EXHIBIT 1.1
1,400,000 Units
NOTIFY CORPORATION
UNDERWRITING AGREEMENT
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X. X. Xxxxx Investment Banking Corp. ____________, 1997
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
NOTIFY CORPORATION, a California corporation (the "Company"), proposes
to issue and sell to you, as underwriter (the "Underwriter"), pursuant to this
Underwriting Agreement (the "Agreement"), an aggregate of 1,400,000 Units, each
Unit being hereinafter referred to as a "Unit" and consisting of (i) one share
of Common Stock, par value $.001 per share, ("Shares"), (ii) one redeemable
class A warrant ("Class A Warrants") to purchase one share of Common Stock and
redeemable class B warrant ("Class B Warrants") at a price of $6.50 from
_______, 1997 to_______, 2002 and (iii) one Class B Warrant to purchase one
share of Common Stock at a price of $8.75 from _______, 1997 to_______, 2002.
The Class A Warrants and Class B Warrants are collectively referred to as the
"Warrants". The Warrants are subject to redemption, in certain instances
commencing one year from the date of this Agreement. 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 210,000 additional Units. Unless
the context otherwise indicates, the term "Units" shall include the 210,000
additional Units referred to above.
The aggregate of 1,400,000 Units to be sold by the Company, together
with all or any part of the 210,000 Units which the Underwriters have the option
to purchase, and the Shares and the Warrants comprising such Units, are herein
called the "Units." The Common Stock of the Company to be outstanding after
giving effect to the sale of the Shares is herein called the "Common Stock." The
Shares and Warrants included in the Units (including the Units which the
Underwriters have the option to purchase) are herein collectively called the
"Securities."
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
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represents and warrants to, and agrees with, the Underwriter 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 by the Company in conformity with the requirements of
the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission under the Act and one or more amendments to such registration
statement may have been so filed. 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, either (A) if the Company relies on Rule 434 under the Act, a
Term Sheet (as hereinafter defined) relating to the Units that shall identify
the Preliminary Prospectus (as hereinafter defined) that it supplements
containing such information as is required or permitted by Rules 434, 430A and
424(b) under the Act or (B) if the Company does not rely on Rule 434 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 in the case of
either clause (i)(A) or (i)(B) of this sentence, as have been provided to and
approved by the Underwriter 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 the Underwriter prior to the
execution of this Agreement.
As used in this Agreement, 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); the term
"Prospectus" means (A) if the Company relies on Rule 434 under the Act, the Term
Sheet relating to the Units that is first filed pursuant to Rule 424(b)(7) under
the Act, together with the Preliminary Prospectus identified therein that such
Term Sheet supplements; (B) if the Company does not rely on Rule 434 under the
Act, the prospectus first filed with the Commission pursuant to Rule 424(b)
under the Act or (C) if the Company does not rely on Rule 434 under the Act and
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; and the term "Term Sheet" means
any term sheet that satisfies the requirements of Rule 434 under the Act. Any
reference to the "date" of a Prospectus that includes a Term Sheet shall mean
the date of such Term Sheet.
(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
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
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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 on page 2 with
respect to stabilization, under the headings "Risk Factors - Possible Adverse
Effect on Liquidity of the Company's Securities Due to the Investigation of X.X.
Xxxxx Investment Banking Corp. and X.X. Xxxxx & Co., Inc. by the Securities and
Exchange Commission" and "Underwriting" and the identity of counsel to the
Underwriter under the heading "Legal Matters" constitute 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 has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with full power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus and is
duly qualified to do business as a foreign corporation and is in good standing
in all other jurisdictions in which the nature of its business or the character
or location of its properties requires such qualification, except where failure
to so qualify will not materially affect the Company's business, properties or
financial condition.
(d) The authorized, issued and outstanding capital stock of the
Company as of December 31, 1996 is as set forth in the Prospectus under
"Capitalization"; the shares of issued and outstanding capital stock of the
Company set forth thereunder have been duly authorized, validly issued and are
fully paid and non-assessable; except as set forth in the Prospectus, no
options, warrants, or other rights to purchase, agreements or other obligations
to issue, or agreements or other rights to convert any obligation into, any
shares of capital stock of the Company have been granted or entered into by the
Company; and the capital stock conforms to all statements relating thereto
contained in the Registration Statement and Prospectus.
(e) The Units and the Shares are duly authorized, and when
issued and delivered pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights of
any security holder of the Company. Neither the filing of the Registration
Statement nor the offering or sale of the Units as contemplated in this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Common Stock,
except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued and delivered
pursuant to this Agreement, will have been duly executed, issued and delivered
and will constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms 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
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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 and no personal liability will attach to the ownership
thereof. The Warrant Agreement has been duly authorized and, when executed and
delivered pursuant to this Agreement, 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. The Warrants and the Warrant Agreement
conform to the respective descriptions thereof in the Registration Statement and
Prospectus.
The Shares and the Warrants contained in the Unit Purchase Option have
been duly authorized and, when duly issued and delivered, such Warrants will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms and entitled to the benefits provided by the Unit
Purchase Option. The Shares included in the Unit Purchase Option (and the
shares of Common Stock issuable upon exercise of such Warrants) when issued and
sold, will be duly authorized, validly issued, fully paid and non-assessable and
free of preemptive rights and no personal liability will attach to the ownership
thereof.
