EXHIBIT 1.1
PRECIS SMART CARD SYSTEMS, INC.
1,000,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
Boca Raton, Florida
_____________, 1999
▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Precis Smart Card Systems, Inc. (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein,
hereby proposes to issue and sell to ▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc. (the
"Underwriter" or "you") for sale in a proposed public offering (the
"Offering") pursuant to the terms of this Underwriting Agreement (the
"Agreement"), on a "firm commitment" basis, 1,000,000 shares of Common Stock
(the "Shares") at $6.00 per Share. The Shares are also referred to as the
"Securities". The date upon which the Securities and Exchange Commission
("Commission") shall declare the Registration Statement of the Company
effective shall be the "Effective Date". In addition, the Company proposes to
grant to the Underwriter the option referred to in Section 2(b) to purchase
all or any part of an aggregate of 150,000 additional Shares (the "Option
Securities").
You have advised the Company that you desire to purchase the
Securities, and that you are authorized to execute this Agreement. The
Company confirms the agreements made by it with respect to the purchase of
the Securities by the Underwriter, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to, and agrees with the
Underwriter as of the Effective Date (as defined above), the Closing Date (as
hereinafter defined) and the Option Closing Date (as hereinafter defined)
that:
(a) A registration statement (File No. ________) on Form SB-2
relating to the public offering of the Securities, including a preliminary
form of the prospectus, copies of which have heretofore been delivered to
you, has been prepared by the Company in conformity with the requirements of
the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (the "Rules and Regulations") of the Commission thereunder, and
has been filed with the Commission under the Act. The Company has prepared in
the same manner and proposes to file, prior to the Effective Date of such
registration statement, an additional amendment or amendments to such
registration statement, including a final form of Prospectus, copies of which
shall be delivered to you. "Preliminary Prospectus" shall mean each
prospectus filed pursuant to the Rules and Regulations under the Act prior to
the Effective Date. The registration statement (including all financial
schedules and exhibits) as amended at the time it becomes effective and the
final prospectus included therein are respectively referred to as the
"Registration Statement" and the "Prospectus", except that (i) if the
prospectus first filed by the Company pursuant to Rule 424(b) of the Rules
and Regulations shall differ
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from said prospectus as then amended, the term "Prospectus" shall mean the
prospectus first filed pursuant to Rule 424(b), and (ii) if such registration
statement or prospectus is amended or such prospectus is supplemented, after
the effective date of such registration statement and prior to the Option
Closing Date (as hereinafter defined), the terms "Registration Statement" and
"Prospectus" shall include such registration statement and prospectus as so
amended, and the term "Prospectus" shall include the prospectus as so
supplemented, or both, as the case may be.
(b) At the Effective Date and at all times subsequent thereto up
to the Option Closing Date, if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriter or Selected Dealers: (i) the Registration Statement and
Prospectus will in all respects conform to the requirements of the Act and
the Rules and Regulations; and (ii) neither the Registration Statement nor
the Prospectus will include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
statements therein, in light of the circumstances under which they are made,
not misleading; provided, however, that the Company makes no representations,
warranty or agreements as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity
with, written information furnished to the Company by the Underwriter
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus with respect to stabilization, under
the heading "Underwriting" and regarding the identity of counsel to the
Underwriter under the heading "Legal Matters" constitute the only information
furnished in writing by the Underwriter for inclusion in the Registration
Statement and the Prospectus.
(c) Each of the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, with full power and
authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus and is duly qualified to do business
as a foreign corporation and is in good standing in all other jurisdictions
in which the nature of its business or the character or location of its
properties requires such qualification, except where failure to so qualify
will not materially affect the Company's business, properties or financial
condition.
(d) The authorized, issued and outstanding securities of the
Company as of the date of the Prospectus is as set forth in the Prospectus
under "Capitalization"; all of the issued and outstanding securities of the
Company have been, or will be when issued as set forth in the Prospectus,
duly authorized, validly issued and fully paid and non-assessable; the
issuances and sales of all such securities complied in all material respect
with, or were exempt from, applicable Federal and state securities laws; the
holders thereof have no rights of rescission against the Company with respect
thereto, and are not subject to personal liability by reason of being such
holders; 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; except as set forth in the Prospectus, no
options, warrants or other rights to purchase, agreements or other
obligations to issue, or agreements or other rights to convert any obligation
into, any securities of the Company have been granted or entered into by the
Company; and all of the securities of the Company, issued and to be issued as
set forth in the Registration Statement, conform to all statements relating
thereto contained in the Registration Statement and Prospectus.
(e) The Shares are duly authorized, and when issued, delivered
and paid for pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights of any
security holder of the Company. Neither the filing of the Registration
Statement nor the offering or sale of the Securities as contemplated in this
Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any securities of the
Company, except as described in the Registration Statement.
The Common Stock Underwriter Warrants and the shares of Common Stock
issuable upon exercise of the Common Stock Underwriter Warrants (as defined
in the Underwriter's Warrant Agreement described in Section 11 herein), have
been duly authorized and, when issued, delivered and paid for, will be
validly issued, fully paid, non-assessable, free of pre-emptive rights and no
personal liability will attach to the ownership thereof, and will constitute
valid and legally binding obligations of the Company enforceable in
accordance with their terms and entitled to the benefits provided by the
Underwriter's Warrant Agreement.
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(f) This Agreement, the Financial Advisory Agreement, the Merger
and Acquisition Agreement (the "M/A Agreement") and the Underwriter's Warrant
Agreement have been duly and validly authorized, executed and delivered by
the Company, and assuming due execution of this Agreement by the other party
hereto, constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency or other laws affecting the rights
of creditors generally. The Company has full power and authority to
authorize, issue and sell the Securities to be sold by it hereunder on the
terms and conditions set forth herein, and no consent, approval,
authorization or other order of any governmental authority is required in
connection with such authorization, execution and delivery or with the
authorization, issue and sale of the Securities or the securities to be
issued pursuant to the Underwriter's Warrant Agreement, except such as may be
required under the Act or state securities laws, or as otherwise have been
obtained.
(g) Except as described in the Prospectus, neither the Company
nor any subsidiary is in material violation, breach of or default under, and
consummation of the transactions herein contemplated and the fulfillment of
the terms of this Agreement will not conflict with, or result in a breach of,
or constitute a material default under, or result in the creation or
imposition of any material lien, charge or encumbrance upon any property or
assets of the Company or any subsidiary or any of the terms or provisions of
any material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any subsidiary is a party or
by which the Company or any subsidiary may be bound or to which any of the
property or assets of the Company or any subsidiary is subject, nor will such
action result in any material violation of the provisions of the Articles of
Incorporation or By-Laws of the Company or any subsidiary, as amended, or any
statute or any order, rule or regulation applicable to the Company or
subsidiary of any court or of any regulatory authority or other governmental
body having jurisdiction over the Company or each subsidiary.
(h) Subject to the qualifications stated in the Prospectus, the
Company and each subsidiary have good and marketable title to all properties
and assets described in the Prospectus as owned by each of them, free and
clear of all liens, charges, encumbrances or restrictions, except such as are
not material to its business, financial condition or results of operation;
all of the material leases and subleases under which the Company or each
subsidiary is the lessor or sublessor of properties or assets or under which
the Company or each subsidiary holds properties or assets as lessee or
sublessee as described in the Prospectus are in full force and effect, and,
except as described in the Prospectus, neither the Company nor each
subsidiary is in default in any material respect with respect to any of the
terms or provisions of any of such leases or subleases, and no claim has been
asserted by anyone adverse to rights of the Company or any subsidiary as
lessor, sublessor, lessee, or sublessee under any of the leases or subleases
mentioned above, or affecting or questioning the right of the Company or any
subsidiary to continued possession of the leased or subleased premises or
assets under any such lease or sublease except as described or referred to in
the Prospectus; and the Company and each subsidiary owns or leases all such
properties described in the Prospectus as are necessary to its operations as
now conducted and, except as otherwise stated in the Prospectus, as proposed
to be conducted as set forth in the Prospectus.
(i) Murrell, Hall, ▇▇▇▇▇▇▇▇ & Co., PLLP, who has given its report
on certain financial statements filed and to be filed with the Commission as
part of the Registration Statement, and which are included in the Prospectus,
is with respect to the Company, independent public accountants as required by
the Act and the Rules and Regulations.
