and within the time period required by Rule 424(b) under the Act.
Upon notification from the Commission that the Registration Statement has become
effective, the Company will so advise you and will not at any time, whether
before or after the effective date, file any amendment to the Registration
Statement or supplement to the Prospectus of which you shall not previously have
been advised and furnished with a copy or to which you or your counsel shall
have reasonably objected in writing or which is not in compliance with the Act
and the Rules and Regulations. At any time prior to the later of (A) the
completion by the Underwriter of the distribution of the Units contemplated
hereby (but in no event more than nine months after the date on which the
Registration Statement shall have become or been declared effective) and (B) 25
days after the date on which the Registration Statement shall have become or
been declared effective, the Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the Registration
Statement or Prospectus which, in the opinion of counsel to the Company and the
Underwriter, may be reasonably necessary or advisable in connection with the
distribution of the Units.
9
As soon as the Company is advised thereof, the Company will
advise you, and provide you copies of any written advice, of the receipt of any
comments of the Commission, of the effectiveness of any post-effective amendment
to the Registration Statement, of the filing of any supplement to the Prospectus
or any amended Prospectus, of any request made by the Commission for an
amendment of the Registration Statement or for supplementing of the Prospectus
or for additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order or
threat thereof suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Units for offering in any jurisdiction,
or of the institution of any proceedings for any of such purposes, and will use
its best efforts to prevent the issuance of any such order, and, if issued, to
obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriter and dealers to use the Prospectus in connection with the sale of
the Units for such period as in the opinion of counsel to the Underwriter and
the Company the use thereof is required to comply with the applicable provisions
of the Act and the Rules and Regulations. In case of the happening, at any time
within such period as a Prospectus is required under the Act to be delivered in
connection with sales by the Underwriter or dealer of any event of which the
Company has knowledge and which materially affects the Company or the securities
of the Company, or which in the opinion of counsel for the Company and counsel
for the Underwriter should be set forth in an amendment of the Registration
Statement or a supplement to the Prospectus in order to make the statements
therein not then misleading, in light of the circumstances existing at the time
the Prospectus is required to be delivered to a purchaser of the Units or in
case it shall be necessary to amend or supplement the Prospectus to comply with
law or with the Rules and Regulations, the Company will notify you promptly and
forthwith prepare and furnish to you copies of such amended Prospectus or of
such supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material facts necessary in order to make the statements in the Prospectus, in
the light of the circumstances under which they are made, not misleading. The
preparation and furnishing of any such amendment or supplement to the
Registration Statement or amended Prospectus or supplement to be attached to the
Prospectus shall be without expense to the Underwriter, except that in case the
Underwriter is required, in connection with the sale of the Units to deliver a
Prospectus nine months or more after the effective date of the Registration
Statement, the Company will upon request of and at the expense of the
Underwriter, amend or supplement the Registration Statement and Prospectus and
furnish the Underwriter with reasonable quantities of prospectuses complying
with Section 10(a)(3) of the Act.
10
The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations thereunder in connection with the offering and issuance of
the Securities.
(b) The Company will furnish such information as may be
required and to otherwise cooperate and use its best efforts to qualify or
register the Units for sale under the securities or "blue sky" laws of such
jurisdictions as you may designate and will make such applications and furnish
such information as may be required for that purpose and to comply with such
laws, provided the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent of service
of process in any jurisdiction in any action other than one arising out of the
offering or sale of the Units. The Company will, from time to time, prepare and
file such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the counsel to the Company and
the Underwriter deem reasonably necessary.
(c) If the sale of the Units provided for herein is not
consummated as a result of the Company not performing its obligations hereunder
in all material respects, the Company shall pay all costs and expenses incurred
by it which are incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in Section
8, including the accountable expenses of the Underwriter (including the
reasonable fees and expenses of counsel to the Underwriter), if the offering is
not consummated.
(d) The Company will use its best efforts to (i) cause a
registration statement under the Exchange Act to be declared effective
concurrently with the completion of this offering and will notify you in writing
immediately upon the effectiveness of such registration statement, and (ii) to
obtain and keep current a listing in the Standard & Poors or ▇▇▇▇▇'▇ OTC
Industrial Manual.
