AMERICAN INTERNATIONAL CONSOLIDATED, INC.
800,000 Shares of Common Stock and
800,000 Redeemable
Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
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, 1997
I.A. ▇▇▇▇▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Worthington Capital Group, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
American International Consolidated Inc., a Delaware corporation (the
"Company"), hereby confirms its agreement with I.A. ▇▇▇▇▇▇▇▇▇▇ & Co., Inc. and
Worthington Capital Group, Inc. ("you" or the "Underwriters"), as follows:
1. Description of the Securities.
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The Company retains the Underwriters as its exclusive agent to sell, on a
best efforts basis, a minimum of the 700,000 shares (the "Shares") of common
stock, $.001 par value per share ("Common Stock"), and 700,000 redeemable common
stock purchase warrants ("Warrants") of the Company (the Shares, together with
such Warrants, being sometimes referred to as the "Securities") and a maximum of
800,000 shares of Common Stock and 800,000 Warrants. The offering of Securities
contemplated hereby may sometimes be referred to as the "Offering."
(a) The Warrants.
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Pursuant to and subject to certain conditions set forth in the agreement
(the "Warrant Agreement") between the Company, the Underwriters and American
Securities Transfer & Trust Co., each Warrant will be exercisable during the
period commencing on the effective date of the Registration Statement, as
defined in Paragraph 2(a) hereof (the "Effective Date"), and expiring five years
thereafter, subject to prior redemption by the Company (as described below), at
an initial exercise price (subject to adjustment as set forth in the Warrant
Agreement) equal to $5.00 per share. The shares of Common Stock issuable upon
the exercise of Warrants are hereinafter referred to as "Warrant Shares."
As more fully provided in the Warrant Agreement, the Warrants will be
redeemable at a price of $.01 per Warrant, commencing 12 months after the
Effective Date and prior to their expiration upon not less than 30 days' prior
written notice to the holders of the Warrants, provided the average closing bid
quotations of the Common Stock as reported on The Nasdaq Stock Market (including
the Electronic Bulletin Board) if traded thereon, or if not traded thereon, the
average closing sale price if listed on a national securities exchange (or other
reporting system that provides last sales prices), has been at least 150% of the
then current Warrant exercise price (initially $7.50 per share, subject to
adjustment), for a period of 20 consecutive trading days ending on the third day
prior to the date on which the Company gives notice of redemption, subject to
the right of the holder to exercise his purchase rights thereunder until
redemption.
(b) Underwriters' Securities.
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The Company will sell to the Underwriters, for nominal consideration,
warrants to purchase up to one share of Common Stock and one Warrant for each
ten shares of Common Stock and ten Warrants sold in the Offering (a maximum of
80,000 shares of Common Stock and 80,000 Warrants) at a price equal to $6.00 per
share of Common Stock and $0.12 per Warrant (the "Underwriters' Warrants"). The
Underwriters' Warrants, shares of Common Stock and Warrants underlying the
Underwriters' Warrants and shares of Common Stock issuable upon exercise of the
Warrants underlying the Underwriters' Warrants are hereinafter referred to
collectively as the "Underwriters' Securities." The Underwriters' Warrants shall
be non-exercisable and non-transferable (other than to officers and directors of
the Underwriters and to members of the selling group and their officers or
partners) for a period of 12 months following the Effective Date. Thereafter,
the Underwriters' Warrants shall be exercisable and transferable for a period of
four years (provided such transfer is in accordance with the Securities Act and
any other applicable securities laws). If the Underwriters' Warrants are not
exercised during their term, they shall, by their terms, automatically expire.
The Underwriters' Securities shall be registered for sale to the public and
shall be included in the Registration Statement filed in connection with the
Offering.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Underwriters that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission"), a registration statement, and one or more amendments
thereto, on Form S-1 (File No. 333- 9583), including in each such registration
statement and each such amendment any related preliminary prospectus
("Preliminary Prospectus"), for the registration of the Securities under the
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Securities Act of 1933 (the "Act"). The Company will, if required, file a
further amendment to said registration statement in the form to be delivered to
you and will not, before the registration statement becomes effective, file any
other amendment thereto to which you shall have reasonably objected in writing
after having been furnished with a copy thereof. Except as the context may
otherwise require, such registration statement, as amended, on file with the
Commission at the time such registration statement becomes effective (including
the prospectus, financial statements, exhibits and all other documents, as
amended, filed as a part thereof), is hereinafter called the "Registration
Statement," and the prospectus, in the form filed with the Commission pursuant
to Rule 424(b) of the General Rules and Regulations of the Commission under the
Act (the "Regulations") or, if no such filing is made, the definitive prospectus
used in the Offering, is hereinafter called the "Prospectus." The Company has
delivered to you copies of each Preliminary Prospectus as filed with the
Commission and has consented to the use of such copies for purposes permitted by
the Act.
(b) The Commission has not issued any orders preventing or suspending
the use of any Preliminary Prospectus, and, as of the date filed with the
Commission, each Preliminary Prospectus conformed in all material respects with
the requirements of the Act and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements or omissions made in
reliance upon and in conformity with information furnished to the Company by or
on your behalf for use in such Preliminary Prospectus and except that this
representation and warranty does not apply to statements or omissions that have
been cured in a subsequent preliminary prospectus or in the Prospectus.
(c) When the Registration Statement becomes effective under the Act
and at all times subsequent thereto to and including any Closing Date
(hereinafter defined) and for such longer periods as a Prospectus is required to
be delivered in connection with the sale of the Securities by the Underwriters,
the Registration Statement and Prospectus, and any amendment thereof or
supplement thereto, will contain all material statements which are required to
be stated therein in accordance with the Act and the Regulations, and will in
all material respects conform to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements or omissions made in
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reliance upon and in conformity with written information furnished to the
Company by you for use in the Registration Statement or Prospectus, or in any
amendment thereof or supplement thereto. It is understood that the statements
set forth in the Prospectus with respect to (i) the amounts of the selling
concession and reallowance; (ii) the identity of counsel to the Underwriters
under the heading "Legal Matters"; (iii) the statements with respect to the
public offering of the Securities set forth under the heading "Underwriting,"
including the information concerning the National Association of Securities
Dealers, Inc. ("NASD") affiliation of the Underwriters; (iv) the stabilization
legend in the Prospectus and (v) any other information in the prospectus
concerning the Underwriters, constitute information supplied by you for use in
the Registration Statement or Prospectus.
(d) The Company is, and at any Closing Date will be, a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company does not have any subsidiaries. The Company is
duly qualified and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification, except those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business or operations of the Company and its
subsidiaries, taken as a whole ("Material Adverse Effect"). The Company has all
requisite corporate powers and authority, and all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies to own or lease its properties and
conduct its business as described in the Prospectus except where the failure to
have any such authorizations, approvals, orders, licenses, certificates or
permits would not have a Material Adverse Effect, and the Company is doing
business and has been doing business during the period described in the
Registration Statement in compliance with all such material authorizations,
approvals, orders, licenses, certificates and permits and all material federal,
state and local laws, rules and regulations concerning the business in which the
Company is engaged, except where the failure to comply with any such
authorizations, approvals, orders, licenses, certificates or permits or any such
laws, rules or regulations would not have a Material Adverse Effect. The
disclosures in the Registration Statement concerning the effects of federal,
state and local regulation on the Company's business as currently conducted and
as contemplated are correct in all material respects and do not omit to state a
material fact required to be stated therein in light of the circumstances under
which such disclosures were made. The Company has all corporate power and
authority to enter into this Agreement and carry out the provisions and
conditions hereof, and all consents, authorizations, approvals and orders
required in connection therewith have been obtained or will have been obtained
prior to the initial Closing Date.
