EXHIBIT 1.1
3,000,000 Shares of Common Stock and
3,000,000 Redeemable Common Stock Purchase Warrants
PROSPECT MEDICAL HOLDINGS, INC.
UNDERWRITING AGREEMENT
New York, New York
, 1998
SECURITY CAPITAL TRADING, INC.
As Representative of the several Underwriters
named in Schedule A annexed hereto
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Prospect Medical Holdings, Inc., a Delaware corporation (the "Company"),
confirms its agreement with Security Capital Trading, Inc. ("Security Capital")
and each of the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom Security Capital is acting as
Representative (in such capacity, Security Capital shall hereinafter be referred
to as "you" or the "Representative"), with respect to the sale by the Company
and the purchase by the Underwriters, acting severally and not jointly, of the
respective number of shares ("Shares") of the Company's common stock, $0.01 par
value per share ("Common Stock"), and redeemable common stock purchase warrants
(the "Redeemable Warrants"), each to purchase one share of Common Stock, set
forth in Schedule A hereto. The aggregate 3,000,000 shares of Common Stock and
3,000,000 Redeemable Warrants will be separately tradable upon issuance and are
hereinafter referred to as the "Firm Securities." Each Redeemable Warrant is
exercisable commencing on _____________________, 1999 [one year from the date
of this Agreement] until ____________________, 2003 [60 months from the date
of this Agreement], unless previously redeemed by the Company, at an initial
exercise price of $______________ [140% of the initial public offering price per
share of Common Stock] per share of Common Stock. The Redeemable Warrants may be
redeemed by the Company at a redemption price of $.10 per Redeemable Warrant at
any time after _________________, 1999 [one year from the date of this
Agreement] on thirty (30) days' prior written notice, provided that the closing
bid price of the Common Stock equals or exceeds $18.00 per share, for any twenty
(20) trading days within a period of thirty (30) consecutive trading days ending
on the fifth trading day prior to the notice of
redemption, all in accordance with the terms and conditions of the Warrant
Agreement (as hereinafter defined).
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriters, acting severally and
not jointly, up to an additional 450,000 shares of Common Stock and/or
450,000 Redeemable Warrants for the purpose of covering over-allotments, if
any. Such 450,000 shares of Common Stock and 450,000 Redeemable Warrants are
hereinafter collectively referred to as the "Option Securities." The Company
also proposes to issue and sell to you warrants (the "Representative's
Warrants") pursuant to the Representative's Warrant Agreement (the
"Representative's Warrant Agreement") for the purchase of an additional
300,000 shares of Common Stock and/or 300,000 Redeemable Warrants. The shares
of Common Stock and Redeemable Warrants issuable upon exercise of the
Representative's Warrants are hereinafter referred to as the
"Representative's Securities." The Firm Securities, the Option Securities,
the Representative's Warrants and the Representative's Securities
(collectively, hereinafter referred to as the "Securities") are more fully
described in the Registration Statement and the Prospectus referred to below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, each of the Underwriters as of
the date hereof, and as of the Closing Date (as hereinafter defined) and each
Option Closing Date (as hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (No. 333-_______________),
including any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Firm Securities, the Option Securities and the
Representative's Securities under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations (the "Regulations") of the Commission under the Act.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated therein
(including, but not limited to, those documents or information incorporated by
reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Regulations), is
hereinafter called the "Registration Statement", and the form of prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." For purposes hereof, "Rules
and Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or Prospectus or any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted
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or are pending or threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed
with the requirements of the Act and the Regulations, and none of the
Preliminary Prospectus, the Registration Statement or Prospectus at the time
of filing thereof contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except that this representation and warranty does not
apply to statements made in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriters by or
on behalf of the Underwriters expressly for use in such Preliminary
Prospectus, Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined herein) and each
Option Closing Date (as defined herein), if any, and during such longer period
as the Prospectus may be required to be delivered in connection with sales by
the Underwriters or a dealer, the Registration Statement and the Prospectus will
contain all statements which are required to be stated therein in accordance
with the Act and the Regulations, and will conform to the requirements of the
Act and the Regulations; neither the Registration Statement nor the Prospectus,
nor any amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in strict conformity with information furnished to
the Company in writing by or on behalf of any Underwriter expressly for use in
the Preliminary Prospectus, Registration Statement or Prospectus or any
amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of its incorporation.
Except as set forth in the Prospectus, the Company does not own an interest in
any corporation, partnership, trust, joint venture or other business entity. The
Company is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such qualification or
licensing. The Company has all requisite power and authority (corporate and
other), and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without limitation,
those having jurisdiction over environmental or similar matters), to own or
lease its properties and conduct its business as described in the Prospectus;
the Company is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all applicable federal, state, local and foreign laws, rules and
regulations; and the Company has not received any notice of proceedings relating
to the revocation or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the earnings,
position, prospects, value, operation, properties, business or results of
operations of the Company. The disclosures in the Registration Statement
concerning the effects of federal, state, local, and foreign laws, rules and
regulations on the Company's business as currently
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conducted and as contemplated are correct in all material respects and do not
omit to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading in light of the
circumstances under which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Capital Stock" and will have the adjusted capitalization set
forth therein under "Capitalization" on the Closing Date and each Option Closing
Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement, the Warrant Agreement, the
Representative's Warrant Agreement and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company conform
or, when issued and paid for, will conform, in all respects to all statements
with respect thereto contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable and the holders
thereof have no rights of rescission with respect thereto, and are not subject
to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company. The Securities are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable and will conform to the
description thereof contained in the Prospectus; the holders thereof will not be
subject to any liability solely as such holders; all corporate action required
to be taken for the authorization, issuance and sale of the Securities has been
duly and validly taken; and the certificates representing the Securities will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities to be sold by the Company hereunder, the Underwriters
or the Representative, as the case may be, will acquire good and marketable
title to such Securities free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement,
each Preliminary Prospectus and the Prospectus fairly present the financial
position, changes in cash flow, changes in stockholders' equity and the results
of operations of the Company at the respective dates and for the respective
periods to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved and such
financial statements have been examined by Ernst & Young LLP and BDO Xxxxxxx,
LLP, who are independent certified public accountants with respect to the
Company. There has been no adverse change or development involving a prospective
adverse change in the condition, financial or otherwise, or in the earnings,
position, prospects, value, operation, properties, business, or results of
operations of the Company, whether or not arising in the ordinary course of
business, since the date of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company, conform
in all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. The financial disclosures (including,
without limitation,
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any pro forma financial information) set forth in the Prospectus under the
headings "Selected Consolidated Financial Data," "Capitalization," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," fairly present, on the basis stated in the Prospectus, the
information set forth therein, and have been derived from or compiled on a
basis consistent with that of the audited financial statements included in
the Prospectus; and, in the case of pro forma financial information, if any,
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein. The amounts shown as accrued for
current and deferred income and other taxes in such financial statements are
sufficient for the payment of all accrued and unpaid federal, state, local
and foreign income taxes, interest, penalties, assessments or deficiencies
applicable to the Company, whether disputed or not, for the applicable period
then ended and periods prior thereto; adequate allowance for doubtful
accounts has been provided for unindemnified losses due to the operations of
the Company; and the statements of income do not contain any items of special
or nonrecurring income not earned in the ordinary course of business, except
as specified in the notes thereto.
(g) The Company (i) has paid all due and payable federal, state,
local, and foreign taxes for which it is liable, including, but not limited to,
withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 1986, as amended (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable, and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriters in connection with (i) the issuance by the Company
of the Securities, (ii) the purchase by the Underwriters of the Firm Securities
and the Option Securities from the Company and the purchase by the
Representative of the Representative's Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) resales of the Firm Securities and the Option Securities in connection with
the distribution contemplated hereby.
