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EXHIBIT 1.1
XXXXXX INTERNATIONAL LTD.
1,650,000 SHARES
OF COMMON STOCK, NO PAR VALUE PER SHARE
UNDERWRITING AGREEMENT
As of , 1998
Xxxxxx Xxxxxxx & Company, Inc.
00 Xxxxxx Xxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Xxxxxx International Ltd., an Ontario corporation (the "Company"), and
Ranch Limited, an Ontario corporation (the "Selling Stockholder"), propose to
sell to Xxxxxx Xxxxxxx & Company, Inc., a corporation (the
"Representative"), and the several other underwriters named on Schedule 1
attached hereto (collectively, the "Underwriters"), and the Underwriters
severally propose to purchase from the Company and the Selling Stockholder, an
aggregate of 1,650,000 shares (the "Firm Shares") of the Company's common stock,
no par value per share (the "Common Stock"), 1,498,000 of which shall be issued
by the Company and 152,000 of which shall be transferred by the Selling
Stockholder, as more fully described in Section 1 hereinbelow.
In addition, the Company shall grant to the Underwriters the option to
purchase up to an additional 247,500 shares of Common Stock (the "Optional
Shares"), solely for the purpose of covering over-allotments (the
"Over-Allotment Option"), if any, in connection with the sale of the Firm Shares
and the Optional Shares (collectively, the "Securities").
1. PURCHASE, SALE, AND DELIVERY OF THE SECURITIES AND UNDERWRITERS' WARRANTS.
(a) PURCHASE AND SALE OF THE FIRM SHARES. On the basis of the
representations, warranties, covenants, and agreements of the Company
and the Selling Stockholder herein contained, and subject to the terms
and conditions herein set forth, the Company agrees to sell to the
several Underwriters, and the Underwriters, severally and not jointly,
agree to purchase from the Company, the Firm Shares at a purchase price
of $5.00 per share.
The Underwriters plan to offer the Firm Shares for sale to the public at
the price (the "Public Offering Price") and upon the terms set forth in
the Prospectus (as defined below) (the "Public Offering") as soon as
practicable after the date the Registration Statement (as defined below)
is declared effective (the "Effective Date") by the U.S. Securities and
Exchange Commission (the "Commission"). The Company and the Selling
Stockholder acknowledge that the Representative shall have the right to
select and form a syndicate of selected dealers and other Underwriters,
reasonably acceptable to the Company, to assist the Representative in
the Public Offering.
(b) PURCHASE AND SALE OF THE OPTIONAL SHARES. The Company hereby grants
to the Underwriters an option to purchase from the Company solely for
the purpose of covering over-allotments in connection with the sale of
the Securities, all or any portion of the Optional Shares for a period
of 45 days from the Effective Date at the same purchase price per
security payable by the Underwriters for each security as provided in
Subsection 1(a) above.
The option to purchase Optional Shares granted in Subsection 1(b) hereof
may be exercised on such number of occasions as is determined by the
Representative during the term thereof by written notice to the Company
from the Representative. Such notice shall set forth the aggregate
number of Optional Shares as to which the option is being exercised and
the time and date of payment and delivery therefor. Such time and date
of delivery shall not be later than either the Closing Date (as
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defined below) or the second business day after the day on which the
option shall have been exercised (the "Option Closing Date"). The Option
Closing Date shall also refer to any subsequent Option Closing Date in
the event such option is exercised in part on more than one occasion.
Delivery and payment for such Optional Shares shall be at the offices
set forth below for delivery and payment for the Firm Shares.
The obligation of the Underwriters to purchase and pay for any of the
Optional Shares is subject (as of the date hereof and as of the Closing
Date and/or the Option Closing Date) to the accuracy and completeness of
and compliance in all material respects with the representations and
warranties of the Company and the Selling Stockholder herein, to the
accuracy and completeness of the statements of the Company or its
officers made in any certificate or other documents to be delivered by
the Company and/or the Selling Stockholder pursuant to this Agreement,
to the performance in all material respects by the Company and/or the
Selling Stockholder of their respective obligations hereunder, to the
satisfaction by the Company and/or the Selling Stockholder of the
conditions as of the date hereof and as of the Closing Date and/or
Option Closing Date, set forth in Subsection 1(c) hereof, and to the
delivery to the Representative of opinions, certificates and letters
dated the Closing Date and/or Option Closing Date substantially similar
in scope to those specified in Section 7, but with each reference to the
"Firm Shares" and the "Closing Date" being deemed to be the "Optional
Shares" and "Option Closing Date."
(c) DELIVERY OF AND PAYMENT FOR THE SECURITIES. Delivery of the
certificates representing the Firm Shares shall be made to the
Underwriters at the offices of the Representative, or such other
location as the Representative shall determine and advise the Company
upon at least two full business days' notice in writing, against payment
therefor by federal wire transfer to the Company as appropriate at
A.M., Eastern Time, on , 1998,
or at such other time and business day (Saturdays, Sundays, and legal
holidays in New York, New York not being considered business days for
the purposes of this Agreement), not later than the third business day
following the date the Underwriters began trading the Firm Shares, as
shall be agreed upon by the Representative and the Company, which time
and date are herein called the "Closing Date." If the Underwriters
purchase any Optional Shares pursuant to the Over-Allotment Option,
delivery and payment for the certificates representing the Optional
Shares shall be made in the same manner described herein on the Option
Closing Date.
Delivery of the certificates representing the Securities shall be made
in registered form in such name or names and in such denominations as
the Representative shall specify to the Company upon at least two full
business days' notice in writing prior to the Closing Date or the Option
Closing Date, as the case may be. The Company will make the certificates
available to the Representative for examination at the offices of the
Representative or at such other location as the Representative shall
specify to the Company, not later than 2:00 P.M., Eastern Time, on the
business day immediately preceding the Closing Date or the Option
Closing Date, as the case may be.
(d) DELIVERY AND PAYMENT OF THE UNDERWRITERS' WARRANTS. On the Closing
Date, the Company will sell to the Representative or its designee, and
the Representative or its designee shall purchase, the Underwriters'
Warrants, as more fully described in Section 6(a) herein. The
Underwriters' Warrants will be in the form of, and in accordance with,
the provisions of the Underwriters' Warrants attached as an exhibit to
the amendment to the Registration Statement (as defined below). Payment
for the Underwriters' Warrants will be made to the Company by check or
checks payable to its order on the Closing Date against delivery of the
certificates representing the Underwriters' Warrants. The certificates
representing the Underwriters' Warrants will be in such denominations
and in such names as the Representative may request at least two
business days prior to the Closing Date.
(e) USE OF PROSPECTUS. The Company and the Selling Stockholder hereby
confirm their authorization to the Underwriters to use, and to make
available for use by dealers, the Preliminary Prospectus and Prospectus
(as defined below), and the Company and the Selling Stockholder hereby
authorize
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the Underwriters, all selected dealers, and all other dealers to whom
any of the Securities may be sold by the Underwriters or selected
dealers, to use the Preliminary Prospectus and Prospectus, as from time
to time amended or supplemented, in connection with the sale of the
Securities in accordance with the applicable provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the rules and
regulations of the Commission thereunder (the "Regulations"), and
applicable state law until completion of the Public Offering and for
such longer period as the Underwriters may request if the Prospectus is
required to be delivered in connection with sales of the Securities by
the Underwriters or a dealer.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING STOCKHOLDER.
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with the Underwriters, that:
(1) REGISTRATION STATEMENT ON FORM SB-2. The Company has prepared in
conformity with the requirements under the Securities Act and the
Regulations, and has filed with the Commission under the Securities
Act, a registration statement on Form SB-2, File No. 333-56661 (the
"Registration Statement"), including the related Prospectus, for
the registration of the sale of the Securities and the
Underwriters' Warrants and the shares of Common Stock underlying
the Underwriters' Warrants (the "Warrant Shares"). The conditions
for the use of a registration statement on Form SB-2 set forth in
the General Instructions thereto have been satisfied with respect
to the Company, the transactions contemplated herein, and the
Registration Statement. As used in this Agreement, the term
"Registration Statement" means such registration statement of the
Company, as amended (pre- or post-effectiveness), on file with the
Commission at the time the registration statement or any
post-effective amendment thereto becomes effective under the
Securities Act (including all financial statements and financial
schedules, exhibits, all other documents filed as a part thereof or
incorporated by reference therein, and all the information
contained in any final Prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act or deemed by
virtue of Rule 430A under the Securities Act to be part of the
Registration Statement). The term "Prospectus" as used herein means
the final Prospectus included as part of the Registration
Statement, including, if applicable, the information contained in
any final Prospectus filed with the Commission pursuant to Rule
424(b) under the Securities Act or deemed by virtue of Rule 430A
under the Securities Act to be part of the Registration Statement.
The term "Preliminary Prospectus" refers to and means any
prospectus included in the Registration Statement or any amendment
thereto prior to the Registration Statement becoming effective
under the Securities Act.
(2) USE AND ACCURACY OF PROSPECTUS. Neither the Commission nor any
state regulatory authority has issued any order preventing or
suspending the use of any Prospectus or any part thereof, and no
proceedings for that purpose have been instituted or, to the
Company's knowledge, are pending, threatened or contemplated. Each
Prospectus delivered to the Underwriters for dissemination in
connection with the Public Offering, at the time of filing thereof
and delivery to the Underwriters for such dissemination, did not
contain any untrue statement of a material fact, or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading; the foregoing shall not
apply, however, to statements in, or omissions from, any Prospectus
that are based upon and conform to written information furnished to
the Company with respect to any Underwriter (or any affiliate or
associate thereof) by or on behalf of the Underwriters or such
Underwriter specifically for use in the preparation thereof.
(3) EFFECTIVENESS AND ACCURACY OF REGISTRATION STATEMENT. The
Registration Statement has or will become effective under the
Securities Act as of the Effective Date. The Registration Statement
and the Prospectus, from the Effective Date through the Closing
Date and, if Optional Shares are purchased, up to and including the
Option Closing Date (and if there are multiple Option Closing
Dates, up to and including the last Option Closing Date), will
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comply in all respects with the applicable requirements of the
Securities Act and the Regulations, and neither the Registration
Statement nor the Prospectus will, on such dates, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, and, on such dates, no event will have
occurred that should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus that has
not then been set forth in such an amendment or supplement; the
foregoing shall not apply, however, to statements in, or omissions
from, the Registration Statement or the Prospectus that are based
upon and conform to written information furnished to the Company
with respect to any Underwriter (or any affiliate or associate
thereof) by or on behalf of the Underwriters or such Underwriter
specifically for use in the preparation thereof. The descriptions
in the Registration Statement and the Prospectus of contracts and
other documents of the Company are accurate and present fairly the
information required to be disclosed, and there are no contracts or
other documents required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement under the Securities Act or the Regulations
which have not been so described or filed as required. The Company
has complied with all requests of the Commission and any state
securities commission in a state designated by the Representative
pursuant to Subsection 3(e) hereof for additional information to be
included in the Registration Statement and Prospectus or otherwise.
(4) INDEPENDENT PUBLIC ACCOUNTANTS. Xxxxxxxx Xxxxxxxx Xxxxxxx, the
accountants whose reports on the financial statements of the
Company are filed with the Commission as a part of the Registration
Statement, are, and were during the periods covered by their
respective reports, independent public accountants as required by
the Securities Act and the Regulations.
(5) ORGANIZATION, QUALIFICATION, ETC. The Company does not have any
subsidiaries and the Company does not own, and at the Closing Date
and any Option Closing Date will not own, directly or indirectly,
any stock or other equity interest in, or control, directly or
indirectly, any other corporation, partnership or other entity. The
Company is (i) a corporation duly organized, validly existing and
its status is active under the laws of the jurisdiction of its
incorporation, with full power and authority to own or lease all of
the assets owned or leased by it and to conduct its business as
described in the Registration Statement and the Prospectus and (ii)
duly qualified to do business and in good standing as a foreign
corporation in all jurisdictions in which the nature of the
activities conducted by it or the character of the assets owned or
leased by it makes such qualification necessary, except where the
failure to so qualify would not have a material adverse effect on
the condition (financial or otherwise), earnings, business, assets,
properties, results of operations or prospects (financial or
otherwise) of the Company (hereinafter a "Material Adverse
Effect"). Complete and correct copies of the articles of
incorporation and the by-laws of the Company in effect on the date
hereof have been delivered to the Representative, and no changes
therein will be made on or subsequent to the date hereof and prior
to the Closing Date and/or any Option Closing Date. The minute
books of the Company have been made available to the Underwriters,
contain a complete summary of all meetings and actions of the
directors and stockholders of the Company since the time of its
incorporation, and reflect all transactions referred to in such
minutes accurately in all respects.