(e) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Exchange Act, the Company, at its expense,
will furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail and
at its expense, will furnish to you during the period ending five (5) years from
the date hereof, (i) as soon as practicable after the end of each fiscal year,
but no earlier than the filing of such information with the Commission a balance
sheet of the Company and any of its Subsidiaries as at the end of such fiscal
year, together with statements of income, surplus and cash flow of the Company
and any Subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as practicable after the end of each of the first
three fiscal quarters of each fiscal year, but no earlier than the filing of
such information with the Commission, consolidated summary financial information
of the Company for such quarter in reasonable detail; (iii) as soon as they are
publicly available, a copy of all reports (financial or other) mailed to
security holders; (iv) as soon as they are available, a copy of all non-
11
confidential reports and financial statements furnished to or filed with the
Commission or any securities exchange or automated quotation system on which any
class of securities of the Company is listed; and (v) such other information as
you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or
Subsidiaries, such financial statements referred to in subsection (e) above will
be on a consolidated basis to the extent the accounts of the Company and its
subsidiary or Subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will deliver to you at or before the First
Closing Date two signed copies of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the Underwriter such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon your order, from time to time until
the effective date of the Registration Statement, as many copies of any
Preliminary Prospectus filed with the Commission prior to the effective date of
the Registration Statement as you may reasonably request. The Company will
deliver to the Underwriter on the effective date of the Registration Statement
and thereafter for so long as a Prospectus is required to be delivered under the
Act, from time to time, as many copies of the Prospectus, in final form, or as
thereafter amended or supplemented, as the Underwriter may from time to time
reasonably request.
(h) The Company will make generally available to its security
holders and to the registered holders of its Warrants and deliver to you as soon
as it is practicable to do so but in no event later than 90 days after the end
of twelve months after its current fiscal quarter, an earnings statement (which
need not be audited) covering a period of at least twelve consecutive months
beginning after the effective date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of
the Securities substantially for the purposes set forth under "Use of Proceeds"
in the Prospectus and, except as set forth therein, shall not use any proceeds
to pay any (i) debt for borrowed funds, or (ii) debt or obligation owed to any
insider outside of salary in the ordinary course of business.
(j) The Company will promptly prepare and file with the
Commission any amendments or supplements to the Registration Statement,
Preliminary Prospectus or Prospectus and take any other action, which in the
opinion of counsel to the Underwriter and counsel to the Company, may be
reasonably necessary or advisable in connection with the distribution of the
Securities, and will use its best efforts to cause the same to become effective
as promptly as possible.
12
(k) The Company will reserve and keep available the maximum
number of its authorized but unissued securities which are issuable upon
exercise of the Purchase Option outstanding from time to time.
(l) (1) For a period of thirty six (36) months from the First
Closing Date or twenty four (24) months with respect to the Bridge Lenders to
the Company or ▇▇▇▇▇▇▇ ▇▇▇▇▇, no officer, director or shareholder of any
securities prior to the offering will, directly or indirectly, offer, sell
(including any short sale), grant any option for the sale of, acquire any option
to dispose of, or otherwise dispose of any shares of Common Stock without the
prior written consent of the Underwriter, other than as set forth in the
Registration Statement. In order to enforce this covenant, the Company shall
impose stop-transfer instructions with respect to the securities owned by every
shareholder prior to the offering until the end of such period (subject to any
exceptions to such limitation on transferability set forth in the Registration
Statement). If necessary to comply with any applicable Blue-sky Law, the shares
held by such shareholders will be escrowed with counsel for the Company or
otherwise as required.
(2) Except for the issuance of shares of capital stock by the
Company in connection with a dividend, recapitalization, reorganization or
similar transactions or as result of the exercise of warrants or options to
purchase up to 500,000 shares of Common Stock pursuant to an incentive and
non-qualified stock option plan disclosed in or issued or granted pursuant to
plans disclosed in the Registration Statement, the Company shall not, for a
period of thirty six (36) months following the First Closing Date, directly or
indirectly, offer, sell, issue or transfer any shares of its capital stock, or
any security exchangeable or exercisable for, or convertible into, shares of the
capital stock or (including stock options) register any of its capital stock
(under any form of registration statement including Form S-8), without the prior
written consent of the Underwriter upon at least 30 days' notice. Options
granted pursuant to plans must be exercisable at the fair market value on the
date of grant. Notwithstanding the foregoing provisions, the Company may issue
securities during said thirty six (36) month period in connection with
acquisitions by the Company which would have a positive effect on the Company's
income statement based upon generally accepted accounting principles.
(m) Upon completion of this offering, the Company will make
all filings required, including registration under the Exchange Act, to obtain
the listing of the Units, Common Stock and the Warrants in the Nasdaq SmallCap
system, and will use its best efforts to effect and maintain such listing for at
least five years from the date of this Agreement.
(n) Except for the transactions contemplated by this Agreement
and as disclosed in the Prospectus, the Company represents that it has not taken
and agrees that it will not take, directly or indirectly, any action designed to
or which has constituted or which might reasonably be expected to cause or
result in the stabilization or manipulation of the price of any of the
Securities.
13
(o) On the First Closing Date and simultaneously with the
delivery of the Units, the Company shall execute and deliver to you the Purchase
Option. The Purchase Option will be substantially in the form filed as an
Exhibit to the Registration Statement.
(p) On the First Closing Date, the Company will have in force
key person life insurance on the life of ▇▇. ▇▇▇▇▇ in an amount of not less than
$1,000,000, payable to the Company, and will use its best efforts to maintain
such insurance during the three year period commencing with the First Closing
Date.