(i) The Company maintains insurance policies, including, but not
limited to, general liability, malpractice and property insurance, which insures
each of the Company and its employees, against such losses and risks generally
insured against by comparable businesses. The Company (A) has not failed to
give notice or present any insurance claim with respect to any matter, including
but not limited to the Company's business, property or employees, under any
insurance policy or surety bond in a due and timely manner, (B) does not have
any disputes or claims against any underwriter of such insurance policies or
surety bonds and has not failed to pay any premiums due and payable thereunder,
and (C) has not failed to comply with all conditions contained in such insurance
policies and surety bonds. There are no facts or circumstances under any such
insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those relating to environmental or similar matters), domestic or
foreign, pending or threatened against (or circumstances that are reasonably
likely to give rise to the same), or involving the properties or business of,
the Company
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which (i) questions the validity of the capital stock of the Company, this
Agreement, the Warrant Agreement or the Representative's Warrant Agreement,
or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement, the Warrant Agreement or the Representative's
Warrant Agreement, (ii) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are summarized
in the Registration Statement are accurately summarized in all material
respects), or (iii) might materially and adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, stockholders'
equity, value, operation, properties, business or results of operations of
the Company.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, enter into this Agreement,
the Warrant Agreement and the Representative's Warrant Agreement and to
consummate the transactions provided for in this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement; and this Agreement, the
Warrant Agreement and the Representative's Warrant Agreement have each been duly
and properly authorized, executed and delivered by the Company. Each of this
Agreement, the Warrant Agreement and the Representative's Warrant Agreement
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, and none of the Company's
issuance and sale of the Securities, execution or delivery of this Agreement,
the Warrant Agreement or the Representative's Warrant Agreement, its performance
hereunder and thereunder, its consummation of the transactions contemplated
herein and therein, or the conduct of its business as described in the
Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of (i) the
certificate of incorporation or by-laws of the Company, (ii) any license,
contract, collective bargaining agreement, indenture, mortgage, deed of trust,
lease, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which the Company is or may be bound or to which it or its assets
(tangible or intangible) is or may be subject, or any indebtedness, or (iii) any
statute, judgment, decree, order, rule or regulation applicable to the Company
of any arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Securities in the manner described
in the Prospectus and the Registration Statement, the performance of this
Agreement, the Warrant Agreement and the Representative's Warrant Agreement and
the transactions contemplated hereby and thereby, including without limitation,
any waiver of any preemptive, first refusal or other rights that any entity or
person may have for the issuance and/or sale of any of the Securities, except
such as have been or may be obtained under the Act or may be required under
state securities or Blue Sky laws or by the National Association of Securities
Dealers, Inc. ("NASD") in connection with the Underwriters' purchase and
distribution
6
of the Firm Securities and the Option Securities, and the Representative's
Warrants to be sold by the Company hereunder.
(m) All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or business may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company, as the case
may be, enforceable against it in accordance with their respective terms. The
descriptions in the Registration Statement of agreements, contracts and other
documents are accurate and fairly present the information required to be shown
with respect thereto by Form S-1, and there are no contracts or other documents
which are required by the Act to be described in the Registration Statement or
filed as exhibits to the Registration Statement which are not described or filed
as required, and the exhibits which have been filed are complete and correct
copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money, (ii) entered into any transaction other than in the ordinary
course of business, or (iii) declared or paid any dividend or made any other
distribution on or in respect of its capital stock of any class, and there has
not been any change in the capital stock, or any change in the debt (long or
short term) or liabilities, or material adverse change in or affecting the
general affairs, management, financial operations, stockholders' equity or
results of operations, of the Company.
(o) No default exists in the due performance and observance of any
term, covenant or condition of any license, contract, collective bargaining
agreement, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, stockholders agreement, partnership agreement,
note, loan or credit agreement, purchase order, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which the property or assets (tangible or intangible) of the
Company is subject or affected which might materially and adversely affect the
business, financial condition or operations of the Company.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance with all
federal, state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours.
There are no pending investigations involving the Company by the U.S. Department
of Labor, or any other governmental agency responsible for the enforcement of
such federal, state, local, or foreign laws and regulations. There is no unfair
labor practice charge or complaint against the Company pending before the
National Labor Relations Board or any lockout, strike, picketing, boycott,
dispute, slowdown or stoppage pending or threatened against or involving the
Company, or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company, and no
collective bargaining agreement
7
or modification thereof is currently being negotiated by the Company. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company. No labor dispute with the
employees of the Company exists or is imminent.
(q) The Company does not maintain, sponsor or contribute to any
program or arrangement that is an "employee pension benefit plan," an "employee
welfare benefit plan," or a "multiemployer plan" as such terms are defined in
Sections 3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does
not maintain or contribute, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, which could subject the
Company to any tax penalty on prohibited transactions and which has not
adequately been corrected. Each ERISA Plan is in compliance with all reporting,
disclosure and other requirements of the Code and ERISA as they relate to any
such ERISA Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply with
Code Section 401(a), stating that such ERISA Plan and the attendant trust are
qualified thereunder. The Company has never completely or partially withdrawn
from a "multiemployer plan."
(r) Neither the Company, nor any of its employees, directors,
stockholders, partners, or affiliates (within the meaning of the Regulations) of
any of the foregoing has taken or will take, directly or indirectly, any action
designed to or which has constituted or which might be expected to cause or
result in, under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Securities or otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held by
the Company, so far as known by the Company, are in dispute or are in any
conflict with the right of any other person or entity. The Company (i) owns or
has the right to use, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all patents, trademarks, service marks, trade
names and copyrights, technology and licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted or proposed to
be conducted without infringing upon or otherwise acting adversely to the right
or claimed right of any person, corporation or other entity under or with
respect to any of the foregoing and (ii) is not obligated or under any liability
whatsoever to make any payment by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant to, any patent, trademark, service xxxx,
trade name, copyright, know-how, technology or other intangible asset, with
respect to the use thereof or in connection with the conduct of its business or
otherwise.
(t) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all material items of real and personal
property stated in the Prospectus to be owned or leased by it, free and clear of
all liens, charges, claims, encumbrances, pledges, security interests, defects,
or other restrictions or equities of any kind whatsoever, other than those
referred
8
to in the Prospectus and liens for taxes not yet due and payable, which
might materially and adversely affect the business, financial condition or
operations of the Company.
(u) Ernst & Young LLP and BDO Xxxxxxx, LLP, whose reports are filed
with the Commission as a part of the Registration Statement, are independent
certified public accountants with respect to the Company as required by the Act
and the Rules and Regulations.
(v) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers and
directors, and all persons or entities who, immediately prior to the declaration
of effectiveness of the Registration Statement are (a) holders of 5% or more of
the shares of Common Stock; and/or (b) holders of securities exercisable or
exchangeable for or convertible into 5% or more of the shares of Common Stock,
has agreed not to, directly or indirectly, offer, sell, grant any option for the
sale or purchase of, assign, transfer, pledge, hypothecate or otherwise encumber
or dispose of any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or subscribe
for any shares of Common Stock (either pursuant to Rule 144 of the Regulations
or otherwise) or dispose of any beneficial interest therein for a period of not
less than twelve (12) months following the effective date of the Registration
Statement (the "Lock-Up Period") without the prior written consent of the
Representative and the Company. The Company will cause the Transfer Agent (as
hereinafter defined) to xxxx an appropriate legend on the face of stock
certificates representing all of such securities and to place "stop transfer"
orders on the Company's stock ledgers. During the 12 month period commencing on
the effective date of the Registration Statement, the Company shall not sell or
offer for sale any of its securities without the prior consent of the
Representative, except pursuant to or in connection with (i) the exercise of
options granted by the Company under any incentive stock ownership plan (a
"Plan") authorized by the Company's stockholders prior to the date hereof, (ii)
the exercise of non-Plan options and warrants granted by the Company prior to
the date hereof and/or (iii) the issuance of shares of Common Stock in
transactions involving acquisitions by the Company of the assets or equity
ownership of unrelated business entities.
