WORLDWIDE WIRELESS SYSTEMS, INC.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
UNDERWRITING AGREEMENT
DuPont Securities Group, Inc. ___________, 1997
00 Xxxxxxxx Xxxxxx
Xxxxxx Xxx, Xxx Xxxx 00000
Gentlemen:
Worldwide Wireless Systems, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Dupont Securities Group, Inc.
("Dupont" or the "Representative") and to each of the other underwriters named
in Schedule I hereto (the "Underwriters"), for each of whom you are acting as
Representative, an aggregate of 1,500,000 Units (each Unit consisting of one
share of Common Stock, ("Common Stock"), and one Common Stock Purchase Warrant
(the "Warrants") of the Company) at a public offering price of $____ per Unit
(estimated to range from $6.00 to $7.00 per Unit). Each Warrant shall entitle
the holder to purchase one share of Common Stock for a five year period from
the Effective Date (hereinafter defined) at a price of $7.50 per share. The
Unit Warrants will be immediately detachable from the Common Stock on the
Effective Date. The Warrants may be called by the Company commencing one year
from Effective Date upon at least thirty days prior written notice at a price
of $.10 per Warrant at any time provided the closing bid for the Common Stock
is at least an average of $9.00 per share during the twenty (20) trading day
period ending five days preceding the date of the written notice. The
1,500,000 Units are hereinafter sometimes referred to as the "Firm Units."
Upon the request of the Representative, and as provided in Section 3 hereof,
the Company will also issue and sell to the Underwriters up to a maximum of an
additional 225,000 Units for the purpose of covering over-allotments. Such
additional Units are hereinafter sometimes referred to as the "Optional
Units." Both the Firm Units and the Optional Units are sometimes collectively
referred to herein as the "Units." All of the securities which are the subject
of this Agreement are more fully described in the Prospectus of the Company
described below. In the event that the Representative does not form an
underwriting group but decides to act as the sole Underwriter, then all
references to Dupont herein as Representative shall be deemed to be to it as
such sole Underwriter and Section 14 hereof shall be deemed deleted in its
entirety.
The Company understands that the Underwriters propose to make a
public offering of the Units as soon as the Representative deems advisable
after the Registration Statement hereinafter referred to becomes effective.
The Company hereby confirms its agreement with the Representative and the
other Underwriters as follows:
SECTION 1. Description of Securities. The Company's authorized and
outstanding capitalization when the public offering of securities contemplated
hereby is permitted to commence, under the Securities Act of 1933, as amended
(the "Act"), and at the Closing Date (hereinafter defined) and the terms of
the Warrants will be as set forth in the Prospectus (hereinafter defined).
SECTION 2. Representations and Warranties of the Company. The Company
hereby represents and warrants to, and agrees with, the Underwriters as
follows:
(a) A Registration Statement on Form SB-2 and amendments
thereto (No. 333-________) with respect to the Units, including a form of
prospectus relating thereto, copies of which have been previously delivered to
you, have been prepared by the Company in conformity with the requirements of
the Act, and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has been
filed with the Commission under the Act. The Company, subject to the
provisions of Section 6(a) hereof, may file one or more amendments to such
Registration Statement and Prospectus. The Underwriters will receive copies of
each such amendment.
The date on which such Registration Statement is declared
effective under the Act and the public offering of the Units as contemplated
by this Agreement is therefore authorized to commence, is herein called the
"Effective Date." The Registration Statement and Prospectus, as finally
amended and revised immediately prior to the Effective Date, are herein called
respectively the "Registration Statement" and the "Prospectus." If, however, a
prospectus is filed by the Company pursuant to Rule 424(b) of the Rules and
Regulations which differs from the Prospectus, the term "Prospectus" shall
also include the prospectus filed pursuant to Rule 424(b).
(b) The Registration Statement (and Prospectus), at the time
it becomes effective under the Act, (as thereafter amended or as supplemented
if the Company shall have filed with the Commission an amendment or
supplement), and, with respect to all such documents, on the Closing Date
(hereinafter defined), will in all material respects comply with the
provisions of the Act and the Rules and Regulations, and will not contain an
untrue statement of a material fact and will not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that none of the representations and warranties
contained in this subsection (b) shall extend to the Underwriters in respect
of any statements in or omissions from the Registration Statement and/or the
Prospectus, based upon information furnished in writing to the Company by the
Underwriters specifically for use in connection with the preparation thereof.
(c) The Company has been duly incorporated and is now, and
on the Closing Date will be, validly existing as a corporation in good
standing under the laws of the State of Delaware, having all required
corporate power and authority to own its properties and conduct its business
as described in the Prospectus. The Company is now,
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and on the Closing Date will be, duly qualified to do business as a foreign
corporation in good standing in all of the jurisdictions in which it conducts
its business or the character or location of its properties requires such
qualifications except where the failure to so qualify would not materially
adversely affect the Company's business, properties or financial condition.
The Company has no subsidiaries, except as are set forth in the Prospectus.
(d) The financial statements of the Company (audited and
unaudited) included in the Registration Statement and Prospectus present
fairly the financial position and results of operations and changes in
financial condition 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, and are in accordance
with the books and records of the Company.
(e) To the best of the Company's knowledge, Xxxxxxx X.
Xxxxxx & Company, LLP independent auditors, who have given their report on
certain financial statements which are included as a part of the Registration
Statement and the Prospectus are independent public accountants as required
under the Act and the Rules and Regulations.
(f) Subsequent to the respective dates as of which
information is given in the Prospectus and prior to the Closing Date and,
except as set forth in or contemplated in the Prospectus, (i) the Company has
not incurred, nor will it incur, any material liabilities or obligations,
direct or contingent, nor has it, nor will it have entered into any material
transactions, in each case not in the ordinary course of business; (ii) there
has not been, and will not have been, any material change in the Company's
Certificate of Incorporation or in its capital stock or funded debt; and (iii)
there has not been, and will not have been, any material adverse change in the
business, net worth or properties or condition (financial or otherwise) of the
Company whether or not arising from transactions in the ordinary course of
business.
(g) Except as otherwise set forth in the Prospectus, the
real and personal properties of the Company as shown in the Prospectus and
Registration Statement to be owned by the Company are owned by the Company by
good and marketable title free and clear of all liens and encumbrances, except
those specifically referred to in the Prospectus, and except those which do
not materially adversely affect the use or value of such assets and except the
lien for current taxes not now due, or are held by the Company by valid
leases, none of which is in default. Except as disclosed in the Prospectus and
Registration Statement, the Company in all material respects has full right
and licenses, permits and governmental authorizations required to maintain and
operate its business and properties as the same are now operated and, to its
best knowledge, none of the activities or business of the Company is in
material violation of, or causes the Company to violate any laws, ordinances
and regulations applicable thereto, the violation of which would have a
material adverse impact on the condition (financial or otherwise), business,
properties or net worth of the Company.
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(h) The Company has no material contingent obligations, nor
are its properties or business subject to any material risks, which may be
reasonably anticipated, which are not disclosed in the Prospectus.
(i) Except as disclosed in the Prospectus and Registration
Statement, there are no material actions, suits or proceedings at law or in
equity of a material nature pending, or to the Company's knowledge, threatened
against the Company which are not adequately covered by insurance, which might
result in a material adverse change in the condition (financial or otherwise),
properties or net worth of the Company, and there are no proceedings pending
or, to the knowledge of the Company, threatened against the Company before or
by any Federal or State Commission, regulatory body, or administrative agency
or other governmental body, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business, properties or net worth or
financial condition or income of the Company, which are not disclosed in the
Prospectus.
(j) All of the outstanding shares of Common Stock are duly
authorized and validly issued and outstanding, fully paid, and non-assessable,
and are free of preemptive rights. The Common Stock and the shares of Common
Stock issuable upon exercise of the Warrants, when paid for, issued and
delivered in accordance with this Agreement and the Warrant Agreement between
the Company and Continental Stock Transfer & Trust Company, dated as of the
date hereof will be duly authorized, validly issued, fully paid and
non-assessable and will not be issued in violation of any preemptive rights.
