1
EXHIBIT 1.1
UNDERWRITING AGREEMENT (FORM)
2
LUMINEX LIGHTING, INC.
Up to 500,000 Shares of Common Stock
and
Up to 500,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
_____________ ___, 1998
Platinum Equities, Inc.
00 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
LUMINEX LIGHTING, INC., a California corporation (the "Company") hereby
confirms the agreement made with respect to the retention of Platinum Equities,
Inc. (the "Underwriter") as the exclusive agent of the Company to publicly offer
and sell, pursuant to the terms of this Underwriting Agreement (the
"Agreement"), an aggregate of 500,000 shares ("Shares") of Common Stock, no par
value per share (the "Common Stock"), and 500,000 redeemable Common Stock
purchase warrants (the "Warrants," and collectively with the Common Stock, the
"Securities") of the Company on a "best efforts, minimum 250,000 Shares and
250,000 Warrants ("Minimum Offering"), maximum 500,000 Shares and 500,000
Warrants ("Maximum Offering")" basis. The offering of the Securities
contemplated hereby may sometimes be referred to as the "Offering."
1. Description of the Securities.
(a) The Warrants.
Each Warrant shall entitle the holder to purchase one share of Common
Stock at an exercise price of $6.00, subject to adjustment. The Warrants are
exercisable at any time during the five year-period commencing on the effective
date of the Registration Statement, as defined in Paragraph 2(a) herein (the
"Effective Date"), subject to prior redemption by the Company. The Shares of
Common Stock issuable upon the exercise of the Warrants are hereinafter referred
to as the "Warrant Shares."
The Warrants will be redeemable at a price of $0.10 per Warrant,
commencing twelve (12) months after the Effective Date, or earlier with the
prior written consent of the Underwriter, upon at least 30 days prior written
notice provided that the closing bid price of the Common Stock (or closing sales
price if listed on an exchange or on a reporting system that provides last sales
prices) for twenty (20) consecutive trading days ending on the third day prior
to the date on which notice of redemption is given, shall exceed $7.50 per
share, subject to the right of the holder to exercise his purchase rights
thereunder until redemption.
(b) Underwriter's Warrants.
On the Closing Date, the Company will sell to the Underwriter, for $10,
a warrant to purchase one share of Common Stock and one Warrant for each ten
Shares of Common Stock and ten Warrants sold in this Offering (a maximum of
50,000 Shares of Common Stock and 50,000 Warrants) at a price equal to $8.15 per
share of Common Stock and $.14 per Warrant (the "Warrants," and collectively
with the Securities underlying the Underwriter's Warrants, the "Underwriter's
Securities"). The Warrants underlying the Underwriter's Warrants shall be
exercisable at a price of $8.30 per Warrant. The Underwriter's Warrants shall
not be sold, transferred, assigned, pledged or hypothecated (other than to (i)
officers of the Underwriter, and (ii) members of the selling group and their
officers or partners) for a period of 12 months following the Effective Date.
Thereafter, they
1
3
are transferable for a period of four years. If the Warrants underlying the
Underwriter's Warrants are not exercised during their term, they shall, by their
terms, automatically expire. The Underwriter's Securities shall be registered
for sale to the public and shall be included in the Registration Statement filed
in connection with the Offering.
2. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Underwriter
that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission"), a registration statement on Form SB-2 (File No.
333- 58025), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities under the Securities Act of
1933, as amended (the "Act"). The Company will file further amendments to said
registration statement in the form to be delivered to you and will not, before
the registration statement becomes effective, file any other amendment thereto
to which you shall have objected in writing after having been furnished with a
copy thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
exhibits and all other documents filed as a part thereof or incorporated
therein), is hereinafter called the "Registration Statement", and the
prospectus, in the form filed with the Commission pursuant to Rule 424(b) of the
General Rules and Regulations of the Commission under the Act (the "Rules and
Regulations") or, if no such filing is made, the definitive prospectus used in
the Offering, is hereinafter called the "Prospectus". The Company has delivered
to you copies of each Preliminary Prospectus as filed with the Commission and
has consented to the use of such copies for purposes permitted by the Act.
(b) The Commission has not issued any orders preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
Act and has not included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, subject to the provisions set forth below and except as such
untrue statement or omission has been cured in the a subsequent preliminary
prospectus or in the final prospectus.
(c) When the Registration Statement becomes effective under
the Act and at all times subsequent thereto including each of the Closing Dates
(hereinafter defined) and for such longer periods as in the opinion of counsel
for the Underwriter, a Prospectus is required to be delivered in connection with
the sale of the Securities by the Underwriter, the Registration Statement and
Prospectus, and any amendment thereof or supplement thereto, will contain all
material statements which are required to be stated therein in accordance with
the Act and the Regulations, and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with written
information furnished to the Company by you, for use in connection with the
preparation of the Registration Statement or Prospectus, or in any amendment
thereof or supplement thereto. It is understood that (i) the statements set
forth under the heading "Underwriting" in the Prospectus with respect to the
amounts of the selling concession; (ii) the information in the Risk Factor
entitled "Inexperienced Underwriter;" (iii) the identity of counsel to the
Underwriter under the heading "Legal Matters"; and (iv) the information
concerning the NASD affiliation of the Underwriter constitute for purposes of
this Section the only information furnished in writing by or on behalf of the
Underwriter for inclusion in the Registration Statement and Prospectus, as the
case may be.
(d) The Company is, and at each Closing Date will be, a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company is, and at each Closing
Date will be, duly qualified or licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such qualification or
licensing, except those jurisdictions in which the failure to so qualify would
not have a material adverse effect. The Company has
2
4
all requisite corporate powers and authority, and, except as set forth in the
Registration Statement, the Company and its employees have all material and
necessary authorizations, approvals, orders, licenses, certificates and permits
of and from all governmental regulatory officials and bodies to own or lease its
properties and conduct its businesses as described in the Prospectus, and the
Company is doing business and has been doing business during the period
described in the Registration Statement in compliance with all such material
authorizations, approvals, orders, licenses, certificates and permits and all
material federal, state and local laws, rules and regulations concerning the
businesses in which the Company is engaged. The disclosures in the Registration
Statement concerning the effects of federal, state and local regulation on the
Company's business as currently conducted and as contemplated are correct in all
material respects and do not omit to state a material fact. The Company has all
corporate power and authority to enter into this Agreement and carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained or will have been
obtained prior to the dates of each of the closings (the "Closing Dates") of the
Offering.
(e) This Agreement has been duly and validly authorized and
executed by the Company. The Securities (including the Common Stock and the
Warrants), the Warrant Shares, the Underwriter's Warrants to be issued and sold
by the Company pursuant to this Agreement, the Securities issuable upon exercise
of the Underwriter's Warrants and payment therefor, and the Common Stock and
Warrant Shares underlying such Underwriter's Warrants, have been duly authorized
(and, in the case of the Common Stock and the Warrant Shares, have been duly
reserved for issuance) and, when issued and paid for in accordance with this
Agreement (and, in the case of the Warrant Shares, upon exercise of the Warrants
and payment to the Company of the exercise price therefor), the Common Stock and
Warrant Shares will be validly issued, fully paid and non-assessable; the Common
Stock, Warrants, Warrant Shares, Underwriter's Warrants and Underwriter's
Warrant Shares are not and will not be subject to the preemptive rights of any
shareholder of the Company and conform and at all times up to and including
their issuance will conform in all material respects to all statements with
regard thereto contained in the Registration Statement and Prospectus; and all
corporate action required to be taken for the authorization, issuance and sale
of the Common Stock, Warrants, Warrant Shares and Underwriter's Warrants has
been taken, and this Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, to issue and sell, upon
exercise in accordance with the terms thereof, the number and kind of securities
called for thereby.
(f) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
the Articles of Incorporation, as amended, or Bylaws of the Company or of any
evidence of indebtedness, lease, contract or other agreement or instrument to
which the Company is a party or by which the Company or any of its respective
properties is bound, or under any applicable law, rule, regulation, judgment,
order or decree of any government, professional advisory body, administrative
agency or court, domestic or foreign, having jurisdiction over the Company or
any of its respective properties, or result in the creation or imposition of any
lien, charge or encumbrance upon any of the properties or assets of the Company;
and no consent, approval, authorization or order of any court or governmental or
other regulatory agency or body is required for the consummation by the Company
of the transactions on its part herein contemplated, except such as may be
required under the Act or under state securities or blue sky laws, except where
a breach, violation or failure to obtain such consent would not have a material
adverse effect upon the business or operation of the Company.
(g) Subsequent to the date hereof, and prior to the Closing
Dates the Company will not issue or acquire any equity securities except that
the Company may make short-term investments as contemplated in the "Use of
Proceeds" section of the Prospectus. Except as described in the Registration
Statement, the Company does not have, and at the Closing Dates will not have,
outstanding any options to purchase or rights or warrants to subscribe for, or
any securities or obligations convertible into or exchangeable for, or any
contracts or commitments to issue or sell shares of its Preferred Stock, Common
Stock or any such options, warrants, convertible securities or obligations.
(h) The financial statements and notes thereto included in the
Registration Statement and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and
3
5
for the respective periods to which they apply; and such financial statements
have been prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved.
(i) Except as set forth in the Registration Statement, the
Company is not at the Closing Dates nor will be, in violation or breach of, or
default in, the due performance and observance of any term, covenant or
condition of any indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which the Company is a
party or by which the Company may be bound or to which any of the property or
assets of the Company is subject, which violations, breaches, default or
defaults, singularly or in the aggregate, would have a material adverse effect
on the Company. The Company has not and will not have taken any action in
material violation of the provisions of the Articles of Incorporation, as
amended, or the Bylaws of the Company or any statute or any order, rule or
regulation of any court or regulatory authority or governmental body having
jurisdiction over or application to the Company, its business or properties.