(f) This Agreement, the Unit Purchase Option, the M/A
Agreement, and the Escrow Agreement have been duly and validly authorized,
executed and delivered by the Company. The Company has full power and lawful
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 with the
authorization, issue and sale of the Units or the Unit Purchase Option, except
such as may be required under the Act or state securities laws.
(g) Except as described in the Prospectus, the Company is not in
violation, breach or default of or under, and consummation of the transactions
herein contemplated and the fulfillment of the terms of this Agreement will not
conflict with, or result in a breach 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 pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company is a party
or by which the Company may be bound or to which any of the property or assets
of the Company is subject, nor will such action result in any violation of the
provisions of the articles of incorporation or the by-laws of the Company, as
amended, or any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental body
having jurisdiction over the Company.
(h) Subject to the qualifications stated in the Prospectus, the
Company has good and marketable title to all properties and assets described in
the Prospectus as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially significant or
important in relation to its business; all of the material leases and subleases
under which the Company is the lessor or sublessor of properties or assets or
under which the Company holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, the Company is not in default in any material
respect with respect to any of the terms or provisions of any of
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such leases or subleases, and no claim has been asserted by anyone adverse to
rights of the Company as lessor, sublessor, lessee or sublessee under any of the
leases or subleases mentioned above, or affecting or questioning the right of
the Company to continued possession of the leased or subleased premises or
assets under any such lease or sublease except as described or referred to in
the Prospectus; and the Company owns or leases all such properties described in
the Prospectus as are necessary to its operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted as set forth
in the Prospectus.
(i) Ernst & Young LLP, who have given their reports on certain
financial statements filed and to be filed with the Commission as a part of the
Registration Statement, which are incorporated in the Prospectus, are with
respect to the Company, independent public accountants as required by the Act
and the Rules and Regulations.
(j) The financial statements, together with related notes, set
forth in the Prospectus (or if the Prospectus is not in existence, the most
recent Preliminary Prospectus) present fairly the financial position and results
of operations and changes in cash flow position of the Company on the basis
stated in the Registration Statement, at the respective dates and for the
respective periods to which they apply. Said statements and related notes have
been prepared in accordance with generally accepted accounting principles
applied on a basis which is consistent during the periods involved. The
information set forth under the captions "Dilution", "Capitalization", and
"Selected Financial Data" in the Prospectus fairly present, on the basis stated
in the Prospectus, the information included therein. The pro forma financial
information filed as part of the Registration Statement or included in the
Prospectus (or such preliminary prospectus) has been prepared in accordance with
the Commission's rules and guidelines with respect to pro forma financial
statements, and includes all adjustments necessary to present fairly the pro
forma financial condition and results of operations at the respective dates and
for the respective periods indicated and all assumptions used in preparing such
pro forma financial statements are reasonable.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), the Company has not
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business, or entered into any transaction not in the ordinary
course of business, which is material to the business of the Company, and there
has not been any change in the capital stock of, or any incurrence of short-term
or long-term debt by, the Company or any issuance of options, warrants or other
rights to purchase the capital stock of the Company or any adverse change or any
development involving, so far as the Company can now reasonably foresee a
prospective adverse change in the condition (financial or other), net worth,
results of operations, business, key personnel or properties of it which would
be material to the business or financial condition of the Company and the
Company has not become a party to, and neither the business nor the property of
the Company has become the subject of, any material litigation whether or not in
the ordinary course of business.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result
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in any material adverse change in the condition (financial or other), business
prospects, net worth, or properties of the Company, nor are there any actions,
suits or proceedings related to environmental matters or related to
discrimination on the basis of age, sex, religion or race; and no labor disputes
involving the employees of the Company exist or are imminent which might be
expected to adversely affect the conduct of the business, property or operations
or the financial condition or results of operations of the Company.
(m) Except as disclosed in the Prospectus, the Company has
filed all necessary federal, state and foreign income and franchise tax returns
and has paid all taxes shown as due thereon; and there is no tax deficiency
which has been or to the knowledge of the Company might be asserted against the
Company.
(n) The Company has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its business
or the ownership of its 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 xxxx registrations, copyrights and
licenses necessary for the conduct of such business and had 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 are in violation of, or cause the Company to violate, any law, rule,
regulation or order of the United States, any state, county or locality, or of
any agency or body of the United States or of any state, county or locality, the
violation of which would have a material adverse impact upon the condition
(financial or otherwise), business, property, prospective results of operations,
or net worth of the Company.
(o) The Company has not, directly or indirectly, at any time
(i) made any contributions to any candidate for political office, or failed to
disclose fully any such contribution in violation of law or (ii) made any
payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(p) On the Closing Dates (hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Units to the Underwriter hereunder
will have been fully paid or provided for by the Company and all laws imposing
such taxes will have been fully complied with.
(q) All contracts and other documents of the Company which are,
under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might
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reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Units hereby.
(s) The Company has no subsidiaries.
(t) The Company has not entered into any agreement pursuant to
which any person is entitled either directly or indirectly to compensation from
the Company for services as a finder in connection with the proposed public
offering.
(u) Except as previously disclosed in writing by the Company
to the Underwriter, no officer, director or stockholder of the Company has any
affiliation or association with any member of the National Association of
Securities Dealers Inc. ("NASD").