The Underwriters will receive good and marketable title to the Units purchased
by them from the Company, free and clear of all liens, encumbrances, claims,
security interests, restrictions, stockholders' agreements and voting trusts
whatsoever. Except as set forth in the Prospectus, there are no outstanding
options, warrants, or other rights, providing for the issuance of, and no
commitments, plans or arrangements to issue, any shares of any class of
capital stock of the Company, or any security convertible into, or
exchangeable for, any shares of any class of capital stock of the Company. All
of the securities of the Company to which this Agreement relates conform to
the statements relating to them that are contained in the Registration
Statement and Prospectus.
(k) The certificate or certificates required to be furnished
to the Underwriters pursuant to the provisions of Section 11 hereof will be
true and correct.
(l) The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and it is
a valid and binding obligation of the Company, enforceable against it in
accordance with its terms except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws pertaining to
creditors rights generally.
(m) No default exists, and no event has occurred which, with
notice or lapse of time, or both, would constitute a default in the due
performance and observance of any material term, covenant or condition by the
Company or any other party, of any material indenture, mortgage, deed of
trust, note or any other material agreement or instrument to which the Company
is a party or by which it or its business or its properties may be bound or
affected, except (i) as disclosed in the Prospectus, (ii) such defaults as
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have been waived by all parties who would otherwise have a remedy or right
with respect thereto or (iii) such defaults which will not cause any material
adverse change in the business, net worth, properties or conditions (financial
or otherwise), of the Company. The Company has full power and lawful authority
to authorize, issue and sell the Units to be sold by it hereunder on the terms
and conditions set forth herein and in the Registration Statement and in the
Prospectus. No consent, approval, authorization or other order of any
regulatory authority is required for such authorization, issue or sale, except
as may be required under the Act or State securities laws. The execution and
delivery of this Agreement, the consummation of the transactions herein
contemplated, and compliance with the terms hereof will not conflict with, or
constitute a default under any indenture, mortgage, deed of trust, note or any
other agreement or instrument to which the Company is now a party or by which
it or its business or its properties may be bound or affected; the Certificate
of Incorporation and any amendments thereto; the by-laws of the Company, as
amended; or any law, order, rule or regulation, writ, injunction or decree of
any government, governmental instrumentality, or court, domestic or foreign,
having jurisdiction over the Company or its business or properties.
(n) No officer or director of the Company has taken, and
each officer and director has agreed that he will not take, directly or
indirectly, any action designed to stabilize or manipulate the price of the
Units, the Common Stock or the Warrants in the open market following the
Closing Date or any other type of action designed to, or that may reasonably
be expected to cause or result in such stabilization or manipulation, or that
may reasonably be expected to facilitate the initial sale, or resale, of any
of the securities which are the subject of this Agreement.
(o) The Warrants to purchase Units to be issued to the
Representative (the "Underwriters' Unit Warrants") hereunder will be, when
issued, duly and validly authorized and executed by the Company and will
constitute valid and binding obligations of the Company, legally enforceable
in accordance with their terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
pertaining to creditors rights generally), and the Company will have duly
authorized, reserved and set aside the shares of its Common Stock issuable
upon exercise of the Underwriters' Unit Warrants and the underlying warrants,
and such stock, when issued and paid for upon exercise of the Underwriters'
Unit Warrants and the underlying warrants in accordance with the provisions
thereof, will be duly authorized and validly issued, fully-paid and
non-assessable.
(p) All of the aforesaid representations, agreements, and
warranties shall survive delivery of, and payment for, the Units.
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SECTION 3. Issuance, Sale and Delivery of the Firm Units, the
Optional Units and the Underwriters' Warrants.
(a) Upon the basis of the representations, warranties,
covenants and agreements of the Company herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
several Underwriters, and the Underwriters, severally and not jointly, agree
to purchase from the Company, the number of the Firm Units set forth opposite
the respective names of the Underwriters in Schedule I hereto, plus any
additional Units which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 14 hereof.
The purchase price of the Units to be paid by the
several Underwriters shall be $________ per Unit ($______ per Unit less a ten
percent discount).
In addition, and upon the same basis, and subject
to the same terms and conditions, the Company hereby grants an option to you
to purchase, but only for the purpose of covering over-allotments, upon not
less than two days' notice from the Representative, the Optional Units, or any
portion thereof, at the same price per Unit as that set forth in the preceding
sentence; and each Underwriter agrees, severally and not jointly, to purchase
Optional Units in the same proportion in which it has agreed to purchase Firm
Units. Notwithstanding anything contained herein to the contrary, you
individually and not as Representative may purchase all or any part of the
Optional Units and are not obligated to offer the Optional Units to the other
Underwriters. The Optional Units may be exercised at any time, and from time
to time, thereafter within a period of 45 calendar days following the
Effective Date. The time(s) and date(s) (if any) so designated for delivery
and payment for the Optional Units shall be set forth in the notice to the
Company. Such dates are herein defined as the Additional Closing Date(s).
(b) Payment for the Firm Units shall be made by certified
or official bank checks in New York Clearing House funds, payable to the order
of the Company, at the offices of the Representative, or its clearing agent, or
at such other place as shall be agreed upon by the Representative and the
Company, upon delivery of the Firm Units to the Representative for the
respective accounts of the Underwriters. In making payment to the Company, the
Representative may first deduct all sums due to it for the balance of the
non-accountable expense allowance and under the Financial Consulting Agreement
(as hereinafter defined). Such delivery and payment shall be made at 10:00
A.M., New York City Time on the third business day which may be extended by
the Representative to not later than the fifth business day following the
Effective Date (unless postponed in accordance with the provisions of Section
14 hereof) or at such other time as shall be agreed upon by the Representative
and the Company. The time and date of such delivery and payment are hereby
defined as the Closing Date. It is understood that each Underwriter has
authorized the Representative, for the account of such Underwriter, to accept
delivery of, receipt for, and make payment of the purchase price for, the Firm
Units which it has agreed to purchase. You, individually, and not as
Representative may (but shall not be obligated to) make payment of the
purchase price for the Firm Units to be purchased by any Underwriter whose
check shall not have been received by the Closing
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Date, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from its obligations hereunder.
(c) Payment for the Optional Units shall be made at the
offices of the Representative, or its clearing agent or at such other place as
shall be agreed upon by the Representative and the Company, in accordance with
the notice delivered pursuant to Section 3(a) which shall be no later than
seven business days from the expiration of the forty-five day option period.
(d) Certificates for the Firm Units and for the Optional
Units shall be registered in such name or names and in such authorized
denominations as the Representative may request in writing at least two
business days prior to the Closing Date, and the Additional Closing Date(s)
(if any). The Company shall permit the Representative to examine and package
said certificates for delivery at least one full business day prior to the
Closing Date and prior to the Additional Closing Date(s). The Company shall
not be obligated to sell or deliver any of the Firm Units except upon tender
of payment by the Underwriters for all of the Firm Units agreed to be
purchased by them hereunder. The Representative, however, shall have the sole
discretion to determine the number of Optional Units, if any, to be purchased.
(e) At the time of making payment for the Firm Units, the
Company also hereby agrees to sell to the Representative, Underwriters' Unit
Warrants to purchase 150,000 Units for an aggregate purchase price of $150.
Each Unit issuable upon exercise of the Underwriters' Unit Warrants shall be
identical to the Units sold to the public. Each Underwriters' Unit Warrant
shall entitle the owner thereof to purchase one Unit of the Company at an
exercise price of $_____ per Unit (120% of the initial public offering price
per Unit). Such Underwriters' Unit Warrants are to become exercisable
immediately after from the Effective Date, and thereafter shall remain
exercisable for a period of five years. For a period of one year after the
Effective Date, the Underwriters Unit Warrants shall not be transferable
except to co-underwriters, selling group members and their officers or
partners. The Underwriters Unit Warrants shall contain customary clauses
protecting the holders thereof in the event the Company pays stock dividends,
effects stock splits, or effects a sale of assets, merger or consolidation.
(f) On and subject to the Closing Date, the Company will
give irrevocable instructions to its transfer agent (which it agrees to
appoint) to deliver to the Representative (at the Company's expense) for a
period of five years from the Closing Date, daily advice sheets showing any
transfers of Units, shares of common stock and Warrants and from time to time
during the aforesaid period a complete stockholders' list will be promptly
furnished by the Company when requested by the Representative on not more than
two occasions per year. Furthermore, the Company will give irrevocable
instructions to Depository Trust Company for a period of five years from the
Closing Date to deliver weekly transfer sheets showing any transfers of Units,
shares of common stock and Warrants.