(w) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuance with
respect to the Company, or any of its officers, directors, stockholders,
partners, employees or affiliates, that may affect the Underwriters'
compensation, as determined by the NASD.
(x) The Common Stock and Redeemable Warrants have been approved for
listing on the American Stock Exchange (the "ASE").
(y) None of the Company, nor any of its officers, employees, agents
or any other person acting on behalf of the Company has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or official or
employee of any governmental agency (domestic or foreign) or instrumentality of
any government
9
(domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (a) might subject
the Company, or any other such person to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign), (b)
if not given in the past, might have had a material adverse effect on the
assets, business or operations of the Company, or (c) if not continued in the
future, might adversely affect the assets, business, financial condition or
operations of the Company. The Company's internal accounting controls are
sufficient to cause the Company to comply with the Foreign Corrupt Practices
Act of 1977, as amended.
(z) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Regulations) of any of the
foregoing persons or entities has or has had, either directly or indirectly, (i)
a material interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, or (ii) a material beneficial interest in any
contract or agreement to which the Company is a party or by which it may be
bound or affected, in either case of a value equal to or greater than $25,000 in
any fiscal year of the Company. Except as set forth in the Prospectus under
"Certain Transactions," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company, and any officer,
director, or 5% or greater stockholder of the Company, or any partner, affiliate
or associate of any of the foregoing persons or entities.
(aa) Any certificate signed by any officer of the Company, and
delivered to the Underwriters or to Underwriters' Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
(bb) The minute books of the Company have been made available to the
Underwriters and contain a complete summary of all meetings and actions of the
directors (including committees thereof) 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.
(cc) Except and to the extent described in the Prospectus, no holders
of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(dd) The Company has entered into an employment agreement with each of
Xx. Xxxxx X. XxXxxxxx and Xx. Xxxxx X. Xxxxxx in the forms filed as Exhibits
10.4 and 10.5, respectively, to the Registration Statement.
(ee) The Company is not, and upon the issuance and sale of the
Securities as herein
10
contemplated and the application of the net proceeds therefrom as described
in the Prospectus under the caption "Use of Proceeds" will not be, an
"investment company" or an entity "controlled" by an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
(ff) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparations of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorizations; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(gg) The Company has entered into a warrant agreement substantially in
the form filed as Exhibit 4.2 to the Registration Statement (the "Warrant
Agreement") with American Stock Transfer and Trust Company, as Warrant Agent, in
form and substance satisfactory to the Representative, with respect to the
Redeemable Warrants.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$______ [91% of the initial public offering price per share of Common Stock]
per share of Common Stock and $_______ [91% of the initial public offering
price per Redeemable Warrant] per Redeemable Warrant, that number of Firm
Securities set forth in Schedule A opposite the name of such Underwriter,
subject to such adjustment as the Representative in its sole discretion shall
make to eliminate any sales or purchases of fractional shares, plus any
additional number of Firm Securities which such Underwriter may become obligated
to purchase pursuant to the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of an
additional 450,000 shares of Common Stock at a price of $ _________ per share
of Common Stock [91% of the initial public offering price per share of Common
Stock] and/or an additional 450,000 Redeemable Warrants at a price of
$________ per Redeemable Warrant [91% of the initial public offering price per
Redeemable Warrant]. The option granted hereby will expire forty-five (45) days
after (i) the date the Registration Statement becomes effective, if the
Company has elected not to rely on Rule 430A under the Regulations, or (ii)
the date of this Agreement if the Company has elected to rely upon Rule 430A
under the Regulations, and may be exercised in whole or in part from time to
time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Firm Securities upon
notice by the Representative to the Company setting forth the number of
Option Securities as to which the several Underwriters are then
11
exercising the option and the time and date of payment and delivery for any
such Option Securities. Any such time and date of delivery (an "Option
Closing Date") shall be determined by the Representative, but shall not be
later than three (3) full business days after the exercise of said option,
nor in any event prior to the Closing Date, as hereinafter defined, unless
otherwise agreed upon by the Representative and the Company. Nothing herein
contained shall obligate the Underwriters to make any over-allotments. No
Option Securities shall be delivered unless the Firm Securities shall be
simultaneously delivered or shall theretofore have been delivered as herein
provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Securities shall be made at the offices of Security Capital at 000
Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as
shall be agreed upon by the Representative and the Company. Such delivery and
payment shall be made at 10:00 a.m. (New York City time) on _______________,
1998 or at such other time and date as shall be agreed upon by the
Representative and the Company, but not less than three (3) nor more than five
(5) full business days after the effective date of the Registration Statement
(such time and date of payment and delivery being herein called the "Closing
Date"). In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
office of the Representative or at such other place as shall be agreed upon by
the Representative and the Company on each Option Closing Date as specified in
the notice from the Representative to the Company relating thereto. Delivery of
the certificates for the Firm Securities and the Option Securities, if any,
shall be made to the Underwriters against payment by the Underwriters, severally
and not jointly, of the purchase price for the Firm Securities and the Option
Securities, if any, to the order of the Company for the Firm Securities and the
Option Securities, if any, by New York Clearing House funds. In the event such
option is exercised, each of the Underwriters, acting severally and not jointly,
shall purchase that proportion of the total number of Option Securities then
being purchased which the number of Firm Securities set forth in Schedule A
hereto opposite the name of such Underwriter bears to the total number of Firm
Securities, subject in each case to such adjustments as the Representative in
its discretion shall make to eliminate any sales or purchases of fractional
shares. Certificates for the Firm Securities and the Option Securities, if any,
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Underwriters may request in writing at least two (2) business days prior to the
Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the Firm Securities and the Option Securities, if any, shall be
made available to the Representative at such office or such other place as the
Representative may designate for inspection, checking and packaging no later
than 9:30 a.m. on the last business day prior to the Closing Date or the
relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative Representative's Warrants at a purchase price of $.0001 per
warrant, which Representative's Warrants shall entitle the holders thereof to
purchase an aggregate of 300,000 shares of Common Stock and/or 300,000
Redeemable Warrants. The Representative's Warrants shall be exercisable for a
period of four years commencing one year from the effective date of the
Registration Statement at a price equaling 120% of the respective initial public
offering price of the Shares and the
12
Redeemable Warrants. The Representative's Warrant Agreement and form of
Warrant Certificate shall be substantially in the form filed as Exhibit 4.3
to the Registration Statement. Payment for the Representative's Warrants
shall be made on the Closing Date.
3. PUBLIC OFFERING OF THE SHARES AND REDEEMABLE WARRANTS. As soon after
the Registration Statement becomes effective as the Representative deems
advisable, the Underwriters shall make a public offering of the Shares and
Redeemable Warrants (other than to residents of or in any jurisdiction in which
qualification of the Securities is required and has not become effective) at the
price and upon the other terms set forth in the Prospectus. The Representative
may from time to time increase or decrease the public offering price after
distribution of the Shares and Redeemable Warrants has been completed to such
extent as the Representative, in its sole discretion, deems advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or Exchange
Act before termination of the offering of the Shares and the Redeemable Warrants
by the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representative and confirm the notice in writing (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any post-
effective amendment to the Registration Statement becomes effective; (ii) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose; (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose; (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to
13
the Representative) or transmit the Prospectus by a means reasonably
calculated to result in filing with the Commission pursuant to Rule 424(b)(1)
(or, if applicable and if consented to by the Representative, pursuant to
Rule 424(b)(4)) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery
of this Agreement and (ii) the fifth business day after the effective date of
the Registration Statement.
