EXHIBIT 1
6,000,000 Common Shares
HOME SECURITY INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
New York, New York
June __, 1997
National Securities Corporation
As Representative of the Several Underwriters
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Ladies and Gentlemen:
Home Security International, Inc., a Delaware corporation (the
"Company") and FAI Home Security Holdings, Inc. (the "Selling Shareholder")
hereby agree with National Securities Corporation ("National") and each of the
underwriters named in Schedule A hereto (collectively, the "Underwriters," which
term shall also include any underwriter substituted as hereinafter provided in
Section 11), for whom National is acting as representative (in such capacity,
National shall hereinafter be referred to as "you" or the "Representative") with
respect to (i) the sale by the Company and the purchase by the Underwriters,
acting severally and not jointly, of 500,000 shares of common stock, par value
[$.001] per share (the "Common Stock") of the Company and (ii) the sale by the
Selling Shareholder and the purchase by the Underwriters, acting severally and
not jointly, of 5,500,000 shares of Common Stock. Such 6,000,000 shares of
Common Stock shall hereinafter be referred to as the "Firm Shares." Upon your
request, as provided in Section 2(b) of this Agreement, the Company shall also
issue and sell to the Underwriters, acting severally and not jointly, up to
400,000 shares of common stock and the Selling Shareholder shall also sell to
the Underwriters, acting severally and not jointly, up to an additional 500,000
shares of Common Stock, such Common Stock to be sold for the purpose of covering
over-allotments, if any. Such 900,000 shares are hereinafter referred to as the
"Option Shares." The Firm Shares and the Option Shares are hereinafter referred
to collectively as the "Shares." The Company also proposes to issue and sell to
you warrants (the "Representative's
Warrants") pursuant to the Representative's Warrant Agreement (the
"Representative's Warrant Agreement") for the purchase of an additional 600,000
shares of Common Stock. The shares of Common Stock issuable upon exercise of
the Representative's Warrants are hereinafter referred to as the
"Representative's Shares." The Firm Shares, the Option Shares, the
Representative's Warrants and the Representative's Shares are more fully
described in the Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company and the Selling
Shareholder.
A. The Company and the Selling Shareholder represent and warrant to,
and agree with, each of the Underwriters as of the date hereof, and as of the
Closing Date and the Option Closing Date, if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (No. __________), including any
related preliminary prospectus (the "Preliminary Prospectus"), and a related
registration statement filed with the Commission pursuant to Rule 462(b) of the
Regulations (as defined below) for the registration of the Securities, the
Representative's Warrants and the Representative's Shares (collectively,
hereinafter referred to as the "Registered Securities") under the Securities Act
of 1933, as amended (the "Act"), which registration statement and amendment or
amendments have been prepared by the Company in conformity with the requirements
of the Act, and the Regulations (as defined below) of the Commission under the
Act. The Company will not file any other amendment thereto to which the
Underwriters shall have objected in writing after having been furnished with a
copy thereof. Except as the context may otherwise require, such registration
statements as amended, on file with the Commission at the time the registration
statements become effective (including the prospectus, financial statements,
schedules, exhibits and all other documents filed as a part thereof or
incorporated therein and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Regulations), are
hereinafter called the "Registration Statement," and the form of prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." For purposes hereof,
"Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus or any part thereof, and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or threatened. Each of the Preliminary Prospectus, the Registration Statement
and the Prospectus at the time of filing thereof conformed in all material
respects with
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the requirements of the Act and the Regulations, and none of the Preliminary
Prospectus, the Registration Statement or the Prospectus at the time of filing
thereof contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements made in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined in Section 2(c)
hereof) and each Option Closing Date (as defined in Section 2(b) hereof), if
any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus, as amended or supplemented as
required, will contain all statements which are required to be stated therein in
accordance with the Act and the Regulations, and will conform in all material
respects to the requirements of the Act and the Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, provided, however, that this representation and warranty does
not apply to statements made or statements omitted in reliance upon and in
conformity with information furnished to the Company in writing by or on behalf
of any Underwriter expressly for use in the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto.
(d) The Company and all subsidiaries in which it owns an
interest, direct or indirect (the "Subsidiaries"), have been duly organized and
are validly existing as corporations in good standing under the laws of the
respective states of their incorporation. The Company does not own or control,
directly or indirectly, any corporation, partnership, trust, joint venture or
other business entity other than the subsidiaries listed in Exhibit 21 of the
Registration Statement. Each of the Company and the Subsidiaries is duly
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations require such qualification or licensing. Each of the
Company and the Subsidiaries has all requisite power and authority (corporate
and other), and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without limitation,
those having jurisdiction over environmental or similar matters), to own or
lease its properties and conduct its business as described in the Prospectus;
each of the Company and the Subsidiaries is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations; and neither the Company nor any of the Subsidiaries
has received any notice of
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proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the business affairs, operations, properties, or
results of operations of the Company and the Subsidiaries, taken as a whole.
The disclosures in the Registration Statement concerning the effects of federal,
state, local, and foreign laws, rules and regulations on the Company's and the
Subsidiaries' businesses as currently conducted and as contemplated are correct
in all material respects and do not omit to state a material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the headings
"Capitalization" and "Description of Capital Stock" and will have the adjusted
capitalization set forth therein on the Closing Date and the Option Closing
Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement,
including, but not limited to, any voting trust agreement, stockholders
agreement or other agreement or instrument, affecting the Common Stock or rights
or obligations of securityholders of the Company or the Subsidiaries or
providing for any of the Company or the Subsidiaries to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement, the
Representative's Warrant Agreement and as described in the Prospectus. The
Common Stock, the Representative's Warrants and the Representative's Shares and
all other securities issued or issuable by each of the Company or the
Subsidiaries conform or, when issued and paid for, will conform, in all material
respects to all statements with respect thereto contained in the Registration
Statement and the Prospectus. All issued and outstanding shares of capital
stock of the Company or any of the Subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the Company and
the related notes thereto included in the Prospectus, neither the Company nor
any Subsidiary has outstanding any options to purchase, or any preemptive rights
or other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements and the options or other rights granted and
exercised thereunder as set forth in the Prospectus conforms in all material
respects with the requirements of the Act. All issued and outstanding
securities of the Company have been duly authorized and validly issued and are
fully paid and nonassessable, and the holders thereof have no rights of
rescission with respect thereto and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the Company
or similar contractual rights granted by the Company.
(f) The Registered Securities are not and will not be subject to
any preemptive or other similar rights of any stockholder, have been duly
authorized and, when issued,
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paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable and will conform in all material
respects to the description thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue and sale of
the Registered Securities has been duly and validly taken; and the certificates
representing the Registered Securities will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof of the Registered Securities
to be sold by the Company hereunder, the Underwriters or the Representative, as
the case may be, will acquire good and marketable title to such Registered
Securities free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect, or other restriction or equity of any kind
whatsoever. No stockholder of the Company has any right which has not been
waived in writing to require the Company to register the sale of any shares
owned by such stockholder under the Act in the public offering contemplated by
this Agreement. No further approval or authority of the stockholders or the
Board of Directors of the Company will be required for the issuance and sale of
the Shares, the Option Shares and the Representative's Warrants to be sold by
the Company as contemplated herein.
(g) The financial statements of each of the Company and the
Subsidiaries, together with the related notes and schedules thereto, included in
the Registration Statement, each Preliminary Prospectus and the Prospectus
fairly present the financial position, changes in stockholders' equity and the
results of operations of the Company and the Subsidiaries at the respective
dates and for the respective periods to which they apply and such financial
statements have been prepared in conformity with generally accepted accounting
principles and the Regulations, consistently applied throughout the periods
involved. There has been no material adverse change or development involving a
material prospective change in the condition, financial or otherwise, or in the
business, affairs, operations, properties, or results of operation of the
Company and the Subsidiaries taken as a whole whether or not arising in the
ordinary course of business since the date of the financial statements included
in the Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company and the
Subsidiaries taken as a whole conform in all respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings "Prospectus
Summary -- Summary Financial Information," "Selected Financial Data,"
"Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in the
Prospectus, the information set forth therein and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus.
(h) Each of the Company and the Subsidiaries have (i) paid all
federal, state, local, franchise, and foreign taxes for which it is liable,
including, but not limited to, withholding taxes and amounts payable under
Chapters 21 through 24 of the Internal Revenue Code of 1986, as amended (the
"Code"), and have furnished all information returns it is required to furnish
pursuant to the Code, (ii) has established adequate reserves for such taxes
which are not due and
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payable, and (iii) does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(i) No transfer tax, stamp duty or other similar tax is payable
by or on behalf of the Underwriters or the Representative in connection with (i)
the issuance by the Company of the Registered Securities, the Representative's
Warrants and the Representative's Shares, (ii) the purchase by the Underwriters
of the Registered Securities from the Company and the purchase by the
Representative of the Representative's Warrants or the Representative's Shares
from the Company, (iii) the consummation by the Company of any of its
obligations under this Agreement or the Representative's Warrant Agreement, or
(iv) resales of the Registered Securities in connection with the distribution
contemplated hereby.
