1. FORM OR UNDERWRITERS AGREEMENT, WARRANT
AGREEMENT AND LOCK-UP AGREEMENT
Form of Underwriting Agreement
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1,000,000 Shares of Series A Preferred Stock
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AWG, LTD.
UNDERWRITING AGREEMENT
New York, New York
______________, 1998
Xxxxx Xxxx and Shire, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
AWG, Ltd., a Nevada corporation (the "Company"), confirms
its agreement with Xxxxx Xxxx and Shire, Inc., ("you", the "Underwriter" or
"KMS") as follows: The Company retains KMS as its exclusive agent to sell
(the "Offering"), on a best efforts basis, a minimum of 300,000 shares (the
"Shares") of the Company's Series A 6% Preferred Stock, $.001 par value per
share (the "Preferred Stock" or the "Securities") and a maximum of 500,000
shares of Preferred Stock, at a price to the public of $10.00 per share of
Preferred Stock during an offering period commencing on the date hereof and
expiring on _______________________, 1998, unless extended by the mutual
consent of the Company and the Underwriter for up to an additional thirty
(30) days (such period, as same may be extended, being hereinafter referred
to as the "Offering Period"). The Company also proposes to issue and sell to
you warrants (the "Underwriter's Warrants") at a
purchase price of $.0001 per Underwriter's Warrant pursuant to the
Underwriter's Warrant Agreement entitling the holder to purchase an aggregate
of 50,000 shares of Preferred Stock exercisable for a period of four years
from ______________, 1999 until ___________________, 2003 at an initial
exercise price of $16.00 per share, subject to adjustment in amount pro rata
in the event all of the Preferred Stock is not sold in the Offering. The
Underwriter's Warrants and the Preferred Stock issuable upon exercise of the
Underwriter's Warrants are hereinafter referred to as the "Underwriter's
Securities." The Underwriter's Securities are more fully described in the
Registration Statement and the Prospectus referred to below.
1. Representations and Warranties. (a) The Company, a
Nevada corporation, which has one wholly-owned subsidiary, AWG, Inc., a
Delaware corporation (the "Subsidiary"), represents and warrants to, and
agrees with, the Underwriter as of the date hereof, and as of the Closing
Date (hereinafter defined) and the Option Closing Date (hereinafter defined),
if any, as follows:
(i) The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration
statement, and an amendment or amendments thereto, on Form SB-1 (No.
333-48165), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Shares of Preferred Stock and the
Underwriter's Securities under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and
the Rules and Regulations of the Commission thereunder. The Company will
promptly file a further amendment to said registration statement in the form
heretofore delivered to the Underwriter and will not file any other amendment
thereto to which the Underwriter shall have 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
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the Commission at the time the registration statement becomes effective
(including the Prospectus, financial statements, schedules, exhibits and all
other documents or information incorporated by reference therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430(A) of the rules and regulations), is hereinafter called the
"Registration Statement", and the form of prospectus in the form first filed
with the Commission pursuant to Rule 424(b) of the rules and regulations, is
hereinafter called the "Prospectus". For purposes hereof, "Rules and
Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable.
(ii) Neither the Commission nor any state
regulatory authority has issued any order preventing or suspending the use of
any Preliminary Prospectus, the Registration Statement or Prospectus or any
part of any thereof and no proceedings for a stop order suspending the
effectiveness of the Registration Statement or any of the Company's
securities have been instituted or are pending or threatened. Each of the
Preliminary Prospectus, the Registration Statement and Prospectus at the time
of filing thereof conformed with the requirements of the Act and the Rules
and Regulations, and none of the Preliminary Prospectuses, the Registration
Statement or Prospectus at the time of filing thereof contained an untrue
statement of a material fact or omitted to state a material fact required to
be stated therein and necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that
this representation and warranty does not apply to statements made in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriter by or on behalf of the Underwriter
expressly for use in such Preliminary Prospectus, Registration Statement or
Prospectus or any amendment or supplement thereto.
(iii) When the Registration Statement becomes
effective and at all times
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subsequent thereto up to the Closing Date (hereinafter defined) and each
Option Closing Date (hereinafter defined), if any, and during such longer
period as the Prospectus may be required to be delivered in connection with
sales by the Underwriter or a dealer, the Registration Statement and the
Prospectus will contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations, and will
conform to the requirements of the Act and the Rules and Regulations; neither
the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, contains or will contain 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 made or
statements omitted in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of the Underwriter (as
set forth in paragraph 1(a)(ii) hereof) expressly for use in the Preliminary
Prospectus, Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(iv) The Subsidiary is a wholly-owned subsidiary
of the Company. Each of the Company and the Subsidiary has been duly
organized and is validly existing as a corporation in good standing under the
laws of the state of its incorporation. Except as set forth in the
Prospectus, neither the Company nor the Subsidiary own an equity interest in
any corporation, partnership, trust, joint venture or other business entity.
Each of the Company and the Subsidiary is duly qualified and licensed and in
good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its operations
require such qualification or licensing except where the failure(s) to be so
qualified, licensed and in good standing, individually or in the aggregate,
would not materially and adversely affect the condition, financial or
otherwise, or the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company and
the Subsidiary. Each of the
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Company and the Subsidiary has all requisite power and authority (corporate
and other), and has obtained any and all authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental
or regulatory officials and bodies (including, without limitation, those
having jurisdiction over environmental or similar matters), necessary to own
or lease its properties and conduct its business as described in the
Prospectus, or is subject to no material liability or disability by reason of
the failure to obtain such authorizations, approvals, orders, licenses,
certificates, franchises and permits; each of the Company and the Subsidiary
is and has been doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates, franchises and permits and all
federal, state, local and foreign laws, rules and regulations and neither the
Company nor the Subsidiary have received any notice of proceedings relating
to the revocation or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the condition, financial or otherwise, or the
earnings, business affairs, position, prospects, value, operations,
properties, business, or results of operations of the Company and the
Subsidiary. The disclosures in the Registration Statement concerning the
effects of federal, state, local, and foreign laws, rules and regulations on
the business of the Company and the Subsidiary as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made.
(v) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and will have the
adjusted capitalization set forth therein on the Closing Date (hereinafter
defined) and the Option Closing Date (hereinafter defined), if any, based
upon the assumptions set forth therein, and the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights,
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warrants, options or other securities, except for this Agreement and as
described in the Prospectus. The Preferred Stock, the Underwriter's Warrants
and the Preferred Stock into which the Underwriter's Warrants are exercisable
(collectively, hereinafter sometimes referred to as the "IPO Securities") and
all other securities issued or issuable by the Company conform or, when
issued and paid for, will conform, in all material respects to all statements
with respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company and its
Subsidiary have been duly authorized and validly issued and are fully paid
and non-assessable and the holders thereof have no rights of rescission with
respect thereto except as disclosed in the Registration Statement, and are
not subject to personal liability by reason of being such holders; and none
of such securities were issued in violation of the preemptive rights of any
holders of any security of the Company or the Subsidiary or similar
contractual rights granted by the Company or the Subsidiary. The IPO
Securities are not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when issued, paid
for and delivered in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable and will conform to the description
thereof contained in the Prospectus; the holders thereof will not be subject
to any liability solely as such holders; all corporate action required to be
taken for the authorization, issue and sale of the IPO Securities has been
duly and validly taken; and the certificates representing the IPO Securities
are in due and proper form. Upon the issuance and delivery pursuant to the
terms hereof of the IPO Securities to be sold by the Underwriter hereunder,
the purchasers of the IPO Securities, will acquire good and marketable title
to such IPO Securities free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity
of any kind whatsoever.
(vi) The financial statements of the Company
together with the related notes and schedules thereto, included in the
Registration Statement, each Preliminary Prospectus and
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the Prospectus fairly present the financial position, income, changes in cash
flow, changes in stockholders' equity and the results of operations of the
Company and the Subsidiary at the respective dates and for the respective
periods to which they apply and the pro forma financial information included
in the Registration Statement, each Preliminary Prospectus and the Prospectus
presents fairly on a basis consistent with that of the audited financial
statements included therein, the Company's and the Subsidiary's pro forma net
income or loss per share, as the case may be, pro forma net tangible book
value, and the pro forma capitalization and such financial statements have
been prepared in conformity with generally accepted accounting principles and
the Rules and Regulations, consistently applied throughout the periods
involved. There has been no material adverse change or development involving
a material change in the condition, financial or otherwise, or in the
earnings, business affairs, position, prospects, value, operation,
properties, business or results of operation of the Company or the Subsidiary
whether or not arising in the ordinary course of business, since the date of
the financial statements included in the Registration Statement and the
Prospectus, and the outstanding debt, the property, both tangible and
intangible, and the business of the Company and the Subsidiary conforms in
all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus.
(vii) The Company and its Subsidiary (A) has paid
all federal, state, local, and foreign taxes for which it is liable,
including, but not limited to, withholding taxes and amounts payable under
Chapters 21 through 24 of the Internal Revenue Code of 1986, as amended (the
"Code"), and has furnished all information returns it is required to furnish
pursuant to the Code, (B) has established adequate reserves for such taxes
which are not due and payable, and (C) does not have any tax deficiency or
claims outstanding, proposed or assessed against it.
(viii) No transfer tax, stamp duty or other
similar tax is payable by or on behalf of the purchasers of the IPO
Securities in connection with (A) the purchase of and the
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issuance and transfer by the Company of the IPO Securities and (B) the
consummation by the Company of any of its obligations under this Agreement.
(ix) The Company and its Subsidiary each maintains
insurance policies, including, but not limited to, general liability, product
liability if applicable and property insurance, which insures the Company and
its Subsidiary and their employees, against such losses and risks generally
insured against by comparable businesses. The Company and its Subsidiary (A)
have not failed to give notice or present any insurance claim with respect to
any matter, including but not limited to the Company's or the Subsidiary's
business, property or employees, under the insurance policy or surety bond in
a due and timely manner, (B) does not have any disputes or claims against any
underwriter of such insurance policies or surety bonds or has not failed to
pay any premiums due and payable thereunder, and (C) has not failed to comply
with all conditions contained in such insurance policies and surety bonds. To
the Company's knowledge 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 and/or its
Subsidiary.
(x) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
business of the Company or its Subsidiary which (A) questions the validity of
the capital stock of the Company, its Subsidiary or this Agreement, or of any
action taken or to be taken by the Company pursuant to or in connection with
this Agreement or the Underwriter's Warrant Agreement, (B) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all material respects), or (C) if adversely determined, might
materially and adversely affect the condition, financial or otherwise,
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or the business affairs or business prospects, earnings, liabilities,
prospects, stockholders' equity, value, properties, business or assets of the
Company and its Subsidiary.
(xi) The Company has full legal right, power and
authority to authorize, issue, deliver and sell the IPO Securities, enter
into this Agreement and the Underwriter's Warrant Agreement and to consummate
the transactions provided for herein and therein; and each of this Agreement
and the Underwriter's Warrant Agreement have been duly and properly
authorized, executed and delivered by the Company. This Agreement and the
Underwriter's Warrant Agreement each constitute a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with
its terms, and neither the Company's issue and sale of the IPO Securities or
execution or delivery of this Agreement and the Underwriter's Warrant
Agreement or its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein, or the conduct of its
business as described in the Registration Statement, the Prospectus, and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result
in the creation or imposition of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of the
Company or its Subsidiary pursuant to the terms of, (A) the certificate of
incorporation or by-laws of the Company or its Subsidiary (B) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement
or instrument to which the Company or its Subsidiary is a party or by which
it is or may be bound or by which its properties or assets (tangible or
intangible) are or may be subject, or any indebtedness, or (C) any statute,
judgment, decree, order, rule or regulation applicable to the Company or its
Subsidiary by any arbitrator, court, regulatory body or administrative agency
or other governmental agency or body (including, without limitation,
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those having jurisdiction over environmental or similar matters), domestic or
foreign, having jurisdiction over the Company or its Subsidiary or any of
their activities or properties, in each case except as described in the
Prospectuses and except for conflicts, breaches, violations, defaults,
creations or impositions which do not and would not have a material adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs, position, shareholder's equity, value, operation, properties,
business or results of operations of the Company and its Subsidiary.
(xii) No consent, approval, authorization or order
of, and no filing with, any court, regulatory body, government agency or
other body, domestic or foreign which has not theretofore been obtained, is
required for the issuance of the IPO Securities pursuant to the Prospectus
and the Registration Statement, the issuance of the Underwriter's Warrants,
the execution, delivery or performance of this Agreement, the Underwriter's
Warrant Agreement and the transactions contemplated hereby and thereby,
including, without limitation, any waiver of any preemptive, first refusal or
other rights that any entity or person may have for the issue and/or sale of
any of the IPO Securities, except such as have been or may be obtained under
the Act or may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the IPO Securities and the
Underwriter's purchase of the Underwriter's Warrants to be sold by the
Company hereunder and thereunder.
(xiii) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other documents
filed as exhibits to the Registration Statement to which the Company and/or
its Subsidiary is a party or by which it may be bound or to which its assets,
properties or business may be subject have been duly and validly authorized,
executed and delivered by the Company and/or its Subsidiary and constitute
the legal, valid and binding agreement of the Company and its Subsidiary,
enforceable against the Company and its Subsidiary, in accordance with its
terms. The descriptions in the Registration Statement of agreements,
contracts
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and other documents and statutes and regulations are accurate and fairly
present the information required to be shown with respect thereto by Form
SB-1, and there are no contracts or other documents which are required by the
Act to be described in the Registration Statement or filed as exhibits to the
Registration Statement which are not described or filed as required, and the
exhibits which have been filed are complete and correct copies of the
documents of which they purport to be copies.
(xiv) Subsequent to the respective dates as of
which information is set forth in the Registration Statement and Prospectus,
and except as may otherwise be indicated or contemplated herein or therein,
the Company nor its Subsidiary have (A) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money, (B)
entered into any transaction other than in the ordinary course of business,
or (C) declared or paid any dividend or made any other distribution on or in
respect of its capital stock of any class, and there has not been any change
in the capital stock, or any change in the debt (long or short term) or
liabilities or material change in or affecting the business affairs or
prospects, management, stockholders' equity, properties, business, financial
operations or assets of the Company and its Subsidiary.
(xv) Except as described in the final Prospectus
no default exists in the due performance and observance of any term, covenant
or condition of any license, contract, indenture, mortgage, installment sale
agreement, lease, deed of trust, voting trust agreement, stockholders
agreement, partnership agreement, note, loan or credit agreement, purchase
order, or any other material agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to which
the Company or its Subsidiary is a party or by which the Company or its
Subsidiary may be bound or to which the property or assets (tangible or
intangible) of the Company or its Subsidiary is subject or affected, which
default would have a material adverse effect on the condition, financial or
otherwise, earnings, business affairs, position, stockholder's
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equity, value, operation, properties, business or results of operations of
the Company and the Subsidiary.
(xvi) Each of the Company and its Subsidiary has
generally enjoyed a satisfactory employer-employee relationship with its
employees and is in compliance in all material respects 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 or the Subsidiary
by the U.S. Department of Labor, or any other governmental agency responsible
for the enforcement of such federal, state, local, or foreign laws and
regulations. There is no unfair labor practice charge or complaint against
the Company or the Subsidiary pending before the National Labor Relations
Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or threatened against or involving the Company or the Subsidiary, or
any predecessor entity, and none has ever occurred. No representation
question exists respecting the employees of the Company or the Subsidiary and
no collective bargaining agreement or modification thereof is currently being
negotiated by the Company or its Subsidiary. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company or its Subsidiary. No labor dispute with the
employees of the Company or its Subsidiary exists, or, to the knowledge of
the Company is imminent.