(j) The Company has, and at the Closing Dates will have, good
and marketable title to all properties and assets described in the Prospectus as
owned by it, free and clear of all liens, charges, encumbrances, claims,
security interests, restrictions and defects of any material nature whatsoever,
except such as are described or referred to in the Prospectus and liens for
taxes not yet due and payable. All of the material leases and subleases under
which the Company is the lessor or sublessor of properties or assets or under
which the Company holds properties or assets as lessee as described in the
Prospectus are, and will on the Closing Dates be, in full force and effect, and
except as described in the Prospectus, the Company is not and will not be in
default in respect to any of the terms or provisions of any of such leases or
subleases (which would have a material adverse effect on the business, business
prospects or operations of the Company), and no claim has been asserted by
anyone adverse to rights of the Company as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continue possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus, and the Company owns or leases all
such properties as are necessary to its operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted set forth in
the Prospectus (which would have a material adverse effect on the business,
business prospects or operations of the Company).
(k) The authorized, issued and outstanding capital stock of
the Company as of December 31, 1997 and as of the date of the Prospectus is as
set forth in the Prospectus under "Capitalization"; the shares of issued and
outstanding capital stock of the Company set forth thereunder have been duly
authorized, validly issued and are fully paid and non-assessable; except as set
forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company have
been granted or entered into by the Company; and the Common Stock, the Warrants
and all such options and warrants conform in all material respects, to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(l) Except as described in the Prospectus, the Company does
not own or control any capital stock or securities of, or have any proprietary
interest in, or otherwise participate in any other corporation, partnership,
joint venture, firm, association or business organization; provided, however,
that this provision shall not be applicable to the investment, if any, of the
net proceeds from the sale of the Securities sold by the Company in certificates
of deposits, savings deposits, short-term obligations of the United States
Government, money market instruments or other short-term investments.
(m) Stonefield Xxxxxxxxx, Inc., who have given their reports
on certain financial statements filed and to be filed with the Commission as a
part of the Registration Statement, which are incorporated in the Prospectus,
are with respect to the Company, independent public accountants as required by
the Act and the Rules and Regulations.
(n) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company
4
6
has not (i) issued any securities or incurred any liability or obligation,
direct or contingent, for borrowed money; or (ii) entered into any transaction
other than in the ordinary course of business; or (iii) declared or paid any
dividend or made any other distribution on or in respect to its capital stock.
(o) There is no litigation or governmental proceeding pending
or to the knowledge of the Company threatened against, or involving the
properties or business of the Company which might materially adversely affect
the value, assets or the operation of the properties or the business of the
Company, except as referred to in the Prospectus. Further, except as referred to
in the Prospectus, there are no pending actions, suits or proceedings related to
environmental matters or related to discrimination on the basis of age, sex,
religion or race, nor is the Company charged with or, to its knowledge, under
investigation with respect to any violation of any statutes or regulations of
any regulatory authority having jurisdiction over its business or operations,
and no labor disturbances by the employees of the Company exist or, to the
knowledge of the Company, have been threatened.
(p) The Company has, and at each Closing Date will have, filed
all necessary federal, state and foreign income and franchise tax returns or has
requested extensions thereof (except in any case where the failure to so file
would not have a material adverse effect on the Company), and has paid all taxes
which it believes in good faith were required to be paid by it except for any
such tax that currently is being contested in good faith or as described in the
Prospectus.
(q) The Company maintains insurance policies including, but
not limited to, general liability and property insurance, which sufficiently
insures the Company and its employees against such losses and risks generally
insured against by comparable businesses, and the Company (i) has not failed to
give notice or present any insurance claim with respect to any matter including,
but not limited to, the Company's business, property or employees, under the
insurance policy or surety bond in a due and timely manner, (ii) have any
disputes or claims against any underwriter of such insurance policies or surety
bonds or has not failed to pay any premiums due and payable thereunder, or (iii)
have failed to comply with all conditions contained in such insurance policies
and surety bonds. There are no facts or circumstances under any such insurance
policy or surety bond which would relieve any insurer of its obligation to
satisfy in full any valid claim of the Company.
(r) The Company is in compliance with the requirements of
Section 13(b)(2) of the Securities Exchange Act of 1934, as amended, and all
rules and regulations promulgated thereunder (the "Exchange Act") and, except as
disclosed in the Prospectus, to the Company's knowledge, neither the Company,
nor any of its employees, officers, directors, agents or affiliates, have made,
directly or indirectly, any payment of funds of such entity or received or
retained funds in violation of any law, rule or regulation, which payment,
receipt or retention is of a character which is required to be disclosed in the
Prospectus.
(s) Neither the Company nor any of its employees, directors,
stockholders, or affiliates (as defined by the Rules and Regulations) of any of
the foregoing, have taken or will take, directly or indirectly, any action
designed to or which has constituted or which might be expected to cause or
result in, under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Common Stock or Warrants.
(t) The Company has not, at any time, (i) made any
contribution to any candidate for political office, or failed to disclose fully
any such contribution, in violation of law, or (ii) made any payment to any
state, federal, foreign governmental or professional regulatory agency, officer
or official or other person charged with similar public, quasi-public or
professional regulatory duties, other than payments or contributions required or
allowed by applicable law.
(u) Except as set forth in the Registration Statement, to the
knowledge of the Company, neither the Company nor any officer, director,
employee or agent of the Company has made any payment or transfer of any funds
or assets of the Company or conferred any personal benefit by use of the
Company's assets or received any funds, assets or personal benefit in violation
of any law, rule or regulation, which is required to be stated in the
Registration
5
7
Statement or necessary to make the statements therein not misleading, nor is
there any business relationship, arrangement of conflict of interest between the
Company and any Majority Shareholder which could have a material adverse effect
upon the Company or its business..
(v) On the Closing Date all transfer or other taxes, if any
(other than income tax) which are required to be paid, and are due and payable,
in connection with (i) the sale and transfer of the Securities by the Company to
the Underwriter; (ii) the consummation by the Company of any of its obligations
hereunder; and (iii) any tax deficiency or claims outstanding, proposed or
assessed against it, will have been fully paid or provided for by the Company as
the case may be, and all laws imposing such taxes will have been fully complied
with in all material respects.
(w) There are no contracts or other documents of the Company
which are of a character required to be described in the Registration Statement
or Prospectus or filed as exhibits to the Registration Statement which have not
been so described or filed.
(x) The Company maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (1) transactions are executed in accordance
with management's general or specified authorizations; (2) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (3) access to assets is permitted only in accordance
with management's general or specific authorizations; and (4) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(y) Except as set forth in the Prospectus, no holder of any
securities of the Company has the right to require registration of any
securities because of the filing or effectiveness of the Registration Statement.
(z) To the Company's knowledge, there are no claims for
services in the nature of a finder's origination fee with respect to the sale of
the Securities hereunder, except as set forth in the Prospectus.
(aa) No right of first refusal exists with respect to any sale
of securities by the Company, except that right of first refusal, granted by the
Company to the Underwriter to (1) underwrite or place any public or private
offering of any debt or equity securities of the Company (excluding sales to
employees of the Company) or any of its subsidiaries or affiliates, or (2) act
as its investment banker with respect to any merger, acquisition or disposition
of assets of the Company or any of its subsidiaries which it introduces or
generates for two years following the Closing Date, and as to which the
Underwriter shall have twenty (20) days after its receipt of written notice
thereof to accept or decline such offering. If the Underwriter declines to
participate in such offering, and if thereafter the terms of such offering are
modified, the Underwriter shall have up to ten (10) days thereafter to accept or
decline the modified terms.
(bb) The Company has generally enjoyed satisfactory
employer/employee relationships with its respective employees and is in
compliance with all federal, state and local laws and regulations respecting the
employment of their respective employees and employment practices, terms and
conditions of employment and wages and hours relating thereto. To the knowledge
of the Company, there are no pending or threatened investigations involving the
Company by the U.S. Department of Labor or any other federal, state or local
agency responsible for the enforcement of such laws and regulations. To the
knowledge of the Company, there are no unfair labor practice charges or
complaints against the Company or any subsidiary pending before the National
Labor Relations Board or any strikes, picketing, boycotts, disputes, slowdowns
or stoppage pending or threatened against or involving the Company or any
subsidiary, or any predecessor entity, and none has occurred. No collective
bargaining agreements or modifications thereof are currently in effect or being
negotiated by the Company or any subsidiary and their respective employees. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining of the Company or any subsidiary.
6
8
(cc) The Company has not maintained or contributed to any
deferred compensation, profit sharing, savings, retirement, pension or other
benefit plan or arrangements with or for the benefit of any person resulting
form a relationship with the Company, except as may be disclosed in the
Prospectus.
(dd) The Company is in compliance with all federal and state
laws, rules, and regulations relating to consumer protection, occupational
safety and health and to the storage, handling or transportation of hazardous or
toxic materials and the Company has received all permits, licenses or other
approvals required of the Company under applicable federal and state
occupational safety and health and environmental laws and regulations to conduct
its business and the Company is in compliance with all terms and conditions of
any such permit, license or approval, except any such violation of law or
regulation, failure to receive required permits, licenses or other approvals
which would not, singly or in the aggregate, result in a material adverse change
in the condition (financial or otherwise), business, net worth or results of
operations of the Company, except as the case may be, as may be described in or
contemplated by the Prospectus.
(ee) Any certificate signed by any officer of the Company, and
delivered to the Underwriter or counsel to the Underwriter, shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
(ff) The minute books of the Company contain a complete
summary of all meetings and actions of the directors and stockholders of the
company, since the time of its incorporation, and reflect all transactions
referred to in such minutes accurately in all material respects.
