1,000,000 SHARES OF COMMON STOCK
500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
DIGITAL POWER CORPORATION
UNDERWRITING AGREEMENT
Boca Raton, Florida
__________, 1996
▇▇▇▇▇▇-▇▇▇▇ SECURITIES, INC.
As Representative of the
The Underwriters listed on Schedule A hereto
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Digital Power Corporation., a California corporation (the "Company")
confirms its agreement with ▇▇▇▇▇▇-▇▇▇▇ Securities, Inc. ("▇▇▇▇▇▇-▇▇▇▇")
and each of the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted
as hereinafter provided in Section 12), for whom ▇▇▇▇▇▇-▇▇▇▇ is acting as
representative (in such capacity, ▇▇▇▇▇▇-▇▇▇▇ shall hereinafter be referred
to as "you" or the "Representative"), with respect to the sale by the
Company and certain selling securityholders of the Company named in
Schedule B herein, ("Selling Securityholders") and the purchase by the
Underwriters, acting severally and not jointly, of an aggregate of
1,000,000 shares of Common Stock, no par value per share, of the Company
from the Company and the Selling Securityholder's shares, of which 750,000
shares shall be offered by the Company and 250,000 shall be offered by the
Selling Securityholders, (collectively the "Shares") and 500,000
Redeemable Common Stock Purchase Warrants, each of which, upon exercise,
entitles the holder thereof to purchase one share of Common Stock during
the three years following the date hereof at a price of $5.00 per share
("Warrants"), from the Company, in the respective amounts. The Company
shall have the right to call each Warrant for redemption upon not less than
thirty (30) days written notice for a redemption price of $.125 per Warrant
provided that the closing bid price of the Common Stock has been at least
$6.00 per share for thirty (30) consecutive days ending within three (3)
trading says of the date on which notice of redemption is given. The
Shares and Warrants are hereinafter referred to as the "Securities."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also sell to the Underwriters acting severally and not
jointly, up to an aggregate of 150,000 shares of Common Stock (the "Option
Shares") and 75,000 Warrants (the "Option Warrants") for the purpose of
covering over-allotments, if any. Such Option Shares and Option Warrants
are hereinafter collectively referred to as the "Option Securities."
The Company also proposes to issue and sell to you warrants (the
"Representative's Warrants") pursuant to the Representative's Warrant
Agreement (the "Representative's Warrant Agreement") for the purchase of an
additional 100,000 shares of Common Stock (the "Underlying Shares") and
50,000 warrants (the "Underlying Warrants"), similar but not identical to,
the Warrants. The underlying shares, underlying warrants and Common Stock
underlying the Warrants issuable upon exercise of the Representative's
Warrants are hereinafter referred to as the "Representative's Securities."
The Securities, the Option Securities, the Representative's Warrants and
the Representative's Securities are more fully described in the
Registration Statement and the Prospectus referred to below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The Company and the Selling Securityholders represents
and warrants to, and agrees with, each of the Underwriters as of the date
hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (No. ________), including any
related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Securities, the Option Securities, the Representative's
Warrants and the Representative's Securities (collectively, hereinafter
referred to as the "Securities"), under the Securities Act of 1933, as
amended (the "Act"), which registration statement and amendment or
amendments have been prepared by the Company in conformity with the
requirements of the Act, and the rules and regulations (the "Regulations")
of the Commission under the Act. The Company will promptly file a further
amendment to said registration statement in the form heretofore delivered
to the Underwriters and will not file any other amendment thereto to which
the Underwriters shall have objected in writing after having been furnished
with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time
the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as
a part thereof or incorporated therein (including, but not limited to those
documents or information incorporated by reference therein) and all
information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the Rules and Regulations), is hereinafter
called the "Registration Statement", and the form of prospectus in the form
first filed with the Commission pursuant to Rule 424(b) of the Regulations,
is hereinafter called the "Prospectus." For purposes hereof, "Rules and
Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of
the Registration Statement or any of the Company's securities have been
instituted or are pending or threatened. Each of the Preliminary
Prospectus, the Registration Statement and Prospectus at the time of filing
thereof conformed with the requirements of the Act and the Rules and
Regulations, and none of the Preliminary Prospectus, the Registration
Statement or Prospectus at the time of filing thereof contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein and necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty does not apply to statements
made or statements omitted in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriters by or
on behalf of the Underwriters expressly for use in such Preliminary
Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined herein) and
each Option Closing Date (as defined herein), if any, and during such
longer period as the Prospectus may be required to be delivered in
connection with sales by the Underwriters or a dealer, the Registration
Statement and the Prospectus will contain all statements which are required
to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules
and Regulations; neither the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that this representation and warranty does not apply to statements
made or statements omitted in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of any
Underwriter expressly for use in the Preliminary Prospectus, Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the state of its
incorporation. Except as set forth in the Prospectus, the Company does not
own an interest in any corporation, partnership, trust, joint venture or
other business entity. The Company is duly qualified and licensed and in
good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its operations
require such qualification or licensing. The Company has all requisite
power and authority (corporate and other), and has obtained any and all
necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials
and bodies, to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits; and the Company has not received any
notice of proceedings relating to the revocation or modification of any
such authorization, approval, order, license, certificate, franchise, or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
condition, financial or otherwise, or the earnings, position, prospects,
value, operation, properties, business or results of operations of the
Company. The disclosures in the Registration Statement concerning the
effects of federal, state, local, and foreign laws, rules and regulations
on the Company's business as currently conducted and as contemplated are
correct in all material respects and do not omit to state a material fact
necessary to make the statements contained therein not misleading in light
of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set
forth therein on the Closing Date based upon the assumptions set forth
therein, and the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement,
Representative's Warrant Agreement and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company
conform or, when paid for and issued, will conform, in all respects to all
statements with respect thereto contained in the Registration Statement and
the Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable and the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of
the preemptive rights of any holders of any security of the Company or
similar contractual rights granted by the Company. The Securities are not
and will not be subject to any preemptive or other similar rights of any
shareholder, have been duly authorized and, when paid for, issued and
delivered in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable and will conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action required to be taken
for the authorization, issue and sale of the Securities has been duly and
validly taken; and the certificates representing the Securities will be in
due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities to be sold by the Company hereunder, the
Representatives or the Representative, as the case may be, will acquire
good and marketable title to such Securities free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(f) The financial statements of the Company together with the
related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly present
the financial position, income, changes in cash flow, changes in
shareholders' equity and the results of operations of the Company at the
respective dates and for the respective periods to which they apply and
such financial statements have been prepared in conformity with generally
accepted accounting principles and the Rules and Regulations, consistently
applied throughout the periods involved. There has been no adverse change
or development involving a material prospective change in the condition,
financial or otherwise, or in the earnings, position, prospects, value,
operations, properties, business, or results of operations of the Company
whether or not arising in the ordinary course of business, since the date
of the financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and
intangible, and the businesses of the Company conform in all respects to
the descriptions thereof contained in the Registration Statement and the
Prospectus. Financial information set forth in the Prospectus under the
headings "Summary Financial Information," "Selected Financial Data,"
"Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated
in the Prospectus, the information set forth therein, and have been derived
from or compiled on a basis consistent with that of the audited and
unaudited financial statements included in the Prospectus.
(g) The Company (i) has paid, accrued or otherwise reserved for,
all federal, state, local, and foreign taxes required to be paid,
including, but not limited to, withholding taxes and amounts payable under
Chapters 21 through 24 of the Internal Revenue Code of 1986 (the "Code"),
and has furnished all information returns it is required to furnish
pursuant to the Code, (ii) has established adequate reserves for such Taxes
which are not due and payable, and (iii) does not have any tax deficiency
or claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable
by or on behalf of the Representatives in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Representatives
of the Securities from the Company and the purchase by the Representative
of the Representatives Warrants from the Company, (iii) the consummation by
the Company of any of its obligations under this Agreement, or (iv) resales
of the Securities in connection with the distribution contemplated hereby.
(i) The Company has, including, but not limited to, general
liability, product and property insurance, which insures the Company and
its employees against such losses and risks generally insured against by
comparable businesses. The Company (A) has not failed to give notice or
present any insurance claim with respect to any matter, including but not
limited to the Company's business, property or employees, under the
insurance policy or surety bond in a due and timely manner, (B) has no
disputes or claims against any underwriter of such insurance policies or
surety bonds or has failed to pay any premiums due and payable thereunder,
or (C) has not failed to comply with all conditions contained in such
insurance policies and surety bonds. There are no facts or circumstances
under any such insurance policy or surety bond which would relieve any
insurer of its obligation to satisfy in full any valid claim of the
Company.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding, domestic or foreign,
pending or threatened against (or circumstances that may give rise to the
same), or involving the properties or business of, the Company which (i)
questions the validity of the capital stock of the Company, this Agreement
or the Representative's Warrant Agreement, or of any action taken or to be
taken by the Company pursuant to or in connection with this Agreement or
the Representative's Warrant Agreement, (ii) is required to be disclosed in
the Registration Statement which is not so disclosed (and such proceedings
as are summarized in the Registration Statement are accurately summarized
in all respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or the earnings, position, prospects,
shareholders' equity, value, operations, properties, business or results of
operations of the Company.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, the Representative's
Securities, enter into this Agreement and the Representative's Warrant
Agreement and to consummate the transactions provided for in such
agreements; and this Agreement, and the Representative's Warrant Agreement
have each been duly and properly authorized, executed and delivered by the
Company. Each of this Agreement and the Representative's Warrant Agreement
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms subject to bankruptcy,
insolvency, and creditor's rights and the application of equitable
principles in any action legal or equitable, and none of the Company's
issue and sale of the Securities, the Representative's Securities,
execution or delivery of this Agreement or the Representative's Warrant
Agreement its performance hereunder and thereunder, its consummation of the
transactions contemplated herein and therein, or the conduct of its
business as described in the Registration Statement, the Prospectus, and
any amendments or supplements thereto, conflicts with or will conflict with
or results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result
in the creation or imposition of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any
kind whatsoever upon, any property or assets (tangible or intangible) of
the Company pursuant to the terms of, (i) the articles of incorporation or
bylaws of the Company, (ii) any license, contract, indenture, mortgage,
deed of trust, voting trust agreement, shareholders agreement, note, loan
or credit agreement or any other agreement or instrument to which the
Company is a party or by which it is or may be bound or to which its
properties or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having jurisdiction
over the Company or any of its activities or properties.