(xvii) Except as described in the Prospectus, each
of the Company and its Subsidiary does not maintain, sponsor or contribute to
any program or arrangement that is an "employee pension benefit plan", an
"employee welfare benefit plan" or a "multi employer plan" as such terms are
defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans").
The Company and/or its Subsidiary does not maintain or contribute, now or at
any time previously, to a defined benefit plan,
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as defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, which could subject the
Company or the Subsidiary to any tax penalty on prohibited transactions and
which has not adequately been corrected. Each ERISA Plan is in compliance
with all material reporting, disclosure and other requirements of the Code
and ERISA as they relate to any such ERISA Plan. Determination letters have
been received from the Internal Revenue Service with respect to each ERISA
Plan which is intended to comply with Code Section 401(a), stating that such
ERISA Plan and the attendant trust are qualified thereunder. Neither the
Company or the Subsidiary has never completely or partially withdrawn from a
"multi employer plan".
(xviii) The Company and its Subsidiary have not
taken and will not take, directly or indirectly, and the Company and its
Subsidiary will use their best efforts to ensure that any of their employees,
directors, stockholders or affiliates (within the meaning of the Rules and
Regulations) of any of the foregoing has not taken or will not take, directly
or indirectly, any action designed to or which has constituted or which might
be expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the IPO Securities or otherwise.
(xix) None of the patents, patent applications,
trademarks, service marks, trade names and copyrights, and licenses and
rights to the foregoing presently owned or held by the Company or its
Subsidiary are in dispute, to the Company's knowledge, or are in any conflict
with the right of any other person or entity. The Company and its Subsidiary
(i) own or have the license or other right to use, free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects or
other restrictions or equities of any kind whatsoever, all patents,
trademarks, service marks, trade names and copyrights, technology and
licenses and rights with respect to the foregoing, used in the conduct of
their business as now conducted or proposed to be conducted
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without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any
of the foregoing, except as set forth in the Prospectuses and (ii) except as
set forth in the Prospectus, are 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 patent, trademark, service
xxxx, tradename, copyright, know-how, technology or other intangible asset,
with respect to the use thereof or in connection with the conduct of their
business or otherwise.
(xx) Neither the Company nor its Subsidiary have
received any notice of infringement of or conflict with asserted rights of
others with respect to any trademark, service xxxx, trade name or copyright
or other intangible asset used or held for use by it in connection with the
conduct of its business which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, might have a material adverse
effect on the condition, financial or otherwise, or the business affairs,
position, properties, results of operations or net worth of the Company and
its Subsidiary
(xxi) The Company and its Subsidiary have good and
marketable title to, or valid and enforceable leasehold estates in, all items
of real and personal property stated in the Prospectus, to be owned or leased
by it free and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects, or other restrictions or equities of any kind
whatsoever, other than those referred to in the Prospectus and liens for
taxes not yet due and payable.
(xxii) The Company has caused to be duly executed
legally binding and enforceable agreements pursuant to which each of its
officers, directors or any person or entity deemed to be an affiliate of the
Company and any stockholders, noteholders and any other parties holding, or
in the future holding, securities, instruments or contract rights convertible
into common shares or preferred shares and/or any other securities of the
Company, including common shares
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issued pursuant to the Company's Stock Option Plan, has agreed, or shall
agree prior to issuance as the case may be, not to, directly or indirectly,
offer to sell, sell, grant any option for the sale of, assign, transfer,
pledge, hypothecate or otherwise encumber or dispose of any securities issued
by the Company (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein for a period of not
less than 24 months following the effective date of the Registration
Statement without the prior written consent of the Underwriter except only
with respect to 3,495,000 shares of common stock held by unaffiliated persons
which constitute the tradeable "public float" on the NASD Electronic Bulletin
Board, and that for a period of 2 years following the Effective Date of the
Registration Statement any such security which has been issued and is
outstanding on the effective date of the Registration Statement and is to be
sold or otherwise disposed of pursuant to such Rule 144 with the consent of
the Underwriter shall only be sold or otherwise disposed of through the
Underwriter. The Company will cause the Transfer Agent, as defined below, 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.
(xxiii) The Company has caused to be duly executed
binding and enforceable agreements with respect to all of the outstanding
loans made to the Company from time to time from affiliated persons wherein
the Company and each such lender has agreed that the Company will not make
payment of principal or accumulated interest thereon for an eighteen (18)
month period from the completion of the Offering except that $500,000 in
presently outstanding loans to the Company including interest thereon from
affiliated persons and no more may be repaid at any time and a Bridge Loan in
the principal sum of $50,000 plus accumulated interest thereon which is being
repaid to a Bridge Lender out of the proceeds of the Offering.
(xxiv) There are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for services in the
nature of a finder's or origination fee with
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respect to the sale of the IPO Securities hereunder or any other
arrangements, agreements, understandings, payments or issuance with respect
to the Company, the Subsidiary or any of their officers, directors,
stockholders, partners, employees or affiliates that may affect the
Underwriter's compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD"), except for the sum of $25,000 previously
paid by the Company to the Underwriter and the Company is aware that the
Underwriter shall compensate any of its personnel who may have acted in such
capacities as they shall determine in their sole discretion.
(xxv) The Preferred Stock has been approved for
quotation on the Nasdaq Small Cap Market and upon notice of issuance, listing
on the Boston Stock Exchange ("BSE").
(xxvi) Neither the Company, the Subsidiary nor any
of their respective officers, employees, agents or any other person acting on
behalf of the Company or the Subsidiary has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or
employee of any governmental agency (domestic or foreign) or instrumentality
of any government (domestic or foreign) or any political party or candidate
for office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company or the Subsidiary (or
assist the Company or the Subsidiary in connection with any actual or
proposed transaction) which (A) might subject the Company or the Subsidiary,
or any other such person to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign), (B) if not given
in the past, might have had a materially adverse effect on the assets,
business or operations of the Company or the Subsidiary, or (C) if not
continued in the future, might adversely affect the assets, business,
operations or prospects of the Company or the Subsidiary. The Company's and
the Subsidiary's internal accounting controls are sufficient to cause the
Company to comply with the Foreign Corrupt
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Practices Act of 1977, as amended.
(xxvii) Except as set forth in the Prospectus, no
officer, director, or stockholder of the Company or the Subsidiary, or any
"affiliate" or "associate" (as these terms are defined in Rule 405
promulgated under the Rules and Regulations) of any of the foregoing persons
or entities has or has had, either directly or indirectly, (A) an interest in
any person or entity which (1) furnishes or sells services or products which
are furnished or sold or are proposed to be furnished or sold by the Company
or the Subsidiary, or (2) purchases from or sells or furnishes to the Company
or the Subsidiary any goods or services, or (B) a beneficiary interest in any
contract or agreement to which the Company or the Subsidiary is a party or by
which it may be bound or affected. Except as set forth in the Prospectus
under "Certain Transactions", there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company or the
Subsidiary, and any officer, director, and 5% or more stockholders (as such
term is defined in the Prospectus) of the Company or the Subsidiary, or any
partner, affiliate or associate of any of the foregoing persons or entities.
(xxviii) Any certificate signed by any officer of
the Company and delivered to the Underwriter or to Underwriter's Counsel (as
defined herein) shall be deemed a representation and warranty by the Company
to the Underwriter as to the matters covered thereby.
(xxix) The minute books of the Company and the
Subsidiary have been made available to the Underwriter and contains a
complete summary of all meetings and actions of the directors and
stockholders of the Company and the Subsidiary since the time of its
incorporation, and reflects all transactions referred to in such minutes
accurately in all material respects
(xxx) Except and to the extent described in the
Prospectus, no holders of any securities of the Company or the Subsidiary or
of any options, warrants or other convertible or exchangeable securities of
the Company or the Subsidiary have the right to include any securities
-17-
issued by the Company or the Subsidiary in the Registration Statement or any
registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company or the
Subsidiary.
(xxxi) The Company has as of the effective date of
the Registration Statement (a) entered into an employment agreement with its
President, Xxxx X. Xxxxxxxx, and a consulting agreement with its Chairman,
Xxxxxx X. Xxxxxxxx, on terms and conditions satisfactory to the Underwriter,
and (ii) purchased "Key-Man" insurance on the life of Xxxx X. Xxxxxxxx in the
sum of $1,000,000 which names the Company as the sole beneficiary on terms
and conditions satisfactory to the Underwriter.
(xxxii) The Company has entered into an
Underwriter's Warrant Agreement with respect to the Underwriter's Warrants
substantially in the form filed as Exhibit _______ to the Registration
Statement, with American Stock Transfer and Trust Company in form and
substance satisfactory to the Underwriter.
(xxxiii) Immediately prior to the effective date
of the Registration Statement there shall be no more than an aggregate of
7,973,635 shares of Common Stock and 500,000 shares of Preferred Stock issued
and outstanding (including any and all (a) securities with equivalent rights
as the Common Stock or Preferred Stock, (b) Common Stock or Preferred Stock
such equivalent securities, issuable upon the exercise of options, warrants
and other contract rights, and (c) Securities convertible directly or
indirectly into Common Stock or Preferred Stock or such equivalent
securities, but excluding a maximum of ___________ shares of Common Stock
which are issuable upon exercise of options which may be granted pursuant to
the Company's two Stock Option Plans.
(xxxiv) Subsequent to the date hereof and prior to
any Closing Date or Option Closing Date except as otherwise described in or
contemplated by the Prospectuses, the
-18-
Company will not issue or acquire any debt or equity securities.
(xxxv) Except for fair market value the Company
shall not issue any shares, options, warrants or any other equity or debt
security within three (3) years following the Effective Date of the
Registration Statement without the express written consent of the Underwriter
except for a maximum of 1,957,500 shares of common stock which may be issued
pursuant to the Company's stock option plans nor shall the Company, during
such three (3) year period, effect a reverse split or reclassification of
shares of its capital stock without the express written consent of the
Underwriter. Notwithstanding the foregoing, the Company shall not issue any
shares of preferred stock or securities convertible into preferred stock
during such three (3) year period without the express written consent of the
Underwriter.
(xxxvi) Services currently being provided to the
Company by affiliated companies, if any, shall continue to be provided to the
Company without charge except for reasonable disbursements incurred on behalf
of the Company.
2. Purchase, Sale and Delivery of the Securities.
(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 Underwriter, and the Underwriter agrees to serve as the
Company's exclusive agent to sell, on a best efforts basis, a minimum of
300,000 shares of Preferred Stock (the "Minimum Offering") and a maximum of
500,000 shares of Preferred Stock (the "Maximum Offering"), less, in the case
of each such security, an underwriting commission of ten percent (10%) of the
gross sale price of each such security sold in the Offering by deduction from
the proceeds of the Offering. The Underwriter may allow a concession not
exceeding $_______ per share of Preferred Stock 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
-19-
exceeding $_____ per share of Preferred Stock.
(b) The proceeds from the sale of the Securities
shall be deposited by the Underwriter upon receipt thereof in an escrow
account (the "Escrow Account") at The Chase Manhattan Bank. The proceeds from
the sale of the Securities shall be deposited by the Underwriter upon receipt
thereof in an escrow account (the "Escrow Account") at The Chase Manhattan
Bank, a New York state charted bank with offices at 000 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 until the Minimum Offering amount of 300,000 shares of
Preferred Stock and $3,000,000 is deposited in the Escrow Account. If the
Minimum Offering amount is not sold and the proceeds thereof deposited into
the Escrow Account prior to the expiration of the Offering Period, the
Offering proceeds received from investors will be promptly refunded to the
investors in full without interest thereon and/or deduction of any kind
therefrom.
(c) Delivery of the Securities and payment
therefore shall be made at 10:00 a.m., New York time on each Closing Date and
Option Closing Date, if any, as hereinafter defined, at the offices of the
Underwriter or such other location as may be agreed upon by you and the
Company. Delivery of certificates for the Preferred Stock (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 or Option Closing Date, if any), 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 and Option Closing Date, if any, at such place
as you shall designate.
3. Closing Date
The "Closing Date" shall be not later than the fourth
business day following receipt
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of the Minimum Offering amount in cleared funds and thereafter as additional
funds are received up to the Maximum Offering amount at such times as you
shall determine (the "Option Closing Date") and advise the Company by at
least three full business days' notice.
4. Covenants and Agreements of the Company. The
Company covenants and agrees with the Underwriter as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable (such Registration Statement to be in form and
substance satisfactory to the Underwriter and its counsel) and will not at
any time, whether before or after the effective date of the Registration
Statement, file any amendment to the Registration Statement or supplement to
the Prospectus or file any document under the Act or Exchange Act before
termination of the Offering of the Securities by the Underwriter of which the
Underwriter shall not previously have been advised and furnished with a copy,
or to which the Underwriter shall have objected unless required under the
Act, the Exchange Act or the Rules and Regulations thereunder or which is not
in compliance with the Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective,
if the provisions of Rule 430A promulgated under the Act will be relied upon,
when the Prospectus has been filed in accordance with said Rule 430A and when
any post-effective amendment to the Registration Statement becomes effective,
(ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding, suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of proceedings for that
purpose (iii) of the issuance by the
-21-
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale
in any jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose, (iv) of the receipt of any comments from the
Commission; and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or
for additional information. If the Commission or any state securities
commission authority shall enter a stop order or suspend such qualification
at any time, the Company will make every effort to obtain promptly the
lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriter and its counsel) or transmit the
Prospectus by a means reasonably calculated to result in filing with the
Commission pursuant to Rule 424 (b) (or, if applicable and if consented to by
the Underwriter, pursuant to Rule 424 (b)(47).
(d) The Company will give the Underwriter notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to
the Prospectus (including any revised prospectus which the Company proposes
for use by the Underwriter in connection with the Offering of the IPO
Securities which differs from the corresponding prospectus on file at the
Commission at the time the Registration Statement becomes effective, whether
or not such revised prospectus is required to be filed pursuant to Rule
424(b) of the Rules and Regulations), and will furnish the Underwriter with
copies of any such amendment or supplement a reasonable amount of time prior
to such proposed filing or use, as the case may be, and will not file any
such prospectus to which the Underwriter or Doros & Brescia, P.C.
("Underwriter's Counsel"), shall reasonably object unless required under the
Act or the Rules and Regulations thereunder.
(e) The Company shall take all action, in cooperation with
the
-22-
Underwriter, at or prior to the time the Registration Statement becomes
effective, to qualify the IPO Securities for offering and sale under the
securities laws of such jurisdictions as the Underwriter may designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications,
file such documents and furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or file a general or limited consent to service of
process in any such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Underwriter
agrees that such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such times
as are or may reasonably be required by the laws of such jurisdiction to
continue such qualification. It is agreed that Underwriter's Counsel (or its
designees) shall perform all such required Blue Sky legal services.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to
comply with all requirements imposed upon it by the Act and the Exchange Act,
as now and hereafter amended and by the Rules and Regulations, as from time
to time in force, so far as necessary to permit the continuance of sales of
or dealings in the IPO Securities in accordance with the provisions hereof
and the Prospectus, or any amendments or supplements thereto. If at any time
when a prospectus relating to the IPO 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 Underwriter's Counsel, the
Prospectus, as then amended or supplemented, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act and the
Rules and Regulations, the Company will notify the Underwriter promptly and
prepare and file with the Commission an appropriate
-23-
amendment or supplement in accordance with Section 10 of the Act, each such
amendment or supplement to be reasonably satisfactory to Underwriter's
Counsel, and the Company will furnish to the Underwriter copies of such
amendment or supplement as soon as available and in such quantities as the
Underwriter may reasonably request.
