Exhibit 1.1
675,000 Shares of Common Stock and
875,000 Class A Common Stock Purchase Warrants
▇▇▇▇'S ORIGINAL, INC.
UNDERWRITING AGREEMENT
New York, New York
________ __, 1997
IAR Securities Corp.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
President
Ladies and Gentlemen:
▇▇▇▇'s Original, Inc., a Delaware corporation (the "Company"), confirms its
agreement with IAR Securities Corp. ("IAR") and each of the underwriters named
in Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 14), for
whom IAR is acting as representative (in such capacity, IAR shall hereinafter be
referred to as "you" or the "Representative"), with respect to the sale by the
Company and the purchase by the Underwriters, acting severally and not jointly,
of the respective numbers of shares (the "Shares") of the Company's common
stock, $0.001 par value per share (the "Common Stock"), and Redeemable Common
Stock Class A Purchase Warrants (the "Warrants") set forth in said Schedule A.
The 675,000 Shares together with the 875,000 Warrants and 875,000 Shares of
Common Stock underlying the Warrants (the "Warrant Shares") are hereinafter
collectively referred to as the "Firm Securities". The Shares and the Warrants
will be separately tradeable upon issuance. Each Warrant is exercisable
commencing the date of this Agreement until three years after the date of this
Agreement, unless previously redeemed by the Company, at an initial exercise
price of $6.00 for one share of Common Stock. The Warrants may be redeemed by
the Company upon ten (10) business days' prior written notice to IAR, if the
Company shall have given not less than thirty (30) days' and not more than sixty
(60) days' prior written notice to the holders thereof at a redemption price of
$0.01 per Warrant at any time, provided, the reported closing bid quotation of
the Common Stock equals or exceeds $12.00 per share (subject to adjustment as
provided in the Warrant Agreement dated ___________ 1997 between the Company and
American Stock Transfer & Trust Company) for a period of twenty (20) consecutive
trading days ending on the third trading day prior to the date of the notice of
redemption. In addition, solely for the purpose of covering over-allotments, the
Company proposes to grant to the Representative the option to purchase from the
Company up to an additional 101,250 Shares and 131,250 Warrants identical to the
Firm Securities (the "Additional Securities"). The Firm Securities and the
Additional Securities are sometimes collectively referred to herein as the
"Securities"). The Company also proposes to issue and to sell to you for the sum
of $250.00 an Option (the "RPO") for the purchase of up to an additional 67,500
Shares and 87,500 Warrants. The Shares, Warrants and Warrant Shares issuable
upon exercise of the RPO are hereinafter referred to as the "Representative's
Securities." Neither the Representative's Securities nor any of the securities
underlying the Representative's Securities shall be redeemable by the Company
but the Representative's Securities and the securities underlying the
Representative's Securities shall otherwise be identical to the Firm Securities.
The RPO will be exercisable between the first and fifth anniversary dates of the
Effective Date as below defined (the "RPO Exercise Term"). You agree that during
the one year period from the Effective Date, IAR will not transfer the
Representative's Securities except to IAR's officers or partners or to any
underwriters or selected dealers or their officers or partners. The RPO shall be
exercisable at a price per Share equal to 130% of the public offering price of
the Shares and for the Warrants, at a price per Warrant equal to 130% of the
public offering price of the Warrants and shall be exercisable at any time and
from time to time, in whole or in part, during the RPO Exercise Term. The RPO
contains the terms and conditions substantially as set forth in Exhibit 4.4 to
the Registration Statement. The shares of the Common Stock issuable upon
exercise of the Warrants (including the Warrants issuable upon exercise of the
RPO) are hereinafter referred to as the "Warrant Shares." The Firm Securities,
the Shares, the Warrants, the Representative's Securities and the Warrant Shares
are more fully described in the Registration Statement and the Prospectus
referred to below.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters as of the date
hereof, and the Closing Date as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission"), a registration statement, and an
amendment or amendments thereto, on Form SB-2, including any related preliminary
prospectus (the "Preliminary Prospectus"), for the registration of the Firm
Securities, Representative Securities as well as the Shares more fully described
in the Prospectus under the heading "Selling Securityholders", 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, as defined below. The
Company will promptly file a further amendment to the registration statement in
the form heretofore delivered to the Underwriters but will not file any other
amendment thereto to which the Underwriters shall have objected in writing after
having been furnished with a copy thereof. Except as the context may otherwise
require, the registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein (including, but not limited to those
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 Regulations) and as further amended by any post effective
amendment declared effective prior to the Closing Date, 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 Regulations, is hereinafter
called the "Prospectus." For purposes hereof, "Rules and Regulations" shall 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.
The Preliminary Prospectus, Registration Statement and Prospectus are sometimes
referred to herein as the "Offering Documents".
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus or any part 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 the Prospectus at the time of filing thereof conformed with the requirements
of the Act and the Rules and Regulations, and none of the Preliminary
Prospectus, the Registration Statement or the Prospectus at the time of filing
thereof contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto until the Closing Date and any Additional Closing Date (as
defined in Section 5 hereof) and during such longer period as the Prospectus may
be required to be delivered in connection with sales by the Underwriters or a
dealer, the Registration Statement and the Prospectus contained, and as amended
by any amendment or supplement thereto, 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, as amended
or supplemented by any amendment or supplement thereto, nor any such amendment
or supplement thereto, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of its incorporation.
The Company does not own an interest in any firm, association, corporation,
partnership, trust, joint venture or other business entity. The Company is duly
qualified and licensed for the transaction of business and in good standing as a
foreign corporation in each jurisdiction in which its ownership or leasing of
any properties or the conduct of its business ("Business") requires such
qualification or licensing, except for jurisdictions where the failure to be so
registered or qualified would not have a material adverse effect on the
Company's Business, assets, prospects, earnings, properties, condition
(financial or otherwise) or results of operation of the Company (herein referred
to as a "Material Adverse Effect"). The Company has all requisite power and
authority (corporate and other), and has obtained any and all necessary and
material authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all government or regulatory officials and bodies
(including, without limitation, those having jurisdiction over building,
factory, environmental or similar matters) to own or lease its properties and
conduct its Business (collectively, the "Approvals"); the Company is and has
been doing business in, and on each Closing Date will be in, compliance with all
such Approvals, and all Federal, state, local and foreign laws, rules and
regulations; and the Company has not received any notice of proceedings relating
to the revocation or modification of any such Approval, which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, which
would have a Material Adverse Effect.
(e) The Company has a fully authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the capitalization set forth therein
on the Closing Date after giving effect to the Closing, and the Company is not a
party to or bound by any instrument, agreement or other arrangement providing
for the issuance of any capital stock, rights, warrants, options or other
securities, except for this Agreement and as described in the Prospectus. The
offers and sales of all securities of the Company outstanding on the date hereof
and/or immediately prior to the Closing Date were at all relevant times either
registered under the Securities Act and the applicable state securities or Blue
Sky laws, or exempt from such registration. No holder of any of the Company's
securities has any rights, "demand," "piggyback" or otherwise, to have such
securities registered (including without limitation on the Registration
Statement) or to demand the filing of a registration statement except as
specifically described in the Prospectus. No holder of any outstanding
securities of the Company has any rights of rescission with respect to the
offering and sale of such securities. The Firm Securities and the
Representative's Securities (collectively, hereinafter sometimes referred to as
the "Securities") and all other securities issued or issuable by the Company
conform or, when issued and paid for, will conform, in all respects to all
statements with respect thereto contained in the Offering Documents. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable, and the holders thereof are not
subject to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company. The 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; the holders thereof will not be
subject to any personal liability solely by reason of being such holders; all
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken, and the certificates
representing the Securities will be in due and proper form. Upon the issuance
and delivery pursuant to the terms hereof of the Securities to be sold by the
Company hereunder, the Underwriters or the Representative, as the case may be,
will acquire good and marketable title to such securities free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or right of equity of any kind whatsoever.