(j) Each of the Company and the Subsidiaries maintains insurance
policies, including, but not limited to, general liability, property and product
liability insurance and surety bonds which insures the Company and the
Subsidiaries and their respective professional staffs against such losses and
risks generally insured against by comparable businesses. Neither the Company
nor any of the Subsidiaries (A) has failed to give notice or present any
insurance claim with respect to any matter, including, but not limited to, the
Company's or any of the Subsidiaries' businesses, property or professional
staff, under any insurance policy or surety bond in a due and timely manner, (B)
have any disputes or claims against any underwriter of such insurance policies
or surety bonds or have failed to pay any premiums due and payable thereunder,
or (C) have failed to comply with all conditions contained in such insurance
policies and surety bonds. There are no facts or circumstances under any such
insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company or any of the
Subsidiaries.
(k) There is no claim, action, suit, proceeding, inquiry,
arbitration, mediation, investigation, litigation, governmental or other
proceeding (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, pending or threatened
against (or circumstances that may give rise to the same), or involving the
properties or businesses of, the Company or any of the Subsidiaries which (i)
questions the validity of the capital stock of the Company or any of the
Subsidiaries, this Agreement or the Representative's Warrant Agreement, or of
any action taken or to be taken by the Company or any of the Subsidiaries or the
Selling Shareholder pursuant to or in connection with this Agreement or the
Representative's Warrant Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
material respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or the business, affairs, position,
stockholders' equity, operation, properties, or results of operations of the
Company and the Subsidiaries taken as a whole.
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(l) The Company has the full legal right, corporate power and
authority to authorize, issue, deliver, and sell the Registered Securities and
to enter into this Agreement and the Representative's Warrant Agreement, and to
consummate the transactions provided for in such agreements; and this Agreement
and the Representative's Warrant Agreement have each been duly and properly
authorized, executed, and delivered by the Company. Each of this Agreement and
the Representative's Warrant Agreement constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with
their 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), and none of the Company's issue and sale of the Registered Securities,
execution, delivery or performance of this Agreement and the Representative's
Warrant Agreement, the consummation of the transactions contemplated herein and
therein, or the conduct by the Company and the Subsidiaries of their businesses
as described in the Registration Statement, the Prospectus, and any amendments
or supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company or any of the Subsidiaries
pursuant to the terms of (i) the certificates of incorporation or bylaws of the
Company or any of the Subsidiaries, as amended and restated, (ii) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note, loan or credit agreement or any other agreement
or instrument to which the Company or any of the Subsidiaries is a party or by
which any of them may be bound or to which their properties or assets (tangible
or intangible) is or may be subject, or any indebtedness of either the Company
or any of the Subsidiaries, or (iii) any statute, judgment, decree, order, rule
or regulation applicable to the Company or any of the Subsidiaries of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company of any of their activities or properties.
(m) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Registered Securities
pursuant to the Prospectus and the Registration Statement, the performance of
this Agreement, the Representative's Warrant Agreement, and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Registered Securities, except such as have
been or may be obtained under the Act or may be required under state securities
or Blue Sky laws in connection with the Underwriters' purchase and distribution
of the Registered Securities to be sold hereunder.
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(n) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company or any of the Subsidiaries is a
party or by which any of them may be bound or to which either of their assets,
properties or businesses may be subject have been duly and validly authorized,
executed and delivered by the Company or any of the Subsidiaries, as the case
may be, and constitute the legal, valid and binding agreements of the Company or
any of the Subsidiaries, as the case may be, enforceable against the Company or
any of the Subsidiaries, as the case may be, in accordance with their 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). The descriptions in
the Registration Statement of such agreements, contracts and other documents are
accurate in all material respects and fairly present the information required to
be shown with respect thereto by Form S-1, and there are no contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be copies.
(o) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus, neither the Company nor any of the
Subsidiaries (i) has incurred any material liabilities or obligations, indirect,
direct or contingent, or entered into any material verbal or written agreement
or other transaction which is not in the ordinary course of business or which
could result in a material reduction in the future earnings of the Company or
any of the Subsidiaries; (ii) has sustained any material loss or interference
with its business or properties from fire, flood, windstorm, accident or other
calamity, whether or not covered by insurance; (iii) has paid or declared any
dividends or other distributions with respect to its capital stock, (iv) neither
the Company nor any of the Subsidiaries is in default in the payment of
principal or interest on any outstanding debt obligations; (v) has had any
change in its capital stock (other than upon the sale of the Firm Shares, the
Option Shares and the Representative's Shares hereunder and upon the exercise of
options and warrants described in the Registration Statement) (other than in the
ordinary course of business) of, or indebtedness material to, the Company or any
of the Subsidiaries; (vi) has issued any securities or incurred any liability or
obligation, primary or contingent, for borrowed money; or (vii) has experienced
any material adverse change in the condition (financial or otherwise) of their
respective businesses, properties, results of operations, or prospects.
(p) Except as disclosed in or specifically contemplated by the
Prospectus, (i) the Company and the Subsidiaries have sufficient trademarks,
trade names, patent rights, copyrights, licenses, approvals and governmental
authorizations to conduct their respective businesses
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as now conducted; (ii) the expiration of any trademarks, trade names, patent
rights, copyrights, licenses, approvals or governmental authorizations would not
have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company or any of the
Subsidiaries; (iii) the Company has no knowledge of any infringement by it or
its subsidiaries of trademark, trade name rights, patent rights, copyrights,
licenses, trade secret or other similar rights of others; and (iv) there is no
claim being made against the Company or any of the Subsidiaries regarding
trademark, trade name, patent, copyright, license, trade secret or other
infringement which could have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of the
Company or any of the Subsidiaries.
(q) None of the Company or any of the Subsidiaries are, or with
the giving of notice or lapse of time or both, will be, in violation of or in
default under their respective charters or bylaws, and no default exists in the
due performance and observance of any term, covenant or condition of any
license, contract, indenture, mortgage, installment sale agreement, lease, deed
of trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement, or any other material agreement or instrument evidencing an
obligation for borrowed money, or any other material agreement or instrument to
which the Company or any of the Subsidiaries is a party or by which the Company
or any of the Subsidiaries may be bound or to which the property or assets
(tangible or intangible) of the Company or any of the Subsidiaries are subject
or affected.
(r) To the Company's knowledge, there are no pending
investigations involving the Company or any of the Subsidiaries by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company or any
of the Subsidiaries pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or to its
knowledge threatened against or involving the Company or any of the
Subsidiaries. No representation question exists respecting the employees of the
Company or any of the Subsidiaries. No collective bargaining agreement, or
modification thereof is currently being negotiated by the Company or any of the
Subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any of
the Subsidiaries. No labor dispute with the employees of the Company or any of
the Subsidiaries exists or is imminent.
(s) Except as described in the Prospectus, neither the Company
nor any of the Subsidiaries maintains, sponsors or contributes to any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multi-employer plan" as such terms are defined in Sections
3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") ("ERISA Plans"). Neither the Company nor any
of the Subsidiaries maintains or contributes to a defined benefit plan, as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a
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"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code, which could subject the Company or any of the Subsidiaries to
any tax penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all material reporting,
disclosure and other requirements of the Code and ERISA as they relate to any
such ERISA Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply with
Code Section 401(a), stating that such ERISA Plan and the attendant trust are
qualified thereunder. Neither the Company nor any of the Subsidiaries has ever
completely or partially withdrawn from a "multi-employer plan."
(t) None of the Company, nor any of the Subsidiaries, nor any of
their employees, directors, stockholders, or affiliates (within the meaning of
the Regulations) of any of the foregoing has taken or will take directly or
indirectly, any action designed to or which has constituted or which might be
expected to cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Registered
Securities.
(u) Each of the Company and the Subsidiaries has good and
marketable title to, or valid and enforceable leasehold estates in, all items of
real and personal property stated in the Prospectus to be owned or leased by it,
free and clear of all liens, charges, claims, encumbrances, pledges, security
interests, or other restrictions or equities of any kind whatsoever other than
those referred to in the Prospectus and liens for taxes not yet due and payable.
(v) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇"), whose report is
filed with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act and the
Regulations.
(w) There are no claims, payments, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Registered
Securities hereunder or any other arrangements, agreements, understandings,
payments or issuance with respect to the Company, the Subsidiaries, or any of
their respective officers, directors, stockholders, employees or affiliates that
may affect the Underwriters' compensation as determined by the Commission and
the National Association of Securities Dealers, Inc. (the "NASD").