(6) PERMITS AND LICENSES. The Company has all requisite power and
authority (corporate and other), and has obtained all approvals,
licenses, franchises, authorizations orders, certificates and
permits (collectively, "Permits") necessary under all applicable
statutes, codes, rules, regulations, orders and decrees of
governments or governmental bodies (collectively, "Laws") to own,
lease or use its assets and to conduct its business as described in
the Prospectus, except where the failure to have any such Permits,
singly or in the aggregate, will not have a Material Adverse
Effect. The Company has not received notice of any proceedings
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relating to the revocation or modification of any such Permits and
the Company is in all respects in compliance with all of its
Permits, except where the failure to comply, either singly or in
the aggregate, will not have a Material Adverse Effect. The Company
is not aware of any breach, violation or default with respect to
such Permits.
(7) CAPITALIZATION AND LEGALITY OF SECURITIES. The authorized, issued
and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization." The Company will
have the adjusted capitalization set forth therein on the Closing
Date and each Option Closing Date, if any, based on the assumptions
set forth therein. There are no preemptive rights or anti-dilution
rights with respect to any outstanding securities of the Company.
The authorized capital stock of the Company conforms to the
descriptions thereof contained in the Prospectus under the caption
"Description of Securities," and consists of 15,000,000 shares of
Common Stock and 1,000,000 shares of preferred stock, no par value
per share ("Preferred Stock"). As of the date hereof, there are
3,700,000 shares of Common Stock issued and outstanding. There are
no shares of Preferred Stock outstanding. In addition, the Company
does not have any outstanding options or warrants to purchase
shares of Common Stock. The Company has sufficient authorized (and
neither issued nor outstanding) Common Stock to be offered and sold
as contemplated herein, and to be issued upon exercise of the
Underwriters' Warrants. Except as otherwise set forth in the
Prospectus, there are no outstanding options, warrants, or other
rights to purchase any shares of Common Stock or other capital
stock of the Company, or to purchase any other securities
convertible into or exchangeable for Common Stock or any other
capital stock of the Company. The outstanding securities of the
Company have been duly authorized and validly issued and are fully
paid and nonassessable. All the shares of Common Stock to be
offered by the Prospectus have been duly authorized and, when
issued and delivered against payment therefor as provided in this
Agreement, the Prospectus, and the Underwriters' Warrants, as
applicable, will be validly issued, fully paid and nonassessable.
The Underwriters' Warrants will constitute, when sold and delivered
as contemplated, a valid and binding obligation of the Company
enforceable in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and similar laws
and court decisions now or hereafter in effect relating to or
affecting creditors' rights and remedies generally and (ii) general
principles of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity). A sufficient
number of shares of Common Stock have been reserved for issuance
upon sale and exercise of the Underwriters' Warrants.
(8) CONSENTS AND APPROVALS. No consent, approval, authorization or
order of, and no filing with, any arbitrator, court, regulatory
body, administrative agency, government agency or other body,
domestic or foreign, is required for the issuance of the Securities
pursuant to the Prospectus and the Registration Statement, this
Agreement and the Underwriters' Warrants, the performance of this
Agreement, the Underwriters' Warrants and the Consulting Agreement
and the transactions contemplated hereby and thereby, except such
as have been obtained under the Securities Act, state securities
laws, The Nasdaq Stock Market and the rules of the National
Association of Securities Dealers, Inc. (the "NASD") in connection
with the Underwriters' purchase and distribution of the Securities.
(9) REGISTRATION OF SECURITIES, UNDERWRITERS' WARRANTS AND WARRANT
SECURITIES. Upon the effectiveness of the Registration Statement,
the Securities shall have been listed on the Nasdaq National Market
System(TM). The Company has taken no action designed, or likely, to
have the effect of terminating the registration of the Securities
under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), nor has the Company received any
notification that the Commission is contemplating terminating such
registration. The registration of the Securities, Underwriters'
Warrants and Warrant Shares under the Exchange Act was declared
effective on the Effective Date, and the Company has not received
any notification that the Commission is contemplating terminating
such registration.
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(10) EXCHANGE ACT FILINGS. As of the filing date, each report or
statement filed by the Company with the Commission pursuant to the
Exchange Act complied as to form in all respects with the
requirements of the Exchange Act and did not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. From the Effective Date thereafter, the Company shall
comply with all periodic reporting and proxy solicitation
requirements imposed by the Commission pursuant to the Exchange
Act, and shall promptly furnish the Representative for a period of
five years from the Effective Date with copies of all material
filed with the Commission pursuant to the Exchange Act or otherwise
furnished to the shareholders of the Company.
(11) TAXES. No transfer tax, stamp duty or other similar tax is payable
by or on behalf of the Underwriters in connection with (i) the
issuance by the Company of the Securities, including the Warrant
Shares, (ii) the purchase by the Underwriters of the Securities
from the Company or the Selling Stockholder and the purchase by the
Representative of the Underwriters' Warrants from the Company,
(iii) the consummation by the Company of any of its obligations
under this Agreement, or (iv) resales of the Securities in
connection with the distribution contemplated hereby.
(12) FINANCIAL STATEMENTS. The financial statements (audited and
unaudited), and related financial schedules and notes
(collectively, the "Financial Statements"), filed with and as part
of the Registration Statement, comply in all respects with the
applicable accounting requirements of the Securities Act and the
Regulations and present fairly the financial position of the
Company as of the dates thereof and results of operations and
changes in cash flows of the Company for the periods to which they
apply, and such Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved. All adjustments
that, in the opinion of management, are necessary for a fair
presentation of the results for all such periods have been made.
The Financial Statements included in the Registration Statement and
the Prospectus are the only financial statements required under the
Securities Act or the Regulations to be included in the
Registration Statement and the Prospectus. The other financial and
statistical information included in the Prospectus, including,
without limitation, "Prospectus Summary," "Summary Consolidated
Financial and Operating Data" and "Selected Consolidated Financial
Data" presents fairly the information shown therein, and has been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement and the books and
records of the Company.
(13) MATERIAL LOSS. The Company has not, since the date of the latest
financial statements included in the Prospectus or the Registration
Statement, sustained any material loss or interference with its
business from fire, explosion, flood, or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order, or decree, other than as set forth in
the Prospectus. Since the respective dates as of which information
is set forth in the Prospectus, and except as otherwise set forth
therein: (i) there has not been any change in the capital stock, or
material increase in the short term or long-term debt, of the
Company; (ii) there has not been any material adverse change or any
prospective material adverse change in the condition (financial or
otherwise), business, prospects (financial or otherwise), results
of operations, general affairs, or management of the Company,
whether or not arising in the ordinary course of business; (iii) no
event has occurred that would result in a material write-down of
assets of the Company; (iv) the Company has not incurred any
material liability or obligation, direct or contingent, or entered
into any material transaction, other than those in the ordinary
course of business; (v) the Company has not purchased any of the
Company's outstanding securities; (vi) there has been no dividend
or distribution of any kind declared, paid, or made by the Company
in respect of the Common Stock; and (vii) there has not been any
execution or imposition of
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any material lien, charge, or encumbrance upon the respective
property or assets of the Company.
(14) INSURANCE. The Company maintains such insurance, including, but
not limited to, general liability, personal and product liability
and property insurance, as are necessary to insure the Company and
its respective employees, against such losses and risks generally
insured against by comparable businesses. The Company has (i) not
failed to give notice or present any insurance claim with respect
to any matter, including but not limited to such entity's business,
property or employees, under any insurance policy or surety bond in
a due and timely manner, (ii) no disputes or claims against any
underwriter of such insurance policies or surety bonds nor has it
failed to pay any premiums due and payable thereunder, and (iii)
not failed to comply with all conditions contained in such
insurance policies and surety bonds. There are no facts or
circumstances under any such insurance policy or surety bond which
would relieve any insurer of its obligation to satisfy in full any
valid claim of the Company.
(15) COMPLIANCE WITH DOCUMENTS AND LAWS. The Company is not in
violation of its articles of incorporation, by-laws, or other
governing documents. Except as set forth in the Registration
Statement, the Company is not in default in the due performance of
any lease or other contract, indenture, mortgage, deed of trust,
note, loan, or other agreement or instrument to which the Company
is a party or it or any of its properties or business is subject,
or any applicable license, franchise, certificate, permit,
authorization, statute, rule or regulation of or from any public,
regulatory, or governmental agency or authority having jurisdiction
over the Company or any of its properties or assets, or any
approval, consent, order, judgment or decree. The Company is in
compliance with all laws, rules and regulations applicable to its
business. The execution and performance of this Agreement by the
Company will not conflict with or result in a breach or violation
of, or default under, any lease or other material contract,
indenture, mortgage, deed of trust, note, loan, or other material
agreement or instrument to which the Company is a party or by it or
any of its properties or business is subject and no consent,
approval, authorization, or order of any court or governmental
authority or agency having jurisdiction over the Company or any of
its properties or assets is required to be obtained by the Company
for the consummation by the Company of the transactions
contemplated herein, except such as have been obtained or may be
required under the Securities Act or the Regulations or under state
securities laws or the applicable rules and regulations promulgated
thereunder.
(16) AUTHORIZATION OF AGREEMENTS. Each of this Agreement, the
Underwriters' Warrants and the Financial Consulting Agreement (as
described herein and in the Prospectus), has been duly authorized,
executed, and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable in accordance with
its terms. The execution, delivery and performance of this
Agreement, the Underwriters' Warrants and the Financial Consulting
Agreement by the Company, the consummation by the Company of the
transactions herein and therein contemplated, and the compliance by
the Company with the terms of this Agreement, the Underwriters'
Warrants and the Financial Consulting Agreement have been duly
authorized by all necessary corporate action and do not and will
not, with or without the giving of notice or the lapse of time, or
both, (i) result in any violation of the articles of incorporation
or by-laws of the Company, (ii) result in a breach of or conflict
with any of the terms or provisions of, or constitute a default
under, or result in the modification or termination of, or result
in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the
Company pursuant to any indenture, mortgage, note, contract,
commitment or other agreement or instrument to which the Company is
a party or under which the Company or any of its properties or
assets is or may be bound or affected, (iii) violate any existing
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the Company, or any of its properties or
business, or
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(iv) violate any Permits of the Company except for any Permits, the
violation of which will not cause a Material Adverse Effect. The
Agreement, the Underwriters' Warrants and the Financial Consulting
Agreement conform to the descriptions thereof in the Prospectus.
(17) TITLE TO PROPERTY. The Company has good and marketable title to,
and valid and enforceable leasehold estates in, all items of
property described in the Registration Statement or the Prospectus
as owned or leased by it, as the case may be, or that are material
to the conduct of their businesses free and clear of all liens,
encumbrances, claims, security interests, and other restrictions,
other than those described in the Registration Statement or
Prospectus. The leases, licenses or other contracts or instruments
under which the Company leases, holds or is entitled to use any
property, real or personal, are valid, subsisting and enforceable,
and the Company is not in material default thereunder and no event
has occurred which, with the passage of time or the giving of
notice, or both, would constitute a default thereunder. The Company
has not received notice of any violation of any applicable law,
ordinance, regulation, order or requirement relating to its owned
or leased properties. The Company has insured its properties
against loss or damage by fire or other casualty and maintains such
other insurance as management of the Company believes is adequate
for the Company's present business operations.
(18) INTELLECTUAL PROPERTY. Except as set forth in the Prospectus, the
Company owns or possesses the requisite licenses, registrations or
other evidences of adequate and full rights to use all copyrights,
patents, trademarks, service marks, trade names, trade dress,
logos, know-how, trade secrets, licenses, Internet domain names and
rights in any way thereof (collectively, the "Intellectual
Property") presently used in or necessary to conduct its business
as described in the Prospectus and the Registration Statement. The
Company has not knowingly infringed the rights of another with
respect to any item of Intellectual Property, and there is no
outstanding claim of or notice from others alleging any such
infringement. The Company is not obligated or under any liability
whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any
trademark, trade name, service xxxx, service name, copyright,
patent or patent application except as set forth in the
Registration Statement or the Prospectus. There is no suit,
proceeding, inquiry, arbitration, investigation, claim, notice or
action by any person pertaining to, or proceeding, domestic or
foreign, pending or, to the Company's knowledge, threatened, which
challenges the exclusive rights of the Company with respect to any
Intellectual Property used in the conduct of its business.