(v) The Company is not, and upon receipt of the proceeds from
the sale of the Units will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
(w) The Company has not distributed and will not distribute
prior to the First Closing Date any offering material in connection with the
offering and sale of the Units other than the Preliminary Prospectus,
Prospectus, the Registration Statement or the other materials permitted by the
Act, if any.
(x) The conditions for use of Form SB-2, as set forth in the
General Instructions thereto, have been satisfied.
(y) There are no business relationships or related-party
transactions of the nature described in Item 404 of Regulation S-K involving the
Company, the Subsidiaries and any person described in such Item that are
required to be disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and that have not been so
disclosed.
(z) The Company has complied with all provisions of Section
517.075 Florida Statutes relating to doing business with the government of Cuba
or with any person or affiliate located in Cuba.
2. Purchase, Delivery and Sale of the Units.
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(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 $_______ per Unit, at the place
and time hereinafter specified, 1,400,000 (the "First Units").
Delivery of the First Units against payment therefor shall take
place at the offices of X. X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx,
Xxx Xxxx, XX 00000(xx at such other place as may be designated by agreement
between you and the Company) at 10:00 a.m., New York time, on , 1997, or at such
later time and date as you may designate, such
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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 to
purchase all or any part of an aggregate of an additional 210,000 Units 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 30 days after the effective date of the Registration Statement
upon 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, 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 X. X. Xxxxx
Investment Banking Corp., 00 Xxxx Xxxxxx, Xxx Xxxx, XX 00000. The Option
granted hereunder may be exercised only to cover overallotments in the sale by
the Underwriters of First Units referred to in subsection (a) above. In the
event the Company declares or pays a dividend or distribution on its Common
Stock, whether in the form of cash, shares of Common Stock or any other
consideration, prior to the Option Closing Date, such dividend or distribution
shall also be paid on the Option Units on the Option Closing Date.
(c) The Company will make the certificates for the securities
comprising the Units to be purchased by the Underwriters 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 two full business days prior to the Closing Dates.
Time shall be of the essence and delivery at the time and place specified in
this Agreement is a further condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Units to be
purchased by the Underwriter hereunder will be delivered by the Company to you
against payment of the purchase price by the Underwriter, by 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 certified or bank cashier's checks payable in
New York Clearing House funds at the offices of X. X. Xxxxx Investment Banking
Corp., 00 Xxxx Xxxxxx,, 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 the Underwriter registered in such names and in
such denominations as the Underwriter may request.
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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
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the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible. If required,
the Company will file the Prospectus or any Term Sheet that constitutes a part
thereof and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rules 434 and 424(b) under the
Act. Upon notification from the Commission that the Registration Statement has
become effective, the Company will so advise you and will not at any time,
whether before or after the effective date, file the Prospectus, Term Sheet or
any amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously have been advised and furnished with a copy or to
which you or your counsel shall have objected in writing or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to the
later of (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 your opinion, may be necessary or
advisable in connection with the distribution of the Units.
As soon as the Company is advised thereof, the Company will
advise you, and confirm the advice in writing, of the receipt of any comments of
the Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or any
amended Prospectus, of any request made by the Commission for amendment of the
Registration Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any state
or regulatory body of any stop order or other order or threat thereof suspending
the effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of 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
several Underwriters the use thereof is required to comply with the applicable
provisions of the Act and the Rules and Regulations. In case of the happening,
at any time within such period as a Prospectus is required under the Act to be
delivered in connection with sales by an underwriter or dealer of any event of
which the Company has knowledge and
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which materially affects the Company or the securities of the Company, or which
in the opinion of counsel for the Company or counsel for the 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.
The Company will comply with the Act, the Rules and Regulations
and the Securities Exchange Act of 1934 and the rules and regulations thereunder
in connection with the offering and issuance of the Units.
(b) The Company will use its best efforts to qualify to
register the Units for sale under the securities or "blue sky" laws of such
jurisdictions as the Underwriter 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 Underwriters
may reasonably request.
(c) If the sale of the Units provided for herein is not
consummated for any reason caused by the Company, the Company shall pay all
costs and expenses incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in Section
8, including the accountable expenses of the Underwriter.
(d) The Company will use its best efforts to (i) cause a
registration statement under the Securities Exchange Act of 1934 to be declared
effective concurrently with the completion of this offering and will notify the
Underwriter in writing immediately upon the effectiveness of such registration
statement, and (ii) if requested by the Underwriter, to obtain a listing on the
Pacific Stock Exchange and to obtain and keep current a listing in the Standard
& Poors or Xxxxx'x Industrial OTC Manual.
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(e) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Securities Exchange Act of 1934, 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, 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, consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are 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-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 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 the order of the Underwriter, 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 the Underwriter 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. The Company, not later than (i) 5:00 p.m., New York City
time, on the date of determination of the public offering price, if such
determination occurred at or prior to 12:00 noon, New York City time, on such
date or (ii) 6:00 p.m., New York City time, on the business day following the
date of determination of the public offering price, if such determination
occurred after 12:00 noon, New York City time, on such date, will deliver to the
Underwriter, without charge, as many copies of the Prospectus and any amendment
or supplement thereto as the Underwriter may reasonably request for purposes of
confirming orders that are expected to settle on the First Closing Date.
