Nolbo, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx, XX 00000
UNDERWRITING AGREEMENT
----------------------
First Level Capital, Inc.
0000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000 _________, 1999
Gentlemen:
The undersigned, Nolbo, Inc., a Delaware corporation (hereinafter
called the "Company"), proposes to issue and sell an aggregate of up to 300,000
shares of Common Stock (the "Shares") at a public offering price of $6.00 per
Share. All of the securities which are the subject of this Agreement are more
fully described in the Prospectus of the Company described below.
The purpose of this agreement (the "Agreement") is to confirm the
arrangements with both you as "Underwriter" and any Co-Underwriter chosen by you
who may later join in this Agreement (collectively called the "Underwriters"),
with respect to the sale of 300,000 Shares by the Underwriter as exclusive agent
for the Company on a "best efforts, all-or-none" basis as to 200,000 Shares and
on a "best efforts" basis as to the remaining 100,000 Shares.
SECTION 1. Description of Securities. The Company's authorized and
outstanding capitalization when the public offering of securities contemplated
hereby is permitted to commence, under the Securities Act of 1933, as amended
(the "Act"), and at the Closing Date (hereinafter defined) will be as set forth
in the Prospectus (hereinafter defined).
SECTION 2. Representations and Warranties of the Company. The Company
hereby represents and warrants to, and agrees with, the Underwriter as follows:
(a) A Registration Statement on Form SB-2 (No. 333-66333) and
Amendments thereto, with respect to, among other things, the Shares and a form
of Prospectus relating thereto, copies of which have been previously delivered
to you, have been prepared by the Company in conformity with the Securities Act
of 1933, as amended (hereinafter called the "Act"), and the rules and
regulations (hereinafter called the "Rules and Regulations") of the Securities
and Exchange Commission (hereinafter called the "Commission") thereunder, and
were filed with the Commission under the Act. The Company, subject to the
provisions of Section 6(a) hereof, may file one or more Post Effective
Amendments to such Registration Statement and Prospectus. The Underwriter will
receive copies of each such amendment.
The date on which the offering of securities contemplated by this
Agreement is authorized to commence pursuant to the Act, is herein called the
"Effective Date". The Registration Statement and Prospectus, as finally amended
and revised immediately prior to the Effective
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Date, are herein called respectively the "Registration Statement" and the
"Prospectus". If, however, a prospectus is filed by the Company pursuant to Rule
424(b) or Rule 424(c) of the Rules and Regulations which differs from the
Prospectus, the term "Prospectus" shall also include the prospectus filed
pursuant to such Rule. The times and dates of delivery and payment hereunder are
herein called the "Closing(s) or Closing Dates."
(b) On the Effective Date, the Registration Statement and the
Prospectus, and on each Closing Date the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission an amendment or
supplement thereto), will comply with the provisions of the Act, and the Rules
and Regulations, and will contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations and will not
contain an untrue statement of a material fact and will not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, provided, however, that none of the representations and
warranties contained in this subsection (b) shall extend to the Underwriters in
respect of any statements in or omissions from the Registration Statement and/or
the Prospectus, based upon information furnished in writing to the Company by or
on behalf of the Underwriters specifically for use in connection with the
preparation thereof.
(c) The Company has been duly incorporated and is now and at
each Closing Date will be validly existing as a corporation in good standing
under the laws of Delaware, having power and authority (corporate and other) to
own its properties and conduct its business as described in the Prospectus. The
Company is now and at each Closing Date will be duly qualified to do business as
a foreign corporation in good standing in all of the jurisdictions in which it
owns or leases property or in which the conduct of its business requires such
qualification and where the failure to so qualify would have a material adverse
effect on the business and operation of the Company. The Company has no
subsidiaries, except as are set forth in the Prospectus.
(d) The financial statements of the Company included in the
Registration Statement and Prospectus fairly present the financial position,
results of operations and other information purported to be shown therein, of
the Company at the respective dates and for the respective periods to which they
apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved, and are in accordance with the books and records of the
Company.
(e) Aidman, Xxxxx & Company, who has certified the financial
statements which were included as a part of the Registration Statement and the
Prospectus is, with respect to the Company, an independent public accountant as
required under the Act and the Rules and Regulations.
(f) Subsequent to the respective dates as of which information
is given in the Prospectus and prior to each Closing Date, and except as may
otherwise be stated in or contemplated by the Registration Statement and the
Prospectus (i) the Company has not incurred, nor will it incur, any material
liabilities or obligations, direct or contingent, nor has it, nor will it have
entered into any material transactions not in the ordinary course of business
and (ii) there
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has not been, and will not have been, any material adverse change in the
condition (financial or otherwise) of the Company whether or not arising from
transactions in the ordinary course of business.
(g) Except as described in the Prospectus, the real and
personal properties of the Company as shown in the Prospectus, are either (i)
owned by the Company by good marketable title in fee simple, free and clear of
all liens, encumbrances and equities of record, or otherwise, except those which
do not materially adversely affect the use or value of such assets and except
the lien of current taxes not now due, or (ii) are held by the Company by valid
leases, none of which is in default. Except as described in the Prospectus, the
Company in all material respects has full right to maintain and operate its
business and properties as the same are now operated or proposed to be operated
and is complying with all laws, ordinances and regulations applicable thereto.
(h) The Company has no material contingent obligations, nor
are its properties or business subject to any material risks, which may be
reasonably anticipated, which are not disclosed in the Prospectus.
(i) Except as described in the Prospectus, there are no
actions, suits or proceedings at law or in equity pending or, to the Company's
knowledge, threatened against the Company and there are no proceedings pending,
or, to the knowledge of the Company, threatened, against the Company before or
by any Federal or State Commission, regulatory body, or administrative agency or
other governmental body, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business, franchise, licenses, permits,
operations or financial condition or income of the Company.
(j) The outstanding common stock has been duly and validly
issued and is fully-paid and non-assessable and shall conform to all statements
with regard thereto contained in the Prospectus. The Shares have been duly and
validly authorized by proper corporate authority; and the Shares when issued and
paid for in accordance with the terms hereof will be duly and validly issued,
fully-paid and non-assessable, and shall not be subject to any pre-emptive
rights of any stockholder of the Company.
(k) The Underwriter's Warrants as defined herein to be issued
to the Underwriter hereunder will be, when issued, duly and validly authorized
and executed by the Company and will constitute valid and binding obligations of
the Company, legally enforceable in accordance with their terms, and the Company
will have duly authorized, reserved and set aside the shares of its Common Stock
issuable upon exercise, and such stock, when issued and paid for upon exercise
of the Underwriter's Warrants in accordance with the provisions thereof, will be
duly and validly authorized and issued, fully-paid and non-assessable.
(l) The certificates required to be furnished to the
Underwriter pursuant to the provisions of Section 11 hereof will be true and
correct.