(x) The Registered Securities have been approved for quotation on
the NASDAQ National Market System, subject only to official notice of insurance.
(y) Each of the Company and the Subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
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accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) None of the Company, the Subsidiaries, nor any of their
respective officers, employees, agents or any other person acting on behalf of
the Company or any of the Subsidiaries has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of any governmental agency (domestic or foreign) or instrumentality of any
government (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company or any of the Subsidiaries (or assist
the Company or any of the Subsidiaries in connection with any actual or proposed
transaction) which might subject the Company, the Subsidiaries, or any other
such person to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign). Each of the Company's and the
Subsidiaries' internal accounting controls are sufficient to cause the Company
and the Subsidiaries to comply with the Foreign Corrupt Practices Act of 1977,
as amended.
(aa) Except as set forth in the Prospectus, no officer, director
or stockholder of the Company, the Subsidiaries, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the
Regulations) of any of the foregoing persons or entities has or has had, either
directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company or any of the Subsidiaries, or
(B) purchases from or sells or furnishes to the Company or any of the
Subsidiaries any goods or services, or (ii) a beneficiary interest in any
contract or agreement to which the Company or any of the Subsidiaries is a party
or by which the Company or any of the Subsidiaries may be bound or affected.
Except as set forth in the Prospectus there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company, the
Subsidiaries, and any officer, director, principal shareholder (as such term is
used in the Prospectus) of the Company, or any affiliate or associate of any of
the foregoing persons or entities.
(bb) None of the Company or any of the Subsidiaries intends to
conduct their respective businesses in a manner in which it would become an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended (the "1940 Act").
(cc) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' Counsel (as defined in
Section 4(d) herein) shall be
-11-
deemed a representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
(dd) The minute books of each of the Company and the Subsidiaries
have been made available to the Underwriters and contain a complete summary of
all meetings and actions of the directors and stockholders of each of the
Company and the Subsidiaries, since the time of their respective incorporation,
and reflect all transactions referred to in such minutes accurately in all
material respects.
(ee) Neither the Company nor any of the Subsidiaries has
distributed nor will distribute prior to the Closing Date any offering material
in connection with the offering and sale of the Securities in this offering
other than the Prospectus, the Registration Statement and the other materials
permitted by the Act. Except as described in the Prospectus, no holders of any
securities of the Company or any of the Subsidiaries or of any options, warrants
or other convertible or exchangeable securities of the Company or any of the
Subsidiaries have the right to include any securities issued by the Company or
any of the Subsidiaries as part of the Registration Statement or to require the
Company or any of the Subsidiaries to file a registration statement under the
Act and no person or entity holds any anti-dilution rights with respect to any
securities of the Company or any of the Subsidiaries.
(ff) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of Doing Business with Cuba, and the Company
further agrees that if it commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Commission or
with the Florida Department of Banking and Finance (the "Department"), whichever
date is later, or if the information reported or incorporated by reference in
the Prospectus, if any, concerning the Company's business with Cuba or with any
person or affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as appropriate,
in a form acceptable to the Department.
(gg) The Company has purchased "key man" life insurance on the
life of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in the amount of [$ ] and the Company is named as
the sole beneficiary of such insurance policy.
B. The Selling Shareholder represents and warrants to, and agrees
with, the each of the Underwriters as of the date hereof, and as of the Closing
Date, and as of the Option Closing Date, if any, as follows:
-12-
(a) The Selling Shareholder has (i) caused a certificate or
certificates for the number of shares of Common Stock to be sold by the Selling
Shareholder hereunder to be delivered to ▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇ (in its capacity as
escrow agent, the "Escrow Agent"), duly endorsed in blank or together with blank
stock powers duly executed, with the signature of the Selling Shareholder
appropriately guaranteed, such certificate or certificates to be held in escrow
by the Escrow Agent pursuant to an escrow agreement for delivery, pursuant to
the provisions hereof, on the Closing Date and the Option Closing Date, if any,
and (ii) granted an irrevocable power of attorney to the Escrow Agent to
purchase all requisite stock transfer tax stamps, to sign this Agreement
(including agreeing on the price at which the Stock and the Additional Stock are
to be sold to the Underwriters) and thereafter to modify and amend this
Agreement, to waive any condition to the obligations of the Selling Shareholder
and to execute all other instruments and documents and to perform all other acts
necessary to carry out the provisions of this Agreement on behalf of the Selling
Shareholder (such escrow agreement together with such irrevocable powers of
attorney being herein called the "Escrow Agreement").
(b) There is no claim, action, suit, proceeding, inquiry,
arbitration, mediation, investigation, litigation, governmental or other
proceeding, domestic or foreign, pending or threatened against the Selling
Shareholder or any of business, properties, or assets owned by the Selling
Shareholder. The Selling Shareholder is not in violation of, or in default with
respect to, any law, rule, regulation, order, judgment, or decree; nor is the
Selling Shareholder required to take any action in order to avoid such violation
or default.
(c) The Selling Shareholder has all the requisite power and
authority to execute, deliver, and perform this Agreement and the Escrow
Agreement. This Agreement and the Escrow Agreement have been duly executed and
delivered by the Selling Shareholder, are the legal, valid, and binding
obligations of the Selling Shareholder and are enforceable as to the Selling
Shareholder in accordance with their respective terms. No consent,
authorization, approval, order, license, certificate, or permit of or from, or
declaration or filing with, any federal, state, local, or other governmental
authority or any court or other tribunal is required by the Selling Shareholder
for the execution, delivery, or performance of this Agreement (except filings
under the Act which have been or will be made before the Closing Date and such
consents consisting only of consents under "blue sky" or securities law which
have been obtained at or prior to the date of this Agreement) or the Escrow
Agreement by the Selling Shareholder. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement, or understanding to which
the Selling Shareholder is a party, or to which any of the properties or assets
of the Selling Shareholder are subject, is required for the execution, delivery,
or performance of this Agreement or the Escrow Agreement; and the execution,
delivery, and performance of this Agreement and the Escrow Agreement will not
violate, result in a breach of, conflict with, or (with or without the giving of
notice or the passage of time or both) entitle any party to terminate or call
default under any such contract, agreement, instrument, lease, license,
arrangement, or understanding, or violate, result in a breach of, or conflict
with, any law, rule, regulation, order,
-13-
judgment, or decree binding on the operations, business, properties, or assets
of the Selling Shareholder are subject.
(d) The Selling Shareholder has good title to the Firm Shares and
Option Shares, as the case may be, to be sold by it pursuant to this Agreement,
free and clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts (except those created by this
Agreement and the Escrow Agreement), and when delivered in accordance with this
Agreement, the Underwriters will receive good title to the Firm Shares or Option
Shares purchased by them from the Selling Shareholder, free and clear of all
liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts.
2. Purchase, Sale and Delivery of the Common Stock and
Representative's Warrants.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company and Selling Shareholder agree to sell to each
Underwriter, and each Underwriter, severally and not jointly, agrees to purchase
from the Company and Selling Shareholder that aggregate principal amount of Firm
Shares set forth opposite the name of such Underwriter, the Company or the
Selling Shareholder in Schedule A hereto at a price equal to 92% of the
principal amount thereof, subject to such adjustment as the Representative in
its discretion shall make to eliminate any fractional sales or purchases, plus
any additional amount of Firm Shares which such Underwriter may become obligated
to purchase pursuant to the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements, herein contained, but subject to the terms and
conditions herein set forth, the Selling Shareholder hereby grants an option to
the Underwriters, severally and not jointly, to purchase all or any part of an
additional 500,000 shares of Common Stock and the Company hereby grants an
option to the Underwriters, severally and not jointly, to purchase all or any
part of an additional 400,000 shares of Common Stock at a price equal to 92% of
the principal amount thereof from the Closing Date. The Company, the Selling
Shareholder and the Representative hereby agree that the first 500,000 option
shares to be purchased by the Representative shall be sold to it by the Selling
Shareholder. The option granted hereby will expire 45 days after (i) the date
the Registration Statement becomes effective, if the Company has elected not to
rely on Rule 430A under the Regulations, or (ii) the date of this Agreement if
the Company has elected to rely upon Rule 430A under the Regulations, and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Shares upon notice by the Representative to the Company
and the Selling Shareholder setting forth the aggregate principal amount of
Option Shares as to which the several Underwriters are then exercising the
option and the time and date of payment and delivery for any such Option Shares.
