430,000 Shares of Series A Cumulative Convertible
Preferred Stock,
par value $.01 per share
and
215,000 Redeemable Class A Warrants for Preferred Stock
MICROENERGY, INC.
UNDERWRITING AGREEMENT
New York, New York
___________, 1996
I. A. ▇▇▇▇▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
MicroEnergy, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to you, as representative of the several
underwriters referred to in the Prospectus (as defined below) (the
"Representative"), an aggregate of 430,000 shares of Series A
Cumulative Convertible Preferred Stock, par value $.01 per share
("Preferred Stock" or "Shares"), and 215,000 Redeemable Class A
Warrants for Preferred Stock ("Warrants"). The Preferred Stock and
Warrants may be collectively referred to hereinafter as the
"Securities". The Preferred Stock is convertible, commencing
__________, 1997 and at any time thereafter that the Preferred
Stock is outstanding, into the Company's common stock, par value
$_____ per share ("Common Stock") at a rate of no less than 1 share
and no more than 2 shares for every share of Preferred Stock, the
actual conversion ratio to be determined on ___________, 1997 based
upon the market price of the Common Stock at that time (all as
described in the Prospectus). The Preferred Stock may be
converted, at the Company's option, in accordance with the
provisions contained in the Prospectus. In the event the Company
exercises its conversion rights, each Warrant will thereafter
entitle the holder thereof to purchase 1 share of Common Stock.
Each Warrant entitles the registered holder thereof to purchase one
(1) share of Preferred Stock at an exercise price of $5.25 per
share for a period of three (3) years, commencing ___________, 1997
(one (1) year from the Effective Date) through ___________, 2000.
The Warrants are subject to redemption by the Company at any time
after ___________, 1997 at $.01 per warrant, if the closing bid
price per share of Common Stock has equaled or exceeded $7.00 per
share for any 5 consecutive trading days ending within 15 days of
the written notice of redemption. In addition, the Company
proposes to grant to the Representative the option referred to in
Section 2(b) to purchase all or any part of an aggregate of 64,500
additional shares of Preferred Stock and 32,250 additional
Warrants.
You have advised the Company that you desire to purchase
the Securities. The Company confirms the agreements made by it
with respect to the purchase of the Securities by the
Representative as follows:
1. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with you that:
(a) A registration statement (File No. 33-________) on Form SB-2
relating to the public offering of the Securities, including a form
of prospectus subject to completion, copies of which have
heretofore been delivered to you, has been prepared in conformity
with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission
under the Act and one or more amendments to such registration
statement may have been so filed. After the execution of this
Agreement, the Company will file with the Commission either (i) if
such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a
prospectus in the form most recently included in an amendment to
such registration statement (or, if no such amendment shall have
been filed in such registration statement), with such changes or
insertions as are required by Rule 430A under the Act or permitted
by Rule 424(b) under the Act and as have been provided to and
approved by you prior to the execution of this Agreement, or (ii)
if such registration statement, as it may have been amended, has
not been declared by the Commission to be effective under the Act,
an amendment to such registration statement, including a form of
prospectus, a copy of which amendment has been furnished to and
approved by you prior to the execution of this Agreement. As used
in this Agreement, the term "Company" means MicroEnergy, Inc.
and/or each of its subsidiaries; the term "Registration Statement"
means such registration statement, as amended at the time when it
was or is declared effective, including all financial schedules and
exhibits thereto and including any information omitted therefrom
pursuant to Rule 430A under the Act and included in the Prospectus
(as hereinafter defined); the term "Preliminary Prospectus" means
each prospectus subject to completion filed with such registration
statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration
Statement or any amendment thereto at the time it was or is
declared effective); and the term "Prospectus" means the prospectus
first filed with the Commission pursuant to Rule 424(b) under the
Act, or, if no prospectus is required to be filed pursuant to said
Rule 424(b), such term means the prospectus included in the
Registration Statement; except that if such registration statement
or prospectus is amended or such prospectus is supplemented, after
the effective date of such registration statement and prior to the
Option Closing Date (as hereinafter defined), the terms
"Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term
"Prospectus" shall include the prospectus as so supplemented, or
both, as the case may be.
(b) The Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus. At the time
the Registration Statement becomes effective and at all times
subsequent thereto up to and on the First Closing Date (as
hereinafter defined) or the Option Closing Date, as the case may
be, (i) the Registration Statement and Prospectus will in all
respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make statements therein not misleading; provided,
however, that the Company makes no representations, warranties or
agreements as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by or
on behalf of the Representative specifically for use in the
preparation thereof. It is understood that the statements set
forth in the Prospectus with respect to stabilization, under the
heading "Underwriting", and the identity of counsel to the
Representative under the heading "Legal Matters" constitute for
purposes of this Section and Section 6(b) the only information
furnished in writing by or on behalf of the Representative for
inclusion in the Registration Statement and Prospectus, as the case
may be.
(c) The Company and its subsidiaries ("Subsidiaries"),
have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation with full corporate power and
authority to own its properties and conduct its business as
described in the Prospectus and are duly qualified or licensed to
do business as a foreign corporation and is in good standing in the
State of Illinois and each other jurisdiction in which the nature
of its business or the character or location of its properties
requires such qualification, except where the failure to so qualify
will not materially adversely affect the Company's business,
properties or financial condition. The Company owns all of the
issued and outstanding capital stock of the Subsidiaries.
(d) The authorized, issued and outstanding capital stock
of the Company, including the predecessors of the Company, is as
set forth the Company's financial statements contained in the
Registration Statement; the shares of issued and outstanding
capital stock of the Company set forth therein have been duly
authorized, validly issued and are fully paid and nonassessable;
except as set forth in the Prospectus, no options, warrants, or
other rights to purchase, agreements or other obligations to issue,
or agreements or other rights to convert any obligation into, any
shares of capital stock of the Company have been granted or entered
into by the Company; and the capital stock conforms to all
statements relating thereto contained in the Registration Statement
and Prospectus.
(e) The shares of Preferred Stock, when paid for, issued
and delivered pursuant to this Agreement, will have been duly
authorized, issued and delivered and will constitute valid and
legally binding obligations of the Company enforceable in
accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency or other laws affecting the right
of creditors generally or by general equitable principles, and
entitled to the rights and preferences provided by the Certificate
of Incorporation, which will be in the form filed as an exhibit to
the Registration Statement. The terms of the Preferred Stock
conform to the description thereof in the Registration Statement
and Prospectus.
The shares of Common Stock issuable upon conversion of
the Preferred Stock or upon exercise of the Warrants, when issued,
will be duly authorized, validly issued, fully paid, and non-assessable,
free of preemptive rights, and no personal liability
will attach to the ownership thereof.
The Warrants, when paid for, issued and delivered
pursuant to this Agreement, will have been duly authorized, issued
and delivered and will constitute valid and legally binding
obligations of the Company enforceable in accordance with their
terms, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the right of creditors generally
or by general equitable principles, and entitled to the benefits
provided by the warrant agreement pursuant to which such Warrants
are to be issued (the "Warrant Agreement"), which will be
substantially in the form filed as an exhibit to the Registration
Statement. The shares of Preferred Stock issuable upon exercise of
the Warrants have been reserved for issuance upon the exercise of
the Warrants and when issued in accordance with the terms of the
Warrants and Warrant Agreement, will be duly and validly authorized
validly issued, fully paid and non-assessable and free of
preemptive rights. The Warrant Agreement has been duly authorized
and, when executed and delivered pursuant to this Agreement,
assuming due authorization, execution and delivery by the transfer
agent, will have been duly executed and delivered and will
constitute the valid and legally binding obligation of the Company
enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally or by general equitable
principles. The Warrants and Warrant Agreement conform to the
respective descriptions thereof in the Registration Statement and
Prospectus.