(j) The financial statements and schedules, together with related
notes, set forth in the Prospectus and the Registration Statement present
fairly the financial condition, results of operations and cash flows of the
Company on the basis stated in the Registration Statement, at the respective
dates and for the respective periods to which they apply. Said financial
statements and related notes and schedules have been prepared in accordance
with generally accepted accounting principles applied on a basis which is
consistent during the periods involved. The Company's internal accounting
controls and procedures are sufficient to cause the Company and each
subsidiary to prepare financial statements which comply in all material
respects with generally accepted accounting principles applied on a basis
which is consistent during the periods involved. During the preceding five
(5) year period, nothing has been brought to the attention of the Company's
management that would result in any material reportable condition relating to
the Company's internal accounting procedures, weaknesses or controls.
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(k) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and the Prospectus and to and
including the Option Closing Date, except as set forth in or contemplated by
the Registration Statement and the Prospectus, (i) neither the Company nor
any subsidiary has incurred and will not have incurred any material
liabilities or obligations, direct or contingent, and has not entered into
and will not have entered into any material transactions other than in the
ordinary course of business and/or as contemplated in the Registration
Statement and the Prospectus; (ii) neither the Company nor any subsidiary has
and will not have paid or declared any dividends or have made any other
distribution on its capital stock; (iii) there has not been any change in the
capital stock of, or any incurrence of long-term debt by, the Company or any
subsidiary; (iv) neither the Company nor any subsidiary has issued any
options, warrants or other rights to purchase the capital stock of the
Company or any subsidiary; and (v) there has not been and will not have been
any material adverse change in the business, financial condition or results
of operations of the Company or any subsidiary, or in the book value of the
assets of the Company or any subsidiary, arising for any reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company or any subsidiary, threatened, any
material action, suit, proceeding, inquiry, arbitration or investigation
against the Company or any subsidiary, or any of the officers or directors of
the Company or any subsidiary, or any material action, suit, proceeding,
inquiry, arbitration, or investigation, which might result in any material
adverse change in the condition (financial or other), business prospects, net
worth, or properties of the Company or any subsidiary.
(m) Except as disclosed in the Prospectus, each of the Company
and each subsidiary has filed all necessary federal, state and foreign income
and franchise tax returns and has paid all taxes shown as due thereon; and
there is no tax deficiency which has been or to the knowledge of the Company
might be asserted against the Company or any subsidiary that has not been
provided for in the financial statements.
(n) Except as set forth in the Prospectus, each of the Company
and each subsidiary has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its property as described in the Prospectus and is in all
material respects in compliance therewith and owns or possesses adequate
right to use all material patents, patent applications, trademarks, service
marks, trade-names, trademark registrations, service ▇▇▇▇ registrations,
copyrights, and licenses necessary for the conduct of such business and has
not received any notice of conflict with the asserted rights of others in
respect thereof. To the best of the Company's knowledge, none of the
activities or business of the Company or any subsidiary are in violation of,
or cause the Company or any subsidiary to violate, any law, rule, regulation
or order of the United States, any state, county or locality, or of any
agency or body of the United States or of any state, county or locality, the
violation of which would have a material adverse impact upon the condition
(financial or otherwise), business, property, prospective results of
operations, or net worth of the Company and any subsidiary.
(o) Neither the Company nor any subsidiary has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of law or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public
of quasi-public duties, other than payments or contributions required or
allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or other
taxes (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Securities to the Underwriter
hereunder will have been fully paid or provided for by the Company and all
laws imposing such taxes will have been fully complied with.
(q) All contracts and other documents which are required to be
described in or filed as exhibits to the Registration Statement have been so
described and/or filed.
(r) Except as described in the Registration Statement and
Prospectus, no holders of Common Stock or of any other securities of the
Company have the right to include such Common Stock or other securities in
the Registration Statement and Prospectus.
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(s) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, neither the Company nor any subsidiary has any
material contingent liabilities.
(t) The Company has no subsidiary corporations except as
disclosed in the Registration Statement and Prospectus, nor has it any equity
interest in any partnership, joint venture, association or other entity
except as disclosed in the Registration Statement or Prospectus. Except as
described in the Registration Statement and Prospectus, the Company owns all
of the outstanding securities of each of its subsidiaries.
(u) The Commission has not issued an order preventing or
suspending the use of any Preliminary Prospectus with respect to the offer
and sale of the Securities and each Preliminary Prospectus, as of its date,
has conformed fully in all material respects with the requirements of the Act
and the Rules and Regulations and did not include any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein not misleading.
(v) Neither the Company, nor, to the Company's knowledge, any of
its officers, directors, employees or stockholders, have taken or will take,
directly or indirectly, any action designed to cause or result in, or which
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any of the securities of the
Company.
(w) Item 26 of Part II of the Registration Statement accurately
discloses all unregistered securities sold by the Company within the three
year period prior to the date as of which information is presented in the
Registration Statement. All of such securities were sold in transactions
which were exempt from the registration provisions of the Act and not in
violation of Section 5 thereof.
(x) Other than as set forth in the Prospectus, the Company has
not entered into any agreement pursuant to which any person is entitled,
either directly or indirectly, to compensation from the Company for services
as a finder in connection with the proposed offering, and the Company agrees
to indemnify and hold harmless the Underwriter against any losses, claims,
damages or liabilities, which shall include, but not be limited to, all costs
to defend against any such claim, so long as such claim arises out of
agreements made or allegedly made by the Company.
(y) Based upon written representations received by the Company,
no officer, director or beneficial owner of five percent (5%) or more of the
securities of the Company or any subsidiary has any direct or indirect
affiliation or association with any member of the National Association of
Securities Dealers, Inc. ("NASD"), except as disclosed to the Underwriter in
writing, and no beneficial owner of the Company's unregistered securities has
any direct or indirect affiliation or association with any NASD member except
as disclosed to the Underwriter in writing. The Company will advise the
Underwriter and the NASD if any five percent (5%) or greater shareholder of
the Company or any subsidiary is or becomes an affiliate or associated person
of an NASD member participating in the distribution.
(z) The Company and each subsidiary is in compliance in all
material respects with all federal, state and local laws and regulations
respecting the employment of its employees and employment practices, terms
and conditions of employment and wages and hours relating thereto. There are
no pending investigations involving the Company or any subsidiary by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state or local laws and regulations. There is no
unfair labor practice charge or complaint against the Company or any
subsidiary pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or to the knowledge
of the Company, threatened against or involving the Company or any subsidiary
or any predecessor entity. No question concerning representation exists
respecting the employees of the Company or any subsidiary and no collective
bargaining agreement or modification thereof is currently being negotiated by
the Company or any subsidiary. No grievance or arbitration proceeding is
pending under any expired or existing collective bargaining agreements of the
Company or any subsidiary, if any.
(aa) Except as disclosed in the Prospectus, neither the Company
nor any subsidiary maintains, sponsors nor contributes to, nor is it required
to 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)
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and 3(37), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") ("ERISA Plans"). Except as disclosed in the
Prospectus, neither the Company nor any subsidiary maintained or contributed
to a defined benefit plan, as defined in Section 3(35) of ERISA.
(ab) Based upon written representations received from the officers
and directors of the Company and each subsidiary, except as disclosed in the
Prospectus, during the past five years, none of the officers or directors of
the Company or any subsidiary have been:
(1) The subject of a petition under the federal
bankruptcy laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which any of them was a general partner
at or within two years before the time of such filing, or any
corporation or business association of which any of them was
an executive officer at or within two years before the time of
such filing;
(2) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) The subject of any order, judgment, or decree
not subsequently reversed, suspended or vacated, of any court
of competent jurisdiction, permanently or temporarily
enjoining any of them from, or otherwise limiting, any of the
following activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by
the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or
employee of any investment company, bank, savings and
loan association or insurance company, or engaging in
or continuing any conduct or practice in connection
with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
federal or state securities law or federal
commodity laws.
(4) The subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated of
any federal or state authority barring, suspending or
otherwise limiting for more than sixty (60) days their right
to engage in any activity described in paragraph (3)(i)
above, or be associated with persons engaged in any such
activity;
(5) Found by any court of competent jurisdiction
in a civil action or by the Securities and Exchange
Commission to have violated any federal or state securities
law, and the judgment in such civil action or finding by the
Commission has not been subsequently reversed, suspended or
vacated; or
(6) Found by a court of competent jurisdiction
in a civil action or by the Commodity Futures Trading
Commission to have violated any federal commodities law, and
the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated.
(ac) Based upon written representations received from the officers
and directors of the Company, each of the officers and directors of the
Company has reviewed the sections in the Prospectus relating to their
biographical data and equity ownership position in the Company, and all
information contained therein is true and accurate.