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(m) The execution and delivery by the Company of this
Underwriting Agreement has been duly authorized by all necessary corporate
action and this Underwriting Agreement is a valid, binding, and legally
enforceable obligation of the Company.
(n) The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement will not conflict with, or constitute a default under
any material indenture, mortgage, deed of trust, or other agreement or
instrument to which the Company is now a party or the Certificate of
Incorporation and any amendments thereto, or by-laws of the Company, or any law,
order, rule or regulation, writ, injunction or decree of any government,
governmental instrumentality, or court, domestic or foreign, having jurisdiction
over the Company.
(o) The Company will apply the proceeds from the sale of the
Shares to the purposes set forth in the Prospectus.
(p) All of the aforesaid representations, agreements, and
warranties shall survive delivery of and payment for all or any part of the
securities covered by this Agreement.
SECTION 3. Issuance, Sale and Delivery of the Shares and the
Underwriter's Warrants.
(a) The Company hereby appoints the Underwriter as its
exclusive agent from the date of this Agreement until the close of business on
___________, 1999, to sell the Shares, and the Underwriter, on the basis of the
representations and warranties herein contained but subject to the terms and
conditions herein set forth, accepts such appointment and agrees to use its best
efforts to find purchasers for the Shares. The selling period, by mutual
agreement, may be extended until the close of business on ______, 1999 (the
selling period, as it may be extended is referred to as the "Offering Period").
An additional period for collection purposes only beyond the aforesaid Offering
Period shall be permitted for a period not to exceed ten (10) business days. In
the event the last day of the offering period occurs on a Saturday, Sunday or
holiday, then the offering period will remain open until the next business day.
The price at which the Underwriter shall sell the Shares to the public, as agent
for the Company, shall be $6.00 per Share and subject to the sale of at least
200,000 shares, the escrow agent on behalf of the Company shall pay the
Underwriter a selling commission equal to ten (10%) percent of the public
offering price for each Share sold. Neither you nor any person acting on your
behalf, including any co-Underwriter or Selected Dealer shall have any authority
to give any information or make any representations in connection with any offer
or sale of the Shares other than as contained in the Prospectus or as is
otherwise expressly authorized in writing by the Company.
(b) It is mutually agreed that the Company shall not issue and
sell any of the Shares to any of the purchasers found by the Underwriters unless
and until the escrow agent on behalf of the purchasers of Shares makes payment
to the Company for at least 200,000 Shares within the period of time specified
above, and no commission or expense allowance shall be payable by the escrow
agent on behalf of the Company hereunder, unless and until such payment shall
have been received by the Company.
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(c) The Underwriter shall deposit all funds received by it
from the sale of up to 300,000 Shares in an escrow account, at _____________by
12:00 noon of the next business day in compliance with NASD Notice to Members
84-7, dated January 30, 1984, and shall so instruct any co-underwriters or
selected dealers to do likewise. Such deposits shall continue to be made until
either (a) such funds are turned over to the Company for the Shares or (b) such
funds are returned directly to the persons who subscribe for the Shares without
interest thereon or deduction therefrom; all in accordance with the terms of an
appropriate escrow agreement to be entered into with such Trust Company.
The Underwriters shall instruct all subscribers to make checks
payable only to _____________ as escrow agent f/b/o Nolbo, Inc." and shall
instruct any co-underwriters or selected dealers to do likewise. In the event
that customer checks are made out to the order of the co-underwriters or
selected dealers, then the co-underwriters and selected dealers agree to
promptly forward their own checks or wire funds to said escrow account or to
endorse the check to the order of the escrow account. It is acknowledged that
only unaffiliated $100,000 net capital broker/dealers may endorse checks to the
order of the escrow account or forward their own checks or wired funds.
(d) On or before the fifth business day following the
Company's and the Underwriter's receipt of notification from the escrow agent
that it has received cash or cleared funds for 200,000 Shares during the
Offering Period, the initial closing, on the sale of such Shares shall occur at
the time and place agreed upon by the Company and the Underwriter ("Initial
Closing"), provided that the other conditions to Closing set forth in Section 6
hereof have been satisfied. The escrow agent's notification will be deemed
received by both the Company and the Underwriter on the date the Company
actually receives it, provided that the Company promptly notifies the
Underwriter on such date by telecopy, telegram or telex of such receipt. At the
Initial Closing, the Company will deliver to the Underwriter the Certificates
for the Shares (in such denominations and in such names as the Underwriter shall
request upon at least 48 hours prior written notice) against payment to the
Company by the escrow agent, on behalf of the purchasers of such Shares (by
certified or bank cashier's check, payable to the order of the Company, in New
York Clearing House Funds), of the public offering price of such Shares less the
commissions and expense allowance payable to the Underwriter as to said Shares
as provided in subsection 3(e) below.
Following the Initial Closing, the Company and the Underwriter
shall mutually agree upon the time and place for additional Closings on Shares
sold during the balance of the Offering Period and shall instruct the escrow
agent, in writing signed by both the Company and the Underwriter, to make
payment for any Shares as to which a Closing shall occur to the Company less the
commissions and expense allowance payable to the Underwriter for such Shares (as
provided in Subsection 3(f) below) against delivery to the Underwriter by the
Company of Certificates for the Shares sold at such Closing.
The Certificates so delivered for the Shares shall be
registered with the transfer agent in the names of the purchasers thereof for
the number of Shares purchased by each, as requested by the Underwriter in the
notices.
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(e) At the Initial Closing, the escrow agent shall deduct from
the Company's proceeds for the Shares sold at such Closing, the Underwriter's
commission equal to ten (10%) percent of the public offering price, an expense
allowance equal to three (3%) percent of the public offering price less the sum
of $15,000 and its financial consulting fee equal to two (2%) percent of the
public offering price of the shares sold at such Closing. The escrow agent shall
be permitted to deduct from the proceeds to the Company any expenses to be paid
by the Company under Sections 7(a) and (b).
(f) At any Closing after the Initial Closing, the escrow agent
shall deduct from the Company's proceeds, the Underwriter's commission equal to
ten (10%) percent of the public offering price of such Shares, its expense
allowance equal to three (3%) percent of the public offering price of such
Shares and its financial consulting fee equal to two (2%) percent of the public
offering price of the Shares, so that the net amount to be paid to the Company
by the escrow agent for the Shares sold at such Closing shall be equal to
eighty-five (85%) of the public offering price of such Shares.
(g) The Parties hereto represent that at each Closing, the
representations and warranties herein contained and the statements contained in
all certificates theretofore or simultaneously delivered by any party to another
pursuant to this Agreement, shall in all respects be true and correct.
(h) The Company will give irrevocable instructions to its
Transfer Agent (which it agrees to appoint) to deliver to the Underwriter (at
the Company's expense) for a period of five years from the first sale of the
Shares, daily advice sheets showing any transfers of Shares, and from time to
time during the aforesaid period a complete Stockholders' list will be furnished
by the Company when requested by the Underwriter.