(d) The Company will give the Representative notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Regulations), and will
furnish the Representative with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such prospectus to which the Representative or Hall
Xxxxxxx Xxxx Xxxxxxxx & Xxxx, LLP ("Underwriters' Counsel") shall object.
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Representative may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign corporation
or file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus relating to the Securities is
required to be delivered under the Act, the Company shall use all reasonable
efforts to comply with all requirements imposed upon it by the Act and the
Exchange Act, as now and hereafter amended and by the Regulations, as from time
to time in force, so far as necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If at any time when a
prospectus relating to the Securities 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 Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Representative promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
satisfactory to Underwriters' Counsel, and the Company will furnish to the
Underwriters copies of such amendment or supplement as soon as available and in
such quantities as the Underwriters may request.
14
(g) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period beginning on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Regulations, and to the Representative, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Regulations, which
statement need not be audited unless required by the Act, covering a period of
at least 12 consecutive months after the effective date of the Registration
Statement.
(h) During a period of five years after the date hereof, the Company
will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
(i) copies of such unaudited quarterly reports concurrently
with furnishing such quarterly reports to its stockholders, accompanied by a
certificate thereon by the Company's principal financial or accounting
officer;
(ii) copies of such annual reports concurrently with
furnishing such reports to its stockholders;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD or
any securities exchange;
(v) every press release and every material news item or
article of interest to the financial community in respect of the Company, or
its affairs, which was released or prepared by or on behalf of the Company;
and
(vi) any additional information of a public nature concerning
the Company (and any future subsidiary) or its businesses which the
Representative may request.
During such five-year period, if the Company has an active subsidiary,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiary(ies) are consolidated, and
will be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(i) The Company will maintain a transfer agent and warrant agent
("Transfer Agent") and, if necessary under the jurisdiction of incorporation of
the Company, a Registrar (which may be the same entity as the Transfer Agent)
for its Common Stock and Redeemable Warrants.
15
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may request.
(k) On or before the effective date of the Registration Statement,
the Company shall provide the Representative with true original copies of duly
executed, legally binding and enforceable agreements from each of the Company's
officers and directors, and all persons or entities who, immediately prior to
the declaration of effectiveness of the Registration Statement are (a) holders
of 5% or more of the shares of Common Stock; and/or (b) holders of securities
exercisable or exchangeable for or convertible into 5% or more of the shares of
Common Stock, providing that such persons or entities shall not, directly or
indirectly, offer, sell, grant any option for the sale or purchase of, assign,
transfer, pledge, hypothecate or otherwise encumber or dispose of any shares of
Common Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Regulations or otherwise) or dispose of any
beneficial interest therein during the Lock-Up Period without the prior written
consent of the Representative and the Company (collectively, the "Lock-up
Agreements"). During the 12 month period commencing on the effective date of the
Registration Statement, the Company shall not sell or offer for sale any of its
securities without the prior consent of the Representative, except pursuant to
or in connection with (i) the exercise of options granted by the Company under a
Plan, (ii) the exercise of non-Plan options and warrants granted by the Company
prior to the date hereof and/or (iii) the issuance of shares of Common Stock in
transactions involving acquisitions by the Company of the assets or equity
ownership of unrelated business entities. On or before the Closing Date, the
Company shall deliver instructions to the Transfer Agent authorizing it to place
appropriate legends on the certificates representing the securities subject to
the Lock-up Agreements and to place appropriate stop transfer orders on the
Company's ledgers.
(l) None of the Company, nor any of its officers, directors,
stockholders, nor any of its affiliates (within the meaning of the Regulations)
will take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company.
(n) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Regulations, and all such reports, forms and documents filed will comply
as to form and substance with the applicable requirements under the Act, the
Exchange Act, and the Regulations.
16
(o) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two full business days prior thereto, a
copy of the latest available unaudited interim financial statements of the
Company (which in no event shall be as of a date more than 30 days prior to the
date of the Registration Statement) which have been read by the Company's
independent public accountants, as stated in their letters to be furnished
pursuant to Sections 6(j) and 6(k) hereof.
(p) The Company shall cause the Common Stock and Redeemable Warrants
to be listed on the ASE and, for a period of five years from the date hereof,
use its reasonable best efforts to maintain the ASE listing of the Common Stock
and the Redeemable Warrants to the extent outstanding.
(q) As and when reasonably requested by the Representative from time
to time during the period of five years from the Closing Date, the Company shall
furnish to the Representative at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Common Stock and Redeemable
Warrants (ii) the list of holders of all of the Company's securities and (iii) a
Blue Sky "Trading Survey" for secondary sales of the Company's securities
prepared by counsel to the Company.
(r) As soon as practicable, (i) but in no event more than five
business days before the effective date of the Registration Statement, the
Company shall file a Form 8-A with the Commission providing for the registration
under the Exchange Act of the Securities and (ii) but in no event more than 30
days after the effective date of the Registration Statement, in the event that
the Securities are not listed on a national securities exchange, the Company
shall take all necessary and appropriate actions to be included in Standard and
Poor's Corporation Descriptions and Xxxxx'x OTC Manual and to continue such
inclusion for a period of not less than five years.
(s) The Company hereby agrees that it will not, for a period of 12
months from the effective date of the Registration Statement, adopt, propose to
adopt or otherwise permit to exist any employee, officer, director, consultant
or compensation plan or similar arrangement permitting (i) the grant, issue,
sale or entry into any agreement to grant, issue or sell any option, warrant or
other contract right (x) at an exercise price that is less than the greater of
the public offering price of the Shares set forth herein and the fair market
value on the date of grant or sale or (y) to any of its executive officers or
directors or to any holder of 5% or more of the Common Stock; (ii) the maximum
number of shares of Common Stock or other securities of the Company issuable
under any Plan to exceed, in the aggregate, __________ shares; (iii) the
payment for such securities with any form of consideration other than cash; or
(iv) the existence of stock appreciation rights, phantom options or similar
arrangements.
(t) Until the completion of the distribution of the Securities, the
Company shall not, without the prior written consent of the Representative and
Underwriters' Counsel, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
17
(u) For a period equal to the lesser of (i) five years from the date
hereof, and (ii) the period ending on the date of sale to the public of the
Representative's Securities, the Company will not take any action or actions
which may prevent or disqualify the Company's use of Form S-1 (or other
appropriate form) for the registration under the Act of the Representative's
Securities. The Company further agrees to use its reasonable best efforts to
file such post-effective amendments to the Registration Statement, as may be
necessary, in order to maintain its effectiveness and to keep such Registration
Statement effective while any of the Redeemable Warrants or Representative's
Warrants remain outstanding.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on the later of the invoiced due
date or the Closing Date or the applicable Option Closing Date, to the extent
not paid at the Closing Date) all expenses and fees (other than fees of
Underwriters' Counsel, except as provided in (iv) below) incident to the
performance of the obligations of the Company under this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement, including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing (including mailing and handling charges),
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto) and delivery of this Agreement, the Warrant Agreement, the
Representative's Warrant Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreements, and related documents, including the cost of all
copies thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Underwriters and such
dealers as the Underwriters may request, in quantities as hereinabove stated,
(iii) the costs and expenses of printing, engraving, issuance and delivery of
the Securities including, but not limited to those incurred in connection with,
(x) the purchase by the Underwriters of the Firm Securities and the Option
Securities and the purchase by the Representative of the Representative's
Warrants from the Company, (y) the consummation by the Company of any of its
obligations under this Agreement, the Warrant Agreement and the Representative's
Warrant Agreement, and (z) resale of the Firm Securities and the Option
Securities by the Underwriters in connection with the distribution contemplated
hereby, (iv) the fees and expenses incurred in connection with qualification of
the Securities under state or foreign securities or "Blue Sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum", the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and disbursements and fees of counsel in connection therewith,
(v) costs and expenses incurred by the Company, but not any Underwriter, in
connection with the "road show", (vi) fees and expenses of the Transfer Agent
and registrar and all issue and transfer taxes, if any, (vii) any applications
made prior to the Closing Date (or applicable Option Closing Date) for
assignment of a rating of the Securities by qualified rating agencies, (viii)
the fees payable to the Commission and the NASD, and (ix) the fees and expenses
incurred in connection with the listing of the Securities on the ASE and any
other exchange.