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2. PURCHASE, DELIVERY AND SALE OF THE SECURITIES.
(a) Subject to the terms and conditions of this Agreement and
based upon the representations, warranties and agreements herein contained,
the Company hereby agrees to issue and sell to the Underwriter an aggregate
of 1,000,000 Shares at $5.40 per Share (the public offering price less ten
percent (10%)) at the place and time hereinafter specified. The price at
which the Underwriter shall sell the Securities to the public shall be $6.00
per Share.
Delivery of the Securities against payment therefor shall take place
at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at such other place as may be designated by the
Underwriter) at 10:00 a.m., Eastern Time, on such date after the Registration
Statement has become effective as the Underwriter shall designate, but not
later than ten (10) business days (holidays excepted) following the first
date that any of the Securities are released to you, such time and date of
payment and delivery for the Securities being herein called the "Closing
Date".
(b) In addition, subject to the terms and conditions of this
Agreement, and based upon the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter to
purchase all or any part of an aggregate of an additional 150,000 Shares at
the same price per Share as the Underwriter shall pay for the Securities
being sold pursuant to the provisions of subsection (a) of this Section 2
(such additional Securities being referred to herein as the "Option
Securities"). This option may be exercised within forty-five (45) days after
the Effective Date of the Registration Statement upon notice by the
Underwriter to the Company advising as to the amount of Option Securities as
to which the option is being exercised, the names and denominations in which
the certificates for such Option Securities are to be registered and the time
and date when such certificates are to be delivered. Such time and date shall
be determined by the Underwriter but shall not be later than ten (10) full
business days after the exercise of said option, nor in any event prior to
the Closing Date, and such time and date is referred to herein as the "Option
Closing Date". Delivery of the Option Securities against payment therefor
shall take place at the offices of the Underwriter. The Option granted
hereunder may be exercised only to cover overallotments in the sale by the
Underwriter of the Securities referred to in subsection (a) above. In the
event the Company declares or pays a dividend or distribution on its Common
Stock, whether in the form of cash, shares of Common Stock or any other
consideration, prior to the Option Closing Date, such dividend or
distribution shall also be paid on the Option Closing Date.
(c) The Company will make the certificates for the Securities to
be sold hereunder available to you or your representative for inspection at
least two (2) full business days prior to the Closing Date at the offices of
the Underwriter, and such certificates shall be registered in such names and
denominations as you may request. Time shall be of the essence and delivery
at the time and place specified in this Agreement is a further condition to
the obligations of the Company to the Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered by the Company to
you for the account of the Underwriter against payment of the purchase price
by the Underwriter by wire transfer in New York Clearing House funds to the
account of the Company.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Securities
pursuant to the provisions of subsection (b) above, payment for such
Securities shall be made by wire transfer at the time and date of delivery of
such Securities as required by the provisions of subsection (b) above,
against receipt of the certificates for such Securities by the Underwriter
for the account of the Underwriter registered in such names and in such
denominations as the Underwriter may request.
It is understood that the Underwriter proposes to offer the
Securities to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement is declared effective by the Commission.
3. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Underwriter that:
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(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you and will not
at any time, whether before or after the Effective Date, file any amendment
to the Registration Statement or supplement to the Prospectus of which you
shall not previously been advised and furnished with a copy or to which you
or your counsel shall have objected in writing, acting reasonably, or which
is not in compliance with the Act and the Rules and Regulations. At any time
prior to the later of (i) the completion by the Underwriter of the
distribution of the Securities as contemplated hereby; or (ii) 25 days after
the date on which the Registration Statement shall have become or been
declared effective, the Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the Registration
Statement or Prospectus which may be necessary or advisable in connection
with the distribution of the Securities and as mutually agreed by the Company
and the Underwriter.
After the Effective Date and as soon as the Company is advised
thereof, the Company will advise you, and confirm the advice in writing, of
the receipt of any comments of the Commission, of the effectiveness of any
post-effective amendment to the Registration Statement, of the filing of any
supplement to the Prospectus or any amended Prospectus, of any request made
by the Commission for amendment of the Registration Statement or for
supplementing of the Prospectus or for additional information with respect
thereto, of the issuance by the Commission or any state or regulatory body of
any stop order or other order suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of any
Preliminary Prospectus, or of the suspension of the qualification of the
Securities for offering in any jurisdiction, or of the institution of any
proceedings for any of such purposes, and will use its best efforts to
prevent the issuance of any such order, and, if issued, to obtain as soon as
possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus and Definitive Prospectus, and the Company has
consented and hereby consents to the use of such copies for the purposes
permitted by the Act. The Company authorizes the Underwriter and Selected
Dealers to use the Prospectus in connection with the sale of the Securities
for such period as in the opinion of counsel to the Underwriter the use
thereof is required to comply with the applicable provisions of the Act and
the Rules and Regulations. In case of the happening, at any time within such
period as a Prospectus is required under the Act to be delivered in
connection with sales by the Underwriter or Selected Dealers, of any event of
which the Company has knowledge and which in the opinion of counsel for the
Company or counsel for the Underwriter should be set forth in an amendment to
the Registration Statement or a supplement to the Prospectus, in order to
make the statements therein not then misleading, in light of the
circumstances existing at the time the Prospectus is required to be delivered
to a purchaser of the Securities, or in case it shall be necessary to amend
or supplement the Prospectus to comply with law or with the Act and the Rules
and Regulations, the Company will notify you promptly and forthwith prepare
and furnish to you copies of such amended Prospectus or of such supplement to
be attached to the Prospectus, in such quantities as you may reasonably
request, in order that the Prospectus, as so amended or supplemented, will
not contain any untrue statement of a material fact or omit to state any
material facts necessary in order to make the statements in the Prospectus,
in the light of the circumstances under which they are made, not misleading.
The preparation and furnishing of any such amendment or supplement to the
Registration Statement or amended Prospectus or supplement to be attached to
the Prospectus shall be without expense to the Underwriter.
The Company will comply with the Act, the Rules and Regulations
thereunder, and the provisions of the Securities Exchange Act of 1934 (the
"1934 Act"), and the rules and regulations thereunder in connection with the
offering and issuance of the Securities.
(b) The Company will act in good faith and use its best efforts
and cooperate with you and your counsel to qualify to register the Securities
for sale under the securities or "blue sky" laws of such jurisdictions as the
Underwriter may designate and will make such applications and furnish such
information as may be required for that purpose and to comply with such laws,
provided the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent to
service of process in any jurisdiction in any action other than one arising
out of the offering or sale of the Securities. The Company will, from time to
time, prepare and file such statements and reports as are or may be required
to continue such qualification in effect for so long a period as the
Underwriter may reasonably request.
8
(c) If the sale of the Securities provided for herein is not
consummated, the Company shall pay all costs and expenses incident to the
performance of the Company's obligations hereunder, including, but not
limited to, all such expenses itemized in Section 8(a) and 8(c) hereof, and
either (i) the out-of-pocket expenses of the Underwriter, not to exceed the
$50,000 previously paid if the Underwriter elects to terminate the offering
for any reason; or (ii) the out-of-pocket expenses of the Underwriter if the
Company elects to terminate the offering for any reason. For the purposes of
this sub-section, the Underwriter shall be deemed to have assumed such
expenses when they are billed or incurred, regardless of whether such
expenses have been paid. The Underwriter shall not be responsible for any
expenses of the Company or others, or for any charges or claims relative to
the proposed public offering if it is not consummated.
(d) The Company will deliver to you at or before the Closing Date
two signed copies of the Registration Statement, including all financial
statements and exhibits filed therewith, and of each amendment or supplement
thereto. The Company will deliver to or upon the order of the Underwriter,
from time to time until the Effective Date of the Registration Statement, as
many copies of any Preliminary Prospectus filed with the Commission prior to
the Effective Date of the Registration Statement as the Underwriter may
reasonably request. The Company will deliver to the Underwriter on the
Effective Date of the Registration Statement and thereafter for so long as a
Prospectus is required to be delivered under the Act, from time to time, as
many copies of the Definitive Prospectus, or as thereafter amended or
supplemented, as the Underwriter may from time to time reasonably request.