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(e) This Agreement has been duly and validly authorized and executed
by the Company. The Securities (including the Shares and the Warrants), the
Warrant Shares underlying such Warrants, and the Underwriters' Securities have
been duly authorized (and, in the case of the Shares and such Warrant Shares,
have been duly reserved for issuance) and, when issued and paid for in
accordance with this Agreement (and, in the case of such Warrant Shares, upon
exercise of such Warrants and payment to the Company of the exercise price
therefor pursuant to the terms of the Warrant Agreement), the Shares and such
Warrant Shares will be validly issued, fully paid and non-assessable; the
Securities, Warrant Shares (other than Underwriters' Securities), and
Underwriters' Securities are not and will not be subject to the preemptive
rights of any stockholder of the Company and conform and at all times up to and
including their issuance will conform in all material respects to all statements
with regard thereto contained in the Registration Statement and Prospectus; and
all corporate action required to be taken for the authorization, issuance and
sale of the Securities, Warrant Shares (other than Underwriters' Securities) and
Underwriters' Securities has been taken, and this Agreement constitutes a valid
and binding obligation of the Company, enforceable in accordance with its terms,
to issue and sell, upon exercise in accordance with the terms thereof, the
number and kind of securities called for thereby.
(f) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
the Certificate of Incorporation or by-laws, in each case as amended, of the
Company or of any evidence of indebtedness, lease, contract or other agreement
or instrument to which the Company is a party or by which the Company or any of
its properties is bound, or under any applicable law, rule, regulation,
judgment, order or decree of any government, professional advisory body,
administrative agency or court, domestic or foreign, having jurisdiction over
the Company or its properties, in each case except for any breach, violation or
default that would not have a Material Adverse Effect, or result in the creation
or imposition of any material lien, charge or encumbrance upon any of the
properties or assets of the Company; and no consent, approval, authorization or
order of any court or governmental or other regulatory agency or body is
required for the consummation by the Company of the transactions on its part
herein contemplated, except such as may be required under the Act or under state
securities or blue sky laws or under the rules and regulations of the NASD, and
except where the breach, violation or failure to obtain such consent, approval,
authorization or order would not have a Material Adverse Effect.
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(g) Subsequent to the date hereof, and prior to any Closing Date,
except as otherwise described in or contemplated by the Prospectus, the Company
will not issue or acquire any equity securities.
(h) The consolidated financial statements and notes thereto included
in the Registration Statement and the Prospectus fairly present the consolidated
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved.
(i) Except as set forth in the Registration Statement, the Company is
not, and at any Closing Date the Company will not be, in violation or breach of,
or default in, the due performance and observance of any term, covenant or
condition of any indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which the Company is a
party or by which the Company may be bound or to which any of the property or
assets of the Company is subject, which violations, breaches, default or
defaults, singularly or in the aggregate, would have a Material Adverse Effect.
The Company does not have and at any Closing Date the Company will not have
taken any action in violation of the provisions of the Certificate of
Incorporation or by-laws, in each case as amended, of the Company, or any
statute or any order, rule or regulation of any court or regulatory authority or
governmental body having jurisdiction over or application to the Company or its
business or properties, except for any violations that, singularly or in the
aggregate, would not have a Material Adverse Effect.
(j) The Company has, and at any Closing Date will have, good and
marketable title to all properties and assets described in the Prospectus as
owned by it, free and clear of all liens, charges, encumbrances, claims,
security interests, restrictions and defects of any material nature whatsoever,
except such as are described or referred to in the Prospectus and liens for
taxes not yet due and payable or such as in the aggregate will not have a
Material Adverse Effect. All of the material leases and subleases under which
the Company is the lessor or sublessor of properties or assets or under which
the Company holds properties or assets as lessee as described in the Prospectus
are, and will on any Closing Date be, in full force and effect, and except as
described in the Prospectus, the Company is not and will not be in default in
respect of any of the terms or provisions of any of such leases or subleases
(except for defaults which would not have a Material Adverse Effect), and no
claim has been asserted by anyone adverse to rights of the Company or the
Subsidiaries as lessor, sublessor, lessee or sublessee under any of the leases
or subleases mentioned above, or affecting or questioning the right of the
Company to continue possession of the leased or subleased premises or assets
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under any such lease or sublease, except as described or referred to in the
Prospectus or such as in the aggregate would not have a Material Adverse Effect,
and the Company (including through wholly owned subsidiaries) owns or leases all
such properties as are necessary to its operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted as set forth
in the Prospectus (except where the failure to own or lease such properties
would not have a Material Adverse Effect).
(k) The authorized, issued and outstanding capital stock of the
Company as of the date referenced in the Prospectus is, and the authorized,
issued and outstanding capital stock of the Company on any Closing Date will be,
as set forth in the Prospectus under "Capitalization" (in each case based on the
assumptions set forth therein); the shares of issued and outstanding capital
stock of the Company set forth thereunder have been (or as of any Closing Date
will be) duly authorized and validly issued and are (or as of any Closing Date
will be) fully paid and non-assessable; except as set forth in the Prospectus,
no options, warrants or other rights to purchase, agreements or other
obligations to issue, or agreements or other rights to convert any obligation
into, any shares of capital stock of the Company have been granted or entered
into by the Company; and the Common Stock, the Warrants and all such options and
warrants conform in all material respects, to all statements relating thereto
contained in the Registration Statement and Prospectus.
(l) Except as described in the Prospectus, the Company does not own or
control any capital stock or securities of, or have any proprietary interest in,
or otherwise participates in any other corporation, partnership, joint venture,
firm, association or business organization (other than those direct or indirect
subsidiaries of the Company disclosed in Exhibit 22 to the Registration
Statement); provided, however, that this provision shall not be applicable to
the investment, if any, of the net proceeds from the sale of the Securities sold
by the Company or other funds thereof in interest-bearing savings accounts,
certificates of deposit, money market accounts, United States government
obligations or other short-term obligations.
(m) ▇▇▇▇ + ASSOCIATES, LLP, who have reported on the financial
statements of the Company which have been filed with the Commission as a part of
the Registration Statement, are independent accountants with respect to the
Company as required by the Act and the Regulations.
(n) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money; or (ii) entered into any transaction other than in the
7
ordinary course of business; or (iii) declared or paid any dividend or made any
other distribution on or in respect of its capital stock; provided, however,
that this provision shall not be applicable to any transaction between or among
the Company and its subsidiaries.
(o) There is no litigation or governmental proceeding pending or to
the knowledge of the Company or the Subsidiaries threatened against, or
involving the properties or business of the Company which might have a Material
Adverse Effect, except as referred to in the Prospectus. Further, except as
referred to in the Prospectus, there are no pending actions, suits or
proceedings related to environmental matters or related to discrimination on the
basis of age, sex, religion or race, nor is the Company charged with or, to its
knowledge, under investigation with respect to any violation of any statutes or
regulations of any regulatory authority having jurisdiction over its business or
operations, which violations might have a Material Adverse Effect, and no labor
disturbances by the employees of the Company exist or, to the knowledge of the
Company, have been threatened.
(p) The Company has, and at any Closing Date will have, filed all
necessary federal, state and foreign income and franchise tax returns or has
requested extensions thereof (except in any case where the failure so to file
would not have a Material Adverse Effect), and has paid all taxes which it
believes in good faith were required to be paid by it except for any such taxes
that currently, or on any Closing Date, as the case may be, are being contested
in good faith or as described in the Prospectus.
(q) The Company has not at any time (i) made any contribution to any
candidate for political office, or failed to disclose fully any such
contribution, in violation of law, or (ii) made any payment to any state,
federal, foreign governmental or professional regulatory agency, officer or
official or other person charged with similar public, quasi-public or
professional regulatory duties, other than payments or contributions required or
allowed by applicable law.