(l) Except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court, regulatory body,
government agency or other body, domestic or foreign, is required for the
issuance of the Securities pursuant to the Prospectus and the Registration
Statement, the issuance of the Representative's Warrants, the performance
of this Agreement and the Representative's Warrant Agreement and the
transactions contemplated hereby and thereby, including without limitation,
any waiver of any preemptive, first refusal or other rights that any entity
or person may have for the issue and/or sale of any of the Securities, or
the Representative's Warrants, except such as have been or may be obtained
under the Act or may be required under state securities or Blue Sky laws in
connection with the Representatives' purchase and distribution of the
Securities, and the Representative's Warrants to be sold by the Company
hereunder.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as
exhibits to the Registration Statement to which the Company is a party or
by which they may be bound or to which its assets, properties or business
may be subject have been duly and validly authorized, executed and
delivered by the Company and constitute the legal, valid and binding
agreements of the Company enforceable against the Company, as the case may
be, in accordance with respective terms. The descriptions in the
Registration Statement of agreements, contracts and other documents are
accurate and fairly present the information required to be shown with
respect thereto by Form SB-2, and there are no contracts or other documents
which are required by the Act to be described in the Registration Statement
or filed as exhibits to the Registration Statement which are not described
or filed as required, and the exhibits which have been filed are complete
and correct copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as
may otherwise be indicated or contemplated herein or therein, the Company
has not (i) issued any securities or incurred any liability or obligation,
direct or contingent, for borrowed money, (ii) entered into any transaction
other than in the ordinary course of business, or (iii) declared or paid
any dividend or made any other distribution on or in respect of its capital
stock of any class, and there has not been any material change in or
affecting the general affairs, management, financial operations,
shareholders equity or results of operations of the Company.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any material license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust,
voting trust agreement, shareholders agreement, partnership agreement,
note, loan or credit agreement, purchase order, or any other material
agreement or instrument evidencing an obligation for borrowed money, or any
other material agreement or instrument to which the Company is a party or
by which the Company may be bound or to which the property or assets
(tangible or intangible) of the Company is subject or affected.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in material
compliance with all federal, state, local, and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. There are no pending investigations
involving the Company by the U.S. Department of Labor, or any other
governmental agency responsible for the enforcement of such federal, state,
local, or foreign laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or involving the Company, or any
predecessor entity, and none has ever occurred. No representation question
exists respecting the employees of the Company, and no collective
bargaining agreement or modification thereof is currently being negotiated
by the Company. No grievance or arbitration proceeding is pending under
any expired or existing collective bargaining agreements of the Company.
No labor dispute with the employees of the Company exists, or, is imminent.
(q) Except as described in the Prospectus, the Company does not
maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan" or a
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") ("ERISA Plans"). The Company does not maintain
or contribute, now or at any time previously, to a defined benefit plan, as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, which could subject the
Company to any tax penalty on prohibited transactions and which has not
adequately been corrected. Each ERISA Plan is in compliance with all
material reporting, disclosure and other requirements of the Code and ERISA
as they relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan
which is intended to comply with Code Section 401(a), stating that such
ERISA Plan and the attendant trust are qualified thereunder. The Company
has never completely or partially withdrawn from a "multi-employer plan."
(r) The Company, nor any of its officers, directors, partners,
"affiliates" or "associates" (as these terms are defined in Rule 405
promulgated under the Rules and Regulations) has ever taken or will take,
directly or indirectly, any action designed to or which has constituted or
which might be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities or
otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or
held by the Company are in dispute so far as known by the Company or are in
any conflict with the right of any other person or entity. The Company (i)
owns or has the right to use, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all patents, trademarks, service marks,
trade names and copyrights, technology and licenses and rights with respect
to the foregoing, used in the conduct of its business as now conducted or
proposed to be conducted without infringing upon or otherwise acting
adversely to the right or claimed right of any person, corporation or other
entity under or with respect to any of the foregoing; and (ii) is not
obligated or under any liability whatsoever to make any payment by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant
to, any patent, trademark, service ▇▇▇▇, trade name, copyright, know-how,
technology or other intangible asset, with respect to the use thereof or in
connection with the conduct of its business or otherwise.
(t) The Company owns and has the unrestricted right to use all
trade secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
inventions, designs, processes, works of authorship, computer programs and
technical data and information (collectively herein "intellectual
property") that are material to the development, manufacture, operation and
sale of all products and services sold or proposed to be sold by the
Company free and clear of and without violating any right, lien, or claim
of others, including without limitation, former employers of its employees;
provided, however, that the possibility exists that other persons or
entities, completely independently of the Company, as the case may be, or
its employees or agents, could have developed trade secrets or items of
technical information similar or identical to those of the Company. The
Company is not aware of any such development of similar or identical trade
secrets or technical information by others.
(u) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all its intellectual
property in all material aspects.
(v) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
stated in the Prospectus, to be owned or leased by it free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects,
or other restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and payable.
(w) ▇▇▇▇ + Associates, LLP, whose report is filed with the
Commission as a part of the Registration Statement, are independent
certified public accountants as required by the Act and the Rules and
Regulations and have been retained by the Company as its auditors.
(x) Except as provided herein and in the Registration Statement,
the Company has caused to be duly executed legally binding and enforceable
agreements ("Lock-up Agreements") pursuant to which the Company's
shareholders and holders of securities exchangeable or exercisable for or
convertible into shares of Common Stock have agreed not to, directly or
indirectly, publicly offer to sell, sell, grant any option for the sale of,
assign, transfer, pledge, hypothecate or otherwise encumber or dispose of
any shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any
shares of Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein for
a period of not less than twenty-four (24) months following the effective
date of the Registration Statement without the prior written consent of the
Representative. On or before the Closing Date, the Company shall deliver
instructions to the Transfer Agent authorizing it to place appropriate
legends on the certificates representing the securities subject to the
Lock-up Agreements and to place appropriate stop transfer orders on the
Company's ledgers. Except for the issuance of shares of capital stock by
the Company in connection with a dividend, recapitalization, reorganization
or similar transaction or as a result of the exercise of warrants or
outstanding options disclosed in the Registration Statement, the Company
shall not, for a period of TWELVE (12) months following the Closing Date,
directly or indirectly, offer, sell, issue or transfer any shares of its
capital stock, or any security exchangeable or exercisable for, or
convertible into, shares of the capital stock, without the prior written
consent of the Representative. Prior to the effective date of the
Registration Statement, the Company will cause each of its shareholders
owning more than 5,000 Shares and private warrantholders to enter into a
written agreement with the Representative that (i) such shareholders and
warrantholders will not sell or otherwise dispose of any shares of the
Company's Common Stock owned directly or indirectly by them or beneficially
by them (as defined by the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and rules promulgated thereunder) on the effective date of
the Registration Statement for a period of twelve (12) months from the
effective date without the Representative's prior written consent and (ii)
they will permit all certificates evidencing Such Common Stock to be
stamped at closing with an appropriate restrictive legend, and will cause
the transfer agent for the Company to note such restriction on the transfer
books and records of the Company.
(y) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities
hereunder or any other arrangements, agreements, understandings, payments
or issuances with respect to the Company, or any of its officers,
directors, shareholders, partners, employees or affiliates that may affect
the Representatives' compensation, as determined by the National
Association of Securities Dealers, Inc. ("NASD").
(z) Upon the effective date of the Registration Statement the
Company will have the Shares and the Warrants and underlying Shares
registered on the National Association of Securities Dealers Automated
Quotation System, Interdealer Quotation system ("NASDAQ") and will use its
best efforts to maintain such listing for not less than five years. The
Company shall also prior to the effective date of the Registration
Statement make application for a listing on an accelerated basis of the
Company's securities in Standard & Poor's.
(aa) To the Company's best knowledge, no funds or assets of the
Company have been used for illegal purposes; no unrecorded funds or assets
of the Company been established for any purpose; no accumulation or use of
the Company's corporate funds or assets have been made without being
properly accounted for in the respective books and records of the Company;
all payments by or on behalf of the Company have been duly and properly
recorded and accounted for in the Company's books and records; no false or
artificial entry has been made in the books and records of the Company for
any reason; no payment has been made by or on behalf of Company with the
understanding that any part of such payment is to be used for any purpose
other than that described in the documents supporting such payments; the
Company has not made, directly or indirectly, any illegal contributions to
any political party or candidate. The Company's internal accounting
controls are sufficient to cause the Company to comply with the Foreign
Corrupt Practices Act of 1977, as amended.
(bb) Except as set forth in the Prospectus, no officer, director,
shareholder or partner of the Company, or any "affiliate" or "associate"
(as these terms are defined in Rule 405 promulgated under the Rules and
Regulations) of any of the foregoing persons or entities has or has had,
either directly or indirectly, (i) an interest in any person or entity
which (A) furnishes or sells services or products which are furnished or
sold or are proposed to be furnished or sold by the Company; or (B)
purchases from or sells or furnishes to the Company any goods or services,
or (ii) a beneficiary interest in any contract or agreement to which the
Company is a party or by which it may be bound or affected. Except as set
forth in the Prospectus under "Management" or "Certain Transactions," there
are no existing material agreements, arrangements, understandings or
transactions, or proposed agreements, arrangements, understandings or
transactions, between or among the Company, and any officer, director,
Principal Shareholder (as such term is defined in the Prospectus) of the
Company, or any partner, affiliate or associate of any of the foregoing
persons or entities.
(cc) Any certificate signed by any officer of the Company and
delivered to the Representatives or to Representatives' Counsel (as defined
herein) shall be deemed a representation and warranty by the Company to the
Representatives as to the matters covered thereby.
(dd) The minute book of the Company has been made available to
the Representatives and contains a complete summary of all meetings and
actions of the directors and shareholders of the Company since the time of
its incorporation, and reflects all transactions referred to in such
minutes accurately in all respects.
(ee) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or
other convertible or exchangeable securities of the Company have the right
to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or to
require the Company to file a registration statement under the Act and no
person or entity holds any anti-dilution rights with respect to any
securities of the Company.
(ff) The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ in
the form filed as Exhibit 10.___ of the Registration Statement, and (ii)
has purchased keyman life insurance on the life of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇. The
policy shall provide for coverage in the amount of $1,000,000, and the
policy shall name the Company as the sole beneficiary thereof.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SECURITYHOLDERS
(a) The Selling Securityholders will have on the Closing Date,
good, valid and marketable title to securities listed on Schedule B hereto
to be sold by such Selling Securityholders to the Representatives, free and
clear of any liens, charges, claims, encumbrances, pledges, security
interests, restrictions, equities, stockholders' agreements, voting trusts
or defects in title whatsoever; and upon delivery of such Securities and
payment of the purchase price therefor as contemplated in this Agreement,
each of the Representatives will receive good and marketable title to such
Securities purchased by it from such Selling Securityholders, free and
clear of any lien, charge, claim, encumbrance, pledge, security interest,
restriction, equity, shareholders' agreement, voting trust, community
property right or defect in title whatsoever; and other than as described
in the Registration Statement and the Prospectus or created hereby, there
are no outstanding options, warrants, rights, or other agreements or
arrangements requiring such Selling Securityholders at any time to transfer
any Securities to be sold hereunder by such Selling Securityholders.