(gg) The Company has received, and promptly presented to the
Underwriter and counsel for the Underwriter, copies of all duly executed and
delivered "lock-up" letters from each of the officers, directors and
shareholders of the Company regarding any Common Stock of the Company or
securities convertible into or exchangeable for such Common Stock, that each of
the foregoing is thereby restricted from selling, hypothecating, pleading or
otherwise disposing of any shares of Common Stock or securities convertible into
or exchangeable for Common Stock, for twelve (12) months from the Effective Date
(or one year with the prior written consent of the Underwriter).
(hh) The Company has received, and promptly presented to the
Underwriter and counsel for the Underwriter, "10b-5" letters form each of the
officers, directors, and holders of at least five percent of the outstanding
shares of any class of equity stock of the Company, whereby such individuals
stated that the information contained in the Registration Statement and the
Prospectus was accurate, and affirmed that he or she has not, in the five years
preceding the Effective Date (or as disclosed in the Registration Statement and
Prospectus), been the subject of any court order, judgment or decree restricting
in any way such person's involvement in the securities or commodities
industries, convicted in or named in a criminal proceeding, the subject of any
bankruptcy, petition or found by a court of competent jurisdiction of violating
any securities or federal commodities law.
(ii) No statement, representation, warranty or covenant made
by the Company in this Agreement or made in any certificate or document required
by this Agreement to be delivered to Underwriter was, when made, or as of the
Closing Date will be materially inaccurate, untrue or incorrect.
3. Covenants of the Company.
The Company covenants and agrees that:
(a) It will deliver to each of the Underwriter and counsel to
the Underwriter, without charge, two conformed copies and two copies,
cumulatively marked to show changes from the immediately preceding amendment, of
each Registration Statement and of each amendment or supplement thereto,
including all financial statements and exhibits.
7
9
(b) The Company will cause the Common Stock and Warrants to be
registered pursuant to Section 12 of the Exchange Act, not later than the
Effective Date.
(c) The Company will deliver to the Underwriter, and each of
the Selected Dealers (as hereinafter defined) without charge, as many copies as
have been requested of each Preliminary Prospectus heretofore filed with the
Commission in accordance with and pursuant to the Commission's Rule 430 under
the Act and will deliver to the Underwriter and to others whose names and
addresses are furnished by the Underwriter or a Selected Dealer, without charge,
on the Effective Date, and thereafter from time to time during such reasonable
period as you may request if, in the opinion of counsel for the Underwriter, the
Prospectus is required by law to be delivered in connection with sales by the
Underwriter or a dealer, as many copies of the Prospectus (and, in the event of
any amendment of or supplement to the Prospectus, of such amended or
supplemented Prospectus) as the Underwriter may request for the purposes
contemplated by the Act. The Company will take all necessary actions to furnish
to whomever directed by the Underwriter, when and as requested by the
Underwriter, all necessary documents, exhibits, information, applications,
instruments and papers as may be reasonably required or, in the opinion of
counsel to the Underwriter desirable, in order to permit or facilitate the sale
of the Securities.
(d) The Company will file with the NASD, as long as the
securities are quoted on the OTC Bulletin Board, and once as long as the
Securities are quoted on the NASDAQ National Market System or SmallCap Market,
all documents required thereby to maintain listing or quotation thereupon, and
will take any and all actions required to comply with and maintain all
continuing requirements for listing thereupon.
(e) The Company will notify the Underwriter and counsel for
the Underwriter immediately of any actual or threatened or impending
investigations (formal or informal) or any delisting or other proceedings
brought by NASDAQ, the NASD, SEC or any other governmental or regulatory agency
or body or any other exchange, including the issuance or threatened issuance of
any "suspension orders" or "stop orders" or other prohibitions preventing or
impairing the proposed Offering. In the event of any of the foregoing, the
Company shall not acquire in any of the foregoing if such acquiescence would, in
all likelihood, adversely affect the Underwriter, and further agrees to actively
defend against or appeal any such action unless counsel for each of the Company
and the Underwriter advises such parties that the probability of successfully
appealing or defending such action is remote.
(f) The Company has authorized the Underwriter to use, and
make available for use by prospective dealers, the Preliminary Prospectus, and
authorizes the Underwriter, all dealers selected by you in connection with the
distribution of the Securities (the "Selected Dealers") to be purchased by the
Underwriter and all dealers to whom any of such Securities may be sold by the
Underwriter or by any Selected Dealer, to use the Prospectus, as from time to
time amended or supplemented, in connection with the sale of the Securities in
accordance with the applicable provisions of the Act, the applicable Regulations
and applicable state law, until completion of the distribution of the Securities
and for such longer period as you may request if the Prospectus is required
under the Act, the applicable Regulations or applicable state law to be
delivered in connection with sales of the Securities by the Underwriter or the
Selected Dealers.
(g) The Company will use its best efforts to cause the
Registration Statement to become effective and will notify the Underwriter
immediately, and confirm the notice in writing: (i) when the Registration
Statement or any post-effective amendment thereto becomes effective, if the
provisions of Rule 497 promulgated under the Act will be relied upon and when
the Prospectus has been filed in accordance with said Rule 497; (ii) of the
issuance by the Commission of any stop order or of the initiation, or to the
best of the Company's knowledge, the threatening, of any proceedings for that
purpose; (iii) the suspension of the qualification of the Securities and the
Underwriter's Warrants, or underlying securities, for offering or sale in any
jurisdiction or of the initiating, or to the best of the Company's knowledge the
threatening, of any proceeding for that purpose; and (iv) of the receipt of any
comments from the Commission. If the Commission shall enter a stop order at any
time, the Company will make every reasonable effort to obtain the lifting of
such order at the earliest possible moment.
8
10
(h) The Company shall enter into an escrow agreement with the
Underwriter and an escrow agent to be designated by the Underwriter, in form and
substance satisfactory to the parties, and agrees to faithfully perform its
obligations thereunder.
(i) During the time when a prospectus is required to be
delivered under the Act, the Company will comply with all requirements imposed
upon it by the Act and the Securities Exchange Act of 1934 (the "Exchange Act"),
as now and hereafter amended and by the Regulations, as from time to time in
force, as necessary to permit the continuance of sales of or dealings in the
Securities in accordance with the provisions hereof and the Prospectus. If at
any time when a prospectus relating to the Securities is required to be
delivered under the Act, any event shall have occurred as a result of which, in
the opinion of counsel for the Company or counsel for the Underwriter, the
Prospectus as then amended or supplemented includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, the Company will notify you
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act and will furnish to you
copies thereof.
(j) The Company will endeavor in good faith, in cooperation
with you, at or prior to the time the Registration Statement becomes effective,
to qualify the Securities for offering and sale under the securities laws or
blue sky laws of such jurisdictions as you may reasonably designate. In each
jurisdiction where such qualification shall be effected, the Company will,
unless you agree that such action is not at the time necessary or advisable,
file and make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction or reasonably requested by
Underwriter's counsel.
(k)
The Company will make generally available to its security holders, as soon as
practicable, but in no event later than the first day of the fifteenth full
calendar month following the Effective Date of the Registration Statement, an
earnings statement of the Company, which will be in reasonable detail but which
need not be audited, covering a period of at least twelve months beginning after
the Effective Date of the Registration Statement, which earnings statements
shall satisfy the requirements of Section 11(a) of the Act and the Regulations
as then in effect. The Company may discharge this obligation in accordance with
Rule 158 of the Regulations.
(l) During the period of five years commencing on the
Effective Date of the Registration Statement, the Company will furnish to its
stockholders an annual report (including financial statements audited by its
independent public accountants), in reasonable detail, and, at its expense,
furnish each of the Underwriters (i) within 90 days after the end of each fiscal
year of the Company, a consolidated balance sheet of the Company and its
consolidated subsidiaries and a separate balance sheet of each subsidiary of the
Company the accounts of which are not included in such consolidated balance
sheet as of the end of such fiscal year, and consolidated statements of
operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries and separate statements of operations, stockholders'
equity and cash flows of each of the subsidiaries of the Company the accounts of
which are not included in such consolidated statements, for the fiscal year then
ended all in reasonable detail and all certified by independent accountants
(within the meaning of the Act and the Regulations), (ii) within 45 days after
the end of each of the first three fiscal quarters of each fiscal year, similar
balance sheets as of the end of such fiscal quarter and similar statements of
operations, stockholders' equity and cash flows for the fiscal quarter then
ended, all in reasonable detail, and subject to year end adjustment, all
certified by the Company's principal financial officer or the Company's
principal accounting officer as having been prepared in accordance with
generally accepted accounting principles applied on a consistent basis, (iii) as
soon as available, each report furnished to or filed with the Commission or any
securities exchange and each report and financial statement furnished to the
Company's shareholders generally and (iv) as soon as available, such other
material as the Underwriter may from time to time reasonably request regarding
the financial condition and operations of the Company.
9
11
(m) For a period of eighteen months from the initial Closing,
the Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit), the Company's financial
statements for each of the first three quarters prior to the announcement of
quarterly financial information, the filing of the Company's 10-Q quarterly
report and the mailing of quarterly financial information to stockholders.
(n) Prior to the Closing Dates, the Company will not issue,
directly or indirectly, without your prior written consent and that of counsel
for the Underwriter, any press release or other public announcement or hold any
press conference with respect to the Company or its activities with respect to
this Offering.
(o) The Company will deliver to you and to our counsel, prior
to filing, any amendment or supplement to the Registration Statement or
Prospectus proposed to be filed after the Effective Date of the Registration
Statement and will not file any such amendment or supplement to which you or
your counsel shall reasonably object after being furnished such copy.
(p) During the period of 120 days commencing on the date
hereof, neither the Company nor any Majority Shareholder will, at any time,
take, directly or indirectly, any action designed to, or which will constitute
or which might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Securities to facilitate the sale or resale of
any of the Securities.
