UNITED STATES FINANCIAL GROUP INCORPORATED
2,025,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
[______], 1998
Xxxxxxx Xxxxxxxx Securities Corporation
As Representatives of the
several Underwriters named
in Schedule A
annexed hereto
c/x Xxxxxxx Davidson Securities Corporpation
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Dear Sirs:
United States Financial Group Incorporated, a Delaware
corporation (the "Company"), hereby confirms its agreement with Xxxxxxx
Xxxxxxxx Securities Corporation (the "Underwriter") and each of the
underwriters named in Schedule A hereto for whom Xxxxxxx Davidson Securities
Corporation is acting as the representative with respect to the sale of the
Company's Common Stock (as hereinafter defined), set forth in Schedule A, as
follows:
1. Description of the Securities.
The Company proposes to issue and sell to the Underwriter
2,025,000 shares of the Company's common stock, $.0001 par value per share (the
"Common Stock" or the "Securities"). The Company proposes to grant to the
Underwriter an option to purchase up to 303,750 additional shares of Common
Stock (the "Additional Securities"). An offering of Securities and Additional
Securities contemplated hereby may sometimes be referred to as the "Offering."
The Company will sell to the Underwriter, for nominal
consideration, a warrant to purchase 202,500 shares of Common Stock at a price
of 120% the public offering price of the Common Stock, exercisable over a
period of four years commencing one year from the Effective Date (the
"Underwriter's Warrants," and collectively with the Securities underlying the
Underwriter's Warrants, the "Underwriter's Securities"). The Underwriter's
Securities shall be non-
exercisable and non-transferable (other than to officers and directors of the
Underwriter and to members of the selling group) for a period of 12 months
following the Effective Date. If the Underwriter's Securities are not exercised
during their term, they shall, by their terms, automatically expire.
2. Representations and Warranties of the Company.
The Company represents and warrants to the
Underwriter that:
(a) The Company has filed with the Securities and
Exchange Commission (the "Commission"), a registration statement on Form SB-2
(File No. 33- _________), including any related preliminary prospectus
("Preliminary Prospectus"), for the registration of the Securities under the
Securities Act of 1933 (the "Act"). The Company will file further amendments to
said registration statement in the form to be delivered to you and will not,
before the registration statement becomes effective, file any other amendment
thereto to which you shall have objected in writing after having been furnished
with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus, financial
statements, exhibits and all other documents filed as a part thereof or
incorporated therein), is hereinafter called the "Registration Statement," and
the prospectus, in the form filed with the Commission pursuant to Rule 424(b)
of the General Rules and Regulations of the Commission under the Act (the
"Regulations") or, if no such filing is made, the definitive prospectus used in
the Offering, is hereinafter called the "Prospectus." The Company has delivered
to you copies of each Preliminary Prospectus as filed with the Commission and
has consented to the use of such copies for purposes permitted by the Act.
(b) The Commission has not issued any orders
preventing or suspending the use of any Preliminary Prospectus, and each
Preliminary Prospectus has conformed in all material respects with the
requirements of the Act and has not included any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, subject to the provisions set forth below
and to except as such omission has been cured in the a subsequent preliminary
prospectus or in the final prospectus.
(c) When the Registration Statement becomes
effective under the Act and at all times subsequent thereto including the
Closing Date (hereinafter defined) and the Option Closing Date (as hereinafter
defined in Section 5(d)) and for such longer periods as in the opinion of
counsel for the Underwriter, a Prospectus is required to be delivered in
connection with the sale of the Securities by the Underwriter, the Registration
Statement and Prospectus, and any amendment thereof or supplement thereto, will
contain all material statements which are required to be stated therein in
accordance with the Act and the Regulations, and will in all material respects
conform to
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the requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with written
information furnished to the Company by you, for use in connection with the
preparation of the Registration Statement or Prospectus, or in any amendment
thereof or supplement thereto. It is understood that the statements set forth
under the heading "Underwriting" in the Prospectus with respect to (i) the
amounts of the selling concession and reallowance; (ii) the identity of counsel
to the Underwriter under the heading "Legal Matters"; and (iii) the information
concerning the NASD affiliation of the Underwriter.
(d) The Company is, and at the Closing Date and the
Option Closing Date will be, a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Company is duly
qualified or licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification or licensing, except
those jurisdictions in which the failure to so qualify would not have a
material adverse effect. The Company has all requisite corporate powers and
authority, and except as set forth in the Registration Statement the Company
and its employees have all material and necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies to own or lease the Company's properties and
conduct its business as described in the Prospectus and the Company is doing
business and has been doing business during the period described in the
Registration Statement in compliance with all such material authorizations,
approvals, orders, licenses, certificates and permits and all material federal,
state and local laws, rules and regulations concerning the business in which
the Company is engaged. The disclosures in the Registration Statement
concerning the effects of federal, state and local regulation on the Company's
business as currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact. The Company has all
corporate power and authority to enter into this Agreement and carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained or will have
been obtained prior to the Closing Date.
(e) This Agreement has been duly and validly
authorized and executed by the Company. The Securities and the Underwriter's
Warrant to be issued and sold by the Company pursuant to this Agreement, the
securities issuable upon exercise of the Underwriter's Warrant and payment
therefor, and the Common Stock underlying such Underwriter's Warrants, have
been duly authorized (and, in the case of the Common Stock, have been duly
reserved for issuance) and, when issued and paid for in accordance with this
Agreement, the Common Stock will be validly issued, fully paid and
non-assessable; the Common Stock, Underwriter's Securities and Additional
Securities and Underwriter's Securities are not and will not be subject to the
preemptive rights of any stockholder of the Company and conform and at all
times up to and including their issuance will conform in all material respects
to all statements with regard thereto contained in the
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Registration Statement and Prospectus; and all corporate action required to be
taken for the authorization, issuance and sale of the Common Stock and
Underwriter's Warrant has been taken, and this Agreement constitutes a valid
and binding obligation of the Company, enforceable in accordance with its
terms, to issue and sell, upon exercise in accordance with the terms thereof,
the number and kind of securities called for thereby.
(f) The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof will not
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, the Articles of Incorporation, as amended, or
bylaws of the Company or of any evidence of indebtedness, lease, contract or
other agreement or instrument to which the Company is a party or by which the
Company or any of its properties is bound, or under any applicable law, rule,
regulation, judgment, order or decree of any government, professional advisory
body, administrative agency or court, domestic or foreign, having jurisdiction
over the Company or its properties, or result in the creation or imposition of
any lien, charge or encumbrance upon any of the properties or assets of the
Company; and no consent, approval, authorization or order of any court or
governmental or other regulatory agency or body is required for the
consummation by the Company of the transactions on its part herein
contemplated, except as such as may be required under the Act or under state
securities or blue sky laws, except where a breach, violation or failure to
obtain such consent would not have a material adverse effect upon the business
or operation of the Company.
(g) Subsequent to the date hereof, and prior to the
Closing Date and the Option Closing Date, the Company will not issue or acquire
any equity securities except that the Company may make short-term investments
as contemplated in the "Use of Proceeds" section of the Prospectus. Except as
described in the Registration Statement, the Company does not have, and at the
Closing Date and at the Option Closing Date will not have, outstanding any
options to purchase or rights or warrants to subscribe for, or any securities
or obligations convertible into, or any contracts or commitments to issue or
sell shares of preferred stock, Common Stock or any such options, warrants,
convertible securities or obligations.