(e) For so long as the Company is a reporting company under
either Section 12 or 15 of the 1934 Act, the Company, at its expense, will
furnish to the Underwriter during the period ending five (5) years from the
Effective Date, (i) as soon as practicable after the end of each fiscal year,
a balance sheet of the Company and any of its subsidiaries as at the end of
such fiscal year, together with statements of income, surplus and cash flow
of the Company and any subsidiaries for such fiscal year, all in reasonable
detail and accompanied by a copy of the certificate or report thereon of
independent accountants; (ii) as soon as they are available, a copy of all
reports (financial or other) mailed to security holders; (iii) as soon as
they are available, a copy of all non-confidential documents, including
annual reports, periodic reports and financial statements, furnished to or
filed with the Commission under the Act and the 1934 Act; (iv) copies of each
press release, news item and article with respect to the Company's affairs
released by the Company; and (v) such other information as you may from time
to time reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will make generally available to its stockholders
and deliver to the Underwriter as soon as it is practicable, but in no event
later than the first day of the sixteenth full calendar month following the
Effective Date, an earnings statement (which need not be audited) covering a
period of at least twelve consecutive months beginning with the Effective
Date of the Registration Statement, which shall satisfy the requirements of
Section 11(a) of the Act or Rule 158 promulgated thereunder.
(h) On the Closing Date, the Company shall have taken the
necessary action to become a reporting company under Section 12 of the 1934
Act, and the Company will make all filings required to and will have obtained
approval for the listing of the Shares on The Nasdaq SmallCap Market System,
and will use its best efforts to maintain such listing for at least seven (7)
years from the date of this Agreement.
(i) For a period of seven (7) years following the Effective Date,
the Company will hold an annual meeting of stockholders for the election of
Directors within 180 days after the end of each of the Company's fiscal years
and, within nine (9) months after the end of each of the Company's fiscal
years will provide the Company's stockholders with the audited financial
statements of the Company as of the end of the fiscal year just completed
prior thereto. Such financial statements shall be those required by Rule
14a-3 under the 1934 Act and shall be included in an annual report pursuant
to the requirements of such Rule.
9
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption
"Use of Proceeds" in the Prospectus, and will file such reports with the
Commission with respect to the sale of the Securities and the application of
the proceeds therefrom as may be required by Sections 12, 13 and/or 15 of the
1934 Act and pursuant to Rule 463 under the Act.
(k) The Company will, promptly upon your request, prepare and
file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action,
which in the reasonable opinion of counsel to the Underwriter and the Company
may be reasonably necessary or advisable in connection with the distribution
of the Securities and will use its best efforts to cause the same to become
effective as promptly as possible.
(l) On the Closing Date, the Company shall execute and deliver to
you the Underwriter's Warrant Agreement. The Underwriter's Warrant Agreement
and Warrant Certificates will be substantially in the form of the
Underwriter's Warrant Agreement filed as an exhibit to the Registration
Statement.
(m) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued securities which are issuable
upon exercise of the Underwriter's Warrants outstanding from time to time.
(n) All beneficial owners of the Company's securities (including
warrants, options and Preferred Stock of the Company) as of the Effective
Date shall agree in writing, in a form satisfactory to the Underwriter, not
to sell, transfer or otherwise dispose of any of such securities (or
underlying securities) of the Company for a period of twenty-four (24) months
from the Effective Date or any longer period required by the NASD, Nasdaq or
any State, without the written consent of the Underwriter. For a period of
two (2) years following the Effective Date, all sales of the Company's
securities by officers and/or directors of the Company shall be through the
Underwriter.
(o) The Company will obtain, on or before the Closing Date, key
person life insurance on each of the lives of ▇▇. ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, in an amount of not less than $1,000,000 each, and will use its best
efforts to maintain such insurance for a period of at least five (5) years
from the Effective Date.
(p) Prior to the Closing Date, the Company shall, at its own
expense, undertake to list the Company's securities in the appropriate
recognized securities manual or manuals published by Standard & Poor's
Corporation and such other manuals as the Underwriter may designate, such
listings to contain the information required by such manuals and the Uniform
Securities Act. The Company hereby agrees to use its best efforts to maintain
such listing for a period of not less than five (5) years. The Company shall
take such action as may be reasonably requested by the Underwriter to obtain
a secondary market trading exemption in such states as may be reasonably
requested by the Underwriter.
(q) During the one (1) year period commencing on the Closing
Date, the Company will not, without the prior written consent of the
Underwriter, grant options or warrants to purchase the Company's Common Stock
at a price less than the initial per share public offering price.
(r) Prior to the Closing Date, neither the Company nor any
subsidiary will issue, directly or indirectly, without your prior consent,
any press release or other communication or hold any press conference with
respect to the Company or its activities or the offering of the Securities
other than routine customary advertising of the Company's products and
services, and except as required by any applicable law or the directives of
any relevant regulatory authority in any relevant jurisdiction.
(s) At the Closing Date, the Company will engage the Underwriter
as a non-exclusive financial advisor to the Company for a period of twelve
(12) months commencing on the first day of the month following the Company's
receipt of the proceeds of this offering, at an aggregate fee of $108,000,
all of which shall be payable to the Underwriter on the Closing Date. The
financial advisory agreement will provide that the Underwriter shall, at the
Company's
10
request, provide advice and consulting services to the Company concerning
potential merger and acquisition proposals and the obtaining of short or
long-term financing for the Company, whether by public financing or otherwise.
(t) The Company shall employ the services of a firm of
independent certified public accountants in connection with the preparation
of the financial statements to be included in any registration statement or
similar disclosure document to be filed by the Company hereunder, or any
amendment or supplement thereto. For a period of five (5) years from the
Effective Date, the Company, at its expense, shall cause its regularly
engaged independent certified public accountants to review (but not audit)
the Company's financial statements for each of the first three (3) fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's quarterly report and the mailing of quarterly
financial information to stockholders.
(u) The Company shall retain UMB Bank, N.A. as the transfer agent
for the securities of the Company, or such other transfer agent as you may
agree to in writing. In addition, the Company shall direct such transfer
agent to furnish the Underwriter with daily transfer sheets as to each of the
Company's securities as prepared by the Company's transfer agent and copies
of lists of stockholders as reasonably requested by the Underwriter, for a
five (5) year period commencing from the Closing Date.
(v) The Company shall cause the Depository Trust Company, or such
other depository of the Company's securities, to furnish special security
position reports and special DTC Tracking Reports to the Underwriter on a
daily and weekly basis at the expense of the Company, for a five (5) year
period from the Effective Date. The DTC Tracking Reports will be furnished
for the initial two (2) month period from the Effective Date, after which
time the Company's obligation to furnish such tracking reports will be
reviewed by the Company and the Underwriter.
(w) Following the Effective Date, the Company shall, at its sole
cost and expense, prepare and file such Blue Sky applications with such
jurisdictions as the Underwriter shall designate and the Company may
reasonably agree.
(x) On the Effective Date and for a period of three (3) years
thereafter, the Company's Board of Directors shall consist of a minimum of
five (5) persons, two (2) of whom shall be independent and not otherwise
affiliated with the Company or associated with any of the Company's
affiliates. The Underwriter shall have the opportunity to invite an observer
to attend Board of Directors meetings of the Company at the expense of the
Company.
(y) On the Closing Date, the Company shall execute and deliver to
you a non-exclusive M/A Agreement with the Underwriter in a form satisfactory
to the Underwriter, providing:
(1) that the Underwriter will be paid a finder's fee, of
from five percent (5%) of the first $1,000,000 ranging in $1,000,000
increments down to one percent (1%) of the excess, if any, over
$4,000,000 of the consideration involved in any transaction
introduced by the Underwriter (including mergers, acquisitions,
joint ventures, and any other business for the Company introduced by
the Underwriter) consummated by the Company, as an "Introduced,
Consummated Transaction", by which the Underwriter introduced the
other party to the Company during a period ending five (5) years
from the date of the M/A Agreement; and
(2) that any such finder's fee due to the Underwriter
will be paid in cash or stock as mutually agreed at the closing of
the particular Introduced, Consummated Transaction for which the
finder's fee is due.
(z) After the Closing Date, the Company shall prepare and publish
"tombstone" advertisements of at least 5 x 5 inches in publications to be
designated by the Underwriter at a total cost not to exceed $15,000.
(aa) Until such time as the securities of the Company are listed
or quoted on either the New York Stock Exchange or the American Stock
Exchange, the Company shall engage the Company's legal counsel to deliver to
the Underwriter a written opinion detailing those states in which the Shares
of the Company may be traded in non-issuer transactions under the Blue Sky
laws of the fifty states ("Secondary Market Trading Opinion"). The initial
Secondary
11
Market Trading Opinion shall be delivered to the Underwriter on the Effective
Date, and the Company shall continue to update such opinion and deliver same
to the Underwriter on a timely basis, but in any event at the beginning of
each fiscal quarter, for a five (5) year period, if required.