(i) At each Closing, the Company will deliver to the
Underwriter, Warrants to purchase one Share for each ten Shares sold in the
offering (the "Underwriter's Warrants") for an aggregate purchase price of $30.
Each Warrant shall entitle the owner thereof to purchase one Share of Common
Stock of the Company at an exercise price equal to $9.90 per Share. Such
Warrants will be exercisable for five (5) years from the Effective Date of the
Registration Statement. From the Effective Date of the Registration Statement
and until one (1) year thereafter, such Warrants may be transferred only to
officers or partners of the Underwriter(s) and selling group members.
The Warrants shall contain customary clauses
protecting Warrant holders in the event the Company pays stock dividends,
effects stock splits, or effects a sale of assets, merger or consolidation.
SECTION 4. Offering of the Shares on Behalf of the Company. In offering
the Shares for sale the Underwriter shall offer it solely as agent for the
Company and such offer shall be made upon the terms and subject to the
conditions set forth in the Registration Statement and Prospectus. The
Underwriter shall commence making such offer as agent for the Company as soon
after the Effective Date as it may deem advisable, provided, however, that if
the Underwriter
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does not commence such offering within three business days after the Effective
Date it shall so advise the Company and the Commission.
The Underwriter shall have the right to engage the services of
Co-Underwriter(s) with regard to the offering contemplated hereby pursuant to
separate written agreement. Such separate agreement, executed copies of which
shall be delivered to the Company prior to the Closing Date, shall provide in
part that (i) First Level Capital, Inc. ("First Level") shall act as Managing
Underwriter hereunder, (ii) the rights of the Co-Underwriter(s) shall not exceed
the rights of the Managing Underwriter, (iii) the liabilities of the
Co-Underwriter(s) shall not be less than the liabilities of the Managing
Underwriter, (iv) the Managing Underwriter shall have the right to allot any
portion of the Underwriter's compensation to the Co-Underwriter(s) and (v) the
Managing Underwriter shall have the right to reject orders from such
Co-Underwriter(s), in whole or in part, for any of the Shares to be offered in
contemplation of this Agreement.
The Underwriter may engage registered dealers selected by it
("Selected Dealers") to solicit sales of Shares and such solicitations shall be
made pursuant to a Selected Dealer Agreement substantially in the form annexed
hereto and pursuant to which it may allow such concession (out of its
underwriting commission) as it may determine within the limits set forth in the
Registration Statement and Prospectus.
The Selected Dealer Agreement shall require the Selected
Dealer to agree to offer the Shares on the terms and conditions of offering set
forth in the Prospectus and in accordance with such covenants, commitments and
undertakings as are submitted by the Company and the Underwriter to the
Commission.
SECTION 5. Registration Statement and Prospectus. The Company will
furnish the Underwriter, without charge, two signed copies of the Registration
Statement and of each amendment thereto, including all exhibits thereto and such
amount of conformed copies of the Registration Statement and Amendments as may
be reasonably requested by the Underwriter for distribution to each of the
Co-Underwriters and Selected Dealers.
The Company will furnish, at its expense, as many
printed copies of a Preliminary Prospectus and of the Prospectus as the
Underwriter may request for the purposes contemplated by this Agreement. If,
while the Prospectus is required to be delivered under the Act or the Rules and
Regulations, any event known to the Company relating to or affecting the Company
shall occur which should be set forth in a supplement to or an amendment of the
Prospectus in order to comply with the Act (or other applicable law) or with the
Rules and Regulations, the Company will forthwith prepare, furnish and deliver
to the Underwriter and to each of the other Underwriters and to others whose
names and addresses are designated by the Underwriter, in each case at the
Company's expense, a reasonable number of copies of such supplement or
supplements to or amendment or amendments of, the Prospectus.
The Company authorizes the Underwriter, Co-Underwriters and
the selected dealers, if any, in connection with the distribution of the Shares
and all dealers to whom any of the Shares may be sold by the Underwriter,
Co-Underwriters, or by any Selected Dealer, to use
7
the Prospectus, as from time to time amended or supplemented, in connection with
the offering and sale of the Shares and in accordance with the applicable
provisions of the Act and the applicable Rules and Regulations and applicable
State Securities Laws.
SECTION 6. Covenants of the Company. The Company covenants and agrees
with each Underwriter that:
(a) After the date hereof, the Company will not at any time,
whether before or after the Effective Date, file any amendment to the
Registration Statement or the Prospectus, or any supplement to the Prospectus,
of which the Underwriter shall not previously have been advised and furnished
with a copy, or to which the Underwriter or the Underwriter's counsel shall have
reasonably objected in writing on the ground that it is not in compliance with
the Act or the Rules and Regulations.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective (provided, however, the Company shall
not cause the Registration Statement to become effective without the written
consent of the Underwriter) and will advise the Underwriter, (i) when the
Registration Statement shall have become effective and when any amendment
thereto shall have become effective, and when any amendment of or supplement to
the Prospectus shall be filed with the Commission, (ii) when the Commission
shall make a request or suggestion for any amendment to the Registration
Statement or the Prospectus or for additional information and the nature and
substance thereof, and (iii) of the issuance by the Commission of an order
suspending the effectiveness of the Registration Statement or of the initiation
of any proceedings for that purpose, and will use its best efforts to prevent
the issuance of such an order, or if such an order shall be issued, to obtain
the withdrawal thereof at the earliest possible moment.
(c) The Company will prepare and file with the Commission,
promptly upon the request of the Underwriter, such amendments, or supplements to
the Registration Statement or Prospectus, in form and substance satisfactory to
counsel to the Company, as in the reasonable opinion of Xxxxx X. Xxxxx, Esq., as
counsel to the Underwriter, may be necessary or advisable in connection with the
offering or distribution of the Shares, and will diligently use its best efforts
to cause the same to become effective.
(d) The Company will, at its expense, when and as requested by
the Underwriter, supply all necessary documents, exhibits and information, and
execute all such applications, instruments and papers as may be required, in the
opinion of the Underwriter's counsel, to qualify the Shares or such part thereof
as the Underwriter may determine, for sale under the so-called "Blue Sky" Laws
of such states as the Underwriter shall designate, and to continue such
qualification in effect so long as required for the purposes of the distribution
of the Shares, provided, however, that the Company shall not be required to
qualify as a foreign corporation or dealer in securities or to file a consent to
service of process in any state in any action other than one arising out of the
offering or sale of the Shares.
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(e) The Company will, at its own expense, file and provide,
and continue to file and provide, such reports, financial statements and other
information as may be required by the Commission, or the proper public bodies of
the States in which the Shares may be qualified for sale, for so long as
required by applicable law, rule or regulation and will provide the Underwriter
with copies of all such registrations, filings and reports on a timely basis.