(f) The financial statements of the Company are true and complete and
fairly present the financial position of the Company at the respective dates and
for the respective periods to which they apply and such financial statements
have been prepared in conformity with generally accepted accounting principles
and the Rules and Regulations, consistently applied throughout the periods
involved and are in accordance with the books and records of the Company. No
other financial statements are required by Form SB-2 or otherwise to be included
in the Registration Statement or the Prospectus. The outstanding debt, the
property, both tangible and intangible, and the business of the Company conform
in all respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. Financial information set forth in the Prospectus
under the headings "Selected Financial Data," "Capitalization," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," fairly present, on the basis stated in the Prospectus, the
information set forth therein and have been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus. Except as otherwise stated in the Offering Documents, since December
31, 1996, (i) the Company has not incurred any liabilities or obligations,
direct or contingent, not in the ordinary course of business, or entered into
any transaction not in the ordinary course of business, which is material to the
business of the Company, and there has not been any change in the capital stock
of, or any incurrence of long-term debt by, the Company, or any issuance of
options, warrants or other rights to purchase the capital stock of the Company,
or any security or other instrument which by its terms is convertible into,
exercisable for or exchangeable for capital stock of the Company and (ii) there
has not occurred any Material Adverse Effect or any development involving a
prospective Material Adverse Effect. The Company has not become a party to, and
neither the business nor the property of the Company has become the subject of,
any litigation which, if adversely determined, would have a Material Adverse
Effect whether or not in the ordinary course of business.
(g) The Company has filed all federal tax returns and all state and
municipal and local tax returns (whether relating to income, sales, franchise,
real or personal property or other types of taxes) required to be filed under
the laws of the United States and applicable states, and has paid in full all
taxes which have become due pursuant to such returns or claimed to be due by any
taxing authority or otherwise due and owing; provided, however, that the Company
has not paid any tax, assessment, charge, levy or license fee that it contests
in good faith and by proper proceedings, which it has disclosed in writing to
the Representative and for which adequate reserves for the accrual of same are
maintained if required by generally accepted accounting principles. Each of the
tax returns heretofore filed by the Company correctly and accurately reflects
the amounts of its tax liability thereunder. The Company has withheld, collected
and paid all other levies, assessments, license fees and taxes (including,
without limitation, employment withholding taxes, FICA/social security and
similar employee taxes) to the extent required and, with respect to payments, to
the extent that the same have become due and payable.
(h) No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriters in connection with (i) the issuance by the Company
of the Securities; (ii) the purchase by the Underwriters of the Securities from
the Company and the purchase by the Representative of the Representative's
Securities from the Company; (iii) the consummation by the Company of any of its
obligations under this Agreement, or (iv) resales of the Securities in
connection with the distribution contemplated hereby.
(i) The Company has, and at the Closing will have, good and marketable
title to, or valid and enforceable leasehold estates in, all items of real
property owned or leased by it, and good and marketable title to, or valid and
enforceable leases with respect to, all items of personal property (tangible and
intangible), free and clear of all liens, encumbrances, claims, security
interests, defects of title, and restrictions of any nature whatsoever, other
than those referred to in the Offering Documents and liens for taxes not yet due
and payable. The Company has adequately insured its tangible and/or real
properties, other than its intellectual properties, against loss or damage by
fire or other casualty (other than earthquake and flood) and maintains such
insurance in adequate amounts (such adequacy being measured by such types and
levels of insurance as are carried by companies conducting comparable volumes of
business of the nature carried on and proposed to be carried on by the Company),
on terms generally offered by reputable insurance carriers in New York State.
The Company (i) has not failed to give notice or present any insurance claims
with respect to any matter, including but not limited to the Company's business
and property under any such insurance policy in a due and timely manner; (ii)
does not have any disputes or claims against any underwriter of such insurance
policies or has not failed to pay any premiums due and payable thereunder, or
(iii) has not failed to comply with all conditions contained in such insurance
policies. To the best of the Company's knowledge, there are no facts or
circumstances under any such insurance policy which would relieve any insurer of
its obligation to satisfy in full any valid claim of the Company.
(j) There is no action, suit, proceeding, injury, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or, to the best knowledge of the Company,
threatened against, or involving the properties or business of, the Company in
or before any court, agency, tribunal, arbitrator, governmental authority or
other person with jurisdiction over the Company and/or its properties
(including, without limitation, those having jurisdiction over environmental or
similar matters) which (i) questions the validity of the capital stock of the
Company, this Agreement, the RPO, or the Warrant Agreement (as defined herein)
or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement or the Warrant Agreement, or (ii) is required
under the Act or the Rules and Regulations to be disclosed in the Registration
Statement and/or the Prospectus which is not so disclosed (and such proceedings
as are summarized in the Registration Statement and/or the Prospectus are
accurately summarized in all material respects).
(k) The Company is not in violation of its Certificate of
Incorporation or By-Laws. The Company has full legal right, power and authority
to issue, deliver and sell the Securities, to execute and deliver this
Agreement, the Warrant Agreement, and the RPO and to consummate the transactions
provided for in each such agreement; and this Agreement, the Warrant Agreement,
and the RPO have each been duly and properly authorized, executed and delivered
by the Company. Each of this Agreement, the Warrant Agreement, and the RPO
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its respective terms, and none of the
Company's issue and sale of the RPO, the Securities or the execution, delivery
or performance of this Agreement, the Warrant Agreement or the RPO, the
consummation of the transactions contemplated herein and therein or the conduct
of its current or proposed business as described in the Offering Documents and
any amendments or supplements thereto, conflicts with or with the lapse of time
will conflict with, or results or with the lapse of time will result in, any
breach or violation of any of the terms or provisions of, or constitutes a
default under, or result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest defect or other restriction or
right of equity of any kind whatsoever upon , any property or assets (tangible
or intangible) of the Company pursuant to or under the terms of, (i) the
certificate of incorporation or By-Laws of the Company; (ii) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which it is or may be bound or
to which its properties or assets (tangible or intangible) is or may be subject,
or any indebtedness; (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court, regulatory body
or administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any of
its activities or properties; or (iv) any permit, certification, registration,
approval, consent, license or franchise necessary for the Company to own or
lease and operate any of its properties and to conduct its business or the
ability of the Company to make use thereof.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Securities or the RPO as described
in the Prospectus and the Registration Statement, the performance of this
Agreement, the Warrant Agreement or the RPO 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 Securities, except such as (i) have been made or
obtained prior to the date hereof or (ii) may be obtained under the Act or may
be required under state securities or Blue Sky laws in connection with the
Underwriters' purchase and distribution of the Securities or the clearance of
such purchase, distribution and sale by the National Association of Securities
Dealers, Inc. (the "NASD").
(m) 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 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
constitute the legal, valid and binding agreements of the Company enforceable
against the Company in accordance with their respective terms. 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. The descriptions in the Registration Statement of such agreements,
contracts and other documents are accurate and fairly present the information
required to be disclosed in conformity with the Act and the Rules and
Regulations. The contracts so described are in full force and effect and the
Company is not in breach of any such agreement.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money; (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any other distribution 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 general
affairs, management, financial operations, stockholders' equity or results of
the operations of the Company.
(o) No default by the Company (or to the Company's knowledge by any
other party) exists in the due performance of any term, covenant or condition of
any license, contract, indenture, mortgage, installment sale agreement, license,
permit, franchise, lease, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement, purchase agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is a party or by which the
Company may be bound or to which the property or assets (tangible or intangible)
of the Company is subject or affected.
(p) The Company is in compliance with all Federal, state, local, and
foreign laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours. To the best of the
Company's knowledge, there are no pending investigations involving the Company
by the United States 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 pending before the National Labor Regulations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or, to the best of the
Company's knowledge, threatened against or involving the Company, or any
predecessor entity, and none has ever occurred. No representation question
exists respecting the employees of the Company, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company. No labor dispute with the
employees of the Company exists or, to the best of the Company's knowledge, is
imminent.
(q) The Company 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 "multiemployer plan" as such terms are defined in
sections 32(2) and 3(1) and 3(37), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") ("ERISA" Plans") The Company
does not maintain or contribute, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA. The Company has never
completely or partially withdrawn from a "multiemployer plan."