(b) Such Selling Securityholders have duly authorized (if
applicable), executed and delivered, in the form heretofore furnished to
the Representative, a Power of Attorney (the "Power of Attorney") with
___________ as attorney-in-fact, (an "Attorney-in-Fact"), and a Letter of
Transmittal and Custody Agreement (the "Custody Agreement") with
____________________ as custodian (the "Custodian"); each of the Power of
Attorney and Custody Agreement constitutes a valid and binding obligation
of such Selling Securityholders, enforceable in accordance with its terms
subject to bankruptcy, insolvency and creditor's right; such Selling
Securityholder's Attorney-in-Fact, acting alone, is authorized to execute
and deliver the certificate(s) evidencing the Securities to be sold to the
Representatives on behalf of such Selling Securityholders, to authorize the
delivery of those Securities to be sold by such Selling Securityholders
under this Agreement and to duly endorse (in blank or otherwise) the
certificate or certificates representing such Securities or a stock power
or powers with respect thereto, to accept payment therefor, and otherwise
to act on behalf of such Selling Securityholders in connection with this
Agreement.
(c) All authorizations, approvals, consents and orders necessary
for the execution and delivery by such Selling Securityholders of the Power
of Attorney and the Custody Agreement, the execution and delivery by or on
behalf of such Selling Securityholders of this Agreement, and the sale and
delivery of Securities to be sold by such Selling Securityholders under
this Agreement have been obtained and are in full force and effect; such
Selling Securityholders have full right, power and authority to enter into
and perform her obligations under this Agreement and such Power of Attorney
and Custody Agreement and to sell, transfer and deliver the Securities to
be sold by such Selling Securityholders under this Agreement.
(d) On the Closing Date, certificates in negotiable form for the
Securities to be sold by such Selling Securityholders under this Agreement
on the Closing Date, together with a stock power or powers duly endorsed in
blank by such Selling Securityholders, will have been placed in custody
with the Custodian for the purpose of effecting delivery hereunder and
thereunder.
(e) The performance of this Agreement and the consummation of
the transactions herein contemplated by such Selling Securityholders, will
not conflict with or result in a breach of, or default under, (i) any
license, contract, indenture, mortgage, deed of trust, voting trust
agreement, shareholders' agreement, note, loan or credit agreement, the
Bylaws, the Articles of Incorporation or other agreement or instrument to
which such Selling Securityholders is a party or by which such Selling
Securityholders is or may be bound or to which any of her property is or
may be subject, or (ii) any statute, judgment, decree, order, rule or
regulation applicable to such Selling Securityholders of any arbitrator,
court, regulatory body or administrative agency or other governmental
agency or body, domestic or foreign, having jurisdiction over such Selling
Securityholders or any of such Selling Securityholders's activities or
properties; this Agreement when executed and delivered by the Selling
Securityholders and, to the extent this Agreement is a binding agreement of
the Representatives, constitutes the valid and binding agreement of such
Selling Securityholders, enforceable in accordance with its terms except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or other laws of general application relating to or affecting
enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law.
(f) Such Selling Securityholders have reviewed and are familiar
with the Registration Statement as originally filed with the Commission and
all amendments and supplements thereto, if any, filed with the Commission
prior to the date hereof, and with the Preliminary Prospectus and the
Prospectus, as supplemented, if applicable, to the date hereof, and has no
knowledge of any fact, condition or information not disclosed in the
Registration Statement and Prospectus, as so supplemented, if applicable,
which has adversely affected or could adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, value,
operation, properties, business or results of operations of the Company;
and the information relating to such Selling Securityholders and the
Securities and other securities of the Company owned by Selling
Securityholders that is set forth in such Registration Statement and
Prospectus, as so supplemented, does not and at the Closing Date, will not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make such information, in light of the
circumstances under which they were made, not misleading and all
information furnished by or on behalf of such Selling Securityholders for
use in the Registration Statement, the Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto is, and, at the Closing
Date will be true and complete in all material respects; and such Selling
Securityholders are not prompted to sell the Securities to be sold by such
Selling Securityholders under this Agreement by any information concerning
the Company which is not set forth in the Prospectus, as so supplemented.
(g) Nothing has come to the attention of such Selling
Securityholders to cause such Selling Securityholders to believe that the
Company's representations and warranties contained in this Agreement are
not accurate in all material respects.
(h) There is not pending or threatened against such Selling
Securityholders any action, suit or proceeding (or circumstances that may
give rise to the same) which (i) questions the validity of this Agreement,
the Custody Agreement, the Power of Attorney or of any action taken or to
be taken by such Selling Securityholders pursuant to or in connection with
any of the foregoing; or (ii) which is required to be disclosed in the
Registration Statement and the Prospectus which is not disclosed and such
proceedings which are summarized in all material respects.
(i) No stamp duty or similar tax is payable by or on behalf of
the Representatives in connection with (i) the sale of the Securities to be
sold by such Selling Securityholders; (ii) the purchase by the
Representatives of the Securities to be sold by such Selling
Securityholders; (iii) the consummation by such Selling Securityholders of
any of its obligations under this Agreement, the Custody Agreement or the
Power of Attorney; or (iv) resales of the Securities in connection with the
distribution contemplated hereby.
(j) Except as set forth in the Prospectus, such Selling
Securityholders does not have any registration rights with respect to any
securities of the Company; and such Selling Securityholders do not have any
right of first refusal or other similar right to purchase any securities of
the Company upon the issuance or sale thereof by the Company or upon the
sale thereof by any other stockholder of the Company.
(k) Such Selling Securityholders have not since the filing of
the initial Registration Statement (i) sold, bid for, purchased, attempted
to induce any person to purchase, or paid anyone any compensation for
soliciting purchases of, Common Stock, or (ii) paid or agreed to pay to any
person any compensation for soliciting another to purchase any securities
of the Company (except for the sale of the Securities to the
Representatives under this Agreement and except as otherwise permitted by
law).
(l) Such Selling Securityholders have not taken, and will not
take, directly or indirectly, any action which has constituted or which
might reasonably be expected to cause or result in stabilization of the
price of any security of the Company to facilitate the distribution of the
Securities.
(m) Such Selling Securityholders will review the Prospectus and
will comply with all agreements and satisfy all conditions on its part to
be complied with or satisfied pursuant to this Agreement, the Custody
Agreement and the Power of Attorney at or prior to the Closing Date and
will advise one of its Attorneys-in-Fact prior to the Closing Date, as the
case may be, if any statement to be made on behalf of such Selling
Securityholders in this Agreement contains any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading if made
as of such Closing Date, as the case may be.
(n) Any certificate signed by or on behalf of such Selling
Securityholders and delivered to the Representatives shall be deemed a
representation and warranty by such Selling Securityholders to the
Representatives as to the matters covered thereby.
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND
REPRESENTATIVE'S WARRANTS.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions
herein set forth, the Company and the Selling Securityholders agree to sell
to each Representative, and each Representative, severally and not jointly,
agrees to purchase from the Company and the Selling Securityholders, as the
case may be, at a price of $4.00 per share of Common Stock and $.125 per
Warrant, that number of Securities set forth in Schedule A opposite the
name of such Representative, subject to such adjustment as the
Representative in its sole discretion shall make to eliminate any sales or
purchases of fractional shares of Common Stock or Warrants, plus any
additional number of Securities which such Representative may become
obligated to purchase pursuant to the provisions of Section 1 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the
terms and conditions herein set forth, the Company hereby grants an option
to the Representatives, severally and not jointly, to purchase all or any
part of the Option Shares (up to an aggregate of an additional 150,000
shares of Common Stock and 75,000 Warrants) at the initial offering price,
less the Representative's discount. The option granted hereby will expire
45 days after (i) the date the Registration Statement becomes effective, if
the Company has elected not to rely on Rule 430A under the Rules and
Regulations, or (ii) the date of this Agreement if the Company has elected
to rely upon Rule 430A under the Rules and Regulations, and may be
exercised in whole or in part from time to time only for the purpose of
covering over-allotments which may be made in connection with the offering
and distribution of the Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which the
several Representatives are then exercising the option and the time and
date of payment and delivery for any such Option Securities. Any such time
and date of delivery (an "Option Closing Date") shall be determined by the
Representative, but shall not be later than seven full business days after
the exercise of said option, nor in any event prior to the Closing Date, as
hereinafter defined, unless otherwise agreed upon by the Representative and
the Company. Nothing herein contained shall obligate the Representatives
to make any over-allotments. No Option Securities shall be delivered
unless the Securities shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
securities for, the Securities shall be made at the offices of the
Representative at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be agreed upon by the
Representative and the Company. Such delivery and payment shall be made at
10:00 a.m. (Florida time) on __________, 1996, or at such other time and
date as shall be agreed upon by the Representative and the Company, but not
less than THREE (3) nor more than TEN (10) full business days after the
effective date of the Registration Statement (such time and date of payment
and delivery being herein called "Closing Date"). In addition, in the
event that any or all of the Option Securities are purchased by the
Representatives, payment of the purchase price for and delivery of
certificates for, such Option Securities shall be made at the above-
mentioned firm office of the Representative or at such other place as shall
be agreed upon by the Representative and the Company on the Option Closing
Date as specified in the notice from the Representative to the Company.