(ab) As promptly as practicable after the Closing Date, the
Company will prepare, at its own expense, hard cover "bound volumes" relating
to the offering, and will distribute such volumes to the individuals
designated by the Underwriter or counsel to the Underwriter.
4. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligation of
the Underwriter to purchase and pay for the Securities which the Underwriter
has agreed to purchase hereunder from the Company is subject, as of the date
hereof and as of the Closing Date and the Option Closing Date, to the
execution of this Agreement by the Underwriter, to the continuing accuracy
of, and compliance with, the representations and warranties of the Company
herein, to the accuracy of statements of officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the following additional conditions:
(a) (i) The Registration Statement shall have become effective not
later than 5:00 p.m., Eastern Time, on the date of this Agreement, or at such
later time or on such later date as you may agree to in writing; (ii) at or
prior to the Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceeding for that purpose shall have been initiated or pending, or shall be
threatened, or to the knowledge of the Company, contemplated by the
Commission; (iii) no stop order suspending the effectiveness of the
qualification or registration of the Securities under the securities or "blue
sky" laws of any jurisdiction (whether or not a jurisdiction which you shall
have specified) shall be threatened or to the knowledge of the Company
contemplated by the authorities of any such jurisdiction or shall have been
issued and in effect; (iv) any request for additional information on the part
of the Commission or any such authorities shall have been complied with to
the satisfaction of the Commission and any such authorities, and to the
satisfaction of counsel to the Underwriter; and (v) after the date hereof no
amendment or supplement to the Registration Statement or the Prospectus shall
have been filed unless a copy thereof was first submitted to the Underwriter
and the Underwriter did not object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus,
(i) there shall not have been any material change in the capital stock or
other securities of the Company or any subsidiary or any material adverse
change in the long-term debt of the Company or any material subsidiary except
as set forth in or contemplated by the Registration Statement, (ii) there
shall not have been any material adverse change in the general affairs,
business, properties, condition (financial or otherwise), management, or
results of operations of the Company or any subsidiary, whether or not
arising from transactions in the ordinary course of business, in each case
other than as set forth in or contemplated by the Registration Statement or
Prospectus; (iii) neither the Company nor any subsidiary shall have sustained
any material interference with its business or properties from fire,
explosion, flood or other casualty, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental
action, order or decree, which is not set forth in the Registration Statement
and Prospectus; and (iv) the Registration Statement and the Prospectus and
any amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall 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
circumstance under which they are made, not misleading.
(c) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company or any subsidiary, threatened, any
material action, suit, proceeding, inquiry, arbitration or investigation
against the Company or any subsidiary, or any of the officers or directors of
the Company or any subsidiary, or any material action, suit, proceeding,
inquiry, arbitration, or investigation, which might result in any material
adverse change in the condition (financial or other), business prospects, net
worth, or properties of the Company or any subsidiary.
(d) Each of the representations and warranties of the Company
contained herein shall be true and correct as of this date and at the Closing
Date as if made at the Closing Date, and all covenants and agreements herein
12
contained to be performed on the part of the Company and all conditions
herein contained to be fulfilled or complied with by the Company at or prior
to the Closing Date shall have been duly performed, fulfilled or complied
with.
(e) At the Closing Date, the Underwriter shall have received the
opinion, dated as of the Closing Date, from ▇▇▇▇ Swan & ▇▇▇▇▇▇▇▇▇▇, counsel
for the Company, in form and substance satisfactory to counsel for the
Underwriter, which in the aggregate shall state:
(i) the Company and each subsidiary has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to own its properties and conduct
its business as described in the Registration Statement and
Prospectus and is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each other
jurisdiction in which the ownership or leasing of its properties or
conduct of its business requires such qualification except for
jurisdictions in which the failure to so qualify would not have a
material adverse effect on the Company and each subsidiary as a
whole;
(ii) the authorized capital of the Company is as set forth
under "Capitalization" in the Prospectus; all shares of the
Company's outstanding stock and other securities requiring
authorization for issuance by the Company's Board of Directors have
been duly authorized, validly issued, are fully paid and
non-assessable and conform to the description thereof contained in
the Prospectus; the outstanding shares of Common Stock of the
Company and other securities have not been issued in violation of
the preemptive rights of any shareholder and the shareholders of
the Company do not have any preemptive rights or, to such counsel's
knowledge, other rights to subscribe for or to purchase securities
of the Company, nor, to such counsel's knowledge, are there any
restrictions upon the voting or transfer of any of the securities
of the Company, except as disclosed in the Prospectus; the Common
Stock, the Shares and the securities contained in the Underwriter's
Warrant Agreement conform to the respective descriptions thereof
contained in the Prospectus; the Common Stock, the Shares and the
securities contained in the Underwriter's Warrant Agreement, have
been duly authorized and, when issued, delivered and paid for, will
be duly authorized, validly issued, fully paid, non-assessable,
free of pre-emptive rights and no personal liability will attach to
the ownership thereof; all prior sales by the Company of the
Company's securities complied in all material respects with, or
were exempt from, applicable federal and state securities laws; no
shareholders of the Company have any rescission rights against the
Company with respect to the Company's securities; a sufficient
number of shares of Common Stock has been reserved for issuance
upon exercise of the Underwriter Warrants, and to the best of such
counsel's knowledge, neither the filing of the Registration
Statement nor the offering or sale of the Securities as
contemplated by this Agreement gives rise to any registration
rights or other rights, other than those which have been waived or
satisfied or described in the Registration Statement;
(iii) this Agreement, the Underwriter's Warrant Agreement,
the Financial Advisory Agreement, and the M/A Agreement have been
duly and validly authorized, executed and delivered by the Company
and, assuming the due authorization, execution and delivery of this
Agreement by the Underwriter, are the valid and legally binding
obligations of the Company, enforceable in accordance with their
terms, except (a) as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws from time to time in effect which effect creditors'
rights generally; and (b) no opinion is expressed as to the
enforceability of the indemnity provisions or the contribution
provisions contained in this Agreement;
(iv) the certificates evidencing the outstanding securities
of the Company and the Shares are in valid and proper legal form;
(v) to the best of such counsel's knowledge, except as set
forth in the Prospectus, there is not pending or threatened any
material action, suit, proceeding, inquiry, arbitration or
investigation against the Company or any subsidiary or any of the
officers of directors of the Company or any subsidiary, nor any
material action, suit, proceeding, inquiry, arbitration, or
investigation, which might materially and adversely affect the
condition (financial or otherwise), business prospects, net worth, or
properties of the Company or any subsidiary;
13
(vi) the execution and delivery of this Agreement, the
Underwriter's Warrant Agreement, the Financial Advisory Agreement,
and the M/A Agreement, and the incurrence of the obligations herein
and therein set forth and the consummation of the transactions
herein or therein contemplated, will not result in a violation of,
or constitute a default under (a) the Articles of Incorporation or
By-Laws of the Company and each subsidiary; (b) to the best of such
counsel's knowledge, any material obligations, agreement, covenant
or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage,
loan agreement, lease, joint venture or other agreement or
instrument to which the Company or any subsidiary is a party or by
which it or any of its material properties is bound; or (c) to the
best of such counsel's knowledge, any material order, rule,
regulation, writ, injunction, or decree of any government,
governmental instrumentality or court, domestic or foreign;
(vii) the Registration Statement has become effective under
the Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or
are pending before, or threatened by, the Commission; the
Registration Statement and the Prospectus (except for the financial
statements and other financial data contained therein, or omitted
therefrom, as to which such counsel need express no opinion) comply
as to form in all material respects with the applicable requirements
of the Act and the Rules and Regulations; and
(viii) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or
delivery of the Securities by the Company in connection with the
execution, delivery and performance of this Agreement by the Company
or in connection with the taking of any action contemplated herein,
or the issuance of the Underwriter's Warrants or the Securities
underlying the Underwriter's Warrants, other than registrations or
qualifications of the Securities under applicable state or foreign
securities or Blue Sky laws and registration under the Act.
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials
as to matters of fact; and may rely as to all matters of law, upon opinions
of counsel satisfactory to you and counsel to the Underwriter. The opinion of
such counsel to the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Underwriter and
they are justified in relying thereon.