(r) None of the Company, any of its employees, directors,
shareholders, or affiliates (within the meaning of the Rules and Regulations) of
any of the foregoing has taken or will take, directly or indirectly, any action
designed to or which has constituted or which might be expected to cause or
result in, under the Exchange Act, stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Securities
or otherwise.
(s) The Company owns or possesses the requisite licenses and/or
enforceable rights to use, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions of any
kind whatsoever, all trademarks, trademark applications, service marks, service
names, trade names, patents and patent applications, copyrights and other rights
(collectively, "Intangibles") described as owned or used by it in the Offering
Documents and/or which are necessary for the conduct of its current business and
the business it proposes to conduct as described in the Offering Documents.
There is no proceeding or action by any person pertaining to, or proceeding or
claim pending or, to the best knowledge of the Company, threatened, and the
Company has not received any claim alleging, infringement directly or indirectly
attributable to the Company's use of its Intangibles with the rights of any
third party or any notice of conflict with the asserted rights of others which
challenges the exclusive right of the Company with respect to, any Intangibles
used in the conduct of the Company's present or proposed business. The Company's
current products, services and processes do not and to the best knowledge of the
Company its proposed products, services and processes do not, infringe on any
Intangibles of any third party. The Company has direct ownership and title, free
and clear of any liens, security interests, encumbrances or claims of others, to
all intellectual property (including all United States patents and United States
and foreign patent applications) and other proprietary rights, confidential
information and know-how. Except as set forth in the Offering Documents, the
Company is not obligated or under any liability whatsoever to make any payments
by way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any patent, trademark, service mark, trade name, copyright,
know-how, technology or other intangible asset, with respect to the use thereof
or in connection with the conduct of the Company's business as now (or currently
proposed to be) conducted or otherwise. No unresolved claims or notices have
been asserted or given during the past three years by any person challenging the
use by the Company of any Intangible or challenging or questioning the validity,
enforceability or effectiveness of or the title to any Intangible or agreement
relating thereto nor to the Company's knowledge is there any action, suit,
investigation or proceeding by or before any court or other governmental entity
reasonably likely to have a Material Adverse Effect on the validity or
enforceability of, or the title or right of the Company to use, any Intangible.
(t) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose report is filed with the Commission as a
part of the Registration Statement, are independent certified public accountants
as required by the Act and the Rules and Regulations.
(u) The Company is not obligated to pay a finder's or broker's fee to
anyone in connection with the introduction of the Company to the Representative
or the consummation of the offering contemplated hereunder, other than payments
to the Representative. The Company has not paid or issued any monies, securities
or other compensation to any member of the National Association of Securities
Dealers, Inc. ("NASD"), or to any affiliate of such a member during the previous
twelve (12) months, except payments made to Millennium Securities Corp. in
connection with the Second Private Placement Financing.
(v) The Securities have been approved for quotation on the OTC
Bulletin Board.
(w) Neither the Company nor any of its officers, employees, agents or
any other person acting on behalf of the Company, 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
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 current or proposed business of the Company (or
assist the Company in connection with any actual or proposed transaction) which
(a) might subject the Company, 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 Material Adverse
Effect, or (c) if not continued in the future, might cause a Material Adverse
Effect. The Company's internal accounting controls are sufficient to cause the
Company to comply with the Foreign Corrupt Practices Act of 1977, as amended.
(x) Except as disclosed in the Prospectus, no officer, director or
shareholder of the Company, 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,
(i) an interest in any person or entity which (A) currently furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, or (ii) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound or
affected, which in any such case is required to be so disclosed. Except as set
forth in the offering documents, there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company on the one hand,
and any officer, director or shareholder owning in excess of 5% of the Common
Stock of the Company, or any affiliate or associate of any of the foregoing
persons or entities, on the other hand.
(y) The minute books of the Company contain a complete summary of all
meetings and actions of the directors and shareholders of the Company, since the
time of its incorporation, and reflect all transactions referred to in such
minutes accurately in all respects.
(z) No holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company has any
anti-dilution rights with respect to any securities of the Company except as
described in the Prospectus.
(aa) The Company has entered into an agreement substantially in the
form filed as Exhibit 4.3 to the Registration Statement (the "Warrant
Agreement") with American Stock Transfer & Trust Company in form and substance
satisfactory to the Representative, with respect to the Warrants. The Warrant
Agreement has been duly and validly authorized by the Company and, assuming due
execution by the parties thereto other than the Company, constitutes a valid and
legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (ii) as enforceability of any indemnification provision may be
limited under the Federal and state securities laws, and (iii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(bb) The Company (i) has not filed a registration statement which is
the subject of any pending proceeding or examination under Section 8 of the
Securities Act, or is the subject of any refusal order or stop order thereunder;
(ii) is not subject to any pending proceeding under Rule 261 of the Securities
Act or any similar rule adopted under Section 3(b) of the Securities Act, or to
an order entered thereunder; (iii) has not been convicted of any felony or
misdemeanor in connection with the purchase or sale of any security or involving
the making of any false filing with the Commission; (iv) is not subject to any
order, judgment, or decree of any court of competent jurisdiction temporarily,
preliminarily or permanently restraining or enjoining, the Company from engaging
in or continuing any conduct or practice in connection with the purchase or sale
of any security or involving the making of any false filing with the Commission;
or (v) is not subject to a United States Postal Service false representation
order entered under Section 3005 of Title 39, United States Code; or a temporary
restraining order or preliminary injunction entered under Section 3007 of Title
39, United States Code, with respect to conduct alleged to have violated Section
3005 of Title 39, United States Code. None of the Company's directors, officers,
or beneficial owners of five percent (5%) or more of any class of its equity
securities (i) has been convicted of any felony or misdemeanor in connection
with the purchase or sale of any security involving the making of a false filing
with the Commission, or arising out of the conduct of the business of an
underwriter, broker, dealer, municipal securities dealer, or investment advisor;
(ii) is subject to any order, judgment, or decree of any court of competent
jurisdiction temporarily, preliminarily or permanently enjoining or restraining,
such person from engaging in or continuing any conduct or practice in connection
with the purchase or sale of any security, or involving the making of a false
filing with the Commission, or arising out of the conduct of the business of an
underwriter, broker, dealer, municipal securities dealer, or investment adviser;
(iii) is subject to an order of the Commission entered pursuant to section
15(b), 15B(a) or 15B(c) of the Securities Exchange Act of 1934 (the "1934 Act"),
or is subject to an order of the Commission entered pursuant to Section 203(e)
or (f) of the Investment Advisers Act of 1940; (iv) is suspended or expelled
from membership in, or suspended or barred from association with a member of, an
exchange registered as a national securities exchange pursuant to Section 6 of
the 1934 Act, an association registered as a national securities association
under Section 15A of the 1934 Act, or a Canadian securities exchange or
association for any act or omission to act constituting conduct inconsistent
with just and equitable principles of trade; or (v) is subject to a United
States Postal Service false representation order entered under Section 3005 of
Title 39, United States Code; or is subject to a restraining order or
preliminary injunction entered under Section 3007 of Title 39, United States
Code, with respect to conduct alleged to have violated Section 3005 of Title 39,
United States Code.
(cc) The Company is not, and the Closing will not be, in violation of
any law, rule, regulation, judgment or decree of any governmental agency or
court, domestic or foreign, having jurisdiction over the Company or any of its
properties or Business other than any violation which individually or in the
aggregate would not have a Material Adverse Effect.
(dd) None of the Company's obligations to any third party are secured
by any of the Company's outstanding securities.
(ee) Any certificate signed by any officer of the Company, and
delivered to the Underwriters or the Underwriters's Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly agrees to purchase from the Company, at a price of
$5.40 per Share and $.18 per Warrant, that number of Firm Securities set forth
in Schedule A opposite the name of such Underwriter, subject to such adjustment
as the Representative in its discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional numbers of Firm Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 14 hereof. The initial public offering price per Share
shall be $6.00 and the initial public offering price per Warrant shall be $.20.