(q) So long as any Warrants are outstanding and the exercise
price of the Warrants is less than the market price of the Common Stock, the
Company shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant and to furnish to the Underwriter as many
copies of each such Prospectus as such Underwriter or dealer may reasonably
request. The Company shall not call for redemption of any of the Warrants unless
a registration statement covering the securities underlying the Warrants has
been declared effective by the Commission and remains current at least until the
date fixed for redemption.
(r) For a period of five (5) years following the Effective
Date, the Company will maintain registration with the Commission pursuant to
Section 12(g) of the Exchange Act and will provide to the Underwriter copies of
all filings made with the Commission pursuant to the Exchange Act. In the event
that the Company fails to maintain registration with the Commission pursuant to
Section 12(g) during such five year period, the Company will provide reasonable
access to an independent accountant designated by the Underwriter, to all books,
records and other documents or statements that reflect the Company's financial
status at least once each quarter, at the Company's expense.
(s) The Company agrees to pay the Underwriter a warrant
solicitation fee of 5.0% of the exercise price of any of the Warrants exercised
beginning one (1) year after the Effective Date (not including warrants
exercised by the Underwriter) if (a) the market price of the Company's Common
Stock on the date the Warrant is exercised is greater than the exercise price of
the Warrant, (b) the exercise of the Warrant was solicited by the Underwriter
and the holder of the warrant designates the Underwriter in writing as having
solicited such Warrant, (c) the Warrant is not held in a discretionary account,
(d) disclosure of the compensation arrangement is made upon the sale and
exercise of the Warrants, (e) soliciting the exercise is not in violation of
Rule 10b-6 under the Securities Exchange Act of 1934, and (f) solicitation of
the exercise is in compliance with the NASD Notice to Members 81-38 (September
22, 1981).
(t) For a period of two years from the Effective Date, at the
request of the Underwriter, the Company shall provide promptly, at the expense
of the Company, copies of
14
the Company's monthly transfer sheets furnished to it by its transfer agent and
copies of the securities position listings provided to it by the Depository
Trust Company.
(u) The Company hereby agrees that:
(i) The Company will pay a finder's fee to the
Underwriter, equal to five percent (5%) of the first $3,000,000 of the
consideration involved in any transaction, 4% of the next $3,000,000 of
consideration involved in the transaction, 3% of the next $2,000,000, 2% of the
next $2,000,000 and 1% of the excess, if any, for future consummated
transactions, if any, introduced by the Underwriter (including mergers,
acquisitions, joint ventures, and any other business for the Company introduced
by the Underwriter) consummated by the Company (an "Introduced Consummated
Transaction"), in which the Underwriter introduced the other party to the
Company during a period ending five years following the First Closing Date; and
(ii) Any finder's fee due hereunder will be paid in
cash or other consideration that is acceptable to the Underwriter, at the
closing of the particular Introduced Consummated Transaction for which the
finder's fee is due.
(v) Upon the first Closing Date and simultaneously with the
delivery of the Securities, the Company shall execute and deliver to the
Underwriter, a two year financial consulting agreement in the form attached as
an Exhibit to the Registration Statement which shall require the Company to pay
the Underwriter 2% of the gross proceeds of the Offering. (the "Financial
Consulting Agreement").
(w) For a period of two (2) years following the Effective Date
the Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company's financial
statements for each of the first three (3) fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
10-Q quarterly report and the mailing of quarterly financial information to
stockholders, provided that the Company shall not be required to file a report
of such accountants relating to such review with the Commission. The Company
will retain its present legal counsel and independent certified public
accountants for at least one year from the Closing Date.
(x) For the two (2) year period commencing on the First
Closing Date, the Company shall recommend and use its best efforts to elect a
designee of the Underwriter as a member of the Company's Board of Directors.
Such designee shall serve on the Compensation Committee of the Board of
Directors so long as such designee would qualify as disinterested for the
purpose of Section 162(m) of the Internal Revenue Code of 1986, as amended.
Alternatively, the Underwriter may appoint an advisor who will be able to attend
all meetings of the Board of Directors. However, the Board of Directors shall
have the right to require such advisor to execute a confidentiality agreement
satisfactory to the Company. The
15
Underwriter shall also have the right to written notice no later than notice to
other directors of each meeting and to obtain copies of the minutes, if
requested, from all Board of Directors meetings for two (2) years following the
Effective Date of the Registration Statement, whether or not a nominee of the
Underwriter attends or participates in any such Board meeting. To the extent
permitted by law, the Company will indemnify the Underwriter and its designee
for the actions of such designee as a director of the Company. The Company will
use its best efforts to obtain liability insurance not to exceed $50,000 per
year in premiums to cover acts of officers and directors, including said
designee. The Company agrees to reimburse the Underwriter immediately upon the
Underwriter's request therefor of any reasonable travel and lodging expenses
directly incurred by the Underwriter in connection with its designee or
representative attending Company Board meetings on the same basis for other
Board members.