The Shares and Warrants contained in the Underwriter's
Purchase Option (as defined in the Registration Statement) have
been duly authorized and, when paid for, issued and delivered
pursuant to this Agreement, will constitute valid and legally
binding obligations of the Company enforceable in accordance with
their terms and entitled to the benefits provided by the Purchase
Option, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors
generally or by general equitable principles. The Securities
issuable upon exercise of the Purchase Option (and the shares of
Preferred Stock issuable upon exercise of the Warrants and the
shares of Common Stock issuable upon conversion of the Preferred
Stock) when issued and paid for in accordance with this Agreement,
the Purchase Option and the Warrant Agreement, will be duly
authorized, validly issued, fully paid and non-assessable and free
of preemptive rights.
(f)This Agreement and the Purchase Option have been
duly and validly authorized, executed and delivered by the Company.
The Company has full power and authority to authorize, issue and
sell the Securities to be sold by it hereunder on the terms and
conditions set forth herein, and no consent, approval,
authorization or other order of any governmental authority is
required in connection with such authorization, execution and
delivery or in connection with the authorization, issuance and sale
of the Securities or the Purchase Option, except such as may be
required under the Act or state securities laws.
(g) Except as described in the Prospectus, or which
would not have a material adverse effect on the condition
(financial or otherwise), business prospects, net worth or
properties of the Company and the Subsidiaries taken as a whole (a
"Material Adverse Effect"), neither the Company nor its
Subsidiaries is in violation, breach or default of or under, and
consummation of the transactions herein contemplated and the
fulfillment of the terms of this Agreement will not conflict with,
or result in a breach or violation of, any of the terms or
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
of the property or assets of the Company or its Subsidiaries
pursuant to the terms of any material indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the
Company or its Subsidiaries is a party or by which the Company or
its Subsidiaries may be bound or to which any of the property or
assets of the Company or its Subsidiaries is subject, nor will such
action result in any violation of the provisions of the certificate
of incorporation or the by-laws of the Company or its Subsidiaries,
as amended, or any statute or any order, rule or regulation
applicable to the Company or its Subsidiaries of any court or of
any regulatory authority or other governmental body having
jurisdiction over the Company or its Subsidiaries.
(h) Subject to the qualifications stated in the
Prospectus, the Company and its Subsidiaries have good and
marketable title to all properties and assets described in the
Prospectus as owned by them, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially
significant or important in relation to their business; all of the
material leases and subleases under which the Company or its
Subsidiaries is the lessor or sublessor of properties or assets or
under which the Company or its Subsidiaries hold properties or
assets as lessee or sublessee as described in the Prospectus are in
full force and effect, and, except as described in the Prospectus,
the Company and its Subsidiaries are not in default in any material
respect with respect to any of the terms or provisions of any of
such leases or subleases, and, to the best knowledge of the
Company, no claim has been asserted by anyone adverse to rights of
the Company or its Subsidiaries, as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or
affecting or questioning the right of the Company or its
Subsidiaries to continued possession of the leased or subleased
premises or assets under any such lease or sublease except as
described or referred to in the Prospectus; and the Company and its
Subsidiaries own or lease all such properties described in the
Prospectus as are necessary to their operations as now conducted
and, except as otherwise stated in the Prospectus, as proposed to
be conducted as set forth in the Prospectus.
(i) Selden, Fox and Associates, Ltd., which has given
its report on certain financial statements filed with the
Commission as a part of the Registration Statement, is with respect
to the Company, independent public accountants as required by the
Act and the Rules and Regulations.
(j) The financial statements, and schedules together
with related notes, set forth in the Prospectus or the Registration
Statement present fairly the financial position and results of
operations and changes in cash flow position of the Company and its
Subsidiaries on the basis stated in the Registration Statement, at
the respective dates and for the respective periods to which they
apply. Said statements and schedules and related notes have been
prepared in accordance with generally accepted accounting
principles applied on a basis which is consistent during the
periods involved except as disclosed in the Prospectus and
Registration Statement.
(k) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus
and except as otherwise disclosed or contemplated therein, the
Company and its Subsidiaries have not incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of
business, or entered into any transaction not in the ordinary
course of business, which would have a Material Adverse Effect, and
there has not been any change in the capital stock of, or any
incurrence of short-term or long-term debt by, the Company or its
Subsidiaries, or any issuance of options, warrants or other rights
to purchase the capital stock of the Company or its Subsidiaries,
or any material adverse change or any development involving, so far
as the Company or its Subsidiaries can now reasonably foresee a
prospective adverse change in the condition (financial or
otherwise), net worth, results of operations, business, key
personnel or properties of it which would have a Material Adverse
Effect.
(l) Except as set forth in the Prospectus, there is not
now pending or, to the knowledge of the Company, threatened, any
action, suit or proceeding to which the Company or its Subsidiaries
are a party before or by any court or governmental agency or body,
which might result in any material adverse change in the financial
condition, business prospects, net worth, or properties of the
Company or its Subsidiaries, nor are there any actions, suits or
proceedings related to environmental matters or related to
discrimination on the basis of age, sex, religion or race; and no
labor disputes involving the employees of the Company or its
Subsidiaries exist or to the knowledge of the Company, are
threatened which might be expected to have a Material Adverse
Effect.
(m) Except as disclosed in the Prospectus, the Company
and its Subsidiaries have filed all necessary federal, state and
foreign income and franchise tax returns required to be filed as of
the date hereof and have paid all taxes shown as due thereon; and
there is no tax deficiency which has been, or to the knowledge of
the party, may be asserted against the Company or its Subsidiaries.
(n) Except as disclosed in the Registration Statement or
Prospectus, the Company and its Subsidiaries have sufficient
licenses, permits and other governmental authorizations currently
necessary for the conduct of their business or the ownership of
their properties as described in the Prospectus and is in all
material respects complying therewith and owns or possesses
adequate rights to use all material patents, patent applications,
trademarks, service marks, trade-names, trademark registrations,
service mark registrations, copyrights and licenses necessary for
the conduct of such businesses and have not received any notice of
conflict with the asserted rights of others in respect thereof. To
the best knowledge of the Company, none of the activities or
business of the Company or its Subsidiaries are in violation of, or
cause the Company or its Subsidiaries to violate, any law, rule,
regulation or order of the United States, any state, county or
locality, or of any agency or body of the United States or of any
state, county or locality, the violation of which would have a
Material Adverse Effect.
(o) Neither the Company nor its Subsidiaries have,
directly or indirectly, at any time (i) made any contributions to
any candidate for political office, or failed to disclose fully any
such contribution in violation of law or (ii) made any payment to
any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties,
other than payments or contributions required or allowed by
applicable law. The Company's internal accounting controls and
procedures are sufficient to cause the Company to comply in all
material respects with the Foreign Corrupt Practices Act of 1977,
as amended.
(p) On the Closing Dates (hereinafter defined) all
transfer or other taxes, (including franchise, capital stock or
other tax, other than income taxes, imposed by any jurisdiction) if
any, which are required to be paid in connection with the sale and
transfer of the Securities to the Representative hereunder will
have been fully paid or provided for by the Company and all laws
imposing such taxes will have been complied with in all material
respects.
(q) All contracts and other documents of the Company and
its Subsidiaries which are, under the Rules and Regulations,
required to be filed as exhibits to the Registration Statement have
been so filed.
(r)Except as disclosed in the Registration Statement,
the Company has no subsidiaries.
(s) Except as disclosed in the Registration Statement,
the Company has not entered into any agreement pursuant to which
any person is entitled either directly or indirectly to
compensation from the Company for services as a finder in
connection with the proposed public offering.
(t) Except as previously disclosed in writing by the
Company to counsel to the Representative or as disclosed in the
Registration Statement, no officer, director or stockholder of the
Company has any National Association of Securities Dealers, Inc.