(q) The Company will apply the net proceeds from the Offering
received by it in the manner set forth under "Use of Proceeds" in the
Prospectus. No portion of the net proceeds will be used, directly or indirectly,
to acquire any securities issued by the Company.
(r) Counsel for the Company, the Company's accountants, and
the officers and directors of the Company will, respectively, furnish the
opinions, the letters and the certificates referred to in subsections of
Paragraph 10 hereof, and, in the event that the Company shall file any amendment
to the Registration Statement relating to the offering of the Securities or any
amendment or supplement to the Prospectus relating to the offering of the
Securities subsequent to the Effective Date of the Registration Statement, such
counsel, such accountants, such officers and directors, respectively, will, at
the time of each such filing , and at such subsequent time as you shall specify,
so long as securities being registered by such amendment or supplement are being
underwritten by the Underwriter, furnish to you such opinions, letters and
certificates, each dated the date of its delivery, of the same nature as the
opinions, the letters and the certificates referred to in said Paragraph 10, as
you may reasonably request, or, if any such opinion or letter or certificate
cannot be furnished by reason of the fact that such counsel or such accountants
or any such officer or director believes that the same would be inaccurate, such
counsel or such accountants or such officer or director will furnish an accurate
opinion or letter or certificate with respect to the same subject matter.
(s) The Company will comply with all of the provisions of any
undertakings contained in the Registration Statement in all material respects.
(t) The Company will reserve and keep available for issuance
that maximum number of its authorized but unissued Shares of Common Stock which
are issuable upon exercise of the Warrants and issuable upon exercise of the
Underwriter's Warrants (including the underlying securities) outstanding from
time to time.
(u) Following the Effective Date and from time to time
thereafter, so long as the Warrants are outstanding, the Company will timely
prepare and file at its sole cost and expense one or more post-effective
amendments to the Registration Statement or a new registration statement as
required by law as will permit Warrant holders to be furnished with a current
prospectus in the event Warrants are exercised, and to use its best efforts and
due diligence to have same be declared effective. The Company will deliver a
draft of each such post-effective amendment or new registration statement to the
Underwriter at least ten days prior to the filing of such post-effective
amendment or registration statement.
10
12
(v) Following the Effective Date and from time to time
thereafter so long as any of the Warrants remain outstanding, the Company will
timely deliver and supply to its warrant agent sufficient copies of the
Company's current Prospectus, as will enable such Warrant Agent to deliver a
copy of such Prospectus to any Warrant or other holder where such Prospectus
delivery is by law required to be made.
(w) During a period of three years, commencing on the
Effective Date, the Company will furnish to you and any Selected Dealers, who
may so request copies of such financial statements and other periodic and
special reports as the Company may from time to time distribute generally to the
holders of any class of its capital stock, and will furnish to you and such
Selected Dealers who may request a copy of each annual or other report which the
Company is required to file with the Commission.
(x) So long as any of the Warrants remain outstanding, the
Company shall continue to employ the services of a firm of independent certified
public accountants reasonably acceptable to the Underwriter in connection with
the preparation of the financial statements to be included in any registration
statement to be filed by the Company hereunder, or any amendment or supplement
thereto (it being understood that Stonefield Xxxxxxxxx, Inc. is acceptable to
the Underwriter). During the same period, the Company shall employ the services
of a law firm(s) acceptable to the Underwriter in connection with all legal work
of the Company, including the preparation of a registration statement to be
filed by the Company hereunder, or any amendment or supplement thereto.
(y) So long as any of the Warrants remain outstanding, the
Company shall continue to appoint a Warrant Agent for the Warrants, who shall be
reasonably acceptable to the Underwriter.
(z) The Company agrees that it will, upon the initial Closing,
for a period of no less than three (3) years, engage a designee of the
Underwriter as an advisor (the "Advisor") to its Board of Directors where such
Advisor shall attend meetings of the Board, receive all notices and other
correspondence and communications sent by the Company to members of its Board of
Directors and shall be entitled to receive compensation therefor equal to the
entitlement of all non-employee directors. Such Advisor shall also be entitled
to receive reimbursement for all reasonable costs incurred in attending such
meetings including, but not limited to, food, lodging, and transportation. The
Company further agrees that during said three (3) year period, it shall schedule
no less than four (4) formal and "in person" meetings of its Board of Directors
in each such year and thirty (30) days advance notice of such meetings shall be
given to the Advisor. Further, during such three (3) year period, the Company
shall give notice to the Underwriter with respect to any proposed acquisitions,
mergers, reorganizations or other similar transactions. In lieu of the
Underwriter's three-year right to designate an Advisor, the Underwriter shall
have the right from time to time during such three-year period, in its sole
discretion, to designate one person for election as a Director of the Company
and the Company will utilize its best efforts to obtain the election of such
person who shall be entitled to receive the same compensation, expense
reimbursements and other benefits set forth above.
The Company agrees to indemnify and hold the Underwriter and
such Advisor or Director harmless against any and all claims, actions, damages,
costs and expenses, and judgments arising solely out of the attendance and
participation of your designee at any such meeting described herein. In the
event the Company maintains a liability insurance policy affording coverage for
the acts of its of officers and directors, it agrees, if possible, to include
the Underwriter's designee as an insured under such policy.
(aa) The Company's Common Stock and Warrants shall be listed
on the OTC Bulletin Board (the "OTC Bulletin Board") maintained by the National
Association of Securities Dealers, Inc. (the "NASD") not later than the final
Closing Date. Immediately following the final Closing Date, the Company will
make all filings required, including registration under the Exchange Act, and
will use its best efforts to obtain the quotation of the Common Stock and
Warrants on the Nasdaq Small Cap Market ("Nasdaq") and maintain such listing
(unless the Company is quoted upon Nasdaq National Market System ("NASDAQ/NMS")
or listed upon the New York Stock Exchange or American Stock Exchange, or is
acquired) for at least five years from the date of this Agreement.
11
13
(bb) The Company will apply for listing in Standard and Poors
Corporation Reports or Moodys OTC Guide and shall use its best efforts to have
the Company included in such publications continuously for at least five years
from the final Closing Date.
(cc) Within thirty (30) days following the final Closing Date,
the Company's accountants shall prepare an audited balance sheet as of the month
ending subsequent to such final Closing Date.
(dd) For a period of twelve (12) months from the Effective
Date, no officer, director or holder of any securities of the Company prior to
the Offering will, directly or indirectly, offer, sell (including any short
sale), grant any option for the sale of, acquire any option to dispose of, or
otherwise dispose of any Shares of Common Stock, including Shares of Common
Stock issuable upon exercise of options, warrants or any convertible securities
of the Company, without the prior written consent of the Underwriter, other than
as set forth in the Registration Statement. In order to enforce this covenant,
the Company shall impose stop-transfer instructions with respect to the
securities owned by every stockholder prior to the Offering until the end of
such period (subject to any exceptions to such limitation on transferability set
forth in the Registration Statement). If necessary to comply with any applicable
Blue-sky Law, the shares held by such stockholders will be escrowed with counsel
for the Company or otherwise as required.
(ee) Except for the issuance of shares of capital stock by the
Company in connection with a dividend, recapitalization, reorganization or
similar transactions or as result of the exercise of warrants or options
disclosed in or issued or granted pursuant to plans disclosed in the
Registration Statement, the Company shall not, for a period of eighteen (18)
months following the Final Closing Date, directly or indirectly, offer, sell,
issue or transfer any shares of its capital stock, or any security exchangeable
or exercisable for, or convertible into, shares of the capital stock or register
any of its capital stock (under any form of registration statement, including
Form S-8), without the prior written consent of the Underwriter. Options granted
pursuant to plans must be exercisable at the fair market value on the date of
grant.
(ff) During the three-year period from the Final Closing Date,
the Underwriter shall have a right of first refusal to act as underwriter or
agent of any and all public or private offerings of the securities of the
Company, or any successor to or subsidiary of the Company or any other entity in
which the Company has an equity interest (collectively referred to herein as the
"Company"), by the Company or any secondary offering of the Company's securities
by any of its officers, directors and 5% or greater stockholders ("Principal
Stockholders"). The Company has caused such Principal Stockholders to deliver to
the Underwriter on or before the date of this Agreement, an agreement to this
effect, as it relates to any proposed secondary offering by such Principal
Stockholders, in form and substance satisfactory to the Underwriter and to
counsel for the Underwriter.
(gg) The Company will use its best efforts to obtain, as soon
after the first Closing Date as is reasonably possible, liability insurance
covering its officers and directors.
(hh) The Company agrees that any conflict of interest arising
between a member of the Company's Board of Directors or Majority Shareholders
and the Company in connection with such Director's dealing with, or obligations
to, the Company, shall be resolved by a vote of the majority of the independent
members of the Board of Directors.
(ii) The Company agrees that, if it deems necessary, in its
sole discretion, it will employ the services of a financial public relations
firm acceptable to the Underwriter for a period of at least twelve months
following the Final Closing Date. The Company will acquire the consent of the
Underwriter for its selection.
(jj) For a period of five (5) years from the Effective Date,
at the request of the Underwriter, the Company shall on a weekly basis provide
promptly, at its expense, copies of the Company's transfer sheets furnished to
it by its transfer agent and copies of the securities positions provided to it
by the Depository Trust Company ("DTC sheets"), and the list of holders of all
of the Company's securities.
12
14
(kk) The Company shall take all action necessary or required
to effectuate and preserve the registration rights granted to the Underwriter,
or other holders, pursuant to the Underwriter's Warrant.