(y) For a period of thirty (30) days from and after the
Effective Date, the Company will not issue a press release or engage in any
publicity other than promotion by the Company of its products and services and
other press releases in the ordinary course of its business, without the
Underwriter's prior written consent, unless required by law.
4. Conditions of Underwriter's Obligation. The obligations of the
Underwriter to purchase and pay for the Units which it has agreed to purchase
hereunder, are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder,
and to the following conditions:
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M., New York time,
on the day following the date of this Agreement, or at such later time or on
such later date as to which you may agree in writing; on or prior to the Closing
Dates no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that or a similar purpose shall
have been instituted or shall be pending or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the Commission; any request
on the part of the Commission for additional information shall have been
complied with to the satisfaction of the Commission; and no stop order shall be
in effect denying or suspending effectiveness of such qualification nor shall
any stop order proceedings with respect thereto be instituted or pending or
threatened. If required, the Prospectus shall have been filed with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act.
(b) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of Singer ▇▇▇▇▇▇▇▇ LLP, counsel for
the Company, in form and substance satisfactory to counsel for the Underwriter,
to the effect that:
(i) the Company and its Subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of organization, with all requisite
corporate power and authority to own their
16
properties and conduct their business as described in the Registration Statement
and Prospectus and are duly qualified or licensed to do business as foreign
corporations and are in good standing in each other jurisdiction in which the
ownership or leasing of their properties or conduct of their business requires
such qualification except where the failure to qualify or be licensed will not
have a Material Adverse Effect;
(ii) the authorized capitalization of the Company as
of _______, 1997 is as set forth in the Registration Statement; the Securities
as set forth in the Registration Statement have been duly authorized and upon
payment of consideration therefor, will be validly issued, fully paid and
non-assessable and conform in all material respects to the description thereof
contained in the Prospectus; to such counsel's knowledge the outstanding shares
of capital stock of the Company and its Subsidiaries have not been issued in
violation of the preemptive rights of any shareholder and to such counsel's
knowledge the shareholders of the Company do not have any preemptive rights or
other rights to subscribe for or to purchase, nor are there any restrictions
upon the voting or transfer of any of the capital stock except as provided in
the Prospectus or as required by law. The Securities, the Purchase Option and
the Warrant Agreement conform in all material respects to the respective
descriptions thereof contained in the Prospectus; the shares of Common Stock,
and the shares of Common Stock issuable upon exercise of Warrants, the Purchase
Option, and the Warrant Agreement will have been duly authorized and, when
issued and delivered in accordance with their respective terms, will be duly and
validly issued, fully paid, non-assessable, free of preemptive rights to the
best of their knowledge; to the best of their knowledge, all prior sales by the
Company of the Company's securities, have been made in compliance with or under
an exemption from registration under the Act and applicable state securities
laws; a sufficient number of shares of Common Stock has been reserved for
issuance upon exercise of the Warrants and Common Stock has been reserved for
issuance upon exercise of the Warrants contained in the Purchase Option and to
the best of such counsel's knowledge, neither the filing of the Registration
Statement nor the offering or sale of the Securities as contemplated by this
Agreement gives rise to any registration rights other than those which have been
waived or satisfied for or relating to the registration of any shares of Common
Stock;
(iii) this Agreement, the Purchase Option, and the
Warrant Agreement have been duly and validly authorized, executed and delivered
by the Company;
(iv) the certificates evidencing the Securities as
described in the Registration Statement comply in all material respects with the
descriptions set forth therein, and comply with the Delaware General Corporation
Law, as in effect on the date hereof; each Warrant will be exercisable for one
share of the Common Stock of the Company, respectively, and at the prices
provided for in the Warrant Agreement;
(v) except as otherwise disclosed in the Registration
Statement, such counsel knows of no pending or threatened legal or governmental
proceedings to which the Company or its Subsidiaries are a party which would
materially adversely affect the business,
property, financial condition or operations of the Company or its Subsidiaries;
or which question the validity of the Securities, this Agreement, the Warrant
Agreement or the Purchase Option, or of any action taken or to be taken by the
Company pursuant to this Agreement, the Warrant Agreement or the Purchase
Option; to such counsel's knowledge there are no governmental proceedings or
regulations required to be described or referred to in the Registration
Statement which are not so described or referred to;
(vi) the execution and delivery of this Agreement,
the Purchase Option or the Warrant Agreement and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated, will not result in a breach or
violation of, or constitute a default under the certificate of incorporation or
by-laws of the Company or its Subsidiaries, or to the best knowledge of counsel
after due inquiry, in the performance or observance of any material obligations,
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any material contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to which the
Company or its Subsidiaries is a party or by which they or any of their
properties is bound or in violation of any order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality or court,