(the "NASD") affiliation.
(u) The Company is a reporting company under Section
12(g) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), and as such, since becoming a reporting company thereunder,
the Company and all directors, officers and principal
securityholders made all required filings, and done so on a timely
basis, and all of such filings conform to the requirements of the
Exchange Act and the rules and regulations thereunder and none of
such filings contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make statements therein not misleading.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties,
and agreements herein contained, the Company agrees to issue and
sell to the Representative and the Representative agrees to buy
from the Company at $4.50 per share of Preferred Stock and $.09 per
Warrant, at the place and time hereinafter specified, 430,000
shares of Preferred Stock and 215,000 Warrants (the "First
Securities").
Delivery of the First Securities against payment therefor
shall take place at the offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (or at such other place as may
be designated by agreement between the Representative and the
Company) at 10:00 a.m., New York time, on _______, 1996, or at such
later time and date as the Representative may designate in writing
to the Company at least two business days prior to such purchase,
but not later than _______, 1996 such time and date of payment and
delivery for the First Securities being herein called the "First
Closing Date."
(b) In addition, subject to the terms and conditions of
this Agreement, and upon the basis of the representations,
warranties and agreements herein contained, the Company hereby
grants an option to the Representative (the "Over-Allotment
Option") to purchase all or any part of an aggregate of an
additional 64,500 shares of Preferred Stock and 32,250 Warrants to
cover over allotments at the same price per share of Preferred
Stock and per Warrant as the Representative shall pay for the First
Securities being sold pursuant to the provisions of subsection (a)
of this Section 2 (such additional Securities being referred to
herein as the "Option Securities"). This option may be exercised
within 45 days after the effective date of the Registration
Statement upon written notice by the Representative to the Company
advising as to the amount of Option Securities as to which the
option is being exercised, the names and denominations in which the
certificates for such Option Securities are to be registered and
the time and date when such certificates are to be delivered. Such
time and date shall be determined by the Representative but shall
not be earlier than four nor later than ten full business days
after the exercise of said option (but in no event more than 60
days after the First Closing Date), nor in any event prior to the
First Closing Date, and such time and date is referred to herein as
the "Option Closing Date." Delivery of the Option Securities
against payment therefor shall take place at the offices of
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(or at such other place as may be designated by agreement between
the Representative and the Company). The option granted hereunder
may be exercised only to cover over-allotments in the sale by the
Representative of First Securities referred to in subsection (a)
above. No Option Securities shall be delivered unless all First
Securities shall have been delivered to the Representative as
provided herein.
(c) The Company will make the certificates for the
Securities to be purchased by the Representative hereunder
available to you for checking at least two full business days prior
to the First Closing Date or the Option Closing Date (which are
collectively referred to herein as the "Closing Dates"). The
certificates shall be in such names and denominations as you may
request, at least three full business days prior to the Closing
Dates. Delivery of the certificates at the time and place
specified in this Agreement is a further condition to the
obligations of the Representative.
Definitive certificates in negotiable form for the
Securities to be purchased by the Representative hereunder will be
delivered by the Company to you for the account of the
Representative against payment of the respective purchase prices by
the Representative, by wire transfer or certified or bank cashier's
checks in New York Clearing House funds, payable to the order of
the Company.
In addition, in the event the Representative exercises
the option to purchase from the Company all or any portion of the
Option Securities pursuant to the provisions of subsection (b)
above, payment for such Securities shall be made to or upon the
order of the Company by wire transfer or certified or bank
cashier's checks payable in New York Clearing House funds at the
offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇.▇., at the time and date of delivery of such Securities as
required by the provisions of subsection (b) above, against receipt
of the certificates for such Securities by you for your account
registered in such names and in such denominations as you may
reasonably request.
It is understood that the Representative proposes to
offer the Securities to be purchased hereunder to the public upon
the terms and conditions set forth in the Registration Statement,
after the Registration Statement becomes effective.
3. Covenants of the Company. The Company covenants and
agrees with the Representative that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective. If required, the
Company will file the Prospectus and any amendment or supplement
thereto with the Commission in the manner and within the time
period required by Rule 424(b) under the Act. Upon notification
from the Commission that the Registration Statement has become
effective, the Company will so advise you and will not at any time,
whether before or after the effective date, file any amendment to
the Registration Statement or supplement to the Prospectus of which
you shall not previously have been advised and furnished with a
copy or to which you or your counsel shall have reasonably objected
in writing or which is not in compliance with the Act and the Rules
and Regulations. At any time prior to the later of (A) the
completion by the Representative of the distribution of the
Securities contemplated hereby (but in no event more than nine
months after the date on which the Registration Statement shall
have become or been declared effective) and (B) 25 days after the
date on which the Registration Statement shall have become or been
declared effective, the Company will prepare and file with the
Commission, promptly upon your request, any amendments or supple-
ments to the Registration Statement or Prospectus which, in the
opinion of counsel to the Company and the Representative, may be
reasonably necessary or advisable in connection with the
distribution of the Securities.
As soon as the Company is advised thereof, the Company
will advise you, and provide you copies of any written advice, of
the receipt of any comments of the Commission, of the effectiveness
of any post-effective amendment to the Registration Statement, of
the filing of any supplement to the Prospectus or any amended
Prospectus, of any request made by the Commission for an amendment
of the Registration Statement or for supplementing of the
Prospectus or for additional information with respect thereto, of
the issuance by the Commission or any state or regulatory body of
any stop order or other order or threat thereof suspending the
effectiveness of the Registration Statement or any order preventing
or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering in
any jurisdiction, or of the institution of any proceedings for any
of such purposes, and will use its best efforts to prevent the
issuance of any such order, and, if issued, to obtain as soon as
possible the lifting thereof.
The Company has caused to be delivered to you copies of
each Preliminary Prospectus, and the Company has consented and
hereby consents to the use of such copies for the purposes
permitted by the Act. The Company authorizes the Representative
and dealers to use the Prospectus in connection with the sale of
the Securities for such period as in the opinion of counsel to the
Representative and the Company the use thereof is required to
comply with the applicable provisions of the Act and the Rules and
Regulations. In case of the happening, at any time within such
period as a Prospectus is required under the Act to be delivered in
connection with sales by the Representative or dealer of any event
of which the Company has knowledge and which materially affects the
Company or the securities of the Company, or which in the opinion
of counsel for the Company and counsel for the Representative
should be set forth in an amendment of the Registration Statement
or a supplement to the Prospectus in order to make the statements
therein not then misleading, in light of the circumstances existing
at the time the Prospectus is required to be delivered to a
purchaser of the Securities or in case it shall be necessary to
amend or supplement the Prospectus to comply with law or with the
Rules and Regulations, the Company will notify you promptly and
forthwith prepare and furnish to you copies of such amended
Prospectus or of such supplement to be attached to the Prospectus,
in such quantities as you may reasonably request, in order that the
Prospectus, as so amended or supplemented, will not contain any
untrue statement of a material fact or omit to state any material
facts necessary in order to make the statements in the Prospectus,
in the light of the circumstances under which they are made, not
misleading. The preparation and furnishing of any such amendment
or supplement to the Registration Statement or amended Prospectus
or supplement to be attached to the Prospectus shall be without
expense to the Representative, except that in case the
Representative is required, in connection with the sale of the
Securities to deliver a Prospectus nine months or more after the
effective date of the Registration Statement, the Company will upon
request of and at the expense of the Representative, amend or
supplement the Registration Statement and Prospectus and furnish
the Representative with reasonable quantities of prospectuses
complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules and regulations thereunder in connection with
the offering and issuance of the Securities.