4. Appointment of Agent to Sell the Securities.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties, and agreements herein
contained, the Company hereby appoints the Underwriter as its exclusive agent
for a period of 180 days from the Effective Date (the "Offering Period"), to
sell the Securities, and the Underwriter, on the basis of the representations
and warranties of the Company herein, accepts such appointment and agrees to use
its best efforts on a "minimum 250,000 Shares and 250,000 Warrants ("Minimum
Offering"), maximum 500,000 Shares and 500,000 Warrants ("Maximum Offering")"
basis to find purchasers for the Securities. The price at which the Underwriter
shall sell the Securities to the public as agent for the Company, shall be $5.50
per share of Common Stock and $.10 per Warrant, less an underwriting discount of
ten percent (10%) of the offering price for each security. The Underwriter may
allow a concession not exceeding $0.25 per share of Common Stock and $0.005 per
Warrant to selected dealers who are members of the National Association of
Securities Dealers, Inc. ("NASD"), and to certain foreign dealers, but all such
sales by selected dealers shall be made by the Company, acting through the
Underwriter as agent, and not for the account of the Underwriter.
(b) Provided that the Minimum Offering is sold and paid for,
the Company agrees to pay the Underwriter for its expenses a non-accountable
expense allowance equal to 3% of the gross proceeds of the offering, subject to
the provisions of Paragraph 9 herein.
(c) It is a condition of this Agreement that the Underwriter
shall use its best efforts to sell the Securities on behalf of the Company, that
any and all funds received from such sale, without any deduction therefrom
whatsoever, including, but not limited to, any underwriting commission or any
dealer concession or otherwise, shall be forthwith deposited into an escrow
account with American Stock Transfer & Trust Company as Escrow Agent, pursuant
to the terms of an Escrow Agreement entered into by and among the Company, the
Underwriter and the Escrow Agent. In the event the Minimum Offering is not sold
within the Offering Period, all funds will be promptly refunded to the
subscribes in full, without deduction therefrom or interest thereon.
Certificates will be issued to purchasers only if the proceeds from the
Securities offered hereby are released from escrow to the Company. Until such
time as the funds have been released and the certificates delivered to the
purchasers thereof, such purchasers, if any, will be deemed subscribers and not
stockholders. The funds in escrow will be held for the benefit of those
subscribers until released to the Company and will not be subject to creditors
of the Company or utilized for the expenses of this Offering. When certificates
for the Securities are to be issued in the name of a participating dealer for
the benefit of its customer, the Escrow Agent may hold such funds with the
dealer reflected as the subscriber.
5. Delivery and Payment.
(a) In the event the Minimum Offering is sold during the
Offering Period, delivery of the certificates representing the Shares and
Warrants against payment therefor shall take place at the offices of Platinum
Equities, Inc., 00 Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (or at such
other place as may be designated by agreement between you and the Company), at
10:00 a.m., New York time, on such date after the Offering has been completed as
the Underwriter shall designate, on at least three (3) full business days' prior
written notice, such time and date of payment and delivery of the Securities
being herein called the "Closing Date." After the Minimum Offering is sold,
subsequent Closings shall be held at the discretion of the Company and the
Underwriter with respect to additional Shares and Warrants up to the Maximum
Offering during the Offering Period.
(b) The Company will make the certificates for the Shares and
Warrants sold hereunder available to the Underwriter for checking at least two
full business days prior to a Closing Date at the offices of the Company's
transfer agent. The certificates shall be in such names and denominations as you
may request, at least two full business days prior to a Closing Date.
13
15
(c) The cost of original issue tax stamps, if any, in
connection with the issuance and delivery of the Securities by the Company to
the Underwriter shall be borne by the Company. The Company will pay and hold the
Underwriter, and any subsequent holder of the Securities, harmless from any and
all liabilities with respect to or resulting from any failure or delay in paying
federal and state stamp taxes, if any, which may be payable or determined to be
payable in connection with the original issuance or sale to the Underwriter of
the Securities or any portions thereof.
6. Offering of Securities on Behalf of the Company.
It is understood that the Underwriter proposes to offer the Securities
to the public solely as agent for the Company, upon the terms and conditions set
forth in the Registration Statement. The Underwriter shall commence making such
offer as agent for the Company on the Effective Date, or as soon thereafter as
the Underwriter deems advisable.
7. Warrant Solicitation Fee.
The Company agrees to pay to the Underwriter, commencing one year from
the Effective Date, a fee of seven percent (7%) of the aggregate exercise price
of the Warrants if: (i) the market price of the Common Stock is greater than the
exercise price of the Warrants on the date of exercise; (ii) the exercise of the
Warrants are solicited by the Underwriter; (iii) the Warrants are not held in a
discretionary account; (iv) the disclosure of compensation arrangements was made
both at the time of the Offering and at the time of the exercise of the Warrant;
and (v) the solicitation of the Warrant is not in violation of Regulation M
promulgated under the Exchange Act. The Company agrees not to solicit the
exercise of any Warrants other than through the Underwriter and will not
authorize any other dealer to engage in such solicitation without the prior
written consent of the Underwriter which will not be unreasonably withheld. The
Warrant solicitation fee will not be paid in a non-solicited transaction. No
Warrant solicitation by the Underwriter will occur prior to one year from the
Effective Date. Additionally, there will be no warrant solicitation by the
Underwriter without the prior written authorization of the Company.
8. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the Company that:
(a) The Underwriter is a member in good standing of the
National Association of Securities Dealers, Inc., and has complied with all NASD
requirements concerning net capital and compensation to be received in
connection with the Offering.
(b) To the Underwriter's knowledge, there are no claims for
services in the nature of a finder's origination fee with respect to the sale of
the Securities hereunder to which the Company is, or may become, obligated to
pay.
9. Payment of Expenses.
(a) Whether or not this Agreement becomes effective or the
sale of the Securities by the Company is completed, the Company will pay and
bear all costs, fees, taxes and expenses incident to and in connection with: (i)
the issuance, offer, sale and delivery of the Securities, including all expenses
and fees incident to the preparation, printing, filing and mailing (including
the payment of postage with respect to such mailing) of the Registration
Statement (including all exhibits thereto), each Preliminary Prospectus, the
Prospectus, and amendments and post- effective amendments thereof and
supplements thereto, and this Agreement and related documents, Preliminary and
Final Blue Sky Memoranda, including the cost of preparing , copying and
distributing all copies thereof, including two bound volumes of complete sets of
executed closing documents to each of the Underwriter and counsel to the
Underwriter, in quantities deemed necessary by the Underwriter; (ii) the costs
of preparing and printing all "Tombstone" and other appropriate advertisements;
(iii) the printing, engraving, issuance and
14
16
delivery of the Common Stock, Warrants, Warrant Shares, Underwriter's Warrants
and the securities underlying the Underwriter's Warrant, including any transfer
or other taxes payable thereon in connection with the original issuance thereof;
(iv) the qualification of the Common Stock and Warrants under the state or
foreign securities or "Blue Sky" laws selected by the Underwriter and the
Company, and disbursements and reasonable fees of counsel for the Underwriter in
connection therewith ($35,000) plus all expenses and disbursements of such
counsel) plus the filing fees for such states; (v) fees of counsel for the
Underwriter for the preparation of a secondary trading memorandum ($15,000);
(vi) fees and disbursements of counsel and accountants for the Company; (vii)
other expenses and disbursements incurred on behalf of the Company (viii) the
filing fees payable to the Commission and the NASD; and (ix) any listing of the
Common Stock and Warrants on a securities exchange or on NASDAQ.
(b) In addition to the expenses to be paid and borne by the
Company referred to in Paragraph 9(a) above, the Company shall reimburse you at
each Closing Date for expenses incurred by you in connection with the Offering
(for which you need not make any accounting), in the amount of 3% of the price
to the public of the Securities sold in the Offering. This 3% non-accountable
expense allowance shall cover the fees of your legal counsel, but shall not
include any expenses for which the Company is responsible under Paragraph 9(a)
above, including the reasonable fees and disbursements of your legal counsel
with respect to Blue Sky matters. As of the date hereof, no funds have been
advanced by the Company to the Underwriter with respect to such non-accountable
expense allowance.
(c) In the event that the Company does not or cannot, for any
reason whatsoever other than a default by the Underwriters, expeditiously
proceed with the Offering, or if any of the representations, warranties or
covenants contained in this Agreement are not materially correct or cannot be
complied with by the Company, or business prospects or obligations of the
Company are adversely affected and the Company does not commence or continue
with the Offering at any time or terminates the proposed transaction prior to a
Closing Date, the Company shall reimburse the Underwriter on an accountable
basis for all out-of-pocket expenses actually incurred in connection with the
Underwriting, this Agreement and all of the transactions hereby contemplated,
including, without limitation, the Underwriter's legal fees and expenses, less
such sums which have already been paid, and the Underwriter shall not be
responsible for any expense of the Company or others or for any change or claim
related to the Offering contemplated hereunder in the event that the Offering is
not consummated.
10. Conditions of Underwriter's Obligations.
The obligations of the Underwriter to consummate the transactions
contemplated by this Agreement shall be subject to the continuing accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of the Closing Dates, the accuracy of the statements of the
Company and its officers and directors made pursuant to the provisions hereof,
and to the performance by the Company of its covenants and agreements hereunder
and under each certificate, opinion and document contemplated hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date following the date of this
Agreement, or such later date and time as shall be consented to in writing by
you and, on or prior to each Closing Date, no stop order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Securities under the securities laws of any jurisdiction shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission or any such authorities of any jurisdiction and
any request on the part of the Commission or any such authorities for additional
information shall have been complied with to the reasonable satisfaction of the
Commission or such authorities and counsel to the Underwriter and after the date
hereof no amendment or supplement shall have been filed to the Registration
Statement or Prospectus without your prior consent.