domestic or foreign the result of which would have a Material Adverse Effect;
(vii) the Registration Statement has become effective
under the Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for that purpose have been instituted or are pending before, or
threatened by, the Commission; the Registration Statement and the Prospectus
(except for the financial statements and other financial data contained therein,
or omitted therefrom, as to which such counsel need express no opinion) as of
the Effective Date comply as to form in all material respects with the
applicable requirements of the Act and the Rules and Regulations;
(viii) in the course of preparation of the
Registration Statement and the Prospectus such counsel has participated in
conferences with the President of the Company with respect to the Registration
Statement and Prospectus and such discussions did not disclose to such counsel
any information which gives such counsel reason to believe that the Registration
Statement or any amendment thereto at the time it became effective contained any
untrue statement of a material fact required to be stated therein or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any supplement
thereto contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make statements therein, in light of the
circumstances under which they were made, not misleading (except, in the case of
both the Registration Statement and any amendment thereto and the Prospectus and
any supplement thereto, for the financial statements, notes thereto and other
financial information (including without limitation, the pro forma financial
information) and schedules contained therein, as to which such counsel need
express no opinion);
18
(ix) all descriptions in the Registration Statement
and the Prospectus, and any amendment or supplement thereto, of contracts and
other agreements to which the Company or its Subsidiaries is a party are
accurate and fairly present in all material respects the information required to
be shown, and such counsel is familiar with all contracts and other agreements
referred to in the Registration Statement and the Prospectus and any such
amendment or supplement or filed as exhibits to the Registration Statement, and
such counsel does not know of any contracts or agreements to which the Company
or its Subsidiaries is a party of a character required to be summarized or
described therein or to be filed as exhibits thereto which are not so
summarized, described or filed;
(x) no authorization, approval, consent, or license
of any governmental or regulatory authority or agency is necessary in connection
with the authorization, issuance, transfer, sale or delivery of the Securities
by the Company, in connection with the execution, delivery and performance of
this Agreement by the Company or in connection with the taking of any action
contemplated herein, or the issuance of the Purchase Option or the Securities
underlying the Purchase Option, other than registrations or qualifications of
the Securities under applicable state or foreign securities or Blue Sky laws and
registration under the Act; and
(xi) the Units, shares of Common Stock and the
Warrants have been duly authorized for quotation on the Nasdaq SmallCap System
("Nasdaq").
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law other than the law of
the United States or of the State of New York or Delaware upon opinions of
counsel satisfactory to you, in which case the opinion shall state that they
have no reason to believe that you and they are not entitled to so rely.
(c) Intentionally Omitted.
(d) All corporate proceedings and other legal matters relating
to this Agreement, the Registration Statement, the Prospectus and other related
matters shall be satisfactory to or approved by ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP,
counsel to the Underwriter.
(e) You shall have received a letter prior to the Effective
Date and again on and as of the First Closing Date from ________________,
independent public accountants for the Company, substantially in the form
reasonably acceptable to you, providing you with such "cold comfort" as you may
reasonably require.
(f) At the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects with the
19
same effect as if made on and as of the Closing Dates taking into account for
the Option Closing Dates the effect of the transactions contemplated hereby and
the Company or its Subsidiaries shall have performed all of its obligations
hereunder and satisfied all the conditions on its part to be satisfied at or
prior to such Closing Date; (ii) the Registration Statement and the Prospectus
and any amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; (iii) there shall have
been, since the respective dates as of which information is given, no material
adverse change, or to the Company or its Subsidiaries's knowledge, any
development involving a prospective material adverse change, in the business,
properties, condition (financial or otherwise), results of operations, capital
stock, long-term or short-term debt or general affairs of the Company or its
Subsidiaries from that set forth in the Registration Statement and the
Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the effective date of the Registration Statement, and
the Company or its Subsidiaries shall not have incurred any material liabilities
or entered into any material agreement not in the ordinary course of business
other than as referred to in the Registration Statement and Prospectus; (iv)
except as set forth in the Prospectus, no action, suit or proceeding at law or
in equity shall be pending or threatened against the Company or its Subsidiaries
which would be required to be set forth in the Registration Statement, and no
proceedings shall be pending or threatened against the Company or its
Subsidiaries before or by any commission, board or administrative agency in the
United States or elsewhere, wherein an unfavorable decision, ruling or finding
would materially and adversely affect the business, property, condition
(financial or otherwise), results of operations or general affairs of the
Company or its Subsidiaries, and (v) you shall have received, at the First
Closing Date, a certificate signed by each of the President and the principal
operating officer of the Company or its Subsidiaries, dated as of the First
Closing Date, evidencing compliance with the provisions of this subsection (f).