(r) Except as set forth in the Registration Statement, neither the
Company nor any officer, director, employee or agent of the Company has made any
payment or transfer of any funds or assets of the Company or conferred any
personal benefit by use of the Company's assets or received any funds, assets or
personal benefit in violation of any law, rule or regulation, which is required
to be stated in the Registration Statement or necessary to make the statements
therein not misleading.
(s) On any Closing Date, all transfer or other taxes, if any (other
than income tax), which are required to be paid, and are due and payable, in
connection with the sale and transfer of the Securities by the Company to the
Underwriters will have been fully paid or provided for by the Company as the
case may be, and all laws imposing such taxes will have been fully complied with
in all material respects.
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(t) There are no contracts or other documents of the Company which are
of a character required to be described in the Registration Statement or
Prospectus or filed as exhibits to the Registration Statement which have not
been so described or filed.
(v) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (1) transactions are executed in
accordance with management's general or specified authorizations; (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; and (3) access to assets is permitted only
in accordance with management's general or specific authorizations.
(w) Except as set forth in the Prospectus, no holder of any securities
of the Company has the right (which has not been effectively waived or
terminated) to require registration of any securities because of the filing or
effectiveness of the Registration Statement, except as set forth in the
Prospectus.
(x) The Company has not taken and at any Closing Date will not have
taken, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock or the Warrants
to facilitate the sale or resale of such securities.
(y) To the Company's knowledge, there are no claims for services in
the nature of a finder's origination fee with respect to the sale of the
Securities hereunder, except as set forth in the Prospectus.
(z) No right of first refusal exists with respect to any sale of
securities by the Company.
(aa) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to the Underwriters was, when made, or as of any
Closing Date will be materially inaccurate, untrue or incorrect.
3. Covenants of the Company.
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The Company covenants and agrees with the Underwriters that:
(a) It will deliver to the Underwriters, without charge, two conformed
copies of each Registration Statement and of each amendment or supplement
thereto, including all financial statements and exhibits.
(b) The Company has delivered to the Underwriters, and each of the
Selected Dealers (as hereinafter defined) without charge, as many copies as have
been reasonably requested of each Preliminary Prospectus heretofore filed with
the Commission in accordance with and pursuant to the Commission's Rule 430
under the Act and will deliver to the Underwriters and to others whose names and
addresses are furnished by the Underwriters or a Selected Dealer, without
charge, on the Effective Date, and thereafter from time to time during such
reasonable period as you may request if, in the reasonable opinion of counsel
for the Underwriters, the Prospectus is required by law to be delivered in
connection with sales by the Underwriters or a dealer, as many copies of the
Prospectus (and, in the event of any amendment of or supplement to the
Prospectus, of such amended or supplemented Prospectus) as the Underwriters may
reasonably request for the purposes contemplated by the Act. The Company will
take all necessary actions to furnish to whomever directed by the Underwriters,
when and as requested by the Underwriters, all necessary documents, exhibits,
information, applications, instruments and papers as may be reasonably required
in order to permit or facilitate the sale of the Securities.
(c) The Company has authorized the Underwriters to use, and make
available for use by prospective dealers, the Preliminary Prospectus, and
authorizes the Underwriters, all dealers selected by you in connection with the
distribution of the Securities (the "Selected Dealers") to be purchased by the
Underwriters and all dealers to whom any of such Securities may be sold by the
Underwriters or by any Selected Dealer, to use the Prospectus during the period
that the Prospectus is current, as from time to time amended or supplemented, in
connection with the sale of the Securities in accordance with the applicable
provisions of the Act, the applicable Regulations and applicable state law,
until completion of the distribution of the Securities and for such longer
period as you may reasonably request if the Prospectus is required under the
Act, the applicable Regulations or applicable state law to be delivered in
connection with sales of the Securities by the Underwriters or the Selected
Dealers.
(d) The Company will use its best efforts to cause the Registration
Statement to become effective and will notify the Underwriters immediately, and
confirm the notice in writing: (i) when the Registration Statement or any
post-effective amendment thereto becomes effective; (ii) of the receipt of any
comments from the Commission regarding the Registration Statement or of the
receipt of any stop order or of the initiation, or to the best of the Company's
knowledge, the threatening, of any proceedings for that purpose; (iii) the
suspension of the qualification of the Securities and the Underwriters'
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Warrants or underlying securities, for offering or sale in any jurisdiction or
of the initiating, or to the best of the Company's knowledge the threatening, of
any proceeding for that purpose; and (iv) of the receipt of any comments from
the Commission. If the Commission shall enter a stop order at any time, the
Company will make every reasonable effort to obtain the lifting of such order as
promptly as practicable.
(e) During the time when a prospectus relating to the Securities is
required to be delivered under the Act, the Company will use its best efforts to
comply with all requirements imposed upon it by the Act and the Securities
Exchange Act of 1934 (the "Exchange Act"), as now and hereafter amended and by
the Regulations, as from time to time in force, as necessary to permit the
continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and the Prospectus and the Company shall use its best efforts
to keep the Registration Statement effective so long as a Prospectus is required
to be delivered in connection with the sale of the Securities by the
Underwriters or by dealers effecting transactions therein in connection with the
initial public offering thereof. If at any time when a prospectus relating to
the Securities is required to be delivered under the Act, any event shall have
occurred as a result of which, in the reasonable opinion of counsel for the
Company or counsel for the Underwriters, the Prospectus as then amended or
supplemented (or the prospectus contained in a new registration statement filed
by the Company pursuant to Paragraph 3(q)), includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if, in the reasonable opinion of
either such counsel, it is necessary at any time to amend the Prospectus (or the
prospectus contained in such new registration statement) to comply with the Act,
the Company will notify you promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the Act and
will furnish to you copies thereof.
(f) The Company will endeavor in good faith, in cooperation with you,
at or prior to the time the Registration Statement becomes effective, to qualify
the Securities for offering and sale under the securities laws or blue sky laws
of such jurisdictions as you may reasonably designate; provided, however, that
in connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
jurisdiction or to make any changes in its capital structure or certificate of
incorporation or in any other material aspects of its business or to enter into
any material agreement with any Blue Sky commissioner. In each jurisdiction
where such qualification shall be effected, the Company will, unless you agree
that such action is not at the time necessary or advisable, use it best efforts
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to file and make such statements or reports at such times as are or may
reasonably be required by the laws of such jurisdiction to continue such
qualification until none of the Warrants held by persons in that jurisdiction
are outstanding.
(g) The Company will make generally available (within the meaning of
Section 11(a) of the Act and the Regulations) to its security holders, as soon
as practicable, but in no event later than the first day of the eighteenth full
calendar month following the Effective Date, an earnings statement of the
Company, which will be in reasonable detail but which need not be audited,
covering a period of at least twelve months beginning after the Effective Date,
which earnings statements shall satisfy the requirements of Section 11(a) of the
Act and the Regulations as then in effect. The Company may discharge this
obligation in accordance with Rule 158 of the Regulations.