(b) The Company will furnish such information as may be
required and to otherwise cooperate and use its best efforts to
qualify or register the Securities for sale under the securities or
"blue sky" laws of such jurisdictions as you may designate and will
make such applications and furnish such information as may be
required for that purpose and to comply with such laws, provided
the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general
consent of service of process in any jurisdiction in any action
other than one arising out of the offering or sale of the
Securities. The Company will, from time to time, prepare and file
such statements and reports as are or may be required to continue
such qualification in effect for so long a period as the counsel to
the Company and the Representative deem reasonably necessary.
(c)If the sale of the Securities provided for herein is
not consummated as a result of the Company not performing its
obligations hereunder in all material respects, the Company shall
pay all costs and expenses incurred by it which are incident to the
performance of the Company's obligations hereunder, including but
not limited to, all of the expenses itemized in Section 8,
including the accountable expenses of the Representative, up to
$100,000 (including the reasonable fees and expenses of counsel to
the Representative).
(d) The Company will use its best efforts to (i) cause
a registration statement under the Exchange Act to be declared
effective concurrently with the completion of this offering and
will notify you in writing immediately upon the effectiveness of
such registration statement, and (ii) if requested by you, to
obtain and keep current a listing in the Standard & Poors or
▇▇▇▇▇'▇ OTC Industrial Manual.
(e) For so long as the Company is a reporting company
under either Section 12(g) or 15(d) of the Exchange Act, the
Company, at its expense, will furnish to its stockholders an annual
report (including financial statements audited by independent
public accountants), in reasonable detail and at its expense, will
furnish to you during the period ending five (5) years from the
date hereof, (i) as soon as practicable after the end of each
fiscal year, but no earlier than the filing of such information
with the Commission a balance sheet of the Company and any of its
subsidiaries as at the end of such fiscal year, together with
statements of income, surplus and cash flow of the Company and any
subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of
independent accountants; (ii) as soon as practicable after the end
of each of the first three fiscal quarters of each fiscal year, but
no earlier than the filing of such information with the Commission,
consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are publicly
available, a copy of all reports (financial or other) mailed to
security holders; (iv) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or
filed with the Commission or any securities exchange or automated
quotation system on which any class of securities of the Company is
listed; and (v) such other information as you may from time to time
reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection
(e) above will be on a consolidated basis to the extent the
accounts of the Company and its subsidiary or subsidiaries are
consolidated in reports furnished to its stockholders generally.
(g) The Company will deliver to you at or before the
First Closing Date two signed copies of the Registration Statement
including all financial statements and exhibits filed therewith,
and of all amendments thereto, and will deliver to the
Representative such number of conformed copies of the Registration
Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Representative may
reasonably request. The Company will deliver to or upon your
order, from time to time until the effective date of the
Registration Statement, as many copies of any Preliminary
Prospectus filed with the Commission prior to the effective date of
the Registration Statement as you may reasonably request. The
Company will deliver to the Representative on the effective date of
the Registration Statement and thereafter for so long as a Prospec-
tus is required to be delivered under the Act, from time to time,
as many copies of the Prospectus, in final form, or as thereafter
amended or supplemented, as the Representative may from time to
time reasonably request.
(h) The Company will make generally available to its
security holders and to the registered holders of its Warrants and
deliver to you as soon as it is practicable to do so but in no
event later than 90 days after the end of twelve months after its
current fiscal quarter, an earnings statement (which need not be
audited) covering a period of at least twelve consecutive months
beginning after the effective date of the Registration Statement,
which shall satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the
sale of the Securities substantially for the purposes set forth
under "Use of Proceeds" in the Prospectus.
(j) The Company will promptly prepare and file with the
Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other
action, which in the opinion of counsel to the Representative and
counsel to the Company, may be reasonably necessary or advisable in
connection with the distribution of the Securities, and will use
its best efforts to cause the same to become effective as promptly
as possible.
(k) The Company will reserve and keep available that
maximum number of its authorized but unissued securities which are
issuable upon exercise of the Purchase Option outstanding from time
to time.
(l) (1) For a period of eighteen (18) months from the
First Closing Date, no officer or director of any securities prior
to the offering will, directly or indirectly, offer, sell
(including any short sale), grant any option for the sale of,
acquire any option to dispose of, or otherwise dispose of any
shares of Common Stock or securities convertible into Common Stock
without the prior written consent of the Representative, other than
as set forth in the Registration Statement. In order to enforce
this covenant, the Company shall impose stop-transfer instructions
with respect to the securities owned by such individuals prior to
the offering until the end of such period (subject to any
exceptions to such limitation on transferability set forth in the
Registration Statement). If necessary to comply with any
applicable Blue-sky Law, the shares held by such individuals will
be escrowed with counsel for the Company or otherwise as required.
(2) Except for the issuance of shares of capital
stock by the Company in connection with a dividend,
recapitalization, reorganization or similar transactions or as
result of the exercise of warrants or options disclosed in or
issued or granted pursuant to plans disclosed in the Registration
Statement, the Company shall not, for a period of eighteen (18)
months following the First Closing Date, directly or indirectly,
offer, sell, issue or transfer any shares of its capital stock, or
any security exchangeable or exercisable for, or convertible into,
shares of the capital stock or register any of its capital stock
without the prior written consent of the Representative, which
shall not be unreasonably withheld.
(m) Upon completion of this offering, the Company will
make all filings required, including registration under the
Exchange Act, to obtain the listing of the Common Stock, Preferred
Stock and the Warrants in the NASDAQ Small Cap Market, and will use
its best efforts to effect and maintain such listing for at least
five years from the date of this Agreement.
(n) Except for the transactions contemplated by this
Agreement and as disclosed in the Prospectus, the Company
represents that it has not taken and agrees that it will not take,
directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or
result in the stabilization or manipulation of the price of any of
the Securities.
(o) On the First Closing Date and simultaneously with
the delivery of the Securities, the Company shall execute and
deliver to you the Purchase Option. The Purchase Option will be
substantially in the form filed as an Exhibit to the Registration
Statement.
(p) On the First Closing Date, the Company will have in
force key person life insurance on the lives of Messrs. ▇▇▇▇▇ and
▇▇▇▇▇▇▇ in an amount of not less than $1,000,000, payable to the
Company, and will use its best efforts to maintain such insurance
during the three year period commencing with the First Closing
Date.
(q) So long as any Warrants are outstanding and the
exercise price of the Warrants is less than the market price of the
Preferred Stock, the Company shall use its best efforts to cause
post-effective amendments to the Registration Statement to become
effective in compliance with the Act and without any lapse of time
between the effectiveness of any such post-effective amendments and
cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant and to furnish to the
Representative as many copies of each such Prospectus as such
Representative or dealer may reasonably request. The Company shall
not call for redemption of any of the Warrants unless a
registration statement covering the securities underlying the
Warrants has been declared effective by the Commission and remains
current at least until the date fixed for redemption.
(r) For a period of five (5) years following the
Effective Date, the Company will maintain registration with the
Commission pursuant to Section 12(g) of the Exchange Act and will
provide to the Representative copies of all filings made with the
Commission pursuant to the Exchange Act. In the event that the
Company fails to maintain registration with the Commission pursuant
to Section 12(g) during such five year period, the Company will
provide reasonable access to an independent accountant designated
by the Representative, to all books, records and other documents or
statements that reflect the Company's financial status at least
once each quarter, at the Company's expense.
(s) The Company agrees to pay the Representative a
warrant solicitation fee of 4.0% of the exercise price of any of
the Warrants exercised beginning one (1) year after the Effective
Date (not including warrants exercised by the Representative) if
(a) the market price of the Company's Preferred Stock on the date
the Warrant is exercised is greater than the exercise price of the
Warrant, (b) the exercise of the Warrant was solicited by the
Representative and the holder of the warrant designates the
Representative in writing as having solicited such Warrant, (c) the
Warrant is not held in a discretionary account, (d) disclosure of
the compensation arrangement is made upon the sale and exercise of
the Warrants, (e) soliciting the exercise is not in violation of
Rule 10b-6 under the Securities Exchange Act of 1934, and (f)
solicitation of the exercise is in compliance with the NASD Notice
to Members 81-38 (September 22, 1981).