Delivery of the certificates for the Securities and the Option Securities,
if any, shall be made to the Representatives against payment by the
Representatives, severally and not jointly, of the purchase price for the
Securities and the Option Securities, if any, by New York Clearing House
funds. In the event such option is exercised, each of the Representatives,
acting severally and not jointly, shall purchase that proportion of the
total number of Option Securities then being purchased which the number of
Securities set forth in Schedule A hereto opposite the name of such
Representative bears to the total number of Securities, subject in each
case to such adjustments as the Representative in its discretion shall make
to eliminate any sales or purchases of fractional shares. Certificates for
the Securities and the Option Securities, if any, shall be in definitive,
fully registered form, shall bear no restrictive legends and shall be in
such denominations and registered in such names as the Representatives may
request in writing at least two (2) business days prior to the Closing Date
or the Option Closing Date, as the case may be. The certificates for the
Securities and the Option Securities, if any, shall be made available to
the Representative at such office or such other place as the Representative
may designate for inspection, checking and packaging no later than 9:30
a.m. on the last business day prior to the Closing Date or the Option
Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative the Representative's Warrants for nominal consideration,
which warrants shall entitle the holders thereof to purchase an aggregate
of 100,000 shares of Common Stock and 50,000 Warrants, similar
but not identical to, the Warrants. The Representative's Warrants shall
be non-exercisable and non-transferable (other than a transfer to affiliates
of the Representative or members of the selling group) for a period of 12
months following the date of the definitive Prospectus. The Representative's
Warrants and the underlying securities shall contain the usual anti-dilution
provisions and shall not be redeemable. The Representative's Warrants will be
exercisable 12 months after the date of the definitive Prospectus used in the
offering and for a period of four years thereafter; and if the
Representative's Warrants are not exercised during this term, they shall, by
their terms, automatically expire. The exercise price of each of the
Representative's Warrants shall be 120% of the public offering price per Share
and Offered Warrants.
The Company and the Representative agree that the Representative
may designate that the Representative's Warrants be issued in varying
amounts directly to its officers, directors, shareholders, employees, and
other proper persons and not to the Representative; however, such
designation will only be made by the Representative if it determines and
represents to the Company that such issuance would not violate the
interpretation of the Board of Governors of the NASD relating to the review
of corporate financing arrangements and would not require registration of
the Representative's Warrants or underlying securities.
4. PUBLIC OFFERING OF THE SECURITIES. As soon after the
Registration Statement becomes effective as the Representative deems
advisable, the Representatives shall make a public offering of the
Securities (other than to residents of or in any jurisdiction in which
qualification of the Securities is required and has not become effective)
at the price and upon the terms set forth in the Prospectus. The
Representative may from time to time increase or decrease the public
offering price after distribution of the Securities has been completed to
such extent as the Representative, in its sole discretion deems advisable.
The Representatives may enter into one or more agreements as the
Representatives, in each of their sole discretion, deem advisable with one
or more broker-dealers who shall act as dealers in connection with such
public offering.
5. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants
and agrees with each of the Representatives as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after
the effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the
Securities by the Representatives of which the Representative shall not
previously have been advised and furnished with a copy, or to which the
Representative shall have objected or which is not in compliance with the
Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice
in writing, (i) when the Registration Statement, as amended, becomes
effective, if the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance with said
Rule 430A and when any post-effective amendment to the Registration
Statement becomes effective; (ii) of the issuance by the Commission of any
stop order or of the initiation, or the threatening, of any proceeding,
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of the Preliminary Prospectus or the
Prospectus, or any amendment or supplement thereto, or the institution of
proceedings for that purpose; (iii) of the issuance by the Commission or by
any state securities commission of any proceedings for the suspension of
the qualification of any of the Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any proceeding
for that purpose; (iv) of the receipt of any comments from the Commission;
and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or
for additional information. If the Commission or any state securities
commission authority shall enter a stop order or suspend such qualification
at any time, the Company will make every effort to obtain promptly the
lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the
Representative, pursuant to Rule 424(b)(4)) not later than the Commission's
close of business on the earlier of (i) the second business day following
the execution and delivery of this Agreement; and (ii) the fifth business
day after the effective date of the Registration Statement.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to
the Prospectus (including any revised prospectus which the Company proposes
for use by the Representatives in connection with the offering of the
Securities which differs from the corresponding prospectus on file at the
Commission at the time the Registration Statement becomes effective,
whether or not such revised prospectus is required to be filed pursuant to
Rule 424(b) of the Rules and Regulations) and will furnish the
Representative with copies of any such amendment or supplement a reasonable
amount of time prior to such proposed filing or use, as the case may be,
and will not file any such prospectus to which the Representative or Atlas,
▇▇▇▇▇▇▇▇, Trop & Borkson, P.A. ("Representatives' Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under
the securities laws of such jurisdictions as the Representative may
designate to permit the continuance of sales and dealings therein for as
long as may be necessary to complete the distribution, and shall make such
applications, file such documents and furnish such information; HOWEVER,
the Company shall not be required to qualify as a foreign corporation or
file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all reasonable
efforts to file and make such statements or reports at such times as are or
may reasonably be required by the laws of such jurisdiction to continue
such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable effort to
comply with all requirements imposed upon it by the Act and the Exchange
Act, as now and hereafter amended and by the Rules and Regulations, as from
time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Securities in accordance with the provisions
hereof and the Prospectus, or any amendments or supplements thereto. If at
any time when a prospectus relating to the Securities or the
Representative's Securities is required to be delivered under the Act, any
event shall have occurred as a result of which, in the opinion of counsel
for the Company or Representatives' Counsel, the Prospectus, as then
amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, the Company will notify the
Representative promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the
Act, each such amendment or supplement to be reasonably satisfactory to
Representatives' Counsel, and the Company will furnish to the
Representatives copies of such amendment or supplement as soon as available
and in such quantities as the Representatives may reasonably request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the
end of the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (90 days in the event that the end of
such fiscal quarter is the end of the Company's fiscal year), the Company
shall make generally available to its securityholders, in the manner
specified in Rule 158(b) of the Rules and Regulations, and will deliver to
the Representative, an earnings statement which will be in the detail
required by, and will otherwise comply with, the provisions of Section
11(a) of the Act and Rule 158(a) of the Rules and Regulations, which
statement need not be audited unless required by the Act, covering a period
of at least twelve (12) consecutive months after the effective date of the
Registration Statement.
(h) During a period of five (5) years after the date hereof,
the Company will furnish to its shareholders, as soon as practicable,
annual reports (including financial statements audited by independent
public accountants) and will deliver to the Representative:
i) Concurrently with furnishing such quarterly reports to
its shareholders, statements of income of the Company for each quarter
in the form furnished to the Company's shareholders and certified by
the Company's principal financial or accounting officer;
ii) concurrently with furnishing such annual reports to its
shareholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
shareholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
certified public accountants;
iii) as soon as they are available, copies of all reports
(financial or other) mailed to shareholders;
iv) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission,
the NASD, NASDAQ or any other securities exchange;
v) every press release and every material news item or
article of interest to the financial community in respect of the
Company, or its affairs which was released or prepared by or on behalf
of the Company; and
vi) any additional information of a public nature
concerning the Company or its business which the Representative may
request.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated
basis to the extent that the accounts of the Company and its subsidiary are
consolidated, and will be accompanied by similar financial statements for
any significant subsidiary which is not so consolidated.
(i) The Company will maintain a Transfer Agent and, if necessary
under the jurisdiction of incorporation of the Company, a Registrar (which
may be the same entity as the Transfer Agent) for its Common Stock.
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative
may designate, copies of each Preliminary Prospectus, the Registration
Statement and any pre-effective or post-effective amendments thereto (two
of which copies will be signed and will include all financial statements
and exhibits), the Prospectus, and all amendments and supplements thereto,
including any prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and in such
quantities as the Representative may reasonably request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of
duly executed, legally binding and enforceable Lock-up Agreements pursuant
to which for a period of twenty-four (24) months from the effective date of
the Registration Statement, shareholders of the Company owning shares of
Common Stock and holders of securities exchangeable or exercisable for or
convertible into shares of Common Stock (owning Warrants) agree that it or
he or she will not directly or indirectly, publicly issue, offer to sell,
sell, grant an option for the sale of, assign, transfer, pledge,
hypothecate or otherwise encumber or dispose of any shares of Common Stock
or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common
Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein without the prior
written consent of the Representative. On or before the Closing Date, the
Company shall deliver instructions to the Transfer Agent authorizing it to
place appropriate legends on the certificates representing the securities
subject to the Lock-up Agreements and to place appropriate stop transfer
orders on the Company's ledgers. Except for the issuance of shares of
capital stock by the Company in connection with a dividend,
recapitalization, reorganization or similar transaction or as a result of
the exercise of warrants or outstanding options disclosed in the
Registration Statement, the Company shall not, for a period of twenty-four
(24) months following the Closing Date, directly or indirectly, offer,
sell, issue or transfer any shares of its capital stock, or any security
exchangeable or exercisable for, or convertible into, shares of the capital
stock, without the prior written consent of the Representative, except the
Company may issue options, not to exceed 120,000 options (without the prior
written consent of the Representative) pursuant to the Company's Stock
Option Plan.
(l) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth
under "Use of Proceeds" in the Prospectus. No portion of the net proceeds
will be used, directly or indirectly, to acquire any securities issued by
the Company.
(m) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form
SR as may be required pursuant to Rule 463 under the Act) from time to
time, under the Act, the Exchange Act, and the Rules and Regulations, and
all such reports, forms and documents filed will comply as to form and
substance with the applicable requirements under the Act, the Exchange Act,
and the Rules and Regulations.
(n) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two full business days prior
thereto, a copy of the latest available unaudited interim financial
statements of the Company (which in no event shall be as of a date more
than thirty (30) days prior to the date of the Registration Statement)
which have been read by the Company's independent public accountants, as
stated in their letters to be furnished pursuant to Section 7(1) hereof.
(o) The Company shall cause the Common Stock and Warrants to be
quoted on NASDAQ and for a period of five years from the date hereof, use
its best efforts to maintain the NASDAQ listing of the Common Stock or,
upon the written consent of the Representative, quotation on a principal
stock exchange.
(p) For a period of five years from the Closing Date, the
Company shall furnish to the Representative at the Company's sole expense,
(i) daily consolidated transfer sheets relating to the Common Stock if such
transfer sheets have been furnished to the Company by its transfer agent at
no additional cost, (ii) the list of holders of all of the Company's
securities and (iii) a Blue Sky "Trading Survey" for secondary sales of the
Company's securities prepared by counsel.
(q) As soon as practicable, (i) but in no event more than ten
business days before the effective date of the Registration Statement, file
a Form 8-A with the Commission providing for the registration under the
Exchange Act of the Securities; and (ii) but in no event more than 30 days
from the effective date of the Registration Statement, take all necessary
and appropriate actions to be included in Standard and Poor's Corporation
Descriptions and to continue such inclusion for a period of not less than
five (5) years.
(r) Until the completion of the distribution of the Securities,
the Company shall not without the prior written consent of the
Representative and Representatives' Counsel, issue, directly or indirectly
any press release or other communication or hold any press conference with
respect to the Company or its activities or the offering contemplated
hereby, other than trade releases issued in the ordinary course of the
Company's business consistent with past practices with respect to the
Company's operations.
(s) For a period equal to the lesser of (i) five (5) years from
the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may
prevent or disqualify the Company's use of Form SB-2 (or other appropriate
form) for the registration under the Act of the Representative's
Securities.