(f) During the period of five years from the Effective Date,
the Company will deliver to the Underwriter a copy of each annual report of the
Company, and will deliver to the Underwriter (i) within 60 days after the end of
each of the Company's first three quarter-yearly fiscal periods, a balance sheet
of the Company as at the end of such quarter-yearly period, together with a
statement of its income and a statement of changes in its cash flow for such
period (Form 10-Q or Form 10-QSB), all in reasonable detail, signed by its
principal financial or accounting officer, (ii) within 110 days after the end of
each fiscal year, a balance sheet of the Company as at the end of such fiscal
year, together with a statement of its income and statement of cash flow for
such fiscal year (Form 10-K or 10-KSB), such balance sheet and statement of cash
flow for such fiscal year to be in reasonable detail and to be accompanied by a
certificate or report of independent public accountants, (who may be the regular
accountants for the Company), (iii) as soon as available a copy of every other
report (financial or other) mailed to the stockholders, and (iv) as soon as
available a copy of every non-confidential report and financial statement
furnished to or filed with the Commission or with any securities exchange
pursuant to requirements by or agreement with such exchange or the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), or
any regulations of the Commission thereunder. If and for so long as the Company
has one or more active subsidiaries, the financial statements required by (i)
and (ii) above shall be furnished on a consolidated basis in respect of the
Company and all of the Company's subsidiaries. Separate financial statements
shall be furnished for each subsidiary, the accounts of which are not so
consolidated. The financial statements referred to in (ii) shall also be
furnished to all of the stockholders of the Company as soon as practicable after
the 110 days referred to therein.
(g) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than 15 months after the
Effective Date, an earnings statement of the Company (which need not be audited)
in reasonable detail, covering a period of at least twelve months beginning
after the Effective Date, which earnings statement shall satisfy the provisions
of Section 11(a) of the Act.
(h) On or before the Effective Date, the Company will apply
for listing in Standard & Poor's Corporation Records Manual. The Company agrees
to keep such listing current for a period of not less than five years from the
Closing Date.
(i) The Company shall appoint Continental Stock Transfer &
Trust Company as transfer agent for the Common Stock (the "Transfer Agent").
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(j) Subject to the sale of the minimum number of shares, the
Company will not sell or issue any shares of its common stock, except for the
issuance of shares pursuant to the exercise of opions, warrants or convertible
securities outstanding upon the completion of the offering, for a period of one
year from the completion of the offering without the prior written consent of
the Underwriter, which consent shall not be unreasonably withheld.
(k) For a period of three years following the closing of the
offering, the Underwriter shall have the right to nominate two persons to be
directors of the Company, and the Company shall use its best efforts to cause
such nominees to be elected to the board of directors. Such directors shall be
reimbursed for all reasonable out-of-pocket expenses incurred in attending each
meeting and shall also be entitled to attendance fees in an amount determined by
the board of directors.
SECTION 7. Expenses of the Company.
(a) The Company will pay its own costs and expenses incurred
in connection with the public offering contemplated hereby, including, without
limitation: (i) expenses incident to the issuance and delivery of the Shares,
including fees of any transfer or registration agent; (ii) Federal, State,
National Association of Securities Dealers, Inc. ("NASD") and other
qualification or registration fees regarding the Shares; (iii) costs of
preparing, printing and filing all copies of the Registration Statement and
related Prospectus (including preliminary and final copies thereof), all
subsequent amendments or supplements thereto, and all exhibits and other
instruments relating to the sale of the Shares, including the costs of
syndication material; (iv) costs of qualifying the Company's Shares for listing
on the OTC Electronic Bulletin Board; (v) costs of printing all copies of the
Underwriting Agreement, the Agreement Among Underwriters, the Selling Group
(Selected Dealers) Agreement, Underwriters' Questionnaire, Power of Attorney,
"Blue Sky" Memorandum, it being understood that in the event the Underwriter
acts as sole Underwriter, it will not print these documents other than the
Selling Group Agreement and Blue Sky Memorandum; (vi) costs of engraving and
supplying the certificates for the Shares and component parts thereof; and (vii)
fees and expenses of legal counsel, accountants and other experts of the
Company. In addition, the Company shall bear the costs of otherwise unreimbursed
postage, including mailing to customers of preliminary and final prospectuses
incurred by or on behalf of the Underwriters in preparation for, or in
connection with the offering and sale and distribution of the Shares on an
accountable basis.
(b) The Company will also pay all expenses relating to
qualifying or registering the securities which are the subject of this Agreement
under the securities or "Blue Sky" laws of such states and jurisdictions as
shall be designated by the Underwriter. Such qualification or registration shall
be performed by the Underwriter's counsel and its counsel fees relating thereto,
in the sum of $20,000 plus state filing fees and disbursements relating thereto,
but not limited to, long-distance telephone calls, photocopying, excess postage,
messengers, overnight mail and courier services which shall be paid by the
Company upon demand. The state filing fees are due
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upon the Company's receipt of "Blue Sky" papers for filing. The $20,000 fee is
due at the Initial Closing Date of the Offering. Disbursements are payable upon
receipt of invoice.
SECTION 8. Payment of Underwriter's Expenses.
(a) On the Closing Date and Additional Closing Date(s) (if
any) the Company will pay to First Level an expense allowance equal to three
(3%) percent of the total gross proceeds derived from the public offering
contemplated by this Agreement, less the amount of $15,000, for its expenses
including costs of otherwise unreimbursed advertising, traveling, postage,
telephone and telegraph expenses and other miscellaneous expenses incurred by or
on behalf of the Underwriter in preparation for, or in connection with the
offering and sale and distribution of the Shares; and First Level shall not be
obligated to account to the Company for such disbursements and expenses.
(b) At the Initial Closing, the Company will enter into an
agreement retaining First Level, as a consultant for a one-year period
commencing as of the Effective Date for a fee equal to 2% of the gross amount of
the moneys raised in this offering. This sum shall be payable in full, in
advance on each Closing Date.
SECTION 9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters, and each person who controls each of the Underwriters within
the meaning of Section 15 of the Act, from and against any and all losses,
claims, damages, expenses, or liabilities, joint or several, to which they or
any of them may become subject under the Act or any other statute or at common
law or otherwise, and to reimburse persons indemnified as above for any
reasonable legal or other expense (including the cost of any investigation and
preparation) incurred by them (as incurred), or any of them, in connection with
investigating, defending against or appearing as a third party witness in
connection with any claim or litigation, whether or not resulting in any
liability, but only insofar as such losses, claims, liabilities, expenses or
litigation arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented, if amended or supplemented), or in any
"Blue Sky" application, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading; provided, however, that
the indemnity agreement contained in this subsection (a) shall not apply to
amounts paid in settlement of any such claims or litigation if such settlement
is effected without the consent of the Company, nor shall it apply to the
Underwriters or any person controlling the Underwriters in respect of any such
losses, claims, damages, expenses, liabilities or litigation arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished in writing to the
Company by such Underwriter, or on its behalf, specifically for use
11
in connection with the preparation of the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto or any such blue
sky application.