(g) During the time when a prospectus relating to the IPO
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 IPO
Securities in accordance with the provisions hereof and the Prospectus and
the Company shall use its best efforts to keep the Registration Statement
current and effective so long as a Prospectus is required to be delivered in
connection with the sale of the IPO Securities by the Underwriter or by
dealers effecting transactions therein in connection with the initial public
offering thereof. If at any time when a prospectus relating to the IPO
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 Underwriter, the Prospectus as then amended or
supplemented (or the prospectus contained in a new registration statement
filed by the Company pursuant to Paragraph 4(x), 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.
-24-
(h) The Company will reserve and keep available for
issuance that maximum number of its authorized but unissued shares of
Preferred Stock which are issuable upon exercise of the Underwriter's
Warrants (including the underlying securities) outstanding from time to time.
(i) 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
holders of the Underwriter's Warrants to be furnished with a current
prospectus in the event and at such time as the Underwriter's 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 Underwriter's Warrants become exercisable)
and to keep the same effective so long as the Underwriter's Warrants are
outstanding. The Company will deliver a draft of each such post-effective
amendment or new registration statement to the Underwriter at least ten days
prior to the filing of such post-effective amendment or registration
statement.
(j) So long as any of the Underwriter's 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 holder of the
Underwriter's Warrants where such Prospectus delivery is by law required to
be made.
(k) So long as any of the Underwriter's Warrants remain
outstanding, the Company shall continue to employ the services of a firm of
independent certified public accountants reasonably acceptable to the
Underwriter 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 Underwriter in connection with all legal work of the
-25-
Company, including the preparation of a registration statement to be filed by
the Company hereunder, or any amendment or supplement thereto.
(l) So long as any of the Underwriter's Warrants remain
outstanding, the Company shall continue to appoint a Warrant Agent for the
Underwriter's Warrants, who shall be reasonably acceptable to the
Underwriter.
(m) As soon as practicable, but in any event not later than
45 days after the end of the 12-month period beginning on the day after the
end of the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (90 days in the event that the end of such
fiscal quarter is the end of the Company's fiscal year), the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) of the Rules and Regulations, and to the Underwriter, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the
Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
(n) During a period of seven years after the date hereof,
the Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Underwriter:
(i) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the Company for each
quarter in the form filed on Form 10-Q with the Commission and certified by
the Company's principal financial or accounting officer
(ii) concurrently with furnishing such annual reports
to its stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations, stockholders'
equity, and cash flows of the Company for such fiscal year,
-26-
accompanied by a copy of the certificate thereon of independent certified
public accountants;
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission,
the NASD or any securities exchange;
(v) every press release and every material news item
or article of interest to the financial community in respect of the Company
or its affairs which was released or prepared by or on behalf of the Company;
and
(vi) any additional information of a public nature
concerning the Company (and any future subsidiaries) or its businesses which
the Underwriter may reasonably request.
During such seven-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(o) The Company will maintain American Stock Transfer and
Trust Company as its Transfer Agent and Registrant (the "Transfer Agent") and
counsel, accounting firm and financial printer for its Common Stock and
Preferred Stock all of whom shall be reasonably acceptable to the
Underwriter. Such Transfer Agent shall, for a period of two years following
the Closing Date, deliver to the Underwriter the daily securities position of
the Company's stockholders of record and for a period of three (3) years
thereafter the monthly securities position.
(p) The Company will furnish to the Underwriter or on the
Underwriter's order, without charge, at such place as the Underwriter may
designate, copies of each Preliminary Prospectus, the Registration Statement,
any pre-effective or post-effective amendments thereto (two
-27-
of which copies will be signed and will include all financial statements and
exhibits), the Prospectus, and all amendments and supplements thereto,
including any Prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such
quantities as the Underwriter may reasonably request.
(q) On or before the effective date of the Registration
Statement, the Company shall provide the Underwriter with true copies of duly
executed, legally binding and enforceable agreements pursuant to which for a
period of not less than 24 months after the effective date of the
Registration Statement, (except only with respect to 3,495,000 shares of
common stock held by unaffiliated persons which constitute the tradeable
"public float" on the NASD Electronic Bulletin Board) each holder of
securities issued by the Company and outstanding at the effective date of the
Registration Statement (including securities convertible into Common Stock or
Preferred Stock of the Company) agrees that it or he or she will not,
directly or indirectly, issue, offer to sell, sell, grant an option for the
sale of, assign, transfer, pledge, hypothecate or otherwise encumber or
dispose of any of such securities (either pursuant to Rule 144 of the Rules
and Regulations or otherwise) or dispose of any beneficial interest therein
without the prior written consent of the Underwriter (collectively, the
"Lock-up Agreements"). During the two (2) year period commencing with the
effective date of the Registration Statement, the Company shall not issue any
securities under Regulation S and will not, without the prior written consent
of the Underwriter, sell, contract or offer to sell, issue, transfer, assign,
pledge, distribute, or otherwise dispose of, directly or indirectly, any debt
security of the Company or any shares of Common Stock or Preferred Stock or
any options, rights or warrants with respect to any shares of Common Stock or
Preferred Stock (other than upon exercise of options or warrants referred to
in the Registration Statement, or with respect to transactions between the
Company and its lenders and purchasers of mortgage backed securities). On or
before the Closing Date, the Company shall deliver instructions to the
Transfer
-28-
Agent authorizing it to place appropriate legends on the certificates
representing the securities subject to the Lock-up Agreements and to place
appropriate stop transfer orders on the Company's ledgers.
(r) The Company has not taken and will not take, directly
or indirectly, and the Company will use their its efforts to ensure that any
of its employees, officers, directors, stockholders or affiliates (within the
meaning of the Rules and Regulations) will take, directly or indirectly, any
action designed to, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any
securities of the Company.
(s) The Company shall apply the net proceeds from the sale
of the IPO Securities in the manner, and subject to the conditions, set forth
under "Use of Proceeds" in the Prospectus. No portion of the net proceeds
will be used, directly or indirectly, to acquire any securities issued by the
Company except as described in the Prospectuses.
(t) The Company shall timely file all such reports, forms
or other documents as may be required (including, but not limited to, a Form
SR as may be required pursuant to Rule 463 under the Act) from time to time,
under the Act, the Exchange Act and the Rules and Regulations, and all such
reports, forms and documents filed will comply as to form and substance with
the applicable requirements under the Act, the Exchange Act and the Rules and
Regulations.
(u) The Company shall furnish to the Underwriter as early
as practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two (2) 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
thirty (30) days prior to the date of the Registration Statement) which have
been read by the Company's independent public accountants, as stated in their
letters to be furnished pursuant to Section 6(j) hereof.
(v) The Company shall cause the Preferred Stock to be
listed on the
-29-
Nasdaq Small Cap Market and on the BSE, and for a period of seven (7) years
from the date hereof, use its best efforts to maintain such listings of the
Preferred Stock to the extent outstanding.
(w) For a period of five (5) years from the Closing Date,
the Company shall furnish to the Underwriter at the Underwriter's request and
at the Company's sole expense, (i) the list of holders of all of the
Company's securities, (ii) a Blue Sky "Trading Survey" for secondary sales of
the Company's securities prepared by counsel to the Company, and (iii) daily
consolidated transfer sheets relating to the Preferred Stock but not more
than six (6) times per year.
(x) As soon as practicable, (i) but in no event more than
five business days before the effective date of the Registration Statement,
file a Form 8-A with the Commission providing for the registration under the
Exchange Act of the Securities and (ii) but in no event more than 30 days
from the effective date of the Registration Statement, take all necessary and
appropriate actions to be included in Standard and Poor's Corporation Records
Service in order to satisfy the requirements for "manual exemption" in those
states where available and to maintain such inclusion for as long as the IPO
Securities are outstanding.
(y) Until the completion of the distribution of the IPO
Securities, the Company shall not without the prior written consent of the
Underwriter and Underwriter's Counsel, issue, directly or indirectly any
press release or other communication or hold any press conference with
respect to the Company or its activities or the offering contemplated hereby,
other than trade releases issued in the ordinary course of the Company's
business consistent with past practices with respect to the Company's
operations.
(z) For a period of three (3) years after the effective
date of the Registration Statement, the Underwriter shall have the right to
designate, one (1) individual for election to the Company's Board of
Directors ("Board") and the Company shall cause such individual to be elected
to the Board. In the event the Underwriter shall not have designated such
-30-
individual at the time of any meeting of the Board or such person is
unavailable to serve, the Company shall notify the Underwriter of each
meeting of the Board and an individual designated by the Underwriter shall be
permitted to attend all meetings of the Board and to receive all notices and
other correspondence and communications sent by the Company to members of the
Board. Such individual shall be reimbursed for all out-of-pocket expenses
incurred in connection with his or her service on, or attendance at meetings
of, the Board. The Company shall provide its outside directors with
compensation in the form of cash and/or options on its Common Stock and/or
Preferred Stock as deemed appropriate and similar for similar companies.
(aa) The Company hereby grants to the Underwriter a right
of first refusal on the terms and subject to the conditions set forth in this
paragraph, for a period of three years from the effective date of the
Registration Statement, to purchase for its account or to sell for the
account of the Company or its present or future subsidiaries, any securities
of the Company or any of its present or future subsidiaries, with respect to
which the Company or any of its present or future subsidiaries may seek a
public or private sale. The Company, for a period of five years from the
effective date of the Registration Statement, will consult, and will cause
such present or future subsidiaries to consult with the Underwriter with
regard to any such offering or placement and will offer, or cause any of its
present or future subsidiaries to offer, to the Underwriter the opportunity,
on terms not more favorable to the Company or such present or future
subsidiary than they can secure elsewhere, to purchase or sell any such
securities. If the Underwriter fails to accept in writing such proposal made
by the Company or any of its present or future subsidiaries within fifteen
business days after receipt of a notice containing such proposal, then the
Underwriter shall have no further claim or right with respect to the proposal
contained in such notice. If, thereafter, such proposal is materially
modified, the Company shall again consult, and cause each present or future
subsidiary to consult, with the Underwriter in connection with such
modification and shall in all
-31-
respects have the same obligations and adopt the same procedures with respect
to such proposal as are provided hereinabove with respect to the original
proposal.
(bb) For a period equal to the lesser of (i) seven (7)
years from the date hereof, and (ii) the date of the sale to the public of
the securities issuable upon exercise of the Underwriter's Warrants and the
Underwriter's Securities, the Company will not take any action or actions
which may prevent or disqualify the Company's use of Form SB-1 for the
registration under the Act of the securities issuable upon exercise of the
Underwriter's Warrants and the Underwriter's Securities.
(cc) On or before the effective date of the Registration
Statement, the Company shall have retained a financial public relations firm
reasonably satisfactory to the Underwriter, which shall be continuously
engaged from such engagement date to a date twelve (12) months from the
Closing Date.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not paid at the Closing Date)
all expenses and fees (other than fees of Underwriter's Counsel, except as
provided in (iv) below) upon presentation of an itemized schedule of expenses
incident to the performance of the obligations of the Company under this
Agreement and the Underwriter's Warrant Agreement including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments
and supplements thereto and the printing, mailing (including the payment of
postage with respect thereto) and delivery of this Agreement and the
Underwriter's Warrant Agreement and related documents, including the cost of
-32-
all copies thereof and of the Preliminary Prospectuses and of the Prospectus
and any amendments thereof or supplements thereto supplied to the Underwriter
and such dealers as the Underwriter may reasonably request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of
the IPO Securities, including, but not limited to, (x) the purchase by the
Underwriter of the Underwriter's Warrants from the Company, (y) the
consummation by the Company of any of its obligations under this Agreement
and the Underwriter's Warrant Agreement and (z) the sale of the IPO
Securities by the Underwriter in connection with the distribution
contemplated hereby to the extent that expenses relate to the printing,
engraving, issuance and delivery of the IPO Securities, (iv) the
qualification of the IPO Securities under state or foreign securities or
"Blue Sky" laws and determination of the status of such securities under
legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum", the "Supplemental Blue Sky Memorandum" and
"Legal Investments Survey", if any, and legal fees of counsel Doros &
Brescia, P.C., of $75,000 less $20,000 heretofore paid plus disbursements
incurred by them in connection therewith, (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show", information meetings and presentations, bound volumes and prospectus
memorabilia and "tomb-stone" advertisement expenses (not to exceed $5,000),
(vi) costs, fees and expenses in connection with due diligence
investigations, including but not limited to the costs of background checks
on key management and/or personnel of the Company, (vii) fees and expenses of
the transfer agent, and registrar, (viii) applications for assignments of a
rating of the IPO Securities by qualified rating agencies, (ix) the fees
payable to the Commission, and the NASD, and (x) the fees and expenses
incurred in connection with the listing of the IPO Securities on the NASD
Electronic Bulletin Board, the BSE and any other exchange.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6, Section 10(a) or Section 12, the
Company shall reimburse and indemnify
-33-
the Underwriter for all of its actual out-of-pocket expenses, including the
fees and disbursements of Underwriters' Counsel (and in addition to fees and
expenses of Underwriter's Counsel incurred pursuant to Section 5(a)(iv) above
for which the Company shall remain liable) less any amounts previously paid,
provided, however, that in the event of a termination pursuant to Section
10(a) hereof such obligation of the Company shall not exceed $50,000.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriter by certified or bank cashier's check or, at the election of
the Underwriter, by deduction from the proceeds of the Offering on the
initial Closing Date and each Option Closing Date a non-accountable expense
allowance equal to two percent (2%) of the gross proceeds of the Offering
less the amount of $25,000 which was previously paid by the Company to the
Underwriter.
(d) The Underwriter shall not be responsible for any
expense of the Company or others or for any charge or claim related to the
Offering in the event that the sale of the IPO Securities as contemplated
hereunder is not consummated.
6. Conditions of the Underwriter's Obligations. The
obligations of the Underwriter hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company and its
Subsidiary herein as of the date hereof and as of the Closing Date and each
Option Closing Date, if any, as if they had been made on and as of the
Closing Date or each Option Closing Date, as the case may be; the accuracy on
and as of the Closing Date or Option Closing Date, if any, of the statements
of the officers of the Company made pursuant to the provisions hereof; and
the performance by the Company on and as of the Closing Date and each Option
Closing Date, if any, of its covenants and obligations hereunder and to the
following further conditions:
(a) The Registration Statement, which shall be in form and
substance
-34-
satisfactory to Underwriter's Counsel, shall have become effective no later
than 12:00 p.m., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Underwriter, and, at
the Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or
shall be pending or contemplated by the Commission and any request on the
part of the Commission for additional information shall have been complied
with to the reasonable satisfaction of Underwriter's Counsel. If the Company
has elected to rely upon Rule 430A of the Rules and Regulations, the price of
the IPO Securities and any price-related information previously omitted from
the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) of the
Rules and Regulations within the prescribed time period, and prior to the
Closing Date the Company shall have provided evidence satisfactory to the
Underwriter of such timely filing, or a post-effective amendment providing
such information shall have been promptly filed and declared effective in
accordance with the requirements of Rule 430A of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriter's opinion, is material, or omits
to state a fact which, in the Underwriter's 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, or
that the Prospectus, or any supplement thereto, contains an untrue statement
of fact which, in the Underwriter's opinion, is material and is required to
be stated therein or is necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriter shall
have received from Underwriter's Counsel, such opinion or opinions with
respect to the organization of the
-35-
Company and its Subsidiary, the validity of the IPO Securities, the
Underwriter's Warrants, the Registration Statement, the Prospectus and other
related matters as the Underwriter may request and Underwriter's Counsel
shall have received such papers and information as they request to enable
them to pass upon such matters.