(b) If this Agreement is terminated by the Representative or by the
Underwriters
18
in accordance with the provisions of Section 6 or Section 12, the Company
shall reimburse and indemnify the Underwriters for all of their actual
out-of-pocket expenses, including the fees and disbursements of Underwriters'
Counsel, less any amounts already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 5, it will pay to the
Representative on the Closing Date by certified or bank cashier's check or, at
the election of the Representative, by deduction from the proceeds of the
offering of the Firm Securities, a non-accountable expense allowance equal to
2.5% of the gross proceeds received by the Company from the sale of the Firm
Securities, $50,000 of which has been paid to date. In the event the
Representative elects to exercise the overallotment option described in Section
2(b) hereof, the Company further agrees to pay to the Representative on each
Option Closing Date, by certified or bank cashier's check, or at the
Representative's election, by deduction from the proceeds of the Option
Securities purchased on such Option Closing Date, a non-accountable expense
allowance equal to 2.5% of the gross proceeds received by the Company from the
sale of such Option Securities.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date or Option Closing Date, if any,
of the statements of the officers of the Company made pursuant to the provisions
hereof; and the performance by the Company on and as of the Closing Date and
each Option Closing Date, if any, of its covenants and obligations hereunder and
to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 12:00 P.M., New York time, on the date of this Agreement or such later date
and time as shall be consented to in writing by the Representative, and at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Regulations, the price of the Firm Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Regulations within the
prescribed time period and, prior to the Closing Date, the Company shall have
provided evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein not
19
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material,
or omits to state a fact which, in the Representative's opinion, is material
and is required to be stated therein or is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) On or prior to each of the Closing Date and each Option Closing
Date, if any, the Representative shall have received from Underwriters' Counsel,
such opinion or opinions with respect to the organization of the Company, the
validity of the Securities, the Registration Statement, the Prospectus and other
related matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
(d) At the Closing Date, the Underwriters shall have received the
favorable opinion of Xxxxxx & Xxxxxxx ("M&H"), counsel to the Company, dated the
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its jurisdiction,
(B) is duly qualified and licensed and in good standing as a foreign corporation
in each jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification or licensing (except
where the failure to so qualify would not have a material adverse effect on the
business, financial condition or operations of the Company), and (C) has all
requisite corporate power and authority to own or lease its properties and
conduct its business as described in the Prospectus, and has obtained any and
all necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies to conduct its business as described in the Prospectus, and, to the
current actual knowledge of such counsel, has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially adversely affect the business, financial
condition or operations of the Company. The disclosures in the Registration
Statement concerning the effects of federal, state and local laws, rules and
regulations on the Company's business as described in the Prospectus are correct
in all material respects and do not omit to state a fact required to be stated
therein or necessary to make the statements contained therein not misleading in
light of the circumstances in which they were made.
(ii) To the current actual knowledge of such counsel, except as
described in the Prospectus, the Company does not own an interest in any other
corporation, partnership, joint venture, trust or other business entity.
(iii) The Company has a duly authorized, and issued and
outstanding capitalization as set forth in the Prospectus, and any amendment
or supplement thereto, under "Capitalization", and the Company is not, to the
current actual knowledge of such counsel, a party to or bound by any
instrument, agreement or other arrangement providing for it to issue, sell,
transfer, purchase or redeem any capital stock, rights, warrants, options or
other securities, except
20
for this Agreement, the Warrant Agreement and the Representative's Warrant
Agreement and as described in the Prospectus. The Securities and all other
securities issued or issuable by the Company conform in all material respects
to all statements with respect thereto contained in the Registration
Statement and the Prospectus. All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid (to
the current actual knowledge of such counsel) and non-assessable; the holders
thereof do not have any rights of rescission with respect thereto, and are
not subject to personal liability by reason of being such holders; and none
of such securities were issued in violation of the preemptive rights of any
holders of any security of the Company or any similar rights imposed by the
Company's certificate of incorporation. The Securities to be sold by the
Company hereunder and under the Warrant Agreement and the Representative's
Warrant Agreement are not and will not be subject to any preemptive or other
similar rights of any stockholder imposed by the Company's certificate of
incorporation or, to the current actual knowledge of such counsel, by any
agreement or other instrument binding upon the Company, have been duly
authorized and, when issued, paid for and delivered in accordance with the
terms hereof and thereof, will be validly issued, fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely
as such holders; all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken; and the certificates representing the Securities are in due and proper
form. The Representative's Warrants and the Redeemable Warrants will, when
issued, paid for and delivered in accordance with the terms set forth herein
and in the Warrant Agreement and Representative's Warrant Agreement,
constitute valid and binding obligations of the Company to issue and sell,
upon exercise thereof and payment therefor, the number and type of securities
of the Company called for thereby. Upon the issuance and delivery pursuant to
this Agreement of the Firm Securities and the Option Securities and the
Representative's Warrants to be sold by the Company, the Underwriters and the
Representative, respectively, will acquire good title to the Firm Securities
and the Option Securities and the Representative's Warrants free and clear of
any pledge, lien, charge, claim, encumbrance, pledge, security interest, or
other restriction or equity of any kind whatsoever created by or imposed
against the Company.
(iv) The Registration Statement is effective under the Act, and,
if applicable, filing of all pricing information has been timely made in the
appropriate form under Rule 430A of the Regulations, and no stop order
suspending the use of the Preliminary Prospectus, the Registration Statement or
Prospectus or any part of any thereof or suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose, to
the current actual knowledge of such counsel, have been instituted or are
pending or, to the current actual knowledge of such counsel, threatened or
contemplated under the Act.
(v) Each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements thereto (other
than the financial statements and other financial and statistical data included
therein, as to which no opinion need be rendered) complies as to form in all
material respects with the requirements of the Act and the Regulations.
(vi) To the current actual knowledge of such counsel (A) there is
not any agreement, contract or other document required by the Act to be
described in the Registration Statement and the Prospectus and filed as an
exhibit to the Registration Statement other than those
21
described in the Registration Statement (or required to be filed under the
Exchange Act if upon such filing they would be incorporated, in whole or in
part, by reference therein) and the Prospectus and filed as an exhibit
thereto, and the exhibits which have been filed are correct copies of the
documents of which they purport to be copies; (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or amendment
thereto of contracts and other documents to which the Company is a party or
by which it is bound, including any document to which the Company is a party
or by which it is bound, incorporated by reference into the Prospectus and
any supplement or amendment thereto, are accurate and fairly present in all
material respects the information required to be shown by Form S-1; (C) there
is not pending or threatened against the Company any action, arbitration,
suit, proceeding, inquiry, investigation, litigation, governmental or other
proceeding (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, pending or threatened
against (or circumstances that may give rise to the same), or involving the
properties or business of, the Company which (x) is required to be disclosed
in the Registration Statement which is not so disclosed (and such proceedings
as are summarized in the Registration Statement are accurately summarized in
all respects), or (y) questions the validity of the capital stock of the
Company or this Agreement, the Warrant Agreement or the Representative's
Warrant Agreement, or of any action taken or to be taken by the Company
pursuant to or in connection with any of the foregoing; (D) there is no
statute or regulation or legal or governmental proceeding required to be
described in the Prospectus which is not described as required; and (E) there
is no action, suit or proceeding pending, or threatened, against or affecting
the Company before any court or arbitrator or governmental body, agency or
official (or any basis thereof known to such counsel) in which there is a
reasonable possibility of a decision which would result in a material adverse
change in the business, financial condition or operations of the Company,
which would adversely affect the present or prospective ability of the
Company to perform its obligations under this Agreement, the Warrant
Agreement or the Representative's Warrant Agreement or which in any manner
would draw into question the validity or enforceability of this Agreement,
the Warrant Agreement or the Representative's Warrant Agreement.