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SECTION 4. Public Offering. The several Underwriters agree, subject
to the terms and provisions of this Agreement, to offer the Units to the
public as soon as practicable after the Effective Date, at the initial
offering price of $_____ per Unit and upon the terms described in the
Prospectus. The Representative may, from time to time, decrease the public
offering price, after the initial public offering, to such extent as the
Representative may determine, however, such decreases will not affect the
price payable to the Company hereunder.
SECTION 5. Registration Statement and Prospectus. The Company will
furnish the Representative, without charge, two signed copies of the
Registration Statement and of each amendment thereto, including all exhibits
thereto and such amount of conformed copies of the Registration Statement and
Amendments as may be reasonably requested by the Representative for
distribution to each of the Underwriters and Selected Dealers.
The Company will furnish, at its expense, as many printed
copies of a Preliminary Prospectus and of the Prospectus as the Representative
may request for the purposes contemplated by this Agreement. If, while the
Prospectus is required to be delivered under the Act or the Rules and
Regulations, any event known to the Company relating to or affecting the
Company shall occur which should be set forth in a supplement to or an
amendment of the Prospectus in order to comply with the Act (or other
applicable law) or with the Rules and Regulations, the Company will forthwith
prepare, furnish and deliver to the Representative and to each of the other
Underwriters and to others whose names and addresses are designated by the
Representative, in each case at the Company's expense, a reasonable number of
copies of such supplement or supplements to or amendment or amendments of, the
Prospectus.
The Company authorizes the Underwriters and the selected
dealers, if any, in connection with the distribution of the Units and all
dealers to whom any of the Units may be sold by the Underwriters, or by any
Selected Dealer, to use the Prospectus, as from time to time amended or
supplemented, in connection with the offering and sale of the Units and in
accordance with the applicable provisions of the Act and the applicable Rules
and Regulations and applicable State Securities Laws.
SECTION 6. Covenants of the Company. The Company covenants and agrees
with each Underwriter that:
(a) After the date hereof, the Company will not at any time,
whether before or after the Effective Date, file any amendment to the
Registration Statement or the Prospectus, or any supplement to the Prospectus,
of which the Representative shall not previously have been advised and
furnished with a copy, or to which the Representative or the Underwriters'
counsel shall have reasonably objected in writing on the ground that it is not
in compliance with the Act or the Rules and Regulations.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective (provided, however, the Company
shall not cause the Registration Statement to become effective without the
written consent of Dupont) and will
8
advise the Representative, (i) when the Registration Statement shall have
become effective and when any amendment thereto shall have become effective,
and when any amendment of or supplement to the Prospectus shall be filed with
the Commission, (ii) when the Commission shall make request or suggestion for
any amendment to the Registration Statement or the Prospectus or for
additional information and the nature and substance thereof, and (iii) of the
issuance by the Commission of an order suspending the effectiveness of the
Registration Statement or of the initiation of any proceedings for that
purpose, and will use its best efforts to prevent the issuance of such an
order, or if such an order shall be issued, to obtain the withdrawal thereof
at the earliest possible moment.
(c) The Company will prepare and file with the Commission,
promptly upon the request of the Representative, such amendments, or
supplements to the Registration Statement or Prospectus, in form and substance
satisfactory to counsel to the Company, as in the reasonable opinion of Xxxxxx
Xxxxx P.C., as counsel to the Underwriters, may be necessary or advisable in
connection with the offering or distribution of the Units, and will diligently
use its best efforts to cause the same to become effective.
(d) The Company will, at its expense, when and as requested
by the Representative, supply all necessary documents, exhibits and
information, and execute all such applications, instruments and papers as may
be required, in the opinion of the Underwriters' counsel, to qualify the Units
or such part thereof as the Representative may determine, for sale under the
so-called "Blue Sky" Laws of such states as the Representative shall
designate, and to continue such qualification in effect so long as required
for the purposes of the distribution of the Units, provided, however, that the
Company shall not be required to qualify as a foreign corporation or dealer in
securities or to file a consent to service of process in any state in any
action other than one arising out of the offering or sale of the Units.
(e) The Company will, at its own expense, file and provide,
and continue to file and provide, such reports, financial statements and other
information as may be required by the Commission, or the proper public bodies
of the States in which the Units may be qualified for sale, for so long as
required by applicable law, rule or regulation and will provide the
Representative with copies of all such registrations, filings and reports on a
timely basis.
(f) During the period of five years from the Effective Date,
the Company will deliver to the Underwriter a copy of each annual report of
the Company, and will deliver to the Underwriter (i) within 50 days after the
end of each of the Company's first three quarter-yearly fiscal periods, a
balance sheet of the Company as at the end of such quarter-yearly period,
together with a statement of its income and a statement of changes in its cash
flow for such period (Form 10-QSB), all in reasonable detail, signed by its
principal financial or accounting officer, (ii) within 105 days after the end
of each fiscal year, a balance sheet of the Company as at the end of such
fiscal year, together with a statement of its income and statement of cash
flow for such fiscal year (Form 10-KSB), such balance sheet and statement of
cash flow for such fiscal year to be in reasonable detail and to be
accompanied by a certificate or report of independent public accountants,
9
(who may be the regular accountants for the Company), (iii) as soon as
available a copy of every other report (financial or other) mailed to the
stockholders, and (iv) as soon as available a copy of every non-confidential
report and financial statement furnished to or filed with the Commission or
with any securities exchange pursuant to requirements by or agreement with
such exchange or the Commission pursuant to the Securities Exchange Act of
1934, as amended (the "1934 Act"), or any regulations of the Commission
thereunder. If and for so long as the Company has one or more active
subsidiaries, the financial statements required by (i) and (ii) above shall be
furnished on a consolidated basis in respect of the Company and all of the
Company's subsidiaries. The financial statements referred to in (ii) shall
also be furnished to all of the stockholders of the Company as soon as
practicable after the 90 days referred to therein.
(g) The Company represents that with respect to the Warrants
and the shares of Common Stock, it will prepare and file a Registration
Statement with the Commission pursuant to Section 12(g) of the 1934 Act, prior
to the Effective Date with a request that such Registration Statement will
become effective on the Effective Date. The Company understands that, to
register, it must prepare and file with the Securities and Exchange Commission
a General Form of Registration of Securities (Form 8-A or Form 10). In
addition, the Company agrees to qualify its Units, Common Stock and the
Warrants for listing on the NASDAQ system on the Effective Date and will take
all reasonable and necessary and appropriate action so that the securities
continue to be listed for trading in the NASDAQ system for at least ten years
from the Effective Date provided the Company otherwise complies with the
prevailing maintenance requirements. In addition, at such time as the Company
qualifies for listing its securities on the National Market System of NASDAQ,
the Company will use its best efforts to have the Company's Units and
components thereof listed on the National Market System of NASDAQ in lieu of
listing as Small-Cap Issues on NASDAQ. For so long as the Company is a
reporting company under the 1934 Act, the Company shall comply with all
periodic reporting and proxy solicitation requirements imposed by the
Commission pursuant to the 1934 Act.
(h) The Company will make generally available to its
security holders, as soon as practicable, but in no event later than 15 months
after the Effective Date, an earnings statement of the Company (which need not
be audited) in reasonable detail, covering a period of at least twelve months
beginning after the Effective Date, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act.
(i) The Company will, on or about the Effective Date, apply
for listing in Standard and Poor's Corporation Records and Standard & Poor's
Monthly Stock Guide and shall use its best efforts to have the Company listed
in such reports for a period of not less than ten (10) years from the Closing
Date. The Company will request accelerated treatment in the Daily News
Supplement of Standard and Poor's Corporation Records.
(j) The Company shall employ the services of an auditing
firm acceptable to the Representative in connection with the preparation of
the financial statements required to be included in the Registration Statement
and shall continue to
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appoint such auditors or such other auditors as are reasonably acceptable to
the Representative for a period of five (5) years following the Effective Date
of the Registration Statement. Said financial statements shall be prepared in
accordance with Regulation S-X under the Rules and Regulations. The Company
shall appoint Continental Stock Transfer & Trust Company as transfer agent for
the Common Stock (the "Transfer Agent") and as warrant agent for the Warrants.