(b) Payment of the purchase price and delivery of certificates for the
Firm Securities shall be made at the offices ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be agreed upon
by the Representative and the Company. Such delivery and payment shall be made
at 10:00 a.m. (New York City time) on the third business day following the date
on which the Registration Statement has been declared effective (the "Effective
Date") or at such earlier time and date or other time and date as shall be
agreed upon by the Representative and the Company not later than third business
days after such third business day (such time and date of payment and delivery
being herein called the "Closing Date"). Delivery of the certificates for the
Firm Securities shall be made to you, for the respective accounts of the
Underwriters, against payment by you, for the respective accounts of the
Underwriters, of the purchase price for the Firm Securities by certified or
official bank checks payable in same day funds or by wire transfer of
immediately available funds, to the order of the Company. Certificates for the
Firm Securities shall be in definitive, fully registered form, shall bear no
restrictive legends (except with respect to Blue Sky resale restrictions) and
shall be in such denominations and registered in such names as the Underwriters
may request in writing at least two business days prior to the Closing Date. The
certificates for the Firm Securities shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to the Closing Date.
(c) The Additional Securities shall be purchased by the Underwriter
from the Company as provided herein. This option may be exercised only to cover
over-allotments in the sale of Shares and Warrants by the Underwriter. This
option may be exercised by you on the basis of the representations, warranties,
covenants, and agreements herein contained, but subject to the terms and
conditions herein set forth, at any time and from time to time on or before the
forty-fifth day following the date that the Registration Statement is declared
effective by the Commission, by written notice by you to the Company. Such
notice shall set forth the aggregate number of Additional Securities as to which
the option is being exercised, the name or names in which the certificates for
the Shares and Warrants (the "Additional Securities") underlying such Additional
Securities are to be registered, the authorized denominations in which such
Additional Securities are to be issued, and the time and date, as determined by
the Underwriter, when such Additional Securities are to be delivered (each such
time and date are herein called an "Additional Closing Date") (references herein
to the Closing Date shall mean the Closing Date referred to in section 5(a)
hereof and/or any Additional Closing Date, if any, as the context requires,
unless otherwise specifically provided herein); provided, however, that no
Additional Closing Date shall be earlier than the Closing Date nor earlier than
the second business day after the date on which the notice of the exercise of
the option shall have been given nor later than the eighth business day after
the date on which such notice shall have been given.
(d) Payment of the purchase price of $5.40 per Share and $.18 per
Warrant and delivery of certificates for the Additional Securities shall be made
at the offices ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, or at such other place as shall be agreed upon by the Representative and
the Company. Delivery of the certificates for the Additional Securities shall be
made to you, for the respective accounts of the Underwriters, against payment by
you, for the respective accounts of the Underwriters, of the purchase price for
the Additional Securities by certified or official bank checks payable in same
day funds or by wire transfer of immediately available funds, to the order of
the Company. Certificates for the Additional Securities shall be in definitive,
fully registered form, shall bear no restrictive legends (except with respect to
Blue Sky resale restrictions) and shall be in such denominations and registered
in such names as the Underwriters may request in writing at least two business
days prior to the Closing Date. The certificates for the Additional Securities
shall be made available to the Representative at such office or such other place
as the Representative may designate for inspection, checking and packaging no
later than 9:30 a.m. on the last business day prior to the Additional Closing
Date.
You have advised the Company that each Underwriter has authorized you
to accept delivery of its Securities, to make payment and to deliver a receipt
therefor. You, individually and not as the Representative of the Underwriters,
may (but shall not be obligated to) make payment for any Securities to be
purchased by any Underwriter whose funds shall not have been received by you by
the Closing Date for the account of such Underwriter, but any such payment shall
not relieve such Underwriter from any of its obligations under this Agreement.
3. Public Offering of the Securities. Immediately upon effectiveness of the
Registration Statement, the Underwriters shall make a public offering of the
Securities (other than to residents of or in any jurisdiction in which
qualification of the Securities is required and has not become effective) at the
price and upon the other terms set forth in the Prospectus. The Representative
may from time to time increase or decrease the public offering price after
distribution of the Securities has been completed to such extent as the
Representative, in its sole discretion deems advisable. The Underwriters may
enter into one of more agreements as the Underwriters, in each of their sole
discretion, deem advisable with one or more broker-dealers who shall act as
dealers in connection with such public offering.
4. Covenants of the Company. The Company covenants and agrees with each
of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the Effective
Date, 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 Underwriters of which the
Representative shall not previously have been advised and furnished with a copy,
to which the Representative shall have reasonably objected 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 Representative and confirm the notice in writing (i)
when the Registration Statement as amended, becomes effective or, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said rule 430A and when any post
effective amendment to the Registration Statement becomes effective; (ii) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose; (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or 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 or 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
reasonably satisfactory to the Representative) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b) not later than the Commission's close of business on the earlier of
(i) the second business day following the execution and delivery of this
Agreement, and (ii) the third business day after the Effective Date.
(d) The Company will give the Representative notice of its intention
to file or prepare any amendment to the Registration Statement (including any
revised prospectus which the Company proposes for use by the Underwriters in
connection with the offering of the 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 Representative with copies of any such amendment or supplement
within a reasonable amount of time prior to such proposed filing or use, as the
case may be, and will not file any such amendment to which the Representative
shall reasonably object.
(e) The Company shall use its best efforts, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdiction as the Representative 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. In each
jurisdiction where such qualification shall be effected, the Company will,
unless the Representative agrees that such action is not at the time necessary
or advisable, use best efforts to file and make such statements or reports at
such times as are or may reasonably be required by the laws of such jurisdiction
to continue such qualification.
(f) During the time when a prospectus is required to be delivered
under the Act, the Company shall use best 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 Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities or the Representative's Securities is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
judgment of the Company, or in the opinion of counsel to the Underwriters, the
Prospectus, as then amended or supplemented, included 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, the Company will notify the
Representative promptly and prepare and file with the Commission an appropriate
amendment or supplement (in form and substance satisfactory to the Underwriters)
to correct such statement or omission or to effect such compliance, and the
Company will furnish to the Underwriters copies of such amendment or supplement
as soon as available and in such quantities as the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period beginning on the day after the end of the
fiscal quarter of the Company during which the Effective Date 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
Representative, an earnings statement which will be in the detail required by,
and will otherwise comply with, the provisions of Section 11(a) of the Act and
Rule 158(a) of the 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.
(h) During the period of three years after the date hereof, the
Company will furnish to its shareholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly reports
to its shareholders, statements of income of the
Company for each quarter in the form furnished to
the Company's shareholders and certified by the
Company's principal financial or accounting
officer;
(ii) concurrently with furnishing such annual reports to
its shareholders, a balance sheet of the Company as
at the end of the preceding fiscal year, together
with statements of operations, shareholders'
equity, and cash flows of the Company for such
fiscal year, accompanied by a copy of the
certification thereof by the Company's independent
certified public accountants;
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to
shareholders;
(iv) as soon as practicable after the filing thereof,
copies of all reports and financial statements
furnished to or filed with the Commission, the NASD
or any securities exchange, and
(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.
(i) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock and Warrants.
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, and all amendments and
supplements thereto, including any Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus and all amendments and supplements thereto, including any prospectus
prepared after the Effective Date, in each case as soon as available and in such
quantities as the Representative may request.
(k) On or before the Effective Date, the Company shall provide the
Representative with true copies of duly executed, legally binding and
enforceable agreements pursuant to which for a period of 24 months from the
effective date of the Registration Statement (or for such longer period not to
exceed 36 months as may be required under applicable state blue sky laws) each
of the Selling Securityholders agrees that it or he or she will not directly or
indirectly, issue, offer to sell, grant an option for the sale of, assign,
transfer, pledge, hypothecate or otherwise encumber or dispose of any shares of
Common Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
which are registered in the Registration Statement (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 Representative (collectively,
the "Lock-up Agreements"). On or before the Closing Date, the Company shall
deliver instructions to the transfer 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.
(l) None of the Company, any of its officers, directors, shareholders
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.
(m) 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.
(n) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, and the Closing Date but not later
than two business days prior thereto, a copy of the latest available unaudited
interim financial statements of the Company (which in no event shall be as of a
date more than 30 days prior to the effective 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 9(g) hereof.