(t) For a period of five (5) years after the effective date of
the Registration Statement, the Representative shall have the right to
designate one individual to be elected to the Company's Board of Directors
(the "Board") and the Company shall use its best efforts to cause such
designee to be elected to the Board. In the event the Representative shall
not have designated such individual at the time of any meeting of the Board
or such person is unavailable to serve, then for a period of two (2) years
after the effective date of the Registration Statement, the Company shall
timely notify the Representative of each meeting of the Board and an
individual selected by the Representative shall be permitted to attend all
meetings of the Board. In addition, the Company shall send to the
Representative's designee all notices and other correspondence and
communications sent by Company to members of the Board at least two (2)
days before any meeting, if applicable. The Company shall reimburse the
Representative's designee for all reasonable expenses incurred in
connection with his service on, or attendance of, meetings of the Board to
the same extent as is provided to all non-employee members of the Board of
Directors.
(u) On or before the effective date of the Registration
Statement, the Company shall have an authorized capital stock acceptable to
the Representative including, without limitation, any stock option plans of
the Company.
(v) On or before the effective date of the Registration
Statement, the Company shall have (i) entered into an employment agreement
with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ in the form filed as Exhibit 10.___ of the
Registration Statement, and (ii) has purchased keyman life insurance on the
life of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇. The policy shall provide for coverage in the
amount of $1,000,000, and the policy shall name the Company as the sole
beneficiary thereof.
(w) If the transactions contemplated by this Agreement are
consummated, during the five (5) year period from the Effective Date, the
Representative and its successors will have the right of first refusal (the
"Right of First Refusal") to act (1) as underwriter, placement agent or
investment banker for any and all public or private offerings of the
securities, whether equity, debt or a combination of equity and debt of the
Company, or any successor to or any current or future subsidiary of the
Company (collectively referred to in this Section (w) as the "Company") by
the Company (the "Subsequent Company Offerings") or any secondary offering
(the "Secondary Offering") of the Company's securities by any principal
shareholder of the Company (the "Principal Shareholders") and (2) to act as
the Company's investment banker on such other transactions as may arise
from time to time, including without limitation, acting as financial
advisor or intermediary in connection with merger and acquisition
opportunities introduced to the Company by ▇▇▇▇▇▇-▇▇▇▇. Accordingly, if
during such period the Company intends to make a Subsequent Company
Offering, the Company receives notification from any of the such Principal
Shareholders of its securities of such holders' intention to make a
Secondary Offering, or the Company proposes a merger, acquisition or
disposition of assets, the Company shall notify the Representative in
writing of such intention and of the proposed terms of the offering or
transaction. The Company shall thereafter promptly furnish the
Representative with such information concerning the business, condition and
prospects of the Company as the Representative may reasonably request. If,
within thirty (30) business days of the receipt of such notice of intention
and statement of terms, the Representative does not accept in writing such
offer to act as underwriter, placement agent or investment banker with
respect to such offering upon the terms proposed, the Company and each of
the Principal Shareholders shall be free to negotiate terms with other
underwriters with respect to such offering and to effect such offering on
such proposed terms within six (6) months after the end of such ten (10)
business days. Before the Company and/or any of the Principal Shareholders
shall accept any modified proposal from such other underwriter, placement
agent or investment banker, the Representative's preferential right shall
be reinstated in the same procedure with respect to such modified proposal
as provided above shall be adopted. The failure by the Representative to
exercise its Right of First Refusal in any particular instance shall not
affect in any way such right with respect to any other Subsequent Company
Offering or Secondary Offering.
(x) The Representative and its successors will have a Right of
First Refusal for a period of five (5) years from the Effective Date to
purchase for the Representative's account or to sell for the account of the
Company's principal stockholders any securities sold pursuant to Rule 144
under the Act. Each of the principal stockholders agrees to consult with
the Representative with respect to any such sales and will offer the
Representative the exclusive opportunity to purchase or sell such
securities on terms at least as favorable to such principal stockholders as
they can secure elsewhere. If the Representative fails to accept in
writing any such proposal for sale by such principal stockholders within
three (3) business days after receipt of a notice containing such proposal,
then the Representative shall have no claim or right with respect to any
such sales contained in any such notice. If, thereafter, such proposal is
modified in any material respect, such principal stockholders shall adopt
the same procedure as with respect to the original proposal.
(y) The Company shall on the Closing Date, enter into a
financial advisory agreement ("Consulting Agreement") with the
Representative for a term of three (3) years commencing on the Effective
Date which will provide that the Representatives will be paid a consulting
fee of one percent of the gross proceeds from the Company's offering of
Securities.
6. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on each of the Closing Date
and the Option Closing Date (to the extent not paid as fees of
Representatives' Counsel, except as provided in (iv) below) incident to the
performance of the obligations of the Company under this Agreement and the
Representative's Warrant Agreement, including, without limitation, (i) the
fees and expenses of accountants and counsel for the Company, (ii) all
costs and expenses incurred in connection with the preparation,
duplication, printing, filing, delivery and mailing of the Registration
Statement and the Prospectus and any amendments and supplements thereto and
the printing, mailing and delivery of this Agreement, the Agreement Among
Representatives, the Selected Dealer Agreements, if any, the Selling
Agreements, if any, and related documents, including the cost of all copies
thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Representatives
and such dealers as the Representatives may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of
the Securities including, but not limited to, (x) the purchase by the
Representatives of the Securities and the purchase by the Representative of
the Representative's Warrants from the Company, and (y) the consummation by
the Company of any of its obligations under this Agreement and the
Representative's Warrant Agreement, (iv) the qualification of the
Securities under state or foreign securities or "Blue Sky" laws and
determination of the statues of such securities under legal investment
laws, including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum," "Legal Investments
Survey," if any, and the "Final Blue Sky Memorandum" and disbursements and
fees of counsel in connection therewith, it being agreed that
Representative's Counsel shall perform the required "Blue Sky" legal
services for the account of the Company,(v) advertising costs
and expenses, consisting of the Company's travel costs and preparation
expenses in connection with the "road show," information meetings and
presentations, bound volumes and prospectus memorabilia and one "tomb-
stone" advertisement in The Wall Street Journal, with expenses relating to
travel, postage and tomb-stone advertising shall not exceed $15,000 in
the aggregate, (vi) fees and expenses of the transfer agent and registrar,
(vii) the fees payable to the Commission and the NASD, and (viii) the fees and
expenses incurred in connection with the listing of the Securities with NASDAQ
and any other exchange.
(b) The Selling Securityholders agree that they will pay all
stock transfer taxes, stamp duties and other similar taxes, if any, payable
(i) upon the sale, issuance or delivery of the Securities sold by such
Selling Securityholders, (ii) upon the purchase by the Representatives of
the Securities sold by such Selling Securityholders, (iii) upon resales of
the Securities sold by such Selling Securityholders in connection with the
distribution contemplated hereby or (iv) in connection with the
consummation by such Selling Securityholders of any of their obligations
under this Agreement and further authorizes the payment of any such amount
(and any amounts payable pursuant to Section 5(c) hereof) by deduction from
the proceeds of the Shares to be sold by them under this Agreement.
(c) If this Agreement is terminated by the Representatives in
accordance with the provisions of Section 6 or Section 12, the Company
shall reimburse and indemnify the Representative for all of its actual
out-of-pocket expenses, including the fees and disbursements of
Representatives' Counsel, less any amounts already paid pursuant to Section
5(d) hereof.
(d) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 6, it will pay to the
Representative on the Closing Date by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds received by the Company from the
sale of the Securities and Option Securities, if any, of which has been
paid upon the execution of the Letter of Intent between the parties hereto.
The Company also agrees to pay certain due diligence fees and expenses
incurred by the Representative in connection with (i) background
investigation of officers, directors and the shareholder of the Company,
pursuant to judgment, UCC and Commission searches and (ii) due diligence
meetings for syndicate members and others.
7. CONDITIONS OF THE REPRESENTATIVES' OBLIGATIONS. The obligations
of the Representatives hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company and Selling
Securityholders herein as of the date hereof and as of the Closing Date and
each Option Closing Date, if any, with respect to the Company as if they
had been made on and as of the Closing Date or each Option Closing Date, as
the case may be; the accuracy on and as of the Closing Date of the
statements of the Selling Securityholders and officers of the Company made
pursuant to the provisions hereof; and the performance by the Company and
the Selling Securityholder and on and as of the Closing Date and each
Option Closing Date, if any, of its or their covenants and obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 P.M., Florida time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the
Representative, and, at Closing Date and each Option Closing Date, if any,
no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Representatives'
Counsel. If the Company has elected to rely upon Rule 430A of the Rules
and Regulations, the price of the Securities and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission
for filing pursuant to Rule 424(b) of the Rules of Regulations within the
prescribed time period, and prior to Closing Date the Company shall have
provided evidence satisfactory to the Representative of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements
of Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company or the
Selling Securityholders that either the Registration Statement, or any
amendment thereto, or the Prospectus, contains an untrue statement of fact
which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to
be stated therein or is necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received from Company's Counsel, and shall have used its best efforts
to cause such counsel to deliver such opinion or opinions with respect to
the organization of the Company, the validity of the Securities, the
Representative's Warrants, the Registration Statement, the Prospectus and
other related matters as the Representative may request and
Representatives' Counsel shall have received such papers and information as
they request to enable them to pass upon such matters.