(d) At the Closing Date, the Underwriter shall have
received the favorable opinion of Jackier, Gould, Bean, Upfal & Eizelman,
counsel to the Company, dated as of the Closing Date, addressed to the
Underwriter and in form and substance satisfactory to Underwriter's Counsel,
to the effect that:
(i) each of the Company and the Subsidiary (A) has been
duly organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction; (B) to such counsel's knowledge has all
requisite corporate power and authority to own or lease its properties and
conduct its business as described in the Prospectus; (C) to such counsel's
knowledge is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such qualification or
licensing; and (D) to such counsel's knowledge, has not received any notice
of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially adversely affect the business,
operations, condition, financial or otherwise, or the earnings, business
affairs or prospects, properties, business, assets or results of operations
of the Company and the Subsidiary taken as a whole. To the knowledge of such
counsel the disclosures in the Registration Statement concerning the effects
of federal, state and local laws, rules and regulations on the Company's or
the Subsidiary's business as currently conducted and as contemplated are
correct in all material respects and do not omit to state a fact necessary to
make the statements contained therein not misleading in light of the
-36-
circumstances in which they were made:
(ii) to such counsel's knowledge, except as set forth
in the Prospectus, the Company nor the Subsidiary does not own an equity
interest in any other corporation, partnership, joint venture, trust or other
business entity;
(iii) to such counsel's knowledge the Company has a
duly authorized, issued and outstanding capitalization as set forth in the
Prospectus, and any amendment or supplement thereto, under "Capitalization",
and, to such counsel's knowledge, the Company nor the Subsidiary is not a
party to or bound by any instrument, agreement or other arrangement providing
for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and the Underwriter's Warrant Agreement
and as described in the Prospectus. The IPO Securities, and all other
securities issued or issuable by the Company, conform in all material
respects to all statements with respect thereto contained in the Registration
Statement and the Prospectus. To the knowledge of such counsel all issued and
outstanding securities of the Company and the Subsidiary have been duly
authorized and validly issued and are fully paid and non-assessable; the
holders thereof have no contractual rights of rescission with respect
thereto, and are not subject to personal liability under the laws of the
State of Nevada as currently in effect by reason of being such holders; and
none of such securities were issued in violation of the preemptive rights of
any holders of any security of the Company. The IPO Securities to be sold by
the Company hereunder and under the Underwriter's Warrant Agreement are not
and will not be subject to any preemptive or other similar rights of any
stockholder, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable and conform to the description thereof contained in
the Prospectus; the holders thereof will not be subject to any liability
solely as such holders; all corporate action required to be taken for the
authorization, issue and sale of the IPO Securities when issued will be duly
and validly taken;
-37-
and the certificates representing the IPO Securities are in due and proper
form. The Underwriter's Warrants constitute valid and binding obligations of
the Company to issue and sell, upon exercise thereof and payment therefore
the number and type of securities of the Company called for thereby. Upon
payment the issuance and delivery pursuant to this Agreement of the IPO
Securities to be sold by the Company hereunder, the purchasers thereof, will
acquire good and marketable title to the IPO Securities free and clear of any
pledge, lien, charge, claim, encumbrance, pledge, security interest, or other
restriction or equity of any kind whatsoever;
(iv) the Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and, to such counsel's
knowledge, no stop order suspending the use of the Preliminary Prospectus,
the Registration Statement or Prospectus or any part of any thereof or
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act;
(v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments or supplement
thereto (other than the financial statements and other financial and
statistical data included therein, as to which no opinion need be rendered)
comply as to form in all material respects with the requirements of the Act
and the Rules and Regulations;
(vi) to the best of such counsel's knowledge, (A) there
are no agreements, contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus and filed as
exhibits to the Registration Statement other than those described in the
Registration Statement (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in part, by
reference therein) and the Prospectus and filed as exhibits thereto, and the
exhibits which have been filed are substantially correct copies of
-38-
the documents of which they purport to be copies; (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company or the
Subsidiary is a party or by which it is bound, including any document to
which the Company or the Subsidiary is a party or by which it is bound,
incorporated by reference into the Prospectus and any supplement or amendment
thereto, are accurate in all material respects and fairly represent the
information required to be shown by Form SB-1; (C) there is not pending or
threatened against the Company or the Subsidiary any action, arbitration,
suit, proceeding, inquiry, investigation, litigation, governmental or other
proceeding (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, pending or threatened
against (or circumstances that may give rise to the same), or involving the
properties or business of the Company or the Subsidiary which (1) is required
to be disclosed in the Registration Statement which is not so disclosed (and
such proceedings as are summarized in the Registration Statement are
accurately summarized in all respects), (2) questions the validity of the
capital stock of the Company or the Subsidiary or this Agreement or the
Underwriter's Warrant Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with any of the foregoing; (D) no
statute or regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required; and (E) except as
disclosed in the Prospectus, there is no action, suit or proceeding pending,
or threatened, against or affecting the Company or the Subsidiary before any
court or arbitrator or governmental body, agency or official (or any basis
thereof known to such counsel) in which an adverse decision which may result
in a material adverse change in the condition, financial or otherwise, or the
earnings, position, prospects, stockholders' equity, value, operation,
properties, business or results of operations of the Company and the
Subsidiary taken as a whole, which could adversely affect the present or
prospective ability of the Company to perform its obligations under this
Agreement or the Underwriter 's Warrant Agreement
-39-
or which in any manner draws into question the validity or enforceability of
this Agreement or the Underwriter's Warrant Agreement;
(vii) the Company has full legal right, power and
authority to enter into this Agreement and the Underwriter's Warrant
Agreement and to consummate the transactions provided for herein and therein;
and this Agreement and the Underwriter's Warrant Agreement has been duly
authorized, executed and delivered by the Company. Each of this Agreement and
the Underwriter's Warrant Agreement assuming due authorization, execution and
delivery by each other party hereto constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable
law), and neither the Company's execution or delivery of this Agreement and
the Underwriter's Warrant Agreement, its performance hereunder or thereunder,
its consummation of the transactions contemplated herein or therein, or the
conduct of its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute a default
under, or result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity
of any kind whatsoever upon, any property or assets (tangible or intangible)
of the Company or the Subsidiary pursuant to the terms of, (A) the
certificate of incorporation or by-laws of the Company or the Subsidiary, (B)
any license, contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any
other agreement or instrument to known to such counsel which the Company or
the Subsidiary is a party or by which
-40-
it is or may be bound or to which any of its properties or assets (tangible
or intangible) is or may be subject, or any indebtedness, or (C) any statute,
judgment, decree, order, rule or regulation applicable to the Company or the
Subsidiary of any arbitrator, court, regulatory body or administrative agency
or other governmental agency or body domestic or foreign, having jurisdiction
over the Company or the Subsidiary or any of its activities or properties,
except for conflicts, breaches, violations, defaults, creations or
impositions which do not and would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs,
position, shareholder's equity, value, operations, properties, business or
results of operations of the Company and the Subsidiary taken as a whole;
(viii) except as described in the Prospectus, no
consent, approval, authorization or order, and no filing with, any court,
regulatory body, government agency or other body (other than such as may be
required under Blue Sky laws, as to which no opinion need be rendered) is
required in connection with the issuance of the IPO Securities pursuant to
the Prospectus and the Registration Statement, the issuance of the
Underwriter's Warrants, the performance of this Agreement and the
Underwriter's Warrant Agreement and the transactions contemplated hereby and
thereby;
(ix) the properties and business of the Company and the
Subsidiary conform to the description thereof contained in the Registration
Statement and the Prospectus;
(x) to such counsel's knowledge and except as described
in the Prospectus neither the Company nor the Subsidiary is in breach of, or
in default under, any term or provision of any license, contract, indenture,
mortgage, installment sale agreement, deed of trust, lease, voting trust
agreement, stockholders' agreement, partnership agreement, note, loan or
credit agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which
the Company or the Subsidiary is a party or by which
-41-
the Company or the Subsidiary may be bound or to which the property or assets
(tangible or intangible) of the Company or the Subsidiary is subject or
affected, which could materially adversely affect the Company or of the
Subsidiary; and neither the Company nor the Subsidiary is in violation of any
term or provision of its Certificate of Incorporation or By-Laws, or in
violation of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation the result of which would materially and
adversely affect the condition, financial or otherwise, or the earnings,
business affairs, position, shareholders' equity, value, operation,
properties, business or results of operations of the Company and the
Subsidiary taken as a whole;
(xi) to the knowledge of such counsel and except as
described in the Prospectus the Company and the Subsidiary owns or possesses,
free and clear of all liens or encumbrances and rights thereto or therein by
third parties, the requisite licenses or other rights to use all trademarks,
service marks, copyrights, service names, trade names, patents, patent
applications and licenses necessary to conduct its business (including,
without limitation any such licenses or rights described in the Prospectus as
being owned or possessed by the Company or the Subsidiary), and to the best
of such counsel's knowledge after reasonable investigation, there is no claim
or action by any person pertaining to, or proceeding, pending, or threatened,
which challenges the exclusive rights of the Company or the Subsidiary with
respect to any trademarks, service marks, copyrights, service names, trade
names, patents, patent applications and licenses used in the conduct of the
Company's or the Subsidiary's business (including, without limitations, any
such licenses or rights described in the Prospectus as being owned or
possessed by the Company or the Subsidiary);
(xii) the IPO Securities have been approved for listing
on the Nasdaq Small Cap Market and the Company's Registration Statement on
Form 8-A under the Exchange Act has become effective;
(xiii) to such counsel's knowledge, the persons listed
under the
-42-
caption "PRINCIPAL STOCKHOLDERS" in the Prospectus are the respective
"beneficial owners" (as such phrase is defined in Regulation 13d-3 under the
Exchange Act) of the securities set forth opposite their respective names
thereunder as and to the extent set forth therein;
(xiv) to such counsel's knowledge, except as described
in the Prospectus, no person, corporation, trust, partnership, association or
other entity has the right to include and/or register any securities of the
Company in the Registration Statement, require the Company to file any
registration statement or, if filed, to include any security in such
registration statement;
(xv) to such counsel's knowledge, except as described
in the Prospectus, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee
with respect to the sale of the IPO Securities hereunder or the financial
consulting arrangement or any other arrangements, agreements, understandings,
payments or issuances that may affect the Underwriter's compensation, as
determined by the NASD;
(xvi) the Lock-up Agreements are legal, valid and
binding obligations of the parties thereto, enforceable against each such
party and any subsequent holder of the securities subject thereto in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action, legal or
equitable); and
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance satisfactory to
Underwriter's Counsel) of other counsel acceptable to Underwriter's Counsel,
familiar with the applicable laws; (B) as to
-43-
matters of fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of
the Company or the Subsidiary, provided that copies of any such statements or
certificates shall be delivered to Underwriter's Counsel if requested. The
opinion of such counsel for the Company shall state that the opinion of any
such other counsel is in form satisfactory to such counsel.
At each Option Closing Date, if any, the Underwriter shall
have received an opinion letter from Jackier, Gould, Bean, Upfal & Eizelman,
counsel to the Company, dated the Option Closing Date, addressed to the
Underwriter and in form and substance satisfactory to Underwriter's Counsel
confirming as of such Option Closing Date the statements made in its opinion
delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriter's Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company and its Subsidiary, or herein contained.
(f) Prior to each Closing Date and each Option Closing
Date, if any, (i) there shall have been no adverse change nor development
involving a prospective change in the condition, financial or otherwise,
prospects, stockholders' equity or the business activities of the Company and
the Subsidiary taken as a whole, whether or not in the ordinary course of
business, from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company
-44-
or the Subsidiary, (iii) neither the Company nor the Subsidiary shall be in
default under any provision of any instrument relating to any outstanding
indebtedness; (iv) neither the Company nor the Subsidiary shall have issued
any securities (other than the IPO Securities and the Underwriter's Warrants)
or declared or paid any dividend or made any distribution in respect of its
capital stock of any class and there has not been any change in the capital
or any change in the debt (long or short term) or liabilities or obligations
of the Company or the Subsidiary (contingent or otherwise); (v) no material
amount of the assets of the Company or the Subsidiary shall have been pledged
or mortgaged, except as set forth in the Registration Statement and
Prospectus; (vi) no action, suit or proceeding, at law or in equity, shall
have been pending or threatened (or circumstances giving rise to same)
against the Company or any Subsidiary, or affecting any of its properties or
business before or by any court or federal, state or foreign commission,
board or other administrative agency wherein an unfavorable decision, ruling
or finding may adversely affect the business, operations, management
prospects or financial condition or assets of the Company or the Subsidiary
taken as a whole, except as set forth in the Registration Statement and
Prospectus: and (vii) no stop order shall have been issued under the Act and
no proceedings therefor shall have been initiated, threatened or contemplated
by the Commission.
(g) At each of the Closing Date and each Option Closing
Date, if any, the Underwriter shall have received a certificate of the
principal executive officer and the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined
the Registration Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties in this
Agreement of the Company and its Subsidiary are true and correct, as if made
on and as of the Closing Date or the Option Closing Date, as the case may be,
and the Company and its Subsidiary have complied with all
-45-
agreements and covenants and satisfied all conditions contained in this
Agreement on their part to be performed or satisfied at or prior to such
Closing Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or are
contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all
statements and information required to be included therein, and none of the
Registration Statement, the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and neither the Preliminary Prospectus or
any supplement thereto included any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading; and
(iv) Since the dates as of which information is given
in the Registration Statement and the Prospectus, (A) there must not have
been any material change in the shares of Common Stock, Preferred Stock or
liabilities of the Company or the Subsidiary except as set forth in or
contemplated by the Prospectus; (B) there must not have been any material
adverse change in the general affairs, management, business, financial
condition or results of operations of the Company or the Subsidiary, whether
or not arising from transactions in the ordinary course of business, as set
forth in or contemplated by the Prospectus; (C) the Company and the
Subsidiary must not have sustained any material loss or interference with its
business from any court or from legislative or other governmental action,
order or decree, whether foreign or domestic, or from any other occurrence,
not described in the Registration Statement and Prospectus; (D) there must
not
-46-
have occurred any event that makes untrue or incorrect in any material
respect any statement or information contained in the Registration Statement
or Prospectus or that is not reflected in the Registration Statement or
Prospectus but should be reflected therein in order to make the statements or
information therein, in light of the circumstances in which they were made,
not misleading in any material respect; (E) the Company and the Subsidiary
must not have incurred up to and including the Closing Date or the Option
Closing Date, as the case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct or contingent; (F)
the Company and the Subsidiary must not have paid or declared any dividends
or other distributions on its capital stock; (G) the Company and the
Subsidiary must not have entered into any transactions not in the ordinary
course of business; (H) there has not been any change in the capital stock or
long-term debt or any increase in the short-term borrowings (other than any
increase in the short-term borrowings in the ordinary course of business) of
the Company or the Subsidiary; (i) the Company and the Subsidiary must not
have sustained any material loss or damage to its property or assets, whether
or not insured; and (J) there has occurred no event required to be set forth
in an amended or supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus
in this subsection (g) are to such documents as amended and supplemented at
the date of such certificate.