(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 12
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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 Units for the purposes set forth under "Use of Proceeds" in the Prospectus,
and will file such reports with the Commission with respect to the sale of the
Units and the application of the proceeds therefrom as may be required pursuant
to Rule 463 under the Act.
(j) The Company will, promptly upon your request, prepare and
file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action, which
in the reasonable opinion of Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel to
the Underwriter, may be reasonably necessary or advisable in connection with the
distribution of the Units, and will use its best efforts to cause the same to
become effective as promptly as possible.
(k) The Company will reserve and keep available that maximum
number of its authorized but unissued securities which are issuable upon
exercise of the Unit Purchase Option outstanding from time to time.
(l) For a period of 13 months from the First Closing Date, no
officer, director or stockholder of the Company 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. In order to enforce
this covenant, the Company shall impose stop-transfer instructions with respect
to the shares owned by such persons until the end of such period.
(m) Prior to completion of this offering, the Company will make
all filings required, including registration under the Securities Exchange Act
of 1934, to obtain the listing of the Units, Common Stock, and Warrants on the
Nasdaq Small Cap Market (or a listing on such other market or exchange as the
Underwriter consents to), and will effect and maintain such listing for at least
five years from the date of this Agreement.
(n) The Company and each officer, director and beneficial
holder of five percent or more of the Company's outstanding Common Stock (the
"Principal Stockholders") represents that it or he has not taken and agree that
it or he will not take, directly or indirectly, any action designed to or which
has constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Units, Shares or the Warrants
or to facilitate the sale or resale of the Securities.
(o) On the Closing Date and simultaneously with the delivery of
the Units, the Company shall execute and deliver to you the Unit Purchase
Option. The Unit Purchase Option will be substantially in the form of the
Underwriter's Unit Purchase Option filed as an Exhibit to the Registration
Statement.
(p) Without the prior written consent of the Underwriter,
(i) during the 18 month period commencing on the date of this Agreement, the
Company will not grant options
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to purchase shares of Common Stock at an exercise price less than the greater of
(x) the initial public offering price of the Units (without allocating any value
to the Warrants) or (y) the fair market value of the Common Stock on the date of
grant; (ii) during the six month period commencing on the date of this
Agreement, grant options to any current officer of the Company; (iii) during the
three year period commencing on the date of this Agreement, offer or sell any of
its securities pursuant to Regulation S under the Act; (iv) grant registration
rights to any person which are exercisable sooner than 13 months from the First
Closing Date; or (v) issue any securities which have per share voting rights
greater than the voting rights of the Shares (or take any corporate action which
would have this effect).
(q) Xxxx XxXxxx shall be President of the Company on the Closing
Dates. The Company has obtained key person life insurance on the life of Xx.
XxXxxx in an amount of not less than $2 million and will use its best efforts to
maintain such insurance during the five year period commencing with the First
Closing Date unless his employment with the Company is earlier terminated. In
such event, the Company will obtain a comparable policy on the life of his
successor for the balance of the five year period. For a period of thirteen
months from the First Closing Date, the compensation of the executive officers
of the Company shall not be increased from the compensation levels disclosed in
the Prospectus.
(r) On or prior to the Closing Date, the Company shall execute
and deliver to you an agreement with you regarding mergers, acquisitions, joint
ventures and certain other forms of transactions, in the form previously
delivered to the Company by you (the "M/A Agreement").
(s) So long as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement to become effective in compliance with the Act and without any lapse
of time between the effectiveness of any such post-effective amendments and
cause a copy of each Prospectus, as then amended, to be delivered to each holder
of record of a Warrant and to furnish to each Underwriter and dealer as many
copies of each such Prospectus as such Underwriter or dealer may reasonably
request. The Company shall not call for redemption any of the 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. In addition, for so long as any Warrant is outstanding,
the Company will promptly notify the Representative of any material change in
the business, financial condition or prospects of the Company.
(t) Upon the exercise of any Warrant or Warrants after _______,
1998, the Company will pay X. X. Xxxxx Investment Banking Corp. a fee of 5% of
the aggregate exercise price of the Warrants, of which a portion may be
reallowed to the dealer who solicited the exercise (which may also be X. X.
Xxxxx Investment Banking Corp.) if (i) the market price of the Company's Common
Stock is greater than the exercise price of the Warrants on the date of
exercise; (ii) the exercise of the Warrant was solicited by a member of the
National Association of Securities Dealers, Inc., (iii) the Warrant is not held
in a discretionary account; (iv) the disclosure of compensation arrangements has
been made in documents provided to customers, both as part of the original
offering and at the time of exercise, and (v) the solicitation of the Warrant
was not in violation of Regulation M promulgated under the Securities Exchange
Act of
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1934, as amended. The Company agrees not to solicit the exercise of any Warrants
other than through X. X. Xxxxx Investment Banking Corp. and will not authorize
any other dealer to engage in such solicitation without the prior written
consent of X. X. Xxxxx Investment Banking Corp.
(u) For a period of five years from the Effective Date the
Company (i) 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 and (ii) shall not change its accounting firm without the prior
written consent of the Chairman or the President of the Underwriter.
(v) As promptly as practicable after the Closing Date, the
Company will prepare, at its own expense, hard cover "bound volumes" relating to
the offering, and will distribute at least four of such volumes to the
individuals designated by the Underwriter or counsel to the Underwriter.