(h) During the period of five years commencing on the Effective Date
(unless the Company shall no longer have a class of equity securities registered
under Section 12(b) or 12(g) of the Exchange Act), the Company will furnish to
its stockholders an annual report (including financial statements audited by its
independent public accountants), in accordance with Rule 14a-3 under the
Exchange Act, and, at its expense, furnish to the Underwriters (i) within 105
days after the end of each fiscal year of the Company, a consolidated balance
sheet of the Company and its consolidated subsidiaries and a separate balance
sheet of each subsidiary of the Company the accounts of which are not included
in such consolidated balance sheet as of the end of such fiscal year, and
consolidated statements of operations, stockholder's equity and cash flows of
the Company and its consolidated subsidiaries and separate statements of
operations, stockholder's equity and cash flows of each of the subsidiaries of
the Company the accounts of which are not included in such consolidated
statements, for the fiscal year then ended all in reasonable detail and all
certified by independent accountants (within the meaning of the Act and the
Regulations), (ii) within 50 days after the end of each of the first three
fiscal quarters of each fiscal year, similar balance sheets as of the end of
such fiscal quarter and similar statements of operations, stockholder's equity
and cash flows for the fiscal quarter then ended, all in reasonable detail, and
subject to year end adjustment, all certified by the Company's principal
financial officer or the Company's principal accounting officer as having been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, (iii) as soon as available, each report furnished to or
filed with the Commission or any securities exchange and each report and
financial statement furnished to the Company's stockholders generally, and (iv)
as soon as available, such other material as the Underwriters may from time to
time reasonably request regarding the financial condition and operations of the
Company; provided, however, that the Underwriters shall use such other material
only in connection with their activities as Underwriters hereunder and shall
otherwise keep such other material confidential.
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(i) For a period of eighteen months from the initial Closing Date, the
Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit), the Company's financial statements
for each of the first three quarters prior to the announcement of quarterly
financial information, the filing of the Company's 10-Q quarterly report and the
mailing,if any, of quarterly financial information to stockholders.
(j) Prior to any Closing Date, the Company will not, directly or
indirectly, without your prior written consent, which shall not be unreasonably
withheld or delayed, issue any press release or other public announcement or
hold any press conference with respect to the Company or its activities with
respect to the Offering (other than trade releases issued in the ordinary course
of the Company's business consistent with past practices with respect to the
Company's operations and other than as required by law).
(k) The Company will deliver to you prior to filing, any amendment or
supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date and will not file any such amendment or supplement to
which you shall reasonably object after being furnished such copy.
(l) During the period of 120 days commencing on the date hereof, the
Company will not at any time take, directly or indirectly, any action designed
to, or which will constitute or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Securities to
facilitate the sale or resale of any of the Securities.
(m) The Company will apply the net proceeds from the Offering received
by it substantially in the manner set forth under "Use of Proceeds" in the
Prospectus.
(n) Counsel for the Company, the Company's accountants, and the
officers and directors of the Company will, respectively, furnish the opinions,
the letters and the certificates referred to in subsections of Paragraph 9
hereof, and, if the Company shall file any amendment to the Registration
Statement relating to the offering of the Securities or any amendment or
supplement to the Prospectus relating to the offering of the Securities
subsequent to the Effective Date, such counsel, such accountants, and such
officers and directors, respectively, will, at the time of such filing or at
such subsequent time as you shall specify, so long as Securities being
registered by such amendment or supplement are being underwritten by the
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Underwriters, furnish to you such opinions, letters and certificates, each dated
the date of its delivery, of the same nature as the opinions, the letters and
the certificates referred to in said Paragraph 9, as you may reasonably request,
or, if any such opinion or letter or certificate cannot be furnished by reason
of the fact that such counsel or such accountants or any such officer or
director believes that the same would be inaccurate, such counsel or such
accountants or such officer or director will furnish an accurate opinion or
letter or certificate with respect to the same subject matter.
(o) The Company will comply in all material respects with all of the
provisions of any undertakings contained in the Registration Statement.
(p) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued shares of Common Stock which are
issuable upon exercise of the Warrants and issuable upon exercise of the
Underwriters' Warrants (including the underlying securities) outstanding from
time to time.
(q) The Company will timely prepare and file at its sole cost and
expense one or more post-effective amendments to the Registration Statement or a
new registration statement as required by law as will permit Warrant holders to
be furnished with a current prospectus in the event and at such time as the
Warrants are exercised, and the Company will use its best efforts and due
diligence to have the same be declared effective (with the intent that the same
be declared effective as soon as the Warrants become exercisable) and to keep
the same effective so long as the Warrants are outstanding. The Company will
deliver a draft of each such post-effective amendment or new registration
statement to the Underwriters at least ten days prior to the filing of such
post-effective amendment or registration statement.
(r) So long as any of the Warrants remain outstanding, the Company
will timely deliver and supply to its Warrant agent sufficient copies of the
Company's current Prospectus, as will enable such Warrant agent to deliver a
copy of such Prospectus to any Warrant or other holder where such Prospectus
delivery is by law required to be made.
(s) So long as any of the Warrants remain outstanding, the Company
shall continue to employ the services of a firm of independent certified public
accountants reasonably acceptable to the Underwriters in connection with the
preparation of the financial statements to be included in any registration
statement to be filed by the Company hereunder, or any amendment or supplement
thereto. During the same period, the Company shall employ the services of a law
firm(s) reasonably acceptable to the Underwriters in connection with all legal
work of the Company, including the preparation of a registration statement to be
filed by the Company hereunder, or any amendment or supplement thereto.
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(t) So long as any of the Warrants remain outstanding, the Company
shall continue to appoint a Warrant agent for the Warrants, who shall be
reasonably acceptable to the Underwriters.
(u) The Company agrees that it will, upon the Effective Date, for a
period of no less than three years, engage a designee of the Underwriters as an
advisor (the "Advisor") to its Board of Directors where such Advisor shall
attend meetings of the Board, receive all notices and other correspondence and
communications sent by the Company to members of its Board of Directors and
receive cash compensation equal to the entitlement of other non-officer
Directors. In addition, such Advisor shall be entitled to receive reimbursement
for all reasonable costs incurred in attending such meetings including, but not
limited to (if reasonably required in connection with any meeting held outside
the New York City metropolitan area), food, lodging and transportation. The
Company further agrees that, during said three year period, it shall schedule no
less than four (4) formal and "in person" meetings of its Board of Directors in
each such year and such meetings shall be held quarterly each year and advance
notice of such meetings identical to the notice given to directors shall be
given to the Advisor. Further, during such three year period, the Company shall
give notice to the Underwriters with respect to any proposed acquisitions,
mergers, reorganizations or other similar transactions. In lieu of the
Underwriters' right to designate an Advisor, the Underwriters shall have the
right during such three-year period, in its sole discretion, to designate one
person for election as a Director of the Company and the Company will utilize
its best efforts to obtain the election of such person who shall be entitled to
receive the same compensation, expense reimbursements and other benefits set
forth above.
The Company agrees to indemnify and hold the Underwriters and such
Advisor or Director harmless against any and all claims, actions, damages, costs
and expenses, and judgments arising solely out of the attendance and
participation of your designee at any such meeting described herein. In the
event the Company maintains a liability insurance policy affording coverage for
the acts of its officers and directors, it agrees, if possible, to include the
Underwriters' designee as an insured under such policy.
(v) Upon the initial Closing Date, the Company shall have entered into
an agreement with the Underwriters in form reasonably satisfactory to the
Underwriters (the "Consulting Agreement"), pursuant to which the Underwriters
will be retained as a management and financial consultant for a three-year
period commencing as of the initial Closing Date, and will be paid a fee of
$3,000 a month for a term of three years, all of which ($108,000) shall be paid
upon the initial Closing Date.
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(w) The Common Stock and Warrants shall be quoted on the Electronic
Bulletin Board of The Nasdaq Stock Market ("Nasdaq"), not later than the initial
Closing Date. Thereafter, (unless the Company is acquired) the Company will
effect and use its best efforts to maintain such listing or cause such
securities to be listed on a national securities exchange or in an inter-dealer
quotation system for at least five years from the date of this Agreement (or
until such earlier date on which no Warrants remain outstanding).
(x) The Company will apply for listing in Standard and Poors
Corporation Reports or Moodys OTC Guide and shall use its best efforts to have
the Company included in one of such publications for at least five years from
the initial Closing Date (unless the Common Stock is listed on the New York
Stock Exchange or the American Stock Exchange or unless the Company shall no
longer have a class of equity securities registered under Section 12(b) or 12(g)
of the Exchange Act).