Such counsel shall also include a statement to the effect that such
counsel has participated in the preparation of the Registration Statement and
the Prospectus and nothing has come to the attention of such counsel to lead
such counsel to believe that the Registration Statement or any amendment
thereto at the time it became effective contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or that the
Prospectus or any supplement thereto contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary in order to make statements therein, in light of the
circumstances under which they are made, not misleading (except, in the case
of both the Registration Statement and any amendment thereto and the
Prospectus and any supplement thereto, for the financial statements, notes
thereto and other financial information and statistical data contained
therein, as to which such counsel need express no opinion).
(f) You shall have received on the Closing Date, a certificate
dated as of the Closing Date, signed by the Chief Executive Officer and the
Chief Financial Officer of the Company and such other officers of the Company
as the Underwriter may reasonably request, certifying that:
(i) No Order suspending the effectiveness of the
Registration Statement or stop order regarding the sale of the
Securities is in effect and no proceedings for such purpose are
pending or are, to their knowledge, threatened by the Commission;
14
(ii) They do not know of any litigation instituted or, to
their knowledge, threatened against the Company or any subsidiary or
any officer or director of the Company or any subsidiary of a
character required to be disclosed in the Registration Statement
which is not disclosed therein; they do not know of any contracts
which are required to be summarized in the Prospectus which are not
so summarized; and they do not know of any material contracts
required to be filed as exhibits to the Registration Statement which
are not so filed;
(iii) They have each carefully examined the Registration
Statement and the Prospectus and, to the best of their knowledge,
neither the Registration Statement nor the Prospectus nor any
amendment or supplement to either of the foregoing contains an
untrue statement of any material fact or omits to state any material
fact required to be stated therein or necessary to make the
statement therein, in light of the circumstances under which they
are made, not misleading; and since the Effective Date, to the best
of their knowledge, there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been so
set forth;
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has
not been any material adverse change in the condition of the Company
or any subsidiary, financial or otherwise, or in the results of its
operations, except as reflected in or contemplated by the
Registration Statement and the Prospectus;
(v) The representations and warranties set forth in this
Agreement are true and correct in all material respects, and the
Company has complied with all of its agreements herein contained;
(vi) Neither the Company nor any subsidiary is delinquent
in the filing of any federal, state and other tax return or the
payment of any federal, state or other taxes; they know of no
proposed redetermination or reassessment of taxes, adverse to the
Company or any subsidiary, and the Company and each subsidiary has
paid or provided by adequate reserves for all known tax liabilities;
(vii) They know of no material obligation or liability of the
Company, contingent or otherwise, not disclosed in the Registration
Statement and Prospectus;
(viii) This Agreement, the Underwriter's Warrant Agreement,
the Financial Advisory Agreement, and the M/A Agreement, the
consummation of the transactions therein contemplated, and the
fulfillment of the terms thereof, will not result in a breach by the
Company of any terms of, or constitute a default under, the Company's
Articles of Incorporation or By-Laws, any indenture, mortgage, lease,
deed of trust, bank loan or credit agreement or any other material
agreement or undertaking of the Company or any subsidiary including, by
way of specification but not by way of limitation, any agreement or
instrument to which the Company or any subsidiary is now a party or
pursuant to which the Company or any subsidiary has acquired any
material right and/or obligations by succession or otherwise;
(ix) The financial statements and schedules filed with and as
part of the Registration Statement present fairly the financial
position of the Company as of the dates thereof all in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved. Since the respective dates of such
financial statements, there have been no material adverse change in the
condition or general affairs of the Company, financial or otherwise,
other than as referred to in the Prospectus;
(x) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
except as may otherwise be indicated therein or contemplated
thereby, neither the Company nor any subsidiary has, prior to the
Closing Date, either (i) issued any securities or incurred any
material liability or obligation, direct or contingent, for borrowed
money, or (ii) entered into any material transaction other than in
the ordinary course of business. The Company has not declared, paid
or made any dividend or distribution of any kind on its capital
stock;
15
(xi) They have reviewed the sections in the Prospectus
relating to their biographical data and equity ownership position in
the Company, and all information contained therein is true and
accurate; and
(xii) Except as disclosed in the Prospectus, during the past
five years, they have not been:
(1) The subject of a petition under the federal
bankruptcy laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which any of them was a general partner
at or within two years before the time of such filing, or any
corporation or business association of which any of them was
an executive officer at or within two years before the time of
such filing;
(2) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining
any of them from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission
merchant, introducing broker, commodity trading
advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person
regulated by the Commodity Futures Trading
Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated
person, director or employee of any investment
company, bank, savings and loan association or
insurance company, or engaging in or continuing any
conduct or practice in connection with any such
activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in
connection with the purchase or sale of any security
or commodity or in connection with any violation of
federal or state securities law or federal commodity
laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or
state authority barring, suspending or otherwise limiting for
more than sixty (60) days their right to engage in any
activity described in paragraph (3)(i) above, or be associated
with persons engaged in any such activity;
(5) Found by any court of competent jurisdiction in a
civil action or by the Securities and Exchange Commission to
have violated any federal or state securities law, and the
judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to
have violated any federal commodities law, and the judgment in
such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed,
suspended or vacated.
(g) The Underwriter shall have received from Murrell, Hall, ▇▇▇▇▇▇▇▇ &
Co., PLLP, independent auditors to the Company, certificates or letters, one
dated and delivered on the Effective Date and one dated and delivered on the
Closing Date, in form and substance satisfactory to the Underwriter, stating
that:
(i) they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
Rules and Regulations;
16
(ii) the financial statements and the schedules included in
the Registration Statement and the Prospectus were examined by them
and, in their opinion, comply as to form in all material respects with
the applicable accounting requirements of the Act, the Rules and
Regulations and instructions of the Commission with respect to
Registration Statements on Form SB-2;
(iii) on the basis of inquiries and procedures conducted by
them (not constituting an examination in accordance with generally
accepted auditing standards), including a reading of the latest
available unaudited interim financial statements or other financial
information of the Company (with an indication of the date of the
latest available unaudited interim financial statements), inquiries of
officers of the Company who have responsibility for financial and
accounting matters, review of minutes of all meetings of the
shareholders and the Board of Directors of the Company and other
specified inquiries and procedures, nothing has come to their attention
as a result of the foregoing inquiries and procedures that causes them
to believe that:
(a) during the period from (and including) the date
of the financial statements in the Registration Statement and
the Prospectus to a specified date not more than five days
prior to the date of such letters, there has been any change
in the Common Stock, long-term debt or other securities of the
Company (except as specifically contemplated in the
Registration Statement and Prospectus) or any material
decreases in net current assets, net assets, shareholder's
equity, working capital or in any other item appearing in the
Company's financial statements as to which the Underwriter may
request advice, in each case as compared with amounts shown in
the balance sheet as of the date of the most recent financial
statements in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or will occur;
(b) during the period from (and including) the date
of the financial statements in the Registration Statement and
the Prospectus to such specified date there was any material
decrease in revenues or in the total or per share amounts of
income or loss before extraordinary items or net income or
loss, or any other material change in such other items
appearing in the Company's financial statements as to which
the Underwriter may request advice, in each case as compared
with the fiscal period ended as of the date of the most recent
financial statements in the Prospectus, except in each case
for increases, changes or decreases which the Prospectus
discloses have occurred or will occur;
(c) the unaudited interim financial statements of the
Company appearing in the Registration Statement and the
Prospectus (if any) do not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the Rules and Regulations or are not fairly presented
in conformity with generally accepted accounting principles
and practices on a basis substantially consistent with the
audited financial statements included in the Registration
Statements or the Prospectus.
(iv) 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 letters and found them to be in agreement; and
(v) they have not during the immediately preceding five (5)
year period brought to the attention of the Company's management any
reportable condition related to the Company's internal accounting
procedures, weaknesses and/or controls.
17
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriter. Any changes, increases or decreases
in the items set forth in such letters which, in the judgment of the
Underwriter, are materially adverse with respect to the financial position or
results of operations of the Company shall be deemed to constitute a failure
of the Company to comply with the conditions of the obligations to the
Underwriter hereunder.
(h) Upon exercise of the option provided for in Section 2(b)
hereof, the obligation of the Underwriter to purchase and pay for the Option
Securities referred to therein will be subject (as of the date hereof and as
of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or, to your knowledge
or the knowledge of the Company, shall be contemplated by the
Commission, and any reasonable request on the part of the Commission
for additional information shall have been complied with to the
satisfaction of counsel to the Underwriter.