(h) The financial statements and notes thereto
included in the Registration Statement and the Prospectus fairly present the
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved.
(i) Except as set forth in the Registration
Statement, the Company is not, and at the Closing Date and at the Option
Closing Date will not be, in violation or breach of, or default in, the due
performance and observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, note, loan or credit agreement, or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the property or assets of the Company is
subject, which violations, breaches, default or defaults, singularly or in the
4
aggregate, would have a material adverse effect on the Company. The Company has
not and will not have taken any action in material violation of the provisions
of the Articles of Incorporation, as amended, or the bylaws of the Company or
any statute or any order, rule or regulation of any court
or regulatory authority or governmental body having jurisdiction over or
application to the Company, its business or properties.
(j) The Company has, and at the Closing Date and at
the Option Closing Date will have, good and marketable title to all properties
and assets described in the Prospectus as owned by it, free and clear of all
liens, charges, encumbrances, claims, security interests, restrictions and
defects of any material nature whatsoever, except such as are described or
referred to in the Prospectus and liens for taxes not yet due and payable. All
of the material leases and subleases under which the Company is the lessor or
sublessor of properties or assets or under which the Company holds properties
or assets as lessee as described in the Prospectus are, and will on the Closing
Date and the Option Closing Date be, in full force and effect, and except as
described in the Prospectus, the Company is not and will not be in default in
respect to any of the terms or provisions of any of such leases or subleases
(which would have a material adverse effect on the business, business prospects
or operations of the Company taken as a whole), and no claim has been asserted
by anyone adverse to rights of the Company as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continue possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus, and the Company owns or leases all
such properties as are necessary to its operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted set forth in
the Prospectus (which would have a material adverse effect on the business,
business prospects or operations of the Company taken as a whole).
(k) The authorized, issued and outstanding capital
stock of the Company as of ___________, 1998 and as of the date of the
Prospectus is as set forth in the Prospectus under "Capitalization;" the shares
of issued and outstanding capital stock of the Company set forth thereunder
have been duly authorized, validly issued and are fully paid and
non-assessable; except as set forth in the Prospectus, no options, warrants or
other rights to purchase, agreements or other obligations to issue, or
agreements or other rights to convert any obligation into, any shares of
capital stock of the Company have been granted or entered into by the Company;
and the Common Stock, and all such options and warrants conform in all material
respects, to all statements relating thereto contained in the Registration
Statement and Prospectus.
(l) Except as described in the Prospectus, the
Company does not own or control any capital stock or securities of, or have any
proprietary interest in, or otherwise participate in any other corporation,
partnership, joint venture, firm, association or business organization;
provided, however, that this provision shall not be applicable to the
investment, if any, of the net proceeds from the sale of the Securities sold by
the Company in certificates of deposits, savings deposits, short-term
obligations of the United States Government, money market instruments or other
short-term investments.
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(m) Xxxxxxx Xxxxxxxx & Co., LLP, who have reported
on the financial statements of the Company for the years ended December 31,
1997 and 1996, and who have reviewed the financial statements of the Company
for the periods ended September 30, 1998 and 1997 all of which are filed with
the Commission as a part of the Registration Statement, are independent
accountants as required by the Act and the Regulations.
(n) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and except
as may otherwise be indicated or contemplated herein or therein, the Company
has not (i) issued any securities or incurred any liability or obligation,
direct or contingent, for borrowed money; or (ii) entered into any transaction
other than in the ordinary course of business; or (iii) declared or paid any
dividend or made any other distribution on or in respect to its capital stock.
(o) There is no litigation or governmental
proceeding pending or to the knowledge of the Company threatened against, or
involving the properties or business of the Company which might materially
adversely affect the value, assets or the operation of the properties or the
business of the Company, except as referred to in the Prospectus. Further,
except as referred to in the Prospectus, there are no pending actions, suits or
proceedings related to environmental matters or related to discrimination on
the basis of age, sex, religion or race, nor is the Company charged with or, to
its knowledge, under investigation with respect to any violation of any
statutes or regulations of any regulatory authority having jurisdiction over
its business or operations, and no labor disturbances by the employees of the
Company exist or, to the knowledge of the Company, have been threatened.
(p) The Company has, and at the Closing Date and at
the Option Closing Date will have, filed all necessary federal, state and
foreign income and franchise tax returns or has requested extensions thereof
(except in any case where the failure to so file would not have a material
adverse effect on the Company), and has paid all taxes which it believes in
good faith were required to be paid by it except for any such tax that
currently is being contested in good faith or as described in the Prospectus.
(q) The Company has not at any time (i) made any
contribution to any candidate for political office, or failed to disclose fully
any such contribution, in violation of law, or (ii) made any payment to any
state, federal, foreign governmental or professional regulatory agency, officer
or official or other person charged with similar public, quasi-public or
professional regulatory duties, other than payments or contributions required
or allowed by applicable law.
(r) Except as set forth in the Registration
Statement, to the knowledge of the Company, neither the Company nor any
officer, director, employee or agent of the Company has made any payment or
transfer of any funds or assets of the Company or conferred any personal
benefit by use of the Company's assets or received any funds, assets or
personal benefit in violation of any law, rule or regulation, which is required
to be stated in the Registration Statement or necessary to make the statements
therein not misleading.
6
(s) On the Closing Date and on the Option Closing
Date, all transfer or other taxes, if any (other than income tax) which are
required to be paid, and are due and payable, in connection with the sale and
transfer of the Securities by the Company to the Underwriter will have been
fully paid or provided for by the Company as the case may be, and all laws
imposing such taxes will have been fully complied with in all material
respects.
(t) There are no contracts or other documents of the
Company which are of a character required to be described in the Registration
Statement or Prospectus or filed as exhibits to the Registration Statement
which have not been so described or filed.
(u) The Company will apply the net proceeds from the
sale of the Securities sold by it for the purposes and in the manner set forth
in the Registration Statement and Prospectus under the heading "Use of
Proceeds."
(v) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or specified
authorizations; (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (3) access to
assets is permitted only in accordance with management's general or specific
authorizations; and (4) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(w) Except as set forth in the Prospectus, no holder
of any securities of the Company has the right to require registration of any
securities because of the filing or effectiveness of the Registration
Statement.
(x) The Company has not taken and at the Closing
Date will not have taken, directly or indirectly, any action designed to cause
or result in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the Common Stock,
to facilitate the sale or resale of such securities.
(y) To the Company's knowledge, there are no claims
for services in the nature of a finder's origination fee with respect to the
sale of the Securities hereunder, except as set forth in the Prospectus.
(z) No right of first refusal exists with respect to
any sale of securities by the Company.
(aa) No statement, representation, warranty or
covenant made by the Company in this Agreement or made in any certificate or
document required by this Agreement to be delivered to Underwriter was, when
made, or as of the Closing Date or as of the Option Closing Date will be
materially inaccurate, untrue or incorrect.
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3. Covenants of the Company.
The Company covenants and agrees that:
(a) It will deliver to the Underwriter, without
charge, two conformed copies of each Registration Statement and of each
amendment or supplement thereto, including all financial statements and
exhibits.