(y) The Company has obtained from each person who is currently an
officer or director of the Company or a beneficial owner of more than five
percent of the Company's Common Stock, a written agreement, in form and
substance reasonably satisfactory to you and your counsel, to the effect that
such person shall not offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, without your prior written consent (or pursuant to such
other agreement with respect to the sale of capital stock as may be required by
state "Blue Sky" laws in order to qualify the Offering in any such State), any
shares of the Common Stock owned by such person or any securities convertible
into, or exchangeable for, or warrants to purchase or acquire, shares of Common
Stock, for a period of twenty-four months from the Effective Date, except as
otherwise set forth in the Prospectus. For a period of two years from the
Effective Date, the Company shall not issue any shares of Common Stock or
preferred stock or any warrants, options or other rights to purchase Common
Stock or preferred stock without the consent of the Underwriters, except for (i)
the Securities, (ii) the Underwriters' Securities, (iii) Warrant Shares, (iv)
securities issuable upon the exercise of other options or warrants outstanding
as of the initial Closing Date, (v) options to purchase shares of Common Stock
pursuant to the Company's stock option plan and shares of Common Stock issuable
upon the exercise of such options.
(z) The Company will use its best efforts to obtain, as soon after the
initial Closing Date as is reasonably possible, liability insurance covering its
officers and directors.
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(aa) The Company agrees that it will employ the services of a
financial public relations firm reasonably acceptable to the Underwriters for a
period of at least twelve months following the Effective Date.
4. Sale, Purchase and Delivery of Securities; Closing Date; Public
Offering.
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(a) On the basis of the warranties, representations and agreements
herein contained, and subject to the satisfaction of all the terms and
conditions of this Agreement, the Company agrees to engage the Underwriters, and
the Underwriters agree to serve as the Company's exclusive agent to sell on a
best efforts basis a minimum of 700,000 shares of Common Stock and 700,000
Warrants (the "Minimum Offering") and a maximum of 800,000 shares of Common
Stock and 800,000 Warrants (the "Maximum Offering"), less, in the case of each
such Security, an underwriting discount of ten percent (10%) of the price for
such Security. The Underwriters may allow a concession not exceeding $. per
share of Common Stock and $. per Warrant to Selected Dealers who are members of
the NASD, and to certain foreign dealers, and such dealers may reallow to NASD
members and to certain foreign dealers a concession not exceeding $. per share
of Common Stock and $ per Warrant.
(b) Delivery of the Securities and payment therefor shall be made at
10:00 A.M., New York time on each Closing Date, as hereinafter defined, at the
offices of the Underwriters or such other location as may be agreed upon by you
and the Company. Delivery of certificates for the Common Stock and Warrants (in
definitive form and registered in such names and in such denominations as you
shall request by written notice to the Company delivered at least four business
days' prior to the Closing Date), shall be made to you for the account of the
purchasers of the Securities against payment of the purchase price therefor by
certified or bank check or wire transfer payable in New York Clearing House
funds to the order of the Company. The Company will make such certificates
available for inspection at least one business day prior to the Closing Date at
such place as you shall designate.
(c) The "Closing Date" shall be , 1997, or such other date not later
than the fourth business day following receipt of the Minimum Offering amount
and thereafter as additional funds are received up to the Maximum Offering
amount at such times as you shall determine and advise the Company by at least
three full business days' notice.
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(d) The cost of original issue tax stamps, if any, in connection with
the issuance and delivery of the Securities by the Company to the Underwriters
shall be borne by the Company. The Company will pay and hold the Underwriters,
and any subsequent holder of the Securities, harmless from any and all
liabilities with respect to or resulting from any failure or delay in paying
federal and state stamp taxes, if any, which are payable in connection with the
original issuance or sale to the Underwriters of the Securities or any portions
thereof.
5. [intentionally omitted]
6. Warrant Solicitation Fee.
-------------------------
The Company agrees to pay the Underwriters a fee of five percent (5%) of
the aggregate exercise price of the Warrants if: (i) the market price of the
Common Stock is greater than the exercise price of the Warrants on the date of
exercise; (ii) the exercise of the Warrants is solicited by a member of the
NASD; (iii) the Warrants are not held in a discretionary account; (iv) the
disclosure of compensation arrangements was made both at the time of the
Offering and at the time of the exercise of the Warrant; and (v) the
solicitation of the Warrant is not in violation of Rule 10b-6 promulgated under
the Exchange Act. The Company agrees not to solicit the exercise of any Warrants
other than through the Underwriters and will not authorize any other dealer to
engage in such solicitation without the prior written consent of the
Underwriters which will not be unreasonably withheld. The Warrant solicitation
fee will not be paid in a non- solicited transaction. Any request for exercise
will be presumed to be unsolicited unless the customer states in writing that
the transaction was solicited and designates in writing the broker/dealer to
receive compensation for the exercise. No Warrant solicitation by the
Underwriters will occur for a period of 12 months from the Effective Date.
7. Representations and Warranties of the Underwriters.
---------------------------------------------------
The Underwriters represent and warrant individually to the Company that:
(a) Each Underwriter is a member in good standing of the NASD, and has
complied with all NASD requirements concerning net capital and compensation to
be received in connection with the Offering.
(b) To the Underwriters' knowledge, there are no claims for services
in the nature of a finder's or origination fee with respect to the sale of the
Securities hereunder, which the Company is, or may become, obligated to pay.
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8. Payment of Expenses.
--------------------
(a) The Company will pay and bear all costs, fees and expenses
incident to and in connection with: (i) the issuance, sale and delivery of the
Securities, including all expenses and fees incident to the preparation,
printing and filing (including the mailing and distribution of preliminary and
final prospectuses) of the Registration Statement (including all exhibits
thereto), each Preliminary Prospectus, the Prospectus, and amendments and
post-effective amendments thereof and supplements thereto, and this Agreement
and related documents, Preliminary and Final Blue Sky Memoranda, including the
cost of preparing and copying all copies thereof in quantities deemed reasonably
necessary by the Underwriters; (ii) advertising costs and expenses, including,
but not limited to, the costs and expenses in connection with the "road show,"
memorabilia and "tombstones" in publications selected by the Underwriters; (iii)
the printing, engraving, issuance and delivery of the Shares, Warrants, Warrant
Shares, Underwriters' Warrants and the securities underlying the Underwriters'
Warrant, including any transfer or other taxes payable thereon in connection
with the original issuance thereof (excluding such transfer or other taxes as
may be payable in connection with the issuance of the securities underlying the
Underwriters' Warrants other than to the registered holder of the Underwriters'
Warrants or in connection with the issuance of Common Stock upon the exercise of
Warrants other than to the registered holder of such Warrants); (iv) the
qualification of the Common Stock and Warrants under the state or foreign
securities or "Blue Sky" laws selected by the Underwriters and the Company, and
disbursements and reasonable fees of $40,000 to counsel for the Underwriters in
connection therewith plus the filing fees for such states; (v) fees and
disbursements of counsel and accountants for the Company; (vi) all reasonable
traveling and lodging expenses incurred by us and/or our counsel in connection
with visits to, and examination of, the Company's premises; (vii) other expenses
and disbursements incurred on behalf of the Company (viii) the filing fees
payable to the Commission and the NASD; (ix) any listing of the Common Stock and
Warrants on a securities exchange or on Nasdaq.
(b) In addition to the expenses to be paid and borne by the Company
referred to in Paragraph 8(a) above, the Company shall reimburse you at closing
for expenses incurred by you in connection with the Offering (for which you need
not make any accounting), in the amount of 3% of the price to the public of the
Securities sold in the Offering. This 3% non-accountable expense allowance shall
cover the fees of your legal counsel, but shall not include any expenses for
which the Company is responsible under Paragraph 8(a) above, including the
reasonable fees and disbursements of your legal counsel with respect to Blue Sky
matters.