(o) The Company shall cause the Securities to be quoted on OTC Bulletin
Board for a period of five years from the date hereof shall use its best efforts
to maintain such quotation of the Securities.
(p) For a period of three years from the Closing Date, at the
Representative's request, the Company shall furnish to the Representative at the
Company's sole expense, daily consolidated transfer sheets relating to the
Common Stock and Warrants.
(q) Until the completion of the distribution of the Securities but in
no event more than 25 days after the Effective Date, the Company shall not
without prior written consent of the Representative, 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.
(r) Until the earlier to occur of (i) the seventh anniversary of the
date hereof, and (ii) the sale to the public of the Representative's Securities,
the Company will not take any action or actions which may prevent or disqualify
the Company's use of Form S-1 (or other appropriate form) for the registration
under the Act of the Representative's Securities.
(s) For a period of not less than two years from the Closing Date, the
Company will recommend and use its best efforts to elect the Representative's
designee (the "Designee") at the Representative's option, either as a member of
or a non-voting observer to the Company's Board of Directors; such Designee, if
elected or appointed, shall attend meetings of the Board and receive no more or
less compensation than is paid to other directors of the Company and shall be
entitled to receive reimbursement for all reasonable expenses incurred in
attending such meetings, including, but not limited to, food, lodging and
transportation. To the extent permitted by law, the Company will agree to
indemnify the Representative and the Designee for the actions of such Designee
as a director of the Company. The Company shall include each of the
Representative and the Designee as an insured under the insured policy referred
to in Section 7(gg) of this agreement. If the Representative does not exercise
its option to designate a member of or an advisor to the Company's Board of
Directors, the Representative shall nevertheless have the right to send a
representative (who need not be the same individual from meeting to meeting,
although the Representative shall endeavor to send the same representative to
each meeting to observe such meeting of the Board of Directors. The Company
agrees to give the Representative notice of each such meeting not later than it
gives such notice and provides such items to the other directors.
(t) The Company agrees that any and all future transactions between the
Company and its officers, directors, principal shareholders and the affiliates
of the foregoing persons will be on terms no less favorable to the Company than
could reasonably be obtained in arm's length transactions with independent third
parties, and that any such transactions also be approved by a majority of the
Company's outside independent directors disinterested in the transaction, if
any.
(u) Until the offering contemplated hereby has been completed or
terminated, if there shall occur any event relating to or affecting, among other
things, the Company or any affiliate thereof, or the operations of the Company
as described in the Offering Documents, as a result of which it is necessary, in
the opinion of counsel for the Representative or counsel for the Company, to
amend or supplement the Offering Documents in order that the Offering Documents
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, the Company shall
immediately prepare and furnish to the Representative a reasonable number of
copies of an appropriate amendment of or supplement to the Offering Documents,
in form and substance satisfactory to counsel for the Representative.
(v) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, substantially as set
forth under "Use of Proceeds" in the Prospectus.
(w) The Company shall be responsible for, and shall pay, all expenses
directly and necessarily incurred in connection with this Offering, including,
but not limited to, the costs of preparing, printing, mailing and filing, where
necessary, the Offering Documents and all amendments and supplements thereto;
the Company's legal and accounting fees, transfer agent fees and the blue sky
fees, filing fees and disbursements of the Representative's counsel in
connection with blue sky matters, as well as the fees and expenses of the
Representative as set forth in Section 8(b) hereof.
(x) Except as disclosed in the Offering Documents the Company has not
prior to the date hereof issued and irrespective of such disclosure will not
hereafter issue, any of the Company's Common Stock, or Preferred Stock(as
defined in the Offering Documents) or securities exercisable or convertible into
any of such securities or enter into any agreement therefor in satisfaction of
any obligation or indebtedness of the Company arising out of any agreement to
which the Company is a party or by which the Company is bound now or for a
period of one year after the Effective Date.
(aa) Until one (1) year from the date hereof, the maximum number of
shares of capital stock of the Company issuable under its 1995 Long Term
Incentive Plan and 1996 Non-Qualified Stock Option Plan shall not exceed
2,000,000 without the prior written consent of the Representative.
(bb) Except as contemplated hereby during the period commencing on the
date hereof and ending on the Closing Date, the Company shall not, without prior
notice to and consent of the Representative, (a) issue any securities or incur
any liability or obligation except the purchase of inventory, equipment and
machinery for the Company's manufacturing operations as described in the
Offering Documents, (b) enter into any transaction not in the ordinary course of
business, or (c) declare or pay any dividend on its capital stock.
(cc) The Company shall for a period of no less than five years from the
date hereof cause and/or take all action necessary to maintain no less than two
(2) outside directors on the Company's Board of Directors.
(dd) For a period of three (3) years from the date hereof, the Company
shall register with and remain covered by the Corporation Records Service
published by Standard and Poors Corporation.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on the first Closing Date all
expenses and fees (other than fees of Underwriters' counsel, except as provided
in subclause (iv) of this section 8(a)) incident to the performance of the
obligations of the Company under this Agreement and the 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 duplication, mailing (including the payment of
postage with respect thereto) and delivery of this Agreement, the Agreement
Among Underwriters, the Selected Dealer Agreement, the Powers of Attorney, and
related documents, including the cost of all copies thereof and of the
Preliminary Prospectus and of the Prospectus and any amendments thereof or
supplements thereto supplied to the Underwriters and such dealers as the
Underwriters may request; (iii) the printing, engraving, issuance and delivery
of the Securities; (iv) the qualification of the Securities under state
securities or "Blue Sky" laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" if
any, and disbursements and fees of counsel to the Underwriters in connection
therewith (such fees and disbursements to be so reimbursed not to exceed $35,000
in the aggregate; (v) the fees and disbursements of Underwriter's counsel in
connection with the qualification with the NASD of the terms of the transaction
relating to underwriting compensation; (vi) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show," information meetings and presentations, and "tombstone" advertisement
expenses; (vii) fees and expenses of the transfer agent and registrar, and
(viii) the fees payable to the Commission, the NASD and OTC Bulletin Board
including the fees and expenses incurred in connection with the listing of the
Securities on the OTC Bulletin Board.