(vii) The Company has full legal right, power and authority
to enter into each of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement, and to consummate the transactions provided
for therein; and each of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement has been duly authorized, executed and
delivered by the Company. Each of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement, assuming due authorization, execution and
delivery by and enforceability against each other party thereto, constitutes a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's execution or delivery of
this Agreement, the Warrant Agreement and the Representative's Warrant
Agreement, its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its business as
described in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or
22
results or will result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (A) the certificate of
incorporation or by-laws of the Company, or (B) to the current actual
knowledge of such counsel, any license, contract, collective bargaining
agreement, indenture, mortgage, deed of trust, lease, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement
or instrument to which the Company is a party or by which it is or may be
bound or to which any of its properties or assets (tangible or intangible) is
or may be subject, or any indebtedness of the Company, or (C) to the current
actual knowledge of such counsel, any statute, judgment, decree, order, rule
or regulation applicable to the Company of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over environmental
or similar matters), domestic or foreign, having jurisdiction over the
Company or any of its activities or properties.
(viii) Except for the order of the Commission declaring the
Registration Statement to be effective, no consent, approval, authorization or
order, and no filing with, any court, regulatory body, government agency or
other body (other than such as may be required under Blue Sky laws, as to which
no opinion need be rendered) is required in connection with the issuance of the
Firm Securities and the Option Securities pursuant to the Prospectus and the
Registration Statement, the issuance of the Representative' Warrants, the
performance of this Agreement, the Warrant Agreement and the Representative's
Warrant Agreement, and the transactions contemplated hereby and thereby.
(ix) Except to the extent that it would not have a material
adverse effect on the business, financial condition or operations of the
Company, the Company has good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property stated in the
Prospectus to be owned or leased by it, in each case free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects or
other restrictions or equities of any kind whatsoever, other than those referred
to in the Prospectus and liens for taxes not yet due and payable.
(x) The Company is not, to the current actual knowledge of such
counsel, in breach of, or in default under, any term or provision of any
license, contract, collective bargaining agreement, indenture, mortgage,
installment sale agreement, deed of trust, lease, voting trust agreement,
stockholders' agreement, partnership agreement, 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 the properties or assets (tangible
or intangible) of the Company is subject or affected which, individually or in
the aggregate, is material to the business, properties, condition (financial or
otherwise), prospects or results of operations of the Company; and the Company
is not, to the current actual knowledge of such counsel, in violation of any
term or provision of its certificate of incorporation or By-Laws or in violation
of any franchise, license, permit, judgment, decree, order, statute, rule or
regulation.
(xi) The statements in the Prospectus under "Risk Factors," "The
23
Company," "Business of the Company," "Management of the Company," "Beneficial
Ownership of Capital Stock," "Certain Transactions," "Description of Capital
Stock " and "Shares Eligible for Future Sale" have been reviewed by such
counsel, and insofar as they refer to statements of law, descriptions of
statutes, regulatory permits, licenses, rules or regulations or legal
conclusions, are correct in all material respects.
(xii) The Securities have been accepted for listing on the
ASE.
(xiii) To the current actual knowledge of such counsel, no
person, corporation, trust, partnership, association or other entity has the
right to include and/or register any securities of the Company in the
Registration Statement, require the Company to file any registration statement
or, if filed, to include any security in such registration statement.
(xiv) To the current actual knowledge of such counsel, except
as described in the Prospectus, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities hereunder or
financial consulting arrangements or any other arrangements, agreements,
understandings, payments or issuances that may affect the Underwriters'
compensation, as determined by the NASD.
(xv) Assuming due authorization, execution and delivery by the
parties thereto, the Lock-up Agreements in the form of Exhibit A annexed hereto
are legal, valid and binding obligations of the parties thereto, enforceable
against such parties in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law).
(xvi) To the current actual knowledge of such counsel, 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 ever completely or partially withdrawn from a "multiemployer plan".
(xvii) The Company shall not, solely as a result of the offer
and sale of the Securities as described in the Prospectus, be deemed to be an
"Investment Company," pursuant to and as defined under the Investment Company
Act of 1940.
Such counsel shall state that such counsel has participated in conferences
with officers and other representatives of the Company, and representatives of
the independent public accountants for the Company, at which conferences such
counsel made inquiries of such officers, representatives and accountants and
discussed the contents of the Preliminary Prospectus, the Registration
Statement, the Prospectus, and related matters and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Preliminary
Prospectus, the Registration Statement or the Prospectus, on the basis of the
24
foregoing, no facts have come to the attention of such counsel which lead them
to believe that either the Registration Statement or any amendment thereto, at
the time such Registration Statement or amendment became effective, or the
Preliminary Prospectus or Prospectus or amendment or supplement thereto as of
the date of such opinion, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading(it being understood that such counsel need express no
opinion with respect to the financial statements and schedules and other
financial and statistical data included in the Preliminary Prospectus, the
Registration Statement and the Prospectus). Such counsel shall further state
that its opinions may be relied upon by Underwriters' Counsel in rendering its
opinion to the Underwriters.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel if requested. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and that the Representative,
Underwriters' Counsel and they are each justified in relying thereon. Such
opinion may state that whenever a statement therein is qualified to such
counsel's current actual knowledge, it is intended to indicate that, during the
course of such counsel's representation of the Company in connection with the
offer and sale of the Securities, no information that would give such counsel
awareness of the inaccuracy of such statement has come to the attention of those
attorneys in the firm who have rendered legal services in connection therewith.
Any opinion of counsel for the Company shall not state that it is to be governed
or qualified by, or that it is otherwise subject to, any treatise, written
policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991)
or any comparable state accord.
(e) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of M&H dated such Option Closing Date, addressed
to the Underwriters and in form and substance satisfactory to Underwriters'
Counsel, confirming as of such Option Closing Date the statements made by M&H in
its opinion delivered on the Closing Date.
(f) On or prior to the Closing Date and each Option Closing Date, if
any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or covenants of the
Company.
(g) As of the Closing Date and each Option Closing Date, if any, (i)
there shall have been no material adverse
25
change in the business, financial condition or operations of the Company,
whether or not in the ordinary course of business, from the latest dates as
of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company, from the latest date as of
which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is adverse to the Company; (iii) the Company
shall not be in default under any provision of any instrument relating to any
outstanding indebtedness of the Company which default could have a material
adverse effect upon the business, operations or financial condition of the
Company; (iv) the Company shall not have issued any securities (other than
the Securities) or declared or paid any dividend or made any distribution in
respect of its capital stock of any class and there shall not have been any
change in the capital stock or any material change in the debt (long or short
term) or liabilities or obligations of the Company (contingent or otherwise),
in each case, since the date hereof; (v) no material amount of the assets of
the Company shall be pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (vi) no action, suit or proceeding, at
law or in equity, shall be pending or threatened (or circumstances giving
rise to same) against the Company, or affecting any of its properties or
business before or by any court or federal, state or foreign commission,
board or other administrative agency wherein an unfavorable decision, ruling
or finding may adversely affect the business, operations, earnings, position,
value, properties, results of operations, prospects or financial condition or
income of the Company; and (vii) no stop order relating to the offer and sale
of the Securities shall be in effect under the Act and no proceedings
therefor shall be pending, threatened or contemplated by the Commission.