9. Conditions of Underwriters' Obligations.
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The obligations of the Underwriters to consummate the transactions
contemplated by this Agreement shall be subject to the continuing accuracy in
all material respects of the representations and warranties of the Company
contained herein (except those representations and warranties that speak as of a
specific date) and the accuracy in all material respects of the statements of
the Company and its officers and directors made pursuant to the provisions
hereof, as of the date hereof and as of any Closing Date, and to the performance
by the Company in all material respects of its covenants and agreements
hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., New York time, on the date following the date of this Agreement,
or such later date and time as shall be consented to in writing by you and, on
or prior to any Closing Date, no stop order suspending the effectiveness of the
Registration Statement and no proceedings for that purpose shall have been
instituted or to your knowledge or the knowledge of the Company, shall be
pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters and after the date hereof
no amendment or supplement shall have been filed to the Registration Statement
or Prospectus without your prior consent, which shall not have been unreasonably
withheld or delayed.
(b) The Underwriters shall not have advised the Company that the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto contains an untrue statement of a fact which, in the Underwriters'
reasonable opinion, is material, or omits to state a fact which, in the
Underwriters' reasonable opinion, is material and is required to be stated
therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) Between the time of the execution and delivery of this Agreement
and any Closing Date, there shall be no litigation instituted against the
Company or any of its officers or directors and between such dates there shall
be no proceeding instituted or, to the Company's knowledge, threatened against
the Company or any of its officers or directors before or by any federal, state
or county commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, in which litigation or proceeding an
unfavorable ruling, decision or finding would have a Material Adverse Effect.
(d) The representations and warranties of the Company contained herein
and in each certificate and document contemplated under this Agreement to be
delivered to you shall be true and correct in all material respects at each
Closing Date as if made at the initial Closing Date, and all covenants and
agreements contained herein to be performed on the part of the Company, and all
conditions contained herein to be fulfilled or complied with by the Company at
or prior to any Closing Date shall be fulfilled or complied with in all material
respects.
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(e) At each Closing Date, you shall have received the opinion of
Bearman ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., counsel to the Company, dated as of such
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to counsel to the Underwriters, to the effect that:
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with all requisite
corporate power and authority to own its properties and to conduct its business
as described in the Registration Statement. The Company is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
where its ownership, leasing, licensing or use of property and assets or the
conduct of its business makes such qualification necessary, except where failure
to be so qualified or in good standing will not have a Material Adverse Effect;
(ii) The Company has all requisite corporate power and authority
to execute, deliver and perform the Underwriting Agreement, the Consulting
Agreement (to be entered into as of the initial Closing Date), the Warrant
Agreement and the Underwriters' Warrants and to consummate the transactions
contemplated thereby. The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and the
Underwriters' Warrants by the Company, the consummation by the Company of the
transactions therein contemplated and the compliance by the Company with the
terms of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreement and the Underwriters' Warrants have been duly authorized by all
necessary corporate action, the Underwriting Agreement has been duly executed
and delivered by the Company, and each of the Consulting Agreement, the Warrant
Agreement and the Underwriters' Warrants will have been duly executed and
delivered by the Company as of the initial Closing Date. The Underwriting
Agreement is, and, as of each Closing Date each of the Consulting Agreement, the
Warrant Agreement and the Underwriters' Warrants will be, a valid and binding
obligation of the Company, enforceable in accordance with its terms, except
insofar as enforceability of indemnification and contribution provisions may be
limited by applicable law or policy or equitable principles, and except as
enforceability may be limited by bankruptcy, reorganization, moratorium,
insolvency or other laws affecting the enforceability of creditors' rights
generally and rules of law governing specific performance, injunctive relief and
other equitable remedies.
21
(iii) The execution, delivery and performance of the Underwriting
Agreement, the Consulting Agreement, the Warrant Agreement and the Underwriters'
Warrants by the Company, and the consummation by the Company of the transactions
therein or herein contemplated will not, with or without the giving of notice or
the lapse of time, or both, (A) result in a violation of the Certificate of
Incorporation or by-laws of the Company, in each case as the same may be
amended, (B) to the best of such counsel's knowledge, result in a breach of, or
conflict with, any 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 material agreement or instrument known to such
counsel to which the Company is a party or by which the Company or any of its
properties or assets are bound or affected, except where any of the foregoing
would not have a Material Adverse Effect; (C) to the best of such counsel's
knowledge, violate any existing applicable law, rule or regulation or judgment,
order or decree known to such counsel of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business, which judgment, order or decree is binding on the
Company or to which any of its business or operations is subject, except where
any such violation would not have a Material Adverse Effect; or (D) to the best
of such counsel's knowledge, have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company to own or lease and operate its properties and to conduct its
business or the ability of the Company to make use thereof;
(iv) To the best of such counsel's knowledge, no authorization,
approval, consent, order, registration, license or permit of any court or
governmental agency or body (other than under the Act, the Regulations and
applicable state securities or Blue Sky laws) is required for the authorization,
issuance, sale and delivery of the Securities, the Warrant Shares or the
Underwriters' Warrants, and the consummation by the Company of the transactions
contemplated by the Underwriting Agreement, the Consulting Agreement, the
Warrant Agreement or the Underwriters' Warrants;
(v) Such counsel has been advised by the staff of the Commission
that the Registration Statement was declared effective under the Act by the
Commission on , 1997; to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued by
the Commission, and no proceedings for that purpose have been instituted or are
pending or threatened under the Act;
(vi) The Registration Statement and the Prospectus, as of the
Effective Date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which such counsel need express no
opinion), comply as to form in all material respects with the requirements of
the Act and Regulations and, to the best of such counsel's knowledge, the
conditions for use of a registration statement on Form S-1 have been satisfied
by the Company;
22
(vii) The description in the Registration Statement and the
Prospectus, other than in the section entitled "Underwriting" as to which no
opinion need be provided, of statutes, regulations, contracts and other
documents have been reviewed by us, and, based upon such review, are accurate
summaries of such statutes, regulations, contracts and other documents in all
material respects and, to the best of such counsel's knowledge, there are no
material contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not so described or filed as required.
(viii) Each share of Common Stock outstanding as of the date of
the Prospectus or immediately prior to the initial Closing Date has been duly
authorized and validly issued and is fully paid and nonassessable. To the best
of such counsel's knowledge, none of the Common Stock outstanding as of either
such date or time has been issued in violation of the preemptive rights of any
stockholder of the Company. The authorized Common Stock conforms in all material
respects to the description thereof contained in the Registration Statement and
Prospectus. To the best of such counsel's knowledge, except as set forth in the
Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise (which has not been waived or terminated), to
have such securities registered under the Act, except as set forth in the
Prospectus;
(ix) The issuance and sale of the Securities, the Warrants, the
Warrant Shares and the Underwriters' Warrants have been duly authorized and,
when issued, paid for and delivered in accordance with the terms hereof and
thereof, the Common Stock comprising the Securities and the Warrant Shares will
be validly issued, fully paid and nonassessable. The Securities are not subject
to statutory preemptive rights of any stockholder of the Company. The
certificates representing the Securities are in proper legal form;
(x) The Warrants and the Underwriters' Warrants constitute, and
the Warrants underlying the Underwriters' Warrants, when issued and delivered
upon exercise of the Underwriters' Warrants, will constitute valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, to issue and sell, upon exercise thereof and payment pursuant to the
terms thereof, the numbers and types of securities of the Company called for
thereby. All corporate action required to be taken for the authorization,
issuance and sale of the Securities has been duly and validly taken. The
Warrants and the Underwriters' Warrants conform in all material respects to the
descriptions thereof contained in the Registration Statement and Prospectus;
23
(xi) Good title to the Securities, free and clear of all liens,
encumbrances, equities, security interests and claims (except those that may
arise from actions or inactions of the Underwriters), has been transferred to
the Underwriters, provided that the Underwriters purchased the Securities in
good faith and without notice of any such lien, encumbrance, equity, security or
claim or any other adverse claim within the meaning of the New York Uniform
Commercial Code ("NYUCC") to the extent that the NYUCC is identical to the
Colorado Uniform Commercial Code ("COUCC");
(xii) To the best of such counsel's knowledge, other than as set
forth or contemplated in the Prospectus, there are no claims, actions, suits,
proceedings, arbitrations, investigations or inquiries before any governmental
agency, court or tribunal, or before any private arbitration tribunal, pending
or threatened against the Company or to which its properties or business is
subject, which, individually or in the aggregate, would have a Material Adverse
Effect.