(ii) At the Option Closing Date, there shall have been
delivered to you the signed opinion from ▇▇▇▇ Swan & ▇▇▇▇▇▇▇▇▇▇,
counsel for the Company, dated as of the Option Closing Date, in form
and substance satisfactory to counsel to the Underwriter, which opinion
shall be substantially the same in scope and substance as the opinion
furnished to you at the Closing Date pursuant to Section 4(e) hereof,
except that such opinion, where appropriate, shall cover the Option
Securities.
(iii) At the Option Closing Date, there shall have been
delivered to you a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company, dated the Option Closing Date, in
form and substance satisfactory to counsel to the Underwriter,
substantially the same in scope and substance as the certificate
furnished to you at the Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been
delivered to you a letter in form and substance satisfactory to you
from Murrell, Hall, ▇▇▇▇▇▇▇▇ & Co., PLLP, independent auditors to the
Company, dated the Option Closing Date and addressed to the Underwriter
confirming the information in their letter referred to in Section 4(g)
hereof and stating that nothing has come to their attention during the
period from the ending date of their review referred to in said letter
to a date not more than five business days prior to the Option Closing
Date, which would require any change in said letter if it were required
to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Securities
shall be satisfactory in form and substance to the Underwriter, and the
Underwriter and counsel to the Underwriter shall have been furnished
with all such documents, certificates, and opinions as you may request
in connection with this transaction in order to evidence the accuracy
and completeness of any of the representations, warranties or
statements of the Company or its compliance with any of the covenants
or conditions contained herein.
(i) No action shall have been taken by the Commission or the
NASD, the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal
or agent) in the Shares and no proceedings for the taking of such action
shall have been instituted or shall be pending, or, to the knowledge of the
Underwriter or the Company, shall be contemplated by the Commission or the
NASD. The Company represents that at the date hereof it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD. The
Company shall advise the Underwriter of any NASD affiliations of any of its
officers, directors, or stockholders of the Company's securities or their
affiliates in accordance with Section 1(y) of this Agreement.
(j) At the Effective Date, you shall have received from counsel
to the Company, dated as of the Effective Date, in form and substance
satisfactory to counsel for the Underwriter, a written Secondary Market
Trading Opinion detailing those states in which the Shares may be traded in
non-issuer transactions under the Blue Sky laws of the fifty (50) states
after the Effective Date, in accordance with Section 3(ab) of this Agreement.
18
(k) The authorization and issuance of the Securities and delivery
thereof, the Registration Statement, the Prospectus, and all corporate
proceedings incident thereto shall be satisfactory in all respects to counsel
for the Underwriter, and such counsel shall be furnished with such documents,
certificates and opinions as they may reasonably request to enable them to
pass upon the matters referred to in this sub-section.
(l) Prior to the Effective Date, the Underwriter shall have
received clearance from the NASD as to the amount of compensation allowable
or payable to the Underwriter, as described in the Registration Statement.
(m) If any of the conditions provided for in this Section shall
not have been fulfilled as of the date indicated, this Agreement and all
obligations of the Underwriter under this Agreement may be canceled at, or at
any time prior to, the Closing Date and/or the Option Closing Date by the
Underwriter notifying the Company of such cancellation in writing or by
facsimile at or prior to the applicable Closing Date or Option Closing Date.
Any such cancellation shall be without liability of the Underwriter to the
Company.
5. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligation
of the Company to sell and deliver the Securities is subject to the execution
of this Agreement by the Company, and to the following conditions:
(i) The Registration Statement shall have become effective not
later than 5:00 p.m., Eastern Time, on the date of this Agreement, or
on such later time or date as the Company and the Underwriter may agree
in writing; and
(ii) At the Closing Date and the Option Closing Date, no stop
orders suspending the effectiveness of the Registration Statement shall
have been issued under the Act or any proceedings therefore initiated
or threatened by the Commission.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the Closing Date but are not fulfilled
after the Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Securities on exercise of
the option provided for in Section 2(b) hereof shall be affected.
6. INDEMNIFICATION. (a) The Company indemnifies and holds harmless
the Underwriter and each person, if any, who controls the Underwriter within
the meaning of the Act against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include
but not be limited to, all reasonable costs of defense and investigation and
all attorneys' fees), to which the Underwriter or such controlling person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in (i) the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, (ii) any blue sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company and filed
in any state or other jurisdiction in order to qualify any or all of the
Securities under the securities laws thereof (any such application, document
or information being hereinafter called a "Blue Sky Application"), or arise
out of or are based upon the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application, a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company will not be
liable in any such cases to the extent, but only to the extent, that any such
losses, claim, damages or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Underwriter specifically for use in the Registration Statement
or any amendment or supplement thereof or any Blue Sky Application or any
Preliminary Prospectus or the Prospectus or any such amendment or supplement
thereto. Notwithstanding the foregoing, the Company shall have no liability
under this Section if such untrue statement or omission made in a Preliminary
Prospectus is cured in the Prospectus and the Prospectus is not delivered to
the person or persons alleging the liability upon which indemnification is
being sought. This indemnity will be in addition to any liability which the
Company may otherwise have.
19
(b) The Underwriter indemnifies and holds harmless the Company,
each of its directors, each nominee (if any) for director named in the
Prospectus, each of the persons who have signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of the
Act, against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees) to which the Company or
any such director, signer of the Registration Statement, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statements or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by the Underwriter specifically for use
in such Registration Statement or Prospectus. Notwithstanding the foregoing,
the Underwriter shall have no liability under this section if such untrue
statement or omission made in a Preliminary Prospectus is cured in the
Prospectus and the Prospectus is not delivered to the person or persons
alleging the liability upon which indemnification is being sought through no
fault of the Underwriter. This indemnity agreement will be in addition to any
liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section, promptly notify in writing the indemnifying party
of the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section. In case any such action
is brought against any indemnified party, and it promptly notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, subject to the provisions herein stated, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such action and
to participate in the defense thereof, but the fees and expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the indemnified party; provided that if the
indemnified party is an Underwriter or a person who controls such Underwriter
within the meaning of the Act, the fees and expenses of such counsel shall be
at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party
or (ii) the named parties to any such action (including any impleaded
parties) include both the Underwriter or such controlling person and the
indemnifying party and in the reasonable judgment of the Underwriter, it is
advisable for the Underwriter or such Underwriter or controlling persons to
be represented by separate counsel (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of
the Underwriter or such controlling person). No settlement of any action
against an indemnified party shall be made without the prior written consent
of the indemnifying party, which shall not be unreasonably withheld in light
of all factors of importance to such indemnifying and indemnified parties.
7. CONTRIBUTION.
(a) If the indemnification provided for in this Agreement
is unavailable to any indemnified party in respect to any losses, claims,
damages, liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, will contribute to the
amount paid or payable by such indemnified party, as a result of such losses,
claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand, and by the Underwriter on the other hand, from the Offering, or
(ii) if the allocation provided by clause (i) 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 the
20
Company on the one hand, and of the Underwriter on the other hand, in
connection with any statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses as well as any other relevant
equitable considerations; provided, that any contribution hereunder by the
Underwriter shall not exceed the amount of consideration received by the
Underwriter hereunder. The relative benefits received by the Company on the
one hand, and by the Underwriter on the other hand, shall be deemed to be in
the same proportion as the total proceeds from the Offering (net of sales
commissions, and the non-accountable expense allowance, but before deducting
expenses) received by the Company, bear to the commissions and the
non-accountable expense allowance received by the Underwriter. The relative
fault of the Company on the one hand, and of the Underwriter on the other
hand, will be determined with reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company, and its
relative intent, knowledge, access or information and opportunity to correct
or prevent such statement or omission. The Company and the Underwriter agree
that it would not be just and equitable if contribution pursuant to this
Section were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in this paragraph.
(b) Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any
action, suit, or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party ("Contributing Party"),
notify the Contributing Party of the commencement thereof, but the omission
to so notify the Contributing Party will not relieve it from any liability
which it may have to any other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against any party, and
such party notifies a Contributing Party or its representative of the
commencement thereof within the aforesaid fifteen (15) days, the Contributing
Party will be entitled to participate therein with the notifying party and
any other Contributing Party similarly notified. Any such Contributing Party
shall not be liable to any party seeking contribution on account of any
settlement of any claim, action or proceeding which was effected by such
party seeking contribution on account of any settlement of any claim, action
or proceeding effected by such party seeking contribution without the written
consent of such Contributing Party. The contribution provisions contained in
this Section are intended to supersede, to the extent permitted by law, any
right to contribution under the Act, the Exchange Act or otherwise available.