(b) Each of the Underwriters severally agrees, in the same
manner and to the same extent as set forth in subsection (a) above, to indemnify
and hold harmless the Company, each of the directors and officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act, with respect to any
statement in or omission from the Registration Statement, or the Prospectus (as
amended or as supplemented, if amended or supplemented), or in any "Blue Sky"
application, if such statement or omission was made in reliance upon and in
conformity with written information furnished in writing to the Company by such
Underwriter, or on its behalf, specifically for use in connection with the
preparation of the Registration Statement or the Prospectus or any such
amendment thereof or supplement thereto, or any such application. An Underwriter
shall not be liable for amounts paid in settlement of any such claim or
litigation if such settlement was effected without its consent.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any claim asserted against it and of any action commenced
against it in respect of which indemnity may be sought hereunder. The omission
to so notify an indemnifying party shall relieve such party of its obligation to
indemnify pursuant to this Agreement, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, subject to the provisions
herein stated, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 9 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that the fees and expenses of such counsel shall
be at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party or
(ii) the defendants in any such action include both the indemnified and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be a conflict between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of such indemnified party or parties), it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the
12
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for the indemnified party which firm shall be designated in writing by
the indemnified party.
(d) The respective indemnity agreements between the
Underwriters and the Company contained in subsections (a) and (b) above, and the
representations and warranties of the Company set forth in Section 2 hereof or
elsewhere in this Agreement, shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of the Underwriters
or by or on behalf of any controlling person of the Underwriters or the Company
or any such officer or director or any controlling person of the Company, and
shall survive the delivery of the Shares. Any successor of the Company, or any
Underwriter, or of any controlling person of any Underwriter or the Company, as
the case may be, shall be entitled to the benefit of such respective indemnity
agreements.
(e) In order to provide for just and equitable contribution
under the Act in any case in which (i) any person entitled to indemnification
under this Section 9 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 9 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 9, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, claims, damages, expenses or liabilities to
which they may be subject (after any contribution from others) in such
proportions so that the Underwriters are responsible in the aggregate for the
proportion of such losses, claims, damages or labilities represented by the
percentage that the underwriting discounts and commissions appearing on the
cover page of the Prospectus bears to the public offering price appearing
thereon, and the Company is responsible for the remaining portion; provided,
that, in any such case, no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Within twenty days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "contributing party"), notify
the contributing party, in writing, of the commencement thereof, but the
omission so to notify the contributing party will not relieve it from any
liability which it may have to any other party other than for contribution
hereunder. In case any such action, suit or proceeding is brought against any
party, and such party so notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid twenty days, the
contributing party will be entitled to participate therein with the notifying
party and any other contributing party similarly notified. Any such contributing
party shall not be liable to any party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution
13
provisions contained in this Section 9 are in addition to any other rights or
remedies which either party hereto may have with respect to the other or
hereunder.
SECTION 10. Effectiveness of Agreement. This Agreement shall become
effective (i) at 10:00 A.M., New York Time, on the first full business day after
the Effective Date, or (ii) at the time of the initial public offering by the
Underwriter of the Shares, whichever shall first occur. The time of the initial
public offering by the Underwriter of the Shares for the purposes of this
Section 10, shall mean the time, after the Registration Statement becomes
effective, of the release by the Underwriter for publication of the first
newspaper advertisement which is subsequently published relating to the Shares,
or the time, after the Registration Statement becomes effective, when the Shares
are first released by the Underwriter for offering by the Underwriter or dealers
by letter or telegram, whichever shall first occur. The Underwriter agrees to
notify the Company immediately after it shall have taken any action, by release
or otherwise, whereby this Agreement shall have become effective. This Agreement
shall, nevertheless, become effective at such time earlier than the time
specified above, after the Effective Date, as the Underwriter may determine by
notice to the Company.
SECTION 11. Conditions of the Underwriter's Obligations. The
obligations of the Underwriter are subject to: the accuracy, as of the date
hereof and as of the Closing Dates; of all of the representations and warranties
of the Company contained in this Agreement; the Company's compliance with, or
performance of, all of its covenants, undertakings and agreements contained in
this Agreement that are required to be complied with or performed on or prior to
each of the Closing Dates and to the following additional conditions:
(a) On or prior to the Initial Closing Date and each
Additional Closing Date, no order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been instituted or be pending or, to the knowledge of the Company,
shall be threatened by the Commission; any request for additional information on
the part of the Commission (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction of
the Commission; and neither the Registration Statement nor any amendment thereto
shall have been filed as which counsel for the Underwriters shall have
reasonably objected, in writing.
(b) The Underwriter shall not have disclosed in writing to the
Company that the Registration Statement or Prospectus or any amendment or
supplement thereto contains an untrue statement of a fact which, in the opinion
of counsel to the Underwriters, is material, or omits to state a fact which, in
the opinion of such counsel, is material and is required to be stated therein,
or is necessary to make the statements therein not misleading.
(c) Between the date hereof, the Initial Closing Date and any
Additional Closing Date(s), the Company shall not have sustained any loss on
account of fire, explosion, flood, accident, calamity or other cause, of such
character as materially adversely affects its business or property, whether or
not such loss is covered by insurance.
14
(d) Between the date hereof, the Initial Closing Date and any
Additional Closing Date(s), there shall be no litigation instituted or
threatened against the Company, and there shall be no proceeding instituted or
threatened against the Company before or by any federal or state commission,
regulatory body or administrative agency or other governmental body, domestic or
foreign, wherein an unfavorable ruling, decision or finding would materially
adversely affect the business, licenses, permits, operations or financial
condition or income of the Company.
(e) Except as contemplated herein or as set forth in the
Registration Statement and Prospectus, during the period subsequent to the
Effective Date and prior to the Initial Closing Date and each Additional Closing
Date(s), (A) the Company shall have conducted its business in the usual and
ordinary manner as the same was being conducted on the date of the filing of the
initial Registration Statement and (B) except in the ordinary course of its
business, the Company shall not have incurred any material liabilities or
obligations (direct or contingent), or disposed of any of its assets, or entered
into any material transaction, and (C) the Company shall not have suffered or
experienced any material adverse change in its business, affairs or in its
condition, financial or otherwise. On each Closing Date, the capital stock and
surplus accounts of the Company shall be substantially as great as at its last
financial report without considering the proceeds from the sale of the Shares
except to the extent that any decrease is disclosed in or contemplated by the
Prospectus.
(f) The authorization of the Shares, the Registration
Statement, the Prospectus and all corporate proceedings and other legal matters
incident thereto and to this Agreement, shall be reasonably satisfactory in all
respects to counsel to the Underwriters.