In addition, such counsel shall state that during the course of
the preparation of the Registration Statement and the Prospectus, such counsel
participated in conferences with officers of the Company, and, while such
counsel are not passing upon, has not verified or independently investigated,
and does not assume any responsibility for the accuracy, completeness or
fairness of the statements or documents contained in the Registration Statement
or the Prospectus, during the course of such preparation and the foregoing
conferences, no facts came to such counsel's attention which caused such counsel
to believe that (A) the Registration Statement (except as to the financial
statements and other financial data contained therein, as to which such counsel
need express no opinion), as of the Effective Date, contained any untrue
statement of 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, or that (B) the Prospectus (except as to the financial
statements and other financial data contained therein, as to which such counsel
need express no opinion), as of its date, contained any untrue statement or a
material fact or omitted to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinions, such counsel may limit their opinions
to matters governed by the federal laws of the United States, the laws of the
24
State of New York (to the extent that New York law is similar to Colorado law)
and the general corporation laws of the State of Delaware, and may rely as to
matters of fact, to the extent they deem proper, on certificates and written
statements of officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be delivered
to counsel to the Underwriters.
(f) On or prior to the initial Closing Date, counsel for the
Underwriters shall have been furnished such documents, certificates and opinions
as they may reasonably require for the purpose of enabling them to review the
matters referred to in subparagraph (e) of this Paragraph 9, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(g) Prior to any Closing Date:
(i) There shall have been no material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus;
(ii) There shall have been no transaction, outside the ordinary
course of business, entered into by the Company from the latest date as of which
the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is material to the Company, which is (x) required
to be disclosed in the Prospectus or Registration Statement and is not so
disclosed, and (y) likely to have a Material Adverse Effect;
(iii) The Company shall not be in default under any material
provision of any instrument relating to any outstanding indebtedness, except as
described in the Prospectus and except such as will not have a Material Adverse
Effect;
(iv) No material amount of the assets of the Company shall have
been pledged, mortgaged or otherwise encumbered, except as set forth in the
Registration Statement and Prospectus;
(v) No action, suit or proceeding, at law or in equity, shall
have been pending or to its knowledge threatened against the Company or
affecting any of its properties or businesses before or by any court or federal
or state commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect, except as set
forth in the Registration Statement and Prospectus;
25
(vi) No stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated or, to the Company's knowledge,
threatened by the Commission; and
(vii) Each of the representations and warranties of the Company
contained in this Agreement and in each certificate and document contemplated
under this Agreement to be delivered to you was, when originally made and is at
the time such certificate is dated, true and correct in all material respects.
(h) Concurrently with the execution and delivery of this Agreement and
at each Closing Date, you shall have received a certificate of the Company
signed by the Chief Executive Officer of the Company and the principal financial
officer of the Company, dated as of each Closing Date, to the effect that the
conditions set forth in subparagraph (g) above have been satisfied in all
material respects and that, as of such Closing Date, the representations and
warranties of the Company set forth in Paragraph 2 herein are true and correct,
as if made on and as of such Closing Date, in all material respects. Any
certificate signed by any officer of the Company and delivered to you or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to the Underwriters as to the statements made therein.
(i) At the time this Agreement is executed, and at each Closing Date,
you shall have received a letter, addressed to the Underwriters and in form and
substance reasonably satisfactory in all material respects to you and counsel
for the Underwriters, from ▇▇▇▇ + ASSOCIATES LLP, dated as of the date of this
Agreement and as of each Closing Date, substantially in the form of Exhibit A
hereto.
(j) All proceedings taken in connection with the authorization,
issuance or sale of the Securities, Warrant Shares and the Underwriters'
Securities as herein contemplated shall be reasonably satisfactory in form and
substance to you and to counsel to the Underwriters, and the Underwriters shall
have received from such counsel an opinion, dated as each Closing Date with
respect to such of these proceedings as you may reasonably require.
(k) On each Closing Date there shall have been duly tendered to you
for your account the appropriate number of shares of Common Stock and Warrants
constituting the Securities.
10. Indemnification and Contribution.
---------------------------------
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Underwriters, each of their agents and counsel
and each person, if any, who controls the Underwriters ("controlling person")
within the meaning of either Section 15 of the Act or Section 20 of the Exchange
Act, against any and all losses, liabilities, claims, damages, actions and
expenses or liability, joint or several, whatsoever (including but not limited
to any and all expense whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever), joint or several, to which it or such controlling persons may
26
become subject under the Act, the Exchange Act or under any other statute or at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any Preliminary Prospectus or the Prospectus (as from time to time
amended and supplemented); in any post-effective amendment or amendments or any
new registration statement and prospectus in which is included the Warrant
Shares of the Company issued or issuable upon exercise of the Warrants, or
Warrant Shares issued or issuable upon exercise of the Underwriters' Warrants;
or in any application or other document or written communication (in this
Paragraph 10 collectively called "application") executed by the Company or based
upon information furnished by the Company filed in any jurisdiction in order to
qualify the Securities, Warrant Shares, Underwriters' Warrants and Underwriters'
Securities under the securities laws thereof or filed with the Commission or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in light of the circumstances under which they were made),
unless such statement or omission was made in reliance upon or in conformity
with information furnished to the Company with respect to the Underwriter by or
on behalf of the Underwriter expressly for use in any Preliminary Prospectus,
the Registration Statement or Prospectus, or any amendment or supplement
thereof, or in any application, as the case may be. Notwithstanding the
foregoing, the Company shall have no liability under this Paragraph 10(a) if any
such untrue statement or omission made in a Preliminary Prospectus, is corrected
in the Prospectus and the Underwriter failed to deliver to the person or persons
alleging the liability upon which indemnification is being sought, at or prior
to the written confirmation of such sale, a copy of the Prospectus. This
indemnity will be in addition to any liability which the Company may otherwise
have.
(b) The Underwriter agree to indemnify and hold harmless the Company
and each of the officers and directors of the Company who have signed the
Registration Statement, each of its agents and counsel, and each other person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the Underwriter in Paragraph 10(a), but only with respect to
any untrue statement or alleged untrue statement of any material fact contained
27
in or any omission or alleged omission to state a material fact required to be
stated in any Preliminary Prospectus, the Registration Statement or Prospectus
or any amendment or supplement thereof or necessary to make the statements
therein not misleading or in any application made in reliance upon, and in
conformity with, written information furnished to the Company by you expressly
for use in the preparation of such Preliminary Prospectus, the Registration
Statement or Prospectus with respect to the Underwriter or directly relating to
the transactions effected or to be effected by the Underwriter in connection
with the Offering. This indemnity agreement will be in addition to any liability
which the Underwriter may otherwise have.