(h) By the Closing Date, the Underwriter will have received
clearance from the NASD as to the amount of compensation allowable or payable
to the Underwriter, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriter
shall have received a letter, dated such date, addressed to the Underwriter
in form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all
respects to the Underwriter and Underwriter's Counsel, from ____________:
-47-
(i) confirming that they are independent
accountants with respect to the Company and the Subsidiary within the meaning
of the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the
financial statements of the Company and the Subsidiary included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and Regulations
thereunder and that the Underwriter may rely upon the opinion of
________________ with respect to the financial statements and supporting
schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited
review which included a reading of the latest available unaudited interim
financial statements of the Company and the Subsidiary (with an indication of
the date of the latest available unaudited interim financial statements), a
reading of the latest available minutes of the stockholders and board of
directors and the various committees of the boards of directors of the
Company and the Subsidiary, consultations with officers and other employees
of the Company and the Subsidiary responsible for financial and accounting
matters and other specified procedures and inquiries, nothing has come to
their attention which would lead them to believe that (A) the unaudited
financial statements, if any, of the Company and the Subsidiary included in
the Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that
of the audited financial statements of the Company and the Subsidiary
included in the Registration Statement, or (B) at a specified date not more
than five (5) days prior to the effective date of the Registration Statement,
there has been any change in the capital stock or long-term debt of the
Company and the Subsidiary, or any decrease in the stockholders' equity or
net current assets or net assets of the Company and the Subsidiary as
compared with
-48-
amounts shown in the ________________, 19__ balance sheet included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting
forth the amount of such change or decrease;
(iv) setting forth, at a date not later than five
(5) days prior to the date of the Registration Statement, the amount of
liabilities of the Company and the Subsidiary (including a breakdown of
commercial paper and notes payable to banks);
(v) stating that they have compared specific
dollar amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company and the
Subsidiary set forth in the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may be derived from
the general accounting records, including work sheets, of the Company and the
Subsidiary and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) stating that they have in addition carried
out certain specified procedures, not constituting an audit, with respect to
certain pro forma financial information which is included in the Registration
Statement and the Prospectus and that nothing has come to their attention as
a result of such procedures that caused them to believe such unaudited pro
forma financial information does not comply in form in all respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or that
the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of that information;
(vii) stating that they have not during the
immediately preceding five (5) year period brought to the attention of any of
the Company's management any "weakness", as
-49-
defined in Statement of Auditing Standard No. 60 "Communication of Internal
Control Structure Related Matters Noted in an Audit", in any of the Company's
internal controls; and
(viii) statements as to such other matters
incident to the transaction contemplated hereby as the Underwriter may
reasonably request.
(j) At the Closing Date and each Option Closing Date, if
any, the Underwriter shall have received from _____________________, a
letter, dated as of the Closing Date or the Option Closing Date, as the case
may be, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (i) of this Section, except that the
specified date in the referred to letter shall be a date not more than five
days prior to the Closing Date or the Option Closing Date, as the case may
be, and, if the Company has elected to rely on Rule 430A of the Rules and
Regulations, to the further effect that they have carried out procedures as
specified in clause (v) of subsection (i) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Underwriter and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (v).
(k) On each of the Closing Date and Option Closing Date, if
any, there shall have been duly tendered to the Underwriter the appropriate
number of IPO Securities.
(l) No order suspending the sale of the IPO Securities in
any jurisdiction designated by the Underwriter pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the
Option Closing Date, if any, and no proceedings for that purpose shall have
been instituted or shall be contemplated.
(m) On or before the Closing Date, the Preferred Stock
shall have been approved for quotation on the Nasdaq Small Cap Market and
shall have been authorized upon official notice of issuance for trading on
the BSE.
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(n) On or before the Closing Date, there shall have been
delivered to the Underwriter the Lock-up Agreements, in form and substance
satisfactory to Underwriter's Counsel.
(o) On or before the Closing Date, the Company shall have
executed and delivered to the Underwriter, (i) the Underwriter's Warrant
Agreement substantially in the form filed as Exhibit _____ to the
Registration Statement in final form and substance satisfactory to the
Underwriter, and (ii) the Underwriter's Warrants in such denominations and to
such designees as shall have been provided to the Company.
If any condition to the Underwriter's obligations hereunder
to be fulfilled prior to or at the Closing Date or the relevant Option
Closing Date, as the case may be, is not so fulfilled, the Underwriter may
terminate this Agreement or, if the Underwriter so elects, it may waive any
such conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification.
(a) The Company and its Subsidiary, jointly and
severally, agrees to indemnify and hold harmless the Underwriter (for
purposes of this Section 7 "Underwriter" shall include the officers,
directors, partners, employees, agents and counsel of the Underwriter, and
each person, if any, who controls the Underwriter ("controlling person")
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, from and against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions in respect thereof), whatsoever
(including but not limited to any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which the Underwriter or such controlling person may become subject under the
Act, the Exchange Act, or any other statute or at common law or otherwise or
under the laws of foreign countries, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus, the Registration Statement or the
-51-
Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any time new registration statement
and prospectus in which is included securities of the Company issued or
issuable upon exercise of the IPO Securities; or (iii) in any application or
other document or written communication (in this Section 7 collectively
called "Application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify
the IPO Securities under the securities laws thereof or filed with the
Commission, any securities commission or agency, the NASD, the BSE 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 the case of the Prospectus, in the
light of the circumstances under which they were made), unless such statement
or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary Prospectus,
the Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, or in any Application, as the case may be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or
otherwise.
(b) The Underwriter agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who has
signed the Registration Statement, and each other person, if any, who
controls the Company within the meaning of the Act, to the same extent as the
foregoing indemnity from the Company to the Underwriter but only with respect
to statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any Application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to the
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement
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or Prospectus or any amendment thereof or supplement thereto or in any such
Application, provided that such written information or omissions only pertain
to disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus directly relating to the transactions effected by the Underwriter
in connection with this offering. The Company acknowledges that the
statements with respect to the public offering of the IPO Securities set
forth under the heading "Plan of Distribution" and the stabilization legend
in the Prospectus have been furnished by the Underwriter expressly for use
therein.
(c) Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action, suit or
proceeding, such indemnified party shall, if a claim in respect thereof is to
be made against one or more indemnifying parties under this Section 7, notify
each party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure so to notify an indemnifying party
shall not relieve it from any liability which it may have under this Section
7 except to the extent that it has been prejudiced in any material respect by
such failure or from any liability which it may have otherwise). In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties will be entitled to participate therein, and to the extent
it may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume
the defense thereof with counsel reasonably satisfactory to such indemnified
party. Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case but the
fees and expenses of such counsel shall be at the expense of such indemnified
party or parties unless (i) the employment of such counsel shall have been
authorized in writing by the indemnifying parties in connection with the
defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory
to such
-53-
indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. Anything in this Section 7 to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or
action effected without its written consent; provided, however, that such
consent was not unreasonably withheld.
(d) In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes claim for
indemnification pursuant to this Section 7, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of this Section 7
provide for indemnification in such case, or (ii) contribution under the Act
may be required on the part of any indemnified party, then each indemnifying
party shall contribute to the amount paid as a result of such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) (A) in such
proportion as is appropriate to reflect the relative benefits received by
each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the IPO Securities or (B)
if the allocation provided by clause (A) above is not permitted by applicable
-54-
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of each
of the contributing parties, on the one hand, and the party to be indemnified
on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages, expenses or liabilities, as well as
any other relevant equitable considerations. In any case where the Company is
a contributing party and the Underwriter is the indemnified party, the
relative benefits received by the Company, on the one hand, and the
Underwriter, on the other, shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities (before deducting
expenses) bear to the total underwriting discounts received by the
Underwriter hereunder, in each case as set forth in the Prospectus. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact necessary to make the statements
made, in light o the circumstances under which they were made, not misleading
relates to information supplied by the Company, or by the Underwriter, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this subdivision (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d) the Underwriter shall
not be required to contribute any amount in excess of the underwriting
discount applicable to the IPO Securities sold by the Underwriter hereunder.
No person guilty of 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. For purposes of this
Section 7, each person, if any, who controls the Company within the meaning
of the Act, each officer of the Company who has signed the
-55-
Registration Statement, and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to this
subparagraph (d), Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such party in respect to which a claim for contribution may be made against
another party or parties under this subparagraph (d), notify such party or
parties from whom contribution may be sought, but the omission so to notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder
or otherwise than under this subparagraph (d), or to the extent that such
party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant
hereto, shall be deemed to be representations, warranties and agreements at
the Closing Date and any Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and its
Subsidiaries and the respective indemnity agreements contained in Section 7
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriter, the Company, any
controlling person of the Underwriter or the Company, and shall survive
termination of this Agreement or the issuance and delivery of the IPO
Securities to the Underwriter.
9. Effective Date. This Agreement shall become effective at
10:00 a.m., New York City time, on the first full business day following the
day on which the Registration Statement becomes effective.
-56-
10. Termination.
(a) Subject to subsection (b) of this Section 10,
the Underwriter shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has materially
disrupted, or in the Underwriter's opinion will in the immediate future
materially disrupt the financial markets; or (ii) any material adverse change
in the financial markets shall have occurred; or (iii) if trading on the New
York Stock Exchange, the American Stock Exchange, or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall have
been required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or (iv) if
the United States shall have become involved in a war or major hostilities,
or if there shall have been an escalation in an existing war or major
hostilities or a national emergency shall have been declared in the United
States; or (v) if a banking moratorium has been declared by a state or
federal authority; or (vi) if a moratorium in foreign exchange trading has
been declared; or (vii) if the Company and/or any of its Subsidiaries, shall
have sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not such loss shall have been insured, will,
in the Underwriter's opinion, make it inadvisable to proceed with the
delivery of the IPO Securities; or (vii) if there shall have been such a
material adverse change in the condition (financial or otherwise), business
affairs or prospects of the Company and/or any of its Subsidiaries, whether
or not arising in the ordinary course of business, which would render, in the
Underwriter's judgment, either of such parties unable to perform
satisfactorily its respective obligations as contemplated by this Agreement
or the Registration Statement, or such material adverse change in the general
market, political or economic conditions, in the United States or elsewhere
as in the Underwriter's judgment would make it inadvisable to proceed with
the offering, sale and/or delivery of the IPO Securities.
-57-
(b) If this Agreement is terminated by the
Underwriter in accordance with the provisions of Section 10(a), the Company
shall promptly reimburse and indemnify the Underwriter for all of its actual
out-of-pocket expenses, including the fees and disbursements of counsel for
the Underwriter in an amount not to exceed $50,000 (less amounts previously
paid pursuant to Section 5(c) above). Notwithstanding any contrary provision
contained in this Agreement, if this Agreement shall not be carried out
within the time specified herein, or any extension thereof granted to the
Underwriter, by reason of any failure on the part of the Company to perform
any undertaking or satisfy any condition of this Agreement by it to be
performed or satisfied (including, without limitation, pursuant to Section 6
or Section 12) then, the Company shall promptly reimburse and indemnify the
Underwriter for all of their actual out-of-pocket expenses, including the
fees and disbursements of counsel for the Underwriter (less amounts
previously paid pursuant to Section 5 (c) above). In addition, the Company
shall remain liable for all Blue Sky counsel fees and expenses and Blue Sky
filing fees. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 6 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Notices. All notices and communications hereunder,
except as herein otherwise specifically provided, shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication. Notices to the Underwriter shall be
directed to the Underwriter at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxxxx Xxx Khan, President, with a copy to Doros & Brescia,
P.C., 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxxxx X. Xxxxxxx, Esq. Notices to the Company
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shall be directed to the Company at 0000 Xxx Xxxxx Xxxx, Xxxx, Xxxxxxxxxx
00000, Attention: Xxxx X. Xxxxxxxx, President, with a copy to Jackier, Gould,
Bean, Upfal & Eizelman, 0000 Xxxxx Xxxxxxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx,
Xxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxxx.
12. Parties. This Agreement shall inure solely to the
benefit of and shall be binding upon, the Underwriter, the Company and the
controlling persons, directors and officers referred to in Section 7 hereof,
and their respective successors, legal Underwriters and assigns and no other
person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. No purchaser of Securities from the Underwriter
shall be deemed to be a successor by reason merely of such purchase.
13. 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 choice of law or conflict of laws principles.
14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and
all of which taken together shall be deemed to be one and the same
instrument.
15. Entire Agreement; Amendments. This Agreement, the
Underwriter's Warrant Agreement and the Warrant Agreement constitute the
entire agreement of the parties hereto and supersede all prior written or
oral agreements, understandings and negotiations with respect to the subject
matter hereof. This Agreement may not be amended except in a writing, signed
by the Underwriter and the Company.
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If the foregoing correctly sets forth the understanding
between the Underwriter and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
AWG, LTD.
By: ___________________________
Xxxx X. Xxxxxxxx, President
Confirmed and accepted as of
the date first above written
XXXXX XXXX & SHIRE, INC.
By: __________________________________
Name: Xxxxxxxx Xxx Khan
Title: President
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AWG. LTD
AND
XXXXX XXXX AND SHIRE, INC.
--------------------------
UNDERWRITER'S
WARRANT AGREEMENT
Dated as of ________________, 1998
UNDERWRITER'S WARRANT AGREEMENT dated as of __________,
1998 between AWG, LTD., a Nevada corporation (the "Company") and XXXXX XXXX
AND SHIRE, INC., its successors, designees and assigns (hereinafter referred
to as the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to Xxxxx Xxxx and
Shire, Inc. warrants (the "Underwriter's Warrants") entitling the holder to
purchase up to an aggregate of 50,000 shares of the Company's Series A
Preferred Stock, $.001 par value per share (the "Preferred Stock"), at a
purchase price of $.0001 per Underwriter's Warrant (the Underwriter's
Warrants and the underlying Preferred Stock being collectively referred to as
the "Warrant Securities"); and
WHEREAS, the Underwriter has agreed pursuant to the
underwriting agreement (the "Underwriting Agreement") dated as of the date
hereof among the Underwriter and the Company to act as to act as the
exclusive agent for the Company, on a best efforts basis, in connection with
the Company's proposed public offering of up to 500,000 shares of Series A
Preferred Stock at a public offering price of $10.00 per share of Preferred
Stock (the "Public Offering"); and
WHEREAS, the Underwriter's Warrants to be issued pursuant
to this Agreement will be issued on the Closing Date and Option Closing Date
(s) (as such term's are defined in the Underwriting Agreement) by the Company
to the Underwriter in consideration for, and as part of the Underwriter's
compensation in connection with, and pursuant to the Underwriting Agreement;
- 1 -
NOW, THEREFORE, in consideration of the premises, the
payment by the Underwriter to the Company of an aggregate five dollars
($5.00), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Grant. The Underwriter is hereby granted the right to
purchase, at any time from ____________, 1999 until 5:00 P.M., New York time,
on _______________, 2003, up to an aggregate of 50,000 shares of Preferred
Stock (the "Shares") at an initial exercise price (subject to adjustment as
provided in Section 8 hereof) of $16.00 per share of Preferred Stock subject
to the terms and conditions of this Agreement. Except as set forth herein,
the Shares issuable upon exercise of the Underwriter's Warrants are in all
respects identical to the shares of Preferred Stock being sold by the
Underwriter to the public pursuant to the terms and provisions of the
Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this
Agreement shall be in the form set forth in Exhibit A, attached hereto and
made a part hereof, with such appropriate insertions, omissions,
substitutions, and other variations as required or permitted by this
Agreement.