(g) The Company shall have furnished to the Underwriter the
opinions, dated the Closing Date, and Additional Closing Date(s), addressed to
you, from Xxxxxx Xxxxx P.C., counsel for the Company, that:
(i) The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus; it has authorized and outstanding capital as set forth
in the Registration Statement and Prospectus; and the Company is duly licensed
or qualified as a foreign corporation in all jurisdictions in which the
ownership or leasing of its properties requires such qualification or license,
except where failure to be so qualified or licensed would have no material
adverse effect on the business of the Company.
(ii) All of the outstanding shares of Common Stock are
duly authorized, validly issued, fully paid, and non-assessable, and do not have
any preemptive rights. The Company will have duly authorized, reserved and set
aside shares of Common Stock issuable upon conversion of certain outstanding
notes and, when issued in accordance with the terms contained therein against
payment therefor, will be duly and validly issued, fully paid and
non-assessable.
15
(iii) The Shares and the Underwriter's Warrants conform to
descriptions thereof under "Description of Securities" contained in the
Prospectus.
(iv) The purchasers of the shares will receive good and
marketable title to the Shares purchased by them from the Company in accordance
with the terms and provisions of this Agreement, to the best of such counsel's
knowledge, free and clear of all liens, encumbrances, claims, security
interests, restrictions, stockholders' agreements and voting trusts whatsoever.
(v) Except as set forth in the Prospectus, there are no
outstanding options, warrants, or other rights, providing for the issuance of,
and, to the best of the knowledge of such counsel, no commitments, plans or
arrangements to issue, any shares of any class of capital stock of the Company,
or any security convertible into, or exchangeable for, any shares of any class
of capital stock of the Company.
(vi) To the best of such counsel's knowledge, no consents,
approvals, authorizations or orders of agencies, officers or other regulatory
authorities are necessary for the valid authorization, issue or sale of the
Shares hereunder, except such as may be required under the Act or state
securities or Blue Sky Laws.
(vii) The Registration Statement has become effective
under the Act and, to the best of the knowledge of such counsel, no order
suspending the effectiveness of the Registration Statement is in effect and no
proceedings for that purpose have been instituted or are pending before or
threatened by, the Commission; the Registration Statement and Prospectus, and
each amendment thereof and supplement thereto, comply as to form in all material
respects with the applicable requirements of the Act and the Rules and
Regulations (except that no opinion need be expressed as to financial
statements, notes thereto, and financial data contained in the Registration
Statement or Prospectus); such counsel has participated in conferences with
officers and representatives of the Company and with its certified public
accountants in the preparation of the Registration Statement and the Prospectus.
At such conferences counsel has made inquiries of such officers, representatives
and accountants, and discussed the contents of the Registration Statement and
the Prospectus. Such counsel has not independently verified, and, accordingly,
does not assume any responsibility for, the accuracy, completeness or fairness
of the information contained in the Registration Statement or the Prospectus,
other than as set forth in paragraph (viii) below, insofar as such statements
relate to the contents of particular documents or laws therein described. On the
basis of the foregoing, nothing has come to the attention of such counsel to
cause such counsel to believe that the Registration Statement, the Prospectus or
any amendment or supplement thereto contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make statements
therein, in light of the circumstances under which they were made, not
misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other financial and statistical data and
schedules contained therein, as to which such counsel need express no opinion);
and such counsel is familiar with all contracts referred to in the Registration
Statement or in the Prospectus and such contracts are sufficiently summarized or
disclosed therein, or filed as exhibits thereto, as required, and such counsel
does
16
not know of any other contracts required to be summarized or disclosed or filed;
and such counsel does not know of any legal or governmental proceedings to which
the Company is a party, or in which property of the Company is the subject, of a
character required to be disclosed in the Registration Statement or the
Prospectus which are not so disclosed therein.
(viii) This Agreement has been duly authorized and
executed by the Company and is a valid and binding agreement of the Company
enforceable in accordance with its terms subject to bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors rights generally
and except that no opinion need be given with regard to the enforceability of
Section 9 hereof or the availability of equitable relief.
(ix) To the best knowledge of such counsel: (a) no default
exists, and no event has occurred which, with notice or lapse of time, or both,
would constitute a default in the due performance and observance of any material
term, covenant or condition by the Company, of any indenture, mortgage, deed of
trust, note or any other agreement or instrument to which the Company is a party
or by which it or its business or its properties may be bound or affected,
except where such default would not have a material adverse effect on the
business of the Company and except as disclosed in the Prospectus; (b) the
Company has full power and lawful authority to authorize, issue and sell the
Shares on the terms and conditions set forth herein and in the Registration
Statement and in the Prospectus; (c) no consent, approval, authorization or
other order of any regulatory authority is required for such authorization,
issue or sale, except as may be required under the Act or State securities laws,
clearance with the NASD and such other consent, approval, authorization or order
as has been obtained and is in full force and effect; and (d) the execution and
delivery of this Agreement, the consummation of the transactions herein
contemplated, and compliance with the terms hereof will not conflict with, or
constitute a default under, any material indenture, mortgage, deed of trust,
note or any other agreement or instrument to which the Company is now a party or
by which it or its business or its properties may be bound or affected, the
Certificate of Incorporation and any amendments thereto, the by-laws of the
Company, or any order, rule or regulation, writ, injunction or decree of any
government, governmental instrumentality, or court, domestic or foreign, having
jurisdiction over the Company or its business or properties.
(x) Except as disclosed in the Registration Statement and
Prospectus, to the best knowledge of such counsel, there are no material
actions, suits or proceedings at law or in equity of a material nature pending,
or to such counsel's knowledge, threatened against the Company which are not
adequately covered by insurance and there are no proceedings pending or, to the
knowledge of such counsel, threatened against the Company before or by any
Federal or State Commission, regulatory body, or administrative agency or other
governmental body, wherein an unfavorable ruling, decision or finding would
materially and adversely affect the business, operation or condition (financial
or otherwise) of the Company, which are not disclosed in the Prospectus.
(xi) The Underwriter's Warrants to be issued to the
Underwriter hereunder will be, when issued, duly and validly authorized and
executed by the Company and will constitute
17
valid and binding obligations of the Company, legally enforceable in accordance
with their terms except as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws pertaining to creditors
rights generally and the Company will have duly authorized, reserved and set
aside the shares of its Common Stock issuable upon exercise of the Underwriter's
Warrants and such stock, when issued and paid for upon exercise of the
Underwriters' Warrants in accordance with the provisions thereof, will be duly
and validly issued, fully-paid and non-assessable.
Such opinion shall also cover such other matters incident to
the transactions contemplated by this Agreement as the Underwriter shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact.