Any such time and date of delivery (an "Option Closing
-14-
Date") shall be determined by the Representative, but shall not be later than
seven full business days after the exercise of said option, nor in any event
prior to the Closing Date, as hereinafter defined, unless otherwise agreed upon
by the Representative, the Company and the Selling Shareholder. Nothing herein
contained shall obligate the Underwriters to exercise the over-allotment option
described above. No Option Shares shall be delivered unless the Firm Shares
shall be simultaneously delivered or shall theretofore have been delivered as
herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the offices of National, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other place as shall
be agreed upon by the Representative and the Company. Such delivery and payment
shall be made at 10:00 a.m. (New York time) on June ______, 1997 or at such
other time and date as shall be agreed upon by the Representative and the
Company, but no more than four (4) business days after the date hereof (such
time and date of payment and delivery being herein called the "Closing Date").
In addition, in the event that any or all of the Option Shares are purchased by
the Underwriters, payment of the purchase price for, and delivery of
certificates for, such Option Shares shall be made at the above mentioned office
of National or at such other place as shall be agreed upon by the
Representative, the Company and the Selling Shareholder on each Option Closing
Date as specified in the notice from the Representative to the Company.
Delivery of the certificates for the Firm Shares and the Option Shares, if any,
shall be made to the Underwriters against payment by the Underwriters, of the
purchase price for the Firm Shares and the Option Shares, if any, to the order
of the Company and the Selling Shareholder. In the event such option is
exercised, each of the Underwriters, acting severally and not jointly, shall
purchase that proportion of the total number of Option Shares then being
purchased which the number of Firm Shares set forth in Schedule A hereto
opposite the name of such Underwriter bears to the total number of Firm Shares,
subject in each case to such adjustments as the Representative in their
discretion shall make to eliminate any sales or purchases of fractional shares.
Certificates for the Firm Shares and the Option Shares, if any, shall be in
definitive, fully registered form, shall bear no restrictive legends and shall
be in such denominations and registered in such names as the Underwriters may
request in writing at least three (3) business days prior to Closing Date or the
relevant Option Closing Date, as the case may be. The certificates for the Firm
Shares and the Option Shares, if any, shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to Closing Date or the relevant Option Closing Date, as
the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative the Representative's Warrants at a purchase price of $.0001 per
warrant, which warrants shall entitle the holders thereof to purchase the
Representative's Shares. The Representative's Warrants shall expire four (4)
years after the effective date of the Registration Statement and shall be
exercisable for a period of four (4) years commencing one (1) year from
-15-
the effective date of the Registration Statement at the exercise prices
described in the first paragraph hereof. The Representative's Warrant Agreement
and form of Warrant Certificate shall be substantially in the form filed as
Exhibit 4.2 to the Registration Statement. Payment for the Representative's
Warrants shall be made on the Closing Date.
3. Public Offering of the Firm Shares. As soon after the
Registration Statement becomes effective as the Representative deem advisable,
the Underwriters shall make a public offering of the Firm Shares (other than to
residents of or in any jurisdiction in which qualification of the Firm Shares is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Representative may from time to time increase or
decrease the public offering price after distribution of the Firm Shares has
been completed to such extent as the Representative, in its sole discretion,
deems advisable. The Underwriters may enter into one or more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public offering.
4. Covenants of the Company and Selling Shareholder. The Company and
the Selling Shareholder covenant and agree with each of the Underwriters as
follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Firm
Shares by the Underwriters of which the Representative shall not previously have
been advised and furnished with a copy, or to which the Representative shall
have objected or which is not in compliance with the Act, the Exchange Act or
the Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Registered Securities for offering
or sale in any jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose, (iv) of the receipt of any comments from the
Commission, and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or
-16-
for additional information. If the Commission or any state securities
commission authority shall enter a stop order or suspend such qualification at
any time, the Company will use its best efforts to obtain promptly the lifting
of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) in accordance with the requirements of the
Act.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Registered Securities
which differs from the corresponding prospectus on file at the Commission at the
time the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such amendment or supplement to which the
Representative or Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP ("Underwriters' Counsel") shall
reasonably object.
(e) The Company shall endeavor in good faith, in cooperation with
the Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Registered Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may reasonably
designate to permit the continuance of sales and dealings therein for as long as
may be necessary to complete the distribution, and shall make such applications,
file such documents and furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or become subject to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act, as now and hereafter amended, and by
the Regulations, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and the Prospectus, or any amendments or supplements thereto.
If at any time when a prospectus relating to the Securities is required to be
delivered under the Act, any event shall have occurred as a result of which, in
the opinion of counsel for the Company or Underwriters' Counsel, the Prospectus,
as then amended or supplemented, includes an untrue statement of a material fact
or omits to state any material fact required to be
-17-
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend or supplement the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its securityholders, in the manner specified in Rule
158(b) of the Regulations, and to the Representative, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Regulations, which
statement need not be audited unless required by the Act, covering a period of
at least 12 consecutive months after the effective date of the Registration
Statement.
(h) During a period of five (5) years after the date hereof, the
Company will furnish to its securityholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Representative:
(i) concurrently with furnishing such quarterly reports to
its securityholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders;
(ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
certified public accountants;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission,
the Nasdaq National Market or any securities exchange;
-18-
(v) every press release and every material news item or
article of interest to the financial community in respect of each of
the Company and the Subsidiaries or their respective affairs which was
released or prepared by or on behalf of the Company or any of the
Subsidiaries; and
(vi) any additional information of a public nature
concerning the Company or any of the Subsidiaries (and any future
subsidiaries) or their respective businesses which the Representative
may reasonably request.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) The Company will maintain a transfer agent (the "Transfer
Agent") and, if necessary under the jurisdiction of incorporation of the
Company, a registrar (which may be the same entity as the transfer agent) for
the Common Stock.
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), each
Preliminary Prospectus, the Prospectus, and all amendments and supplements
thereto, including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such quantities
as the Representative may reasonably request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of duly
executed, legally binding and enforceable Lock-up Agreements. On or before the
Closing Date, the Company shall deliver instructions to the Transfer Agent
authorizing it to place appropriate stop transfer orders on the Company's
ledgers.
(l) The Company shall use its best efforts to cause its officers,
directors, stockholders or affiliates (within the meaning of the Regulations)
not to take, directly or indirectly, any action designed to, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of the
Common Stock substantially in the manner, and subject to the conditions, set
forth under "Use of Proceeds" in the Prospectus.
-19-
(n) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Regulations.
(o) The Company shall cause the Common Stock to be quoted on the
NASDAQ National Market System and for a period of two (2) years from the date
hereof shall use its best efforts to maintain the quotation of the Common Stock
to the extent outstanding.
(p) For a period of two (2) years from the Closing Date, the
Company shall furnish to the Representative, at the Company's sole expense,
daily consolidated transfer sheets relating to the Common Stock.
(q) For a period of five (5) years after the effective date of
the Registration Statement the Company shall, at the Company's sole expense,
take all necessary and appropriate actions to further qualify the Company's
securities in all jurisdictions of the United States in order to permit
secondary sales of such securities pursuant to the Blue Sky laws of those
jurisdictions which do not require the Company to qualify as a foreign
corporation or to file a general consent to service of process.
(r) The Company (i) prior to the effective date of the
Registration Statement, has filed a Form 8-A with the Commission providing for
the registration of the Common Stock under the Exchange Act and (ii) as soon as
practicable, will use its best efforts to take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and
▇▇▇▇▇'▇ OTC Manual and to continue such inclusion for a period of not less than
five (5) years.
(s) The Company agrees that for a period of thirteen (13) months
following the effective date of the Registration Statement it will not, without
the prior written consent of National, offer, issue, sell, contract to sell,
grant any option for the sale of or otherwise dispose of any Common Stock, or
securities convertible into Common Stock, except for the issuance of the Option
Shares, the Representative's Warrants, and shares of Common Stock upon the
exercise of currently outstanding warrants or options issued under any stock
option plan in effect on the Closing Date or options to purchase shares of
Common Stock granted pursuant to any stock option plan in effect on the Closing
Date.
(t) Until the completion of the distribution of the Securities,
none of the Company nor any of the Subsidiaries shall, without the prior written
consent of National or Underwriters' Counsel, issue, directly or indirectly
issue any press release or other communication or hold any press conference with
respect to the Company, any of the Subsidiaries, their respective
-20-
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
(u) For a period equal to the lesser of (i) five (5) years from
the date hereof, and (ii) the sale to the public of the Representative's Shares,
the Company will not take any action or actions which may prevent or disqualify
the Company's use of Form S-1 (or other appropriate form) for the registration
under the Act of the Representative's Shares.