(19) LITIGATION. There is no litigation or governmental or other
proceeding or investigation before any court or before or by any
public, regulatory, or governmental agency or authority (or any
judgment, decree, or order of such court, agency, or authority)
pending or, to the best knowledge of the Company, threatened to
which the Company is a party or to which its business or properties
are subject which is not disclosed in the Prospectus or
Registration Statement as required by the Securities Act or the
Regulations. There are no outstanding orders, judgments or decrees
of any court, governmental agency or other tribunal naming the
Company or enjoining the Company from taking, or requiring the
Company to take, any action, or to which it or its properties or
business are bound or subject. There are no claims, pending or
threatened against or involving the Company, or any of its
properties (i) that are required to be disclosed, or (ii) which if
adversely determined, would have a Material Adverse Effect.
(20) RELATED PARTY TRANSACTIONS. Except as set forth in the Prospectus,
no officer, director, shareholder or partner of the Company or any
"affiliate" or "associate" (as these terms are defined in Rule 405
of the Regulations) of any of the foregoing persons or entities has
or has had, either directly or indirectly, (i) an interest in any
person or entity which (A) furnishes or sells services or products
which are furnished or sold or are proposed to be furnished or sold
by the Company, or (B) purchases from or sells or furnishes to the
Company any goods
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or services, or (ii) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be
bound or affected. Except as set forth in the Prospectus under
"Certain Relationships and Related Transactions," there are no
existing agreements, arrangements, understandings or transactions,
or proposed agreements, arrangements, understandings or
transactions, between or among the Company and any officer,
director or 5% or greater securityholder of the Company, or any
partner, affiliate or associate of any of the foregoing persons or
entities.
(21) PROHIBITED PAYMENTS. Neither the Company nor any of its directors
or officers acting in any capacity on its behalf, has used any
corporate funds for unlawful contributions, gifts, entertainment,
or other unlawful expenses relating to political activity; made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns
from corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate,
payoff, influence payment, kickback, or other unlawful payment.
(22) INTERNAL ACCOUNTING CONTROLS. The Company maintains a system of
internal accounting controls which, taken as a whole, is sufficient
to cause it to comply with the Foreign Corrupt Practices Act of
1977, as amended, and to meet the broad objectives of preventing
and detecting errors or irregularities in amounts that would be
material to the Company's financial statements. Except as
specifically disclosed in the Prospectus, neither the Company, nor
any employee or agent of the Company, has made any payment or
transfer of any funds or assets of the Company, conferred any
personal benefit by the use of the assets of the Company, or
received any funds, assets, or personal benefit in each case in
violation of any law, rule, or regulation, which is required to be
disclosed in the Prospectus or necessary to make the statements
therein not misleading.
(23) TAX RETURNS. The Company (i) has paid all federal, state, local
and foreign taxes which are due and payable and has furnished all
information returns it is required to furnish pursuant to the
Income Tax Act of Canada and/or other applicable law, (ii) has
established adequate reserves for such taxes which are not yet due
and payable and (iii) does not have any tax deficiency or claims
outstanding, proposed or assessed against it. The Company has not
executed or filed with any taxing authority, foreign or domestic,
any agreement extending the period for assessment or collection of
any income taxes, nor is it a party to any pending action or
proceeding by any foreign or domestic governmental agency for
assessment or collection of taxes; and no claims for assessment or
collection of taxes have been asserted against either of it. The
Company has not been, nor is currently being, audited by any taxing
authority, nor has the Company entered into any agreement to toll
any applicable statute of limitations with respect to the payment
of any taxes.
(24) EMPLOYEE PLANS. Except as set forth in the Registration Statement
or the Prospectus, the Company does not have any employee benefit
plans (including, without limitation, pension, profit sharing, and
welfare benefit plans) or deferred compensation arrangements. In
the event the Company establishes an employee stock option plan in
the future, such plan shall reserve not more than 400,000 shares of
Common Stock for issuance upon exercise of options granted
thereunder, and options granted thereunder shall have a vesting
period of not less than two years. Additionally, the Company has
agreed to limit the amount of options granted pursuant to the plan
to Xxxxx Xxxxxx and Xxxxx Xxxxxx to an aggregate of 100,000
options.
(25) LABOR DISPUTES. The Company has generally enjoyed satisfactory
employer-employee relationships with its employees and is in
compliance with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms
and conditions of employment and wages and hours. There are no
pending investigations involving the Company by the Department of
Labor or comparable agency, or any other governmental agency
responsible for the enforcement of such federal, state, local, or
foreign laws and regulations. To the knowledge of the Company,
there is no unfair labor practice charge or
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complaint against the Company pending before the National Labor
Relations Board or comparable agency or any lockout, strike,
picketing, boycott, dispute, slowdown or stoppage pending or
threatened against or involving the Company, or any predecessor
entity, and none has ever occurred. No representation question
exists respecting the employees of the Company, no collective
bargaining agreement or modification thereof is currently being
negotiated by the Company nor is the Company a party to any such
agreement. No grievance or arbitration proceeding is pending under
any expired or existing collective bargaining agreements of the
Company. No labor dispute exists or, to the knowledge of the
Company, is imminent with the employees of the Company.
(26) REGISTRATION RIGHTS. No person, firm, or entity of any nature
whatsoever has any right to require the Company to register or
attempt to register under the Securities Act or any other
securities law any shares of capital stock, including Common Stock
or securities convertible into or exchangeable or exercisable for
any shares of capital stock including Common Stock, by reason of
the filing of the Registration Statement with the Commission or
otherwise.
(27) STABILIZATION. Neither the Company, nor any person that controls,
is controlled by or is under common control with, the Company has
taken or will take, directly or indirectly, any action designed to,
or that might reasonably be expected to, cause or result in
stabilization or manipulation under the Exchange Act of the price
of any security in order to facilitate the sale or resale of any of
the Securities.
(28) INVESTMENT COMPANY. The Company is not, and upon the issuance and
sale of the Securities as herein contemplated and the application
of the net proceeds therefrom as described in the Prospectus under
the caption "Use of Proceeds" will not be, an "investment company"
or an entity "controlled" by an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
(29) FINDER OR BROKER. The Company has not retained or dealt with any
broker or finder with respect to the transactions contemplated
hereby, and the Company knows of no outstanding claims for services
in the nature of a finder's fee or origination fee with respect to
the sale of the Securities hereunder. The Company hereby agrees to
indemnify and hold harmless the Underwriters with respect to any
claim for a finder's fee by any party claiming to be owed such fee
based on contacts, conversations, or arrangements with the Company.
(30) CONTRACTS. Each contract or other instrument to which the Company
is a party or by its properties or business are or may be bound or
affected and to which reference is made in the Registration
Statement or Prospectus has been duly and validly executed by the
Company, is in full force and effect in all material respects and,
based on the fact that each other party has full power, corporate
or otherwise, to execute, deliver and perform such contracts, is
enforceable against the parties thereto in accordance with its
terms, except to the extent that enforcement thereof may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and similar laws and court decisions now or
hereafter in effect relating to or affecting creditors' rights and
remedies generally and (ii) general principles of equity
(regardless of whether such enforcement is considered in a
proceeding at law or in equity). None of such contracts or
instruments has been assigned by the Company, nor is the Company in
default thereunder and, no event has occurred which, with the lapse
of time or the giving of notice, or both, would constitute a
default thereunder which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect.
Additionally, none of the material provisions of such contracts or
instruments violates any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court
having jurisdiction over the Company or any of its assets or
business.
(31) NASD INFORMATION. All information provided by the Company to the
Representative or its counsel in connection with any filings made
with the National Association of Securities Dealers, Inc. ("NASD")
with respect to the Public Offering is true and correct.
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(32) COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS. The Company is
in compliance in all material respects with all applicable federal,
state and local environmental laws and regulations, including,
without limitation, those applicable to emissions to the
environment, waste management and waste disposal (collectively, the
"Environmental Laws"), except for any such noncompliance as may be
described in the Registration Statement or Prospectus and, to the
Company's knowledge, there are no circumstances that would prevent,
interfere with, or materially increase the cost of such compliance
in the future. Except as set forth in the Registration Statement or
Prospectus, there is no claim under any Environmental Laws
("Environmental Claim"), pending or threatened against or affecting
the Company and, there are no past or present actions, activities,
circumstances, events or incidents, including, without limitation,
releases of any material into the environment that could form the
basis of any Environmental Claim against or affecting the Company.
(33) BUSINESS WITH CUBA. The Company is not doing business with the
government of Cuba or with any person or affiliate located in Cuba.
(34) INDEBTEDNESS. There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of
business) or guarantees of indebtedness by the Company to or for
the benefit of any of the officers or directors of the Company or
any of the members of the families of any of them, except as
disclosed in the Registration Statement and the Prospectus.
(35) ACQUISITIONS OR DISPOSITIONS. Except as set forth in the
Registration Statement and Prospectus, the Company has not
consummated the acquisition or disposition of any business or
property which is "significant" to them within the meaning of
Regulation S-X under the Securities Act, and no such acquisition or
disposition is probable.
(36) LOCK-UP. The holders of all of the shares of Common Stock of the
Company, including each director, officer and shareholder of the
Company, have executed an agreement (collectively, the "Lock-Up
Agreements") pursuant to which he, she or it has agreed, for a
period extending eighteen (18) months following the effective date
of the Registration Statement (the "Lock-Up Period"), not to
directly or indirectly, offer, offer to sell, sell, grant an option
for the purchase or sale of, transfer, pledge, assign, hypothecate
or otherwise encumber (whether pursuant to Rule 144 of the Rules
and Regulations or otherwise) any securities issued or issuable by
the Company, whether or not owned by or registered in the name of
such persons, or dispose of any interest therein, without the prior
written consent of the Underwriter. Such persons have all further
agreed in the Lock-Up Agreements that, for a period extending
twenty-four (24) months following the effective date of the
Registration Statement, all sales of such securities of the Company
shall be made through the Representative in accordance with its
customary brokerage policies. The Company will cause its transfer
agent to xxxx an appropriate legend on the face of stock
certificates representing all of such securities and to place "stop
transfer" orders on the Company's stock ledgers.
(37) CHANGES. At any time during the period of five years from the
Effective Date, if there is any change in the information referred
to in this Subsection 2(a), the Company will immediately notify
Representative of such change.
(38) REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDER. The
Company is not aware, and has no reason to believe, that any
representation or warranty of the Selling Stockholder set forth in
Subsection 2(b) below is untrue or inaccurate in any material
respect.
(39) ADDITIONAL REPRESENTATIONS. To the Company's knowledge, no
director, officer, or key employee of the Company has been arrested
or convicted of any felony, experienced a personal bankruptcy, or
been an officer, director, or key employee of any company that
during their tenure with such company experienced any bankruptcy,
or had any trustee, receiver, or conservator appointed with respect
to its business or assets.
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(b) REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDER. The
Selling Stockholder represents and warrants to and agrees with each
Underwriter that:
(1) ORGANIZATION, QUALIFICATION, ETC. The Selling Stockholder is an
Ontario corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization,
with full power and authority to conduct its business.
(2) AUTHORIZATION OF AGREEMENTS. This Agreement has been duly
authorized, executed, and delivered by the Selling Stockholder and
constitutes a valid and binding obligation of the Selling
Stockholder, enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by the
Selling Stockholder, the consummation by the Selling Stockholder of
the transactions herein contemplated, and the compliance by the
Selling Stockholder with the terms of this Agreement have been duly
authorized by all necessary action and do not and will not, with or
without the giving of notice or the lapse of time, or both, (i)
result in a breach of or conflict with any of the terms or
provisions of, or constitute a default under, or result in the
modification or termination of, or result in the creation or
imposition of any lien, security interest, change or encumbrance
upon any of the shares of Common Stock owned by the Selling
Stockholder pursuant to any indenture, mortgage, note, contract,
commitment or other agreement or instrument to which the Selling
Stockholder is a party or under which the Selling Stockholder or
its properties or assets are or may be bound or affected, or (ii)
violate any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Selling Stockholder, or its
properties or business.