(k) Prior to the Effective Date, the Company will enter into
employment contracts with its executive officers and directors in the form
filed with the Securities and Exchange Commission and approved by the
Representative.
(l) Within ninety (90) days subsequent to the Effective
Date, the Company will furnish "Key Man" Life Insurance in the amount of
$1,000,000 each on the lives of __________and __________ with the Company as
the beneficiary thereof and the Company shall pay the annual premiums,
therefore, for a period of not less than five years from the Effective Date.
(m) The Company will for a period of five years:
(i) Furnish to the Representative and to the Company's
shareholders annual audited financial statements contained in an annual report
and unaudited financial statements contained in quarterly reports for each of
the Company's first three quarters.
(ii) Furnish the Representative with a duplicate copy of
the daily transfer sheets prepared by the Transfer Agent and a duplicate copy of
a list of stockholders.
(iii) Designate an Audit Committee which will generally
supervise the financial affairs of the Company.
(iv) At its expense, shall cause its regularly engaged
independent certified public accountants to read and comment (but not audit) the
Company's financial statements for each of the first three (3) fiscal quarters
prior to the announcement of quarterly financial information, the filing of the
Company's 10-QSB quarterly report and the mailing of quarterly financial
information to security holders.
(n) Until such time as the securities of the Company are
listed on the New York Stock Exchange, the American Stock Exchange or
NASDAQ/NMS, the Company shall cause its legal counsel or an independent third
party acceptable to the Representative to provide the Representative with a
survey with the first one to be delivered at Closing, to be updated at least
annually, of those states in which the securities of the Company may be traded
in non-issuer transactions under the Blue Sky laws of the states and the basis
for such authority.
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(o) As soon as practicable after the Closing Date, the
Company will deliver to the Representative and its counsel a total of two
bound volumes of copies of all documents relating to the public offering which
is the subject of this Agreement.
(p) Stock certificates and Warrant certificates shall be
first submitted to the Representative for approval prior to printing. The
Company shall, as promptly as possible, after filing the Registration
Statement with the Commission, obtain a CUSIP number for the Units, Common
Stock and Unit Warrants and have each of the securities eligible for closing
through Depository Trust Company.
(q) The Company will not file a Form S-8 Registration
Statement for a period of thirteen months from the Effective Date without the
Representative's prior written consent. Further, the Company will not offer
its securities pursuant to Regulation S of the Securities Act of 1933, as
amended, for a period of three years from the Effective Date without the
Representative's prior written consent.
SECTION 7. Expenses of the Company.
The Company shall be responsible for and shall bear all expenses
directly and necessarily incurred in connection with the proposed financing,
including: (i) the preparation, printing and filing of the Offering Documents
and amendments thereto, including NASD, SEC and NASDAQ filing and/or
application fees, preliminary and final Prospectus and the printing of the
Underwriting Agreement, the Agreement Among Underwriters and the Selected
Dealers' Agreement, a Blue Sky Memorandum, material to be circulated to the
Underwriters by us and other incidental material; (ii) the issuance and
delivery of certificates representing the Common Stock and Unit Warrants,
including original issue and transfer taxes, if any; (iii) the qualifications
of the Company's Units (covered by the "firm commitment" offering) under State
Securities or Blue Sky Laws, including counsel fees of the Representative
relating thereto in the sum of Thirty Thousand ($30,000) Dollars ($_________
of which has been paid prior to the Effective Date), together with appropriate
state filing fees) plus disbursements relating to, but not limited to,
long-distance telephone calls, photocopying, messengers, excess postage,
overnight mail and courier services; (iv) the fees and disbursements of
counsel for the Company and the accountants for the Company; and (v) any other
costs of qualifying the Units and components thereof for listing on NASDAQ.
The Company shall, upon receipt of an invoice from the
Representative, reimburse the Representative for any costs of otherwise
unreimbursed postage and including mailing of preliminary and final
prospectuses incurred by or on behalf of the Representative and the
Underwriters in preparation for, or in connection with the offering and sale
and distribution of the Units on an accountable basis, and for the cost of
investigative reports (such as Xxxxxx'x Reports) of the Company's executive
officers, directors and principal shareholders. Reimbursement of the costs of
investigative reports shall not exceed the actual cost of the invoice(s) and
in no event shall exceed $___________. After closing of the public offering,
the Company shall bear the costs of tombstone announcements not to exceed
$10,000.
12
SECTION 8. Payment of Underwriters' Expenses.
On the Closing Date and Additional Closing Date(s) (if any)
the Company will pay to Dupont an expense allowance equal to three (3%) percent
of the total gross proceeds derived from the public offering contemplated by
this Agreement for the fees and disbursements of counsel to the Underwriters and
for costs of otherwise unreimbursed advertising, traveling, postage, telephone
and telegraph expenses and other miscellaneous expenses incurred by or on
behalf of the Representative and the Underwriters in preparation for, or in
connection with the offering and sale and distribution of the Units; and
Dupont shall not be obligated to account to the Company for such disbursements
and expenses. In the event, however, that the Representative terminates this
Agreement pursuant to the provisions of Section 12 hereof, the Representative
shall be obligated to account for expenditures of any advance payment to
Dupont and to refund to the Company any portion of the advance not expended.
In the event that the Representative terminates this agreement pursuant to the
provisions of Section 12(b), the Representative shall be entitled to
reimbursement of expenses on an accountable basis up to $50,000.
SECTION 9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
of the Underwriters, and each person who controls each of the Underwriters
within the meaning of Section 15 of the Act, from and against any and all
losses, claims, damages, expenses, or liabilities, joint or several, to which
they or any of them may become subject under the Act or any other statute or
at common law or otherwise, and to reimburse persons indemnified as above for
any reasonable legal or other expense (including the cost of any investigation
and preparation) incurred by them (as incurred), or any of them, in connection
with investigating, defending against or appearing as a third party witness in
connection with any claim or litigation, whether or not resulting in any
liability, but only insofar as such losses, claims, liabilities, expenses or
litigation arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus (as amended or supplemented, if amended or supplemented), or in
any "Blue Sky" application, or arising out of or based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading; provided,
however, that the indemnity agreement contained in this subsection (a) shall
not apply to amounts paid in settlement of any such claims or litigation if
such settlement is effected without the consent of the Company, nor shall it
apply to the Underwriters or any person controlling the Underwriters in
respect of any such losses, claims, damages, expenses, liabilities or
litigation arising out of, or based upon, any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such statement
or omission was made in reliance upon and in conformity with written
information furnished in writing to the Company by such Underwriter, or on its
behalf, specifically for use in connection with the preparation of the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto or any such blue sky application.
13
(b) Each of the Underwriters severally agrees, in the same
manner and to the same extent as set forth in subsection (a) above, to
indemnify and hold harmless the Company, each of the directors and officers
who have signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act, with respect
to any statement in or omission from the Registration Statement, or the
Prospectus (as amended or as supplemented, if amended or supplemented), or in
any "Blue Sky" application, if such statement or omission was made in reliance
upon and in conformity with written information furnished in writing to the
Company by such Underwriter, or on its behalf, specifically for use in
connection with the preparation of the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto, or any such
application. An Underwriter shall not be liable for amounts paid in settlement
of any such claim or litigation if such settlement was effected without its
consent.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any claim asserted against it and of any action
commenced against it in respect of which indemnity may be sought hereunder.
The omission to so notify an indemnifying party shall relieve such party of
its obligation to indemnify pursuant to this Agreement, but failure to so
notify an indemnifying party shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, subject to the provisions herein stated, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section 9 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right
to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has
been specifically authorized in writing by the indemnifying party or (ii) the
defendants in any such action include both the indemnified and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be a conflict between the positions of the indemnifying party
and the indemnified party in conducting the defense of any such action or that
there may be legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the indemnifying
party (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party or parties), it
being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be
14
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for the indemnified party which firm shall be designated in writing
by the indemnified party.