(d) At the Closing Date, the Representatives shall have received
the favorable opinion of ▇▇▇▇▇▇ Eng ▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the
Company, dated the Closing Date, addressed to the Representatives and in
form and substance reasonably satisfactory to Representatives' Counsel, to
the effect that:
i) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction, (B) is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction where the nature of its
properties or the conduct of its business requires such registration
and the failure to register or so qualify would have a material
adverse effect on the Company, (C) has all requisite corporate power
and authority, and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of
and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; (D) the Company
is and has been doing business in material compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises
and permits and all federal, state and local laws, rules and
regulations; and, (E) the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially adversely
affect the business, condition, financial or otherwise, or the
earnings, affairs, position, prospects, value, operation, properties,
business or results of operations of the Company. The disclosures in
the Registration Statement concerning the effects of federal, state
and local laws, rules and regulations on the Company's business as
currently conducted and as contemplated are correct in all material
respects or do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the
circumstances in which they were made.
ii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization", and to our
knowledge, the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this
Agreement and the Representative's Warrant Agreement and as described
in the Prospectus. The Securities, the Representative's Warrants and
all other securities issued or issuable by the Company conform in all
material respects to all statements with respect thereto contained in
the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; the holders
thereof have no rights to rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and
none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company. The Securities
and the Representative's Securities to be sold by the Company
hereunder and under the Representative's Warrant Agreement are not and
will not be subject to any preemptive or other similar rights of any
shareholder, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof, will be validly issued,
fully paid and non-assessable and conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject
to any liability solely as such holders; all corporate action required
to be taken for the authorization, issue and sale of the Securities
and the Representative's Securities has been duly and validly taken;
and the certificates representing the Securities and the
Representative's Warrants are in due and proper form. Subject to
compliance with the registration provisions of the Act and applicable
state registration and qualification provisions, the Representative's
Warrants constitute valid and binding obligations of the Company to
issue and sell, upon exercise thereof and payment therefor, the number
and type of securities of the Company called for thereby. Upon the
issuance and delivery pursuant to this Agreement of the Securities and
the Representative's Warrants to be sold by the Company, and upon
payment in full therefor the Representatives and the Representative,
respectively, will acquire good and marketable title to the Securities
and Representative Warrants free and clear of any pledge, lien,
charge, claim, encumbrance, security interest, or other restriction
(excluding securities law restrictions) or equity of any kind
whatsoever, except with respect to any actions that may have been
taken or omitted to be taken by the Representatives or the
Representative after the date hereof. No transfer tax is payable by
or on behalf of the Representatives in connection with (A) the
issuance by the Company of the Securities, (B) the purchase by the
Representatives and the Representative of the Securities and the
Representative's Securities, respectively, from the Company, (C) the
consummation by the Company of any of its obligations under this
Agreement or the Representative's Warrant Agreement, or (D) resales of
the Securities in connection with the distribution contemplated
hereby.
iii) the Registration Statement has become effective under
the Act, and, if applicable, filing of all pricing information has
been timely made in the appropriate form under Rule 430A, and no stop
order suspending the use of the Preliminary Prospectus, the
Registration Statement or Prospectus or any part of any thereof or
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or, to the best of such counsel's knowledge, threatened or
contemplated under the Act.
iv) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments a statements or
supplements thereto (other than the financial statements and the notes
thereto and other financial and statistical data included therein, as
to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations.
v) to the best of such counsel's knowledge, (A) there are
no agreements, contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus and filed
as exhibits to the Registration Statement other than those described
in the Registration Statement (or required to be filed under the
Exchange Act if upon such filing they would be incorporated, in whole
or in part, by reference therein) and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are correct
copies of the documents of which they purport to be copies; (B) the
descriptions in the Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and other documents to
which the Company is a party or by which it is bound, including any
document to which the Company is a party or by which it is bound,
incorporated by reference into the Prospectus and any supplement or
amendment thereto, are accurate and fairly represent the information
required to be shown by Form SB-2; or (C) there is not pending or
threatened against the Company any action, arbitration, suit,
proceeding, inquiry, investigation, litigation, legal, statutory,
regulatory, governmental or other proceeding (including, without
limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against, or
involving the properties or business of the Company which (x) is
required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects), (y) questions
the validity of the capital stock of the Company or this Agreement or
the Representative's Warrant Agreement, or of any action taken or to
be taken by the Company pursuant to or in connection with any of the
foregoing; (D) no statute or regulation or legal or governmental
proceeding required to be described in the Prospectus is not described
as required; and (E) there is no action, suit or proceeding, pending
or threatened, against or affecting the Company before any court or
arbitrator or governmental body, agency or official (or any basis
thereof known to such counsel) which in any manner draws into
question the validity or enforceability of this Agreement or the
Representative's Warrant Agreement;
vi) the Company has full legal right, power and authority
to enter into each of this Agreement and the Representative's Warrant
Agreement, and to consummate the transactions provided for therein;
and each of this Agreement and the Representative's Warrant Agreement
has been duly authorized, executed and delivered by the Company. Each
of this Agreement and the Representative's Warrant Agreement, assuming
due authorization, execution and delivery by each other party thereto
constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms (except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's execution or
delivery of this Agreement and the Representative's Warrant Agreement,
its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its
business as described in the Registration Statement, the Prospectus,
and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company pursuant to the terms
of, (A) the articles of incorporation or by-laws of the Company; (B)
any license, contract, indenture, mortgage, deed of trust, voting
trust agreement, shareholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is
a party or by which it is or may be bound or to which any of its
properties or assets (tangible or intangible) is or may be subject, or
any indebtedness, or (C) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency
or body (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
vii) no consent, approval, authorization or order,and no
filing with, any court, regulatory body, government agency or other
body (other than such as may be required under Blue Sky laws, as to
which no opinion need be rendered) is required in connection with the
issuance of the Securities pursuant to the Prospectus, the issuance of
the Representative's Warrants, and the Registration Statement, the
performance of this Agreement and the Representative's Warrant
Agreement, and the transactions contemplated hereby and thereby;
viii) the properties and business of the Company conform in
all material respects to the description thereof contained in the
Registration Statement and the Prospectus;
ix) the Company is not in breach of, or in default under,
any term or provision of any material license, contract, indenture,
mortgage, installment sale agreement, deed of trust, lease, voting
trust agreement, shareholders' agreement, partnership agreement, note,
loan or credit agreement or any other material agreement or instrument
evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which
any of the Company may be bound or to which the property or assets
(tangible or intangible) of any of the Company is subject or affected;
and the Company is not in violation of any term or provision of its
Articles of Incorporation or by-laws or in violation of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation;
x) the statements in the Prospectus under "PROSPECTUS
SUMMARY - THE COMPANY," "BUSINESS," "MANAGEMENT," "SELLING
SECURITYHOLDERS," "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,"
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,"
"DESCRIPTION OF SECURITIES," and "SHARES ELIGIBLE FOR FUTURE SALE"
have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions are correct in all material respects;
xi) the Securities will be listed on NASDAQ upon the
effective date of the Registration statement.
xii) the person listed under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the
Prospectus are the respective "beneficial owners" (as such phrase is
defined in Regulation 13d-3 under the Exchange Act) of the securities
set forth opposite their respective names thereunder as and to the
extent set forth therein;
xiii) except as described in the Prospectus, no person,
corporation, trust, partnership, association or other entity has the
right to include and/or register any securities of the Company in the
Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration
statement;
xiv) except as described in the Prospectus, there are no
claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's or origination fee with respect
to the sale of the Securities hereunder or financial consulting
arrangement or any other arrangements, agreements, understandings,
payments or issuances that may affect the Representatives'
compensation, as determined by the NASD;
xv) assuming due execution by the parties thereto other
than the Company, the Lock-up Agreements hereof are legal, valid and
binding obligations of parties thereto, enforceable against the party
and any subsequent holder of the securities subject thereto in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization
moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
rights to indemnity or contribution may be limited by applicable law);
xvi) except as described in the Prospectus, the Company
does not (A) maintain, sponsor or contribute to any ERISA Plans, (B)
maintain or contribute, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA, and (C) has never
completely or partially withdrawn from a "multi-employer plan;"
xvii) except as set forth in the Prospectus, no officer,
director of shareholder of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under
the Rules and Regulations) of any of the foregoing persons or entities
has or has had, either directly or indirectly, (A) an interest in the
person or entity which (x) furnishes or sells services or products
which are furnished or sold or are proposed to be furnished or sold by
the Company, or (y) purchases from or sells or furnishes to the
Company any goods or services, or (B) a beneficial interest in any
contract or agreement to which the Company is a party or by which they
may be bound or affected. Except as set forth in the Prospectus under
"Management" or "Certain Transactions," there are no existing material
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or
among the Company, and any officer, director, or Principal Shareholder
of the Company, or any affiliate or associate of any such person or
entity.
Such counsel shall state that during the course of its participation
in the preparation of the Registration Statement and the Prospectus and the
amendments thereto, no facts have come to the attention of such counsel
which lead them to believe that either the Registration Statement or any
amendment thereto, at the time such Registration Statement or amendment
became effective or the Preliminary Prospectus or Prospectus or amendment
or supplement thereto as of the date of such opinion contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading (it being understood that such counsel need express no opinion
with respect to the financial statements and schedules and other financial
and statistical data included in the Preliminary Prospectus, the
Registration Statement or Prospectus).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States
and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon
an opinion or opinions (in form and substance satisfactory to
Representatives' Counsel) of other counsel acceptable to Representatives'
Counsel, familiar with the applicable laws; (B) as to matters of fact, to
the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of
the Company, provided that copies of any such statements or certificates
shall be delivered to Representatives' Counsel if requested. The opinion
of such counsel for the Company shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and that the
Representative and they are justified in relying thereon.
(e) At the Closing Date, the Representative shall have received
the favorable opinion of ▇▇▇▇▇▇ Eng ▇▇▇▇ & ▇▇▇▇▇▇▇▇ with respect to the
Selling Securityholders dated the Closing Date, addressed to the
Representatives and in form and substance satisfactory to Representatives'
Counsel, to the effect that:
i) The Selling Securityholders have full right, power and
authority to enter into and to perform its obligations under this
Agreement, his Power of Attorney, Custody Agreement and to sell,
transfer and deliver the Securities to be sold by such Selling
Securityholders under this Agreement.
ii) This Agreement and the Powers of Attorney have been
duly executed and delivered by or on behalf of the Selling
Securityholders, and are the valid and binding obligations of such
Selling Securityholders, enforceable against such Selling
Securityholders in accordance with their respective terms;
iii) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby, including the issuance, sale and delivery of the Securities to
be sold by the Selling Securityholders, will not result in a breach or
violation of, or constitute a default under, any will, license,
contract indenture, mortgage, voting trust agreement, shareholders'
agreement, deed of trust, note, loan or credit agreement, or other
agreement or instrument to which such Selling Securityholders are a
party or by which such Selling Securityholders are or may be bound or
to which any of such Selling Securityholders's property are or may be
subject or any indebtedness, statue, judgment, decree, order, rule or
regulation applicable to such Selling Securityholders of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic
or foreign having jurisdiction over such Selling Securityholders or
any of their activities or properties;
iv) To the best of such counsel's knowledge, no consent,
approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any public, governmental or
regulatory agency or body having jurisdiction over such Selling
Securityholders, or any of their respective properties or assets is
required for the execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby,
including the issuance, sale and delivery of the Securities to be sold
by such Selling Securityholders, except the registration under the Act
of the Shareholder Securities and such consents, approvals,
authorizations, orders, registrations, filings, qualifications,
licenses and permits as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Shareholder Securities to be sold by the Representatives; and
v) Upon delivery of the Securities set forth on Schedule B
hereto to be sold by such Selling Securityholders, and the receipt of
payment therefor pursuant hereto, good, valid and marketable title to
such Securities and, free and clear of all liens, charges,
encumbrances, equities, claims, pledges, security interests,
restrictions, shareholders' agreements, voting trusts, community
property rights, or defects in title whatsoever will pass to the
Representatives.