8. COSTS AND EXPENSES. (a) Whether or not this Agreement becomes
effective or the sale of the Securities to the Underwriter is consummated,
the Company will pay all costs and expenses incident to the performance of
this Agreement by the Company including but not limited to the fees and
expenses of counsel to the Company and of the Company's accountants; the
costs and expenses incident to the preparation, printing, filing and
distribution under the Act of the Registration Statement (including the
financial statements therein and all amendments and exhibits thereto),
Preliminary Prospectus and the Prospectus, as amended or supplemented; the
fee of the National Association of Securities Dealers, Inc. ("NASD") in
connection with the filing required by the NASD relating to the offering of
the Securities contemplated hereby; all state filing fees, expenses and
disbursements and legal fees of counsel to the Company who shall serve as
Blue Sky counsel to the Company in connection with the filing of applications
to register the Securities under the state securities or blue sky laws; the
cost of printing and furnishing to the Underwriter copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Selected Dealers Agreement, and the Blue Sky Memorandum; the cost of printing
the certificates evidencing the securities comprising the Securities; the
cost of preparing and delivering to the Underwriter and its counsel bound
volumes containing copies of all documents and appropriate correspondence
filed with or received from the Commission and the NASD and all closing
documents; and the fees and disbursements of the transfer agent for the
Company's securities. The Company shall pay any and all taxes (including any
original issue, transfer, franchise, capital stock or other tax imposed by
any jurisdiction) on sales to the Underwriter hereunder. The Company will
also pay all costs and expenses incident to the furnishing of any amended
Prospectus or of any supplement to be attached to the Prospectus. The Company
shall also engage the Company's counsel to provide the Underwriter with a
written Secondary Market Trading Opinion in accordance with Section 3(ab) and
4(j) of this Agreement.
(b) In addition to the foregoing expenses, the Company shall at
the Closing Date pay to the Underwriter a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds received from the sale of
the Securities, of which an advance of $35,000 has been paid to date. In the
event the overallotment option is exercised,
21
the Company shall pay to the Underwriter at the Option Closing Date an
additional amount equal to three percent (3%) of the gross proceeds received
upon exercise of the overallotment option.
(c) Other than as disclosed in the Registration Statement, no
person is entitled either directly or indirectly to compensation from the
Company, from the Underwriter or from any other person for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Underwriter against any losses, claims,
damages or liabilities, which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and
all attorneys' fees, to which the Underwriter may become subject insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an
employee of the party claiming indemnity) or entity that he or it is entitled
to a finder's fee in connection with the proposed offering by reason of such
person's or entity's influence or prior contact with the indemnifying party.
9. EFFECTIVE DATE. The Agreement shall become effective upon its
execution except that you may, at your option, delay its effectiveness until
11:00 a.m., Eastern time, on the first full business day following the
execution of this Agreement; or at such earlier time after the Effective Date
of the Registration Statement as you in your discretion shall first commence
the public offering of any of the Securities. The time of the public offering
shall mean the time after the effectiveness of the Registration Statement
when the Securities are first generally offered by you to the Selected
Dealers and/or the public. This Agreement may be terminated by you at any
time before it becomes effective as provided above, except that Sections
3(c), 6, 7, 8, 12, 13, 14, 15, 16 and 17 shall remain in effect
notwithstanding such termination.
10. TERMINATION. (a) This Agreement, except for Sections 3(c), 6,
7, 8, 12, 13, 14, 15, 16, and 17 hereof, may be terminated at any time prior
to the Closing Date, and the option referred to in Section 2(b) hereof, if
exercised, may be cancelled at any time prior to the Option Closing Date, by
you if in your judgment it is impracticable to offer for sale or to enforce
contracts made by the Underwriter for the resale of the Securities agreed to
be purchased hereunder by reason of: (i) the Company having sustained a
material adverse loss, whether or not insured, by reason of fire, earthquake,
flood, accident or other calamity, or from any labor dispute or court or
government action, order or decree; (ii) trading in securities on the New
York Stock Exchange or the American Stock Exchange having been suspended or
limited; (iii) material governmental restrictions having been imposed on
trading in securities generally (not in force and effect on the date hereof);
(iv) a banking moratorium having been declared by Federal or New York or
Florida state authorities; (v) an outbreak of major international hostilities
or other national or international calamity having occurred; (vi) the passage
by the Congress of the United States or by any state legislative body of
similar impact, of any act or measure, or the adoption of any orders, rules
or regulations by any governmental body or any authoritative accounting
institute or board, or any governmental executive, which is likely to have a
material adverse impact on the business, financial condition or financial
statements of the Company or the market for the Securities offered hereby;
(vii) any material adverse change in the financial or securities markets
beyond normal market fluctuations having occurred since the date of this
Agreement; (viii) any material adverse change having occurred, since the
respective dates as of which information is given in the Registration
Statement and Prospectus, in the earnings, business prospects or general
condition of the Company, financial or otherwise, whether or not arising in
the ordinary course of business; (ix) a pending or threatened legal or
governmental proceeding or action relating generally to the Company's
business, or a notification having been received by the Company of the threat
of any such proceeding or action, which could materially adversely affect the
Company; (x) except as contemplated by the Prospectus, the Company is merged
or consolidated into or acquired by another company or group or there exists
a binding legal commitment for the foregoing or any other material change of
ownership or control occurs; or (xi) the Company shall not have complied in
all material respects with any term, condition or provisions on its part to
be performed, complied with or fulfilled (including but not limited to those
set forth in this Agreement) within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section, the
Company shall be promptly notified by you, by telephone, telegram or
facsimile, confirmed by letter.
11. UNDERWRITER'S WARRANT AGREEMENT. At the Closing Date, the
Company will issue to the Underwriter and/or persons related to the
Underwriter, for an aggregate purchase price of $10, and upon the terms and
conditions set forth in the form of Underwriter's Warrant Agreement annexed
as an exhibit to the Registration Statement,
22
Underwriter Warrants to purchase up to an aggregate of 100,000 Shares, in
such denominations as the Underwriter shall designate. In the event of
conflict in the terms of this Agreement and the Underwriter's Warrant
Agreement, the language of the form of Underwriter's Warrant Agreement shall
control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. The respective indemnities, agreements, representations, warranties
and other statements of the Company and its principal officers, where
appropriate, and the Underwriter set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Underwriter, the Company or any of
its officers or directors or any controlling person and will survive delivery
of and payment for the Securities and the termination of this Agreement.
13. NOTICE. All communications hereunder will be in writing and,
except as otherwise expressly provided herein, will be mailed, delivered or
telefaxed, and confirmed:
If to the Underwriter: ▇▇▇▇▇▇ ▇. ▇▇▇▇, President
▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Company: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
Precis Smart Card Systems, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇ Swan & ▇▇▇▇▇▇▇▇▇▇
2800 Oklahoma Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
14. PARTIES IN INTEREST. This Agreement herein set forth is made
solely for the benefit of the Underwriter, the Company and, to the extent
expressed, the holders of the Underwriter Warrants, any person controlling
the Company or the Underwriter, and directors of the Company, nominees for
director (if any) named in the Prospectus, each person who has signed the
Registration Statement, and their respective executors, administrators,
successors, assigns and no other person shall acquire or have any right under
or by virtue of this Agreement. The term "successors and assigns" shall not
include any purchaser of the Securities, as such purchaser, from the
Underwriter.
15. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
contracts made and to be performed entirely within the State of Florida. The
parties agree that any action brought by any party against another party in
connection with any rights or obligations arising out of this Agreement shall
be instituted properly in a federal or state court of competent jurisdiction
with venue only in the Fifteenth Judicial Circuit Court in and for Palm Beach
County, Florida or the United States District Court for the Southern District
of Florida, West Palm Beach Division. A party to this Agreement named as a
Defendant in any action brought in connection with this Agreement in any
court outside of the above named designated county or district shall have the
right to have the venue of said action changed to the above designated county
or district or, if necessary, have the case dismissed, requiring the other
party to refile such action in an appropriate court in the above designated
county or federal district.
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16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one
and the same instrument.
17. ENTIRE AGREEMENT. This Agreement and the agreements referred
to within this Agreement constitute the entire agreement of the parties, and
supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this Agreement, whereupon it will
become a binding Agreement between the Company and the Underwriter in
accordance with its terms.
Very truly yours,
PRECIS SMART CARD SYSTEMS, INC.
BY:
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
▇▇▇▇▇▇ ▇▇▇▇▇ SECURITIES, INC.
BY:
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, President
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