(b) The Company has delivered to the Underwriter,
and each of the Selected Dealers (as hereinafter defined) without charge, as
many copies as have been requested of each Preliminary Prospectus heretofore
filed with the Commission in accordance with and pursuant to the Commission's
Rule 430 under the Act and will deliver to the Underwriter and to others whose
names and addresses are furnished by the Underwriter or a Selected Dealer,
without charge, on the Effective Date of the Registration Statement, and
thereafter from time to time during such reasonable period as you may request
if, in the opinion of counsel for the Underwriter, the Prospectus is required
by law to be delivered in connection with sales by the Underwriter or a dealer,
as many copies of the Prospectus (and, in the event of any amendment of or
supplement to the Prospectus, of such amended or supplemented Prospectus) as
the Underwriter may request for the purposes contemplated by the Act. The
Company will take all necessary actions to furnish to whomever directed by the
Underwriter, when and as requested by the Underwriter, all necessary documents,
exhibits, information, applications, instruments and papers as may be
reasonably required or, in the opinion of counsel to the Underwriter desirable,
in order to permit or facilitate the sale of the Securities.
(c) The Company has authorized the Underwriter to
use, and make available for use by prospective dealers, the Preliminary
Prospectus, and authorizes the Underwriter, all dealers selected by you in
connection with the distribution of the Securities (the "Selected Dealers") to
be purchased by the Underwriter and all dealers to whom any of such Securities
may be sold by the Underwriter or by any Selected Dealer, to use the
Prospectus, as from time to time amended or supplemented, in connection with
the sale of the Securities in accordance with the applicable provisions of the
Act, the applicable Regulations and applicable state law, until completion of
the distribution of the Securities and for such longer period as you may
request if the Prospectus is required under the Act, the applicable Regulations
or applicable state law to be delivered in connection with sales of the
Securities by the Underwriter or the Selected Dealers.
(d) The Company will use its best efforts to cause
the Registration Statement to become effective and will notify the
Representative immediately, and confirm the notice in writing: (i) when the
Registration Statement or any post-effective amendment thereto becomes
effective; (ii) of the issuance by the Commission of any stop order or of the
initiation, or to the best of the Company's knowledge, the threatening, of any
proceedings for that purpose; (iii) the suspension of the qualification of the
Securities and the Underwriter's Warrants, or underlying securities, for
offering or sale in any jurisdiction or of the initiating, or to the best of
the Company's knowledge the threatening, of any proceeding for that purpose;
and (iv) of the receipt of any
8
comments from the Commission. If the Commission shall enter a stop order at any
time, the Company will make every reasonable effort to obtain the lifting of
such order at the earliest possible moment.
(e) During the time when a prospectus is required to
be delivered under the Act, the Company will comply with all requirements
imposed upon it by the Act and the Securities Exchange Act of 1934 (the
"Exchange Act"), as now and hereafter amended and by the Regulations, as from
time to time in force, as necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriter, the Prospectus as then amended or supplemented includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend the Prospectus to comply with the Act, the Company will
notify you promptly and prepare and file with the Commission an appropriate
amendment or supplement in accordance with Section 10 of the Act and will
furnish to you copies thereof.
(f) The Company will endeavor in good faith, in
cooperation with you, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws or blue sky laws of such jurisdictions as you may reasonably
designate. In each jurisdiction where such qualification shall be effected, the
Company will, unless you agree that such action is not at the time necessary or
advisable, file and make such statements or reports at such times as are or may
reasonably be required by the laws of such jurisdiction.
(g) The Company will make generally available to its
security holders, as soon as practicable, but in no event later than the first
day of the fifteenth full calendar month following the Effective Date of the
Registration Statement, an earnings statement of the Company, which will be in
reasonable detail but which need not be audited, covering a period of at least
twelve months beginning after the Effective Date of the Registration Statement,
which earnings statements shall satisfy the requirements of Section 11(a) of
the Act and the Regulations as then in effect. The Company may discharge this
obligation in accordance with Rule 158 of the Regulations.
(h) During the period of five years commencing on
the Effective Date of the Registration Statement, the Company will furnish to
its stockholders an annual report (including financial statements audited by
its independent public accountants), in reasonable detail, and, at its expense,
furnish the Underwriter (i) within 90 days after the end of each fiscal year of
the Company, a consolidated balance sheet of the Company and its consolidated
subsidiaries and a separate balance sheet of each subsidiary of the Company the
accounts of which are not included in such consolidated balance sheet as of the
end of such fiscal year, and consolidated statements of operations,
stockholder's equity and cash flows of the Company and its consolidated
subsidiaries and separate statements of operations, stockholder's equity and
cash flows of each of the subsidiaries of the
9
Company the accounts of which are not included in such consolidated statements,
for the fiscal year then ended all in reasonable detail and all certified by
independent accountants (within the meaning of the Act and the Regulations),
(ii) within 45 days after the end of each of the first three fiscal quarters of
each fiscal year, similar balance sheets as of the end of such fiscal quarter
and similar statements of operations, stockholder's equity and cash flows for
the fiscal quarter then ended, all in reasonable detail, and subject to year
end adjustment, all certified by the Company's principal financial officer or
the Company's principal accounting officer as having been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, (iii) as soon as available, each report furnished to or filed
with the Commission or any securities exchange and each report and financial
statement furnished to the Company's shareholders generally and (iv) as soon as
available, such other material as the Underwriter may from time to time
reasonably request regarding the financial condition and operations of the
Company.
(i) For a period of eighteen months from the Closing
Date, the Company, at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit), the
Company's financial statements for each of the first three quarters prior to
the announcement of quarterly financial information, the filing of the
Company's 10-Q quarterly report and the mailing of quarterly financial
information to stockholders.
(j) Prior to the Closing Date or the Option Closing
Date, the Company will not issue, directly or indirectly, without your prior
written consent and that of counsel for the Underwriter, any press release or
other public announcement or hold any press conference with respect to the
Company or its activities with respect to this Offering.
(k) The Company will deliver to you prior to filing,
any amendment or supplement to the Registration Statement or Prospectus
proposed to be filed after the Effective Date of the Registration Statement and
will not file any such amendment or supplement to which you shall reasonably
object after being furnished such copy.
(l) During the period of 120 days commencing on the
date hereof, the Company will not at any time take, directly or indirectly, any
action designed to, or which will constitute or which might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Securities to facilitate the sale or resale of any of the Securities.
(m) The Company will apply the net proceeds from the
Offering received by it in the manner set forth under "Use of Proceeds" in the
Prospectus. For a period of three years from the Closing, the Company will not
make any loans or engage in any transactions with any officer, director or
shareholder of the Company, or any person, corporation or other entity
affiliated with such persons, without the approval of the independent Audit
Committee.
(n) Counsel for the Company, the Company's
accountants, and the officers and directors of the Company will, respectively,
furnish the opinions, the letters and the certificates referred to in
subsections of Paragraph 9 hereof, and, in the event that the Company shall
file any
10
amendment to the Registration Statement relating to the offering of the
Securities or any amendment or supplement to the Prospectus relating to the
offering of the Securities subsequent to the Effective Date of the Registration
Statement, such counsel, such accountants, such officers and directors,
respectively, will, at the time of such filing or at such subsequent time as
you shall specify, so long as securities being registered by such amendment or
supplement are being underwritten by the Underwriter, furnish to you such
opinions, letters and certificates, each dated the date of its delivery, of the
same nature as the opinions, the letters and the certificates referred to in
said Paragraphs 9, as you may reasonably request, or, if any such opinion or
letter or certificate cannot be furnished by reason of the fact that such
counsel or such accountants or any such officer or director believes that the
same would be inaccurate, such counsel or such accountants or such officer or
director will furnish an accurate opinion or letter or certificate with respect
to the same subject matter.