3. Exercise of Warrant.
3.1 Method of Exercise. The Underwriter's Warrants
initially are exercisable at an aggregate initial exercise price (subject to
adjustment as provided in Section 8 hereof) per share
- 2 -
of Preferred Stock set forth in Section 6 hereof payable by certified or
official bank check in New York Clearing House funds, subject to adjustment
as provided in Section 8 hereof. Upon surrender of a Warrant Certificate with
the annexed Form of Election to Purchase duly executed, together with payment
of the Exercise Price (as hereinafter defined) for the Warrant Securities
purchased at the Company's principal offices (presently located at 0000 Xxx
Xxxxx Xxxx, Xxxx, Xxxxxxxxxx 00000) the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the shares of Preferred Stock so purchased.
The purchase rights represented by each Warrant Certificate are exercisable
at the option of the Holders thereof, in whole or part (but not as to
fractional shares of the Preferred Stock). In the case of the purchase of
less than all of the Preferred Stock purchasable under any Warrant
Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the Warrant Securities purchasable thereunder.
3.2 Exercise by Surrender of Warrant. In addition to the
method of payment set forth in Section 3.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Underwriter's Warrants shall have
the right at any time and from time to time to exercise the Underwriter's
Warrants in full or in part by surrendering the Warrant Certificate in the
manner specified in Section 3.1. The number of shares of Preferred Stock to
be issued pursuant to this Section 3.2 shall be equal to the difference
between (a) the number of shares of Preferred Stock in respect of which the
Underwriter's Warrants are exercised and (b) a fraction, the numerator of
which shall be the number of shares of Preferred Stock in respect of which
the Underwriter's Warrants are exercised multiplied by the Exercise Price (as
hereinafter defined) and the denominator of which shall be the Market Price.
- 3 -
3.3 Definition of Market Price. As used herein, the phrase
"Market Price" at any date shall be deemed to be (i) when referring to the
Preferred Stock, the last reported sale price, or, in case no such reported
sale takes place on such day, the average of the last reported sale prices
for the last three (3) trading days, in either case as officially reported by
the principal securities exchange on which the Preferred Stock is listed or
admitted to trading or by the Nasdaq National Market ("NNM"), or, if the
Preferred Stock is not listed or admitted to trading on any national
securities exchange or quoted by NNM, the average closing bid price as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through Nasdaq or similar organization including the NASD Electronic Bulletin
Board if Nasdaq is no longer reporting such information, or if the Preferred
Stock is not quoted on Nasdaq, or such similar organization as determined in
good faith by resolution of the Board of Directors of the Company, based on
the best information available to it. Notwithstanding the foregoing, for
purposes of Section 8, the Market Price of a share of Preferred Stock shall
be determined by reference to the relevant information set forth above during
the thirty (30) trading days immediately preceding the date of the event
requiring the determination of the Market Price (except that, in the event of
a public offering of shares of Preferred Stock, the Market Price of a share
of Preferred Stock shall be determined by reference to the trading day
immediately preceding the effective date of the public offering and not such
thirty (30) trading day period).
4. Issuance of Certificates. Upon the exercise of the
Underwriter's Warrants, the issuance of certificates for shares of Preferred
Stock and/or other securities, properties or rights underlying such
Underwriter's Warrants, shall be made forthwith (and in any event within five
(5) business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the
- 4 -
provisions of Sections 5 and 7 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such
certificates in a name other than that of the Holder and the Company shall
not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing
the Shares (and/or other securities, property or rights issuable upon the
exercise of the Underwriter's Warrants) shall be executed on behalf of the
Company by the manual or facsimile signature of the then present Chairman or
Vice Chairman of the Board of Directors or President or Vice President of the
Company under its corporate seal reproduced thereon, attested to by the
manual or facsimile signature of the then present Secretary or Assistant
Secretary of the Company. Warrant Certificates shall be dated the date of
execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a
Warrant Certificate, by its acceptance thereof, covenants and agrees that the
Underwriter's Warrants are being acquired as an investment and not with a
view to the distribution thereof; that the Underwriter's Warrants may not be
sold, transferred, assigned, hypothecated or otherwise disposed of, in whole
or in part, for a period of one (1) year from the date hereof, except to
officers of the Underwriters.
- 5 -
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as
otherwise provided in Section 8 hereof, the initial exercise price of each
Underwriter Warrant shall be $16.00 per share of Preferred Stock. The
adjusted exercise price shall be the price which shall result from time to
time from any and all adjustments of the initial exercise price in accordance
with the provisions of Section 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending
upon the context.
7. Registration Rights.
7.1 Current Registration Under the Securities Act of 1933.
The Underwriter's Warrants and the Shares of Preferred Stock issuable upon
exercise of the Underwriter's Warrants have been registered under the
Securities Act of 1933, as amended (the "Act"), pursuant to the Company's
Registration Statement on Form SB-1 (Registration No. 333-48165) (the
"Registration Statement"). The Company covenants and agrees to use its best
efforts to maintain the effectiveness of the Registration Statement for a
period of five (5) years from its effective date.
7.2 Contingent Registration Rights. In the event that, for
any reason whatsoever, the Company shall fail to maintain the effectiveness
of the Registration Statement for a period of five (5) years from its
effective date and, in any event, from and after the fifth (5th) anniversary
of the
- 6 -
effective date of the Registration Statement, the Underwriter and other
Holders shall have, commencing the date of any such occasion, the contingent
registration rights ("Registration Rights") set forth in Sections 7.3 and 7.4
hereof.
7.3 Piggyback Registration. (a) If, at any time commencing
after the effective date of the Registration Statement and expiring on the
seventh (7th) anniversary of the effective date of the Registration
Statement, the Company proposes to register any of its securities under the
Act, either for its own account or the account of any other security holder
or holders of the Company possessing registration rights ("Other
Stockholders") (other than pursuant to Form S-4, Form S-8 or comparable
registration statement), it shall give written notice, at least thirty (30)
days prior to the filing of each such registration statement, to the
Underwriter and to all other Holders of Underwriter's Warrants and/or Shares
of Preferred Stock issuable upon exercise of the Underwriter's Warrants
(collectively the "Registrable Securities") of its intention to do so. If the
Underwriter or other Holders of Registrable Securities notify the Company
within twenty-one (21) days after the receipt of any such notice of its or
their desire to include any such securities in such proposed registration
statement, the Company shall afford the Underwriter and such other Holders of
such securities the opportunity to have any such securities registered under
such registration statement.
(b) If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Underwriter and such other Holders as part of the
written notice given pursuant to Section 7.3(a) hereof. The right of the
Underwriter or any such other Holders to registration pursuant to this
Section 7.3 shall be conditioned upon their participation in such
underwriting and the inclusion of their Registrable Securities in the
underwriting to the extent hereinafter provided. The Underwriter and all
other
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Holders proposing to distribute their securities through such underwriting
shall (together with the Company and any officers, directors or other
Stockholders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the Underwriter of the
underwriter or underwriters selected by the Company. Notwithstanding any
other provision of this Section 7.3, if the Underwriter of the underwriter or
underwriters advises the Company in writing that marketing factors require a
limitation or elimination of the number of shares of Preferred Stock or other
securities to be underwritten, the Underwriter may limit the number of shares
of Preferred Stock or other securities to be included in the registration and
underwriting. The Company shall so advise the Underwriter and all other
Holders of Registrable Securities requesting registration, and the number of
shares of Preferred Stock or other securities that are entitled to be
included in the registration and underwriting shall be allocated among the
Underwriter and other Holders requesting registration, in each case, in
proportion, as nearly as practicable, to the respective amounts of securities
which they had requested to be included in such registration at the time of
filing the registration statement.
(c) Notwithstanding the provisions of this Section
7.3, the Company shall have the right at any time after it shall have given
written notice pursuant to Section 7.3(a) hereof (irrespective of whether a
written request for inclusion of any such securities shall have been made) to
elect not to file any such proposed registration statement, or to withdraw
the same after the filing but prior to the effective date thereof.
7.4 Demand Registration. (a) At any time commencing after
the effective date of the Registration Statement and ending on the fifth
(5th) anniversary of the effective date of the Registration Statement, the
Holders of Registrable Securities representing a "Majority" (as
- 8 -
hereinafter defined) of such securities (assuming the exercise of all of the
Underwriter's Warrants) (the "Initiating Holders") shall have the right
(which right is in addition to the registration rights under Section 7.3
hereof), exercisable by written notice to the Company, to have the Company
prepare and file with the Commission, on one occasion, a registration
statement and such other documents, including a prospectus, as may be
necessary in the opinion of both counsel for the Company and counsel for the
Holders, in order to comply with the provisions of the Act, so as to permit a
public offering and sale of their respective Registrable Securities for up to
two hundred and seventy (270) days by such Holders and any other Holders of
Registrable Securities, as well as any other security holders possessing
similar registration rights, who notify the Company within twenty-one (21)
days after receiving notice from the Company of such request
(b) The Company covenants and agrees to give
written notice of any registration request under this Section 7.4 by any
Holder or Holders to all other registered Holders of Registrable Securities,
as well as any other security holders possessing similar registration rights,
within ten (10) days after the date of the receipt of any such registration
request.
(c) If the Initiating Holders intend to distribute
the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request
made pursuant to Section 7.4(a) hereof. The right of any Holder to
registration pursuant to this Section 7.4 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent and subject
to the limitations provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities it holds.
(d) The Company shall (together with all Holders,
officers, directors and other stockholders proposing to distribute their
securities through such underwriting) enter into an
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underwriting agreement in customary form with the Underwriter of the
underwriters selected for such underwriting by the Initiating Holders, which
underwriter(s) shall be reasonably acceptable to the Underwriter.
Notwithstanding any other provision of this Section 7.4, if the Underwriter
of the underwriter or underwriters advises the Initiating Holders in writing
that marketing factors require a limitation or elimination of the number of
shares of Preferred Stock or other securities to be underwritten, the
Underwriter may limit the number of shares of Preferred Stock or other
securities to be included in the registration and underwriting. The Company
shall so advise the Underwriter and all Holders of Registrable Securities
requesting registration, and the number of shares of Preferred Stock or other
securities that are entitled to be included in the registration and
underwriting shall be allocated among the Underwriter and other Holders
requesting registration, in each case, in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested
to be included in such registration at the time of filing the registration
statement. If the Company or any Holder of Registrable Securities who has
requested inclusion in such registration as provided above disapproves of the
terms of any such underwriting, such person may elect to withdraw its
securities therefrom by written notice to the Company, the underwriter and
the Initiating Holders. Any securities so excluded shall be withdrawn from
such registration. No securities excluded from such registration by reason of
such underwriters' marketing limitations shall be included in such
registration. To facilitate the allocation of shares in accordance with this
Section 7.4(d), the Company or underwriter or underwriters selected as
provided above may round the number of securities of any holder which may be
included in such registration to the nearest 100 shares.
(e) In the event that the Initiating Holders are
unable to sell all of the Registrable Securities for which they have
requested registration due to the provisions of Section 7.4(d) hereof and if,
at that time, the Initiating Holders are not permitted to sell Registrable
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Securities under Rule 144(k), the Initiating Holders shall be entitled to
require the Company to afford the Initiating Holders an opportunity to effect
one additional demand registration under this Section 7.4.
(f) In addition to the registration rights under
Section 7.3 and subsection (a) of Section 7.4 hereof, at any time commencing
on the date hereof and expiring five (5) years thereafter any Holder of
Registrable Securities shall have the right, exercisable by written request
to the Company, to have the Company prepare and file, on one occasion, with
the Commission a registration statement so as to permit a public offering and
sale for 270 days by any such Holder of its Registrable Securities provided,
however, that the provisions of Section 7.5(b) hereof, shall not apply to any
such registration request and registration and all costs incident thereto
shall be at the expense of the Holder or Holder's making such request.
(g) Notwithstanding anything to the contrary
contained herein, if the Company shall not have filed a registration
statement for the Registrable Securities of the Initiating Holders or the
Holder(s) referred to in Section 7.5(f) above (the "Paying Holders"), within
the time period specified in Section 7.5(a) below, the Company shall upon the
written notice of election of the Initiating Holders or the Paying Holders,
as the case may be, repurchase (i) any and all Shares of Preferred Stock at
the higher of the Market Price per share of Preferred Stock on (x) the date
of the notice sent to the Company under Section 7.4(a) or (f), as the case
may be, or (y) the expiration of the period specified in Section 7.5(a) and
(ii) any and all Warrants at such Market Price less the Exercise Price of
such Warrant. Such repurchase shall be in immediately available funds and
shall close within five (5) business days after the expiration of the period
specified in Section 7.5(a).
7.5 Covenants of the Company With Respect to Registration.
In connection with
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any registration under Sections 7.3 and 7.4 hereof, the Company covenants and
agrees as follows:
(a) The Company shall use its best efforts to file
a registration statement within sixty (60) days of receipt of any demand
therefor, shall use its best efforts to have any registration statements
declared effective at the earliest possible time, and shall furnish each
Holder desiring to sell Registrable Securities such number of prospectuses as
shall reasonably be requested.
(b) The Company shall pay all costs (excluding
fees and expenses of Holder(s)' counsel and any underwriting or selling
commissions), fees and expenses in connection with all registration
statements filed pursuant to Sections 7.3 and 7.4 hereof including, without
limitation, the Company's legal and accounting fees, printing expenses, blue
sky fees and expenses. If the Company shall fail to comply with the
provisions of Section 7.5(a), the Company shall, in addition to any other
equitable or other relief available to the Holder(s), extend the exercise
period of the Underwriter's Warrants by such number of days as shall equal
the delay caused by the Company's failure.
(c) The Company will take all necessary action
which may be required in qualifying or registering the Registrable Securities
included in a registration statement for offering and sale under the
securities or blue sky laws of such states as reasonably are requested by the
Holder(s); provided that the Company shall not be obligated to execute or
file any general consent to service of process or to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of
the Registrable Securities to be sold pursuant to any registration statement
and each person, if any, who controls such Holders within the meaning of
Section 15 of the Act or Section 20(a) of the Securities Exchange Act of
1934, as amended ("Exchange Act"), against all loss, claim, damage, expense
or
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liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from
such registration statement but only to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to
indemnify the Underwriter contained in Section 7 of the Underwriting
Agreement.
(e) The Holder(s) of the Registrable Securities to
be sold pursuant to a registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, its
officers and directors and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage or expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Act, the
exchange Act or otherwise, arising from information furnished by or on behalf
of such Holders, or their successors or assigns, for specific inclusion in
such registration statement to the same extent and with the same effect as
the provisions contained in Section 7 of the Underwriting Agreement pursuant
to which the Underwriter has agreed to indemnify the Company.