(g) Upon exercise of the Over-Allotment Option provided for in
Section 2(b) hereof, the obligations of the Underwriter to purchase and pay for
the Option Units referred to therein will be subject (as of the date hereof and
as of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective
at the Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose shall have
been instituted or shall be pending, or, to your knowledge or the knowledge of
the Company, shall be contemplated by the Commission, and any reasonable request
on the part of the Commission for additional information shall have been
complied with to the satisfaction of the Commission.
20
(ii) At the Option Closing Date there shall have been
delivered to you the signed opinion of Singer ▇▇▇▇▇▇▇▇ LLP, counsel to the
Company, dated as of the Option Closing Date, in form and substance reasonably
satisfactory to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel to the Underwriter, which
opinion shall be substantially the same in scope and substance as the opinion
furnished to you at the First Closing Date pursuant to Sections 4(b) hereof,
except that such opinion, where appropriate, shall cover the Option Securities.
(iii) At the Option Closing Date there shall have be
delivered to you a certificate of the President and the principal operating
officer of the Company, dated the Option Closing Date, in form and substance
reasonably satisfactory to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel to the
Underwriter, substantially the same in scope and substance as the certificate
furnished to you at the First Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date there shall have been
delivered to you a letter in form and substance satisfactory to you from
________________, dated the Option Closing Date and addressed to the Underwriter
confirming the information in their letter referred to in Section 4(e) hereof
and stating that nothing has come to their attention during the period from the
ending date of their review referred to in said letter to a date not more than
five business days prior to the Option Closing Date, which would require any
change in said letter if it were required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the Option Units shall
be reasonably satisfactory in form and substance to you, and you and ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, counsel to the Underwriter, shall have been furnished with all
such documents, certificates, and opinions as you may reasonably request in
connection with this transaction in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company or its compliance with any of the covenants or conditions contained
herein.
(h) No action shall have been taken by the Commission or the
NASD the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal or
agent) in the Securities and no proceedings for the taking of such action shall
have been instituted or shall be pending, or, to the knowledge of the
Underwriter or the Company, shall be contemplated by the Commission or the NASD.
The Company and the Underwriter represent that at the date hereof each has no
knowledge that any such action is in fact contemplated against it by the
Commission or the NASD.
(i) If any of the conditions herein provided for in this
Section shall not have been fulfilled in all material respects as of the date
indicated, this Agreement and all obligations of the Underwriter under this
Agreement may be canceled at, or at any time prior to, each Closing Date by the
Underwriter notifying the Company of such cancellation in
21
writing or by telegram at or prior to the applicable Closing Date. Any such
cancellation shall be without liability of the Underwriter to the Company.
5. Conditions of the Obligations of the Company, The obligation
of the Company to sell and deliver the Units is subject to the following
conditions:
(a) The Registration Statement shall have become effective not
later than 10:00 A.M. New York time, on the day following the date of this
Agreement, or on such later date as the Company and the Underwriter may agree in
writing.
(b) At the Closing Dates, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued under the Act
or any proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided
for in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Units on
exercise of the Over-Allotment Option provided for in Section 2(b) hereof shall
be affected.
6. Indemnification.
(a) The Company agrees (i) to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against
any losses, claims, damages or liabilities, joint or several (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees), to which
such Underwriter or such controlling person may become subject, under the Act or
otherwise, and (ii) to reimburse, as incurred, the Underwriter and such
controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages or liabilities; insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
relating to (i) and (ii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (B) any blue sky application or other document executed by
the Company specifically for that purpose containing written information
specifically furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Securities under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based upon
the omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, Prospectus, or any amendment or supplement thereto, or
in any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be
22
required to indemnify the Underwriter and any controlling person or be liable in
any such case to the extent, but only to the extent, that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the Underwriter specifically for use in the preparation of the
Registration Statement or any such amendment or supplement thereof or any such
Blue Sky Application or any such preliminary Prospectus or the Prospectus or any
such amendment or supplement thereto, provided, further that the indemnity with
respect to any Preliminary Prospectus shall not be applicable on account of any
losses, claims, damages, liabilities or litigation arising from the sale of
Securities to any person if a copy of the Prospectus was not delivered to such
person at or prior to the written confirmation of the sale to such person. This
indemnity will be in addition to any liability which the Company may otherwise
have.
(b) The Underwriter will indemnify and hold harmless the
Company, each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and reasonable attorneys' fees) to which the Company or any
such director, nominee, officer or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
specifically for use in the preparation thereof and for any violation by the
Underwriter in the sale of such Securities of any applicable state or federal
law or any rule, regulation or instruction thereunder relating to violations
based on unauthorized statements by Underwriter or its representative; provided
that such violation is not based upon any violation of such law, rule or
regulation or instruction by the party claiming indemnification or inaccurate or
misleading information furnished by the Company or its representatives,
including information furnished to the Underwriter as contemplated herein. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify in writing the indemnifying party of the commencement
thereof; but the omission so to notify the
23
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, subject to
the provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that the reasonable fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party or (ii) the named
parties to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and in the reasonable judgment of
the counsel to the indemnified party, it is advisable for the indemnified party
to be represented by separate counsel (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of such
indemnified party, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for the indemnified party,
which firm shall be designated in writing by the indemnified party). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnified party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnified party. If it is
ultimately determined that indemnification is not permitted, then an indemnified
party will return all monies advanced to the indemnifying party.