(b) As of each Closing Date, the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto shall not contain an
untrue statement of a fact which is material, or omit to state a fact
15
17
which is material and is required to be stated therein or is necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) Between the time of the execution and delivery of this
Agreement and each Closing Date, (i) there shall be no litigation instituted
against the Company or any of its officers or directors and between such dates
there shall be no proceeding instituted or, to the Company's knowledge,
threatened against the Company or any of its officers or directors before or by
any federal, state or county commission, regulatory body, administrative agency
or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding would, individually or in
the aggregate, have a material adverse effect on the Company or its business,
business prospects or properties, or have a material adverse effect on the
financial condition or results of operation of the Company, and (ii) no
executive officer of the Company listed as such in the Prospectus shall have
died, become physically or mentally disabled, resigned or been removed or
discharged.
(d) Each of the representations and warranties of the Company
contained herein and each certificate and document contemplated under this
Agreement to be delivered to you shall be true and correct at each Closing Date
as if made at each such Closing Date, and all covenants and agreements contained
herein and in each such certificate and document to be performed on the part of
the Company, and all conditions contained herein and in each such certificate
and document to be fulfilled or complied with by the Company at or prior to the
Closing Dates shall be fulfilled or complied with.
(e) At each Closing Date, you shall have received the opinion
of Xxxxxxx & Beam, counsel to the Company, dated as of each such Closing Date,
addressed to the Underwriter and in form and substance satisfactory to counsel
to the Underwriter, as follows:
(i) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation with full corporate power and authority, and all licenses,
permits, certifications, registrations, approvals, consents and franchises to
own or lease and operate its properties and to conduct its business as described
in the Registration Statement. The Company is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company;
(ii) The Company has full corporate power and
authority to execute, deliver and perform the Underwriting Agreement, the
Warrant Agreement and the Underwriter's Warrants and to consummate the
transactions contemplated thereby. The execution, delivery and performance of
the Underwriting Agreement, the Warrant Agreement and the Underwriter's Warrants
by the Company, the consummation by the Company of the transactions therein
contemplated and the compliance by the Company with the terms of the
Underwriting Agreement, the Warrant Agreement and the Underwriter's Warrants
have been duly authorized by all necessary corporate action, and each of the
Underwriting Agreement, the Warrant Agreement and the Underwriter's Warrants
have been duly executed and delivered by the Company. Each of the Underwriting
Agreement, the Warrant Agreement and the Underwriter's Warrants is a valid and
binding obligation of the Company, enforceable in accordance with their
respective terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and the discretion of courts in granting equitable
remedies and except that enforceability of the indemnification provisions and
the contribution provisions set forth in the Underwriting Agreement may be
limited by the federal securities laws or public policy underlying such laws;
(iii) The execution, delivery and performance of the
Underwriting Agreement, the Warrant Agreement and the Underwriter's Warrants by
the Company, the consummation by the Company of the transactions therein
contemplated and the compliance by the Company with the terms of the
Underwriting Agreement, the Warrant Agreement and the Underwriter Warrants do
not, and will not, with or without the giving of notice or the lapse of time, or
both, (A) result in a violation of the Certificate
16
18
of Incorporation, as the same may be amended, or Bylaws of the Company or any of
its Subsidiaries, (B) to the best of our knowledge, result in a breach of, or
conflict with, any terms or provisions of or constitute a default under, or
result in the modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries pursuant to, any
indenture, mortgage, note, contract, commitment or other material agreement or
instrument to which the Company or any of its Subsidiaries are a party or by
which the Company or any of its Subsidiaries or any of their properties or
assets are or may be bound or affected, except where any of the foregoing would
not result in a material adverse effect upon the Company's or any Subsidiaries
business or operations; (C) to the best of our knowledge, violate any existing
applicable law, rule or regulation or judgment, order or decree known to us of
any governmental agency or court, domestic or foreign, having jurisdiction over
the Company or any of its Subsidiaries or any of their properties or businesses;
or (D) to the best of our knowledge, have any effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company or any of its Subsidiaries to own or lease and operate their
properties and to conduct their business or the ability of the Company or any of
its Subsidiaries to make use thereof;
(iv) To the best of our knowledge, no authorization,
approval, consent, order, registration, license or permit of any court or
governmental agency or body (other than under the Act, the Regulations and
applicable state securities or Blue Sky laws) is required for the valid
authorization, issuance, sale and delivery of the Securities, the Common Stock,
the Warrants, the Warrant Shares, or the Underwriter's Warrants, and the
consummation by the Company of the transactions contemplated by the Underwriting
Agreement, the Consulting Agreement, the Warrant Agreement or the Underwriter's
Warrants;
(v) The Registration Statement was declared effective
under the Act on _________, 1998 and is effective thereunder, and filing of all
pricing information (if applicable) has been timely made in the appropriate form
under Rule 430A; and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement, the Preliminary Prospectus, or the
final Prospectus or any part thereof, has been issued, and no proceedings for
that purpose have been instituted or are pending, threatened or contemplated
under the Act or applicable state securities laws;
(vi) The Registration Statement and the Prospectus,
as of the Effective Date (except for the financial statements and other
financial data included therein or omitted therefrom, as to which we express no
opinion), comply as to form in all material respects with the requirements of
the Act and Regulations and the conditions for use of a registration statement
on Form SB-2 have been satisfied by the Company;
(vii) The description in the Registration Statement
and the Prospectus of statutes, regulations, contracts and other documents have
been reviewed by us, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed, and to the
best of our knowledge, there are no material statutes or regulations, or, to the
best of our knowledge, material contracts or documents, of a character required
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement, which are not so described or filed
as required.
To the best of our knowledge, none of the material provisions of the contracts
or instruments described above violates any existing applicable law, rule or
regulation or judgment, order or decree known to us of any United States
governmental agency or court having jurisdiction over the Company or any of its
assets or businesses;
(viii) The outstanding Common Stock , Warrants, and
all other securities of the Company, have been duly authorized and validly
issued. The outstanding Common Stock is fully paid and nonassessable. To the
best of our knowledge, none of the outstanding Common Stock has been issued in
violation of the preemptive rights of any stockholder of the Company. None of
the holders of the outstanding Common Stock is subject to personal liability
solely by reason of being such a holder. The authorized Common Stock conforms to
the description thereof contained in the Registration Statement and Prospectus.
To the best of our knowledge, except as set forth in the Prospectus, no holders
of any of the Company's securities have any rights, "demand," "piggyback" or
otherwise, to have such securities registered under the Act;
17
19
(ix) The issuance and sale of the Securities,
including the Common Stock, the Warrants, the Warrant Shares and the
Underwriter's Warrants have been duly authorized and when issued will be validly
issued, fully paid and nonassessable, and the holders thereof will not be
subject to personal liability solely by reason of being such holders. Neither
the Common Stock nor the Warrants or Warrant Shares are subject to preemptive
rights of any stockholder of the Company. The certificates representing the
Securities are in proper legal form;
(x) The issuance and sale of the Warrant Shares
and the Underwriter's Warrants have been duly authorized and, when paid for,
issued and delivered pursuant to the terms of the Warrant Agreement or the
Underwriter's Warrants, as the case may be, the Warrants, the Warrant Shares and
the Underwriter's Warrants will constitute the valid and binding obligations of
the Company, enforceable in accordance with their terms, to issue and sell the
Warrants, the Warrant Shares and/or Underwriter's Warrants. All corporate action
required to be taken for the authorization, issuance and sale of the securities
has been duly, validly and sufficiently taken. The Common Stock and the Warrants
have been duly authorized by the Company to be offered in the form of the
Securities. The Warrants, the Warrant Shares and the Underwriter Warrants
conform to the descriptions thereof contained in the Registration Statement and
Prospectus;
(xi) The Underwriter has acquired good title to the
Securities, free and clear of all liens, encumbrances, equities, security
interests and claims, provided that the Underwriter is a bona fide purchaser as
defined in Section8-302 of the Uniform Commercial Code;
(xii) To the best of our knowledge, after due
inquiry, there are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries before any governmental agency, court or tribunal,
foreign or domestic, or before any private arbitration tribunal, pending or
threatened against the Company or any of its Subsidiaries or involving their
properties or businesses, other than as described in the Prospectus, such
description being accurate, and other than litigation incident to the kind of
business conducted by the Company or any of its Subsidiaries which, individually
and in the aggregate, is not material, and, except as otherwise disclosed in the
Prospectus and the Registration Statement, the Company and its Subsidiaries have
complied with all federal and state laws, statutes and regulations concerning
its business;
(xiii) All sales of the Company's securities have
been made in compliance with or under an exemption from the registration
requirements of the Act, and no purchaser of such securities in any such sale
has a right of action against the Company for failure to comply with the
registration or filing requirement of any state;
(xiv) The Company owns or possesses, free and clear
of all liens or encumbrances and rights thereto or therein by third parties, the
requisite licenses or other rights to use all trademarks, service marks,
copyrights, service names, trade names, patents, patent applications and
licenses necessary to conduct its business (including, without limitation, any
such licenses or rights described in the Prospectus as being owned or possessed
by the Company), and to the best of such counsel's knowledge after reasonable
investigation there is no claim or action by any person pertaining to, or
proceeding, pending, or threatened which challenges the exclusive rights of the
Company with respect to any trademarks, service marks, copyrights, service
names, trade names, patents, patent applications and licenses used in the
conduct of the Company's business (including, without limitations, any such
licenses or rights described in the Prospectus as being owned or possessed by
the Company);
(xv) Except as described in the Prospectus, the
Company does not (a) maintain, sponsor, or contribute to any ERISA Plans, (b)
maintain or contribute, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA, and (c) has not, completely or
partially, withdrawn from a "multi employer plan," with respect to any employees
of or who perform duties on behalf of the Company;
(xvi) The Company has no subsidiaries.