(f) At each Option Closing Date, if any, the Representatives
shall have received the favorable opinion of ▇▇▇▇▇▇ Eng ▇▇▇▇ & ▇▇▇▇▇▇▇▇,
counsel to the Company, dated the Option Closing Date, addressed to the
Representatives and in form and substance satisfactory to Representatives'
Counsel confirming as of such Option Closing Date the statements made by
▇▇▇▇▇▇ Eng Linn & ▇▇▇▇▇▇▇▇, in the opinion delivered on the Closing Date
with respect to the Option Securities.
(g) On or prior to each of the Closing Date and the Option
Closing Date, if any, Representatives' Counsel shall have been furnished
such documents, certificates and opinions as they may reasonably require
for the purpose of enabling them to review or pass upon the matters
referred to in subsection (c) of this Section 6, or in order to evidence
the accuracy, completeness or satisfaction of any of the representations,
warranties or conditions of the Company, or herein contained.
(h) Prior to each of the Closing and each Option Closing Date,
if any (1) there shall been no adverse change or development involving a
prospective change in the condition, financial or otherwise, prospects,
shareholder's equity with the business activities of the Company, whether
or not in the ordinary course of business, from the latest dates as of
which such condition is set forth in the Registration Statement and
Prospectus; (2) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company, from the latest date as of
which the financial condition of the Company is set forth in the
Registration Statement and Prospectus which is adverse to the Company; (3)
the Company shall not be in default under any provision of any instrument
relating to any outstanding indebtedness; (4) the Company shall not have
issued any securities (other than Securities and the Representatives
Warrants) or declared or paid any dividend or made any distribution in
respect of its capital stock of any class and there has not been any change
in the capital stock or change in the debt (long or short term) or
liabilities or obligations of the Company (contingent or otherwise); (5) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and
Prospectus; (6) no action, suit or proceeding, at law or in equity, shall
have been pending or threatened (or circumstances giving rise to same)
against the Company or affecting any of its properties or business before
or by any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding
may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus; and (7) no stop order shall have
been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(i) At each of the Closing Date and each Option Closing Date, if
any, the Representatives shall have received a certificate of the Company
signed by the principal executive officer and by the chief financial or
chief accounting officer of the Company, dated the Closing Date or Option
Closing Date, as the case may be, to the effect that each of such persons
has carefully examined the Registration Statement, the Prospectus and this
Agreement, and that:
i) The representations and warranties of the Company in
this Agreement are true and correct in all material respects, as if
made on and as of the Closing Date or the Option Closing Date, as the
case may be, and the Company has complied with all agreements and
covenants and satisfied all conditions contained in this Agreement on
its part to be performed or satisfied at or prior to such Closing Date
or Option Closing Date, as the case may be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, after due inquiry are
contemplated or threatened under the Act;
iii) Each Preliminary Prospectus, the Registration
Statement and the Prospectus and, if any, each amendment and each
supplement thereto, contain all statements and information required to
be included therein; and
iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
(a) the Company has not incurred up to and including the Closing Date
or the Option Closing Date, as the case may be, other than in the
ordinary course of its business, any material liabilities or
obligations, direct or contingent; (b) the Company has not paid or
declared any dividends or other distributions on its capital stock;
(c) the Company has not entered into any transactions not in the
ordinary course of business; (d) there has not been any change in the
capital stock or long-term debt or any increase in the short-term
borrowings (other than any increase in the short-term borrowings in
the ordinary course of business) of the Company; (e) the Company has
not sustained any material loss or damage to its property or assets,
whether or not insured; (f) there is no litigation which is pending or
threatened (or circumstances giving rise to same) against the Company
or any affiliated party of the foregoing which is required to be set
forth in an amended or supplemented Prospectus which has not been set
forth; and (g) there has occurred no event required to be set forth in
an amended or supplemented Prospectus, which has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at the
date of such certificate.
(j) At the Closing Date, if any, the Representative shall have
received a certificate of an Attorney-in-Fact for the Selling
Securityholders, dated as of such date, to the effect that (i) the
representations and warranties of such Selling Securityholders, contained
herein are true and correct with the same force and effect as though
expressly made at and as of such Closing Date, (ii) such Selling
Securityholders have reviewed the Prospectus, and any supplements thereto,
and the information relating to such Selling Securityholders and such
Selling Securityholders's shares of Common Stock and other securities of
the Company owned by such Selling Securityholders that is set forth in the
Prospectus, and any supplements thereto, does not contain any untrue
statement of a material fact or omit to state any material fact necessary
to make such information not misleading, and all of the information
furnished by or on behalf of such Selling Securityholders for use in the
Prospectus is true, correct and complete in all respects.
(k) The Representative shall have the obligation to satisfy the
requirements set forth by the rules and regulations of the NASD as to the
amount of compensation allowable or payable by the Representative and,
accordingly, by the Closing Date, the Representatives will have received
clearance from the NASD as to the amount of compensation allowable or
payable to the Representatives, as described in the Registration Statement.
(l) At the time this Agreement is executed, the Representatives
shall have received a letter, dated such date, addressed to the
Representatives in form and substance satisfactory (including the
non-material nature of the changes or decreases, if any, referred to in
clause (iii) below) in all respects to the Representatives and
Representatives' Counsel, from ___________________:
i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act
and the applicable Rules and Regulations;
ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and
Regulations thereunder and that the Representative may rely upon the
opinion of ▇▇▇▇ + Associates, LLP, with respect to the financial
statements and supporting schedules included in the Registration
Statement;
iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the
latest available unaudited interim financial statements), a reading of
the latest available minutes of the shareholders and board of
directors and the various committees of the boards of directors of the
Company, consultations with officers and other employees of the
Company responsible for financial and accounting matters and other
specified procedures and inquiries, nothing has come to its attention
which would lead it to believe that (A) the unaudited financial
statements and supporting schedules of the Company included in the
Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the Rules and Regulations or are not fairly presented in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
of the Company included in the Registration Statement, or (B) at a
specified date not more than five days prior to the effective date of
the Registration Statement, there has been any change in the capital
stock or long-term debt of the Company, or any decrease in the
shareholder's equity or net assets of the Company as compared with
amounts shown in the June 30, 1996 balance sheet included in the
Registration Statement, other than as set forth in or contemplated by
the Registration Statement, or, if there was any change or decrease,
setting forth the amount of such change or decrease; and (C) during
the period from June 30, 1996, to a specified date not more than five
(5) days prior to the effective date of the Registration Statement,
there was any decrease in net revenues, net earnings or increase in
net earnings per common share of the Company, as compared with the
corresponding period beginning June 30, 1996, other than as set forth
in or contemplated by the Registration Statement, or, if there was any
such decrease, setting forth the amount of such decrease; setting
forth, at a date not later than five (5) days prior to the date of the
Registration Statement, the amount of liabilities of the Company
(including a break-down of commercial paper and notes payable to
banks).
iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company
set forth in the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may be
derived from the general accounting records, including work sheets, of
the Company and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter and
found them to be in agreement;
v) stating that they have not during the immediately
preceding five-year period brought to the attention of any of the
Company's management any "weakness," as defined in Statement of
Auditing Standard No. 60 "Communication of Internal Control Structure
Related Matters Noted in an Audit," in any of the Company's internal
controls;
vi) statements as to such other matters incident to the
transaction contemplated hereby as the Representative may reasonably
request.
(m) At Closing Date and each Option Closing Date, if any, the
Representatives shall have received from ▇▇▇▇▇▇ Eng ▇▇▇▇ & ▇▇▇▇▇▇▇▇, a
letter, dated as of the Closing Date or the Option Closing Date, as the
case may be, to the effect that they reaffirm those statements made in the
letter furnished pursuant to SUBSECTION (l) of this Section, except that
the specified date referred to shall be a date not more than five days
prior to Closing Date or the Option Closing Date, as the case may be, and,
if the Company has elected to rely on Rule 430A of the Rules and
Regulations, to the further effect that they have carried out procedures as
specified in subsection (l) of this Section with respect to certain
amounts, percentages and financial information as specified by the
Representative and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
subsection (l).
(n) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Representatives' accounts the appropriate number of Securities.
(o) No order suspending the sale of the Securities in any
jurisdiction, which in the judgment of the Representative is material to
Closing of the transaction, designated by the Representative pursuant to
subsection (e) of Section 4 hereof shall have been issued on either the
Closing Date or the Option Closing Date, if any, and no proceedings for
that purpose shall have been instituted or shall be contemplated.
(p) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's
Warrant Agreement substantially in the form filed as Exhibit ____ to the
Registration Statement in final form and substance satisfactory to the
Representative, and (ii) the Representative's Warrants in such
denominations and to such designees as shall have been provided to the
Company.
(q) Upon the effective date of the Registration Statement, the
Securities shall have been duly approved for quotation on NASDAQ, subject
to official notice of issuance.
(r) On or before Closing Date, there shall have been delivered
to the Representative all of the Lock-up Agreements, in form and substance
reasonably satisfactory to Representatives' Counsel.
(s) On or before the Closing Date, the Company shall have
executed and delivered to the Representative the Consulting Agreement
substantially in the form filed as Exhibit ____.
If any condition to the Representatives' obligations hereunder to
be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representative may
terminate this Agreement or, if the Representative so elects, it may waive
any such conditions which have not been fulfilled or extend the time for
their fulfillment.
8. INDEMNIFICATION.
(a) The Company and the Selling Securityholders, severally but
not jointly agrees to indemnify and hold harmless each of the
Representatives (for purposes of this Section 8 "Representative" shall
include the officers, directors, partners, employees, agents and counsel of
the Representative, including specifically each person who may be
substituted for an Representative as provided in Section 12 hereof), and
each person, if any, who controls the Representative ("controlling person")
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions in respect thereof),
whatsoever (including but not limited to any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Representative or such controlling person may become
subject under the Act, the Exchange Act or any other statute or at common
law or otherwise or under the laws of foreign countries, arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact contained (i) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and
supplemented); (ii) in any post-effective amendment or amendments or any
new registration statement and prospectus in which is included securities
of the Company issued or issuable upon exercise of the Securities; or (iii)
in any application or other document or written communication (in this
Section 8 collectively called "application") executed by the Company or
based upon written information furnished by the Company in any jurisdiction
in order to qualify the Securities under the securities laws thereof or
filed with the Commission, any state securities commission or agency,
NASDAQ or any other securities exchange; or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of the
Prospectus, in the light of the circumstances under which they were made),
unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect
to any Representative by or on behalf of such Representative expressly for
use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company or the Selling Securityholders
may have at common law or otherwise.