(d) The respective indemnity agreements between the
Underwriters and the Company contained in subsections (a) and (b) above, and
the representations and warranties of the Company set forth in Section 2
hereof or elsewhere in this Agreement, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriters or by or on behalf of any controlling person of the Underwriters
or the Company or any such officer or director or any controlling person of
the Company, and shall survive the delivery of the Units. Any successor of the
Company, or of the Underwriters, or of any controlling person of the
Underwriters or the Company, as the case may be, shall be entitled to the
benefit of such respective indemnity agreements.
(e) In order to provide for just and equitable contribution
under the Act in any case in which (i) any person entitled to indemnification
under this Section 9 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or the denial
of the last right of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of any such person in circumstances for which
indemnification is provided under this Section 9, then, and in each such case,
the Company and the Underwriters shall contribute to the aggregate losses,
claims, damages, expenses or liabilities to which they may be subject (after
any contribution from others) in such proportions so that the Underwriters are
responsible in the aggregate for the proportion of such losses, claims,
damages or liabilities represented by the percentage that the underwriting
discounts and commissions appearing on the cover page of the Prospectus bears
to the public offering price appearing thereon, 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.
Within twenty 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 to be made against another party (the "contributing party"), notify
the contributing party, in writing, of the commencement thereof, but the
omission so to notify the contributing party will not relieve it from any
liability which 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 so notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid twenty 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
contribution provisions contained in this
15
Section 9 are in addition to any other rights or remedies which either party
hereto may have with respect to the other or hereunder.
SECTION 10. Effectiveness of Agreement. This Agreement shall become
effective (i) at 10:00 A.M., New York Time, on the first full business day
after the Effective Date, or (ii) at the time of the initial public offering
by the Underwriters of the Units, whichever shall first occur. The time of the
initial public offering by the Underwriters of the Units for the purposes of
this Section 10, shall mean the time, after the Registration Statement becomes
effective, of the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the Units,
or the time, after the Registration Statement becomes effective, when the
Units are first released by the Representative for offering by the
Underwriters or dealers by letter or telegram, whichever shall first occur.
The Representative agrees to notify the Company immediately after it shall
have taken any action, by release or otherwise, whereby this Agreement shall
have become effective. This Agreement shall, nevertheless, become effective at
such time earlier than the time specified above, after the Effective Date, as
the Representative may determine by notice to the Company.
SECTION 11. Conditions of the Underwriters' Obligations. The
obligations of the several Underwriters to purchase and pay for the Units
which the Underwriters have agreed to purchase hereunder are subject to: the
accuracy, as of the date hereof and as of the Closing Dates, of all of the
representations and warranties of the Company contained in this Agreement; the
Company's compliance with, or performance of, all of its covenants,
undertakings and agreements contained in this Agreement that are required to
be complied with or performed on or prior to each of the Closing Dates and to
the following additional conditions:
(a) On or prior to the Closing Date, no order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or be pending or, to
the knowledge of the Company, shall be threatened by the Commission; any
request for additional information on the part of the Commission (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of the Commission; and neither the
Registration Statement nor any amendment thereto shall have been filed to
which counsel to the Underwriters shall have reasonably objected, in writing.
(b) The Representative shall not have disclosed in writing
to the Company that the Registration Statement or Prospectus or any amendment
or supplement thereto contained, as of the date thereof, an untrue statement
of a fact which, in the opinion of counsel to the Underwriters, is material,
or omits to state a fact which, in the opinion of such counsel, is material
and is required to be stated therein, or is necessary to make the statements
therein not materially misleading.
(c) Between the date hereof and the Closing Date, the
Company shall not have sustained any loss on account of fire, explosion,
flood, accident, calamity or other
16
cause, of such character as materially adversely affects its business or
property, whether or not such loss is covered by insurance.
(d) Between the date hereof and the Closing Date, there
shall be no litigation instituted or threatened against the Company, and there
shall be no proceeding instituted or threatened against the Company before or
by any federal or state commission, regulatory body or administrative agency
or other governmental body, domestic or foreign, wherein an unfavorable
ruling, decision or finding would materially adversely affect the business,
licenses, permits, operations or financial condition or income of the Company.
(e) Except as contemplated herein or as set forth in the
Registration Statement and Prospectus, during the period subsequent to the
Effective Date and prior to the Closing Date, (A) the Company shall have
conducted its business in the usual and ordinary manner as the same was being
conducted on the date of the filing of the initial Registration Statement and
(B) except in the ordinary course of its business, the Company shall not have
incurred any material liabilities or obligations (direct or contingent), or
disposed of any of its assets, or entered into any material transaction, and
(C) the Company shall not have suffered or experienced any material adverse
change in its business, affairs or in its condition, financial or otherwise.
On the Closing Date, the capital stock and surplus accounts of the Company
shall be substantially as great as at its last financial report without
considering the proceeds from the sale of the Units except to the extent that
any decrease is disclosed in or contemplated by the Prospectus.
(f) The authorization of the Units, the Common Stock and the
Warrants, the Registration Statement, the Prospectus and all corporate
proceedings and other legal matters incident thereto and to this Agreement,
shall be reasonably satisfactory in all respects to counsel to the
Underwriters.
(g) The Company shall have furnished to the Representative
the opinions, dated the Closing Date, and Additional Closing Date(s),
addressed to you, of Gravel and Xxxx counsel for the Company, that:
(i) The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; it has authorized and outstanding capital as set forth
in the Registration Statement and Prospectus; and the Company is duly licensed
or qualified as a foreign corporation in all jurisdictions in which the
ownership or leasing of its properties requires such qualification or license,
except where failure to be so qualified or licensed would have no material
adverse effect on the business of the Company.
(ii) All of the outstanding shares of Common Stock are
duly authorized, validly issued, fully paid, and non-assessable, and do not have
any preemptive rights. The Company will have duly authorized, reserved and set
aside shares of Common Stock issuable upon exercise of the Warrants and any
other outstanding options, warrants or
17
stock option plans and when issued in accordance with the terms contained
therein against payment therefor, will be duly and validly issued, fully paid
and non-assessable.
(iii) The Common Stock, Warrants and the Underwriter's Unit
Warrant conform to descriptions thereof under "Description of Securities"
contained in the Prospectus.
(iv) The Underwriters will receive good and marketable
title to the Units purchased by them from the Company in accordance with the
terms and provisions of this Agreement, to the best of such counsel's knowledge,
free and clear of all liens, encumbrances, claims, security interests,
restrictions, stockholders' agreements and voting trusts whatsoever.
(v) Except as set forth in the Prospectus, there are no
outstanding options, warrants, or other rights, providing for the issuance of,
and, to the best of the knowledge of such counsel, no commitments, plans or
arrangements to issue, any shares of any class of capital stock of the Company,
or any security convertible into, or exchangeable for, any shares of any class
of capital stock of the Company.
(vi) To the best of such counsel's knowledge, no
consents, approvals, authorizations or orders of agencies, officers or other
regulatory authorities are necessary for the valid authorization, issue or sale
of the Units hereunder, except such as may be required under the Act or state
securities or Blue Sky Laws.
(vii) The Registration Statement has become effective
under the Act and, to the best of the knowledge of such counsel, no order
suspending the effectiveness of the Registration Statement is in effect and no
proceedings for that purpose have been instituted or are pending before or
threatened by, the Commission;
(viii) To the best of such counsel's knowledge and based
upon the investigation described below, the Registration Statement and
Prospectus, and each amendment thereof and supplement thereto, comply as to form
in all material respects with the applicable requirements of the Act and the
Rules and Regulations (except that no opinion need be expressed as to financial
statements, notes thereto, and financial data contained in the Registration
Statement or Prospectus). Such counsel has participated in conferences with
officers and representatives of the Company and with its certified public
accountants in the preparation of the Registration Statement and the
Prospectus. At such conferences counsel has made inquiries of such officers,
representatives and accountants, and discussed the contents of the
Registration Statement and the Prospectus. Such counsel has not independently
verified, and, accordingly, does not assume any responsibility for, the
accuracy, completeness or fairness of the information contained in the
Registration Statement or the Prospectus, other than as set forth the
Prospectus insofar as such statements relate to the contents of particular
documents therein described. On the basis of the foregoing, nothing has come
to the attention of such counsel to cause such counsel to believe that the
Registration Statement, the Prospectus or any amendment or supplement thereto
contains any untrue statement of a material fact
18
or omits to state a material fact necessary in order to make statements
therein, in light of the circumstances under which they were made, not
misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other financial and statistical data
and schedules contained therein, as to which such counsel need express no
opinion); and such counsel is familiar with all contracts referred to in the
Registration Statement or in the Prospectus and such contracts are
sufficiently summarized or disclosed therein, or filed as exhibits thereto, as
required, and such counsel does not know of any other contracts required to be
summarized or disclosed or filed; and such counsel does not know of any legal
or governmental proceedings to which the Company is a party, or in which
property of the Company is the subject, of a character required to be
disclosed in the Registration Statement or the Prospectus which are not so
disclosed therein.