18
20
(xvii) Company counsel has participated in reviews
and discussions in connection with the preparation of the Registration Statement
and the Prospectus. Although we are not passing upon and do not assume
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement, no facts came to our attention which
lead us to believe that (A) the Registration Statement (except as to the
financial statements and other financial data contained therein, as to which we
express no opinion), on the Effective Date, contained any untrue statement of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or that (B) the Prospectus (except as to the financial statements
and other financial data contained therein, as to which we express no opinion)
contains any untrue statement or a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(xviii) Company counsel has reviewed the Prospectus,
and insofar as it refers to statements of law, description of statues, licenses,
rules or regulations or legal conclusions, it is correct in all material
respects;
(xix) To Company counsel's knowledge, the persons
listed in the Principal Stockholders or Management sections of the Prospectus
are the respective "beneficial owners" (as such phrase is defined in Regulation
13d-3 promulgated under the Exchange Act) of the securities set forth opposite
their respective names thereunder as and to the extent set forth therein;
(xx) To such counsel's knowledge, except as described
in the Prospectus, no person, corporation, trust partnership, association or
other entity has the right to include and/or register any securities of the
Company in the Registration Statement, require the Company to file any
registration statement or, if filed, to include any security in such
registration statement;
(xxi) To such counsel's knowledge, except as
described in the Prospectus, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Shares hereunder or the
financial consulting arrangement or any other arrangements, agreements,
understandings, payments or issuances, that may affect the Underwriter's
compensation, as determined by the NASD;
(f) On or prior to each Closing Date, counsel for the
Underwriter shall have been furnished such documents, certificates and opinions
as they may reasonably require for the purpose of enabling them to review the
matters referred to in subparagraphs (e) of this Paragraph 10, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(g) Prior to each Closing Date:
(i) There shall have been no material adverse change
in the condition or prospects or the business activities, financial or
otherwise, of the Company from the latest dates as of which such condition is
set forth in the Registration Statement and Prospectus;
(ii) There shall have been no transaction, outside
the ordinary course of business, entered into by the Company from the latest
date as of which the financial condition of the Company is set forth in the
Registration Statement and Prospectus which is material to the Company, which is
either (x) required to be disclosed in the Prospectus or Registration Statement
and is not so disclosed, or (y) likely to have material adverse effect on the
Company's business or financial condition;
(iii) The Company shall not be in default under any
material provision of any instrument relating to any outstanding indebtedness,
except as described in the Prospectus;
(iv) No material amount of the assets of the Company
shall have been pledged, mortgaged or otherwise encumbered, except as set forth
in the Registration Statement and Prospectus;
19
21
(v) No action, investigation, suit or proceeding, at
law or in equity, shall have been pending or to its knowledge threatened against
the Company or affecting any of its properties or businesses before or by any
court or federal or state commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding would materially and
adversely affect the business, operations, prospects or financial condition or
income of the Company, taken as a whole, except as set forth in the Registration
Statement and Prospectus; and
(vi) No stop order shall have been issued under the
Act and no proceedings therefor shall have been initiated or, to the Company's
knowledge, threatened by the Commission.
(vii) Each of the representations and warranties of
the Company contained in this Agreement and in each certificate and document
contemplated under this Agreement to be delivered to you was, when originally
made and is at the time such certificate is dated, true and correct.
(h) Concurrently with the execution and delivery of this
Agreement and at each Closing Date, you shall have received a certificate of the
Company signed by the Chief Executive Officer of the Company and the principal
financial officer of the Company, dated as of the Closing Date, to the effect
that the conditions set forth in subparagraph (g) above have been satisfied and
that, as of the Closing Date, the representations and warranties of the Company
set forth in Paragraph 2 herein and the statements in the Registration Statement
and Prospectus were and are true and correct. Any certificate signed by any
officer of the Company and delivered to you or for counsel for the Underwriter
shall be deemed a representation and warranty by the Company to the Underwriter
as to the statements made therein.
(i) At the time this Agreement is executed, and at each
Closing Date, you shall have received a "cold comfort" letter, addressed to the
Underwriter and in form and substance satisfactory in all respects to you and
counsel for the Underwriter, from Stonefield Xxxxxxxxx, Inc., dated as of the
date of this Agreement and as of each Closing Date:
(i) to the effect that they are independent certified
public accountants with respect to the Company within the meaning of the Act and
the Exchange Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and the Rules
and Regulations thereunder;
(iii) and stating that, on the basis of a limited
review which included a reading of the latest available unaudited interim
financial statements of the Company, a reading of the latest available minutes
of the stockholders, and Board of Directors and the various committees of the
Board of Directors of the Company, consultations with officers and other
employees of the Company responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
which would lead them to believe that (A) the unaudited financial statements and
supporting schedules of the Company, as applicable, included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the Rules and
Regulations or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements and supporting schedules of the Company,
included in the Registration Statements, (B) at a specified date not more than
five days prior to the later of the date of this Agreement on the Effective Date
of the Registration Statement, there has been any change in the capital stock or
long-term debt of the Company or any decrease in the stockholders' equity or net
current assets or net assets of the Company, as compared with amounts, shown in
the December 31, 1997 balance sheet included in the Registration Statement other
than as set forth in or contemplated by the Registration Statement, or, if there
was any change or decrease, setting forth the amount of such change or decrease,
and (C) during the period from December 31, 1997 to a specified date not more
than five days prior to the later of the date of this Agreement or the Effective
Date of the Registration Statement, there was any decrease in net revenues, net
earnings or net earnings per common share of the Company, as compared with the
corresponding period beginning December 31, 1997, other than
20
22
as set forth in or contemplated by the Registration Statement, or, if there was
any such decrease, setting forth the amount of such decrease;
(iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements
and/or 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 need not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement;
(v) statements as to such other matters incident to
the transaction contemplated hereby as you may reasonably request; and
(vi) reaffirming that statements made in such letter
furnished pursuant to the foregoing clauses (i) through (v), except that the
specified date referred to shall be a date not more than five days prior to the
Closing Date and, if the Company has elected to rely on Rule 430A of the Rules
and Regulations, to the further extent that they have carried out procedures as
specified above, with respect to certain amounts, percentages and financial
information as specified by you and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records so specified above.
(j) All proceedings taken in connection with the
authorization, issuance or sale of the Common Stock, Warrants, Warrant Shares,
the Underwriter's Warrants and the Underwriter's Warrant Shares as herein
contemplated shall be satisfactory in form and substance to you and to counsel
to the Underwriter, and the Underwriter shall have received from such counsel an
opinion, dated as each Closing Date with respect to such of these proceedings as
you may reasonably require.
(k) The Company shall have furnished to you such certificates,
additional to those specifically mentioned herein, as you may have reasonably
requested in a timely manner as to the accuracy and completeness, at each
Closing Date, of any statement in the Registration Statement or the Prospectus,
as to the accuracy, at each Closing Date, of the representations and warranties
of the Company herein and in each certificate and document contemplated under
this Agreement to be delivered to you, as to the performance by the Company of
its obligations hereunder and under each such certificate and document or as to
the fulfillment of the conditions concurrent and precedent to your obligations
hereunder.
(l) On or before the Closing Date, the Company shall cause to
be provided, and the Underwriter shall have received from each officer, director
and shareholder of the Company, "lock-up" agreements from each such person
restricting any sales, transfers, pledges or other hypothecations of such
person's shares of any class of equity security of the Company for a period of
twelve (12) months from the Closing Date.
(m) The obligation of the Underwriter to sell any Securities
hereunder is subject to the accuracy of the representations and warranties of
the Company contained herein on and as of each Closing Date and to the
satisfaction on and as of each Closing Date of the conditions set forth herein.
(n) On each Closing Date there shall have been duly tendered
to you for the purchasers of the Securities the appropriate number of Shares of
Common Stock and Warrants constituting the Securities and the appropriate number
of Underwriter's Warrants.
(o) 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 Securities and no proceedings for the taking of such action shall
have been instituted or shall be pending
21
23
or, to the knowledge of the Representative, the Company shall be contemplated by
the Commission or the NASD. The Company and the Underwriter represent that at
the date hereof each has no knowledge that any such action is in fact
contemplated against any of them by the Commission or the NASD.
(p) Prior to the Effective Date, the Company will make all
filings required, including registration under the Exchange Act, to obtain, and
shall thereafter have obtained and shall use its best efforts to maintain, the
quotation of the Common Stock and Warrants on the OTC Bulletin Board.
(q) If any of the conditions herein provided for in this
paragraph shall not have been fulfilled, or all "lock-up" letters restricting
sales, pledges, transfers or hypothications of any kind by officers, directors
or all shareholders of the Company for twelve (12) months after the Closing Date
have not been received, 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, each Closing Date by the Underwriter notifying the Company of
such cancellation in writing or by telegram at or prior to the applicable
Closing Date. Any such cancellation shall be without liability of the
Underwriter to the Company.
11. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless the Underwriter and each person, if any,
who controls the Underwriter ("controlling person") within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act, against any and all
losses, liabilities, claims, damages, actions and expenses or liability, joint
or several, whatsoever (including but not limited to any and all expense
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), joint or
several, to which it or such controlling persons may become subject under the
Act, the Exchange Act or under any other statute or at common law or otherwise
or under the laws of foreign countries, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any Preliminary Prospectus or the Prospectus (as from
time to time amended and supplemented); in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
the Warrant Shares of the Company issued or issuable upon exercise of the
Warrants, or Underwriter's Warrant Shares upon exercise of the Underwriter's
Warrants; or in any application or other document or written communication (in
this Paragraph 10 collectively called "application") executed by the Company or
based upon written information furnished by the Company filed in any
jurisdiction in order to qualify the Common Stock, Warrants, Warrant Shares,
Underwriter's Warrants and Underwriter's Warrant Shares (including the Shares
issuable upon exercise of the Warrants underlying the Underwriter's Warrants)
under the securities laws thereof or filed with the Commission or any securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless such statement or omission was made in
reliance upon or in conformity with written information furnished to the Company
with respect to the Underwriter by or on behalf of the Underwriter expressly for
use in any Preliminary Prospectus, the Registration Statement or Prospectus, or
any amendment or supplement thereof, or in application, as the case may be.