(t) For a period of three years from the Effective Date,
at the request of the Representative, the Company shall provide
promptly, at the expense of the Company, copies of the Company's
daily transfer sheets furnished to it by its transfer agent and
copies of the securities position listings provided to it by the
Depository Trust Company.
(u) The Company hereby agrees that it will pay a
finder's fee to the Representative, equal to five percent (5%) of
the first $4,000,000 of the consideration involved in any
transaction, 4% of the next $1,000,000 of consideration involved in
the transaction, 3% of the next $1,000,000, 2% of the excess, if
any, over $6,000,000, for future consummated transactions, if any,
introduced by the Representative (including mergers, acquisitions,
joint ventures, and any other business for the Company introduced
by the Representative) consummated by the Company (an "Introduced,
Consummated Transaction"), in which the Representative introduced
the other party to the Company during a period ending five years
following the First Closing Date.
(v) Upon the first Closing Date and simultaneously with
the delivery of the Securities, the Company shall execute and
deliver to the Representative, a two year financial consulting
agreement in the form attached as an Exhibit to the Registration
Statement which shall require the Company to pay the Representative
$48,000 on the First Closing Date (the "Financial Consulting
Agreement").
(w) For a period of five (5) years following the
Effective Date the Company, at its expense, shall cause its
regularly engaged independent certified public accountants to
review (but not audit) the Company's financial statements for each
of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information, the filing of the Company's 10-Q
quarterly report and the mailing of quarterly financial information
to stockholders, provided that the Company shall not be required to
file a report of such accountants relating to such review with the
Commission. The Company will retain its present legal counsel and
independent certified public accountants for at least one year from
the Closing Date.
(x) For the three (3) year period commencing on the
First Closing Date, the Representative shall have the right to
nominate a member of the Company's Board of Directors. If the
Representative does not exercise this right, it may appoint an
advisor who will be able to attend all meetings of the Board of
Directors. However, if the Board of Directors determines that
confidential information is to be discussed during any part of any
meeting attended by such advisor, it shall have the right to
exclude the advisor from the meeting during such discussion. The
Representative shall also have the right to obtain copies of the
minutes, if requested, from all Board of Directors meetings for
three (3) years following the Effective Date of the Registration
Statement, whether or not a nominee of the Representative attends
or participates in any such Board meeting. The Company agrees to
reimburse the Representative immediately upon the Representative's
request therefor of any reasonable travel and lodging expenses
directly incurred by the Representative in connection with its
representative attending Company Board meetings on the same basis
for other Board members.
4. Conditions of Representative's Obligation. The
obligations of the Representative to purchase and pay for the
Securities which it has agreed to purchase hereunder, are subject
to the accuracy (as of the date hereof, and as of the Closing
Dates) of and compliance with the representations and warranties of
the Company herein, to the performance by the Company of its
obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become
effective and you shall have received notice thereof not later than
10:00 A.M., New York time, on the day following the date of this
Agreement, or at such later time or on such later date as to which
you may agree in writing; on or prior to the Closing Dates no stop
order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that or a similar
purpose shall have been instituted or shall be pending or, to your
knowledge or to the knowledge of the Company, shall be contemplated
by the Commission; any request on the part of the Commission for
additional information shall have been complied with to the
satisfaction of the Commission; and no stop order shall be in
effect denying or suspending effectiveness of such qualification
nor shall any stop order proceedings with respect thereto be
instituted or pending or threatened. If required, the Prospectus
shall have been filed with the Commission in the manner and within
the time period required by Rule 424(b) under the Act.
(b) At the First Closing Date, you shall have received
the opinion, dated as of the First Closing Date, of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
& ▇▇▇▇, counsel for the Company, in form and substance satisfactory
to counsel for the Representative, to the effect that:
(i) the Company and the Subsidiaries have been duly
incorporated and are validly existing as corporations in good
standing under the laws of the their respective jurisdictions of
incorporation, with all requisite corporate power and authority to
own their properties and conduct their business as described in the
Registration Statement and Prospectus and are duly qualified or
licensed to do business as a foreign corporation and are in good
standing in Illinois and each other jurisdiction in which the
ownership or leasing of its properties or conduct of its business
requires such qualification except where the failure to qualify or
be licensed will not have a Material Adverse Effect. The Company
owns all of the issued and outstanding capital stock of the
Subsidiaries;
(ii) the authorized capitalization of the Company as
of _____________, 1996 is as set forth in the Registration
Statement; the Securities as set forth in the Registration
Statement have been duly authorized and upon payment of
consideration therefore, will be validly issued, fully paid and
non-assessable and conform in all material respects to the description
thereof contained in the Prospectus; to such counsel's knowledge
the outstanding shares of capital stock of the Company have not
been issued in violation of the preemptive rights of any
shareholder and to such counsel's knowledge the shareholders of the
Company do not have any preemptive rights or other rights to
subscribe for or to purchase, nor are there any restrictions upon
the voting or transfer of any of the capital stock except as
provided in the Prospectus or as required by law. The Securities,
the Purchase Option and the Warrant Agreement conform in all
material respects to the respective descriptions thereof contained
in the Prospectus; the shares of Preferred Stock, and the shares of
Preferred Stock issuable upon exercise of Warrants, the Purchase
Option, and the Warrant Agreement (and the shares of Common Stock
issuable upon conversion of the Preferred Stock) will have been
duly authorized and, when issued and delivered in accordance with
their respective terms, will be duly and validly issued, fully
paid, non-assessable, free of preemptive rights; to the best of
their knowledge, all prior sales by the Company of the Company's
securities have been made in compliance with or under an exemption
from registration under the Act and applicable state securities
laws; a sufficient number of shares of Preferred Stock has been
reserved for issuance upon exercise of the Warrants, the Purchase
Option and a sufficient number of Common Stock has been reserved
for issuance upon exercise of the conversion rights of the
Preferred Stock and to the best of such counsel's knowledge,
neither the filing of the Registration Statement nor the offering
or sale of the Securities as contemplated by this Agreement gives
rise to any registration rights other than those which have been
waived or satisfied;
(iii) this Agreement, the Purchase Option, and
the Warrant Agreement have been duly and validly authorized,
executed and delivered by the Company;
(iv) the certificates evidencing the Securities as
described in the Registration Statement comply in all material
respects with the descriptions set forth therein, and comply with
the Delaware General Corporation Law, as in effect on the date
hereof; each Warrant will be exercisable for one share of the
Preferred Stock of the Company, respectively, and at the prices
provided for in the Warrant Agreement;
(v) except as otherwise disclosed in the
Registration Statement, such counsel knows of no pending or
threatened legal or governmental proceedings to which the Company
or its Subsidiaries is a party which would materially adversely
affect the business, property, financial condition or operations of
the Company or its Subsidiaries; or which question the validity of
the Securities, this Agreement, the Warrant Agreement or the
Purchase Option, or of any action taken or to be taken by the
Company pursuant to this Agreement, the Warrant Agreement or the
Purchase Option; to such counsel's knowledge there are no
governmental proceedings or regulations required to be described or
referred to in the Registration Statement which are not so
described or referred to;
(vi) the execution and delivery of this Agreement,
the Purchase Option or the Warrant Agreement and the incurrence of
the obligations herein and therein set forth and the consummation
of the transactions herein or therein contemplated, will not result
in a breach or violation of, or constitute a default under the
certificate of incorporation or by-laws of the Company or its
Subsidiaries, or to the best knowledge of counsel after due
inquiry, in the performance or observance of any material
obligations, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness or in any
material contract, indenture, mortgage, loan agreement, lease,
joint venture or other agreement or instrument to which the Company
or its Subsidiaries is a party or by which it or any of its
properties is bound or in violation of any order, rule, regulation,
writ, injunction, or decree of any government, governmental
instrumentality or court, domestic or foreign the result of which
would have a Material Adverse Effect;
(vii) the Registration Statement has become