(h) The Company shall have furnished to the Underwriter
certificates of the President or Chairman of the Board and the
Vice-President-Finance and Administration of the Company, dated as of the
Closing Date, and Additional Closing Date(s), to the effect that:
(i) Each of the representations and warranties of the
Company contained in Section 2 hereof are true and correct in all material
respects at and as of such Closing Date, and the Company has performed or
complied with all of its agreements, covenants and undertakings contained in
this Agreement and has performed or satisfied all the conditions contained in
this Agreement on its part to be performed or satisfied at such Closing Date;
(ii) The Registration Statement has become effective
and no order suspending the effectiveness of the Registration Statement has been
issued, and, to the best of the knowledge of the respective signers, no
proceeding for that purpose has been initiated or is threatened by the
Commission;
(iii) The respective signers have each carefully
examined the Registration Statement and the Prospectus and any amendments and
supplements thereto, and to the best of their knowledge the Registration
Statement and the Prospectus and any amendments and supplements thereto and all
statements contained therein are true and correct in all material respects, and
neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and, since the effective date of the
Registration Statement, there has occurred no event required to be set forth in
an amended or supplemented Prospectus which has not been so set forth except
changes which the Registration Statement and Prospectus indicate might occur.
(iv) Except as set forth or contemplated in the
Registration Statement and Prospectus, since the respective dates as of which,
or periods for which, information is given in the Registration Statement and
Prospectus and prior to the date of such certificate (A) there has not been any
material adverse change, financial or otherwise, in the business, business
prospects, earnings, general affairs or condition (financial or otherwise), of
the Company (in each case
18
whether or not arising in the ordinary course of business), and (B) the Company
has not incurred any liabilities, direct or contingent, or entered into any
transactions, otherwise than in the ordinary course of business other than as
referred to in the Registration Statement or Prospectus and except changes which
the Registration Statement and Prospectus indicate might occur.
(i) The Company shall have furnished to the Underwriter on
each Closing Date, such other certificates, additional to those specifically
mentioned herein, as the Underwriter may have reasonably requested, as to: the
accuracy and completeness of any statement in the Registration Statement or the
Prospectus, or in any amendment or supplement thereto; the representations and
warranties of the Company herein; the performance by the Company of its
obligations hereunder; or the fulfillment of the conditions concurrent and
precedent to the obligations of the Underwriters hereunder, which are required
to be performed or fulfilled on or prior to each Closing Date.
(j) At the time this Agreement is executed, and on the Initial
Closing Date you shall have received a letter from Aidman, Xxxxx & Company,
addressed to the Underwriter, and dated, respectively, as of the date of this
Agreement and as of the Initial Closing Date and Additional Closing Date(s) as
the case may be, in form and substance reasonably satisfactory to the
Underwriter, to the effect that:
(i) They are independent public accountants within
the meaning of the Act and the applicable published Rules and Regulations of the
Commission;
(ii) In their opinion, the financial statements and
related schedules of the Company included in the Registration Statement and
Prospectus and covered by their reports comply as to form in all material
respects with the applicable accounting requirements of the Act and the
published Rules and Regulations of the Commission issued thereunder;
(iii) On the basis of limited procedures in
accordance with standards established by the American Institute of Certified
Public Accountants, including (1) a reading of the latest available financial
statements of the Company (a copy of which shall be attached to such letter),
(2) a reading of the latest available minutes of the meetings of the
stockholders and the Board of Directors of the Company as set forth in the
minute books of the Company, officials of the Company having advised you and
them that the minutes of all such meetings through that date were set forth
therein, (3) consultations with officials of the Company responsible for
financial and accounting matters of the Company, which procedures do not
constitute an examination in accordance with generally accepted accounting
standards, and would not necessarily reveal material adverse changes in the
financial position or results of operations or inconsistencies in the
application of generally accepted accounting principles, nothing has come to
their attention which in their judgment would lead them to believe that (a) the
unaudited financial statements and related schedules of the Company included in
the Registration Statement and Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act and the
published Rules and Regulations of the Commission issued thereunder, or were not
prepared in accordance with generally accepted accounting principles and
practices consistent in all material
19
respects with those followed in the preparation of the comparable financial
statements and schedules covered by their reports included in the Registration
Statement and Prospectus, or would require any material adjustments for a fair
presentation of the information purported to be shown thereby or (b) during the
period from the date of the Capitalization table included in the Prospectus to a
specified date not more than four business days prior to the date of such
letter, there has been any material change in the capital stock or debt of the
Company, or (c) during the period from the date of the latest balance sheet and
related statements of operations, changes in stockholders' equity and changes in
financial position included in the Prospectus and covered by their reports
contained therein to the date of the letter, there has been any material adverse
change in the financial condition, or results of operations, of the Company; and
(iv) In addition to the examination referred to in
their reports included in the Registration Statement and the Prospectus and the
limited procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are derived from the
general accounting records of the Company which appear in the Prospectus under
the captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Executive Compensation", "Certain Transactions",
"Selected Financial Data," "Dilution," and "Risk Factors," as well as such other
financial information as may be specified by the Underwriter, and that they have
compared such amounts, percentages and financial information with the accounting
records of the Company and have found them to be in agreement.
All the opinions, letters, certificates and evidence
mentioned above or elsewhere in this Agreement shall be deemed to be in
compliance with the provisions hereof only if they are in form and substance
reasonably satisfactory to counsel to the Underwriters, whose approval shall not
be unreasonably withheld, conditioned or delayed.
If any of the conditions specified in this Section
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, this Agreement and all obligations of the Underwriters hereunder may
be terminated and canceled by the Underwriter by notifying the Company of such
termination and cancellation in writing or by telegram at any time prior to, or
on, the Initial Closing Date or any Additional Closing Date(s) and any such
termination and cancellation shall be without liability of any party hereto to
any other party, except with respect to the provisions of Sections 7 and 8
hereof. The Underwriter may, of course, waive, in writing, any conditions which
have not been fulfilled or extend the time for their fulfillment.
SECTION 12. Termination.
(a) This Agreement may be terminated by the Underwriter by
written or telegraphic notice to the Company at any time before it becomes
effective pursuant to Section 10.
(b) This Agreement may be terminated by the Underwriter by
written or telegraphic notice to the Company, at any time after it becomes
effective, in the event that the Company, after notice from the Underwriter and
an opportunity to cure, shall have failed or been
20
unable to comply with any of the terms, conditions or provisions of this
Agreement on the part of the Company to be performed, complied with or fulfilled
within the respective times herein provided for, including without limitation
Section 6(g) hereof, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by the Underwriter in writing. This
Agreement may also be terminated if (i) qualifications are received or provided
by the Company's independent public accountants or attorneys to the effect of
either difficulties in furnishing certifications as to material items including,
without limitation, information contained within the footnotes to the financial
statements, or as affecting matters incident to the issuance and sale of the
securities contemplated or as to corporate proceedings or other matters or (ii)
there is any action, suit or proceeding, threatened or pending, at law or equity
against the Company, or by any Federal, State or other commission, board or
agency wherein any unfavorable result or decision could materially adversely
affect the business, property, or financial condition of the Company which was
not disclosed in the Prospectus.