Notwithstanding the foregoing, the Company shall have no liability under this
Paragraph 11(a) if any such untrue statement or omission made in a Preliminary
Prospectus, is cured in the Prospectus and the Underwriter failed to deliver to
the person or persons alleging the liability upon which indemnification is being
sought, at or prior to the written confirmation of such sale, a copy of the
Prospectus. This indemnity will be in addition to any liability which the
Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the
Company and each of the officers and directors of the Company who have signed
the Registration Statement and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
the Underwriter in Paragraph 11(a), but only with respect to any untrue
statement or alleged untrue statement of any material fact contained in or any
omission or alleged omission to state a material fact required to be stated in
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or necessary to make the statements therein not
misleading or in any application made
22
24
solely in reliance upon, and in conformity with, written information furnished
to the Company by you specifically expressly for use in the preparation of such
Preliminary Prospectus, the Registration Statement or Prospectus directly
relating to the transactions effected by the Underwriter in connection with this
Offering. This indemnity agreement will be in addition to any liability which
the Underwriter may otherwise have. Notwithstanding the foregoing, the
Underwriter shall have no liability under this Paragraph 11(b) if any such
untrue statement or omission made in a Preliminary Prospectus is cured in the
Prospectus, and the Prospectus is delivered to the person or persons alleging
the liability upon which indemnification is being sought.
(c) If any action is brought against any indemnified party
(the "Indemnitee") in respect of which indemnity may be sought against another
party pursuant to the foregoing (the "Indemnitor"), the Indemnitor shall assume
the defense of the action, including the employment and fees of counsel
(reasonably satisfactory to the Indemnitee) and payment of expenses. Any
Indemnitee shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
Indemnitee unless the employment of such counsel shall have been authorized in
writing by the Indemnitor in connection with the defense of such action. If the
Indemnitor shall have employed counsel to have charge of the defense or shall
previously have assumed the defense of any such action or claim, the Indemnitor
shall not thereafter be liable to any Indemnitee in investigating, preparing or
defending any such action or claim. Each Indemnitee shall promptly notify the
Indemnitor of the commencement of any litigation or proceedings against the
Indemnitee in connection with the issue and sale of the Common Stock, Warrants,
Warrants Shares, Underwriter's Securities or in connection with the Registration
Statement or Prospectus.
(d) In order to provide for just and equitable contribution
under the Act in any case in which: (i) the Underwriter makes a claim for
indemnification pursuant to Paragraph 11 hereof, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the time to appeal has expired or the last right of appeal has been denied)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Paragraph 11 provides for indemnification of such case; or (ii)
contribution under the Act may be required on the part of the Underwriter in
circumstances for which indemnification is provided under this Paragraph 11,
then, and in each such case, the Company and the Underwriter shall contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after any contribution from others) in such proportion so that the
Underwriter is responsible for the portion represented by dividing the total
compensation received by the Underwriter herein by the total purchase price of
all Securities sold in the public offering and the Company is responsible for
the remaining portion; provided, that in any such case, no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11 (f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The foregoing contribution agreement shall in no way affect the
contribution liabilities of any persons having liability under Section 11 of the
Act other than the Company and the Underwriter. As used in this Paragraph 11,
the term "Underwriter" includes any officer, director, or other person who
controls the Underwriter within the meaning of Section 15 of the Act, and the
word "Company" includes any of officer, director or person who controls the
Company within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then the
Underwriter and each person who controls the Underwriter shall be entitled to
contribution from the Company to the full extent permitted by law. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement.
(e) Within fifteen (15) days after receipt by any party to
this Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is made against another party (the "contributing party"), notify
the contributing party of the commencement thereof, but the omission so to
notify the contributing party will not relieve it from any liability it may have
to any other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against any
party, and such party notifies a contributing party or his or its representative
of the commencement thereof within the aforesaid fifteen (15) days, the
contributing
23
25
party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified. Any such contributing party shall
not be liable to any party seeking contribution on account of any settlement of
any claim, action or proceeding effected by such party seeking contribution
without the written consent of such contributing party. The indemnification
provisions contained in this Paragraph 11 are in addition to any other rights or
remedies which either party hereto may have with respect to the other or
hereunder.
12. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnity and contribution agreements by the Underwriter
and the Company contained in Paragraph 11 hereof, and the covenants,
representations and warranties of the Company and the Underwriter set forth in
this Agreement, shall remain operative and in full force and effect regardless
of (i) any investigation made by the Underwriter or on its behalf or by or on
behalf of any person who controls the Underwriter, or by the Company or any
controlling person of the Company or any director or any of officer of the
Company, (ii) acceptance of any of the Securities and payment therefor, or (iii)
any termination of this Agreement, and shall survive the delivery of the
Securities and any successor of the Underwriter or the Company, or of any person
who controls you or the Company or any other indemnified party, as the case may
be, shall be entitled to the benefit of such respective indemnity and
contribution agreements. The respective indemnity and contribution agreements by
the Underwriter and the Company contained in this Paragraph 12 shall be in
addition to any liability which the Underwriter and the Company may otherwise
have.
13. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective on the date of
execution by the parties hereto.
(b) This Agreement may be terminated by the Underwriter by
notifying the Company at any time on or before the Closing Date, if any domestic
or international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, securities markets; or
if trading on the New York Stock Exchange, the American Stock Exchange, or in
the over-the-counter market shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required on the over-the-counter market by the NASD
or NASDAQ or by order of the Commission or any other governmental authority
having jurisdiction; or if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or if the Company shall have
sustained a loss material or substantial to the Company taken as a whole by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in your opinion, make it inadvisable to proceed with the delivery of the
Securities; or if there shall have been a material adverse change in the
conditions of the securities market in general, as in your reasonable judgment
would make it inadvisable to proceed with the offering, sale and delivery of the
Securities; or if there shall have been a material adverse change in the
financial or securities markets, particularly in the over-the-counter market, in
the United States having occurred since the date of this Agreement.
(c) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Paragraph 12, the
Company shall be notified promptly by you by telephone or facsimile, confirmed
by letter.
(d) If this Agreement shall not become effective by reason of
an election of the Underwriter pursuant to this Paragraph 13 or if this
Agreement shall not be carried out within the time specified herein by reason of
any failure on the part of the Company to perform any undertaking, or to satisfy
any condition of this Agreement by it to be performed or satisfied, the sole
liability of the Company to the Underwriter, in addition to the obligations
assumed by the Company pursuant to Paragraph 8 herein, will be to reimburse the
Underwriter for the following: (i) Blue Sky counsel fees and expenses to the
extent set forth in Paragraph 9(a)(iv); (ii) Blue Sky filing fees; and (iii)
such reasonable out-of-pocket expenses of the Underwriter (including the fees
and disbursements of their counsel), to the
24
26
extent set forth in Paragraph 9(c), in connection with this Agreement and the
proposed offering of the Securities, less such amounts already paid.
Notwithstanding any contrary provision contained in this Agreement, any
election hereunder or any termination of this Agreement, and whether or not this
Agreement is otherwise carried out, the provisions of Paragraph 9 and 11 hereof
shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
14. Notices.
All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Underwriter, shall be mailed,
faxed with electronic confirmation receipt, or delivered personally with receipt
acknowledged or by a nationally recognized next day courier service with
delivery confirmed to the Underwriter at Platinum Equities, Inc., 00 Xxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx Xxxxx, with a copy
thereof to Xxxxxxxx Xxxxxxx, Esq., Gusrae, Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, and, if sent to the Company, shall be mailed, faxed with
electronic confirmation receipt, or delivered personally with receipt
acknowledged or by a nationally recognized next day courier service with
delivery confirmed to the Company at 00000 Xxxxxx Xxxxxx, Xxxxx, Xxxxxxxxxx
00000, Attention: Xxxxx Xxxxxxxx, President, with a copy thereof to Xxxxxxx &
Xxxx, Xxx Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, Attention:
Xxxxxxxx X. Xxxxxxx, Esq.
15. Parties.
This Agreement shall inure solely to the benefit of and shall be
binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Paragraph 11 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
16. Construction.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York and shall supersede any
agreement or understanding, oral or in writing, express or implied, between the
Company and you relating to the sale of any of the Securities.
17. Jurisdiction and Venue.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York with respect to contracts made and to be fully
performed therein, without regard to the conflicts of laws principles thereof.
The parties hereto hereby agree that any suit or proceeding arising under this
Agreement, or in connection with the consummation of the transactions
contemplated hereby, shall be brought solely in a federal or state court located
in the City, County and State of New York, or in any court of competent
jurisdiction selected by the Underwriter. By its execution hereof, the Company
hereby consents and irrevocably submits to the in personam jurisdiction of the
federal and state courts located in the City, County and State of New York (or
any such other court of competent jurisdiction selected by the Underwriter) and
agrees that any process in any suit or proceeding commenced in such courts by
this Agreement may be served upon it personally or by certified registered mail,
return receipt requested, or by Federal Express or other courier service, with
the same force and effect as if personally served upon it in New York City (or
in the city or county in which such other court is located). The parties hereto
each waive any claim that any such jurisdiction is not a convenient forum for
any such suit or proceeding and any defense of lack of in personam jurisdiction
with respect thereto.
25
27
18. Counterparts.
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
LUMINEX LIGHTING, INC.
By:__________________________
Xxxxx Xxxxxxxx, President
Accepted as of the date first above written:
PLATINUM EQUITIES, INC.
By:___________________________
26