(3) TRANSACTIONS. No transaction has occurred between the Selling
Stockholder and the Company that is required to be described in and
is not described in the Registration Statement and the Prospectus.
(4) OWNERSHIP. The Selling Stockholder is the lawful owner of the
Securities to be sold by such Selling Stockholder pursuant to this
Agreement and has, and on any Option Closing Date will have, good
and clear title to such Securities, free of all restrictions on
transfer, liens, encumbrances, security interests and claims
whatsoever and has legal right and full power to sell, transfer and
deliver the Securities and will transfer such title to the
Underwriters.
(5) TITLE TO SECURITIES. Upon delivery of and payment for such
Securities pursuant to this Agreement, good and clear title to such
Securities will pass to the Underwriters, free of all restrictions
on transfer, liens, encumbrances, security interests and claims
whatsoever.
(6) DELIVERY OF CERTIFICATES. Certificates in negotiable form for the
Selling Stockholder's shares of Common Stock to be transferred
pursuant to Subsection 1(b) of this Agreement have been delivered
to the transfer agent for delivery pursuant to the terms of this
Agreement; the shares of Common Stock represented by the
certificates so held in custody for such Selling Stockholder are
subject to the interests hereunder of the Underwriters; the
arrangements for custody and delivery of such certificates made by
such Selling Stockholder hereunder are not subject to termination
by any acts of such Selling Stockholder, or by operation of law,
and if any such event shall occur before the delivery of such
shares of Common Stock hereunder, certificates for the shares of
Common Stock will be delivered in accordance with the terms and
conditions of this Agreement as if such event had not occurred,
regardless of whether or not the custodian shall have received
notice of such event.
(7) STABILIZATION. The Selling Stockholder has not taken, and will not
take, directly or indirectly, any action designed to, or which
might reasonably be expected to, cause or result in stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the shares of Common Stock
pursuant to the distribution contemplated by this Agreement, and
other than as permitted by the Securities Act, the Selling
Stockholder has not distributed and will not distribute any
prospectus or other offering material in connection with the
offering and sale of the Securities.
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(8) ABSENCE OF CONFLICTS WITH AGREEMENTS. The execution, delivery and
performance of this Agreement by the Selling Stockholder,
compliance by the Selling Stockholder with all the provisions
hereof and the consummation of the transactions contemplated hereby
will not require any consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other
governmental body (except as such may be required under the
Securities Act or state securities laws) and will not conflict with
or constitute a breach of any of the terms or provisions of any
agreement, indenture or other instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder or
property of the Selling Stockholder is bound, or violate or
conflict with any law, administrative regulation or ruling or court
decree applicable to either the Selling Stockholder or property of
the Selling Stockholder.
(9) ACCURACY OF INFORMATION. All information furnished to the Company
by or on behalf of the Selling Stockholder with respect to the
Selling Stockholder for use in connection with the preparation of
the Registration Statement is true, correct and complete in all
material respects as of the stated date of such information and the
date hereof; the Selling Stockholder has read the information
appearing in the Prospectus and, as it pertains to the Selling
Stockholder, such information does not contain an untrue statement
of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of circumstances under
which they were made, not misleading.
(10) FINDER OR BROKER. The Selling Stockholder has not retained or
dealt with any broker or finder with respect to the transaction
contemplated hereby, and the Selling Stockholder does not know of
any outstanding claims for services in the nature of a finder's fee
or origination fee with respect to the sale of Securities by such
Selling Stockholder hereunder. The Selling Stockholder hereby
agrees to indemnify and hold harmless the Underwriters with respect
to any claims for a finder's fee by any party claiming to be owed
such fee based on contacts, conversations, or arrangements with the
Company or the Selling Stockholder.
(11) REASON FOR SALE. The sale of Securities by the Selling Stockholder
pursuant to this Agreement is not prompted by any information
concerning the Company which is not set forth in the Registration
Statement.
3. COVENANTS OF THE COMPANY. The Company covenants to and agrees with
the Underwriters that:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. If the Effective Date is
not prior to the execution and delivery of this Agreement, the
Company will use its best efforts to cause the Registration
Statement and any subsequent amendments thereto to become effective
as promptly as possible. The Company will notify the Underwriters
promptly (i) when the Registration Statement or any subsequent
amendment thereto has become effective or any supplement to the
Prospectus has been filed and (ii) of the receipt of any requests,
and the nature and substance thereof, by the Commission for any
amendment or supplement to the Registration Statement or Prospectus
or for any other additional information. The Company will prepare
and file with the Commission, promptly upon the Representative's
reasonable request, any amendment or supplement to the Registration
Statement or Prospectus that may be necessary or advisable in
connection with the sale or distribution of the Securities, any of
the Underwriters' Warrants or the Warrant Shares to comply with the
Regulations. The Company will file no amendment or supplement to
the Registration Statement or Prospectus (other than any document
required to be filed under the Exchange Act that upon filing is
deemed to be incorporated by reference therein) to which the
Representative shall reasonably object by notice to the Company
after having been furnished a copy within a reasonable time, but no
later than five business days, prior to the proposed filing
thereof, except in instances when the Company's counsel advises
such amendment or supplement is necessary pursuant to the
Regulations or the rules and regulations of the Exchange Act. The
Company will furnish to the Representative at or prior to the
filing thereof with the
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Commission a copy of any document that upon filing is deemed to be
incorporated by reference in whole or in part in the Registration
Statement or the Prospectus.
(b) NOTICE OF STOP ORDER. The Company will advise the Underwriters
promptly, and confirm in writing, when and if it receives notice or
obtains knowledge of (i) the issuance by the Commission or any
state securities commission in a state designated by the
Representative pursuant to Subsection 3(e) hereof of any stop order
or other order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or the effectiveness of the
Registration Statement or (ii) the suspension of the qualification
of any of the Securities, the Underwriters' Warrants or the Warrant
Shares for offering or sale in any jurisdiction in which they were
previously qualified, or (iii) the initiation or threat of any
proceeding for that purpose. The Company will promptly use its
reasonable best efforts to prevent the issuance, and to obtain the
withdrawal if such issuance is not prevented, of any such stop
order or other suspension.
(c) COMPLIANCE WITH THE SECURITIES ACT AND THE EXCHANGE ACT. Within
the time during which a Prospectus relating to the Securities, the
Underwriters' Warrants, or the Warrant Shares is required to be
delivered under the Securities Act, the Company will use its best
efforts to comply with all requirements imposed upon it by the
Securities Act and the Exchange Act, as now in effect and as
hereafter amended, and by the Regulations, as from time to time in
force, to permit the continuance of sales of or dealings in the
distribution of the Securities or the Underwriters' Warrants or the
Warrant Shares, as contemplated by the provisions therein, herein,
and in the Registration Statement or Prospectus. If during such
period any event as to which the Company has knowledge occurs as a
result of which the Registration Statement or the Prospectus as
then amended or supplemented includes an untrue statement of a
material fact or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary
to amend the Registration Statement or supplement the Prospectus to
comply with the Securities Act, the Company will notify the
Representative promptly, will amend the Registration Statement or
supplement the Prospectus so as to correct such statement or
omission or otherwise to effect such compliance, and will furnish
without charge to the Underwriters and to any dealer in securities
as many copies of such amended or supplemented Prospectus as the
Underwriters may from time to time reasonably request. Furthermore,
the Company will prepare and file with the Commission, promptly
upon the request of the Representative, any amendments or
supplements to the Registration Statement or the Prospectus, which
in the opinion of the Representative may be reasonably necessary to
enable the Underwriters to continue the distribution of the
Securities, and will use its best efforts to cause the same to
become effective as promptly as possible.
(d) COPIES OF SECURITIES ACT DOCUMENTS. The Company will deliver to
the Representative and the Selling Stockholder, from time to time
without charge, such number of copies of the Registration Statement
(two of which delivered to the Representative shall be manually
signed and will include all exhibits), each Preliminary Prospectus,
the Prospectus, and all amendments and supplements thereto, in each
case as soon as available and in such quantities and to such
persons as reasonably requested by the Underwriters. The Company
consents to the use of any Preliminary Prospectus as originally
filed, any amended Preliminary Prospectus, the Prospectus and any
amendments or supplements thereto by the Underwriters and by any
dealer for the purpose contemplated by the Securities Act and the
Regulations.
(e) STATE SECURITIES LAWS QUALIFICATIONS. The Company will use its
best efforts, in cooperation with the Representative and the
Representative's counsel, to register or qualify the Securities,
the Underwriters' Warrants and the Warrant Shares for offer and
sale under the securities laws of such jurisdictions as the
Representative may reasonably designate, and will continue
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such qualifications in effect for so long as may be necessary to
complete the distribution and sale of such securities.
(f) SECTION 11(A) EARNINGS STATEMENT. As soon as practicable, but in
any event not later than 45 days after the end of the 12-month
period beginning on the day after the end of the fiscal quarter of
the Company during which the effective date of the Registration
Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company will
make generally available to its security holders (within the
meaning of Section 11(a) of the Securities Act) and deliver to the
Representative as soon as practicable an earnings statement that
shall satisfy the requirements of Section 11(a) and Rule 158 under
the Securities Act, covering a period of at least 12 consecutive
months after the Effective Date.
(g) INFORMATION PROVIDED TO THE REPRESENTATIVE. After the Closing Date
and for a period of four years thereafter, the Company will furnish
or cause to be furnished to the Representative and the
Representative's counsel, with reasonable promptness, copies of (i)
quarterly balance sheets, statements of operations of the Company
(which need not be audited) and all other reports prepared and
issued to the public; (ii) annual reports, including a balance
sheet as at the end of the preceding fiscal year, together with
statements of operations, shareholders' equity and cash flows,
accompanied by a report thereon of the Company's independent
certified public accountant; (iii) all reports, if any, to its
shareholders, (iv) all reports filed by the Company with the
Commission, any securities exchange and/or the NASD; (v) every
press release and every material news item or article of interest
to the financial community in respect of the Company, or its
respective affairs which was released or prepared by or on behalf
of the Company; and (vi) such other material documents and
information with respect to the Company and its affairs as the
Representative may from time to time reasonably request and the
Company can produce at reasonable cost. The Company shall cause the
Board of Directors to meet, at least quarterly, upon proper notice,
and shall also cause the agenda and minutes of the last meeting to
be mailed to each Director prior to each meeting and a copy of such
report to be sent to the Representative. For a period of three
years from the Closing Date, the Company shall cause its transfer
agent to provide the Representative with copies of the Company's
monthly transfer sheets and Depository Trust Company transfer
sheets. For a period of three years from the Closing Date, upon
request, the Company shall also provide the Representative with
current lists of its shareholders and warrant holders, if any. The
Representative will maintain the confidentiality of any documents
or information provided to it pursuant to this Subsection 3(h) and
will comply fully with federal and state securities laws regarding
the use of such documents or information.
(h) LISTING IN SECURITIES MANUAL; AFTER-MARKET TRADING MEMORANDUM;
NON-ISSUER TRANSACTION. In the event the Common Stock is not listed
for quotation on Nasdaq National Market or the American Stock
Exchange, the Company shall have become listed at or prior to the
Effective Date, and shall use its best efforts to maintain such
listing, for at least five years after the Effective Date in
Standard and Poor's Corporation Records Service and/or Xxxxx'x OTC
Guide. For a period of five years from the Effective Date, at the
Company's sole expense, the Company shall cause its counsel to
provide to the Representative a list of those states in which the
Company's securities may be traded in non-issuer transactions under
the securities laws of the 50 states.
(i) LISTING ON NASDAQ NATIONAL MARKET OR EXCHANGES. Prior to the
Effective Date, the Company, at its cost, shall use its best
efforts to have caused the Securities, and the Warrant Shares to be
listed for trading on Nasdaq National Market or the American Stock
Exchange and, if possible, on the Toronto Stock Exchange under
symbols which are acceptable to the Representative, and the Company
shall use its best efforts to have the Securities and the Warrant
Shares remain listed for at least five years from the Effective
Date, and to ensure
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that the Company otherwise complies with the prevailing
requirements of The Nasdaq Stock Market, Inc. or the American Stock
Exchange, as the case may be, and the requirements of the Toronto
Stock Exchange if the Common Stock is listed with such Exchange.