(b) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 8, it will pay to the
Representative on the Closing Date by certified or bank cashier's check or, at
the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Securities, it being acknowledged that $50,000 of said amount has already been
delivered to the Representative.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of each Closing Date, as if they had been made on and as of each Closing
Date, the accuracy on and as of each Closing Date of the statements of officers
of the Company made pursuant to the provisions hereof, and the performance by
the Company on and as of each Closing Date of its covenants and obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m. New York time, on the date subsequent to the date of this
Agreement or such later date and time as shall be consented to in writing by the
Representative, and, at the Closing Date 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 the Representative. If the Company has elected to rely upon Rule
430A of the Rules and Regulations, the price of the Shares and Warrants 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 Representative of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Registration Statement, or any amendment thereto, shall not
contain an untrue statement of a material fact or omit to state a material fact
which is required to be stated therein or is necessary to make the statements
therein not misleading, or the Prospectus, or any supplement thereof, shall not
contain an untrue statement of a material fact, or omit to state a material fact
which 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) At each of the Effective Date and each Closing Date, the
Underwriters shall have received the opinion of ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, P.C. (the "Firm") counsel to the Company, dated the Effective Date
and each Closing Date, respectively, addressed to the Underwriters and in form
and substance satisfactory to IAR, to the effect that:
(i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing
under the laws of the jurisdiction of its
incorporation; (B) is duly qualified and licensed
for the transaction of business and in good
standing as a foreign corporation in every
jurisdiction in which its ownership, leasing,
licensing or use of property and assets or the
conduct of its Business makes such
qualification necessary except where the failure
to be so qualified does not now have and will not
in the future have a Material Adverse
Effect; and (C) has all requisite corporate power
and authority, has obtained any and all material
authorizations, approvals, orders,
licenses, certificates, franchises and permits of
and from all governmental or regulatory officials
and bodies, to own or lease its properties and
conduct its Business. The disclosures in the
Registration Statement concerning the effects of
Federal, state and local laws, rules and
regulations on the Company's business as
currently conducted and as contemplated are
accurate in all respects and do not omit to state
a fact necessary to make the statements
contained therein not misleading in light of the
circumstances in which they were made;
(ii) the Firm has not been engaged to perform legal
services in connection with any transaction whereby
the Company would acquire an interest in any
corporation, partnership, joint venture, trust or
other business entity;
(iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the
Prospectus (and any amendment or supplement
thereto) under the heading "Capitalization" and
except as set forth in the Prospectus, 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, warrants, options
or other securities. The Securities and all other
securities issued or issuable by the Company have
been duly authorized; all outstanding shares of
Common Stock have been fully paid for and are
non-assessable, and the Securities when issued,
paid for and delivered in accordance with
the terms hereof and of the Warrant Agreement,
will be validly issued fully paid and non-
assessable. The Securities conform to the
description thereof in the Prospectus. All
corporate action required to be taken for the
authorization, issue and sale of the Securities
has been duly and validly taken. The
Representative's Securities constitute valid and
binding obligations of the Company to issue and
sell, upon exercise thereof and payment therefor,
the number and type of securities of the Company
called for thereby. Upon the issuance
and delivery pursuant to this Agreement, the
Warrant Agreement and the RPO of the Securities
and Representative's Securities, as
applicable, the Underwriters will acquire title
to the Firm Securities, and the Representative
will acquire title to the Representative's
Securities, free and clear of any pledge, lien,
charge, claim, encumbrance, pledge, security
interest, or other restriction or equity
of any kind whatsoever. No transfer tax is payable
by or on behalf of the Underwriters in connection
with (A) the issuance by the Company
of the Securities; (B) the purchase by the
Underwriters and the Representative of the Firm
Securities and the Representative's Securities,
respectively, from the Company; (C) the
consummation by the Company of any of its
obligations under this Agreement, the
Warrant Agreement or the RPO or (D) resales of the
Firm Securities in connection with the
distribution contemplated hereby;
(iv) the Registration Statement has become 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
counsel's knowledge no stop order suspending the
effectiveness of the Registration Statement
or preventing the use of the preliminary
prospectus or any part of any thereof has been
issued and no proceeding for that purpose has
been instituted or is pending, or is threatened
or contemplated under the Act;
(v) counsel does not know of any agreements, contracts
or other documents required by the Act to be
described in the Registration Statement and the
Prospectus or to be filed as exhibits to 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) which are not so
described or filed; the descriptions in the
Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and
other documents to which the Company is a
party or by which it is bound, incorporated
by reference into the Prospectus and any
supplement or amendment thereto, are accurate
and fairly present in all material respects
the information required to be presented therein;
to counsel's knowledge there is no action,
arbitration, suit, proceeding, inquiry,
investigation, litigation, governmental, legal
or other proceeding (including, without
limitation those having jurisdiction over
environmental or similar matters), domestic or
foreign, pending or threatened against the
Company, or involving the properties or business
of the Company which is required to
be disclosed in the Registration Statement which
is not so disclosed. No Federal, state or local
statute or regulation required to be described in
the Prospectus is not described as required;
(vi) the Company has full corporate power and authority
to enter into each of this Agreement, the RPO and
the Warrant Agreement and to consummate the
transactions contemplated therein; and each of
this Agreement, the RPO and the Warrant Agreement
has been duly authorized, executed and delivered
by or on behalf of the Company.
Each of this Agreement, the RPO and the Warrant
Agreement, assuming due authorization, execution
and delivery by each other party thereto,
constitutes a legal, valid and binding agreement
of the Company enforceable against the Company in
accordance with its respective terms (except as
such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium
or other laws of general application relating to
or affecting enforcement of creditors' rights
generally and the application of general equitable
principles in any action, legal or equitable, and
except as to those provisions relating to
indemnity or contribution as to which no
opinion is expressed). None of the Company's
execution, delivery or performance of this
Agreement, the Warrant Agreement, the RPO, or
the conduct of its Business will result in any
breach or violation of any of the terms or
provisions of, or conflicts or will conflict with
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 pursuant to the terms of (A) the articles
of incorporation or by-laws of the Company;
(B) any material license, contract,
indenture, mortgage, deed of trust, voting trust
agreement, shareholders agreement, note, loan or
credit agreement or any other agreement or
instrument to which the Company is a party or by
which it is or may be bound or to which any of its
properties or assets (tangible or intangible) is
or may be subject; (C) any Federal, state or
local statute, judgment, decree, order, rule or
regulation applicable to the Company of any
arbitrator, court, regulatory body or
administrative agency or other governmental agency
or body, domestic or foreign, having jurisdiction
over the Company or any of its properties, or
(D) have any Material Adverse Effect on any permit,
certification, registration, approval, consent,
license or franchise necessary for the Company to
own or lease and operate any of its
properties and to conduct its Business or the
ability of the Company to make use thereof;
(vii) the Firm has not been engaged to provide legal
services with respect to, nor does the Firm have
any knowledge of, any breach of or a
default under, any term or provision of any
license, contract, indenture, mortgage,
installment sale agreement, deed of trust, lease,
voting trust agreement, shareholders' agreement,
note, loan or credit agreement or any other
agreement or instrument evidencing any
obligation for borrowed money, or any other
agreement or instrument to which the Company is a
party or by which the Company may be bound or to
which the property or assets (tangible or
intangible) of the Company is subject or affected.
The Company is not in violation of any term or
provision of its certificate of incorporation or
by-laws or, to counsel's knowledge in violation of
any franchise, license, permit, judgment, decree,
order, statute, rule or regulation;
(viii) the statements in the Prospectus under the
headings "THE COMPANY", "BUSINESS", "MANAGEMENT,"
"PRINCIPAL STOCKHOLDERS, "SELLING SECURITYHOLDERS",
"CERTAIN TRANSACTIONS", "DESCRIPTION OF
SECURITIES", and "SHARES ELIGIBLE FOR FUTURE SALE"
have been reviewed by such counsel, and insofar as
they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal
conclusions, except for any of the foregoing
opined upon to the underwriters by counsel to the
Company other than Blau, ▇▇▇▇▇▇, Wactlar &
▇▇▇▇▇▇▇▇▇, P.C.; are correct in all
material respects;
(ix) the Firm Securities have been accepted for
quotation on the OTC Bulletin Board;
(x) to counsel's knowledge, 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
Securities hereunder or financial consulting
arrangement or any other arrangements, agreements,
understandings, payments or issuances that may
affect the Underwriters' compensation, as
determined by the NASD;
(xi) to counsel's knowledge, the Company is not party to
any ERISA plans or defined benefit plan, as defined
in Section 3(35) of ERISA; and
(xii) The Securities, when issued in accordance with the
terms of this Agreement, will be duly and validly
issued. The stock certificates and warrants
comprising the Securities are in due and proper
legal form. To the knowledge of such counsel
and except as disclosed in the Prospectus, no
holder of any of the Company's securities has any
rights, "demand," "piggyback" or otherwise, to
have such securities registered or to demand the
filing of a registration statement. Except
as set forth in the Prospectus, there are no
preemptive or other rights to subscribe for or
purchase, or any restriction upon the voting or
transfer of, any shares of Common Stock, under the
Certificate of Incorporation or By-Laws of the
Company or under the General Corporation Law of
the State of Delaware, or, to the knowledge of
such counsel, under any agreement or other
outstanding instrument to which the Company is a
party or by which it is bound.
(xiii) To such counsel's knowledge, no approval or
consent of any court, board or governmental agency,
instrumentality or authority of the United States
or of any state having jurisdiction or authority
over the Company or of any other third party, not
duly obtained (other than any approval or consent
required under any state securities or Blue
Sky laws) is required for the valid authorization,
issuance, sale and delivery of the Securities and
the consummation of the transactions
contemplated by this Agreement, the Warrant
Agreement, the RPO or the Offering Documents.