(v) The Company agrees that upon the request of National it shall
use its best efforts, which shall include, but shall not be limited to, the
solicitation of proxies, to elect two (2) designees of National to the Company's
Board of Directors for a period of five (5) years following the Closing,
provided that such designees are reasonably acceptable to the Company. In the
event National does not exercise its right to designate a member of the Board of
Directors, then it shall have the right to designate one person to attend all
meetings of the Board of Directors, then it shall have the right to designate
one person to attend all meetings of the Board of Directors of the Company, and
all committees thereof, as an observer. Such observer shall be entitled to
receive notices of all such meetings, and all correspondence and communications
sent by the Company to members of its Board of Directors and to attend all such
meetings. The Company shall reimburse the designees of National for out-of-
pocket expenses incurred in connection with attendance at such meetings.
(w) The Company agrees that within forty-five (45) days after the
Closing it shall retain a public relations firm which is acceptable to National.
The Company shall keep such public relations firm, or any replacement, for a
period of three (3) years from the Closing. Any replacement public relations
firm shall be retained only with the consent of National.
(x) The Company agrees that any and all future transactions
between the Company or any of the Subsidiaries and their respective officers,
directors, principal stockholders and the affiliates of the foregoing persons
will be on terms no less favorable to the Company or any of the Subsidiaries
than could reasonably be obtained in arm's length transactions with independent
third parties, and that any such transactions also be approved by a majority of
the Company's or any of the Subsidiaries', as the case may be, outside
independent directors disinterested in the transaction.
(y) The Company shall prepare and deliver, at the Company's sole
expense, to National within the one hundred and twenty (120) day period after
the later of the effective date of the Registration Statement or the latest
Option Closing Date, as the case may be, bound volumes containing all
correspondence with regulatory officials, agreements, documents and all other
materials in connection with the offering as requested by the Underwriters'
Counsel.
-21-
(z) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Common Stock in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the 1940 Act.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date
and each Option Closing Date (to the extent not previously paid) all expenses
and fees (other than fees of Underwriters' Counsel, except as provided in (iv)
below) incident to the performance of the obligations of the Company under this
Agreement and the Representative's Warrant Agreement, including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, filing, delivery and mailing (including the
payment of postage with respect thereto) of the Registration Statement and the
Prospectus and any amendments and supplements thereto and the duplication,
mailing (including the payment of postage with respect thereto) and delivery of
this Agreement, the Agreement Among Underwriters, the Selected Dealers
Agreement, the Powers of Attorney, and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriters and
such dealers as the Underwriters may request, in quantities as hereinabove
stated, (iii) the printing, engraving, issuance and delivery of the certificates
representing the Registered Securities, (iv) the qualification of the Common
Shares and the Representative's Shares under state or foreign securities or Blue
Sky laws and determination of the status of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal
Investments Survey," if any, and reasonable disbursements and fees of counsel in
connection therewith, (v) advertising costs and expenses, including but not
limited to the costs and expenses incurred in connection with the "road show,"
information meetings and presentations, bound volumes and prospectus memorabilia
and "tombstone" advertisement expenses, (vi) fees and expenses of the transfer
agent and registrar, (vii) issue and transfer taxes, if any, (viii) experts,
(ix) the fees payable to the Commission, the NASD and (xi) the fees and expenses
incurred in connection with the listing of the Securities and the
Representative's Shares on the NASDAQ National Market System and any other
market or exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 12, the
Company and the Selling Shareholder shall reimburse and indemnify the
Representative for all of its actual out-of-pocket expenses on an accountable
basis, including the fees and disbursements of Underwriters' Counsel and all
Blue Sky counsel fees and Blue Sky filing fees, less any amounts already paid
pursuant to Section 5(c) hereof.
-22-
(c) The Company and the Selling Shareholder further agree, with
respect to the Firm Shares sold by each, that, in addition to the expenses
payable by the Company pursuant to subsection (a) of this Section 5, they will
pay to the Representative on the Closing Date by certified or bank cashier's
check or, at the election of the Representative, by deduction from the proceeds
of the offering contemplated herein a non-accountable expense allowance equal to
two percent (2%) of the gross proceeds received by the Company and Selling
Shareholder from the sale of the Firm Shares, $__________ of which has been paid
to date. In the event the Representative elects to exercise the over-allotment
option described in Section 2(b) hereof, the Company and Selling Shareholder
agree to pay to the Representative on the Option Closing Date (by certified or
bank cashier's check or, at the Representative's election, by deduction from the
proceeds of the offering) a non-accountable expense allowance equal to two
percent (2%) of the gross proceeds received by the Company and the Selling
Shareholder from the sale of the Option Shares.
6. Conditions of the Underwriters' Obligations. The obligations of
the Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company and Selling Shareholder herein as
of the date hereof and as of the Closing Date and each Option Closing Date, if
any, as if they had been made on and as of the Closing Date or each Option
Closing Date, if any; the accuracy on and as of the Closing Date and each Option
Closing Date, if any, of the statements of officers of the Company and Selling
Shareholder made pursuant to the provisions hereof; and the performance by the
Company and by the Selling Shareholder on and as of the Closing Date and each
Option Closing Date, if any, of their respective covenants and obligations
hereunder:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York City time, on the date [prior to the date] of
this Agreement or such later date and time as shall be consented to in writing
by the Representative, and, at Closing Date and each Option Closing Date, if
any, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or contemplated by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Underwriters' Counsel. If the
Company has elected to rely upon Rule 430A of the Regulations, the price of the
Firm Shares and any price-related information previously omitted from the
effective Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the
Regulations within the prescribed time period, and prior to Closing Date the
Company shall have provided evidence satisfactory to the Representative of such
timely filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Regulations.
(b) The Representative shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in
-23-
the Representative's opinion, is material, or omits to state a fact which, in
the Representative's opinion, is material and is required to be stated therein
or is necessary to make the statements therein not misleading, or that the
Prospectus, or any supplement thereto, contains an untrue statement of fact
which, in the Representative's reasonable opinion, is material, or omits to
state a fact which, in the Representative's reasonable opinion, is material and
is required to be stated therein or is necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriters shall have
received from Underwriters' Counsel such opinion or opinions with respect to the
organization of the Company, the validity of the Registered Securities, the
Registration Statement, the Prospectus and other related matters as the
Representative may request and Underwriters' Counsel shall have received from
the Company such papers and information as they request to enable them to pass
upon such matters.
(d) At the Closing Date, the Underwriters shall have received the
favorable opinion of ▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇ ("▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇"), counsel to the
Company, dated the Closing Date addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) each of the Company and the Subsidiaries (A) has been
duly organized and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, (B)
is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or
leasing of any properties or the character of its operations
requires such qualification or licensing, and (C) to the best of
such counsel's knowledge after due inquiry, has all requisite
corporate power and authority and has obtained any and all
necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental
or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or
similar matters, the absence of which would have a material
adverse effect on the Company), to own or lease its properties
and conduct its business as described in the Prospectus;
(ii) the Company owns one hundred percent (100%) of the
outstanding capital stock of the Subsidiaries free and clear of
any liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions or equities of any kind
whatsoever;
-24-
(iii) except as described in the Prospectus, and to the best
of such counsel's knowledge after due inquiry, neither the
Company nor any of the Subsidiaries owns an interest in any
corporation, limited liability company, partnership, joint
venture, trust or other business entity;
(iv) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and
any amendment or supplement thereto, under "Capitalization" and
"Description of Capital Stock," and to the best of such counsel's
knowledge after due inquiry, neither the Company nor any of the
Subsidiaries is a party to or bound by any instrument, agreement
or other arrangement providing for it to issue any capital stock,
rights, warrants, options or other securities, except for this
Agreement and the Representative's Warrant Agreement, and as
described in the Prospectus; the Registered Securities, and all
other securities issued or issuable by the Company or any of the
Subsidiaries conform in all material respects to the statements
with respect thereto contained in the Registration Statement and
the Prospectus; all issued and outstanding securities of the
Company or any of the Subsidiaries have been duly authorized and
validly issued and are fully paid and, to the best of such
counsel's knowledge after due inquiry, nonassessable; the holders
thereof are not subject to personal liability by reason of being
such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security
of the Company or any of the Subsidiaries, or to the best of such
counsel's knowledge after due inquiry, similar contractual rights
granted by the Company or any of the Subsidiaries or applicable
securities laws; the Registered Securities to be sold by the
Company hereunder and under the Representative's Warrant
Agreement are not and will not be subject to any preemptive or
other similar rights of any securityholder of the Company or any
of the Subsidiaries; the holders thereof will not be subject to
any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the
Registered Securities has been duly and validly taken; the
certificates representing the Registered Securities and the
Representative's Warrants are in due and proper form; the