(j) SECTION 12(G) REGISTRATION. Upon the Effective Date, the Common
Stock will be registered with the Commission under the provisions
of Section 12(g) of the Exchange Act. The Company shall comply with
the Securities Act, the Regulations, the Exchange Act and the rules
and regulations promulgated thereunder, the applicable rules and
regulations of the NASD, and applicable state securities laws so as
to permit the continuance of sales of and dealings in the
Securities and the exercise of the Underwriters' Warrants and the
issuance and sale of the Warrant Shares upon such exercise in
compliance with applicable provisions of such laws, rules, and
regulations, including the filing with the Commission, NASD
Regulation, Inc. and state securities commissions in all states
where the Securities, including the Warrant Shares, have been
issued or sold, all reports required to be so filed, and the
Company will deliver to the holders of the Securities and/or
Warrant Shares all reports required to be provided to such holders
pursuant to such laws, rules, or regulations. The Company shall
timely file with the Commission and deliver to the Representative,
from time to time as required to make the same reasonably current,
such statements and reports as are required to be filed by a
company registered under Section 12(g) of the Exchange Act, as if
the Company were a company incorporated in the United States.
(k) USE OF PROCEEDS. The Company shall apply the net proceeds received
from the sale of the Securities and the exercise of the
Underwriters' Warrants in substantially the manner set forth under
the caption "Use of Proceeds" in the Registration Statement and
Prospectus, which shall state that the primary application of the
proceeds to be realized by the Company will be for expansion of
existing operations and for working capital.
(l) BOARD MEETINGS AND MEMBERSHIP. For a period of five years
commencing on the Effective Date, the Representative shall have the
right to designate one nominee for election to the Company's Board
of Directors, which member shall be reasonably acceptable to the
Company. The Company shall, prior to the Effective Date, obtain
from the officers, directors and holders of 5% or more of the
outstanding Common Stock of the Company, agreements in writing to
vote the shares of Common Stock respectively owned by them, whether
directly or indirectly, during such five-year period in favor of
the election of such nominee. Following the election of such
nominee as director, such person shall receive the same
compensation paid to other non-officer directors of the Company for
attendance at meetings of the Board of Directors of the Company and
shall be entitled to receive reimbursement for all reasonable costs
incurred in attending such meetings to the extent permitted under
applicable law, and on the same basis as all other directors of the
Company. The Company agrees to indemnify and hold such director
harmless, to the maximum extent permitted by law, against any and
all claims, actions, awards and judgments arising out of his or her
service as director and, in the event the Company maintains a
liability insurance policy affording coverage for the acts of its
officers and directors, to include such director as insured under
such policy. The rights and benefits of such indemnification and
the benefits of such insurance shall, to the extent possible,
extend to the Representative insofar as it may be or may be alleged
to be responsible for such director, provided that the extension of
such rights and benefits to the Representative may be done without
additional cost to the Company.
In the event that the Representative does not elect to designate
one member to the Company's Board of Directors, the Representative
shall have the right during such five-year period to have one
representative attend all meetings of the Board of Directors of the
Company, which meetings shall be held at least quarterly, including
any meetings of any committees of the Board of Directors. All
information received by such representative at such meetings shall
be kept confidential, shall not be disclosed by the representative
to any third party, and shall be dealt with in full compliance with
federal and state securities laws.
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Additionally, the Company shall elect or cause to be elected, a
minimum of two (2) "outside" persons (i.e., excluding affiliates of
the Company and family members of the Company's existing directors,
officers and shareholders) to the Company's Board of Directors
within 90 days after the Effective Date, and shall designate an
audit committee consisting of a majority of such "outside"
directors, which will generally supervise the financial affairs of
the Company, including, but not limited to, the application of the
proceeds of the Public Offering. The Company shall maintain (or
establish if necessary) any other such committees of the Board of
Directors as are necessary to comply with the corporate governance
requirements imposed by the exchange(s) or other organizations
wherein the Common Stock is listed.
(m) FUTURE SALES. The Company will not, during the period of the Public
Offering and for a period of 18 months from the Effective Date,
without the Representative's prior written consent, offer, sell,
contract to sell, or otherwise dispose of, any securities of the
Company, except for the issuance of shares of Common Stock to be
issued pursuant to the exercise of options or options currently
reserved for future grant and disclosed in the Registration
Statement and Prospectus, provided that the exercise price of any
options issued after the date hereof is no less than the greater of
the fair market value on the date of grant or issuance, as the case
may be, and the initial public offering price per share of common
stock.
(n) UNDERTAKINGS. The Company will comply with the provisions of all
undertakings contained in the Registration Statement or made in
connection with any application to register or qualify any of the
Securities, including the Warrant Securities, under state
securities laws.
(o) CERTAIN DELIVERIES TO THE REPRESENTATIVE. The Company shall obtain
from its officers, counsel, and accountants those certificates,
opinions, and letters referred to in Section 7. The Company shall,
upon request of the Representative, furnish to the Representative
as early as practicable prior to each of the date hereof, the
Closing Date and any Option Closing Date, but not later than two
full business days prior thereto, a copy of the latest available
unaudited interim financial statements of the Company (which in no
event shall be as of a date more than 30 days prior to the date of
the Registration Statement) which have been read by the Company's
independent public accountants, as stated in the accountants'
letter to be furnished pursuant to Subsection 7(k) hereof.
(p) REDEMPTION AND DIVIDENDS. For a period of three years from the
Effective Date, the Company shall not redeem any of its securities
and shall not pay any dividends or make any other cash distribution
in respect of its securities in excess of the amount of the
Company's current and retained earnings after the Closing Date,
without obtaining the Representative's prior written consent. The
Representative shall either approve or disapprove such contemplated
redemption of securities or dividend payment or distribution within
five business days from the date the Representative receives
written notice of the Company's proposal with respect thereto; a
failure of the Representative to respond within such period of five
business days shall be deemed consent to the transaction.
(q) RESTRICTIONS ON SALES, OPTIONS AND VOTING BY AFFILIATES. Except as
provided in the Registration Statement or upon prior written
consent of the Representative, all directors, officers, and holders
of the Company's capital stock issued and outstanding as of the
Effective Date, as well as options, warrants or rights thereto,
shall agree not to sell any shares of any class of capital stock
owned by them, privately or publicly (either pursuant to Rule 144
of the Regulations or otherwise) for a period of not less than 18
months following the Effective Date (the "Lock-up Period"), except
in a private transaction where the transferee agrees to the
restrictions described above. Such persons shall further agree
that, for a period commencing on the date hereof and ending 24
months following the Effective Date, all sales of securities issued
by the Company shall be made through the Representative in
accordance with its customary brokerage policies. An appropriate
restrictive legend shall be placed on the face of all stock
certificates representing such share of capital stock prior to the
Effective
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Date. The Company will cause its transfer agent to note such
restriction on the transfer books and records of the Company and
will obtain "lock-up agreements" from such directors, officers, and
shareholders prior to the Effective Date. This Subsection 3(q)
shall not apply to the Selling Stockholder.
(r) OUTSTANDING WARRANTS, OPTIONS AND OTHER RIGHTS. There shall not be
outstanding on the Closing Date any warrants, options, or other
rights to purchase any shares of Common Stock, except as otherwise
set forth in the Registration Statement or Prospectus.
(s) ACCOUNTING FIRM. The Company shall retain a nationally recognized,
reputable independent public accounting firm reasonably acceptable
to the Representative for a period of five years from the Effective
Date. The Representative acknowledges that the accounting firm of
Xxxxxxxx Xxxxxxxx Xxxxxxx is acceptable.
(t) BUSINESS WITH CUBA. The Company will inform the Florida Department
of Banking and Finance (the "Department") if at any time it
commences engaging in business with the government of Cuba or with
any person or affiliate located in Cuba after the Effective Date.
Such information will be provided to the Department within 90 days
after the commencement of business in Cuba or within 90 days after
the change occurs with respect to previously reported information.
(u) CLOSING BINDERS. The Company shall, at its sole cost and expense,
supply and deliver to the Representative and the Representative's
counsel, within a reasonable period not to exceed 180 days after
the Closing Date, three sets of hard-bound transaction binders,
each of which shall include the Registration Statement, as amended
or supplemented, all exhibits to the Registration Statement, each
Preliminary Prospectus, the Prospectus, the Preliminary Blue Sky
Memorandum and any supplement thereto, correspondence filed with or
received from the Commission or the NASD and all underwriting and
other closing documents.
(v) ANNUAL REPORTS. Until the third anniversary of the Effective Date,
the Company shall distribute an annual report to all shareholders
setting forth clearly the financial position of the Company.
(w) REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date, and except
as may be set forth in the Registration Statement, the Company
shall not repay (or agree to repay) any indebtedness to any of its
shareholders (or incur any indebtedness to any of its shareholders)
unless the terms thereof are approved in advance by the
Representative. The loan made by certain insiders of the Company to
the Company in the approximate sum of $760,000 shall be repaid in
quarterly installments over an 18-month period following the
Closing Date, provided that the Company is profitable for the
particular quarter in which a quarterly installment is paid, and
the Company will have sufficient cash flow after any such payment
is made to operate its business in the ordinary course.
(x) TRANSFER AGENT. The Company will appoint a transfer agent for the
Common Stock reasonably acceptable to the Representative.
(y) INSURANCE. The Company shall have, within 30 days from the Closing
Date, obtained directors and officers insurance and "key man" life
insurance in the amount of U.S. $2,000,000 on the life or lives of
its key officers, directors and employees as deemed necessary by
the mutual agreement of the Company and the Representative and on
terms acceptable to both the Company and the Representative. The
Company shall pay the premiums for such insurance and maintain such
insurance in force for a period of not less than five years from
the Effective Date; the Company shall be the named beneficiary on
all such insurance policies.
(z) EMPLOYMENT AGREEMENTS. The Company shall have entered into
employment agreements with Xxxxx Xxxxxx, Xxxxx Xxxxxx and other key
employees on terms approved by the Representative. The annual
salary provided in such employment agreements with Xxxxx
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Xxxxxx and Xxxxx Xxxxxx shall be $175,000 with $25,000 annual
bonuses payable if the Company achieves specified projected
revenues and post-tax earnings.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE REPRESENTATIVE. The
Representative represents and warrants to, and agrees with, the Company
and the Selling Stockholder that:
(a) REGISTRATION AS BROKER-DEALER AND MEMBER OF NASD. The
Representative is registered as a broker-dealer with the Commission
and in all states in which it shall offer the Securities, and is a
member in good standing of the NASD. Additionally, any firm with
which the Representative associates to act as an Underwriter shall
also be registered as a broker-dealer with the Commission and a
member in good standing of the NASD or shall be a foreign
broker-dealer and a member of the national stock exchange of its
country of residency.
(b) NO PENDING PROCEEDINGS. There is not now pending or threatened
against the Representative any action or proceeding of which it has
been advised, either in any court of competent jurisdiction or
before the Commission, or before any state securities commission or
the NASD, concerning its activities as a broker or dealer, that
could have a material adverse effect upon its ability to perform
its obligations under this Agreement.
(c) NO UNTRUE STATEMENTS. No information furnished to the Company in
writing by or on behalf of the Representative for the express
purpose of use in or for preparation of the Registration Statement
or the Prospectus contains any untrue statement of a material fact
or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. For all
purposes under this Agreement, the only information which shall be
deemed to have been provided by or on behalf of the Representative
for the express purpose of use in or for preparation of the
Registration Statement or the Prospectus shall be the information
contained in the "Underwriting" section of the Prospectus.
(d) FINDER OR BROKER. Except as contemplated by this Agreement, the
Representative (i) has not retained or dealt with any broker or
finder or financial consultant with respect to the transactions
contemplated hereby, and (ii) does not know of any outstanding
claims for services in the nature of a finder's fee or origination
fee with respect to transactions contemplated hereby. The
Representative agrees to indemnify and hold harmless the Company
with respect to any claims for a finder's fee by any party claiming
to be owed such fee based on contacts, conversations, or
arrangements with the Representative or any Underwriter.