(xiv) To such counsel's knowledge, there are no claims,
actions, suits, hearings, investigations,
inquiries or proceedings of any kind or
nature, before or by any court, governmental
authority, tribunal or instrumentality pending or
threatened against the Company or involving the
properties of the Company which could materially
and adversely affect the Business of the Company,
or which would reasonably be expected to
materially adversely affect the transactions
or other acts contemplated by this Agreement, the
Warrant Agreement, the RPO or the validity or
enforceability of such agreements.
(xv) To such counsel's knowledge, there are no material
licenses, permits, certificates, registrations,
approvals or consents of any governmental agency,
commission, board, instrumentality or department
that are required to be obtained by the Company in
order to conduct its current or presently proposed
business as described in the Offering Documents
which have not been so obtained and the failure to
so obtain which would have a Material Adverse
Effect.
(xvi) To such counsel's knowledge and except as disclosed
in the Prospectus, the issuance of the Securities
will not give any holder of any of the Company's
outstanding securities or rights to purchase shares
of the Company's Common Stock, the right to
purchase any additional shares of Common Stock
and/or the right to purchase shares at a reduced
price.
The opinion shall also state that the Registration Statement, the
Prospectus and each amendment thereto or supplement thereof (except for the
financial statements and schedules and other financial information included
therein, as to which such counsel will express no opinion) comply as to form in
all material respects with the applicable requirements of the Act and the Rules
and Regulations.
Such counsel's opinion shall also include a statement to the effect
that it has participated in conferences with officers and other representatives
of the Company representatives of the independent public accountants of the
Company and representatives of the Representative at which the contents of the
Registration Statement and the Prospectus were discussed and, although such
counsel is not passing upon and does not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, on the basis of the foregoing (relying as to
materiality to a large extent upon the opinions of officers and other
representatives of the Company), nothing has come to such counsel's attention
that causes it to believe that the Registration Statement at the time the
Registration Statement became effective contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus at the date of the Prospectus and as supplemented or amended at all
times up to and including the date of such opinion, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein, in light of circumstances under which they were made, not
misleading (it being understood that such counsel expresses no opinion or belief
with respect to the financial statements and schedules, statistical information
or other financial information included in the Registration Statement or
Prospectus, or as to information set forth in the Registration Statement under
the captions "Risk Factors -- Government Regulation", "Business -- Intellectual
Properties Patent, Patents Pending and Products", "Business -- Government
Regulation" and "Business -- Legal Proceedings").
(d) On or prior to each Closing Date, the Representative shall receive
from the President and chief financial officer of the Company a certificate
dated the date of each Closing Date stating that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all
material respects, on and as of each Closing Date,
and the Company has complied with all agreements
and covenants and satisfied all conditions
contained in this Agreement on its part to be
performed or satisfied at or prior to each Closing
Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been
issued, and no proceedings for that purpose have
been instituted or are pending or, to the best of
each of such person's knowledge, after due inquiry,
are contemplated or threatened under the Act;
(iii) the Registration Statement and Prospectus contain
all statements and information required to be
included therein, and neither of the Registration
Statement or the Prospectus includes any untrue
statement of a material fact or omits to state any
material fact required to be stated therein or
necessary to make statements therein not
misleading and neither the Preliminary Prospectus
or any 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, in light of the circumstances under
which they were made, not misleading, and
(iv) subsequent to the respective dates as of which
information is given in the Registration Statement
and the Prospectus, (A) the Company has not
incurred up to and including each Closing Date,
other than in the ordinary course of its business,
any material liabilities or obligations,
direct or contingent; (B) the Company has not paid
or declared any dividends or other distributions
on its capital stock; (C) the Company has not
entered into any transactions not in the ordinary
course of business; (D) there has not been any
change in the capital stock or long-term debt or
any increase in the short-term borrowings of the
Company; (E) the Company has not sustained any
loss or damage to its property or assets, whether
or not insured; (F) there is no litigation
which is pending or threatened (or circumstances
giving rise to same) against the Company or any
affiliated party or any of the foregoing
which is required to be set forth in an amended
or supplemental Prospectus which has not been set
forth, and (G) there has occurred no event
required to be set forth in an amended or
supplemental Prospectus which has not been set
forth.
(References to the Registration Statement and the Prospectus in this subsection
are to such documents as amended and supplemented at the date of such
certificate.)
(e) By the Effective Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters.
(f) At the date this Agreement is executed, the Underwriters shall have
received a letter, dated such date, addressed to the Underwriters in form and
substance satisfactory in all respects (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) to the
Underwriters and Underwriters' counsel, from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
(i) confirming that they are independent certified
public accountants with respect to the Company
within the meaning of the Act and the applicable
Rules and Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules and footnotes
thereto of the Company 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 Representatives
may rely upon the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
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 (with an indication of the date of the
latest available unaudited interim financial
statements), a reading of the latest
available minutes of meetings of the shareholders
and board of directors and the various committees
of the board of directors of the Company,
consultations with officers and other employees of
the Company responsible for financial and
accounting matters and other specified procedures
and inquiries, nothing has come to their
attention which would lead them to believe that
(A) the unaudited financial statements and
supporting schedules of the Company
included in the Registration Statement, if any,
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
included in the Registration Statement, or (B) at
a specified date not more than five days prior to
the Effective Date, there has been any change in
the capital stock or long-term debt of the Company,
or any decrease in the shareholders' equity or
net current assets or net assets of the
Company as compared with amounts shown in the
June 30, 1996 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 days
prior to the date of the Registration Statement,
the amount of liabilities of the Company (including
a breakdown of commercial paper and notes payable);
(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
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 excluding any questions
requiring an interpretation by legal
counsel, with the results obtained from the
application of specified readings, inquiries and
other appropriate procedures (which
procedures do not constitute an examination in
accordance with generally accepted auditing
standards) set forth in the letter and found
them to be in agreement, and
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the
Representative may request.
(g) On each Closing Date, there shall have been duly tendered to the
Representative for the several Underwriters' accounts, the certificates in the
names and denominations requested by the Representative for the Securities.
(h) No order suspending the sale of the Securities in any jurisdiction
designated by the Representative pursuant to subsection (e) of Section 7 hereof
shall have been issued on the Closing Date and no proceedings for that purpose
shall have been instituted or shall be contemplated.
(i) On or before each Closing Date and upon exercise of the RPO and
payment of the exercise price therefor, if applicable, the Company shall have
executed and delivered to the Representative, the Representative's Securities in
the such denominations and to such designees as shall have been provided to the
Company.
(j) On or before Closing Date, the Securities shall have been duly
approved for quotation on the OTC Bulletin Board.
(k) On or before Closing Date, there shall have been delivered to the
Representative all of the Lock-up Agreements, in form and substance satisfactory
to Underwriters' counsel.
(l) On or before Closing Date, the Company shall have executed the RPO
and the Warrant Agreement, substantially in the forms thereof filed as exhibits
to the Registration Statement.
(m) On or before the Effective Date the Company shall deliver to the
Representative satisfactory results of UCC, lien and title searches effected in
all appropriate jurisdictions, showing that the Company's assets, including all
of its intellectual properties, except as set forth in the offering documents,
are unencumbered, and satisfactory evidence, including trademark and copyright
searches, of its unencumbered title to its owned intellectual properties.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date is not so fulfilled, the
Representative may terminate this Agreement on notice to the Company or, if the
Representative so elects, it may waive any such conditions which have not been
fulfilled or extend the time for their fulfillment, and proceed with the
transactions contemplated by this Agreement.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7 "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of the
Underwriters), including specifically each person who may be substituted for an
Underwriter (a "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 Underwriters 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 based upon any
untrue statement or alleged untrue statement of a material fact contained (i) in
any Preliminary Prospectus, the Registration Statement or the Prospectus (as
from time to time amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included securities of the Company issued or issuable upon exercise of
the 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 Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
OTC Bulletin Board or any other 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
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 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 above referred to shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its officers and directors 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 Underwriters but only with respect
to statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company by such Underwriter expressly
for use in such Preliminary Prospectus, the Registration Statement or Prospectus
or any amendment thereof or supplement thereto or any such application. The
Company acknowledges that the statements with respect to the public offering of
the securities set forth under the heading "Underwriting," the risk factor
entitled "Experience of the Underwriter" and the stabilization legend in the
Prospectus have been furnished by the Underwriters expressly for use therein and
constitute the only information furnished in writing by or on behalf of the
Underwriters for inclusion in the Prospectus.