Representative's Warrants constitute valid and binding
obligations of the Company to issue and sell, upon exercise
thereof and payment therefor, the number and type of
securities of the Company called for thereby (except as the
enforceability thereof 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
-25-
limited by applicable law); upon the issuance and delivery
pursuant to this Agreement and the Representative's Warrant
Agreement of the Registered Securities to be sold by the Company
hereunder and thereunder, the Company will convey against payment
therefore as provided herein, to the Underwriters or the
Representative, as the case may be, good and marketable title
thereto free and clear of all liens and other encumbrances;
(v) the Registration Statement is effective under the Act;
if applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and no stop order
suspending the use of the Preliminary Prospectus, the
Registration Statement or Prospectus or any part of any thereof
or suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been
instituted or are pending or, to the best of such counsel's
knowledge, threatened or contemplated under the Act;
(vi) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial
and statistical data included therein as to which no opinion need
be rendered) comply as to form in all material respects with the
requirements of the Act and the Regulations. Such counsel shall
state that such counsel has participated in conferences with
officers and other representatives of the Company and the
Representative and representatives of the independent public
accountants for the Company, at which conferences the contents of
the Preliminary Prospectus, the Registration Statement, the
Prospectus, and any amendments or supplements thereto were
discussed, and, although such counsel is not passing upon and
does not assume any responsibility for the accuracy, completeness
or fairness of the statement and Prospectus, and any amendments
or supplements thereto, on the basis of the foregoing, no facts
have come to the attention of such counsel which lead them to
believe that either the Registration Statement or amendment
became effective or the Preliminary Prospectus or Prospectus or
amendment or supplement thereto as of the date of such opinion
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading (it being
understood that such counsel need express no opinion with respect
to the financial statements and schedules and other financial and
statistical data included in the Preliminary Prospectus, the
Registration Statement or Prospectus, and any amendments or
supplements thereto);
-26-
(vii) to the best of such counsel's knowledge after due
inquiry, (A) there are no agreements, contracts or other
documents required by the Act to be described in the Registration
Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the
Registration Statement and the Prospectus and filed as exhibits
thereto; (B) the descriptions in the Registration Statement and
the Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company or any of the
Subsidiaries is a party or by which any of them is bound are
accurate in all material respects and fairly represent the
information required to be shown by Form S-1; (C) there is not
pending or threatened against the Company or any of the
Subsidiaries any action, arbitration, suit, proceeding,
litigation, governmental or other proceeding (including, without
limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, against the Company or any
of the Subsidiaries which (x) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are
accurately summarized in all material respects), (y) questions
the validity of the capital stock of the Company or any of the
Subsidiaries or this Agreement or the Representative's Warrant
Agreement, or of any action taken or to be taken by the Company
or any of the Subsidiaries pursuant to or in connection with any
of the foregoing; and (D) there is no action, suit or proceeding
pending or threatened against the Company or any of the
Subsidiaries before any court or arbitrator or governmental body,
agency or official in which there is a reasonable possibility of
an adverse decision which may result in a material adverse change
in the financial condition, business, affairs, stockholders'
equity, operations, properties, business or results of operations
of the Company or any of the Subsidiaries, which could adversely
affect the present or prospective ability of the Company to
perform its obligations under this Agreement or the
Representative's Warrant Agreement or which in any manner draws
into question the validity or enforceability of this Agreement or
the Representative's Warrant Agreement;
(viii) the Company has the corporate power and authority to
enter into each of this Agreement and the Representative's
Warrant Agreement and to consummate the transactions provided for
herein and therein; and each of this Agreement and the
Representative's Warrant Agreement has been duly authorized,
executed and delivered by the Company; each of this Agreement and
the Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other party
thereto, constitutes a legal, valid and binding agreement of the
Company
-27-
enforceable against the Company in accordance with its terms
(except as the enforceability thereof 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), and none of the Company's execution, delivery or
performance of this Agreement and the Representative's Warrant
Agreement, its consummation of the transactions contemplated
herein or therein, or the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or
supplements thereto conflicts with or results in any breach or
violation of any of the terms or provisions of, or constitutes a
default under, or will result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the
Company or any of the Subsidiaries pursuant to the terms of (A)
the articles of incorporation or by laws of the Company or any of
the Subsidiaries, as amended, (B) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note, loan or credit agreement or any
other agreement or instrument known to such counsel to which the
Company or any of the Subsidiaries is a party or by which any of
them is bound, or (C) any federal, state or local statute, rule
or regulation applicable to the Company or any of the
Subsidiaries or any judgment, decree or order known to such
counsel of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of the Subsidiaries or any
of their activities or properties;
(ix) no consent, approval, authorization or order, and no
filing with, any court, regulatory body, government agency or
other body (other than such as may be required under federal
securities or Blue Sky laws, as to which no opinion need be
rendered) is required in connection with the issuance of the
Registered Securities as contemplated by the Prospectus and the
Registration Statement, the performance of the Agreement and the
Representative's Warrant Agreement and the transactions
contemplated hereby and thereby;
(x) to the best of such counsel's knowledge after due
inquiry, the properties and businesses of the Company and the
Subsidiaries conform in
-28-
all material respects to the description thereof contained in the
Registration Statement and the Prospectus;
(xi) to the best knowledge of such counsel, and except as
disclosed in the Registration Statement and the Prospectus, none
the Company nor any of the Subsidiaries is in breach of, or in
default under, any term or provision of any license, contract,
indenture, mortgage, installment sale agreement, deed of trust,
lease, voting trust agreement, stockholders' agreement, note,
loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the
Subsidiaries is bound or to which the property or assets
(tangible or intangible) of the Company or any of the
Subsidiaries is subject; and none the Company nor any of the
Subsidiaries is in violation of any term or provision of its
articles of incorporation or bylaws, as amended, nor to the best
of such counsel's knowledge after due inquiry, in violation of
any franchise, license, permit, judgment, decree, order, statute,
rule or regulation, which would have a material adverse effect on
the Company;
(xii) the statements in the Prospectus under "Dividend
Policy" and "Description of Capital Stock," have been reviewed by
such counsel, and insofar as they refer to statements of law,
descriptions of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects;
(xiii) the Common Stock has been approved for listing on the
NASDAQ National Market System, subject only to official notice of
issuance;
(xiv) to the best of such counsel's knowledge and based upon
a review of the outstanding securities and the contracts
furnished to such counsel by the Company, no person, corporation,
trust, partnership, association or other entity has the right to
include and/or register any securities of the Company in the
Registration Statement, require the Company to file any
registration statement or, if filed, to include any security in
such registration statement; and
(xv) the Company is not an "investment company" or
"promoter" or "principal underwriter" for or, to such counsel's
knowledge, an
-29-
"affiliated person" of, an "investment company" as such terms are
defined in the 1940 Act.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws, rules and regulations of
the United States and the laws, rules and regulations of the State of Delaware,
to the extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws provided, however, that
if the laws, rules and regulations of jurisdictions other than the United States
and Delaware on which such other counsel opines differ materially from the laws,
rules and regulations of the United States and Delaware, the opinion of such
other counsel shall be modified to contain all provisions customarily included
in such opinions in such jurisdiction; (B) as to matters of fact, to the extent
they deem proper, on certificates and written statements of responsible officers
of the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company, provided that copies of any
such statements or certificates shall be delivered to Underwriters' Counsel if
requested. The opinion of such counsel shall state that knowledge shall not
include the knowledge of a director or officer of the Company who is affiliated
with such firm in his or her capacity as an officer or director of the Company.
The opinion of such counsel for the Company shall state that the opinion of any
such other counsel is in form satisfactory to such counsel.
At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of ▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Company,
dated the Option Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel confirming as of such Option
Closing Date the statements made by ▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇ in their opinion delivered
on the Closing Date.
(e) At the Closing Date, the Underwriters shall have received the
favorable opinion of ▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Selling Shareholder,
dated the Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel to the effect that:
(i) the Selling Shareholder has full power and authority to
execute, deliver, and perform this Agreement and the Escrow Agreement.
This Agreement and the Escrow Agreement have been duly executed and
delivered by the Selling Shareholder and are the legal, valid, and
binding obligations of the Selling Shareholder, and (subject to
applicable bankruptcy, insolvency, and other laws affecting the
enforceability of creditors' rights generally) are enforceable as to
it in accordance with their respective terms. No consent,
authorization, approval, order, license, certificate, or permit of or
from, or declaration or filing with, any federal, state, local, or
other governmental authority or any court or other tribunal is
required by the Selling Shareholder for the execution, delivery, or
performance of this Agreement (except filings under the Act, all of
which have been made, and
-30-
such consents consisting only of consents under "blue sky" or
securities laws) or the Escrow Agreement by the Selling Shareholder.