(w) For a period of five years from the First Closing Date
(i) the Underwriter shall have the right, but not the obligation, to designate
one director of the Board of Directors of the Company and (ii) the Company shall
engage a public relations firm acceptable to the Underwriter.
(x) The Company shall, for a period of six years after date of
this Agreement, submit which reports to the Secretary of the Treasury and to
stockholders, as the Secretary may require, pursuant to Section 1202 of the
Internal Revenue Code, as amended, or regulations promulgated thereunder, in
order for the Company to qualify as a "small business" so that stockholders may
realize special tax treatment with respect to their investment in the Company.
(y) On or prior to the Effective Date, the Company shall have
obtained officers and directors insurance and property and casualty insurance in
appropriate amounts and shall maintain such insurance coverage for a period of
five years from the Effective Date.
4. Conditions of Underwriter's Obligation. The obligation of the
--------------------------------------
Underwriter to purchase and pay for the Units is subject to the accuracy (as of
the date hereof, and as of the Closing Dates) of and compliance with the
representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M., New York
time, on the date on which the amendment to the registration statement
originally filed with respect to the Units or to the Registration
Statement, as the case may be, containing information regarding the initial
public offering price of the Units has been filed with the Commission, or
such later time and date as shall have been agreed to by the Underwriter;
if required, the Prospectus or any Term Sheet that
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constitutes a part thereof and any amendment or supplement thereto shall
have been filed with the Commission in the manner and within the time
period required by Rule 434 and 424(b) under the Act; on or prior to the
Closing Dates no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
or a similar purpose shall have been instituted or shall be pending or, to
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 reasonable satisfaction of
Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel to the Underwriter;
(b) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx Professional Corporation, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriter, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of California, with full corporate power and authority to own its
properties and conduct its business as described in the Registration
Statement and Prospectus and is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each other
jurisdiction in which the ownership or leasing of its properties or
conduct of its business requires such qualification, except where the
failure to be so licensed or qualified would not have a material
adverse effect on the business or condition (financial or otherwise) of
the Company;
(ii) to the best knowledge of such counsel, (a) the Company
has obtained, or is in the process of obtaining, all licenses, permits
and other governmental authorizations necessary to the conduct of its
business as described in the Prospectus, (b) such licenses, permits and
other governmental authorizations obtained are in full force and
effect, and (c) the Company is in all material respects complying
therewith;
(iii) the authorized capitalization of the Company as of
December 31, 1996 is as set forth under "Capitalization" in the
Prospectus; all shares of the Company's outstanding stock requiring
authorization for issuance by the Company's board of directors have
been duly authorized, validly issued, are fully paid and non-assessable
and conform to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock of the Company have not been issued
in violation of the preemptive rights of any shareholder and 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 Stock; the Common Stock, the
Warrants, the Unit Purchase Option and the Warrant Agreement conform
-15-
to the respective descriptions thereof contained in the Prospectus; the
Shares have been, and the shares of Common Stock to be issued upon
exercise of the Warrants and the Unit Purchase Option, upon issuance in
accordance with the terms of such Warrants, the Warrant Agreement and
Unit Purchase Option have been duly authorized and, when issued and
delivered, will be duly and validly issued, fully paid, non-assessable,
free of preemptive rights and no personal liability will attach to the
ownership thereof; 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 and no
shareholders of the Company have any rescission rights with respect to
Company securities; a sufficient number of shares of Common Stock has
been reserved for issuance upon exercise of the Warrants and Unit
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 Units as contemplated by this Agreement gives rise to any
registration rights or other rights, other than those which have been
waived or satisfied for or relating to the registration of any shares
of Common Stock;
(iv) this Agreement, the Unit Purchase Option, the Warrant
Agreement, the M/A Agreement and the Escrow Agreement have been duly
and validly authorized, executed and delivered by the Company and,
assuming due execution by each other party hereto or thereto, each
constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or contribution may be
limited by applicable law;
(v) the certificates evidencing the shares of Common Stock
are in valid and proper legal form; the Warrants will be exercisable
for shares of Common Stock of the Company in accordance with the terms
of the Warrants and at the prices therein provided for; at all times
during the term of the Warrants the shares of Common Stock of the
Company issuable upon exercise of the Warrants have been duly
authorized and reserved for issuance upon such exercise and such
shares, when issued upon such exercise in accordance with the terms of
the Warrants and at the price provided for, will be duly and validly
issued, fully paid and non-assessable;
(vi) such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which could
materially adversely affect the business, property, financial condition
or
-16-
operations of the Company; or which question the validity of the
Securities, this Agreement, the Warrant Agreement, the Unit Purchase
Option, the M/A Agreement or the Escrow Agreement, or of any action
taken or to be taken by the Company pursuant to this Agreement, the
Warrant Agreement, the Unit Purchase Option, the M/A Agreement or the
Escrow Agreement; and no such proceedings are known to such counsel to
be contemplated against the Company; 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;
(vii) the Company is not in violation of or default
under, nor will the execution and delivery of this Agreement, the Unit
Purchase Option, the Warrant Agreement, the M/A Agreement or the Escrow
Agreement, and the incurrence of the obligations herein and therein set