(c) If any action is brought against any indemnified party (the
"Indemnitee") in respect of which indemnity may be sought against another party
pursuant to the foregoing (the "Indemnitor"), the Indemnitor shall assume the
defense of the action, including the employment and fees of counsel (reasonably
satisfactory to the Indemnitee) and payment of expenses. Any Indemnitee shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee unless
the employment of such counsel shall have been authorized in writing by the
Indemnitor in connection with the defense of such action. If the Indemnitor
shall have employed counsel to have charge of the defense or shall previously
have assumed the defense of any such action or claim, the Indemnitor shall not
thereafter be liable to any Indemnitee in investigating, preparing or defending
any such action or claim. Each Indemnitee shall promptly notify the Indemnitor
of the commencement of any litigation or proceedings or any other action against
the Indemnitee in respect of which indemnification is to be sought.
(d) In order to provide for just and equitable contribution under the
Act in any case in which: (i) the Underwriter makes a claim for indemnification
pursuant to Paragraph 10 hereof, but it is judicially determined (by the entry
of a final judgment or decree by a court of competent jurisdiction and the time
to appeal has expired or the last right of appeal has been denied) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Paragraph 10 provides for indemnification of such case; or (ii)
contribution under the Act may be required on the part of the Underwriters in
circumstances for which indemnification is provided under this Paragraph 10,
then, and in each such case, the Company and the Underwriters shall contribute
to the aggregate losses, claims, damages or liabilities to which they may be
subject (after any contribution from others) in such proportion so that the
Underwriters are responsible for the portion represented by dividing the total
compensation received by the Underwriters herein or in connection with the
Offering by the total purchase price of all Securities sold in the public
offering and the Company is responsible for the remaining portion; provided,
that in any such case, no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
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The foregoing contribution agreement shall in no way affect the
contribution liabilities of any persons having liability under Section 11 of the
Act other than the Company and the Underwriters. As used in this Paragraph 10,
the term "Underwriters" includes any officer, director, or other person who
controls any Underwriter within the meaning of Section 15 of the Act, and the
word "Company" includes any officer, director or person who controls the Company
within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then the
Underwriters and each person who controls the Underwriters shall be entitled to
contribution from the Company to the full extent permitted by law. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent in writing to the settlement.
(e) Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission so to notify
the contributing party will not relieve it from any liability it may have to any
other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against any party,
and such party notifies a contributing party or his or its representative of the
commencement thereof within the aforesaid fifteen (15) days, the contributing
party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified. Any such contributing party shall
not be liable to any party seeking contribution on account of any settlement of
any claim, action or proceeding effected by such party seeking contribution
without the written consent of such contributing party. The indemnification
provisions contained in this Paragraph 11 are in addition to any other rights or
remedies which either party hereto may have with respect to the other or
hereunder.
11. Representations, Warranties, Agreements to Survive Delivery.
-----------------------------------------------------------
The respective indemnity and contribution agreements by the Underwriters
and the Company contained in Paragraph 10 hereof, and the covenants,
representations and warranties of the Company and the Underwriters set forth in
this Agreement, 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 any Underwriter, or by the Company or any
controlling person of the Company or any director or any officer of the Company,
(ii) acceptance of any of the Securities and payment therefor, or (iii) any
termination of this Agreement, and shall survive the delivery of the Securities;
and any successor of the Underwriters or the Company, or of any person who
controls you or the Company or any other indemnified party, as the case may be,
shall be entitled to the benefit of such respective indemnity and contribution
agreements. The respective indemnity and contribution agreements by the
Underwriters and the Company contained in Paragraph 10 above shall be in
addition to any liability which the Underwriters and the Company may otherwise
have.
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12. Effective Date of This Agreement and Termination Thereof.
---------------------------------------------------------
(a) This Agreement shall become effective at 10:00 A.M., New York
time, on the first full business day following the day on which you and the
Company receive notification that the Registration Statement became effective.
(b) This Agreement may be terminated by the Underwriters by notifying
the Company at any time on or before the initial Closing Date, if any domestic
or international event or act or occurrence has materially disrupted, or in your
reasonable opinion will in the immediate future materially disrupt, securities
markets in the United States; or if trading in securities generally on the New
York Stock Exchange, the American Stock Exchange, or in the over-the-counter
market in the United States shall have been suspended, or minimum or maximum
prices for trading in securities generally shall have been fixed, or maximum
ranges for prices for securities shall have been required, on the
over-the-counter market by the NASD or Nasdaq or by order of the Commission or
any other governmental authority having jurisdiction; or if a moratorium in
foreign exchange trading by major international banks or persons has been
declared in the United States; or if the Company shall have sustained a loss
material or substantial to the Company taken as a whole by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in your
reasonable opinion, make it inadvisable to proceed with the offering, sale and
delivery of the Securities; or if there shall have been a material adverse
change in the conditions of the United States securities market in general, as
in your reasonable judgment would make it inadvisable to proceed with the
offering, sale and delivery of the Securities.
30
(c) If you elect to terminate this Agreement as provided in this
Paragraph 12, the Company shall be notified promptly by you by telephone or
facsimile, confirmed by letter.
(d) Anything in this Agreement to the contrary notwithstanding, if
this Agreement shall terminate or shall not be carried out within the time
specified herein by reason of any failure on the part of the Company to perform
any undertaking, or to satisfy any condition of this Agreement by it to be
performed or satisfied, the sole liability of the Company to the Underwriters,
in addition to the obligations assumed by the Company pursuant to Paragraph 8
herein, will be to reimburse the Underwriters on an accountable basis for the
following: (i) reasonable Blue Sky counsel fees and expenses to the extent set
forth in Paragraph 8(a)(iv); (ii) Blue Sky filing fees to that same extent; and
(iii) such other reasonable out-of-pocket expenses actually incurred by the
Underwriters (including the reasonable fees and disbursements of their counsel),
to the extent set forth in Paragraph 8(a), in connection with this Agreement and
the proposed offering of the Securities, but in no event to exceed the sum of
$100,000 less such amounts as shall have already been paid pursuant to Section
8(b) or otherwise. The Company shall not in any event be liable to the
Underwriters for the loss of anticipated profits from the transactions covered
by this Agreement.
Anything in this Agreement to the contrary notwithstanding, if this
Agreement shall be terminated by you because you have exercised your rights
pursuant to Paragraph 12(b) above, the Company shall not be under any liability
to you except, on an accountable basis, for the portion of the non-accountable
expense allowance referred to in Paragraph 8(b) for which expenses have actually
been paid or incurred by you, and any balance will be returned by you to the
Company.
13. Notices.
--------
All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Underwriters, shall be mailed,
delivered or telegraphed and confirmed to the Underwriters at the addresses set
forth on the first page hereof, with a copy thereof to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and, if sent to the Company, shall be mailed, delivered or
telegraphed and confirmed to the Company at 14603 ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer, with a copy thereof to
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq., Bearman ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
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14. Parties.
--------
This Agreement shall inure solely to the benefit of and shall be binding
upon, the Underwriters, the Company and the controlling persons, directors and
officers referred to in Paragraph 10 hereof, and their respective successors,
legal representatives and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. No
purchaser of any of the Securities from the Underwriters shall be deemed a
successor or assign by reason merely of such purchase.
15. Construction.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without giving effect to the
rules governing conflict of laws, and shall supersede any agreement or
understanding, oral or in writing, express or implied, between the Company and
you relating to the sale of any of the Securities.
16. Jurisdiction and Venue.
-----------------------
The Company agrees that the courts of the State of New York shall have
jurisdiction over any litigation arising from this Agreement, and venue shall be
proper in the Southern District of New York.
17. Counterparts.
-------------
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the understanding between you and the
Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
AMERICAN INTERNATIONAL CONSOLIDATED,
INC.
By:___________________________
▇▇▇▇ ▇▇▇▇▇▇,
Chief Executive Officer
Accepted as of the date first above written:
I.A. ▇▇▇▇▇▇▇▇▇▇ & CO. WORTHINGTON CAPITAL GROUP, INC.
By:_______________________ By:_______________________
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