7. Contribution.
In order to provide for just and equitable contribution under
the Act in any case in which the indemnification provided in Section 6 hereof is
requested but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case, notwithstanding the fact that the express provisions of
Section 6 provide for indemnification in such case, then the Company and each
person who controls the Company, in the aggregate, and the Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees) (after contribution from others) in
24
such proportions that the Underwriter is responsible in the aggregate for that
portion of such losses, claims, damages or liabilities represented by the
percentage that the underwriting discount for each of the Units appearing on the
cover page of the Prospectus bears to the public offering price appearing
thereon and the Company shall be responsible for the remaining portion;
provided, however, that if such allocation is not permitted by applicable law
then allocated in such proportion as is appropriate to reflect relative benefits
but also the relative fault of the Company and the Underwriter and controlling
persons, in the aggregate, in connection with the statements or omissions which
resulted in such damages and other relevant equitable considerations shall also
be considered. The relative fault shall be determined by reference to, among
other things, whether in the case of an untrue statement of a material fact or
the omission to state a material fact, such statement or omission relates to
information supplied by the Company or the Underwriter and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Underwriter agree that it
would not be just and equitable if the respective obligations of the Company and
the Underwriter to contribute pursuant to this Section 7 were to be determined
by pro rata or per capita allocation of the aggregate damages or by any other
method of allocation that does not take account of the equitable considerations
referred to in this Section 7. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this paragraph, the word "Company" includes any
officer, director, or person who controls the Company within the meaning of
Section 15 of the Act. If the full amount of the contribution specified in this
paragraph is not permitted by law, then the Underwriter and each person who
controls the Underwriter shall be entitled to contribution from the Company, its
officers, directors and controlling persons, and the Company, its officers,
directors and controlling persons shall be entitled to contribution from the
Underwriter to the full extent permitted by law. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any persons
having liability under Section 11 of the Act other than the Company and the
Underwriter. No contribution shall be requested with regard to the settlement of
any matter from any party who did not consent to the settlement; provided,
however, that such consent shall not be unreasonably withheld in light of all
factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the
sale of the Securities to the Underwriter is consummated, the Company will pay
all costs and expenses incident to the performance of this Agreement by the
Company including, but not limited to, the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
supplemented, the fee of the NASD in connection with the filing required by the
NASD relating to the offering of the Units contemplated hereby; all expenses,
including reasonable fees not to exceed $40,000
25
and disbursements of counsel to the Underwriter, in connection with the
qualification of the Securities under the state securities or blue sky laws
which the Underwriter shall designate; the cost of printing and furnishing to
the Underwriter copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus, this Agreement, and the Blue Sky Memorandum, any
fees relating to the listing of the Units, Common Stock and Warrants on Nasdaq
or any other securities exchange, the cost of printing the certificates
representing the Securities; fees for bound volumes and prospectus memorabilia
and the fees of the transfer agent and warrant agent. The Company shall pay any
and all taxes (including any transfer, franchise, capital stock or other tax
imposed by any jurisdiction) on sales to the Underwriter hereunder. The Company
will also pay all costs and expenses incident to the furnishing of any amended
Prospectus or of any supplement to be attached to the Prospectus as called for
in Section 3(a) of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses, the Company shall
at the First Closing Date pay to the Underwriter a non-accountable expense
allowance of $126,000. In the event the overallotment option is exercised, the
Company shall pay to the Underwriter at the Option Closing Date an additional
amount in the aggregate equal to 3% of the gross proceeds received upon exercise
of the overallotment option. In the event the transactions contemplated hereby
are not consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant, representation
or warranty contained herein or because any other condition to the Underwriter's
obligations hereunder required to be fulfilled by the Company is not fulfilled)
the Company shall not be liable for any expenses of the Underwriter, including
the Underwriter's legal fees. In the event the transactions contemplated hereby
are not consummated by reason of the Company being unable to perform its
obligations hereunder in all material respects, the Company shall be liable for
the actual accountable out-of-pocket expenses of the Underwriter, including
reasonable legal fees.
(c) Except as disclosed in the Registration Statement, no
person is entitled either directly or indirectly to compensation from the
Company, from the Underwriter or from any other person for services as a finder
in connection with the proposed offering, and the Company agrees to indemnify
and hold harmless the Underwriter, against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
reasonable attorneys' fees), to which the Underwriter or person may become
subject insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the claim of any person (other
than an employee of the party claiming indemnity) or entity that he or it is
entitled to a finder's fee in connection with the proposed offering by reason of
such person's or entity's influence or prior contact with the indemnifying
party.