forth and the consummation of the transactions herein or therein
contemplated, result in a breach or violation of, or constitute a
default under the certificate or articles of incorporation or by-laws,
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 contract, indenture,
mortgage, loan agreement, lease, joint venture or other agreement or
instrument known to such counsel to which the Company is a party or by
which it or any of its properties may be bound or in violation of any
material order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality or court, domestic or foreign;
(viii) the Registration Statement has become effective
under the Act, and to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or are
pending before, or threatened by, the Commission; the Registration
Statement and the Prospectus (except for the financial statements and
other financial data contained therein, or omitted therefrom, as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Rules and Regulations;
(ix) such counsel has participated in the preparation of the
Registration Statement and the Prospectus and nothing has come to the
attention of such counsel to cause such counsel to have reason to
believe that the Registration Statement or any amendment thereto at the
time it became effective or as of the Closing Dates 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
-17-
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 and schedules
contained therein, as to which such counsel need express no opinion);
(x) all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and
other documents are accurate and fairly present the information
required to be shown, and such counsel is familiar with all contracts
and other documents referred to in the Registration Statement and the
Prospectus and any such amendment or supplement or filed as exhibits to
the Registration Statement, and such counsel does not know of any
contracts or documents of a character required to be summarized or
described therein or to be filed as exhibits thereto which are not so
summarized, described or filed;
(xi) 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 Units 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
Unit Purchase Option or the Securities underlying the Unit Purchase
Option, other than registrations or qualifications of the Units under
applicable state or foreign securities or Blue Sky laws and
registration under the Act;
(xii) the statements in the Registration Statement under
the captions "Business", "Use of Proceeds", "Management", and
"Description of Securities" have been reviewed by such counsel and
insofar as they refer to descriptions of agreements, statements of law,
descriptions of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects;
(xiii) such counsel has received notification that the
Units, the Common Stock and the Warrants have been duly authorized for
quotation on the Nasdaq SmallCap Market; and
(xiv) to such counsel's knowledge, there are no business
relationships or related-party transactions of the nature described in
Item 404 of Regulation S-K involving the Company, any Subsidiary and
any person described in such Item that are required to be disclosed in
the Prospectus and which have not been so disclosed.
(c) At the First Closing Date, you shall have received the
opinion, addressed to the Underwriter, dated as of the First Closing Date,
of
-18-
_______, patent counsel to the Company, in form and substance satisfactory
to counsel for the Underwriter, to the effect that:
(i) we have carefully read and analyzed the material set
forth in the Prospectus under "Risk Factors - Risks of Limited
Protection for the Company's Intellectual Property and Proprietary
Rights and Infringement of Third of Parties Rights" and "Business-
Proprietary Rights" and, in our opinion, such material accurately and
adequately discloses the Company's patent position and did not, at the
time the Registration Statement became effective and does not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(ii) the patent applications referred to in the Prospectus
were properly filed and the Patent and Trademark Office has not taken
substantive action with respect thereto; there has not been any public
use or sale by the Company prior to the filing of any of the patents or
patent applications which would affect their validity and, in such
counsel's opinion, the claims contained in the applications represent
valid patent claims; such counsel has no reason to believe that patents
will not issue with respect thereto or that the claims contained in the
applications conflict with the rights of others;
(iii) There are no facts which would preclude the
Company from having clear title to the United States patents and United
States patent applications owned by the Company;
(iv) Neither the Company nor its subsidiaries has received
any notice challenging the validity or enforceability of any of the
United States patents owned by, or licensed to, the Company;
(v) The Company does not lack or will not be unable to
obtain any rights or licenses to use United States patents necessary to
their respective businesses as currently conducted;
(vi) There are no material legal or governmental proceedings
pending or threatened with respect to any patents of the Company; and
(vii) there have been no claims asserted against the
Company relating to the potential infringement of or conflict with any
patents, trademarks, copyrights or trade secrets of others; such
counsel has conducted a search for existing United States patents with
claims that might cover the Company's technology and, in such counsel's
opinion, the Company's technology does not infringe any United States
patents.
-19-
Such opinions 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 California upon opinions of counsel
satisfactory to you, in which case the opinion shall state that they have no
reason to believe that you and they are not entitled to so rely.
(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 Bachner, Tally, Xxxxxxx & Xxxxxx
LLP, counsel to the Underwriter, and you shall have received from such counsel a
signed opinion, dated as of the First Closing Date, with respect to the validity
of the issuance of the Units, the form of the Registration Statement and
Prospectus (other than the financial statements and other financial data
contained therein), the execution of this Agreement and other related matters as
you may reasonably require. The Company shall have furnished to counsel for the
Underwriter such documents as they may reasonably request for the purpose of
enabling them to render such opinion.
(e) You shall have received a letter prior to the effective date of
the Registration Statement and again on and as of the First Closing Date from
Ernst & Young LLP, independent public accountants for the Company, substantially
in the form approved by you, and including estimates of the Company's revenues
and results of operations for the period ending at the end of the month
immediately preceding the effective date and results of the comparable period
during the prior fiscal year.