(h) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the principal financial or principal
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date or the
Option Closing Date, as the case may be, and the Company has complied in all
material respects with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be complied with or satisfied at or
prior to such Closing Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no proceedings
for that purpose have been instituted or are pending or, to the best of each of
such person's knowledge, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, 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 neither the Preliminary Prospectus or any supplement thereto
included any untrue statement of a material
26
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; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (A) the Company has
not incurred up to and including the Closing Date or the Option Closing Date, as
the case may be, other than in the ordinary course of its business, any material
liabilities or obligations, direct or contingent; (B) the Company has not paid
or declared any dividends or other distributions on its capital stock; (C) the
Company has not entered into any transactions not in the ordinary course of
business; (D) there has not been any change in the capital stock or long-term
debt or any increase in the short-term borrowings (other than any increase in
the short-term borrowings in the ordinary course of business) of the Company;
(E) the Company has not sustained any material loss or damage to its properties
or assets, whether or not insured; (F) there is no litigation which is pending
or threatened (or circumstances giving rise to same) against the Company or any
affiliated party which is required to be set forth in an amended or supplemented
Prospectus which has not been set forth; and (G) there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has not
been so set forth.
References to the Registration Statement and the Prospectus in this subsection
(h) are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters shall
have received "cold comfort" letters, dated such date, addressed to the
Underwriters in form and substance customary for initial public offerings of
securities, and satisfactory (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) in all respects to the
Underwriters and Underwriters' Counsel, from (i) Ernst & Young LLP addressing
the matters set forth in sub-sections (i) - (vi) hereof as they relate to the
Company's financial statements and disclosures for the year ended December 31,
1997 and any interim period set forth in the Prospectus which are contained in
the Prospectus; and (ii) from BDO Xxxxxxx LLP addressing the matters set forth
in sub-sections (i) - (vi) hereof as they relate to the Company's financial
statements and disclosures for the two years ended December 31, 1996 which are
contained in the Prospectus:
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act and the
applicable 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 Regulations thereunder and that the
Representative may rely upon the opinion of Ernst & Young LLP or BDO Xxxxxxx
LLP, as the case may be, with respect to the financial statements and supporting
schedules included in the Registration Statement;
27
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company, 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 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 Regulations or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the Company included
in the Registration Statement, or (B) at a specified date not more than five
days prior to the effective date of the Registration Statement, there has been
any change in the capital stock or long-term debt of the Company, or any
decrease in the 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 effective date of the Registration Statement, there was any
decrease in net revenues, net earnings or net earnings per common share of the
Company, in each case as compared with the corresponding period from December
31, 1996, other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount of such
decrease;
(iv) setting forth, at a date not later than five days prior to
the date of the Registration Statement, the total amount of liabilities of the
Company (including a break-down of commercial paper and notes payable to banks);
(v) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement; and
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Representative may reasonably request.
(k) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from each of Ernst & Young LLP and BDO Xxxxxxx
LLP a letter, dated as of the Closing Date or the Option Closing Date, as the
case may be, to the effect that they reaffirm that statements made in the
letters respectively furnished by them pursuant to subsection (j) of this
Section, except that the specified date referred to shall be a date not more
than five days prior to the Closing Date or the Option Closing Date, as the case
may be, and, if the Company has elected to rely
28
on Rule 430A of the Regulations, to the further effect that they have carried
out procedures as specified in clause (v) of subsection (j) of this Section
with respect to certain amounts, percentages and financial information as
specified by the Representative and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages
and financial information to be in agreement with the records specified in
such clause (v).
(l) On each of the Closing Date and each Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(n) On or before the Closing Date, the Company shall have executed
and delivered to the Representative, (i) the Representative's Warrant Agreement
substantially in the form filed as Exhibit 4.3 to the Registration Statement, in
final form and substance satisfactory to the Representative, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(o) On or before the Closing Date, the Firm Securities and Option
Securities shall have been duly approved for listing on the ASE, subject to
official notice of issuance.
(p) On or before the Closing Date, there shall have been delivered to
the Representative all of the Lock-up Agreements, in form and substance
satisfactory to Underwriters' Counsel.
(q) On or before the Closing Date, the Company shall have executed
and delivered to the Representative and the Transfer Agent the Warrant Agreement
substantially in the form filed as Exhibit 4.2 the Registration Statement, in
final form and substance satisfactory to the Representative.
If any condition to the Underwriters' obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Option Closing Date, as the case
may be, is not so fulfilled, the Representative may terminate this Agreement or,
if the Representative so elects, it may waive any such conditions which have not
been fulfilled or extend the time for their fulfillment.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of an Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in Section 11 hereof), and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or
29
Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, suits and litigation in respect
thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such claim, action, proceeding, investigation, inquiry, suit or litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which the Underwriter or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law or otherwise or
under the laws of foreign countries, arising out of or based upon (A) any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus, the Registration Statement or the Prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Securities; or
(iii) in any application or other document or written communication (in this
Section 7 collectively called "application") executed by the Company or based
upon written information furnished by the Company in any jurisdiction in order
to qualify the Securities under the securities laws thereof or filed with the
Commission, any state securities commission or agency, ASE or any other
securities exchange; (B) the omission or alleged omission therefrom of a
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 (C) any breach of any representation, warranty, covenant or
agreement of the Company contained herein or in any certificate by or on behalf
of the Company or any of its officers delivered pursuant hereto, unless, in the
case of clause (A) or (B) above, such statement or omission was made in reliance
upon and in strict conformity with written information furnished to the Company
with respect to any Underwriter by or on behalf of such Underwriter expressly
for use in any Preliminary Prospectus, the Registration Statement or Prospectus,
or any amendment thereof or supplement thereto, or in any application, as the
case may be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of the Act, to the same extent
as the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Firm Securities and the Option Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus and the last
sentence of the front cover page of the Prospectus have been furnished by the
Underwriters expressly for use therein and constitute the only information
furnished in writing
30
by or on behalf of the Underwriters for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any claim, action, suit, investigation,
inquiry, proceeding or litigation, such indemnified party shall, if a claim in
respect thereof is to be made against one or more indemnifying parties under
this Section 7, notify each party against whom indemnification is to be sought
in writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 7 except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it may have
otherwise). In case any such claim, action, suit, investigation, inquiry,
proceeding or litigation is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense thereof at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense thereof within a reasonable
time after notice of commencement thereof, or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense thereof on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one claim, action, suit,
investigation, inquiry, proceeding or litigation or separate but similar or
related claims, actions, suits, investigations, inquiries, proceedings or
litigation in the same jurisdiction arising out of the same general allegations
or circumstances. Anything in this Section 7 to the contrary notwithstanding,
an indemnifying party shall not be liable for any settlement of any claim,
action, suit, investigation, inquiry, proceeding or litigation effected without
its written consent; provided, however, that such consent was not unreasonably
withheld. An indemnifying party will not, without the prior written consent of
the indemnified parties, settle, compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit,
investigation, inquiry, proceeding or litigation in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim, action, suit,
investigation, inquiry, proceeding or litigation), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit, investigation,
inquiry, proceeding or litigation and (ii) does not include a statement as to or
an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) In order to provide for just and equitable contribution in any
case in which
31
(i) an indemnified party makes claim for indemnification pursuant to this
Section 7, but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that the express
provisions of this Section 7 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of the Firm Securities and the Option
Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified, on the other hand, in connection with the statements
or omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. In any
case where the Company is the contributing party and the Underwriters are the
indemnified party, the relative benefits received by the Company on the one
hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Firm Securities
and the Option Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case
as set forth in the table on the Cover Page of the Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, or by the Underwriters, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, expenses or liabilities (or actions
in respect thereof) referred to above in this subsection (d) shall be deemed
to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Firm Securities and the Option
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company or the Underwriter within the meaning of the
Act, each officer of the Company who has signed the Registration Statement,
and each director of the Company shall have the same rights to contribution
as the Company or the Underwriter, as the case may be, subject in each case
to this subsection (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subsection (d), notify such party
or parties from whom contribution may be sought, but the omission so to
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder
or otherwise than under this subsection (d), or to the extent that such party
or parties were not adversely affected by such omission. The contribution
agreement set forth above shall be in addition to any liabilities which any
indemnifying party may have at common law or otherwise.