(ix) The statements in the Registration Statement under
the caption Business Facilities" have been reviewed by such counsel and insofar
as they refer to descriptions of agreements, statutes, licenses, certifications,
rules or regulations or legal conclusions, are correct in all material respects.
(x) This Agreement has been duly authorized and executed
by the Company and is a valid and binding agreement of the Company enforceable
in accordance with its terms subject to bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors rights generally and except that
no opinion need be given with regard to the enforceability of Section 9 hereof
or the availability of equitable relief.
(xi) To the best knowledge of such counsel: (a) no
default exists, and no event has occurred which, with notice or lapse of time,
or both, would constitute a default in the due performance and observance of any
material term, covenant or condition by the Company, of any indenture, mortgage,
deed of trust, note or any other agreement or instrument to which the Company is
a party or by which it or its business or its properties may be bound or
affected, except where such default would not have a material adverse effect
on the business of the Company and except as disclosed in the Prospectus; (b)
the Company has full power and lawful authority to authorize, issue and sell
the Units on the terms and conditions set forth herein and in the Registration
Statement and in the Prospectus; (c) no consent, approval, authorization or
other order of any regulatory authority is required for such authorization,
issue or sale, except as may be required under the Act or State securities
laws, clearance with the NASD and such other consent, approval, authorization
or order as has been obtained and is in full force and effect; and (d) the
execution and delivery of this Agreement, the consummation of the transactions
herein contemplated, and compliance with the terms hereof will not conflict
with, or constitute a default under, any material indenture, mortgage, deed of
trust, note or any other agreement or instrument to which the Company is now a
party or by which it or its business or its properties may be bound or
affected, the Certificate of Incorporation and any amendments thereto, the
by-laws of the Company, or any order, rule or regulation, writ, injunction or
decree of any government, governmental instrumentality, or court, domestic or
foreign, having jurisdiction over the Company or its business or properties.
19
(xii) Except as disclosed in the Registration Statement
and Prospectus, to the best knowledge of such counsel, there are no material
actions, suits or proceedings at law or in equity of a material nature pending,
or to such counsel's knowledge, threatened against the Company which are not
adequately covered by insurance and there are no proceedings pending or, to the
knowledge of such counsel, threatened against the Company before or by any
Federal or State Commission, regulatory body, or administrative agency or other
governmental body, wherein an unfavorable ruling, decision or finding would
materially and adversely affect the business, operation or condition
(financial or otherwise) of the Company, which are not disclosed in the
Prospectus.
(xiii) The Underwriters' Unit Warrants to be issued to
the Representative hereunder will be, when issued, duly and validly authorized
and executed by the Company and will constitute valid and binding obligations of
the Company, legally enforceable in accordance with their terms except as
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws pertaining to creditors rights generally and the
Company will have duly authorized, reserved and set aside the shares of its
Common Stock issuable upon exercise of the Underwriters' Unit Warrants and the
underlying warrants and such stock, when issued and paid for upon exercise of
the Underwriters' Unit Warrants and the underlying warrants in accordance with
the provisions thereof, will be duly and validly issued, fully-paid and
non-assessable.
Such opinion shall also cover such other matters incident to
the transactions contemplated by this Agreement as the Representative shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters
of fact.
(h) The Company shall have furnished to the Representative
certificates of the President and a Vice-President of the Company, dated as of
the Closing Date, and Additional Closing Date(s), to the effect that:
(i) Each of the representations and warranties of the
Company contained in Section 2 hereof is true and correct in all material
respects at and as of such Closing Date, and the Company has performed or
complied with all of its agreements, covenants and undertakings contained in
this Agreement and has performed or satisfied all the conditions contained in
this Agreement on its part to be performed or satisfied at the Closing Date;
(ii) The Registration Statement has become effective and
no order suspending the effectiveness of the Registration Statement has been
issued, and, to the best of the knowledge of the respective signers, no
proceeding for that purpose has been initiated or is threatened by the
Commission;
(iii) The respective signers have each carefully examined
the Registration Statement and the Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and the
Prospectus and any amendments and supplements thereto and all statements
contained therein are
20
true and correct in all material respects, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and, since the effective date of the Registration Statement, there
has occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth except changes which the
Registration Statement and Prospectus indicate might occur.
(iv) Except as set forth or contemplated in the
Registration Statement and Prospectus, since the respective dates as of which,
or periods for which, information is given in the Registration Statement and
Prospectus and prior to the date of such certificate (A) there has not been any
material adverse change, financial or otherwise, in the business, business
prospects, earnings, general affairs or condition (financial or otherwise), of
the Company (in each case whether or not arising in the ordinary course of
business), and (B) the Company has not incurred any material liabilities,
direct or contingent, or entered into any material transactions, otherwise
than in the ordinary course of business other than as referred to in the
Registration Statement or Prospectus and except changes which the Registration
Statement and Prospectus indicate might occur.
(i) The Company shall have furnished to the Representative
on the Closing Date, such other certificates of executive officers of the
Company additional to those specifically mentioned herein, as the
Representative may have reasonably requested, as to: the accuracy and
completeness of any statement in the Registration Statement or the Prospectus,
or in any amendment or supplement thereto; the representations and warranties
of the Company herein; the performance by the Company of its obligations
hereunder; or the fulfillment of the conditions concurrent and precedent to
the obligations of the Underwriters hereunder, which are required to be
performed or fulfilled on or prior to the Closing Date.
(j) At the time this Agreement is executed, and on each
Closing Date you shall have received a letter from Xxxxxxx X. Xxxxxx & Company
LLP, addressed to the Representative, as Representative of the Underwriters,
and dated, respectively, as of the date of this Agreement and as of each
Closing Date in form and substance reasonably satisfactory to the
Representative, to the effect that:
(i) They are independent public accountants within the
meaning of the Act and the applicable published Rules and Regulations of the
Commission;
(ii) In their opinion, the financial statements and related
schedules of the Company included in the Registration Statement and Prospectus
and covered by their reports comply as to form in all material respects with the
applicable accounting requirements of the Act and the published Rules and
Regulations of the Commission issued thereunder;
21
(iii) On the basis of limited procedures in
accordance with standards established by the American Institute of Certified
Public Accountants, including (1) a reading of the latest available financial
statements of the Company (a copy of which shall be attached to such letter),
(2) a reading of the latest available minutes of the meetings of the
stockholders and the Board of Directors of the Company as set forth in the
minute books of the Company, officials of the Company having advised you and
them that the minutes of all such meetings through that date were set forth
therein, (3) consultations with officials of the Company responsible for
financial and accounting matters of the Company, which procedures do not
constitute an examination in accordance with generally accepted accounting
standards, and would not necessarily reveal material adverse changes in the
financial position or results of operations or inconsistencies in the
application of generally accepted accounting principles, nothing has come to
their attention which in their judgment would lead them to believe that (a) the
unaudited financial statements and related schedules of the Company included in
the Registration Statement and Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act and the
published Rules and Regulations of the Commission issued thereunder, or were not
prepared in accordance with generally accepted accounting principles and
practices consistent in all material respects with those followed in the
preparation of the comparable financial statements and schedules covered by
their reports included in the Registration Statement and Prospectus, or would
require any material adjustments for a fair presentation of the information
purported to be shown thereby or (b) during the period from the date of the
Capitalization table included in the Prospectus to a specified date not more
than four business days prior to the date of such letter, there has been any
material change in the capital stock or debt of the Company, or (c) during the
period from the date of the latest balance sheet and related statements of
operations, changes in stockholders' equity and changes in financial position
included in the Prospectus and covered by their reports contained therein to the
date of the letter, there has been any material adverse change in the financial
condition, or results of operations, of the Company except as disclosed in the
registration statement; and
(iv) In addition to the examination referred to in
their reports included in the Registration Statement and the Prospectus and the
limited procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are derived from the
general accounting records of the Company which appear in the Prospectus under
the captions "Capitalization", "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Executive Compensation",
"Certain Transactions", "Selected Financial Data," "Dilution," and "Risk
Factors," as well as such other financial information as may be specified by
the Representative, and that they have compared such amounts, percentages and
financial information with the accounting records of the Company and have
found them to be in agreement.