(f) At the Closing Dates, (i) the representations and warranties of
the Company contained in this Agreement shall be true and correct with the same
effect as if made on and as of the Closing Dates and the Company shall have
performed all of its obligations hereunder and satisfied all the conditions on
its part to be satisfied at or prior to such Closing Date; (ii) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all material respects
conform to the requirements thereof, and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto shall contain any untrue
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 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 from that set forth in the Registration
Statement and the Prospectus, except changes which the Registration Statement
and Prospectus indicate might occur after the effective date of the Registration
Statement, and the Company shall not have incurred any material liabilities or
entered into any agreement not in the ordinary course of business other than as
referred to in the Registration Statement and Prospectus; and (iv) except as set
forth in the Prospectus, no action, suit or proceeding at law or in equity shall
be pending or threatened against the Company which would
-20-
be required to be set forth in the Registration Statement, and no proceedings
shall be pending or threatened against the Company before or by any commission,
board or administrative agency in the United States or elsewhere, wherein an
unfavorable decision, ruling or finding would materially and adversely affect
the business, property, condition (financial or otherwise), results of
operations or general affairs of the Company, and (v) you shall have received,
at the First Closing Date, a certificate signed by each of the Chairman of the
Board or the President and the principal financial or accounting officer of the
Company, dated as of the First Closing Date, evidencing compliance with the
provisions of this subsection (f).
(g) Upon exercise of the option provided for in Section 2(b) hereof,
the obligation 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 Bachner, Tally, Xxxxxxx & Xxxxxx
LLP, counsel to the Underwriter.
(ii) At the Option Closing Date there shall have been delivered
to you the signed opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx Professional
Corporation, counsel for the Company, dated as of the Option Closing Date,
in form and substance satisfactory to Bachner, Tally, Xxxxxxx & Xxxxxx 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 Section 4(b) hereof, except that such opinion, where
appropriate, shall cover the Option Units.
(iii) At the Option Closing Date there shall have been
delivered to you a certificate of the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the Option Closing Date, in form and substance satisfactory to
Bachner, Tally, Xxxxxxx & Xxxxxx 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 Ernst &
Young LLP, 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
-21-
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
satisfactory in form and substance to you, and you and Bachner, Tally,
Xxxxxxx & Xxxxxx LLP, counsel to the Underwriter, shall have been furnished
with all such documents, certificates, and opinions as you may request in
connection with this transaction in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company or its compliance with any of the covenants or conditions contained
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
Units, Common Stock or the Warrants 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 represents that at the date hereof it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD. The
Company shall have advised the Underwriter of any NASD affiliation of any of its
officers, directors, stockholders or their affiliates.
(i) The estimated revenues and earnings of the Company for the six
months ending March 31, 1997 will be greater than those of the six months ended
March 31, 1996.
(j) If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement and all
obligations of the Underwriter under this Agreement may be cancelled at, or at
any time prior to, each Closing Date by the Underwriter. 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 condition that at
the Closing Dates, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued under the Act or any proceedings
therefor initiated or threatened by the Commission.
If the condition to the obligations of the Company provided for in
this Section 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
option provided for in Section 2(b) hereof shall be affected.
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6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all attorneys'
fees), to which the Underwriter or such controlling person may become subject,
under the Act or otherwise, and will 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)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(B) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Units under the securities laws thereof (any such application, document
or information being hereinafter called a "Blue Sky Application"), or arise out
of or are based upon the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, Prospectus, or any amendment
or supplement thereto, or in any Blue Sky Application, a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the 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. 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 all attorneys' fees) to which the Company or any such
director, nominee, officer or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
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supplement thereto (i) in reliance upon and in conformity with written
information furnished to the Company by the Underwriter specifically for use in
the preparation thereof and (ii) relates to the transactions effected by the
Underwriter in connection with the offer and sale of the Units contemplated
hereby. 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 indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is the Underwriter
or a person who controls the Underwriter within the meaning of the Act, the fees
and expenses of such counsel shall be at the expense of the indemnifying party
if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the Underwriter or such
controlling person and the indemnifying party and in the judgment of the
Underwriter, it is advisable for the Underwriter or controlling persons to be
represented by separate counsel (in which case the indemnifying party shall not
have the right to assume the defense of such action on behalf of the Underwriter
or such controlling person, it being understood, however, that the indemnifying
party shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys for the Underwriter and
controlling persons, which firm shall be designated in writing by you). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnifying party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnifying party.