32
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant
hereto, shall be deemed to be representations, warranties and agreements at
the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the indemnity
and contribution agreements contained in Section 7 hereof, shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any Underwriter, the Company, any controlling person of
any Underwriter or the Company, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the Underwriters
and the Representative, as the case may be.
9. EFFECTIVE DATE. This Agreement shall become effective at 10:00 a.m.,
New York City time, on the next full business day following the date hereof, or
at such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such securities for offering or the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. TERMINATION.
(a) Subject to subsection (b) of this Section 10, the Representative
shall have the right to terminate this Agreement, (i) if any domestic or
international event or act or occurrence has materially adversely disrupted, or
in the Representative's opinion will in the immediate future materially
adversely disrupt, the financial markets; or (ii) if any material adverse change
in the financial markets shall have occurred; or (iii) if trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq
Stock Market, the Boston Stock Exchange, the Commission or any governmental
authority having jurisdiction over such matters; or (iv) if trading of any of
the securities of the Company shall have been suspended, or any of the
securities of the Company shall have been delisted, on any exchange or in any
over-the-counter market; or (v) if the United States shall have become involved
in a war or major hostilities, or if there shall have been an escalation in an
existing war or major hostilities or a national emergency shall have been
declared in the United States; or (vi) if a banking moratorium has been declared
by a state or federal authority; or (vii) if a moratorium in U.S. foreign
exchange trading has been declared; or (viii) if the Company shall have
sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in the
Representative's opinion, make it inadvisable to proceed with the offering, sale
and/or delivery of the Securities; or (ix) if there shall have been such a
material adverse change in the conditions or prospects of the Company, or such
material adverse change in the general market, political or economic conditions,
in the United States or elsewhere, that, in each case, in the Representative's
judgment, would make it inadvisable to proceed with the offering, sale and/or
delivery of the Securities or (x) if either Xx. Xxxxx X. Xxxxxx or Xx. Xxxxx X.
XxXxxxxx shall no longer serve the Company in their respective present
capacities.
33
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) the Company shall promptly
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to Section 5(c) above). Notwithstanding
any contrary provision contained in this Agreement, if this Agreement shall not
be carried out within the time specified herein, or any extension thereof
granted by the Representative, by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied (including, without limitation, pursuant to
Section 6 or Section 12) then, the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(c) above). In addition, the
Company shall remain liable for all Blue Sky counsel fees and disbursements,
expenses and filing fees. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 6, 10, 11 and 12 hereof),
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 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.
11. SUBSTITUTION OF THE UNDERWRITERS. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 6, Section 10 or Section 12
hereof) to purchase the Securities which it or they are obligated to purchase on
such date under this Agreement (the "Defaulted Securities"), the Representative
shall have the right, within 24 hours thereafter, to make arrangement for one or
more of the non-defaulting Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the
Representative shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Firm Securities to be purchased on such date, the non-
defaulting Underwriters shall be obligated to purchase the full amount thereof
in the proportions that their respective underwriting obligations hereunder bear
to the underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Securities, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriters (or, if such default shall occur
with respect to any Option Securities to be purchased on an Option Closing Date,
the Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date).
No action taken pursuant to this Section 11 shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination of this
Agreement, the Representative shall have the right to postpone the Closing Date
for a period not exceeding seven
34
(7) business days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements.
12. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing Date
or at any Option Closing Date, as applicable, to sell and deliver the number of
Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option Securities
from the Company on such date) without any liability on the part of any non-
defaulting party other than pursuant to Section 5, Section 7 and Section 10
hereof. No action taken pursuant to this Section 12 shall relieve the Company
from liability, if any, in respect of such default.
13. NOTICES. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxx X. Xxxxxxxx, President, with a copy to Hall Xxxxxxx Xxxx
Xxxxxxxx & Xxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxxxx X. Xxxxxx, Esq. Notices to the Company shall be directed to the Company
at 000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxx X. Xxxxxx, M.D., Chief Executive Officer, with a copy to:
Xxxxxx & Xxxxxxx, 0000 Xxxxxxx Xxxx Xxxx, Xxxxxxx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000, Attention: Xxxx X. Xxxxxx, Esq.
14. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
15. CONSTRUCTION. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to its choice of law or conflict of laws principles.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
35
17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Warrant Agreement
and the Representative's Warrant Agreement constitute the entire agreement of
the parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
PROSPECT MEDICAL HOLDINGS, INC.
By:
-----------------------------------
Xxxxx X. Xxxxxx, M.D.,
Chief Executive Officer
Confirmed and accepted as of
the date first above written.
SECURITY CAPITAL TRADING, INC.
For itself and as Representative of the several Underwriters named in Schedule A
hereto.
By:
-----------------------------
Xxxxxx X. Xxxxxxxx, President
36
SCHEDULE A
NUMBER OF SHARES NUMBER OF REDEEMABLE
NAME OF UNDERWRITERS TO BE PURCHASED WARRANTS TO BE PURCHASED
-------------------- ---------------- ------------------------
Security Capital Trading, Inc.
--------- ---------
Total 3,000,000 3,000,000
A-1
EXHIBIT A
________________, 1998
Security Capital Trading, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
The undersigned understands that Security Capital Trading, Inc. (the
"Representative") is considering acting as Representative for an initial public
offering (the "Offering") of securities of Prospect Medical Holdings, Inc., a
Delaware corporation (the "Company"), pursuant to a registration statement on
Form S-1 (the "Registration Statement") filed with the Securities and Exchange
Commission (the "Commission").
The Representative has informed the Company that the Representative's
obligation to execute an underwriting agreement with respect to the Offering,
and to purchase the securities which the Company will be offering to the public,
will be conditioned upon the Company's receipt of agreements from all persons or
entities who, immediately prior to the declaration of effectiveness of the
Registration Statement are (a) holders of 5% or more of the shares of the
Company's common stock, par value $.01 per share (the "Common Stock"); and/or
(b) holders of securities exercisable or exchangeable for or convertible into 5%
or more of the shares of Common Stock, regarding the imposition of restrictions
on the sale or other disposition of their respective securities.
In consideration of the foregoing, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees that the undersigned will not, for a period of 12 months
following the date the Registration Statement is declared effective by the
Commission, without the prior written consent of the Company and the
Representative, directly or indirectly, offer, sell, transfer, pledge, assign,
hypothecate or otherwise encumber any of the shares of Common Stock or
securities exercisable or exchangeable for or convertible into shares of Common
Stock ("Derivative Securities") held by the undersigned, or otherwise dispose of
any interest therein under Rule 144 promulgated by the Commission or otherwise,
except as to transfers by gift or under the laws of descent and distribution
when the donee or transferee enters into an agreement of like tenor herewith.
The number of shares of Common Stock and Derivative Securities to which
this agreement relates is set forth below.
Very truly yours,
--------------------------------
Number of shares of Common Stock held:
--------------------------------------
Number and type of Derivative Securities held:
--------------------------------