(o) The Company will comply with all of the
provisions of any undertakings contained in the Registration Statement in all
material respects.
(p) The Company will reserve and keep available for
issuance that maximum number of its authorized but unissued shares of Common
Stock which are issuable upon exercise of the Underwriter's Warrant outstanding
from time to time.
(q) The Company's Common Stock shall be listed on
the NASDAQ National Market ("NNM"), or the Nasdaq SmallCap Market ("Nasdaq")
and the Boston Stock Exchange ("BSE"), not later than the Closing Date.
Promptly after the Closing Date, the Company will make all filings required,
including registration under the Exchange Act, to obtain the listing of the
Common Stock on the NNM, or Nasdaq and the BSE, as the case may be, and will
effect and use its best efforts to maintain such listing (unless the Company is
acquired) for at least five years from the date of this Agreement.
(r) The Company will apply for listing in Standard
and Poor's Corporation Reports or Xxxxx'x OTC Guide and shall use its best
efforts to have the Company included in such publications for at least five
years from the Closing Date.
(s) Except as contemplated in the Registration
Statement, no person who is currently an officer or director of the Company nor
any stockholder, warrant holder or option holder of the Company shall, without
your written consent, offer for sale, pledge, contract to sell, or sell or
otherwise dispose of directly or indirectly, any shares of the Common Stock of
the Company owned by such stockholder (including shares issuable upon exercise
of existing options and shares issued pursuant to Rule 144 under the Act), on
the date of this Agreement for a period of six months from the Closing Date.
The Company has caused each of its officers, directors, stockholders, warrant
holders and option holders to deliver to you, on or before the date of this
Agreement, an agreement to this effect, in form and substance reasonably
satisfactory to the Underwriter and to counsel for the Underwriter. For a
period of twelve months from the Effective Date, the Company shall not issue
any shares of Common Stock or preferred stock or any warrants, options or other
rights to purchase Common Stock or preferred stock or any other security of the
11
Company without the consent of the Underwriter, with the exception of shares
issued pursuant to the exercise of options, warrants or other convertible
securities outstanding prior to the Effective Date. The Company agrees not to
file any registration statement on Form S-8, during the 24 months following the
Effective Date without prior written approval of the Underwriter.
(t) The Company will use its best efforts to obtain
key person life insurance payable to the Company on the life of M. Xxx Xxxx in
the amount of $1,000,000; provided, however, that such insurance need not be
maintained on such person if he ceases to be employed by the Company.
(u) The Company will use its best efforts to obtain,
as soon after the Closing Date as is reasonably possible, liability insurance
covering its officers and directors.
(v) The Company agrees that any conflict of interest
arising between a member of the Company's Board of Directors and the Company in
connection with such Director's dealing with, or obligations to, the Company,
shall be resolved by a vote of the majority of the independent members of the
Board of Directors.
(w) The Company agrees that it will not amend the
terms or cancel any employment or consulting agreement without the approval of
the independent Audit Committee.
(x) The Company agrees that it will employ the
services of financial public relations firm acceptable to the Underwriter for a
period of at least twelve months following the Effective Date.
(y) Except as contemplated in the Registration
Statement, no person who is currently an officer or director of the Company or
a holder of more than 5% of the Company's outstanding Common Stock shall,
without the Underwriter's written consent, offer for sale, pledge, contract to
sell, or sell or otherwise dispose of directly or indirectly, any shares of the
Common Stock of the Company owned by such stockholder (including shares
issuable upon exercise of existing options and shares saleable pursuant to Rule
144 under the Act), on the date of this Agreement for a period of 18 months
from the Effective Date. The Company has caused its principal stockholders and
certain other presently existing stockholders to deliver to the Underwriter, on
or before the date of this Agreement, an agreement to this effect, in form and
substance reasonably satisfactory to the Underwriter and to counsel for the
Underwriter.
4. Sale, Purchase and Delivery of Securities;
Closing Date.
(a) The Company agrees to sell to the Underwriter,
and the Underwriter, on the basis of the warranties, representations and
agreements of the Company herein, and subject to the terms and conditions
herein, agrees to purchase the Securities from the Company at a price of $15
per share, less an underwriting discount of ten percent (10%) of the offering
price for each security. The Underwriter may allow a concession not exceeding
[$ ] per share to Selected Dealers
12
who are members of the National Association of Securities Dealers, Inc.
("NASD"), and to certain foreign dealers, and such dealers may allow to NASD
members and to certain foreign dealers a concession not exceeding $.[ ] per
share.
(b) Delivery of the Securities and payment therefor
shall be made at 10:00 A.M., New York time on the Closing Date, as hereinafter
defined, at the offices of Xxxxxxx Xxxxxxxx Securities Corp., 00 Xxxxx Xxxx
Xxxxxx, Xxxxxxxx, XX 00000, or such other location as may be agreed upon by you
and the Company. Delivery of certificates for the Common Stock (in definitive
form and registered in such names and in such denominations as you shall
request by written notice to the Company delivered at least four business days'
prior to the Closing Date) shall be made to you for the account of the
Underwriter against payment of the purchase price therefor by certified or bank
check or wire transfer payable in New York Clearing House funds to the order of
the Company. The Company will make such certificates available for inspection
at least two business days prior to the Closing Date at such place as you shall
designate.
(c) The "Closing Date" shall be __________, 1998,
which shall be the third business day following the Effective Date of the
Registration Statement or such other date as you shall determine and advise the
Company by at least three full business days' notice.
(d) The cost of original issue tax stamps, if any,
in connection with the issuance and delivery of the Securities by the Company
to the Underwriter shall be borne by the Company. The Company will pay and hold
the Underwriter, and any subsequent holder of the Securities, harmless from any
and all liabilities with respect to or resulting from any failure or delay in
paying federal and state stamp taxes, if any, which may be payable or
determined to be payable in connection with the original issuance or sale to
the Underwriter of the Securities or any portions thereof.
5. Sale, Purchase and Delivery of Additional Securities;
Option Closing Date.
(a) The Company agrees to sell to the Underwriter,
and upon the basis of the representations, warranties and agreements of the
Company herein contained, subject to the satisfaction of all the terms and
conditions of this Agreement, the Underwriter shall have the option (the
"Option") to purchase the Additional Securities from the Company, at the same
price per Security as set forth in Paragraph 4(a) above. Additional Securities
may be purchased solely for the purpose of covering over-allotments made in
connection with the distribution and sale of the Securities.
(b) The Option to purchase all or part of the
Additional Securities covered thereby is exercisable by you at any time and
from time to time before the expiration of a period of 45 calendar days from
the date of the Effective Date of the Registration Statement (the "Option
Period") by written notice to the Company setting forth the number of
Additional Securities for which the Option is being exercised, the name or
names in which the certificates for such Additional Securities are to be
registered and the denominations of such certificates. Upon each exercise of
the
13
Option, the Company shall sell to the Underwriter the aggregate number of
Additional Securities specified in the notice exercising such Option.