9. Effective Date.
26
The Agreement shall become effective upon its execution except
that you may, at your option, delay its effectiveness until 11:00 A.M., New York
time on the first full business day following the effective date of the
Registration Statement, or at such earlier time on such business day after the
effective date of the Registration Statement as you in your discretion shall
first commence the public offering of the Units. The time of the initial public
offering shall mean the time of release by you of the first newspaper
advertisement with respect to the Securities, or the time when the Securities
are first generally offered by you to dealers by letter or telegram, whichever
shall first occur. This Agreement may be terminated by you at any time before it
becomes effective as provided above, except that Sections 3(c), 6, 7, 8, 12, 13,
14 and 15 shall remain in effect notwithstanding such termination.
10. Termination.
(a) After this Agreement becomes effective, this Agreement,
except for Sections 3(c), 6, 7, 8, 12, 13, 14 and 15 hereof, may be terminated
at any time prior to the First Closing Date, by you if in your judgment (i)
trading in securities on the New York Stock Exchange or the American Stock
Exchange having been suspended or limited, (ii) material governmental
restrictions have been imposed on trading in securities generally (not in force
and effect on the date hereof), (iii) a banking moratorium has been declared by
federal or New York state authorities, (iv) an outbreak of major international
hostilities involving the United States or other substantial national or
international calamity has occurred, (v) a pending or threatened legal or
governmental proceeding or action relating generally to the Company's business,
or a notification has been received by the Company of the threat of any such
proceeding or action, which would materially adversely affect the Company; (vi)
the passage by the Congress of the United States or by any state legislative
body of similar impact, of any act or measure, or the adoption of any orders,
rules or regulations by any governmental body or any authoritative accounting
institute or board, or any governmental executive, which is reasonably believed
likely by the Underwriter to have a material adverse impact on the business,
financial condition or financial statements of the Company; or (vii) any
material adverse change having occurred, since the respective dates of which
information is given in the Registration Statement and Prospectus, in the
earnings, business prospects or general condition of the Company, financial or
otherwise, whether or not arising in the ordinary course of business.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
27
11. Purchase Option.
At or before the First Closing Date, the Company will sell the
Underwriter or its designees for a consideration of $60, and upon the terms and
conditions set forth in the form of Purchase Option annexed as an exhibit to the
Registration Statement, a Purchase Option to purchase an aggregate of 60,000
Units. In the event of conflict in the terms of this Agreement and the Purchase
Option with respect to language relating to the Purchase Option, the language of
the Purchase Option shall control.
12. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the Company that it
is registered as a broker-dealer in all jurisdictions in which it is offering
the Units and that it will comply with all applicable state or federal laws
relating to the sale of the Units, including but not limited to, violations
based on unauthorized statements by the Underwriter or its representatives.
13. Representations, Warranties and Agreements to Survive
Delivery.
The respective indemnities, agreements, representations,
warranties and other statements of the Company and the Underwriter and the
undertakings set forth in or made pursuant to this Agreement will remain in full
force and effect until three years from the date of this Agreement, regardless
of any investigation made by or on behalf of the Underwriter, the Company or any
of its officers or directors or any controlling person and will survive delivery
of and payment of the Securities and the termination of this Agreement.
14. Notice.
Any communications specifically required hereunder to be in
writing, if sent to the Representative, will be mailed, delivered or telecopied
and confirmed to them at ▇▇▇▇▇▇ ▇▇▇▇▇▇ Securities, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, with a copy sent to ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
or if sent to the Company, will be mailed, delivered or telecopied and confirmed
to it at ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, with a copy sent
to Singer ▇▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.
Notice shall be deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication.
15. Parties in Interest.
The Agreement herein set forth is made solely for the benefit
of the Underwriter, the Company, any person controlling the Company or the
Underwriter, and directors of the Company, nominees for directors (if any) named
in the Prospectus, its officers
28
who have signed the Registration Statement, and their respective executors,
administrators, successors, assigns and no other person shall acquire or have
any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser, as such purchaser, from the
Underwriter of the Units.
16. Applicable Law.
This Agreement will be governed by, and construed in
accordance with, of the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.
17. Counterparts.
This agreement may be executed in one or more counterparts
each of which shall be deemed to constitute an original and shall become
effective when one or more counterparts have been signed by each of the parties
hereto and delivered to the other parties (including by fax, followed by
original copies by overnight mail).
18. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement of the parties
hereto and supersedes all prior written or oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may not
be amended except in writing, signed by the Underwriter and the Company.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
ALL COMMUNICATIONS CORPORATION
By:______________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
▇▇▇▇▇▇ ▇▇▇▇▇▇ SECURITIES, INC.
By:_____________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Director Corporate Finance
29