effective under the Act, and to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement is in effect, and no proceedings for that
purpose have been instituted or are pending before, or threatened
by, the Commission; the Registration Statement and the Prospectus
(except for the financial statements and other financial data
contained therein, or omitted therefrom, as to which such counsel
need express no opinion) as of the Effective Date comply as to form
in all material respects with the applicable requirements of the
Act and the Rules and Regulations;
(viii) in the course of preparation of the
Registration Statement and the Prospectus such counsel has
participated in conferences with the President of the Company with
respect to the Registration Statement and Prospectus and such
discussions did not disclose to such counsel any information which
gives such counsel reason to believe that the Registration
Statement or any amendment thereto at the time it became effective
contained any untrue statement of a material fact required to be
stated therein or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus or any supplement thereto
contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make statements therein, in
light of the circumstances under which they were made, not
misleading (except, in the case of both the Registration Statement
and any amendment thereto and the Prospectus and any supplement
thereto, for the financial statements, notes thereto and other
financial information (including without limitation, the pro forma
financial information) and schedules contained therein, as to which
such counsel need express no opinion);
(ix) all descriptions in the Registration Statement
and the Prospectus, and any amendment or supplement thereto, of
contracts and other agreements to which the Company or its
Subsidiaries is a party are accurate and fairly present in all
material respects the information required to be shown, and such
counsel is familiar with all contracts and other agreements
referred to in the Registration Statement and the Prospectus and
any such amendment or supplement or filed as exhibits to the
Registration Statement, and such counsel does not know of any
contracts or agreements to which the Company or its Subsidiaries is
a party of a character required to be summarized or described
therein or to be filed as exhibits thereto which are not so
summarized, described or filed;
(x) no authorization, approval, consent, or license
of any governmental or regulatory authority or agency is necessary
in connection with the authorization, issuance, transfer, sale or
delivery of the Securities by the Company, in connection with the
execution, delivery and performance of this Agreement by the
Company or in connection with the taking of any action contemplated
herein, or the issuance of the Purchase Option or the Securities
underlying the Purchase Option, other than registrations or
qualifications of the Securities under applicable state or foreign
securities or Blue Sky laws and registration under the Act;
(xi) the shares of Common Stock, Preferred Stock and
the Warrants have been duly authorized for quotation on the NASDAQ
Small Cap Market ("NASDAQ"); and
(xii) The Company is a reporting Company under
Section 12(g) of the Securities Exchange Act of 1934, as amended
("Exchange Act") and as such, since becoming a reporting company
thereunder the Company and all directors, officers and principal
stockholders have made all required filings, and done so on a
timely basis, and all of such filings conform to the requirements
of the Exchange Act and the rules and regulations thereunder and
none of such filings contains any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make statement therein not misleading.
Such opinion shall also cover such matters incident to
the transactions contemplated hereby as the Representative or
counsel for the Representative shall reasonably request. In
rendering such opinion, such counsel may rely upon certificates of
any officer of the Company or public officials as to matters of
fact; and may rely as to all matters of law other than the law of
the United States or of the State of New York or Delaware upon
opinions of counsel satisfactory to you, in which case the opinion
shall state that they have no reason to believe that you and they
are not entitled to so rely.
(c) Intentionally Omitted.
(d) All corporate proceedings and other legal matters
relating to this Agreement, the Registration Statement, the
Prospectus and other related matters shall be satisfactory to or
approved by ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel to the
Representative.
(e) You shall have received a letter prior to the
Effective Date and again on and as of the First Closing Date from
Selden, Fox and Associates, Ltd., independent public accountants
for the Company, substantially in the form reasonably acceptable to
you, providing you with such "cold comfort" as you may reasonably
require.
(f) At the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true
and correct in all material respects with the same effect as if
made on and as of the Closing Dates taking into account for the
Option Closing Dates the effect of the transactions contemplated
hereby and the Company shall have performed all of its obligations
hereunder and satisfied all the conditions on its part to be
satisfied at or prior to such Closing Date; (ii) the Registration
Statement and the Prospectus and any amendments or supplements
thereto shall contain all statements which are required to be
stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the
requirements thereof, and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading; (iii) there shall have
been, since the respective dates as of which information is given,
no material adverse change, or to the Company's knowledge, any
development involving a prospective material adverse change, in the
business, properties, condition (financial or otherwise), results
of operations, capital stock, long-term or short-term debt or
general affairs of the Company or its Subsidiaries from that set
forth in the Registration Statement and the Prospectus, except
changes which the Registration Statement and Prospectus indicate
might occur after the effective date of the Registration Statement,
and the Company and its Subsidiaries shall not have incurred any
material liabilities or entered into any material agreement not in
the ordinary course of business other than as referred to in the
Registration Statement and Prospectus; (iv) except as set forth in
the Prospectus, no action, suit or proceeding at law or in equity
shall be pending or threatened against the Company or its
Subsidiaries which would be required to be set forth in the
Registration Statement, and no proceedings shall be pending or
threatened against the Company and its Subsidiaries before or by
any commission, board or administrative agency in the United States
or elsewhere, wherein an unfavorable decision, ruling or finding
would materially and adversely affect the business, property,
condition (financial or otherwise), results of operations or
general affairs of the Company and its Subsidiaries, and (v) you
shall have received, at the First Closing Date, a certificate
signed by each of the President and the principal operating officer
of the Company, dated as of the First Closing Date, evidencing
compliance with the provisions of this subsection (f).
(g) Upon exercise of the Over-Allotment Option provided
for in Section 2(b) hereof, the obligations of the Representative
to purchase and pay for the Option Securities referred to therein
will be subject (as of the date hereof and as of the Option Closing
Date) to the following additional conditions:
(i) The Registration Statement shall remain
effective at the Option Closing Date, and no stop order suspending
the effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been instituted or shall be pending,
or, to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any reasonable request on the
part of the Commission for additional information shall have been
complied with to the satisfaction of the Commission.
(ii) At the Option Closing Date there shall have
been delivered to you the signed opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇,
counsel to the Company, dated as of the Option Closing Date, in
form and substance reasonably satisfactory to ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, counsel to the Representative, which opinion shall
be substantially the same in scope and substance as the opinion
furnished to you at the First Closing Date pursuant to Sections
4(b) hereof, except that such opinion, where appropriate, shall
cover the Option Securities.
(iii) At the Option Closing Date there shall
have be delivered to you a certificate of the President and the
principal operating officer of the Company, dated the Option
Closing Date, in form and substance reasonably satisfactory to
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel to the Representative,
substantially the same in scope and substance as the certificate
furnished to you at the First Closing Date pursuant to Section 4(f)
hereof.
(iv) At the Option Closing Date there shall have
been delivered to you a letter in form and substance satisfactory
to you from Selden, Fox and Associates, Ltd., dated the Option
Closing Date and addressed to the Representative confirming the
information in their letter referred to in Section 4(e) hereof and
stating that nothing has come to their attention during the period
from the ending date of their review referred to in said letter to
a date not more than five business days prior to the Option Closing
Date, which would require any change in said letter if it were
required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the Option
Securities shall be reasonably satisfactory in form and substance
to you, and you and ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel to the
Representative, shall have been furnished with all such documents,
certificates, and opinions as you may reasonably request in
connection with this transaction in order to evidence the accuracy
and completeness of any of the representations, warranties or
statements of the Company or its compliance with any of the
covenants or conditions contained herein.