(c) Delivery of the Additional Securities with
respect to which Options shall have been exercised and payment therefor shall
be made at 10:00 A.M., New York time on the Option Closing Date, as hereinafter
defined, at the offices of Xxxxxxx Davidson Securities Corp. or at such other
locations as may be agreed upon by you and the Company. Delivery of
certificates for Additional Securities shall be made to you for the account of
the Underwriter against payment of the purchase price therefor by certified or
bank check or wire transfer in New York Clearing House Funds to the order of
the Company. The Company will make certificates for Additional Securities to be
purchased at the Option Closing Date available for inspection at least two
business days prior to such Option Closing Date at such place as you shall
designate.
(d) The "Option Closing Date" shall be the date not
later than three business days after the end of the Option Period as you shall
determine and advise the Company by at lease three full business days' notice,
unless some other time is agreed upon between you and the Company.
(e) The obligations of the Underwriter to purchase
and pay for Additional Securities at such Option Closing Date shall be subject
to compliance as of such date with all the conditions specified in Paragraph 2
herein and the delivery to you of opinions, certificates and letters, each
dated such Option Closing Date, substantially similar in scope to those
specified in Paragraph 9 herein.
(f) The cost of original issue tax stamps, if any,
in connection with the issuance and delivery of the Additional Securities by
the Company to the Underwriter shall be borne by the Company. The Company will
pay and hold the Underwriter, and any subsequent holder of Additional
Securities, harmless from any and all liabilities with respect to or resulting
from any failure or delay in paying federal and state stamp taxes, if any,
which may be payable or determined to be payable in connection with the
original issuance or sale to the Underwriter of the Additional Securities or
any portion thereof.
6. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the
Company that:
(a) The Underwriter is a member in good standing of
the National Association of Securities Dealers, Inc., and has complied with all
NASD requirements concerning net capital and compensation to be received in
connection with the Offering.
(b) To the Underwriter's knowledge, there are no
claims for services in the nature of a finder's origination fee with respect to
the sale of the Securities hereunder to which the Company is, or may become,
obligated to pay.
14
7. Payment of Expenses.
(a) The Company will pay and bear all costs, fees,
taxes and expenses incident to and in connection with: (i) the issuance, offer,
sale and delivery of the Securities, including all expenses and fees incident
to the preparation, printing, filing and mailing (including the payment of
postage with respect to such mailing) of the Registration Statement (including
all exhibits thereto), each Preliminary Prospectus, the Prospectus, and
amendments and post-effective amendments thereof and supplements thereto, and
this Agreement and related documents, Preliminary and Final Blue Sky Memoranda,
including the cost of preparing and copying all copies thereof in quantities
deemed necessary by the Underwriter; (ii) the costs of preparing and printing
all "Tombstone" and other appropriate advertisements; (iii) the printing,
engraving, issuance and delivery of the Common Stock, Additional Securities,
Underwriter's Warrant and the securities underlying the Underwriter's Warrant,
including any transfer or other taxes payable thereon in connection with the
original issuance thereof; (iv) the qualification of the Common Stock under the
state or foreign securities or "Blue Sky" laws selected by the Underwriter and
the Company, and disbursements and reasonable fees of counsel for the
Underwriter in connection therewith plus the filing fees for such states; (v)
fees and disbursements of counsel and accountants for the Company; (vi) other
expenses and disbursements incurred on behalf of the Company (vii) the filing
fees payable to the Commission and the National Association of Securities
Dealers, Inc. ("NASD"); (viii) fees associated with the preparation of
transaction "bibles" and lucite cube momentos in such quantities as the
Underwriter may request; and (ix) any listing of the Common Stock on a
securities exchange or on NASDAQ.
(b) In addition to the expenses to be paid and borne
by the Company referred to in Paragraph 8(a) above, the Company shall reimburse
you at closing for expenses incurred by you in connection with the Offering
(for which you need not make any accounting), in the amount of 3% of the price
to the public of the Securities and Additional Securities sold in the Offering.
This 3% non-accountable expense allowance shall cover the fees of your legal
counsel, but shall not include any expenses for which the Company is
responsible under Paragraph 8(a) above, including the reasonable fees and
disbursements of your legal counsel with respect to Blue Sky matters. As of the
date hereof, $25,000 has been advanced by the Company to the Underwriter with
respect to such non-accountable expense allowance.
(c) In the event that the Company does not or
cannot, for any reason whatsoever other than a default by the Underwriter,
expeditiously proceed with the Offering, or if any of the representations,
warranties or covenants contained in this Agreement are not materially correct
or cannot be complied with by the Company, or business prospects or obligations
of the Company are adversely affected and the Company does not commence or
continue with the Offering at any time or terminate the proposed transaction
prior to the first closing date of this Agreement the Company shall reimburse
the Underwriter on an accountable basis for all out-of-pocket expenses actually
incurred in connection with the underwriting, this Agreement and all of the
transactions hereby contemplated, including, without limitation, your legal
fees and expenses, less such sums which have already been paid.
15
8. Conditions of Underwriter's Obligations.
The obligations of the Underwriter to consummate the
transactions contemplated by this Agreement shall be subject to the continuing
accuracy of the representations and warranties of the Company contained herein
as of the date hereof and as of the Closing Date, the accuracy of the
statements of the Company and its officers and directors made pursuant to the
provisions hereof, and to the performance by the Company of its covenants and
agreements hereunder and under each certificate, opinion and document
contemplated hereunder and to the following additional conditions:
(a) The Registration Statement shall have become
effective not later than 5:00 p.m., New York time, on the date following the
date of this Agreement, or such later date and time as shall be consented to in
writing by you and, on or prior to the Closing Date, no stop order suspending
the effectiveness of the Registration Statement or the qualification or
registration of the Securities under the securities laws of any jurisdiction
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or to your knowledge or the knowledge of the
Company, shall be contemplated by the Commission or any such authorities of any
jurisdiction and any request on the part of the Commission or any such
authorities for additional information shall have been complied with to the
reasonable satisfaction of the Commission or such authorities and counsel to
the Underwriter and after the date hereof no amendment or supplement shall have
been filed to the Registration Statement or Prospectus without your prior
consent.
(b) The Registration Statement or the Prospectus or
any amendment thereof or supplement thereto shall not contain an untrue
statement of a fact which is material, or omit to state a fact which is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) Between the time of the execution and delivery
of this Agreement and the Closing Date, there shall be no litigation instituted
against the Company or any of its officers or directors and between such dates
there shall be no proceeding instituted or, to the Company's knowledge,
threatened against the Company or any of its officers or directors before or by
any federal, state or county commission, regulatory body, administrative agency
or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding would have a material
adverse effect on the Company or its business, business prospects or
properties, or have a material adverse effect on the financial condition or
results of operation of the Company.
(d) Each of the representations and warranties of
the Company contained herein and each certificate and document contemplated
under this Agreement to be delivered to you shall be true and correct at the
Closing Date as if made at the Closing Date, and all covenants and agreements
contained herein and in each such certificate and document to be performed on
the part of the Company, and all conditions contained herein and in each such
certificate and document to
16
be fulfilled or complied with by the Company at or prior to the Closing Date
shall be fulfilled or complied with.
