1,000,000 Shares
PATCOMM CORPORATION
UNDERWRITING AGREEMENT
Dated: , 1997
Xxxxxx Xxxxxxx, Inc.
as the Underwriter named herein
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, X.X. 00000
Dear Sirs:
The undersigned, Patcomm Corporation, a Nevada corporation, (herein called
the "Company"), hereby confirms its agreement with Xxxxxx Xxxxxxx, Inc. (the
"Underwriter") as follows:
1. Description of Shares. The Company has authorized by appropriate
corporate action, and proposes to issue 1,000,000 shares of common stock of the
Company, $.001 par value (hereinafter called the "Shares") as more fully
described in the Registration Statement and Prospectus referred to hereinafter.
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with the Underwriter that:
(a) A registration statement on Form SB-2 with respect to the Shares,
including a preliminary prospectus, copies of which have heretofore been
delivered by the Company to the Underwriter, has been carefully prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (hereinafter called the "Act"), and the Rules and Regulations of the
Securities and Exchange Commission (hereinafter called the "Commission") under
such Act, and has been filed with the Commission (File No. ). On or prior to the
effective date of such registration statement, one or more amendments to such
registration statement, copies of which have heretofore been or will be
delivered to the Underwriter, will have been so prepared and filed including a
final prospectus, in the form heretofore delivered to the Underwriter. Such
registration statement (including all exhibits thereto) as finally amended prior
to the effective date thereof, each related preliminary prospectus, and the
final prospectus as filed pursuant to Rule 424(b) under the Act, are hereby
respectively referred to as the "Registration Statement", the "Preliminary
Prospectus" and the "Prospectus".
(b) When the Registration Statement becomes effective and at all times
subsequent thereto up to and including the Closing Date (as defined in Section 3
hereof), (i) the Registration Statement and the Prospectus and any amendments or
supplements thereto will contain all statements which are required to be stated
therein by the Act and the Rules and Regulations of the Commission thereunder
and will in all respects conform to the requirements of the Act and such Rules
and Regulations, and (ii) neither the Registration Statement nor the Prospectus
nor any amendment or supplement thereto will include any untrue statement of a
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material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that the Company makes no representations or warranties as to information
contained in or omitted from the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by the Underwriter expressly for use in the
preparation thereof.
(c) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Nevada, with all corporate and
other power and authority necessary to carry on its business; and the Company is
qualified and in good standing in all other jurisdictions in which the nature of
its business requires such qualification. The Company has no subsidiaries.
(d) The consummation of the transactions herein contemplated will not
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company is a party or by which it or any of
its properties is bound, or of its Certificate of Incorporation, or By-laws, or
any order, rule or regulation applicable to the Company or any of its
properties, of any court or other governmental body.
(e) The Company has full power and authority to authorize, issue and sell
the Shares on the terms and conditions herein set forth, and has taken all
corporate action necessary therefor; no consent, approval, authorization or
other order of any regulatory authority is required for such authorization,
issue or sale, except as may be required under the Act or state securities or
blue sky laws. This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and legally binding agreement of the Company
enforceable in accordance with its terms.
(f) The Shares and the authorized capitalization of the Company conform to
the description thereof contained in the Registration Statement and Prospectus.
The outstanding shares of capital stock are, and the Shares issuable pursuant to
the public offering contemplated hereby will upon such issuance be, duly
authorized and issued and fully paid and non-assessable. There are no options,
rights of conversion, indebtedness or calls in equity other than as disclosed in
the Prospectus and Registration Statement.
(g) Except as set forth or contemplated in the Registration Statement and
Prospectus, subsequent to the respective date as of which information is given
in the Registration Statement and the Prospectus, the Company has not incurred
any material liabilities or obligations, direct or contingent, or entered into
any material transactions, not in the ordinary course of business, and there has
not been any material change in the capital stock or funded debt of the Company,
or any material adverse change in the condition (financial or other) or results
of operations of the Company.
(h) The financial statements (audited and unaudited) set forth in the
Registration Statement and Prospectus fairly present the financial condition of
the Company and the results of its operations as of the dates and for the
periods therein specified; and said financial statements (including the related
notes and schedules) have been prepared in accordance with generally accepted
accounting principles which have been consistently applied throughout the
periods covered thereby.
(i) The accountants whose opinion or opinions is or are included in the
Registration Statement are independent public accountants within the meaning of
the Act and the Rules Regulations of the Commission thereunder.
(j) Except as set forth in the Prospectus, there is not pending any action,
suit or other proceeding to which the Company is a party or of which any
property of the Company is subject, before or by any court or other governmental
body, which might result in any material adverse change in the condition,
business or prospects of the Company, or might materially adversely affect the
properties or assets of the Company; and, except as indicated in the Prospectus,
no such proceeding is known by the Company to be threatened or contemplated.
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(k) The Company knows of no claim for services, either in the nature of a
finder's fee, brokerage fee or otherwise, with respect to this financing,
whether or not heretofore satisfied, for which it or the Underwriters or any of
them may be responsible, other than as expressly disclosed in the Prospectus.
(l) On the effective date of the Registration Statement, the outstanding
capital stock of the Company will consist of not more than _________ shares of
Common Stock, $0.001 par value.
3. Employment of the Underwriter. On the basis of the representations and
warranties herein contained, but subject to the terms and conditions herein set
forth:
(a) The Company hereby employs the Underwriter as its exclusive agent to
sell for its account 1,000,000 Shares as defined in Section 1 hereof, on a "best
efforts, all or none" basis as to all such shares.