No consent of any party to any contract, agreement, instrument, lease,
license, arrangement, or understanding known to such counsel to which
the Selling Shareholder is a party, or to which the Selling
Shareholder's properties or assets are subject, is required for the
execution, delivery, or performance of this Agreement or the Escrow
Agreement; and the execution, delivery, and performance of this
Agreement and the Escrow Agreement will not violate, result in a
breach of, conflict with, or (with or without the giving of notice or
the passage of time or both) entitle any party to terminate or call a
default under any such contract, agreement, instrument, lease,
license, arrangement, or understanding, or violate, result in a breach
of, or conflict with any law, rule, regulation, order, judgment, or
decree binding on the Selling Shareholder or to which the Selling
Shareholder's operations, business, properties, or assets are subject;
and
(ii) Upon the issuance and delivery pursuant to this Agreement of
the Registered Securities to be sold by the Selling Shareholder, the
Selling Shareholder will convey, against payment therefor as provided
herein, to the Underwriters and the Representative, respectively, good
and marketable title to the Registered Securities free and clear of
all liens and other encumbrances.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws, rules and regulations of
the United States and the laws, rules and regulations of the State of Delaware,
to the extent such counsel deems proper and to the extent specified in such
option, if at all, upon an opinion or opinions (in form and substance
satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws provided, however, that
if the laws, rules and regulations of jurisdictions other than the United States
and Delaware on which such other counsel opines differ materially from the laws,
rules and regulations of the United States and Delaware, the opinion of such
other counsel shall be modified to contain all provisions customarily included
in such opinions in such jurisdiction; (B) as to matters of fact, to the extent
they deem proper, on certificates and written statements of responsible officers
of the Company and certificates or other written statements of officers of
department of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company, provided that copies of any
such statements or certificates shall be delivered to Underwriters' Counsel if
requested. The opinion of such counsel shall state that knowledge shall not
include the knowledge of a director or officer of the Company who is affiliated
with such firm in his or her capacity as an officer or director of the Company.
The opinion of such counsel for the Company shall state that the opinion of any
such other counsel is in form satisfactory to such counsel.
At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of ▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Selling
Shareholder, dated the Option Closing Date, addressed to the Underwriters and in
form and substance satisfactory to the Underwriters' Counsel confirming as of
such Option Closing Date the statements made by
-31-
▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇ in their opinion delivered on the Closing Date with respect to
the Selling Shareholder.
(f) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company herein contained.
(g) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities any of the
Company and the Subsidiaries, whether or not in the ordinary course of business,
from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by any of the
Company or the Subsidiaries, from the latest date as of which the financial
condition of the Company and the Subsidiaries is set forth in the Registration
Statement and Prospectus which is adverse to the Company and the Subsidiaries
taken as a whole; (iii) none of the Company or the Subsidiaries shall be in
default under any provision of any instrument relating to any outstanding
indebtedness which default has not been waived; (iv) none of the Company or the
Subsidiaries shall have issued any securities (other than Registered Securities)
or declared or paid any dividend or made any distribution in respect of its
capital stock of any class, nor has there been any change in the capital stock,
or any material increase in the debt (long or short term) or liabilities or
obligations of any of the Company or the Subsidiaries (contingent or otherwise);
(v) no material amount of the assets of any of the Company or the Subsidiaries
shall have been pledged or mortgaged, except as set forth in the Registration
Statement and Prospectus; (vi) no action, suit or proceeding, at law or in
equity, shall have been pending or threatened (or circumstances developed giving
rise to same) against any of the Company or the Subsidiaries, or affecting any
of their respective properties or businesses before or by any court or federal,
state or foreign commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely affect the
business, operations, prospects or financial condition or any income of the
Company or any of the Subsidiaries, except as set forth in the Registration
Statement and Prospectus; and (vii) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
(h) At each of the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received a certificate of the Company signed on
behalf of the Company by the principal executive officer of the Company, dated
the Closing Date or Option Closing Date, as the case may be, to the effect that
such executive has carefully examined the Registration Statement, the
Prospectus, this Agreement and the Representative's Warrant Agreement, and that:
-32-
(i) The representations and warranties of the Company in
this Agreement and, the Representative's Warrant Agreement are
true and correct, as if made on and as of the Closing Date or the
Option Closing Date, as the case may be, and the Company has
complied with all agreements and covenants and satisfied all
conditions contained in this Agreement and the Representative's
Warrant Agreement on its part to be performed or satisfied at or
prior to such Closing Date or Option Closing Date, as the case
may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and
no proceedings for that purpose have been instituted or are
pending or, to the best of each of such person's knowledge after
due inquiry, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all
statements and information required by the Act to be included
therein, and none of the Registration Statement, the Prospectus
nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading and neither the Preliminary Prospectus or
any supplement, as of their respective dates, thereto included
any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) none of the Company or the Subsidiaries has
incurred up to and including the Closing Date or the Option
Closing Date, as the case may be, other than in the ordinary
course of its business, any material liabilities or obligations,
direct or contingent; (b) none of the Company or the Subsidiaries
has paid or declared any dividends or other distributions on its
capital stock; (c) none of the Company or the Subsidiaries has
entered into any transactions not in the ordinary course of
business; (d) there has not been any change in the capital stock
or material increase in long-term debt or any increase in the
short-term borrowings (other than any increase in the short-term
borrowings in the ordinary course of business) of any of the
Company or the Subsidiaries, (e) none of the Company or the
Subsidiaries has sustained any loss or damage to its property or
assets, whether or not insured, (f) there is no litigation which
is pending or threatened (or circumstances giving rise to same)
against the Company, or any of the Subsidiaries or any affiliated
party of any of the foregoing which is required to be set forth
in
-33-
an amended or supplemented Prospectus which has not been set
forth, and (g) there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been
set forth.
References to the Registration Statement and the Prospectus in this
subsection (g) are to such documents as amended and supplemented at the date of
such certificate.
(i) At each of the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received a certificate from the Selling
Shareholder, dated the Closing Date or the Option Closing Date, as the case may
be, to the effect that the Selling Shareholder has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that the
representations and warranties of the Selling Shareholder in this Agreement are
true and correct, as if made on and as of the Closing Date or the Option Closing
Date, as the case may be, and the Selling Shareholder has complied with all
agreements and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to such Closing
Date or Option Closing Date, as the case may be.
(j) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters.
(k) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriters and Underwriters' Counsel, from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇:
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of
the Act and the Exchange Act and the applicable Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company and the
Subsidiaries included in the Registration Statement comply as to
form in all material respects with the applicable accounting
requirements of the Act and the Regulations thereunder and that
the Representative may rely upon the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with respect to the financial statements and supporting schedules
included in the Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim
financial statements of the Company and the Subsidiaries (with an
indication of the date of the latest available unaudited interim
financial statements), a reading of the latest available minutes
of the stockholders and board of directors and the various
committees of the board of directors of the Company and the
Subsidiaries, consultations with officers and other employees of
each of the Company
-34-
and the Subsidiaries responsible for financial and accounting
matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A)
the unaudited financial statements and supporting schedules of
the Company and the Subsidiaries, if any, included in the
Registration Statement, do not comply as to form in all material
respects with the applicable accounting requirements of the Act
and the Regulations or are not fairly presented in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements of the Company and the Subsidiaries included in the
Registration Statement, or (B) at a specified date not more than
five (5) days prior to the effective date of the Registration
Statement, there has been any change in the capital stock or
material increase in long-term debt any of the Company or the
Subsidiaries, or any material decrease in the stockholders'
equity or net current assets or net assets of the Company as
compared with amounts shown in the ____________, 19__, balance
sheet included in the Registration Statement, other than as set
forth in or contemplated by the Registration Statement, or, if
there was any change or decrease, setting forth the amount of
such change or decrease;
(iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to each of
the Company and the Subsidiaries set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general
accounting records, including work sheets, of each of the Company
and the Subsidiaries and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from
the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an
examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in
agreement; and
(v) statements as to such other material matters incident to
the transaction contemplated hereby as the Representative may
reasonably request.
(l) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ a letter, dated as of the
Closing Date or the Option Closing Date, as the case may be, to the effect that
they reaffirm that statements made in the letter furnished pursuant to
Subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five (5) days prior to Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (iv)
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of Subsection (k) of this Section 6 with respect to certain amounts, percentages
and financial information as specified by the Representative and deemed to be a
part of the Registration Statement pursuant to Rule 430A(b) and have found such
amounts, percentages and financial information to be in agreement with the
records specified in such clause (iv).
(m) On the Closing Date and each Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Registered Securities.
(n) No order suspending the sale of the Registered Securities in
any jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on the Closing Date or each Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(o) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement, substantially in the form filed as [EXHIBIT 4.2] to the Registration
Statement, in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(p) On or before Closing Date, the shares of Common Stock shall
have been duly approved for quotation on the American Stock Exchange.