(f) For a period of one hundred eighty (180) days
after the effectiveness of any registration statement filed pursuant to
Section 7.4 hereof, the Company shall not permit any other registration
statement (other than (1) a registration statement relating to the securities
for which the Company has granted demand registration rights, as described in
the Prospectus included in the Registration Statement, (2) a registration
statement relating to the securities for which the Company has granted
piggyback registration rights, as described in the Prospectus included in the
Registration Statement and (3) a registration statement filed on Forms S-4 or
S-8 to be or remain effective during the effectiveness of a registration
statement filed pursuant to Section 7.4 hereof, without the prior
- 13 -
written consent of the Holders of the Registrable Securities representing a
Majority of such securities.
(g) The Company shall furnish upon request to each
Holder participating in the offering and to each underwriter, if any, a
signed counterpart, addressed to such Holder or underwriter, of (i) an
opinion of counsel to the Company, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) a "cold comfort" letter dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under
the underwriting agreement) signed by the independent public accountants who
have issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered
to underwriters in underwritten public offerings of securities.
(h) The Company shall as soon as practicable after
the effective date of any registration statement filed pursuant to Sections
7.3 and 7.4 hereof, and in any event within 15 months thereafter, make
"generally available to its security holders" (within the meaning of Rule 158
under the Act) an earnings statement (which need not be audited) complying
with Section 11(a) of the Act and covering a period of at least 12
consecutive months beginning after the effective date of the registration
statement.
(i) The Company shall deliver promptly to each
Holder participating in the offering requesting the correspondence and
memoranda described below and to the managing
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underwriters, copies of all written correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to the registration
statement and permit each Holder and underwriters to do such investigation,
upon reasonable advance notice, with respect to information contained in or
omitted from the registration statement as it deems reasonably necessary to
comply with applicable securities laws or rules of the NASD. Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable
times and as often as any such Holder or underwriter shall reasonably
request
(j) With respect to any registration under Section
7.4 hereof, the Company shall enter into an underwriting agreement with the
managing underwriter selected for such underwriting by the Initiating Holders
or the Paying Holders, as the case may be. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such
managing underwriters, and shall contain such representations, warranties and
covenants by the Company and such other terms as are customarily contained in
agreements of that type used by the managing underwriter. The Holders shall
be parties to any underwriting agreement relating to an underwritten sale of
their Registrable Securities and may, at their option, require that any or
all the representations, warranties and covenants of the Company to or for
the benefit of such underwriters shall also be made to and for the benefit of
such Holders. Such Holders shall not be required to make any representations
or warranties to or agreements with the Company or the underwriters, except
as they may relate to such Holders and their intended methods of
distribution.
(k) For purposes of this Agreement, the term
"Majority" in reference to the Holders of Registrable Securities, shall mean
in excess of fifty percent (50%) of the then
- 15 -
outstanding Underwriter's Warrants and/or Shares of Preferred Stock issued
upon exercise of the Underwriter's Warrants that (i) are not held by the
Company, an affiliate, officer, creditor, employee or agent thereof or any of
their respective affiliates, members of their family, persons acting as
nominees or in conjunction therewith and (ii) have not been resold to the
public pursuant to a registration statement filed with the Commission under
the Act.
(l) Nothing contained in this Agreement shall be
construed as requiring the Holder(s) to exercise their Underwriter's Warrants
prior to the initial filing of any registration statement or the
effectiveness thereof.
(m) In addition to the Registrable Securities,
upon the written request therefor, by any Holder(s), the Company shall
include in the registration statement any other securities of the Company
held by such Holder(s) as of the date of filing of such registration
statement, including without limitation restricted shares of Preferred Stock,
options, warrants or any other securities convertible into shares of
Preferred Stock.
7.6 Restrictive Legends. In the event that the Company
fails to maintain the effectiveness of the Registration Statement, such that
the exercise, in part or in whole, of the Underwriter's Warrants are not, at
the time of such exercise, registered under the Act, any certificates
representing the Shares underlying the Underwriter's Warrants, the Underlying
Warrants and any of the other securities issuable upon exercise of the
Underwriter's Warrants shall bear the following restrictive legend:
The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended ("Act"), and may
not be offered or sold except pursuant to (i) an effective registration
statement under the Act, (ii) to the extent applicable, Rule 144 under the
- 16 -
Act (or any similar rule under such Act relating to the disposition of
securities), or (iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that an exemption from
registration under such Act is available.
8. Adjustments to Exercise Price and Number of Securities.
8.1 Computation of Adjusted Exercise Price. Except as
hereinafter provided, in the event the Company shall at any time after the
date hereof issue or sell any shares of Preferred Stock (other than the
issuances or sales referred to in Section 8.7 hereof), including shares held
in the Company's treasury and shares of Preferred Stock issued upon the
exercise of any options, rights or warrants to subscribe for shares of
Preferred Stock and shares of Preferred Stock issued upon the direct or
indirect conversion or exchange of securities for shares of Preferred Stock,
for a consideration per share less than the Market Price in effect
immediately prior to the issuance or sale of such shares, or without
consideration, then forthwith upon such issuance or sale, the Exercise Price
shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) equal to the quotient derived by
dividing (i) an amount equal to the sum of (a) the total number of shares of
Preferred Stock outstanding immediately prior to the issuance or sale of such
shares, multiplied by the Exercise Price in effect immediately prior to such
issuance or sale, and (b) the aggregate of the amount of all consideration,
if any, received by the Company upon such issuance or sale, by (ii) the total
number of shares of Preferred Stock outstanding immediately after such
issuance or sale; provided, however, that in no event shall the Exercise
Price be adjusted pursuant to this computation to an amount in excess of the
Exercise Price in effect immediately prior to such computation, except in the
case of a combination of outstanding shares of Preferred Stock, as provided
by Section 8.3 hereof.
- 17 -
For the purposes of this Section 8 the term Exercise Price
shall mean the Exercise Price per share of Preferred Stock set forth in
Section 6 hereof, as adjusted from time to time pursuant to the provisions of
this Section 8.
For the purposes of any computation to be made in
accordance with this Section 8.1, the following provisions shall be
applicable:
(i) In case of the issuance or sale of shares of
Preferred Stock for a consideration part or all of which shall be cash, the
amount of the cash consideration therefor shall be deemed to be the amount of
cash received by the Company for such shares (or, if shares of Preferred
Stock are offered by the Company for subscription, the subscription price,
or, if either of such securities shall be sold to underwriters or dealers for
public offering without a subscription offering, the initial public offering
price) before deducting therefrom any compensation paid or discount allowed
in the sale, underwriting or purchase thereof by underwriters or dealers or
other performing similar services, or any expenses incurred in connection
therewith.
(ii) In case of the issuance or sale (other than
as a dividend or other distribution on any stock of the Company) of shares of
Preferred Stock for a consideration part or all of which shall be other than
cash, the amount of the consideration therefor other than cash shall be
deemed to be the value of such consideration as determined in good faith by
the Board of Directors of the Company and shall include any amounts payable
to security holders or any affiliates thereof, including without limitation,
pursuant to any employment agreement, royalty, consulting agreement, covenant
not to compete, earnout or contingent payment right or similar arrangement,
agreement or understanding, whether oral or written; all such amounts being
valued for the purposes hereof at the aggregate amount payable thereunder,
whether such payments are absolute or contingent, and irrespective of the
period or uncertainty of payment, the rate of interest, if any, or
- 18 -
the contingent nature thereof; provided, however, that if any Holder(s) does
not agree with such evaluation, a mutually acceptable independent appraiser
shall make such evaluation, the cost of which shall be borne by the Company.
(iii) Shares of Preferred Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the day
following the record date for the determination of stockholders entitled to
receive such dividend or other distribution and shall be deemed to have been
issued without consideration.
(iv) The reclassification of securities of the
Company other than shares of Preferred Stock into securities including shares
of Preferred Stock shall be deemed to involve the issuance of such shares of
Preferred Stock for a consideration other than cash immediately prior to the
close of business on the date fixed for the determination of security holders
entitled to receive such shares, and the value of the consideration allocable
to such shares of Preferred Stock shall be determined as provided in
subsection (ii) of this Section 8.1.
(v) The number of shares of Preferred Stock at any
one time outstanding shall include the aggregate number of shares issued or
issuable (subject to readjustment upon the actual issuance thereof) upon the
exercise of options, rights, warrants and upon the conversion or exchange of
convertible or exchangeable securities.
8.2 Options, Rights, Warrants and Convertible and
Exchangeable Securities. In case the Company shall at any time after the date
hereof issue options, rights or warrants to subscribe for shares of Preferred
Stock, or issue any securities convertible into or exchangeable for shares of
Preferred Stock, for a consideration per share less than the Market Price in
effect immediately prior
- 19 -
to the issuance of such options, rights or warrants, or such convertible or
exchangeable securities, or without consideration, the Exercise Price in
effect immediately prior to the issuance of such options, rights or warrants,
or such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making a computation in accordance with the
provisions of Section 8.1 hereof, provided that:
(a) The aggregate maximum number of shares of
Preferred Stock, as the case may be, issuable under such options, rights or
warrants shall be deemed to be issued and outstanding at the time such
options, rights or warrants were issued, and for a consideration equal to the
minimum purchase price per share provided for in such options, rights or
warrants at the time of issuance, plus the consideration (determined in the
same manner as consideration received on the issue or sale of shares in
accordance with the terms of the Underwriter's's Warrants), if any, received
by the Company for such options, rights or warrants.
(b) The aggregate maximum number of shares of
Preferred Stock issuable upon conversion or exchange of any convertible or
exchangeable securities shall be deemed to be issued and outstanding at the
time of issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration received on the
issue or sale of shares of Preferred Stock in accordance with the terms of
the Underwriter's Warrants) received by the Company for such securities, plus
the minimum consideration, if any, receivable by the Company upon the
conversion or exchange thereof.
(c) If any change shall occur in the price per
share provided for in any of the options, rights or warrants referred to in
subsection (a) of this Section 8.2, or in the price per share at which the
securities referred to in subsection (b) of this Section 8.2 are convertible
or exchangeable, such options, rights or warrants or conversion or exchange
rights, as the case may be,
- 20 -
shall be deemed to have expired or terminated on the date when such price
change became effective in respect of shares not theretofore issued pursuant
to the exercise or conversion or exchange thereof, and the Company shall be
deemed to have issued upon such date new options, rights or warrants or
convertible or exchangeable securities at the new price in respect of the
number of shares issuable upon the exercise of such options, rights or
warrants or the conversion or exchange of such convertible or exchangeable
securities.
8.3 Subdivision and Combination. In case the Company shall
at any time subdivide or combine the outstanding shares of Preferred Stock,
the Exercise Price shall forthwith be proportionately decreased in the case
of subdivision or increased in the case of combination.
8.4 Adjustment in Number of Securities. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Section
8, the number of Warrant Securities issuable upon the exercise at the
adjusted exercise price of each Underwriter's Warrant shall be adjusted to
the nearest full amount by multiplying a number equal to the Exercise Price
in effect immediately prior to such adjustment by the number of Warrant
Securities issuable upon exercise of the Underwriter's Warrants immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
8.5 Definition of Preferred Stock. For the purpose of this
Agreement, the term "Preferred Stock" shall mean those shares of Series A
Preferred Stock, $.001 par value per share (the "Preferred Stock") of the
Company authorized for issuance in the Company's Certification of
Incorporation by the Company's Board of Directors, which do not have voting
rights except as
- 21 -
may be required by applicable law, entitles the holders thereof to a
Preferred Annual Return of 6% per annum payable in Preferred Stock in an
amount equivalent to 6% of the number of shares of Preferred Stock registered
in the name of each of the holders as of the close of business on December 31
of each year and will have a preference upon liquidation of the Company in
the amount of $10.00 per share.
8.6 Merger or Consolidation. In case of any consolidation
of the Company with, or merger of the Company with, or merger of the Company
into, another corporation (other than a consolidation or merger which does
not result in any reclassification or change of the outstanding Preferred
Stock), the corporation formed by such consolidation or merger shall execute
and deliver to the Holder a supplemental warrant agreement providing that the
holder of each Underwriter's Warrant then outstanding or to be outstanding
shall have the right thereafter (until the expiration of such Underwriter's
Warrant) to receive, upon exercise of such warrant, the kind and amount of
shares of stock and other securities and property receivable upon such
consolidation or merger, by a holder of the number of shares of Preferred
Stock of the Company for which such Underwriter's Warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall
be identical to the adjustments provided in Section 8. The above provision of
this subsection shall similarly apply to successive consolidations or
mergers.
8.7 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Underwriter's
Warrants or the shares
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of Preferred Stock issuable upon the exercise of the Underwriter's Warrants; or
(b) If the amount of said adjustment shall be less
than two cents (2(cent)) per Warrant Security, provided, however, that in
such case any adjustment that would otherwise be required then to be made
shall be carried forward and shall be made at the time of and together with
the next subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least two cents (2(cent)) per Warrant Security.
8.8 Dividends and Other Distributions. In the event that
the Company shall at any time prior to the exercise of all Underwriter's
Warrants declare a dividend (other than a dividend consisting solely of
shares of Preferred Stock) or otherwise distribute to its stockholders any
assets, property, rights, evidences of indebtedness, securities (other than
shares of Preferred Stock), whether issued by the Company or by another, or
any other thing of value, the Holders of the unexercised Underwriter's
Warrants shall thereafter be entitled, in addition to the shares of Preferred
Stock or other securities and property receivable upon the exercise thereof,
to receive, upon the exercise of such Underwriter's Warrants, the same
property, assets, rights, evidences of indebtedness, securities or any other
thing of value that they would have been entitled to receive at the time of
such dividend or distribution as if the Underwriter's Warrants had been
exercised immediately prior to such dividend or distribution. At the time of
any such dividend or distribution, the Company shall make appropriate
reserves to ensure the timely performance of the provisions of this
subsection 8.8.
9. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the surrender
thereof by the registered Holder at the principal
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executive office of the Company, for a new Warrant Certificate of like tenor
and date representing in the aggregate the right to purchase the same number
of Warrant Securities in such denominations as shall be designated by the
Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any
Warrant Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to it, and reimbursement to the Company
of all reasonable expenses incidental thereto, and upon surrender and
cancellation of the Underwriter's Warrants, if mutilated, the Company will
make and deliver a new Warrant Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall
not be required to issue fractional shares of Preferred Stock upon the
exercise of Underwriter's Warrants. Underwriter's Warrants may only be
exercised in such multiples as are required to permit the issuance by the
Company of one or more whole shares of Preferred Stock. If one or more
Underwriter's Warrants shall be presented for exercise in full at the same
time by the same Holder, the number of whole shares of Preferred Stock which
shall be issuable upon such exercise thereof shall be computed on the basis
of the aggregate number of shares of Preferred Stock purchasable on exercise
of the Underwriter's Warrants so presented. If any fraction of a share of
Preferred Stock would, except for the provisions provided herein, be issuable
on the exercise of any Underwriter's Warrant (or specified portion thereof),
the Company shall pay an amount in cash equal to such fraction multiplied by
the then current market value of a share of Preferred Stock, determined as
follows:
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(1) If the Preferred Stock is listed or admitted to
unlisted trading privileges on the NYSE or the AMEX, or is traded on the NNM,
the current market value of a share of Preferred Stock shall be the closing
sale price of the Preferred Stock at the end of the regular trading session
on the last business day prior to the date of exercise of the Underwriter's
Warrants on whichever of such exchanges or NNM had the highest average daily
trading volume for the Preferred Stock on such day; or
(2) If the Preferred Stock is not listed or admitted to
unlisted trading privileges, on either the NYSE or the AMEX and is not traded
on NNM, but is quoted or reported on Nasdaq, the current market value of a
share of Preferred Stock, shall be the average of the Underwriter closing bid
and asked prices (or the last sale price, if then reported by Nasdaq) of the
Preferred Stock at the end of the regular trading session on the last
business day prior to the date of exercise of the Underwriter's Warrants as
quoted or reported on Nasdaq, as the case may be; or
(3) If the Preferred Stock is not listed, or admitted to
unlisted trading privileges, on either of the NYSE or the AMEX, and is not
traded on NNM or quoted or reported on Nasdaq, but is listed or admitted to
unlisted trading privileges on the BSE or another national securities
exchange (other than the NYSE or the AMEX), the current market value of a
share of Preferred Stock shall be the closing sale price of the Preferred
Stock at the end of the regular trading session on the last business day
prior to the date of exercise of the Underwriter's Warrants on whichever of
such exchanges has the highest average daily trading volume for the Preferred
Stock on such day; or
(4) If the Preferred Stock is not listed or admitted to
unlisted trading privileges on any national securities exchange, or listed
for trading on NNM or quoted or reported on Nasdaq, but is traded in the
over-the-counter market, the current market value of a share of Preferred
Stock
- 25 -
shall be the average of the last reported bid and asked prices of the
Preferred Stock reported by the National Quotation Bureau, Inc. on the last
business day prior to the date of exercise of the Underwriter's Warrants; or
(5) If the Preferred Stock is not listed, admitted to
unlisted trading privileges on any national securities exchange, or listed
for trading on NNM or quoted or reported on Nasdaq, and bid and asked prices
of the Preferred Stock are not reported by the National Quotation Bureau,
Inc., the current market value of a share of Preferred Stock shall be an
amount, not less than the book value thereof as of the end of the most
recently completed fiscal quarter of the Company ending prior to the date of
exercise, determined in accordance with generally acceptable accounting
principles, consistently applied.
11. Reservation and Listing of Securities. The Company
shall at all times reserve and keep available out of its authorized shares of
Preferred Stock, solely for the purpose of issuance upon the exercise of the
Underwriter's Warrants, such number of shares of Preferred Stock or other
securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the
Underwriter's Warrants and payment of the Exercise Price therefor, all shares
of Preferred Stock and other securities, if any, issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject
to the preemptive rights of any stockholder. As long as the Underwriter's
Warrants shall be outstanding, the Company shall use its best efforts to
cause all shares of Preferred Stock issuable upon the exercise of the
Underwriter's Warrants to be listed (subject to official notice of issuance)
on all securities exchanges on which the Preferred Stock issued to the public
in connection herewith may then be listed and/or quoted.
- 26 -
12. Notices to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote
or to consent or to receive notice as a stockholder in respect of any
meetings of stockholders for the election of directors or any other matter,
or as having any rights whatsoever as a stockholder of the Company. If,
however, at any time prior to the expiration of the Underwriter's Warrants
and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Preferred Stock for the purpose of entitling them to receive a
dividend or distribution payable other than in cash, or a cash dividend or
distribution payable other than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Preferred Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital stock of
the Company, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall
be proposed; then, in any one or more of said events, the Company shall give
written notice of such event at least fifteen (15) days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer
book, as the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of any
convertible or exchangeable
- 27 -
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. Underwriter's Warrants.
The form of the certificate representing Underwriter's
Warrants (and the form of election to purchase shares of Preferred Stock upon
the exercise of Underwriter's Warrants and the form of assignment printed on
the reverse thereof) shall be substantially as set forth in Exhibit "A" to
the Warrant Agreement. Each Underwriter's Warrant shall entitle the Holder to
purchase one fully paid and non-assessable share of Preferred Stock at an
initial purchase price of $16.00 per share from ______________, 1999 until
5:00 P.M. New York time on _____________, 2003 at which time the
Underwriter's Warrants shall expire. The exercise price of the Underwriter's
Warrants and the number of shares of Preferred Stock issuable upon the
exercise of the Underwriter's Warrants are subject to adjustment, whether or
not the Underwriter's Warrants have been exercised, in the manner and upon
the occurrence of the events set forth in Section 8 of the Warrant Agreement,
which is hereby incorporated herein by reference and made a part hereof as if
set forth in its entirety herein. Subject to the provisions of this Agreement
and upon issuance of the Underwriter's Warrants, each registered holder of
such Underwriter's Warrant shall have the right to purchase from the Company
(and the Company shall issue to such registered holders) up to the number of
fully paid and non-assessable shares of Preferred Stock (subject to
adjustment as provided herein and in the Warrant Agreement), free and clear
of all preemptive rights of stockholders, provided that such registered
holder complies with the terms governing exercise of the Underwriter's
Warrant set forth in the Warrant Agreement, and pays the applicable exercise
price, determined in accordance with the terms of the Warrant Agreement. Upon
exercise of the Underwriter's Warrants, the Company
- 28 -
shall forthwith issue to the registered holder of any such Underwriter's
Warrant in his name or in such name as may be directed by him, certificates
for the number of shares of Preferred Stock so purchased. Except as otherwise
provided herein and in Section 6.1 hereof, the Underwriter's Warrants shall
be governed in all respects by the terms of the Warrant Agreement. The
Underwriter's Warrants shall be transferable in the manner provided in the
Warrant Agreement, and upon any such transfer, a new Underwriter's Warrant
Certificate shall be issued promptly to the transferee. The Company covenants
to, and agrees with, the Holder(s) that without the prior written consent of
the Holder(s), which will not be unreasonably withheld, the Warrant Agreement
will not be modified, amended, canceled, altered or superseded, and that the
Company will send to each Holder, irrespective of whether or not the
Underwriter's Warrants have been exercised, any and all notices required by
the Warrant Agreement to be sent to holders of the Underwriter's Warrants.
14. Notices.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of the Underwriter's
Warrants, to the address of such Holder as shown on the books of the Company;
or
(b) If to the Company, to the address set forth in Section
3 hereof or to such other address as the Company may designate by notice to
the Holders.
15. Supplements and Amendments. The Company and the
Underwriter may from time to time supplement or amend this Agreement without
the approval of any Holders of Warrant
- 29 -
Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem shall
not adversely affect the interests of the Holders of Warrant Certificates.
16. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
17. Termination. This Agreement shall terminate at the
close of business on ___________, 2003. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall survive such termination until
the close of business on ___________, 2008.
18. Governing Law; Submission to Jurisdiction. This
Agreement and each Warrant Certificate issued hereunder shall be deemed to be
a contract made under the laws of the State of New York and for all purposes
shall be construed in accordance with the laws of said State of New York
without giving effect to the rules of said State of New York governing the
conflicts of laws.
The Company, the Underwriter and any other registered
Holders hereby agree that any action, proceeding or claim against it arising
out of, or relating in any way to, this Agreement shall be brought and
enforced in the courts of the State of New York or of the United States of
America for the Southern District of New York, and irrevocably submits to
such jurisdiction, which
- 30 -
jurisdiction shall be exclusive. The Company, the Underwriter and any other
registered Holders hereby irrevocably waive any objection to such exclusive
jurisdiction or inconvenient forum. Any such process or summons to be served
upon any of the Company, the Underwriter and the Holders (at the option of
the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in
Section 14 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the party so served in any action, proceeding or
claim. The Company, the Underwriter and any other registered Holders agree
that the prevailing party(ies) in any such action or proceeding shall be
entitled to recover from the other party(ies) all of its their reasonable
legal costs and expenses relating to such action or proceeding and/or
incurred in connection with the preparation therefor.
19. Entire Agreement; Modification. This Agreement
(including the Underwriting Agreement and the Warrant Agreement to the extent
portions thereof are referred to herein) contains the entire understanding
between the parties hereto with respect to the subject matter hereof and may
not be modified or amended except by a writing duly signed by the party
against whom enforcement of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall
be held to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this
Agreement are for
- 31 -
convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive
effect.
22. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the
Company and the Underwriter and any other registered Holder(s) of the Warrant
Certificates or Warrants Securities any legal or equitable right, remedy or
claim under this Agreement; and this Agreement shall be for the sole benefit
of the Company and the Underwriter and any other registered Holders of
Warrant Certificates or Warrant Securities.
23. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and such counterparts shall together constitute
but one and the same instrument.
- 32 -
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
[SEAL] AWG, LTD.
By: ___________________________
Xxxx X. Xxxxxxxx, President
Attest:
______________, Secretary
XXXXX XXXX AND SHIRE, INC.
By: ____________________________
Xxxxxxxx Xxx Khan, President
- 33 -
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
(i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT
REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _______________, 2003
No. RW-101 Warrants to Purchase
50,000 Shares of Series A Preferred Stock
- 34 -
WARRANT CERTIFICATE
This Warrant Certificate certifies that Xxxxx Xxxx and
Shire, Inc., or registered assigns, is the registered holder of Warrants to
purchase initially, at any time from _________, 1999 until 5:00 p.m. New York
time on ___________, 2003 (the "Expiration Date"), up to 50,000 fully-paid
and non-assessable shares of Series A Preferred Stock, $.001 par value per
share ("Preferred Stock") of AWG, Ltd., a Nevada corporation (the "Company"),
at the initial exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $16.00 per share of Preferred Stock upon surrender of
this Warrant Certificate and payment of the Exercise Price at an office or
agency of the Company, but subject to the conditions set forth herein and in
the Underwriter's Warrant Agreement dated as of ________________, 1998
between the Company and Xxxxx Xxxx and Shire, Inc. (the "Underwriter's
Warrant Agreement"). Payment of the Exercise Price shall be made by certified
or official bank check in New York Clearing House funds payable to the order
of the Company or by surrender of this Warrant Certificate.
No Warrant may be exercised after 5:00 p.m., New York time,
on the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part
of a duly authorized issue of Warrants issued pursuant to the Underwriter's
Warrant Agreement, which Underwriter's Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
The Underwriter's Warrant Agreement provides that upon the
occurrence of certain events the Exercise Price and the type and/or number of
the Company's securities issuable thereupon may, subject to certain
conditions, be adjusted. In such event, the Company will, at the request of
the holder, issue a new Warrant Certificate evidencing the adjustment in the
Exercise Price and the number and/or type of securities issuable upon the
exercise of the Warrants; provided, however, that the failure of the Company
to issue such new Warrant Certificates shall not in any way change, alter, or
otherwise impair, the rights of the holder as set forth in the Underwriter's
Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Underwriter's Warrant Agreement, without any charge except
for any tax or other governmental charge imposed in connection with such
transfer.
Upon the exercise of less than all of the Warrants
evidenced by this Warrant Certificate, the Company shall forthwith issue to
the holder hereof a new Warrant Certificate representing such numbered
unexercised Warrants.
- 35 -
The Company may deem and treat the registered holder(s)
hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, and of any distribution to the holder(s)
hereof, and for all other purposes, and the Company shall not be affected by
any notice to the contrary.
All terms used in this Warrant Certificate which are
defined in the Underwriter's Warrant Agreement shall have the meanings
assigned to them in the Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of ____________, 1998
[SEAL] AWG, LTD.
By: ________________________________
Xxxx X. Xxxxxxxx, President
Attest:
__________________________________
______________, Secretary
- 36 -
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase:
_______________________ Warrant Securities
and herewith tenders in payment for such securities a certified or official
bank check payable in New York Clearing House Funds to the order of AWG, Ltd.
in the amount of $______, all in accordance with the terms of Section 3.1
of the Underwriter's Warrant Agreement dated as of ___________________, 1998
between AWG, Ltd. and Xxxxx Xxxx and Shire, Inc. The undersigned request that
a certificate for such Warrant Securities be registered in the name of
_________________ whose address is and that such Certificate be delivered to
_________________ whose address is __________________.
Signature ________________________________
(Signature must conform in all respects to
name of holder as specified on the face
of the Warrant Certificate)
_________________________________________
(Insert Social Security or Other
Identifying Number of Holder)
- 37 -
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
______________ unto
___________________________________________________
(Please print name and address of transferee)
Warrant Certificate, together with all right, title and interest
therein, and does hereby reasonably constitute and appoint ____________ ,
as Attorney, to transfer the within Warrant Certificate on the books of
the within-named Company, with full power of substitution.
Date: ___________________________ Signature: ____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
_______________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
- 38 -
___________, 1998
Xxxxx Xxxx and Shire, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
AWG, Ltd.
0000 Xxx Xxxxx Xxxx
Xxxx, Xxxxxxxxxx 00000
Gentlemen:
The undersigned shareholder of common stock and or holder
of warrants issuable into shares of common stock of AWG, Ltd., a Nevada
corporation (the "Company"), in consideration of the underwriting of a public
offering (the "Public Offering") of securities of the Company by Xxxxx Xxxx
and Shire, Inc. ("KMS" or the "Underwriter"), hereby agrees that, without the
prior written consent of KMS, for a period of twenty-four (24) months from
the effective date (the "Effective Date") of the Company's Registration
Statement on Form SB-1 (File No. ___________) which relates to the Offering
of its securities by KMS, on a best efforts basis, the undersigned will not
offer, sell, transfer or otherwise depose of any shares of Common Stock of
the Company now owned or hereafter acquired, whether beneficially(1) or of
record, by the undersigned, including, but not limited to shares of Common
Stock acquired upon exercise of options or warrants or acquired upon
conversion of any other securities owned by the undersigned (collectively,
the "Securities"), except by means of a private transaction in connection
with which the proposed transferee agrees in writing to be bound by all of
the provisions of this agreement prior to the
--------
(1) It is agreed that, for purposes of this letter, the undersigned
beneficially owns, among other shares, any shares owned by any
person or entity controlled by the undersigned or under common
control with the undersigned.
-2-
___________, 1998
consummation of such private transaction; provided that the foregoing shall
not apply to shares of Common Stock acquired by the undersigned in the Public
Offering or to Securities acquired by the undersigned in the after market
after the closing date of the Public Offering.
The undersigned acknowledges that it will cause:
1. A copy of this Agreement to be available from the
Company or the Company's transfer agent upon
request and without charge;
2. A notice to be placed on the face of each
certificate for the Securities stating that the
transfer of the Securities is restricted in
accordance with the conditions set forth on the
reverse side of the certificate; and
3. A typed legend to be placed on the reverse side of
each certificate representing the Securities which
states that the sale or transfer of the Securities
is subject to certain restrictions pursuant to an
agreement between the shareholder, the Company and
Worthington, which agreement is on file with the
Company and the stock transfer agent, from which a
copy is available upon request and without charge.
Notwithstanding anything to the contrary in this Agreement,
this Agreement shall terminate upon termination of the letter of intent dated
November 25, 1997 between the Company and the Underwriter relating to the
Public Offering in accordance with the provisions of the letter of intent or,
if the Company and the Underwriter enter into an underwriting agreement with
respect to the Public Offering, upon termination of the underwriting
agreement without consummation of the Public Offering.
Very truly yours,
By: ________________________
Name:
Title: (if applicable)
-3-
___________, 1998
Acknowledged and Agreed:
XXXXX XXXX AND SHIRE, INC.
By:__________________________________
Xxxxxxxx Xxx Khan, President
AWG, LTD.
By: _________________________________
Xxxx X. Xxxxxxxx, President