(h) No action shall have been taken by the Commission or
the NASD the effect of which would make it improper, at any time
prior to the Closing Date, for members of the NASD to execute
transactions (as principal or agent) in the Securities and no
proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the
Representative or the Company and its Subsidiaries, shall be
contemplated by the Commission or the NASD. The Company and the
Representative represent that at the date hereof each has no
knowledge that any such action is in fact contemplated against it
by the Commission or the NASD.
(i) If any of the conditions herein provided for in this
Section shall not have been fulfilled in all material respects as
of the date indicated, this Agreement and all obligations of the
Representative under this Agreement may be canceled at, or at any
time prior to, each Closing Date by the Representative notifying
the Company of such cancellation in writing or by telegram at or
prior to the applicable Closing Date. Any such cancellation shall
be without liability of the Representative to the Company.
5. Conditions of the Obligations of the Company, The
obligation of the Company to sell and deliver the Securities is
subject to the following conditions:
(a) The Registration Statement shall have become
effective not later than 10:00 A.M. New York time, on the day
following the date of this Agreement, or on such later date as the
Company and the Representative may agree in writing.
(b) At the Closing Dates, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued
under the Act or any proceedings therefor initiated or threatened
by the Commission.
If the conditions to the obligations of the Company
provided for in this Section have been fulfilled on the First
Closing Date but are not fulfilled after the First Closing Date and
prior to the Option Closing Date, then only the obligation of the
Company to sell and deliver the Securities on exercise of the
Over-Allotment Option provided for in Section 2(b) hereof shall be
affected.
6. Indemnification.
(a) The Company agrees (i) to indemnify and hold
harmless the Representative and each person, if any, who controls
the Representative within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act against any losses, claims,
damages or liabilities, joint or several (which shall, for all
purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable
attorneys' fees), to which such Representative or such controlling
person may become subject, under the Act or otherwise, and (ii) to
reimburse, as incurred, the Representative and such controlling
persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a
third party witness in connection with any losses, claims, damages
or liabilities; insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) relating to (i) and
(ii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in (A) the
Registration Statement, any Preliminary Prospectus, the Prospectus,
or any amendment or supplement thereto, (B) any blue sky
application or other document executed by the Company specifically
for that purpose containing written information specifically
furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Securities under
the securities laws thereof (any such application, document or
information being hereinafter called a "Blue Sky Application"), or
arise out of or are based upon the omission or alleged omission to
state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue
Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the Company will not be required to indemnify the
Representative and any controlling person or be liable in any such
case to the extent, but only to the extent, that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the
Representative specifically for use in the preparation of the
Registration Statement or any such amendment or supplement thereof
or any such Blue Sky Application or any such preliminary Prospectus
or the Prospectus or any such amendment or supplement thereto,
provided, further that the indemnity with respect to any
Preliminary Prospectus shall not be applicable on account of any
losses, claims, damages, liabilities or litigation arising from the
sale of Securities to any person if a copy of the Prospectus was
not delivered to such person at or prior to the written
confirmation of the sale to such person. This indemnity will be in
addition to any liability which the Company may otherwise have.
(b) The Representative will indemnify and hold harmless
the Company, each of its directors, each nominee (if any) for
director named in the Prospectus, each of its officers who have
signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Act, against any
losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and reasonable attorneys' fees)
to which the Company or any such director, nominee, officer or
controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto,
or any Blue Sky Application in reliance upon and in conformity with
written information furnished to the Company by the Representative
specifically for use in the preparation thereof and for any
violation by the Representative in the sale of such Securities of
any applicable state or federal law or any rule, regulation or
instruction thereunder relating to violations based on unauthorized
statements by Representative or its representative; provided that
such violation is not based upon any violation of such law, rule or
regulation or instruction by the party claiming indemnification or
inaccurate or misleading information furnished by the Company or
its representatives, including information furnished to the
Representative as contemplated herein. This indemnity agreement
will be in addition to any liability which the Representative may
otherwise have.
(c) Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section, notify in
writing the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party
otherwise than under this Section. In case any such action is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, subject to the provisions
herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in
the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with
counsel reasonably satisfactory to the indemnified party; provided
that the reasonable fees and expenses of such counsel shall be at
the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the
indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the indemnified
party and the indemnifying party and in the reasonable judgment of
the counsel to the indemnified party, it is advisable for the
indemnified party to be represented by separate counsel (in which
case the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party, it
being understood, however, that the indemnifying party shall not,
in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the indemnified party, which firm
shall be designated in writing by the indemnified party). No
settlement of any action against an indemnified party shall be made
without the consent of the indemnified party, which shall not be
unreasonably withheld in light of all factors of importance to such
indemnified party. If it is ultimately determined that
indemnification is not permitted, then an indemnified party will
return all monies advanced to the indemnifying party.
7. Contribution.
In order to provide for just and equitable contribution
under the Act in any case in which the indemnification provided in
Section 6 hereof is requested but it is judicially determined (by
the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be
enforced in such case, notwithstanding the fact that the express
provisions of Section 6 provide for indemnification in such case,
then the Company and each person who controls the Company, in the
aggregate, and the Representative shall contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not
be limited to, all reasonable costs of defense and investigation
and all reasonable attorneys' fees) (after contribution from
others) in such proportions that the Representative is responsible
in the aggregate for that portion of such losses, claims, damages
or liabilities represented by the percentage that the underwriting
discount for each of the Securities appearing on the cover page of
the Prospectus bears to the public offering price appearing thereon
and the Company shall be responsible for the remaining portion;
provided, however, that if such allocation is not permitted by
applicable law then allocated in such proportion as is appropriate
to reflect relative benefits but also the relative fault of the
Company and the Representative and controlling persons, in the
aggregate, in connection with the statements or omissions which
resulted in such damages and other relevant equitable consider-
ations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case
of an untrue statement of a material fact or the omission to state
a material fact, such statement or omission relates to information
supplied by the Company or the Representative and the parties'
relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The
Company and the Representative agree that it would not be just and
equitable if the respective obligations of the Company and the
Representative to contribute pursuant to this Section 7 were to be
determined by pro rata or per capita allocation of the aggregate
damages or by any other method of allocation that does not take
account of the equitable considerations referred to in this Section
7. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. As used in this paragraph, the word "Company"
includes any officer, director, or person who controls the Company
within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this paragraph is not permitted by
law, then the Representative and each person who controls the
Representative shall be entitled to contribution from the Company,
its officers, directors and controlling persons, and the Company,
its officers, directors and controlling persons shall be entitled
to contribution from the Representative to the full extent
permitted by law. The foregoing contribution agreement shall in no
way affect the contribution liabilities of any persons having
liability under Section 11 of the Act other than the Company and
the Representative. No contribution shall be requested with regard
to the settlement of any matter from any party who did not consent
to the settlement; provided, however, that such consent shall not
be unreasonably withheld in light of all factors of importance to
such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or
the sale of the Securities to the Representative is consummated,
the Company will pay all costs and expenses incident to the
performance of this Agreement by the Company including, but not
limited to, the fees and expenses of counsel to the Company and of
the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the
Registration Statement (including the financial statements therein
and all amendments and exhibits thereto), Preliminary Prospectus
and the Prospectus, as amended or supplemented, the fee of the NASD
in connection with the filing required by the NASD relating to the
offering of the Securities contemplated hereby; all expenses,
including reasonable fees and disbursements of counsel to the
Representative, in connection with the qualification of the
Securities under the state securities or blue sky laws which the
Representative shall designate; the cost of printing and furnishing
to the Representative copies of the Registration Statement, each
Preliminary Prospectus, the Prospectus, this Agreement, and the
Blue Sky Memorandum, any fees relating to the listing of the Common
Stock and Warrants on NASDAQ or any other securities exchange, the
cost of printing the certificates representing the Securities; fees
for bound volumes and prospectus memorabilia and the fees of the
transfer agent and warrant agent. The Company shall pay any and
all taxes (including any transfer, franchise, capital stock or
other tax imposed by any jurisdiction) on sales to the
Representative hereunder. The Company will also pay all costs and
expenses incident to the furnishing of any amended Prospectus or of
any supplement to be attached to the Prospectus as called for in
Section 3(a) of this Agreement except as otherwise set forth in
said Section.