5. OFFERING EXPENSES AND RELATED MATTERS.
(a) GENERAL. The Company agrees to pay or reimburse the
Representative, if paid by the Representative, whether or not the
transactions contemplated hereby are consummated or this Agreement
is terminated, all costs and expenses incident to the issuance,
sale and delivery of the Securities, the Underwriters' Warrants and
the Warrant Shares and the performance of the obligations of the
Company hereunder, including without limiting the generality of the
foregoing, (i) the preparation, printing, filing, and copying of
the Registration Statement, Preliminary Prospectus, Prospectus,
this Agreement, Blue Sky memoranda, the Agreement Among
Underwriters, if any, the Selected Dealers Agreement, and other
underwriting documents, if any, and any drafts, amendments or
supplements thereto, including the cost of all copies thereof
supplied to the Underwriter in such quantities as reasonably
requested by the Representative, the costs of mailing Preliminary
and Final Prospectuses to offerees and purchasers of the
Securities, excluding costs of mailing by the Representative or any
Underwriter; (ii) the printing, engraving, issuance and delivery of
certificates representing the Securities, including any transfer or
other taxes payable thereon; (iii) the registration or
qualification of the Securities, including the Underwriters'
Warrants and the Warrant Shares, under state securities laws,
including the reasonable fees and disbursements of counsel
(regardless of whether such counsel is also counsel to the
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Representative, subject to the limitation set forth in Subsection
5(d) below) and filing fees in connection therewith; (iv) all fees
and expenses of the Company's counsel, accountants and all transfer
or warrant agent fees; (v) all costs, expenses and filing fees in
connection with review of the terms of the Public Offering by the
NASD; (vi) all costs and expenses and filing fees, including legal
fees of the Company, of any listing of the Securities on Nasdaq
National Market and/or on a stock exchange and/or in Standard and
Poor's Corporate Reports and/or in any other securities manuals;
(vii) all costs and expenses of three bound volumes provided to the
Representative of all closing documents as set forth in Section
3(v) hereof; (viii) the reasonable costs and expenses, including
travel expenses, of all pre-closing and post-closing advertisements
relating to the Public Offering (such as tombstone advertisements)
(ix) all costs of holding informational meetings and "road shows";
and (x) all other costs and expenses incurred or to be incurred by
the Company in connection with the transactions contemplated by
this Agreement. The parties hereto acknowledge that the
Registration Statement and the exhibits thereto have been prepared
by counsel for the Company, and that the various state securities
and Blue Sky law applications and the survey distributed by the
Representative in connection therewith have been prepared by the
Representative's counsel, Broad and Xxxxxx, whose costs and
expenses in connection with such state applications and survey up
to a maximum of $35,000 shall have been paid for by the Company at
the Closing, provided that if the Common Stock is listed on the
Nasdaq National Market or the American Stock Exchange, such costs
and expenses payable by the Company shall not be more than $15,000.
The obligations of the Company under this Subsection 5(a) shall
survive any termination or cancellation of this Agreement.
(b) REPRESENTATIVE'S DISCOUNT. The Representative shall be entitled
to, and the Company agrees to pay to Representative, an
underwriting discount equal to 10% of the Public Offering Price
paid on each sale of Securities in the Public Offering, payable at
the Closing Date and any Option Closing Date.
(c) NON-ACCOUNTABLE EXPENSE ALLOWANCE. In addition to the Company's
payment of the foregoing expenses and Representative's discount,
upon the consummation of the Public Offering herein contemplated,
the Company shall pay to the Representative a non-accountable
expense allowance equal to 3% of the gross proceeds of the Public
Offering, including in the computation of such amount the proceeds
from any sale of Optional Securities, of which $25,000 was paid to
the previous representative and $15,000 was paid to the
Representative. The balance of the non-accountable expense
allowance due shall be paid on the Closing Date and on each Option
Closing Date, as applicable.
(d) EXPENSES IF THE PUBLIC OFFERING IS NOT COMPLETED. The
Representative hereby acknowledges the payment by the Company of
$40,000, which amount shall be applied to the non-accountable
expense allowance. It shall be the Company's obligation, whether or
not the offering is consummated, to bear all expenses in connection
with the proposed offering, including, but not limited to the
following: filing fees; printing costs; experts; expense of
tombstone advertisements; advertising costs and expenses, including
but not limited to costs and expenses in connection with "road
shows"; informational meetings and presentations; registrar and
transfer agent fees; postage and mailing expenses with respect to
the transmission of the prospectuses; Company counsel and
accounting fees, due diligence fees, issue and transfer taxes, if
any; and blue sky counsel fees and expenses. If this Agreement is
terminated by the Representative in accordance with the provisions
of Section 7 or 10 hereof, the Company shall reimburse and
indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of the
Representative's counsel, less any amounts already paid. It is
understood and agreed by the parties hereto that any expenses
incurred by the Representative will be deemed to be reasonable and
unobjectionable upon demonstration by the Representative that such
expenses were incurred directly or indirectly in connection with
the proposed transaction and/or relationship of the parties hereto,
as described herein.
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(e) COMPLIANCE WITH STATE SECURITIES LAWS. The Representative shall
determine in which states or jurisdictions the Securities,
including the Underwriters' Warrants and the Warrant Shares (as
described below), shall be registered or qualified for sale. Copies
of all applications and related documents for the registration or
qualification of securities (except for the Registration Statement
and Prospectus) filed with the various states shall be supplied to
the Company's counsel as soon as possible following their
transmission to the various states, and copies of all comments and
orders received from the various states shall be made available
promptly to the Company's counsel. Immediately prior to the
Effective Date, counsel for the Representative shall advise counsel
for the Company in writing of all states in which the offering has
been registered or qualified for sale or has been cancelled,
withdrawn, or denied, the date of each such event, and the number
of Securities, including the Underwriters' Warrants and the Warrant
Shares, registered or qualified for sale in each such state.
Pursuant to Section 5(a) hereof, the Company shall be responsible
for the cost of state registration or qualification filing fees and
the legal fees of the Representative's counsel in connection with
such filings, which filing fees are payable to the Representative's
counsel in advance of such filings.
6. UNDERWRITERS' WARRANTS; OTHER FINANCIAL ARRANGEMENTS.
(a) UNDERWRITERS' WARRANTS. On the Closing Date, the Company will sell
to the Underwriters the Underwriters' Warrants, for an aggregate of
$100, evidencing the Underwriter's right to purchase in the
aggregate the equivalent of 10% of the Securities sold in the
Public Offering, at an exercise price of $8.25 per share of Common
Stock (165% of the Public Offering Price per share of Common
Stock). The Underwriters' Warrants will be in the form of EXHIBIT A
attached hereto. The Underwriters' Warrants shall be
non-exercisable and non-transferable (other than to officers,
consultants, partners or directors of and members of the
underwriting or selling group) for a period of 12 months following
the Effective Date. The Underwriters' Warrants shall be
exercisable, in whole or in part, commencing 12 months after the
Effective Date and for a period of five years thereafter (the
"Term"). If the Underwriters' Warrants are not exercised during the
Term, they shall, by their terms, automatically expire. The
Underwriters' Warrants shall contain customary anti-dilutive
provisions relating to any recapitalization, stock split, stock
dividend or similar event involving the Company. The Underwriters'
Warrants shall also contain provisions providing for demand and
"piggyback" registration rights with respect to the Underwriters'
Warrants and the Warrant Shares, and shall not be redeemable. The
Underwriters' Warrants shall otherwise be transferable after one
year from the Effective Date pursuant to available exemptions from
registration under the Securities Act.
(b) FINANCIAL CONSULTING AGREEMENT. On the Closing Date, the Company
shall enter into a financial consulting agreement with the
Representative in the form of EXHIBIT B attached hereto, pursuant
to which the Representative will provide financial consulting
services to the Company for a two-year period beginning on the
Closing Date (the "Financial Consulting Agreement"). The Company
shall pay to the Representative a consulting fee equal to 1% of the
gross proceeds generated from the Public Offering, which will be
payable in full on the Closing Date.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
UNDERWRITERS. Notwithstanding the execution and delivery of this
Agreement or the performance of any part hereof, the Underwriters'
obligations to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction of each of the conditions
set forth in this Section 7, except to the extent that such satisfaction
is waived in writing by the Representative.
(a) EFFECTIVENESS OF REGISTRATION STATEMENT.
(1) The Registration Statement shall have been declared effective
by the Commission not later than , Eastern
Time, on December 18, 1998, or such later time or date as shall
have been consented to by the Representative in writing.
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(2) On the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or the
qualification or registration of the Securities, the
Underwriters' Warrants and the Warrant Shares, under the
securities laws of any jurisdiction (whether or not a
jurisdiction specified by the Representative) shall have been
issued, and no proceeding for that purpose shall have been
initiated or shall be threatened or contemplated by the
Commission or the authorities of any such jurisdiction to the
best of the Company's or the Underwriter's knowledge.
(3) Any request of the Commission or any such authorities for
additional information to be included in the Registration
Statement or Prospectus or otherwise shall have been complied
with to the reasonable satisfaction of counsel for the
Representative.
(b) REPRESENTATIONS; COMPLIANCE WITH AGREEMENT. The representations
and warranties of the Company in this Agreement shall be true and
correct on and as of the Closing Date, with the same effect as if
made on the Closing Date, and the Company shall have complied with
all the agreements and satisfied all the obligations required to be
performed or satisfied by it at or prior to the Closing Date.
(c) SUFFICIENT AUTHORIZED COMMON STOCK; STOCK SPLIT. The Company shall
have, as of the Effective Date, sufficient authorized (and neither
issued nor outstanding) Common Stock to be offered and sold in the
Public Offering, and to be issued and sold upon exercise of the
Underwriters' Warrants and the Warrant Shares. The Company shall
have effectuated a split of its outstanding securities such that,
as of the Effective Date, the Company shall have, on a fully
diluted basis, 3,700,000 shares of Common Stock outstanding and no
shares of preferred stock outstanding. Neither the offer nor the
sale of the Shares shall be subject to any preemptive right of any
kind.
(d) NO UNTRUE STATEMENTS. The Registration Statement and the
Prospectus shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and, since
the Effective Date, there shall not have occurred any event
required to be set forth in an amended or supplemented Prospectus
that has not been so set forth (except any such statement or
omission based upon information furnished in writing by or on
behalf of the Underwriters for inclusion in the Registration
Statement).
(e) NO MATERIAL CHANGE. Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, and except as set forth or contemplated in the
Prospectus, (i) there shall have been no Material Adverse Effect,
actual or threatened, for whatever reason, with respect to the
properties, operations, business, financial condition, results of
operations or prospects of the Company, (ii) the Company shall not
have entered into any material transaction not in the ordinary
course of business, (iii) the Company shall not have paid or
declared any dividends or other distributions on its capital stock,
(iv) the conduct of the business and operations of the Company
shall not have been materially interfered with by strike, fire,
flood, hurricane, accident or other calamity (whether or not
insured), or by any court or governmental action, order or decree,
and the properties of the Company shall not have sustained any
material loss or damage (whether or not insured) as a result of any
such occurrence.
(f) NASD. The Representative shall have the obligation to satisfy the
requirements set forth by the rules and regulations of the NASD as
to the amount of compensation allowable or payable by the
Representative and, accordingly, by the Effective Date the
Representative will have received clearance from the NASD as to the
amount of compensation allowable or payable to the Underwriters, as
described in the Registration Statement and this Agreement. The
NASD shall have indicated that it has no objection (i) to the
underwriting arrangements pertaining to the sale of the Securities
by the Underwriters and (ii) the participation by the Underwriters
in the sale of the Securities. No action shall have been taken by
the
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Commission or the NASD the effect of which would make it improper,
at any time prior to the Closing Date, for any member firm of the
NASD to execute transactions (as principal or as agent) in the
Common Stock and no proceedings for the purpose of taking such
action shall have been instituted or shall be pending, or, to the
Underwriters' or the Company's knowledge, shall be contemplated by
the Commission or the NASD. The Company and the Representative each
represent at the date hereof, and shall represent as of the Closing
Date or Option Closing Date, as the case may be, that neither has
any knowledge that any such action is in fact contemplated by the
Commission or the NASD.
(g) OFFICERS' CERTIFICATE. The Company shall have furnished to the
Underwriters a certificate of the President and of the Company's
principal accounting officer, dated as of the Closing Date, to the
effect that, among other things, each signer of such certificate
has examined the Registration Statement, the Prospectus, and this
Agreement, and the conditions set forth in Subsections 7(a) through
7(d) have been satisfied.