(e) At the Closing Date, you shall have received the
opinion of Doros & Brescia, P.C., counsel to the Company, dated as of such
Closing Date, addressed to the Underwriter and in form and substance
satisfactory to counsel to the Underwriter, to the effect that:
(i) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full corporate power and authority, and all licenses, permits,
certifications, registrations, approvals, consents and franchises to own or
lease and operate its properties and to conduct its business as described in
the Registration Statement. The Company is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company;
(ii) The Company has full corporate power
and authority to execute, deliver and perform the Underwriting Agreement and
the Underwriter's Warrant and to consummate the transactions contemplated
thereby. The execution, delivery and performance of the Underwriting Agreement
and the Underwriter's Warrant by the Company, the consummation by the Company
of the transactions therein contemplated and the compliance by the Company with
the terms of the Underwriting Agreement and the Underwriter's Warrant have been
duly authorized by all necessary corporate action, and each of the Underwriting
Agreement and the Underwriter's Warrant has been duly executed and delivered by
the Company. Each of the Underwriting Agreement and the Underwriter's Warrant
are a valid and binding obligation of the Company, enforceable in accordance
with their respective terms, subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and the discretion of courts in
granting equitable remedies and except that enforceability of the
indemnification provisions and the contribution provisions set forth in the
Underwriting Agreement may be limited by the federal securities laws or public
policy underlying such laws;
(iii) The execution, delivery and
performance of the Underwriting Agreement and the Underwriter's Warrant by the
Company, the consummation by the Company of the transactions therein
contemplated and the compliance by the Company with the terms of the
Underwriting Agreement and the Underwriter's Warrant do not, and will not, with
or without the giving of notice or the lapse of time, or both, (A) result in a
violation of the Certificate of Incorporation, as the same may be amended, or
by-laws of the Company, (B) to the best of our knowledge, result in a breach
of, or conflict with, any terms or provisions of or constitute a default under,
or result in the modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company pursuant to, any indenture, mortgage,
note, contract, commitment or other material agreement or instrument to which
the Company is a party or by which the Company or any of its properties or
17
assets are or may be bound or affected, except where any of the foregoing would
not result in a material adverse effect upon the Company's business or
operations; (C) to the best of our knowledge, violate any existing applicable
law, rule or regulation or judgment, order or decree known to us of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or business; or (D) to the best of our
knowledge, have any effect on any permit, certification, registration,
approval, consent, license or franchise necessary for the Company to own or
lease and operate its properties and to conduct its business or the ability of
the Company to make use thereof;
(iv) To the best of our knowledge, no
authorization, approval, consent, order, registration, license or permit of any
court or governmental agency or body (other than under the Act, the Regulations
and applicable state securities or Blue Sky laws) is required for the valid
authorization, issuance, sale and delivery of the Securities, the Additional
Securities or the Underwriter's Warrants, and the consummation by the Company
of the transactions contemplated by the Underwriting Agreement or the
Underwriter's Warrants;
(v) The Registration Statement was declared
effective under the Act on [___________], 1998; to the best of our knowledge,
no stop order suspending the effectiveness of the Registration Statement has
been issued, and no proceedings for that purpose have been instituted or are
pending, threatened or contemplated under the Act or applicable state
securities laws;
(vi) The Registration Statement and the
Prospectus, as of the Effective Date (except for the financial statements and
other financial data included therein or omitted therefrom, as to which we
express no opinion), comply as to form in all material respects with the
requirements of the Act and Regulations and the conditions for use of a
registration statement on Form SB-2 have been satisfied by the Company;
(vii) The description in the Registration
Statement and the Prospectus of statutes, regulations, contracts and other
documents have been reviewed by us, and, based upon such review, are accurate
in all material respects and present fairly the information required to be
disclosed, and to the best of our knowledge, there are no material statutes or
regulations, or, to the best of our knowledge, material contracts or documents,
of a character required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement, which are
not so described or filed as required.
To the best of our knowledge, none of the material
provisions of the contracts or instruments described above violates any
existing applicable law, rule or regulation or judgment, order or decree known
to us of any United States governmental agency or court having jurisdiction
over the Company or any of its assets or businesses;
(viii) The outstanding Common Stock has
been duly authorized and validly issued. The outstanding Common stock is fully
paid an non-assessable. To the best of our
18
knowledge, none of the outstanding Common Stock has been issued in violation of
the preemptive rights of any shareholder of the Company. None of the holders of
the outstanding Common Stock are subject to personal liability solely by reason
of being such a holder. The authorized Common Stock conforms to the description
thereof contained in the Registration Statement and Prospectus. To the best of
our knowledge, except as set forth in the Prospectus, no holders of any of the
Company's securities has any rights, "demand," "piggyback" or otherwise, to
have such securities registered under the Act;
(ix) The issuance and sale of the
Securities, the Additional Securities and the Underwriter's Warrant have been
duly authorized and when issued will be validly issued, fully paid and
non-assessable, and the holders thereof will not be subject to personal
liability solely by reason of being such holders. Neither the Securities, the
Additional Securities, nor the Common Stock are subject to preemptive rights of
any stockholder of the Company. The certificates representing the Securities
are in proper legal form;
(x) The issuance and sale of the
Underwriter's Warrant has been duly authorized and, when paid for, issued and
delivered pursuant to the terms of the Underwriter's Agreement or the
Underwriter's Warrants, as the case may be, the Underwriter's Warrant will
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms, to issue and sell the Underwriter's Warrants. All
corporate action required to be taken for the authorization, issuance and sale
of the securities has been duly, validly and sufficiently taken. The Common
Stock has been duly authorized by the Company to be offered in the form of the
Securities. The Underwriter's Warrant conforms to the descriptions thereof
contained in the Registration Statement and Prospectus;
(xi) The Underwriter has acquired good
title to the Securities, free and clear of all liens, encumbrances, equities,
security interests and claims, provided that the Underwriter is a bona fide
purchasers as defined in ss.8-302 of the Uniform Commercial Code;
(xii) Assuming that the Underwriter
exercises the over-allotment option to purchase the Additional Securities and
make payments therefor in accordance with the terms of the Underwriting
Agreement, upon delivery of the Additional Securities to the Underwriter
thereunder, the Underwriter will acquire good title to the Additional
Securities, free and clear of any liens, encumbrances, equities, security
interests and claims, provided that the Underwriter is a bona fide purchasers
as defined in ss.8-302 of the Uniform Commercial Code;
(xiii) To the best of our knowledge, there
are no claims, actions, suits, proceedings, arbitrations, investigations or
inquiries before any governmental agency, court or tribunal, foreign or
domestic, or before any private arbitration tribunal, pending or threatened
against the Company or involving its properties or business, other than as
described in the Prospectus, such description being accurate, and other than
litigation incident to the kind of business conducted by the Company which,
individually and in the aggregate, is not material, and, except as
19
otherwise disclosed in the Prospectus and the Registration Statement, the
Company has complied with all federal and state laws, statutes and regulations
concerning its business;
(xiv) We have participated in reviews and
discussions in connection with the preparation of the Registration Statement
and the Prospectus. Although we are not passing upon and do not assume
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement, no facts came to our attention which
lead us to believe that (A) the Registration Statement (except as to the
financial statements and other financial data contained therein, as to which we
express no opinion), on the Effective Date, contained any untrue statement of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or that (B) the Prospectus (except as to the financial statements
and other financial data contained therein, as to which we express no opinion)
contains any untrue statement or a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(xv) The Company is not in violation of or
in default under its Articles of Incorporation or by-laws, or to the knowledge
of such counsel, in the performance or observance of any material obligation,
agreement, covenant or condition contained in any bond, debenture, note or
other evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement or instrument to which the Company is a party or by which it or any
of its properties may be bound, or in violation of any material order, rule,
regulation, writ, injunction or decree of any government or governmental
instrumentality or court.