(q) On or before Closing Date, there shall have been delivered to
the Representative all of the Lock-up Agreements in final form and substance
satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company and the Selling Shareholder, as of the date
hereof and as of the Option Closing Date, if any, agree to indemnify and hold
harmless each of the Underwriters (for purposes of this Section 7,
"Underwriters" shall include the officers, directors, partners, employees,
agents and counsel of the Underwriters, including specifically each person who
may be substituted for an Underwriter as provided in Section 11 hereof), and
each person, if any, who controls the Underwriter ("controlling person") within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from
and against any and all loss, liability, claim, damage, and expense whatsoever
(including, but not limited to, reasonable attorneys' fees and any and all
reasonable expense whatsoever incurred in investigating, preparing or defending
against any
-36-
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may not agree to any such settlement without the prior
written consent of the Company), as and when incurred, arising out of, based
upon or in connection with (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented); or
(B) in any application or other document or communication (in this Section 7
collectively called "application") executed by or on behalf of the Company or
the Selling Shareholder or based upon written information furnished by or on
behalf of the Company or the Selling Shareholder in any jurisdiction in order to
qualify the Registered Securities under the securities laws thereof or filed
with the Commission, any state securities commission or agency, The NASDAQ Stock
Market Inc. or any securities exchange; or any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of the Prospectus, in the light
of the circumstances under which they were made), unless such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, or in
any application, as the case may be; or (ii) any breach of any representation,
warranty, covenant or agreement of the Company or the Selling Shareholder
contained in this Agreement. The indemnity agreement in this subsection (a)
shall be in addition to any liability which the Company or the Selling
Shareholder may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly,
to indemnify and hold harmless the Company, the Selling Shareholder, each of
their directors, each of their officers who has signed the Registration
Statement, and each other person, if any, who controls the Company or the
Selling Shareholder, within the meaning of the Act, to the same extent as the
foregoing indemnity from the Company and the Selling Shareholder to the
Underwriters but only with respect to statements or omissions, if any, made in
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any application made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to any Underwriter by such Underwriter or the
Representative expressly for use in such Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any such application, provided that such written information or
omissions only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement or Prospectus directly relating to the transactions
effected by the Underwriters in connection with this Offering. The Company and
the Selling Shareholder acknowledge that the statements with respect to the
public offering of the Securities set forth under the heading "Underwriting" and
the stabilization legend in the Prospectus have been furnished by the
Underwriters expressly for use therein and constitute the only information
furnished in writing by or on behalf of the Underwriters or the Representative
for inclusion in the Prospectus. The indemnity agreement in this subsection (b)
shall be in addition to any liability which the Underwriters may have at common
law or otherwise.
-37-
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure to so notify an indemnifying party shall not relieve it from any
liability which it may have otherwise or which it may have under this Section 7,
except to the extent that it has been prejudiced in any material respect by such
failure). In case any such action is brought against any indemnified party, and
it notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded, based on the
advice of counsel, that there may be defenses available to it or them which are
different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the reasonable fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Registered Securities, or (B) if the allocation provided by clause (A) above
is not permitted by applicable law, in such proportion as
-38-
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of each of the contributing parties, on
the one hand, and the party to be indemnified on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable considerations.
In any case where the Company and/or the Selling Shareholder, on the one hand,
is a contributing party and the Underwriters on the other hand, are the
indemnified party, the relative benefits received by the Company or Selling
Shareholder on the one hand, and the Underwriters, on the other, shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Registered Securities (before deducting expenses other than underwriting
discounts and commissions) bear to the total underwriting discounts received by
the Underwriters hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and/or the Selling Shareholder, on the one
hand, or by the Underwriters on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, expenses or liabilities (or
actions in respect thereof) referred to above in this subdivision (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subdivision (d), the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Registered Securities purchased by the
Underwriters hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 12(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company or the Selling Shareholder within the meaning of the Act,
each officer of the Company or the Selling Shareholder who has signed the
Registration Statement, and each director of the Company or the Selling
Shareholder shall have the same rights to contribution as the Company, subject
in each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution
agreement set forth above shall be in addition to any liabilities which any
indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement contained
in certificates of officers of the Company or the Selling Shareholder submitted
pursuant hereto, shall be deemed to be representations, warranties and
agreements of the Company or the Selling Shareholder at the Closing Date and as
of each Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company or the Selling Shareholder and the
respective indemnity
-39-
and contribution agreements contained in Section 7 hereof shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Underwriter, the Company, the Selling Shareholder, or any
controlling person of any of the Underwriter, the Company or the Selling
Shareholder, and shall survive termination of this Agreement or the issuance and
delivery of the Registered Securities to the Underwriters and the
Representative, as the case may be.
9. Effective Date. This Agreement shall become effective at 4:00
p.m., New York City time, on the date hereof. For purposes of this Section 9,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Representative of telegrams to
securities dealers releasing such Registered Securities for offering or the
release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Registered
Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has materially disrupted,
or in the Representative's reasonable opinion, will in the immediate future
materially disrupt the financial markets; or (ii) any material adverse change in
the financial markets shall have occurred; or (iii) if trading on the New York
Stock Exchange, the American Stock Exchange, or in the over-the-counter market
shall have been suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been required
on the over-the-counter market by the NASD or by order of the Commission or any
other government authority having jurisdiction; or (iv) if the United States
shall have become involved in a war or major hostilities, or if there shall have
been an escalation in an existing war or major hostilities or a national
emergency shall have been declared in the United States; or (v) if a banking
moratorium has been declared by a state or federal authority; or (vi) if the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
delivery of the Registered Securities; or (vii) if there shall have been such a
material adverse change in the prospects or conditions of the Company or any of
the Subsidiaries, or such material adverse change in the general market,
political or economic conditions, in the United States or elsewhere as in the
Representative's judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Registered Securities.
(b) If this Agreement is terminated by the Representative in
accordance with any of the provisions of Section 6, Section 10(a) or Section 12,
the Company and/or the Selling Shareholder shall promptly reimburse and
indemnify the Underwriters pursuant to Section 5(b) hereof. Notwithstanding any
contrary provision contained in this Agreement, any election hereunder or any
termination of this Agreement (including, without limitation, pursuant to
Sections 6, 10, 11 and 12 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 and Section 7 shall not be
in any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
-40-
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth. If, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the total number of Securities to be purchased on such date, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Securities to be purchased on such date, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
12. Default by the Company. If the Company or Selling Shareholder
shall fail at the Closing Date or at any Option Closing Date, as applicable, to
sell and deliver the number of Registered Securities which it is obligated to
sell hereunder on such date, then this Agreement shall terminate (or, if such
default shall occur with respect to any Option Shares to be purchased on an
Option Closing Date, the Underwriters may at the Representative's option, by
notice from the Representative to the Company and the Selling Shareholder
terminate the Underwriters' obligation to purchase Option Shares from the
Company and the Selling Shareholder on such date) without any liability on the
part of any non-defaulting party other than pursuant to Section 5, Section 7 and
Section 10 hereof. No action taken pursuant to this Section shall relieve the
Company or the Selling Shareholder from liability, if any, in respect of such
default.
13. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative, c/o National Securities Corporation, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, with a copy, which
shall not
-41-
constitute notice, to Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. Annex, Esq. CAMHY KARLINSKY & ▇▇▇▇▇
LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. Notices to the Company and
the Selling Shareholder shall be directed to the Company at [address], with a
copy, which shall not constitute notice, to ▇'▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Arthur Don.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon the Underwriters, the Company and the Selling Shareholder,
and the controlling persons, directors and officers referred to in Section 7
hereof and their respective successors, legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. No purchaser of Registered Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware without giving
effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative,
the Company and the Selling Shareholder.
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If the foregoing correctly sets forth the understanding among the
Underwriters, the Company and the Selling Shareholder, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
HOME SECURITY INTERNATIONAL, INC.
By:_____________________________________
Name:
Title:
FAI HOME SECURITY HOLDINGS, INC.
________________________________________
CONFIRMED AND ACCEPTED AS OF
THE DATE FIRST ABOVE WRITTEN:
NATIONAL SECURITIES CORPORATION
By:________________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman
For itself and as Representative of the Underwriters named in Schedule A hereto.
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SCHEDULE A
FIRM SHARES
-----------
Number of Shares Total
Number of Shares to to be Purchased Number of
Name of be Purchased from from the Selling Shares to
Underwriters the Company Shareholder be Purchased
--------------------- ------------------- ---------------- ------------
National Securities
Corporation.........
TOTAL................ 500,000 5,000,000 250,000
EXH. A-1
SCHEDULE B
OPTION SHARES
-------------
Number of Shares Total
Number of Shares to to be Purchased Number of
Name of be Purchased from from the Selling Shares to
Underwriters the Company Shareholder be Purchased
--------------------- ------------------- ---------------- ------------
National Securities
Corporation.........
TOTAL................ 400,000 500,000 900,000
EXH. B-1