(h) OPINION OF COMPANY COUNSEL. At the time this Agreement is executed
and as of the Closing Date and the Option Closing Date, as
applicable, the Company shall have furnished to the Underwriters
the opinion of counsel for the Company, dated the Closing Date, in
form and substance reasonably satisfactory to counsel for the
Representative and substantially in the form of EXHIBIT C attached
hereto.
(i) ADDITIONAL DOCUMENTS. On or prior to each of the Closing Date and
the Option Closing Date, if any, counsel for the Representative
shall have been furnished such documents, certificates and opinions
as they may reasonably require for the purpose of enabling them to
review or pass upon matters referred to in Subsection 7(h), or in
order to evidence the accuracy, completeness or satisfaction of any
of the representations, warranties or conditions of the Company, as
herein contained.
(j) CERTIFICATES, BYLAWS AND PROCEEDINGS. The Company's Certificate
of Incorporation and By-Laws, and all proceedings taken in
connection with the authorization, issuance, or sale of the
Securities, the Underwriters' Warrants and the Warrant Shares, as
herein contemplated, shall be reasonably satisfactory in form and
substance to counsel for the Representative.
(k) ACCOUNTANTS' LETTER. At the time this Agreement is executed and as
of the Closing Date and each Option Closing Date, as applicable,
Xxxxxxxx Xxxxxxxx Xxxxxxx, the current independent public
accountants for the Company, shall have furnished to the
Underwriters a letter addressed to the Underwriters and dated the
date of this Agreement and/or the Closing Date, and each Option
Closing Date, as applicable, to within five business days of such
dates, in form and substance satisfactory to the Representative and
counsel to the Representative, confirming that it is the
independent public accountant with respect to the Company within
the meaning of the Securities Act and the Regulations and published
instructions, and stating to the effect that:
(1) In its opinion, the audited financial statements included in
the Registration Statement and Prospectus covered by its report
included therein, comply as to form in all material respects
with the applicable requirements of the Securities Act and the
Regulations and published instructions.
(2) On the basis of a reading of the minutes of the shareholders'
and directors' meetings of the Company since their respective
inceptions, inquiries of officials of the Company responsible
for financial and accounting matters, and other specified
procedures and inquiries, nothing came to its attention causing
it to believe that:
(A) the unaudited financial information set forth in the
Prospectus does not comply as to form in all material
respects with the applicable requirements of the
Securities Act and the related published instructions and
Regulations and is not fairly presented in accordance
with generally accepted accounting principles
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applied on a basis consistent with the audited financial
statements set forth in the Prospectus, or
(B) with respect to the period subsequent to March 31, 1998,
there were, at a specified date not more than three
business days prior to the date of such letter, any
changes in the capital stock or long-term debt
obligations of the Company, or any changes or decreases
in shareholders' equity, net assets, or current net
assets of the Company, each as compared with the amounts
shown in the most recent balance sheet of the Company
included in the Registration Statement or disclosed in
such Registration Statement, except as otherwise
disclosed in the letter,
(C) during the period from May 31, 998, to a specified date not
more than three days prior to the effective date of the
Registration Statement, there was no decrease in net
revenues, net earnings or net earnings per share of
Common Stock, in each case as compared with the
corresponding period beginning May 31, 1998, other than
as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting
forth the amount of such decrease.
(3) It has compared specific dollar amounts, numbers of shares of
securities, percentages of revenues and earnings, and
statements about other financial or statistical information
pertaining to the Company set forth in the Prospectus, in each
case to the extent that such amounts, numbers, percentages,
statements, and information may be derived from the general
accounting records, which are subject to the system of internal
accounting controls, including worksheets, of the Company (and
excluding any questions requiring an interpretation by legal
counsel), with the results obtained from the application of
specific readings, inquiries, and other appropriate procedures
(which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set
forth in the letter, and found them to be in agreement.
(4) Such other statements as to such other matters incident to the
transaction contemplated hereby as the Representative may
request.
(l) CHANGE IN CAPITALIZATION. Subsequent to the respective dates as
of which information is given in the Registration Statement and the
Prospectus, there shall not have been any Material Adverse Effect
on or decrease in the capitalization of the Company that makes it
impractical or inadvisable in the reasonable judgment of the
Representative to proceed with the Public Offering or the delivery
of the Securities, as the case may be, as contemplated in the
Prospectus.
(m) NASDAQ NATIONAL MARKET. On or before the Closing Date, the
Securities shall have been approved for listing on the Nasdaq
National Market or the American Stock Exchange.
(n) "MARKET-OUT" PROVISION. The Representative's obligations hereunder
shall be subject to, among other things, there being, in its
opinion: (i) no material adverse change in the conditions or
obligations of the Company or its present or proposed business and
affairs; and (ii) no market conditions which might render the offer
and sale of the Securities herein contemplated inadvisable.
(o) CERTIFICATE OF SELLING STOCKHOLDER. The Selling Stockholder shall
have furnished to the Underwriters a certificate, signed by the
duly Selling Stockholder, dated as of the Closing Date, to the
effect that the signer of such certificate has carefully examined
the Registration Statement, the Prospectus, any supplement to the
Prospectus and this Agreement and that the representations and
warranties of the Selling Stockholder in this Agreement are true
and correct in all material respects on and as of the Closing Date
to the same effect as if made on the Closing Date.
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(p) LETTER AGREEMENTS. The Company will obtain letter agreements
executed by each of its officers, directors and principal
shareholders with respect to those matters referred to in
Subsection 3(m).
(q) INTERIM FINANCIAL STATEMENTS. At least two full business days
prior to the date hereof, the Closing Date and each Option Closing
Date, if any, the Company shall have delivered to the
Representative unaudited interim financial statements of the
Company (which in no event shall be as of a date more than 30 days
prior to the date hereof, the Closing Date or the relevant Option
Closing Date, as the case may be) which have been read by the
Company's independent public accountants.
(r) OTHER INFORMATION. Prior to the Closing Date, the Company and the
Selling Stockholder shall have furnished to the Representative such
further information, certificates, and documents in connection with
the Company's and the Selling Stockholder's obligations set forth
herein as the Representative may reasonably request.
If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as required by this Agreement or expressly
waived in writing by the Representative, this Agreement and all
obligations of the Representative hereunder may be terminated by
the Representative at, or at any time prior to, the Closing Date.
Notice of such termination shall be given to the Company and the
Selling Stockholder in writing, or by telegraph, facsimile
transmission or telephone and confirmed in writing. In such event,
the Company, the Selling Stockholder and the Representative shall
not be under any obligation to each other except to the extent
provided in Sections 5 and 8 hereof.
8. INDEMNIFICATION.
(a) INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and
hold harmless the Representative, each of the other Underwriters
and each person, if any, who controls any of the foregoing within
the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, and each of them, from and against any and all
loss, liability, claim, damage, expense or action, joint or several
(including, but not limited to, any and all reasonable expenses
incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and
any amount paid in settlement of any litigation), commenced or
threatened, or of any claim whatsoever, to which they or any of
them may become subject under the Securities Act, the Exchange Act
or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, liability, claim, damage,
expense or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement or breach of any
representation, warranty or covenant made by the Company in this
Agreement, (ii) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement (or any
amendment thereto), or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, (iii) any
untrue statement or alleged untrue statement of a material fact
contained in a Preliminary Prospectus or the Prospectus (or any
amendment or supplement thereto), or any omission or alleged
omission therefrom of a material fact required to be stated therein
or necessary in order to make the statements therein not
misleading, or (iv) any untrue statement or alleged untrue
statement of a material fact contained in any application or other
document executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify all or any of the Securities, the Underwriters'
Warrants or the Warrant Shares under the securities laws thereof or
filed with the Commission, the NASD or any securities exchange, or
any omission or alleged omission therefrom of a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; provided, however, that the
Company shall not be liable in any such case to the extent that
such untrue statement or omission or such alleged untrue statement
or omission was made in reliance upon and in conformity with
information furnished in writing by or on behalf of any
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of the Underwriters to the Company expressly for use in the
Registration Statement (or any amendment thereto), any such
Preliminary Prospectus or the Prospectus (or any amendment or
supplement thereto) or any such application or document. The
Company acknowledges that the statements under the caption
"Underwriting" contained in any Preliminary Prospectus and the
Prospectus constitute the only information furnished in writing by
the Underwriters expressly for inclusion in the Registration
Statement, any Preliminary Prospectus or the Prospectus. The
indemnity agreement contained in this Subsection 8(a) is in
addition to any liability which the Company may otherwise have to
the Underwriters or any controlling person of the Underwriters. The
Company agrees to pay any legal and other expenses for which it is
liable under this subsection (a) from time to time (but not more
frequently than monthly) within 30 days after its receipt of a xxxx
therefor.
(b) INDEMNIFICATION BY THE REPRESENTATIVE. The Representative agrees
that it will indemnify and hold harmless the Company, the Selling
Stockholder, each of the Company's officers who signs the
Registration Statement, each of its directors, and each person who
controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act against any and
all loss, liability, claim, damage, expense or action, joint or
several, to the same extent as the foregoing indemnity from the
Company and the Selling Stockholder to the Underwriters in
Subsection 8(a), but only with respect to statements or omissions
made in the Registration Statement (or any amendment thereto) or a
Preliminary Prospectus or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with
information furnished in writing by the Representative to the
Company expressly for use in the Registration Statement (or any
amendment thereto). The indemnity agreement contained in this
Subsection 8(b) is in addition to any liability which the
Representative may otherwise have to the Company and the Selling
Stockholder or any of the Company's directors, officers, or
controlling persons. The Company and the Selling Stockholder
acknowledges that the statements in any Preliminary Prospectus and
in the Prospectus made under the caption "Underwriting" constitute
the only information furnished in writing by the Representative or
its counsel on behalf of the Representative expressly for inclusion
in the Registration Statement, any Preliminary Prospectus or the
Prospectus. The Representative agrees to pay any legal and other
expenses for which it is liable under this Subsection 8(b) from
time to time (but not more frequently than monthly) within 30 days
of receipt of a xxxx therefor.
(c) INDEMNIFICATION BY THE SELLING STOCKHOLDER. The Selling
Stockholder agrees to indemnify and hold harmless the Company, the
Representative, each of the other Underwriters and each person, if
any, who controls any of the foregoing within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
other than the indemnifying party, and each of them, to the same
extent as the foregoing indemnity from the Company to the
Underwriters in Section 8(a) above but only with respect to (i)
statements or omissions of a material fact, if any, made in any
Preliminary Prospectus, any Rule 430A Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any
application in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Selling
Stockholder expressly for use in any Preliminary Prospectus, any
Rule 430A Prospectus, the Registration Statement or the Prospectus,
or any amendment or supplement thereto, or in any application, as
the case may be, or (ii) any breach of any representation,
warranty, covenant or agreement of the Selling Stockholder
contained in this Agreement. In case any action shall be brought
against the Company, any Underwriter or any other person so
indemnified based on any Preliminary Prospectus, any Rule 430A
Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or in any application, or with
respect to any such breach, and in respect of which indemnity may
be sought against any of the Selling Stockholder, the Selling
Stockholder shall have the rights and duties given to the
indemnifying parties, and the Company, the Underwriters and each
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other person so indemnified shall have the rights and duties given
to the indemnified parties under the provisions of this Section 8.
(d) CLAIMS. Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim, threatened claim or the
commencement of any action, the indemnified party shall, if a claim
in respect thereof is to be made against an indemnifying party
under this Section 8, notify the indemnifying party in writing of
the claim, threatened claim or the commencement of that action;
provided, however, that the failure to notify an indemnifying party
shall not relieve such indemnifying party from any liability which
it may have to an indemnified party otherwise than under this
Section 8. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate
therein, and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense
thereof with its counsel, who shall be reasonably satisfactory to
the indemnified party. After notice from the indemnifying party to
the indemnified party of its election to assume the defense of such
claim, threatened claim or action, the indemnifying party shall not
be liable to the indemnified party under this Section 8 for any
legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the Representative
shall have the right to employ counsel to represent it and its
controlling persons who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by the
Representative against the Company and/or the Selling Stockholder
under this Section 8 if, in the Representative's reasonable
judgment, it is necessary for the Representative and its
controlling persons to be represented by separate counsel in order
to avoid an actual or potential conflict of interest or if the
Representative shall have reasonably concluded that there may be
defenses available to the Representative and its controlling
persons different from or in addition to those available to the
Company or the Selling Stockholder, and in either such event the
reasonable fees and expenses of such separate counsel shall be paid
by the Company and the Selling Stockholder. An indemnifying party
shall not be liable for any settlement of any action or claims
effected without its written consent (which consent shall not
unreasonably be withheld).