(c) Promptly after receipt of 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, 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 the
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party; (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded 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 is 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, 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 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 Securities, or (B) if
the allocation provided by clause (A) above is not permitted by applicable 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 Underwriters are the indemnified party, the relative benefits received
by the Company on the one hand, and the Underwriters on the other, shall be
deemed to be in the same proportions as the total net proceeds from the offering
of the Securities (before deducting expenses) bear to the total underwriting
discounts received by the Underwriters hereunder, in each case as set forth in
the table on the Cover Page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission of alleged omission to state
a material fact relates to information supplied by the Company, or by the
Underwriters, 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, expense 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 claims. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 12(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to 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 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, covenants 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 of the Company at the
Closing Date and such representations, warranties and agreements of the Company
including without limitation the respective indemnity agreements contained in
Sections 4 and 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of either the Underwriter or the Company and
shall survive the execution and/or termination of this Agreement or the issuance
and delivery of the Securities to the Underwriters and the Representative, as
the case may be.
9. Effective Date. This Agreement shall become effective at 9:00 a.m., New
York City time, on the next full business day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for the sale to
the public, provided, the provisions of Sections 7, 8 and 10 of this Agreement
shall at all times be effective. For purposes of this Section 9, the Securities
to be purchased hereunder shall be deemed to have been so released upon the
earlier of dispatch by the Representative of telegrams to securities dealers
releasing such shares for offering or the release by the Representative for
publication of the first newspaper advertisement which is subsequently published
relating to the Securities.
10. Termination.
(a) The Representative shall have the right to terminate this Agreement
by giving written notice to the Company at any time prior to the Closing Date if
(i) market conditions are unsuitable for the offering contemplated hereby at the
price per Share and Warrant set forth in Section 5(a) hereof and the Company and
the Representative cannot agree on another price or structure; or (ii) the
Company shall have failed, refused, or been unable to perform any of its
obligations hereunder, or breached any of its representations or warranties
hereunder or there shall be a failure of a closing condition to the
Representative's obligations hereunder; (iii) information comes to the
Representative's attention subsequent to the date hereof relating to the
Company, its financial operations and status, its management, its prospects or
its position in the industry which would preclude a successful offering on the
terms set forth herein; (iv) a material adverse change has occurred in the
financial condition, business or prospects of the Company; (v) the Company has
failed to comply with all applicable statutes, laws, rules and regulations; (vi)
the Company cannot expeditiously proceed with the offering contemplated hereby;
(vii) an action, suit or proceeding at law or in equity is commenced or brought
against the Company by any Federal, state or other commission, board or agency,
where any unfavorable decision would materially adversely affect the business
property, financial condition, prospects or income of the Company; (viii) any
domestic or international event or act or occurrence shall have disrupted the
financial markets; (ix) minimum or maximum prices shall have been established by
the New York Stock Exchange, by the American Stock Exchange or in the
over-the-counter market by the NASD (but not in the discretion of any
Underwriter), or trading in securities generally shall have been suspended or
materially limited by either stock exchange or in the over-the-counter market by
the NASD; (x) 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 in which the United States is a participant, or a national
emergency shall have been declared in the United States; (xi) a general banking
moratorium shall have been declared by New York or Federal authorities, or (xii)
there shall have been a material adverse change in the general market, political
or economic conditions in the United States, such that in any such case, in the
Representative's judgment it would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities.
(b) If the Representative exercises its rights to terminate this
Agreement and not proceed with the Offering as a result of the circumstances
enumerated in subclauses (ii) through (xi) of the previous sentence, the Company
shall reimburse the Representative in full for its accountable out-of-pocket
expenses (including the Representative's counsel fees and disbursements), minus
any amounts previously paid pursuant to Section 5 hereof. If the Representative
exercises its rights to terminate this Agreement as a result of the
circumstances enumerated in subclause (i) of such sentence, the Company shall
reimburse the Representative in full for its accountable out-of-pocket expenses
(including the Representative's counsel fees and disbursements) up to a maximum
of $75,000 minus the amount previously paid pursuant to Section 5 hereof.
(c) In the event the Representative elects not to proceed with the
offering contemplated hereby as a result of any condition enumerated in Section
10(a) above, then the Company agrees that it will not negotiate with or engage
any investment banking firm or underwriter other than the Representative with
respect to any private or public financing for the Company during the 12-month
period commencing on the date of such termination.
11. Substitution of the Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or Section 11 hereof) to
purchase the Securities which it or they are obligated to purchase on such date
under this Agreement (the "Defaulted Securities"), the Representative shall have
the right, within 24 hours thereafter, to make arrangement for one or more of
the non-defaulting Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth and if any such underwriter is willing
to so purchase the Defaulted Securities, then notwithstanding Section 14(ii)
below, the Representative shall be obligated to effect such arrangement; if,
however, the Representative shall not have completed such arrangement within
such 24-hour period, then:
(i) if the number of Defaulted Securities does not
exceed 10% of the total number of Firm Securities
to be purchased on such date, the non-defaulting
Underwriters shall be obligated to purchase the
full amount thereof in the proportions that their
respective underwriting
obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(ii) if the number of Defaulted Securities exceeds 10%
of the total number of Firm Securities, this
Agreement shall terminate without liability on the
part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination
of this Agreement, the Representative shall have the right to postpone the
Closing Date for a period of not exceeding ten days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. 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 three days following the day when mailed by prepaid first class
mail, or upon the day of personal delivery. Notices to the Underwriters shall be
directed to the Representative, IAR Securities Corp., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President, with a copy to ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Notices to the Company shall be directed to the Company at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, with a copy to Blau, ▇▇▇▇▇▇, Wactlar & ▇▇▇▇▇▇▇▇▇, P.C., ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Att:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
13. Parties. This Agreement shall inure solely to the benefit of and shall
be binding upon, the Underwriters, the Company and the controlling persons,
directors and officers and their respective successors, legal representatives
and assigns, and no person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of by virtue of this
Agreement or any provisions herein contained. No purchaser of Securities from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
14. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the law of the State of New York without giving
effect to the choice of law or conflict of laws principles.
15. 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.
16. Entire Agreement; Amendments. This Agreement and the Warrant Agreement
constitute the entire agreement between the parties hereto, and supersede all
prior written or oral agreement, understandings and negotiations, with respect
to the subject matter hereof, except as herein expressly provided. This
Agreement may not be amended except in writing, signed by the Representative and
the Company.
17. Law. This Agreement shall be deemed to have been made and delivered in
New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company and you (i) agree that any legal suit, action or
proceeding arising out or relating to this letter shall be instituted
exclusively in New York State Supreme Court, County of New York or in the United
States District Court for the Southern District of New York, and the United
States District Court for the Southern District of New York; (ii) waive any
objection to the venue of any such suit, action or proceeding, and (iii)
irrevocably consent to the jurisdiction of the New York State Supreme Court,
County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. The Company and you
further agree to accept and acknowledge service of any and all process which may
be served in any such suit, action or proceeding in the New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York and agree that service of process upon it mailed
by certified mail to its address shall be deemed in every respect effective
service of process upon it in any such suit, action or proceeding.
18. No Assignment. Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the prior written consent of
the other party, and any attempted assignment without such consent shall be void
and of no effect.
19. Schedules. Any disclosure made on any schedule hereto shall be deemed
as also having been made on any other schedule hereto as to which such
disclosure is also responsive.
If the foregoing correctly sets forth the understanding between the
Underwriters 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,
▇▇▇▇'S ORIGINAL, INC.
By:__________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
President
Confirmed and accepted as of
the date first above written
IAR Securities Corp.
For itself and as Representative
of the other Underwriters named
in Schedule A hereto.
By: _______________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
President
SCHEDULE A
Number of Shares to Number of Warrants to
Underwriter be Purchased be Purchased
----------- --------------------- ------------------------
IAR Securities Corp.
Millennium Securities Corp.
TOTAL