All the opinions, letters, certificates and evidence
mentioned above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form and substance
reasonably satisfactory to counsel to the Underwriters, whose approval shall not
be unreasonably withheld, conditioned or delayed.
22
If any of the conditions specified in this Section shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
this Agreement and all obligations of the Underwriters hereunder may be
terminated and cancelled by the Representative by notifying the Company of such
termination and cancellation in writing or by telegram at any time prior to,
or on, the Closing Date and any such termination and cancellation shall be
without liability of any party hereto to any other party, except with respect
to the provisions of Sections 7 and 8 hereof. The Representative may, of
course, waive, in writing, any conditions which have not been fulfilled or
extend the time for their fulfillment.
SECTION 12. Termination.
(a) This Agreement may be terminated by the Representative
by written or telegraphic notice to the Company at any time before it becomes
effective pursuant to Section 10.
(b) This Agreement may be terminated by the Representative
by written or telegraphic notice to the Company, at any time after it becomes
effective, in the event that the Company, after notice from the Representative
and an opportunity to cure, shall have failed or been unable to comply with
any of the terms, conditions or provisions of this Agreement on the part of
the Company to be performed, complied with or fulfilled within the respective
times herein provided for, including without limitation Section 6(g) hereof,
unless compliance therewith or performance or satisfaction thereof shall have
been expressly waived by the Representative in writing. This Agreement may
also be terminated if (i) qualifications are received or provided by the
Company's independent public accountants or attorneys to the effect of either
inabilities in furnishing certifications as to material items including,
without limitation, information contained within the footnotes to the
financial statements, or as affecting matters incident to the issuance and
sale of the securities contemplated or as to corporate proceedings or other
matters or (ii) there is any action, suit or proceeding, threatened or
pending, at law or equity against the Company, or by any Federal, State or
other commission, board or agency wherein any unfavorable result or decision
could materially adversely affect the business, property, or financial
condition of the Company which was not disclosed in the Prospectus.
(c) This Agreement may be terminated by the Representative
by written or telegraphic notice to the Company at any time after it becomes
effective, if the offering of, or the sale of, or the payment for, or the
delivery of, the Units is rendered impracticable or inadvisable because (i)
additional material governmental restriction, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New
York Stock Exchange or trading in securities generally on such exchange shall
have been suspended or a general banking moratorium shall have been
established by Federal or New York State authorities or (ii) a war or other
national calamity shall have occurred involving the United States or (iii) the
condition of the market for securities in general shall have materially and
adversely changed, or (iv) the condition of any matter materially affecting
the Company or its business or business prospects, is such that it would be
undesirable,
23
impractical or inadvisable to proceed with, or consummate, this Agreement or
the public offering of the Units.
(d) Any termination of this Agreement pursuant to this
Section 12 shall be without liability of any character (including, but not
limited to, loss of anticipated profits or consequential damages) on the part
of any party hereto, except that the Company shall remain obligated to pay the
costs and expenses provided to be paid by it specified in Sections 6, 7 and 8,
to the extent therein provided. In addition, the Underwriter shall account to
the Company for any advance and shall reimburse the Company for any portion of
the advance not expended for actual out-of-pocket expenses.
SECTION 13. Finder. The Company and the Underwriters mutually
represent that they know of no person who rendered any service in connection
with the introduction of the Company to the Underwriters and that they know of
no claim by anyone for a "finder's fee" or similar type of fee, in connection
with the public offering which is the subject of this Agreement. Each party
hereby indemnifies the other against any such claims by any person known to
it, and not known to the other party hereto, who shall claim to have rendered
services in connection with the introduction of the Company to the
Underwriters and/or to have such a claim.
SECTION 14. Substitution of Underwriters.
(a) If one or more Underwriters default in its or their
obligations to purchase and pay for Units hereunder and if the aggregate
amount of such Units which all Underwriters so defaulting have agreed to
purchase does not exceed 10% of the aggregate number of Units constituting the
Units, the non-defaulting Underwriters shall have the right and shall be
obligated severally to purchase and pay for (in addition to the Units set
forth opposite their names in Schedule I) the full amount of the Units agreed
to be purchased by all such defaulting Underwriters and not so purchased, in
proportion to their respective commitments hereunder. In such event the
Representative, for the accounts of the several non-defaulting Underwriters,
may take up and pay for all or any part of such additional Units to be
purchased by each such Underwriter under this subsection (a), and may postpone
the Closing Date to a time not exceeding seven full business days; or
(b) If one or more Underwriters (other than the
Representative) default in its or their obligations to purchase and pay for
the Units hereunder and if the aggregate amount of such Units which all
Underwriters so defaulting shall have agreed to purchase shall exceed 10% of
the aggregate number of Units, or if one or more Underwriters for any reason
permitted hereunder cancel its or their obligations to purchase and pay for
Units hereunder, the non-canceling and non-defaulting Underwriters
(hereinafter called the "Remaining Underwriters") shall have the right, but
shall not be obligated to purchase such Units in such proportion as may be
agreed among them, at the Closing Date. If the Remaining Underwriters do not
purchase and pay for such Units at such Closing Date, the Closing Date shall
be postponed for one business day and the remaining Underwriters shall have
the right to purchase such Units, or to substitute another person or persons
to
24
purchase the same or both, at such postponed Closing Date. If purchasers shall
not have been found for such Units by such postponed Closing Date, the Closing
Date shall be postponed for a further two business days and the Company shall
have the right to substitute another person or persons, satisfactory to you to
purchase such Units at such second postponed Closing Date. If the Company
shall not have found such purchasers for such Units by such second postponed
Closing Date, then this Agreement shall automatically terminate and neither
the Company nor the remaining Underwriters (including the Representative)
shall be under any obligation under this Agreement (except that the Company
shall remain liable to the extent provided in Paragraph 7 hereof). As used in
this Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 14. Nothing in this subparagraph (b) will
relieve a defaulting Underwriter from its liability, if any, to the other
Underwriters for damages occasioned by its default hereunder (and such damages
shall be deemed to include, without limitation, all expenses reasonably
incurred by each Underwriter in connection with the proposed purchase and sale
of the Units) or obligate any Underwriter to purchase or find purchasers for
any Units in excess of those agreed to be purchased by such Underwriter under
the terms of Sections 3 and 14 hereof.
SECTION 15. Registration of the Underwriters' Unit Warrants
and/or securities underlying the Underwriter's Unit Warrants. The Company
agrees that it will, upon request by the Representative or the holders of a
majority of the Underwriters' Unit Warrants and Underlying Securities within
the period commencing one year after the Closing Date, and for a period of
five years from the Effective Date, on one occasion only at the Company's sole
expense, cause the Underwriter's Warrants and/or the Underlying Securities
issuable upon exercise of the Underwriter's Warrants, to be the subject of a
post-effective amendment, a new Registration Statement, if appropriate
(hereinafter referred to as the "demand Registration Statement"), so as to
enable the Representative and/or its assigns to offer publicly the
Underwriter's Warrants and/or the underlying securities. The Company agrees to
register such securities expeditiously and, where possible, within forty-five
(45) business days after receipt of such requests. The Company agrees to use
its "best efforts" to cause the post-effective amendment, new Registration
Statement to become effective and for a period of nine (9) months thereafter
to reflect in the post-effective amendment, new Registration Statement,
financial statements which are prepared in accordance with Section 10(a)(3) of
the Act and any facts or events arising which, individually or in the
aggregate, represent a fundamental and/or material change in the information
set forth in such post-effective amendment or new Registration Statement. The
holders of the Underwriters' Unit Warrants may demand registration without
exercising such Warrants and, in fact, are never required to exercise same.