(b) Each of the Representatives agree severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors,
proposed directors, each of its officers who has signed the Registration
Statement, counsel for the Company, the Selling Securityholders, and each
other person, if any, who controls the Company within the meaning of the
Act, to the same extent as the foregoing indemnity from the Company and the
Selling Securityholders to the Representatives but only with respect to
statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect
to any Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment thereof or supplement thereto or in any such application,
provided that such written information or omissions only pertain to
disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus directly relating to the transactions effected by the
Representatives in connection with this Offering. The Company acknowledges
that the statements with respect to the public offering of the Securities
set forth under the heading "Underwriting" and the stabilization legend in
the Prospectus have been furnished by the Representatives expressly for use
therein and constitute the only information furnished in writing by or on
behalf of the Representatives for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, suit or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against one or more indemnifying parties under this Section 8, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure so to notify an indemnifying party
shall not relieve it from any liability which it may have under this
Section 8 except to the extent that it has been prejudiced in any material
respect by such failure or from any liability which it may have otherwise).
In case any such action is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and
to the extent it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof with counsel reasonably satisfactory
to such indemnified party. Notwithstanding the foregoing, the indemnified
party or parties shall have the right to employ its or their own counsel in
any such case but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying
parties in connection with the defense of such action at the expense of the
indemnifying party, (ii) the indemnifying parties shall not have employed
counsel reasonably satisfactory to such indemnified party to have charge of
the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties
shall have reasonably concluded, based upon an opinion of counsel, that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in
any of which events such fees and expenses of one additional counsel shall
be borne by the indemnifying parties. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel, in
addition to any local counsel, separate from their own counsel for all
indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement effected without its written consent; provided, however, that
such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 8, but it is judicially determined (by the entry
of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding
the fact that the express provisions of this Section 8 provides for
indemnification in such case or (ii) contribution under the Act may be
required on the part of any indemnified party, then each indemnifying party
shall contribute to the amount paid as a result of such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) (A) in
such proportion as is appropriate to reflect the relative benefits received
by each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the Securities or (B)
if the allocation provided by clause (A) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party
to be indemnified on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. In
any case where each of the Company or the Selling Securityholders are
contributing parties and the Representatives are the indemnified party, the
relative benefits received by the Company or Selling Securityholders on the
one hand, and the Representatives, on the other, shall be deemed to be in
the same proportion as the total net proceeds from the offering of the
Securities (before deducting expenses) bear to the total underwriting
discounts received by the Representatives hereunder, in each case as set
forth in the table on the Cover Page of the Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, the Selling Securityholders, or by the Representatives, and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The amount paid
or payable by an indemnified party as a result of the losses, claims,
damages, expenses or liabilities (or actions in respect thereof) referred
to above in this subdivision (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding
the provisions of this subdivision (d), the Representatives shall not be
required to contribute any amount in excess of the underwriting discount
applicable to the Securities purchased by the Representatives hereunder.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person, if any, who controls the Company within the
meaning of the Act, each officer of the Company who has signed the
Registration Statement, and each director of the Company shall have the
same rights to contribution as the Company, subject in each case to this
subparagraph (d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such party in respect to which a claim for contribution may be made against
another party or parties under this subparagraph (d), notify such party or
parties from whom contribution may be sought, but the omission so to notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have
hereunder or otherwise than under this subparagraph (d), except to the
extent that such party or parties were adversely affected by such omission.
The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or
otherwise.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant
hereto, shall be deemed to be representations, warranties and agreements at
the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the indemnity
agreements contained in Section 7 hereof, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf
of any Representative, the Company, Selling Securityholders, any
controlling person of any Representative or the Company, and shall survive
termination of this Agreement or the issuance and delivery of the
Securities to the Representatives and the Representative, as the case may
be.
10. EFFECTIVE DATE. This Agreement shall become effective at 10:00
a.m., Florida time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Representative, in its discretion, shall release the
Securities for the sale to the public; provided, however, that the
provisions of Sections 6, 8 and 11 of this Agreement shall at all times be
effective. For purposes of this Section 10, the Securities to be purchased
hereunder shall be deemed to have been so released upon the earlier of
dispatch by the Representative of telegrams to securities dealers releasing
such shares for offering or the release by the Representative for
publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
11. TERMINATION.
(a) Subject to subsection (b) of this Section 11, the
Representative shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has disrupted, or in
the Representative's opinion will in the immediate future disrupt the
financial markets, AND SUCH EVENTS HAVE A MATERIAL AND ADVERSE IMPACT ON
THE MARKET FOR THE SECURITIES; or (ii) any material adverse change in the
financial markets shall have occurred; or (iii) if trading on the New York
Stock Exchange, the American Stock Exchange, or the over-the-counter market
shall have been suspended, or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities shall have
been required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or (iv)
if the United States shall have become involved in a war or major
hostilities, or if there shall have been an escalation in an existing war
or major hostilities or a national emergency shall have been declared in
the United States; or (v) if a banking moratorium has been declared by a
state or federal authority; or (VI) if the Company shall have sustained a
loss material or substantial to the Company by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious act
which, whether or not such loss shall have been insured, will, in the
Representative's opinion, make it inadvisable to proceed with the delivery
of the Securities; or (VII) if there shall have been such a material
adverse change in the conditions or prospects of the Company as in the
Representative's judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities; or (VIII) IF THERE SHALL
HAVE BEEN A material adverse change in the general market, political or
economic conditions, in the United States or elsewhere, THAT HAVE A
MATERIAL AND ADVERSE IMPACT ON THE SECURITIES MARKET GENERALLY
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 11(a), the Company shall promptly
reimburse and indemnify the Representative for all of its actual and
reasonable out-of-pocket expenses, including the fees and disbursements of
counsel for the Representatives (less amounts previously paid pursuant to
Section 6(c) above). Notwithstanding any contrary provision contained in
this Agreement, if this Agreement shall not be carried out within the time
specified herein, or any extension thereof granted to the Representative,
by reason of any failure on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement by it to be
performed or satisfied (including, without limitation, pursuant to Section
7 or Section 13) then, the Company shall promptly reimburse and indemnify
the Representative for all of its actual out-of-pocket expenses, including
the fees and disbursements of counsel for the Representatives (less amounts
previously paid pursuant to Section 6(d) above). In addition, the Company
shall remain liable for all reasonable Blue Sky counsel fees and expenses
and Blue Sky filing fees. Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or any termination of this
Agreement (including, without limitation, pursuant to Sections 7, 11, 12
and 13 hereof), and whether or not this Agreement is otherwise carried out,
the provisions of Section 6 and Section 8 shall not be in any way affected
by such election or termination or failure to carry out the terms of this
Agreement or any part hereof.
12. SUBSTITUTION OF THE REPRESENTATIVES. If one or more of the
Representatives shall fail (otherwise than for a reason sufficient to
justify the termination of this Agreement under the provisions of Section
6, Section 10 or Section 12 hereof) to purchase the Securities which it or
they are obligated to purchase on such date under this Agreement (the
"Defaulted Securities"), the Representative shall have the right, within 24
hours thereafter, to make arrangement for one or more of the non-defaulting
Representatives, or any other underwriters, to purchase all, but not less
than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Representative shall
not have completed such arrangement within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the total number of Securities to be purchased on such date, the non-
defaulting Representatives shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Representatives, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Representatives, or the
Company.
No action taken pursuant to this Section shall relieve any defaulting
Representative from liability in respect of any default by such
Representative under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or
in any other documents or arrangements.
13. DEFAULT BY THE COMPANY AND/ OR SELLING SECURITYHOLDERS. If the
Company or Selling Securityholders fail at the Closing Date or the Company
shall fail at any Option Closing Date, to sell and deliver the number of
Securities which it or they are obligated to sell hereunder on such date,
then this Agreement shall terminate (or, if such default shall occur with
respect to any Option Securities to be purchased on an Option Closing Date,
the Representatives may at the Representative's option, by notice form the
Representative to the Company, terminate the Representatives' obligation to
purchase Option Securities from the Company on such date) without any
liability on the part of any non-defaulting party other than pursuant to
Section 5, Section 7 and Section 10 hereof. No action taken pursuant to
this Section shall relieve the Company or Selling Securityholders from
liability, if any, in respect of such default.
14. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Representatives shall be
directed to the Representative at ▇▇▇▇▇▇-▇▇▇▇ Equities, Inc., ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇ ▇▇▇▇, with a copy to Atlas, ▇▇▇▇▇▇▇▇, Trop & Borkson, P.A., New
River Center, Suite 1900, ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. Notices to the Company
shall be directed to the Company at c/o Sierra Resources Corporation, ▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ with a copy to ▇▇▇▇▇▇ Eng ▇▇▇▇ &
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇ ▇. Eng , Esq.
15. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Representatives, the Company, Selling
Securityholders and the controlling persons, directors and officers
referred to in Section 7 hereof, and their respective successors, legal
representatives and assigns, and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect
of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from any Representative shall be deemed to be a
successor by reason merely of such purchase.
16. CONSTRUCTION. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Florida without
giving effect to the choice of law or conflict of laws principles. The
parties hereto agree that any action, proceeding or claim against it
arising out of or in any way related to this Agreement shall be brought and
enforced in the courts of the State of Florida or the United States of
America for the Southern District of Florida and irrevocably submit to such
exclusive jurisdiction, and hereby irrevocably waive any objection to such
exclusive jurisdiction or inconvenient forum.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
18. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof.
This Agreement may not be amended except in a writing, signed by the
Representative and the Company.
If the foregoing correctly sets forth the understanding between the
Representatives and the Company, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
DIGITAL POWER CORPORATION
By:________________________________
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
Chairman of the Board
Confirmed and accepted as of
the date first above written. By:________________________________
for Selling Securityholders
▇▇▇▇▇▇-▇▇▇▇ SECURITIES, INC.
For itself and as Representative
of the several Representatives named
in Schedule A hereto.
By:______________________________
▇▇▇▇▇▇ ▇▇▇▇, President
SCHEDULE A
Number of Shares Number of Warrants
NAMES OF REPRESENTATIVES TO BE PURCHASED TO BE PURCHASED
▇▇▇▇▇▇-▇▇▇▇ Securities Corp. 1,000,000 500,000
Total 1,000,000 500,000
SCHEDULE B