(f) On or prior to the Closing Date, counsel for the
Underwriter shall have been furnished such documents, certificates and opinions
as they may reasonably require for the purpose of enabling them to review the
matters referred to in subparagraph (e) of this Paragraph 9, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(g) Prior to the Closing Date:
(i) There shall have been no material
adverse change in the condition or prospects or the business activities,
financial or otherwise, of the Company from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus;
(ii) There shall have been no transaction,
outside the ordinary course of business, entered into by the Company from the
latest date as of which the financial condition of the Company is set forth in
the Registration Statement and Prospectus which is material to the Company,
which is either (x) required to be disclosed in the Prospectus or Registration
Statement and is not so disclosed, or (y) likely to have material adverse
effect on the Company's business or financial condition;
20
(iii) The Company shall not be in default
under any material provision of any instrument relating to any outstanding
indebtedness, except as described in the Prospectus;
(iv) No material amount of the assets of
the Company shall have been pledged, mortgaged or otherwise encumbered, except
as set forth in the Registration Statement and Prospectus;
(v) No action, suit or proceeding, at law
or in equity, shall have been pending or to its knowledge threatened against
the Company or affecting any of its properties or businesses before or by any
court or federal or state commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding would materially and
adversely affect the business, operations, prospects or financial condition or
income of the Company, taken as a whole, except as set forth in the
Registration Statement and Prospectus; and
(vi) No stop order shall have been issued
under the Act and no proceedings therefor shall have been initiated or, to the
Company's knowledge, threatened by the Commission.
(vii) Each of the representations and
warranties of the Company contained in this Agreement and in each certificate
and document contemplated under this Agreement to be delivered to you was, when
originally made and is at the time such certificate is dated, true and correct.
(h) Concurrently with the execution and delivery of
this Agreement and at the Closing Date, you shall have received a certificate
of the Company signed by the Chief Executive Officer of the Company and the
principal financial officer of the Company, dated as of the Closing Date, to
the effect that the conditions set forth in subparagraph (g) above have been
satisfied and that, as of the Closing Date, the representations and warranties
of the Company set forth in Paragraph 2 herein and the statements in the
Registration Statement and Prospectus were and are true and correct. Any
certificate signed by any officer of the Company and delivered to you or for
counsel for the Underwriter shall be deemed a representation and warranty by
the Company to the Underwriter as to the statements made therein.
(i) At the time this Agreement is executed, and at
the Closing Date, you shall have received a letter, addressed to the
Underwriter and in form and substance satisfactory in all respects to you and
counsel for the Underwriter, and including estimates of the Company's revenues
and results of operations for the period ending at the end of the month
immediately preceding the Effective Date and results of the comparable period
during the prior fiscal year, from Xxxxxxx Xxxxxxxx & Co., LLP, dated as of the
date of this Agreement and as of the Closing Date.
(j) All proceedings taken in connection with the
authorization, issuance or sale of the Common Stock and the Underwriter's
Securities as herein contemplated shall be
21
satisfactory in form and substance to you and to counsel to the Underwriter,
and the Underwriter shall have received from such counsel an opinion, dated as
the Closing Date with respect to such of these proceedings as you may
reasonably require.
(k) The Company shall have furnished to you such
certificates, additional to those specifically mentioned herein, as you may
have reasonably requested in a timely manner as to the accuracy and
completeness, at the Closing Date, of any statement in the Registration
Statement or the Prospectus, as to the accuracy, at the Closing Date, of the
representations and warranties of the Company herein and in each certificate
and document contemplated under this Agreement to be delivered to you, as to
the performance by the Company of its obligations hereunder and under each such
certificate and document or as to the fulfillment of the conditions concurrent
and precedent to your obligations hereunder.
(l) The obligation of the Underwriter to purchase
Additional Securities hereunder is subject to the accuracy of the
representations and warranties of the Company contained herein on and as of the
Option Closing Date and to the satisfaction on and as of the Option Closing
Date of the conditions set forth herein.
(m) On the Closing Date there shall have been duly
tendered to you for your account the appropriate number of shares of Common
Stock.
9. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriter and each person,
if any, who controls the Underwriter ("controlling person") within the meaning
of either Section 15 of the Act or Section 20 of the Exchange Act, against any
and all losses, liabilities, claims, damages, actions and expenses or
liability, joint or several, whatsoever (including but not limited to any and
all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever), joint or several, to which it or such controlling persons may
become subject under the Act, the Exchange Act or under any other statute or at
common law or otherwise or under the laws of foreign countries, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any Preliminary Prospectus or
the Prospectus (as from time to time amended and supplemented); in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included the Underwriter's Securities upon exercise of
the Underwriter's Warrants; or in any application or other document or written
communication (in this Paragraph 9 collectively called "application") executed
by the Company or based upon written information furnished by the Company filed
in any jurisdiction in order to qualify the Common Stock, Underwriter's Warrant
and Underwriter's Securities under the securities laws thereof or filed with
the Commission or any securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), unless such statement
22
or omission was made in reliance upon or in conformity with written information
furnished to the Company with respect to the Underwriter by or on behalf of the
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof, or in
application, as the case may be. Notwithstanding the foregoing, the Company
shall have no liability under this Paragraph 9(a) if any such untrue statement
or omission made in a Preliminary Prospectus, is cured in the Prospectus and
the Underwriter failed to deliver to the person or persons alleging the
liability upon which indemnification is being sought, at or prior to the
written confirmation of such sale, a copy of the Prospectus. This indemnity
will be in addition to any liability which the Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold
harmless the Company and each of the officers and directors of the Company who
have signed the Registration Statement and each other person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, to the same extent as the foregoing indemnity from
the Company to the Underwriter in Paragraph 9(a), but only with respect to any
untrue statement or alleged untrue statement of any material fact contained in
or any omission or alleged omission to state a material fact required to be
stated in any Preliminary Prospectus, the Registration Statement or Prospectus
or any amendment or supplement thereof or necessary to make the statements
therein not misleading or in any application made solely in reliance upon, and
in conformity with, written information furnished to the Company by you
specifically expressly for use in the preparation of such Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriter in connection with this Offering. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have. Notwithstanding the foregoing, the Underwriter shall have
no liability under this Paragraph 9(b) if any such untrue statement or omission
made in a Preliminary Prospectus is cured in the Prospectus, and the Prospectus
is delivered to the person or persons alleging the liability upon which
indemnification is being sought.
(c) If any action is brought against any indemnified
party (the "Indemnitee") in respect of which indemnity may be sought against
another party pursuant to the foregoing (the "Indemnitor"), the Indemnitor
shall assume the defense of the action, including the employment and fees of
counsel (reasonably satisfactory to the Indemnitee) and payment of expenses.