The Company understands and will agree that if, at any
time within the period commencing one year after the Closing Date and ending
seven years after the Effective Date of the Company's Registration Statement, it
should file a Registration Statement with the Securities and Exchange Commission
pursuant to the Securities Act, regardless of whether some of the holders of the
Underwriters' Unit Warrants and Underlying Securities shall have theretofore
availed themselves of the right provided above, the Company, at its own
expense, will offer to said holders the opportunity to
25
register the Underwriters' Unit Warrants and Underlying Securities. This
paragraph is not applicable to a Registration Statement filed by the Company
with the SEC on Form S-8 or any other inappropriate form.
In addition to the rights above provided, the Company
will cooperate with the then holders of the Underwriter's Warrants and
Underlying Securities in preparing and signing a Registration Statement, on one
occasion only in addition to the Registration Statements discussed above,
required in order to sell or transfer the aforesaid Underwriter's Warrants and
underlying securities and will supply all information required therefor, but
such additional Registration Statement shall be at the then holders' cost and
expense unless the Company elects to register additional shares of the
Company's Common Stock in which case the cost and expense of such Registration
Statement will be prorated between the Company and the holders of the
Underwriter's Warrants and underlying securities according to the aggregate
sales price of the securities being issued. The holders of the Underwriter's
Warrants may include such Warrants in any such filing without exercising the
Underwriter's Warrants, and in fact, are never required to exercise same. The
Company can, at any time for any reason, withdraw any such registration except
in connection with a Registration Statement filed pursuant to the Company's
demand Registration Statement.
For purposes of this Section 15, the term "Underlying
Securities" shall refer to and include the Common Stock and underlying warrants
issuable and issued upon exercise of the Underwriters' Unit Warrants as well as
any Common Stock issued upon the exercise of the underlying warrants.
SECTION 16. Warrant Exercise Fee Agreement. Commencing
twelve months after the Effective Date, the Company will pay Dupont an amount
equal to ten (10%) percent of the aggregate exercise price of each Warrant
exercised of which a portion may be allowed to the dealer who solicited the
exercise (which may also be Dupont); provided: (1) the market price of the
Common Stock on the date the Warrant was exercised was greater than the
Warrant exercise price on that date; (2) exercise of the Warrant was solicited
by a member of the NASD; (3) the Warrant was not held in a discretionary
account; (4) disclosure of compensation arrangements was made both at the time
of the offering and at the time of exercise of the Warrant; and (5) the
solicitation of the exercise of the Warrant was not in violation of Regulation
M promulgated under the Securities Exchange Act of 1934 or Rule 2710 of the
NASD Rules of Conduct. The Warrant Exercise Fee shall be paid in accordance
with the provisions of this paragraph and the Warrant Exercise Fee Agreement
filed as an exhibit to the Registration Statement (the "Warrant Exercise Fee
Agreement"). The Company also agrees to execute and deliver the Warrant
Exercise Fee Agreement to Dupont on the Closing Date.
SECTION 17. Designation of a Director or Non-voting Advisor to the
Board: Unless waived by us, we shall have the right to designate a director or
a non-voting advisor to the Board for a period of three years after the
Effective Date. Said designee, shall attend meetings of the Board and receive
no more or less compensation than is paid to other non-management directors of
the Company and shall be entitled to receive
26
reimbursement for all reasonable costs incurred in attending such meetings,
including but not limited to, food, lodging and transportation. Moreover, to
the extent permitted by law, the Company will agree to indemnify the
Representative and its designee for the actions of such designee as director
or as an advisor of the Company. In the event the Underwriter designates a
director, then the Company will utilize its best efforts to obtain officer and
director liability insurance of at least $1,000,000 dollars prior to such
person serving as a director and if obtained, to maintain such policy in
effect until five years from the Effective Date. To the extent permitted under
the policy, it will also include each of the Representative and its designee
as an insured under such policy.
SECTION 18. Restriction on Securities. All officers, directors and
present stockholders (including holders of derivative securities) as of the
Effective Date, have agreed not to sell, transfer, hypothecate or convey any
capital stock or derivative securities by registration or otherwise for a
"Lock-Up" period of thirteen months from the Effective Date without the prior
written consent of the Representative (except that, subject to compliance with
applicable securities laws, any such officer, director or stockholder may
transfer his or her stock to a member of his family or in the event of death,
by will or operation of law, provided that any such transferee shall agree, as
a condition to such transfer, to be bound by the restrictions set forth herein
and further provided that the transferor (except in the case of the
transferor's death) shall continue to be deemed the beneficial owner of such
shares in accordance with Regulation 13d-(3) of the Securities Exchange Act of
1934, as amended). An appropriate legend shall be marked on the face of stock
certificates representing all of such securities.
SECTION 19. Notice. Except as otherwise expressly provided in this
Agreement, (A) whenever notice is required by the provisions hereof to be
given to the Company, such notice shall be given in writing, by certified
mail, return receipt requested, addressed to the Company at P. O. Xxx 000,
Xxxxxxxx, Xxxxxxx 00000, copy to Xxxxx X. Xxxx, Esq., Gravel and Xxxx, 00 Xx.
Xxxx Xxxxxx, 0xx Xxxxx, P. O. Xxx 000, Xxxxxxxxxx, Xxxxxxx 00000 and (B)
whenever notice is required by the provisions hereof to be given to the
Underwriters, such notice shall be in writing addressed to the Representative
at the address set forth on the first page of this Agreement, copy to Xxxxxx
Xxxxx, Esq., Xxxxxx Xxxxx P.C., 000 Xxxxx Xxxx Xxxx, Xxxxx 000, Xxxxx Xxxx,
Xxx Xxxx 00000. Any party may change the address for notices to be sent by
giving written notice to the other persons.
SECTION 20. Representations and Agreements to Survive Delivery.
Except as the context otherwise requires, all representations, warranties,
covenants, and agreements contained in this Agreement shall be deemed to be
representations, warranties, covenants, and agreements as at the date hereof
and as at the Closing Date and the Additional Closing Date(s), and all
representations, warranties, covenants, and agreements of the several
Underwriters and the Company, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any of the
Underwriters or the Company or any of their respective controlling persons,
and shall survive any termination of this Agreement (whensoever made) and/or
delivery of the Firm Units and the Optional Units to the several Underwriters.
27
SECTION 21. Miscellaneous. This Agreement is made solely for the
benefit of the Underwriters and the Company and their respective successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successor" or the term "successors and
assigns" as used in this Agreement shall not include any purchaser, as such,
of any of the Units.
This Agreement shall not be assignable by any party without the
other party's prior written consent. This Agreement shall be binding upon, and
shall inure to the benefit of, our respective successors and permitted assigns.
The foregoing represents the sole and entire agreement between us with respect
to the subject matter hereof and supersedes any prior agreements between us with
respect thereto. This Agreement may not be modified, amended or waived except
by a written instrument signed by the party to be charged. The validity,
interpretation and construction of this Agreement, and of each part hereof,
shall be governed by the internal laws of the State of New York, without
giving effect to the conflict of laws provisions thereof.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall be
deemed to be one and the same instrument.
If a party signs this Agreement and transmits an electronic
facsimile of the signature page to the other party, the party who receives the
transmission may rely upon the electronic facsimile as a signed original of this
Agreement.
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If the foregoing is in accordance with your understanding
of our agreement, kindly sign and return to us a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding agreement
between the Company and the Underwriters in accordance with its terms.
Very truly yours,
WORLDWIDE WIRELESS SYSTEMS, INC.
By: _______________________
Xxxxx X. Xxxxxx
President/CEO
CONFIRMED AND ACCEPTED, as of the
date first above written:
DUPONT SECURITIES GROUP, INC.
By:_____________________________________________
Xxxxxxx X. Xxxxxxxx, President
For itself and as the Representative of the
other Underwriters named in Schedule I hereto.
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SCHEDULE I
Underwriters Number of Firm Units to be
------------
Purchased
-----------------------
Dupont Securities Group, Inc. 1,500,000
Total 1 500,000
=========
30