Anything herein to the contrary notwithstanding, the indemnity
agreement of the Company in Subsection 8(a) hereof, the
representations and warranties in this Agreement and any
representation or warranty as to the accuracy of the Registration
Statement or the Prospectus contained in any certificate furnished
by the Company pursuant to Section 7 hereof, insofar as they may
constitute a basis for indemnification for liabilities (other than
payment by the Company of expenses incurred or paid in the
successful defense of any action, suit or proceeding) arising under
the Securities Act, shall not extend to the extent of any interest
therein of a controlling person or partner of the Representative
who is a director, officer or controlling person of the Company
when the Registration Statement has become effective, except in
each case to the extent that an interest of such person shall have
been determined by a court of appropriate jurisdiction as not
against public policy as expressed in the Securities Act. Unless in
the opinion of counsel for the Company the matter has been settled
by a controlling precedent, the Company will, if a claim for such
indemnification is asserted, submit to a court of appropriate
jurisdiction the question whether such interest is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(e) CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which indemnification provided for
in Subsection 8(a), 8(b) or 8(c) is unavailable, the Company, the
Underwriters or the Selling Stockholder shall contribute to the
aggregate loss, claim, damage, expense and liability to which the
Company, the Underwriters or the Selling Stockholder may be subject
(and, in any case where the Company is seeking contribution, after
seeking contribution from persons who control the Company within
the meaning of the Securities Act, officers of the Company who
signed the Registration Statement and directors
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of the Company, who may be liable for contribution and after
deducting from such loss, claim, damage, expense and liability the
amount of contribution obtained from such persons) in such
proportions as are applicable to reflect the relative benefits
received by the Company, the Underwriters and the Selling
Stockholder from the offering of the Securities; provided, however,
that if such allocation is not permitted by applicable law or if
the indemnified party failed to give the notice required under
Subsection 8(d), then the relative fault of the Company, the
Underwriters or the Selling Stockholder, in connection with the
statements or omissions which resulted in such losses, claims,
damages and liabilities and other relevant equitable considerations
will be considered together with such relative benefits. The
relative benefits received by the Company and the Selling
Stockholder, on the one hand, and the Underwriters, on the other
hand, shall be deemed to be in the same proportion as the total net
proceeds from the Public Offering (before deducting expenses)
received by the Company and the Selling Stockholder bear to the
total underwriting discounts and commissions received by the
Underwriters (the "Underwriters Portion"), in each case appearing
on the cover page of the Prospectus; provided, however, that (i)
the provisions of the Agreement Among Underwriters, if any, shall
govern the contribution among Underwriters, (ii) in no case shall
the Underwriters (except as may be provided in the Agreement Among
Underwriters, if any) be responsible for any amount in excess of
their respective pro rata shares, based on the number of Securities
purchased by each of them, of the amount of the Underwriters
Portion, and (iii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The relative fault of the Company and
the Selling Stockholder, on the one hand, and of the Underwriters,
on the other hand, shall be determined by reference to, among other
things, whether in the case of an untrue statement or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact, such statement or omission
relates to information supplied by the Company or the Selling
Stockholder, on the one hand, or by the Underwriters, on the other
hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue
statements or omission. The Company, the Selling Stockholder and
the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Subsection 8(e) were determined by
pro-rata allocation (even if the Underwriters are treated as one
entity for such purpose) or by any other method of allocation that
does not take account of the equitable considerations referred to
in this Subsection 8(e). The amount paid or payable by the
indemnified party as a result of the losses, claims, damages or
liabilities referred to above in this Subsection 8(e) shall be
deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or
defending against or appearing as a third-party witness in any such
action or claim. For purposes of this Subsection 8(e), each person,
if any, who controls any of the Underwriters within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as such Underwriter and
each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
each officer who shall have signed the Registration Statement and
each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clause (iii)
of this Subsection 8(e). Each party entitled to contribution agrees
that upon the service of a summons or other initial legal process
upon it in any action instituted against it in respect of which
contribution may be sought, it will promptly give written notice of
such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any
such service shall not relieve the party from whom contribution may
be sought from any obligations it may have hereunder or otherwise
(except as specifically provided in Subsection 8(d)). No party
shall be liable for contribution with respect to any action or
claim settled without its consent (which consent shall not
unreasonably be withheld).
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(f) SURVIVAL. The respective indemnity and contribution agreements by
the Underwriters, the Selling Stockholder and the Company contained
in this Section 8, and the covenants, representations and
warranties of the Selling Stockholder and the Company set forth
herein, shall remain operative and in full force and effect
regardless of (i) any investigation made by the Underwriters or on
their behalf or by or on behalf of any person who controls the
Underwriters, by the Company or any controlling person of the
Company or any director or any officer of the Company, (ii)
acceptance and delivery of the Securities, the Underwriters'
Warrants and Warrant Shares and payment therefor, or (iii) any
termination of this Agreement, and any successor to the Company or
to the Underwriters or any person who controls any of Underwriters
or the Company, as the case may be, shall be entitled to the
benefit of such respective indemnity and contribution agreements.
9. EFFECTIVENESS. This Agreement shall become effective
contemporaneously with the effectiveness of the Registration Statement;
provided, however, that the provisions of Sections 5, 8, and 9 hereof
shall at all times be in full force and effect from the date first
written above.
10. TERMINATION. This Agreement may be terminated, in the
Representative's sole and absolute discretion, by notice given to the
Selling Stockholder and the Company prior to the Closing Date if the
Company or the Selling Stockholder shall have failed, refused, or been
unable, prior to the Closing Date, to perform any material agreement
required to be performed by it hereunder, or if any other condition
precedent to the Underwriters' obligations hereunder determined to be
material by the Representative required to be fulfilled by the Company
is not fulfilled. In addition, this Agreement may be terminated, as set
forth above, if, prior to the Closing Date, any of the following shall
have occurred: (i) material governmental restrictions (not in force and
effect on the date hereof) have been imposed on trading in securities on
The Nasdaq National Market System? (or the American Stock Exchange if
the Common Stock is listed thereon) or in the over-the-counter market;
(ii) a material adverse change, beyond normal fluctuations, in general
financial market or economic conditions from such conditions on the date
hereof; (iii) a material interruption in mail or telecommunications
service or other general means of communications within the United
States after the execution and delivery of this Agreement; (iv) a
banking moratorium has been declared by federal or New York or Florida
state authorities; (v) an outbreak of major international hostilities or
other national or international calamity has occurred; (vi) the passage
by the Congress of the United States or by any state legislative body of
any act or measure, or the adoption of any orders, rules, or regulations
by any governmental body or executive or any authoritative accounting
institute or board, that the Underwriters believe will have a material
adverse effect on the business, financial condition, or financial
statements of the Company or the distribution of the Securities or
market for the Securities; or (vii) any Material Adverse Effect has
occurred, since the respective dates of which information is given in
the Registration Statement and Prospectus, in the condition of the
Company, financial or otherwise, whether or not arising in the ordinary
course of business. Any such termination shall be without liability of
any party to any other party, except as provided in Section 8 herein and
except that the Company shall remain obligated to pay costs and expenses
pursuant to Section 5 herein. If the Representative elects to prevent
this Agreement from becoming effective, or to terminate this Agreement,
as provided in this Section 10, the Representative shall promptly notify
the Company and the Selling Stockholder by telegram or telephone, and
confirm by letter, and the Representative shall not be under any
liability to the Company or the Selling Stockholder.
11. DEFAULT BY THE UNDERWRITERS. If the Underwriters shall fail at the
Closing Date to purchase the Securities that they are respectively
obligated to purchase pursuant to this Agreement (the "Defaulted
Securities"), the Underwriters shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriter, to purchase all, but not less
than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the Underwriters
shall not have completed such arrangements within such 24-hour period,
then:
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(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Securities, the non-defaulting Underwriters shall
be obligated to purchase the full amount thereof in the proportions
that their respective underwriting obligations bear to the
underwriting obligations of the non-defaulting Underwriters; and
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters.
In the event of any such default that does not result in a
termination of this Agreement, either the Underwriters or the
Company shall have the right to postpone the Closing Date for a
period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other
documents or arrangements. Nothing contained herein shall relieve a
defaulting Underwriter of any liability it may have for damages
caused by its default.
12. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND INDEMNITIES. The
respective agreements, representations, warranties, and indemnities
contained in this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the Company or
the Underwriters or their respective officers or directors or
controlling persons, and will survive delivery of and payment for the
Securities and the Underwriters' Warrants and the Warrant Shares.
13. NOTICES. All notices and other communications hereunder (unless
otherwise expressly provided for herein) shall be in writing and shall
be deemed given when delivered in person, on the business day (before
5:00 P.M.) sent by facsimile transmission with confirmation of receipt,
or on the date indicated on the return receipt if sent by registered or
certified mail (return receipt requested) to the party to receive the
same at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to the Company: Xxxxxx International, Ltd.
0 Xxxxxx Xxxxxxxx
Xxxxxxxxx, Xxxxxxx X0X 0X0
Attention: Xx. Xxxxx Xxxxxx
with a copy to: Gersten, Savage, Xxxxxxxxx & Xxxxxxxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, Esquire
If to the Selling Stockholder: Ranch Limited
[insert address and contact person]
If to the Representative: Xxxxxx Xxxxxxx & Company, Inc.
00 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:
In each case, with a copy to: Broad and Xxxxxx
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esquire
14. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors. Except
as only to the extent stated in Section 8 herein with respect to the
officers, directors and controlling persons referred to in such Section
8, no person other than the parties hereto and their respective
successors will have any right or obligation hereunder. The terms
"successor" and "successors and assigns" as used in this Agreement shall
not include any buyer, as such, of any of the Securities from the
Underwriters.
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15. CONSENTS AND PRIOR APPROVALS. Any consent or approval by the
Underwriters required hereunder to any corporate action of the Company
shall not be unreasonably withheld, and, notwithstanding any other
provision hereof, any such consent or approval to any corporate action
of the Company after the Closing Date, shall not be required if the
Company obtains an opinion from an AV-rated law firm that the
requirement of such consent or approval constitutes an abrogation of the
Board of Directors' duties under the corporate law of such jurisdiction.
16. ENTIRE UNDERSTANDING; INCORPORATION BY REFERENCE. This Agreement,
together with the Financial Consulting Agreement, the Underwriters'
Warrant, and the other documents, exhibits and schedules referred to
herein, contains the entire understanding between the parties hereto and
supersedes any prior understandings or oral or written agreements
between them respecting the subject matter hereof. The documents,
exhibits and schedules referred to in this Agreement are incorporated
herein by reference.
17. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original but all of which taken
together shall constitute one and same agreement.
18. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without
giving effect to choice of law or conflict of laws principles thereof,
and any proceeding arising between the parties in any manner pertaining
or related to this Agreement shall, to the extent permitted by law, be
held in New York, New York.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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Please confirm, by signing and returning to the Company counterparts of
this Underwriting Agreement, that the foregoing correctly sets forth the
understanding between the Company, the Selling Stockholder and the
Representative, whereupon this Agreement will constitute a binding agreement
among us.
Very truly yours,
COMPANY:
XXXXXX INTERNATIONAL, LTD., an Ontario
corporation
By:
Xxxxx Xxxxxx, President
SELLING STOCKHOLDER:
RANCH LIMITED, an Ontario corporation
By:
Name:
Title:
Confirmed and Accepted as of the
date
first above-written:
REPRESENTATIVE:
XXXXXX XXXXXXX & COMPANY, INC.,
a _________ corporation
By:
Xxxxx Xxxxxxxxx, Chairman and
President
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SCHEDULE 1
NUMBER
UNDERWRITERS OF SHARES
------------ ----------
Xxxxxx Xxxxxxx & Company, Inc...............................
----------
Total.................................................. 1,650,000
I-1