(c) This Agreement may be terminated by the Underwriter by
written or telegraphic notice to the Company at any time after it becomes
effective, if the offering of, or the sale of, or the payment for, or the
delivery of, the Shares is rendered impracticable or inadvisable because (i)
additional material governmental restriction, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New York
Stock Exchange or trading in securities generally on such exchange shall have
been suspended or a general banking moratorium shall have been established by
Federal or New York State authorities or (ii) a war or other national calamity
shall have occurred or (iii) the condition of the market for securities in
general shall have materially and adversely changed, or (iv) the condition of
any matter materially affecting the Company or its business or business
prospects, is such that it would be undesirable, impractical or inadvisable to
proceed with, or consummate, this Agreement or the public offering of the
Shares.
(d) Any termination of this Agreement pursuant to this Section
12 shall be without liability of any character (including, but not limited to,
loss of anticipated profits or consequential damages) on the part of any party
hereto, except that the Company shall remain obligated to pay the costs and
expenses provided to be paid by it specified in Sections 6, 7 and 8, to the
extent therein provided.
SECTION 13. Finder. The Company and the Underwriters mutually represent
that they know of no person who rendered any service in connection with the
introduction of the Company to the Underwriters and that they know of no claim
by anyone for a "finder's fee" or similar type of fee, in connection with the
public offering which is the subject of this Agreement. Each party hereby
indemnifies the other against any such claims by any person known to it, and not
known to the other party hereto, who shall claim to have rendered services in
connection with the introduction of the Company to the Underwriters and/or to
have such a claim.
SECTION 14. Restriction on Securities All officers, directors and
present stockholders have agreed not to sell, transfer, hypothecate or convey
any of shares of stock of the Company
21
held by them, by registration or otherwise, for a period of three years from the
Effective Date without the prior written consent of the Underwriter except that
(i) each such person may sell up to 10,000 shares during each of the second and
third years of such period, and (ii) such persons may sell shares without such
restriction if the common stock of the Company is trading at a price of $7.50
per share of higher. In addition, the holders of the Company's outstanding
convertible notes have agreed not to transfer any shares of Common Stock which
may be issued upon conversion for a period of one year from the Effective Date.
Stop transfer instructions reflecting such restrictions shall be issued to the
transfer agent for the common stock of the company and appropriate legends
reflecting such restrictions shall be placed on the face of the stock
certificates representing all of such securities.
SECTION 15. Registration of the Underwriter's Warrants and/or Common
Stock underlying the Underwriters' Warrants. The Company agrees that it will,
upon request by the holders of at least 50% of the Underwriter's Warrants within
the four-year period commencing twelve (12) months from the Effective Date, on
one occasion only at the Company's sole expense, cause the Underwriters'
Warrants and/or the underlying securities issuable upon exercise of the
Underwriters' Warrants, to be the subject of a post-effective amendment, or a
new Registration Statement, if appropriate (hereinafter referred to as the
"demand Registration Statement"), so as to enable the Underwriter and/or its
assigns to offer publicly the Underwriters' Warrants and/or the underlying
securities. The Company agrees to register such securities expeditiously and,
where possible, within forty-five (45) business days after receipt of such
requests. The Company agrees to use its "best efforts" to cause the
post-effective amendment, or new Registration Statement to become effective and
for a period of nine (9) months thereafter to reflect in the post-effective
amendment, new Registration Statement, financial statements which are prepared
in accordance with Section 10(a)(3) of the Act and any facts or events arising
which, individually or in the aggregate, represent a fundamental and/or material
change in the information set forth in such post-effective amendment or new
Registration Statement. The holders of the Underwriter's Warrants may demand
registration without exercising such Warrants and, in fact, are never required
to exercise same.
The Company understands and agrees that if, at any
time within the period commencing one year and ending seven years after the
Effective Date, it should file a registration statement with the Commission
pursuant to the Act, regardless of whether some of the holders of the
Underwriter's Warrants and underlying securities shall have theretofore availed
themselves of the right above provided, the Company, at its own expense, will
offer to said holders the opportunity to register such securities. This
paragraph is not applicable to a Registration Statement filed by the Company
with the Commission on Form S-8 or any other inappropriate form.
SECTION 16. Notice. Except as otherwise expressly provided in this
Agreement, (A) whenever notice is required by the provisions hereof to be given
to the Company, such notice shall be given in writing, by certified mail, return
receipt requested, addressed to the Company at 0000 Xxxxxxxx Xxxxxx, Xxxxx, XX
00000, copy to Xxxxxx Xxxxx P.C., 000 Xxxxx Xxxx Xxxx, Xxxxx 000, Xxxxx Xxxx, XX
00000; and (B) whenever notice is required by the provisions hereof
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to be given to the Underwriters, such notice shall be in writing addressed to
the Underwriter at 0000 Xxxxx Xxxx, Xxxxxxxx, Xxxxxxx 00000, copy to Xxxxx X.
Xxxxx, Esq., Xxx Xxxxxxx Xxxx Xxxxx, 0xx Xx., Xxx Xxxx, XX 00000. Any party may
change the address for notices to be sent by giving written notice to the other
persons.
SECTION 21. Representations and Agreements to Survive Delivery. Except
as the context otherwise requires, all representations, warranties, covenants,
and agreements contained in this Agreement shall be deemed to be
representations, warranties, covenants, and agreements as at the date hereof and
as at the Closing Date and the Additional Closing Date(s), and all
representations, warranties, covenants, and agreements of the several
Underwriters and the Company, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any of the
Underwriters or the Company or any of their respective controlling persons, and
shall survive any termination of this Agreement (whensoever made) and/or
delivery of the Shares and the Optional Shares to the several Underwriters.
SECTION 22. Miscellaneous. This Agreement is made solely for the
benefit of the Underwriters and the Company and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successor" or the term "successors and assigns" as
used in this Agreement shall not include any purchaser, as such, of any of the
Shares.
This Agreement shall not be assignable by any party without
the other party's prior written consent. This Agreement shall be binding upon,
and shall inure to the benefit of, our respective successors and permitted
assigns. The foregoing represents the sole and entire agreement between us with
respect to the subject matter hereof and supersedes any prior agreements between
us with respect thereto. This Agreement may not be modified, amended or waived
except by a written instrument signed by the party to be charged. The validity,
interpretation and construction of this Agreement, and of each part hereof,
shall be governed by the internal laws of the State of Florida, without giving
effect to the conflict of laws provisions thereof.
This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one and the same instrument.
If a party signs this Agreement and transmits an electronic
facsimile of the signature page to the other party, the party who receives the
transmission may rely upon the electronic facsimile as a signed original of this
Agreement.
If the foregoing is in accordance with your understanding
of our agreement, kindly sign and return to us a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding agreement
between the Company and the Underwriters in accordance with its terms.
Very truly yours,
NOLBO, INC.
By:
---------------------------------
Xxxxxx X. Xxxxxx, President
CONFIRMED AND ACCEPTED, as of the date first above written:
FIRST LEVEL CAPITAL, INC.
By:_____________________________________
Xxxxx Xxxxxx, Chief Executive Officer
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