7. Contribution.
------------
In order to provide for just and equitable contribution under
the Act in any case in which (i) the Underwriter makes claim for indemnification
pursuant to Section 6 hereof but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
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indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 6 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of the Underwriter,
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) in either such case (after
contribution from others) in 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 per
Unit appearing on the cover page of the Prospectus bears to the public offering
price appearing thereon, and the Company shall be responsible for the remaining
portion, provided, however, that if such allocation is not permitted by
applicable law then 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
Underwriters 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 the first sentence of
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 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 Units to the Underwriters is consummated, the Company will pay all
costs and expenses incident to the performance of this Agreement by the Company
including, but not limited to, the fees and expenses of counsel to the Company
(which fees shall not exceed $150,000) 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, or the
Term Sheet, the fee of the NASD in connection with the filing
-25-
required by the NASD relating to the offering of the Units contemplated hereby;
all expenses, including reasonable fees and disbursements of counsel to the
Underwriters, in connection with the qualification of the Units under the state
securities or blue sky laws which the Representative shall designate; the cost
of printing and furnishing to the several Underwriters copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus, this
Agreement, the Agreement Among Underwriters, Selling Agreement, Underwriters'
Questionnaire, Underwriters' Power of Attorney and the Blue Sky Memorandum, any
fees relating to the listing of the Units, Common Stock and Warrants on the
Nasdaq Small Cap Market or any other securities exchange, the cost of printing
the certificates representing the securities comprising the Units, the fees of
the transfer agent and warrant agent the cost of publication of at least three
"tombstones" of the offering (at least one of which shall be in national
business newspaper and one of which shall be in a major New York newspaper) and
the cost of preparing at least four hard cover "bound volumes" relating to the
offering, in accordance with the Underwriters' request. The Company shall pay
any and all taxes (including any transfer, franchise, capital stock or other tax
imposed by any jurisdiction) on sales to the Underwriters hereunder. The Company
will also pay all costs and expenses incident to the furnishing of any amended
Prospectus or of any supplement to be attached to the Prospectus as called for
in Section 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
$_______ of which $_______ has been paid. In the event the overallotment option
is exercised, the Company shall pay to the Underwriter at the Option Closing
Date an additional amount equal to 3% of the gross proceeds received upon
exercise of the overallotment option. In the event the transactions
contemplated hereby are not consummated 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 be liable for the accountable,
out-of-pocket expenses of the Underwriter, including legal fees up to a maximum
of $_______. In the event the transactions contemplated hereby are not
consummated by reason of any action of the Company or because of a breach by the
Company of any covenant, representation or warranty herein, the Company shall be
liable for the accountable, out-of-pocket expenses of the Underwriter, including
legal fees, up to a maximum of $_______.
(c) 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 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.
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9. Effective Date.
--------------
The Agreement shall become effective upon its execution except
that you may, at your option, delay its effectiveness until 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 after the effective date of the
Registration Statement as you in your discretion shall first commence the
initial public offering by the Underwriter of any 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 Units, or the time when the Units
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) 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,
and the option referred to in Section 2(b) hereof, if exercised, may be
cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriters for the resale of the Units agreed to be purchased hereunder by
reason of (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree; (ii)
trading in securities on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq SmallCap Market or the Nasdaq National Market having been
suspended or limited; (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and effect on the date
hereof); (iv) a banking moratorium having been declared by federal or New York
state authorities; (v) an outbreak of international hostilities or other
national or international calamity or crisis or change in economic or political
conditions having occurred; (vi) a pending or threatened legal or governmental
proceeding or action relating generally to the Company's business, or a
notification having been received by the Company of the threat of any such
proceeding or action, which could materially adversely affect the Company; (vii)
except as contemplated by the Prospectus, the Company is merged or consolidated
into or acquired by another company or group or there exists a binding legal
commitment for the foregoing or any other material change of ownership or
control occurs; (viii) the passage by the Congress of the United States or by
any state legislative body or federal or state agency or other authority of any
act, rule or regulation, measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
the Representative to have a material impact on the business, financial
condition or financial statements of the Company or the market for the
securities offered pursuant to the Prospectus; (ix) any adverse change in the
financial or securities markets beyond normal market fluctuations having
occurred since the date of this Agreement, or (x) any material adverse change
having occurred, since the respective dates of which information is given in the
Registration Statement and Prospectus, in the earnings, business prospects or
general condition of the Company, financial or otherwise, whether or not arising
in the ordinary course of business.
-27-
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 11 or in Section 10, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
11. Unit Purchase Option.
--------------------
At or before the First Closing Date, the Company will sell to the
Underwriter or its designees, for a consideration of $140, and upon the terms
and conditions set forth in the form of Unit Purchase Option annexed as an
exhibit to the Registration Statement, a Unit Purchase Option to purchase an
aggregate of 140,000 Units. In the event of conflict in the terms of this
Agreement and the Unit Purchase Option, the language of the Unit Purchase Option
shall control.
12. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
The respective indemnities, agreements, representations,
warranties and other statements of the Company or its Principal Stockholders,
where appropriate, and the undertakings set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriter, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment of
the Units and the termination of this Agreement.
13. Notice.
------
Any communications specifically required hereunder to be in
writing, if sent to the Underwriters, will be mailed, delivered and confirmed to
them at X.X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, with a copy sent to Bachner, Tally, Xxxxxxx & Xxxxxx LLP, 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or if sent to the Company, will be mailed,
delivered and confirmed to it at 0000 X. XxXxxx Xxxx., Xxx Xxxx, Xxxxxxxxxx
00000.
14. Parties in Interest.
-------------------
The Agreement herein set forth is made solely for the benefit of
the Underwriter, the Company and, to the extent expressed, the Principal
Stockholders, any person controlling the Company or the Underwriter, and
directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers 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.
15. Applicable Law.
--------------
This Agreement will be governed by, and construed in accordance
with, the laws of the State of New York applicable to agreements made and to be
entirely performed within New York.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
NOTIFY CORPORATION
By:
____________________________________
Xxxx X. XxXxxx, President
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
X.X. XXXXX INVESTMENT BANKING CORP.
By:
____________________________________
Xxxxxx X. Xxxx, Vice Chairman and
General Counsel
We hereby agree to be bound by the provisions of Sections 3(l) and (n)
and 13 hereof.
______________________________
______________________________
______________________________
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