(b) In addition to the foregoing expenses, the Company
shall at the First Closing Date pay to the Representative a
non-accountable expense allowance of $65,145. In the event the
overallotment option is exercised, the Company shall pay to the
Representative at the Option Closing Date an additional amount in
the aggregate equal to 3% of the gross proceeds received upon
exercise of the overallotment option. In the event the
transactions contemplated hereby are not consummated by reason of
any action by the Representative (except if such prevention is
based upon a breach by the Company of any covenant, representation
or warranty contained herein or because any other condition to the
Representative's obligations hereunder required to be fulfilled by
the Company is not fulfilled) the Company shall not be liable for
any expenses of the Representative, including the Representative's
legal fees. In the event the transactions contemplated hereby are
not consummated by reason of the Company being unable to perform
its obligations hereunder in all material respects, the Company
shall be liable for the actual accountable out-of-pocket expenses
of the Representative, including reasonable legal fees, not to
exceed in the aggregate $100,000.
(c) Except as disclosed in the Registration Statement,
no person is entitled either directly or indirectly to compensation
from the Company, from the Representative or from any other person
for services as a finder in connection with the proposed offering,
and the Company agrees to indemnify and hold harmless the
Representative, against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and
investigation and all reasonable attorneys' fees), to which the
Representative or person may become subject insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than
an employee of the party claiming indemnity) or entity that he or
it is entitled to a finder's fee in connection with the proposed
offering by reason of such person's or entity's influence or prior
contact with the indemnifying party.
9. Effective Date.
The Agreement shall become effective upon its execution
except that you may, at your option, delay its effectiveness until
11:00 A.M., New York time on the first full business day following
the effective date of the Registration Statement, or at such
earlier time on such business day after the effective date of the
Registration Statement as you in your discretion shall first
commence the public offering of the Securities. The time of the
initial public offering shall mean the time of release by you of
the first newspaper advertisement with respect to the Securities,
or the time when the Securities are first generally offered by you
to dealers by letter or telegram, whichever shall first occur.
This Agreement may be terminated by you at any time before it
becomes effective as provided above, except that Sections 3(c), 6,
7, 8, 12, 13, 14 and 15 shall remain in effect notwithstanding such
termination.
10. Termination.
(a) After this Agreement becomes effective, this
Agreement, except for Sections 3(c), 6, 7, 8, 12, 13, 14 and 15
hereof, may be terminated at any time prior to the First Closing
Date, by you if in your judgment (i) the Company or its
Subsidiaries have sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other
calamity, or from any labor dispute or court or government action,
order or decree, (ii) trading in securities on the New York Stock
Exchange or the American Stock Exchange having been suspended or
limited, (iii) material governmental restrictions have been imposed
on trading in securities generally (not in force and effect on the
date hereof), (iv) a banking moratorium has been declared by
federal or New York state authorities, (v) an outbreak of major
international hostilities involving the United States or other
substantial national or international calamity has occurred, (vi)
a pending or threatened legal or governmental proceeding or action
relating generally to the Company's or its Subsidiaries' business,
or a notification has been received by the Company or its
Subsidiaries of the threat of any such proceeding or action, which
would materially adversely affect the Company or its Subsidiaries;
(vii) except as contemplated by the Prospectus, the Company or its
Subsidiaries is merged or consolidated into or acquired by another
company or group or there exists a binding legal commitment for the
foregoing or any other material change of ownership or control
occurs; (viii) the passage by the Congress of the United States or
by any state legislative body of similar impact, of any act or
measure, or the adoption of any orders, rules or regulations by any
governmental body or any authoritative accounting institute or
board, or any governmental executive, which is reasonably believed
likely by the Representative to have a material adverse impact on
the business, financial condition or financial statements of the
Company or its Subsidiaries; (ix) any material adverse change in
the financial or securities markets beyond normal market
fluctuations having occurred since the date of this Agreement, or
(x) any material adverse change having occurred, since the
respective dates of which information is given in the Registration
Statement and Prospectus, in the earnings, business prospects or
general condition of the Company or its Subsidiaries, financial or
otherwise, whether or not arising in the ordinary course of
business.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this
Section 10, the Company shall be promptly notified by you, by
telephone or telegram, confirmed by letter.
11. Purchase Option.
At or before the First Closing Date, the Company will
sell the Representative or its designees for a consideration of
$21.50, and upon the terms and conditions set forth in the form of
Purchase Option annexed as an exhibit to the Registration
Statement, a Purchase Option to purchase an aggregate of 21,500
Units consisting of 43,000 shares of Preferred Stock and 21,500
Warrants. In the event of conflict in the terms of this Agreement
and the Purchase Option with respect to language relating to the
Purchase Option, the language of the Purchase Option shall
control.
12. Representations and Warranties of the Representative.
The Representative represents and warrants to the Company
that it is registered as a broker-dealer in all jurisdictions in
which it is offering the Securities and that it will comply with
all applicable state or federal laws relating to the sale of the
Securities, including but not limited to, violations based on
unauthorized statements by the Representative or its
representatives.
13. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements, representations,
warranties and other statements of the Company and the
Representative and the undertakings set forth in or made pursuant
to this Agreement will remain in full force and effect until three
years from the date of this Agreement, regardless of any
investigation made by or on behalf of the Representative, the
Company or any of its officers or directors or any controlling
person and will survive delivery of and payment of the Securities
and the termination of this Agreement.
14. Notice.
Any communications specifically required hereunder to be
in writing, if sent to the Representative, will be mailed,
delivered or telecopied and confirmed to them at I. A. ▇▇▇▇▇▇▇▇▇▇
& Co., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, with a copy sent to
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, or if sent to the Company,
will be mailed, delivered or telecopied and confirmed to it at ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy sent to
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq. Notice shall be deemed to have been duly given
if mailed or transmitted by any standard form of telecommunication.
15. Parties in Interest.
The Agreement herein set forth is made solely for the
benefit of the Representative, the Company, any person controlling
the Company or the Representative, and directors of the Company,
nominees for directors (if any) named in the Prospectus, its
officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no
other person shall acquire or have any right under or by virtue of
this Agreement. The term "successors and assigns" shall not
include any purchaser, as such purchaser, from the Representative
of the Securities.
16. Applicable Law.
This Agreement will be governed by, and construed in
accordance with, of the laws of the State of New York applicable to
agreements made and to be entirely performed within New York.
17. Counterparts.
This agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an
original and shall become effective when one or more counterparts
have been signed by each of the parties hereto and delivered to the
other parties (including by fax, followed by original copies by
overnight mail).
18. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement of the
parties hereto and supersedes all prior written or oral agreements,
understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in writing,
signed by the Representative and the Company.
If the foregoing is in accordance with your understanding
of our agreement, kindly sign and return this agreement, whereupon
it will become a binding agreement between the Company and the
Representative in accordance with its terms.
Very truly yours,
MICROENERGY, INC.
By:
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
The foregoing Underwriting Agreement is hereby confirmed
and accepted as of the date first above written.
I. A. ▇▇▇▇▇▇▇▇▇▇ & CO.
By:
Name:
Title:
The undersigned agree to be bound by the provisions of
Section 3(l)(l).
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