Any Indemnitee shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
such Indemnitee unless the employment of such counsel shall have been
authorized in writing by the Indemnitor in connection with the defense of such
action. If the Indemnitor shall have employed counsel to have charge of the
defense or shall previously have assumed the defense of any such action or
claim, the Indemnitor shall not thereafter be liable to any Indemnitee in
investigating, preparing or defending any such action or claim. Each Indemnitee
shall promptly notify the Indemnitor of the commencement of any litigation or
proceedings against the Indemnitee in connection with the issue and sale of the
Common Stock, the Underwriter's Securities or in connection with the
Registration Statement or Prospectus.
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(d) In order to provide for just and equitable
contribution under the Act in any case in which: (i) the Underwriter make a
claim for indemnification pursuant to Paragraph 9 hereof, but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the time to appeal has expired or the last right of appeal has
been denied) that such indemnification may not be enforced in such case
notwithstanding the fact that this Paragraph 9 provides for indemnification of
such case; or (ii) contribution under the Act may be required on the part of
the Underwriter in circumstances for which indemnification is provided under
this Paragraph 9, then, and in each such case, the Company and the Underwriter
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after any contribution from others) in such
proportion so that the Underwriter is responsible for the portion represented
by dividing the total compensation received by the Underwriter herein by the
total purchase price of all Securities sold in the public offering and the
Company is responsible for the remaining portion; provided, that in any such
case, no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
The foregoing contribution agreement shall in no way affect
the contribution liabilities of any persons having liability under Section 11
of the Act other than the Company and the Underwriter. As used in this
Paragraph 9, the term "Underwriter" includes any officer, director, or other
person who controls the Underwriter within the meaning of Section 15 of the
Act, and the word "Company" includes any officer, director or person who
controls the Company within the meaning of Section 15 of the Act. If the full
amount of the contribution specified in this paragraph is not permitted by law,
then the Underwriter and each person who controls the Underwriter shall be
entitled to contribution from the Company to the full extent permitted by law.
No contribution shall be requested with regard to the settlement of any matter
from any party who did not consent to the settlement.
(e) Within fifteen (15) days after receipt by any
party to this Agreement (or its representative) of notice of the commencement
of any action, suit or proceeding, such party will, if a claim for contribution
in respect thereof is made against another party (the "contributing party"),
notify the contributing party of the commencement thereof, but the omission so
to notify the contributing party will not relieve it from any liability it may
have to any other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid fifteen (15)
days, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The indemnification provisions contained in this Paragraph 9 are in
addition to any other rights or remedies which either party hereto may have
with respect to the other or hereunder.
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10. Representations, Warranties, Agreements to Survive
Delivery.
The respective indemnity and contribution agreements
by the Underwriter and the Company contained in Paragraph 9 hereof, and the
covenants, representations and warranties of the Company and the Underwriter
set forth in this Agreement, shall remain operative and in full force and
effect regardless of (i) any investigation made by the Underwriter or on their
behalf or by or on behalf of any person who controls the Underwriter, or by the
Company or any controlling person of the Company or any director or any officer
of the Company, (ii) acceptance of any of the Securities and payment therefor,
or (iii) any termination of this Agreement, and shall survive the delivery of
the Securities and any successor of the Underwriter or the Company, or of any
person who controls you or the Company or any other indemnified party, as the
case may be, shall be entitled to the benefit of such respective indemnity and
contribution agreements. The respective indemnity and contribution agreements
by the Underwriter and the Company contained in this Paragraph 10 shall be in
addition to any liability which the Underwriter and the Company may otherwise
have.
11. Effective Date of This Agreement and Termination
Thereof.
(a) This Agreement shall become effective at 10:00
A.M., New York time, on the first full business day following the day on which
you and the Company receive notification that the Registration Statement became
effective.
(b) This Agreement may be terminated by the
Underwriter by notifying the Company at any time on or before the Closing Date,
if any domestic or international event or act or occurrence has materially
disrupted, or in your opinion will in the immediate future materially disrupt,
securities markets; or if trading on the New York Stock Exchange, the American
Stock Exchange, or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required on the over-the-counter
market by the NASD or NASDAQ or by order of the Commission or any other
governmental authority having jurisdiction; or if a moratorium in foreign
exchange trading by major international banks or persons has been declared; or
if the Company shall have sustained a loss material or substantial to the
Company taken as a whole by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act which, whether or not such
loss shall have been insured, will, in your opinion, make it inadvisable to
proceed with the delivery of the Securities; or if there shall have been a
material adverse change in the conditions of the securities market in general,
as in your reasonable judgment would make it inadvisable to proceed with the
offering, sale and delivery of the Securities; or if there shall have been a
material adverse change in the financial or securities markets, particularly in
the over-the-counter market, in the United States having occurred since the
date of this Agreement.
(c) If you elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Paragraph
11, the Company shall be notified promptly by you by telephone or facsimile,
confirmed by letter.
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(d) If this Agreement shall not become effective by
reason of an election of the Underwriter pursuant to this Paragraph 11 or if
this Agreement shall not be carried out within the time specified herein by
reason of any failure on the part of the Company to perform any undertaking, or
to satisfy any condition of this Agreement by it to be performed or satisfied,
the sole liability of the Company to the Underwriter, in addition to the
obligations assumed by the Company pursuant to Paragraph 7 herein, will be to
reimburse the Underwriter for the following: (i) Blue Sky counsel fees and
expenses to the extent set forth in Paragraph 7(a)(iv); (ii) Blue Sky filing
fees; and (iii) such reasonable out-of-pocket expenses of the Underwriter
(including the fees and disbursements of their counsel), to the extent set
forth in Paragraph 7(c), in connection with this Agreement and the proposed
offering of the Securities, but in no event to exceed the sum of $100,000 less
such amounts already paid.
Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Paragraph 7 and 9 hereof shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
12. Notices.
All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to the Underwriter,
shall be mailed, delivered or telegraphed and confirmed to the Underwriter at
Xxxxxxx Davidson Securities Corp., 00 Xxxxx Xxxx Xxxxxx, Xxxxxxxx, XX 00000,
attention: Xxxxxx Xxxxxxx with a copy thereof to Xxxxxxx Xxxxxxxxx, Esq.,
Sichenzia, Ross & Xxxxxxxx, LLP, 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000, and, if sent to the Company, shall be mailed, delivered or telegraphed
and confirmed to the Company at 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000,
attention: M. Xxx Xxxx, President.
13. Parties.
This Agreement shall inure solely to the benefit of and shall
be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Paragraph 9 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision herein contained.
14. Construction.
This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York and shall
supersede any agreement or understanding, oral or in writing, express or
implied, between the Company and you relating to the sale of any of the
Securities.
15. Jurisdiction and Venue.
26
The Company agrees that the courts of the State of New York
shall have jurisdiction over any litigation arising from this Agreement, and
venue shall be proper in the Southern District of New York.
16. Counterparts.
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the understanding
between you and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
UNITED STATES FINANCIAL GROUP INCORPORATED
By:
---------------------------------------
M. Xxx Xxxx, President
Accepted as of the date first
above written:
XXXXXXX DAVIDSON SECURITIES CORP.
By:
------------------------------
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SCHEDULE A
Shares of
Common
Stock to be
Underwriter Purchased
----------- -----------
Xxxxxxx Xxxxxxxx Securities Corp [____]
Total: 2,025,000
----- =========
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