(b) In the event that less than 1,000,000 Shares are sold during the
offering period, this offering will not be completed, none of the Shares will be
sold, and all proceeds will be returned in full, with interest in accordance
with the Escrow Agreement between the parties hereto and European American Bank,
to subscribers, not later than 7 business days following the expiration of
ninety (90) days (or 180 days, as the case may be) from the effective date as
set forth in the prospectus described herein. The escrow agent must first be
provided with a properly executed W-9.
(c) The Shares shall be offered to the general public at the initial public
offering price of $5.75 per Share.
(d) All funds received from subscribers shall be held in escrow with
European American Bank (the "Escrow Agent") pursuant to an Escrow Agreement
annexed as an Exhibit to the Registration Statement. Checks tendered for
subscription of Shares shall be made payable to the Escrow Agent and will be
transmitted to the Escrow Agent by noon of the next business day following
receipt.
(e) The Company agrees to issue or have the Shares issued in such names and
denominations as may be specified by the Underwriter and to deliver the Shares
on the Closing Date against payment to the company at $.5.175 per Share, less
non-accountable expenses as set forth in Paragraph 4(e).
(f) If all of the Shares are sold, the Underwriter shall be entitled to
receive as compensation (a) a commission of $.575 per Share with respect to all
Shares sold, which compensation the Underwriter shall be entitled to deduct and
retain from the proceeds of the sale of the Shares prior to transmittal of
payment to the Company.
(g) The Underwriter and the Company, by mutual agreement may, at any time
prior to Closing Date, direct that the Escrow Agent return funds to any or all
subscribers.
4. Covenants of the Company. The Company further covenants and agrees with
the Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective and will not at any time, whether before or after
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the effective date, file any amendment to the Registration Statement or
supplement to the Prospectus of which the Underwriter shall not previously have
been advised and furnished with a copy or to which the Underwriter shall have
reasonably objected in writing or which is not in compliance with the Act, or
the Rules and Regulations of the Commission thereunder.
(b) The Company will notify the Underwriter immediately and confirm in
writing (i) when the Registration Statement and any post-effective amendment
thereto becomes effective, (ii) of the issuance of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or of the Prospectus or of the
initiation of any proceedings for such purposes, and (iii) of the receipt of any
comments (in writing or orally) from the Commission in respect of the
Registration Statement or Prospectus. If the Commission shall enter a stop order
or any order preventing or suspending the use of any Preliminary Prospectus or
of the Prospectus at any time, or shall initiate any proceedings for such
purpose, the Company will make every reasonable effort to prevent the issuance
of such order and if issued, to obtain the withdrawal thereof.
(c) Within the time during which a prospectus relating to the Shares and/or
the Underwriter Warrant Shares (or the exercise of any Shares or Underwriter
Warrants) is required to be delivered under the Act, the Company will comply
with all requirements imposed upon it by the Act, as now and hereafter amended,
and by the Rules and Regulations of the Commission thereunder, from time to time
in force, so far as necessary to permit the continuance of sales or dealings in
the Shares, (or the Shares to be acquired upon the exercise of the Underwriter
Warrants) as contemplated by the provisions hereof and the Prospectus; and if
during such period any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in the
light of the circumstances then existing, not misleading, or if during such
period it is necessary to amend or supplement the Prospectus to comply with the
Act, the Company will promptly notify the Underwriter and will amend or
supplement the Prospectus (in form reasonably satisfactory to your counsel and
at the expense of the Company) so as to correct such statement or omission or
effect such compliance.
(d) The Company will cooperate with the Underwriter and will take all
necessary action, and furnish to whomever the Underwriter may direct such proper
information, as may be lawfully required in qualifying the Shares for offering
and sale under the securities or blue sky law of such states as the Underwriter
may designate, and in continuing such qualifications in effect so long as
required for the distribution; provided that the Company shall not be obligated
to qualify as a foreign corporation to do business under the laws of any such
state or to submit to any requirements which it reasonably deems unduly
burdensome.
(e) The Company will pay any and all fees, taxes and expenses incident to
the performance of its obligations under this Underwriting Agreement, including,
but not limited to, expenses and taxes incident to the issuance and delivery to
the Underwriter of the Shares, Underwriter's Warrants and Underwriter's Warrant
Shares, if any, to be sold to the Underwriter pursuant to Sections 3 and 4
hereof; all fees and disbursements of counsel and accountants for the Company;
expenses and filing fees incident to the preparation, printing, delivery,
shipment and filing with Commission, and state blue sky authorities of the
Registration Statement and all exhibits thereto and the Prospectus, and any
amendments or supplements thereto; fees of blue sky counsel equal to $15,000. to
cover the fees attendant to the qualification of the Shares in a maximum of
twenty (20) states or jurisdictions (which counsel is to be designated by the
Underwriter and who may be Underwriter's counsel). The Company will further pay
at closing for expenses incurred in connection with this offering on a
non-accountable basis, an amount equal to 3% of the aggregate public offering.
The Company will further pay at closing a financial consulting fee of $108,000.
pursuant to the terms of a Financial Consulting Agreement between the Company
and the Underwriter. It is expressly understood by and between the parties
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hereto that if the transactions referred to herein are not consummated the
Company will be under no obligation to reimburse the Underwriter, on an
accountable or non-accountable basis, for any fees or expenses incurred by the
Underwriter in connection with this offering.
(f) The Company will apply the net proceeds from the sale of the Shares
substantially as set forth under the caption "Use of Proceeds" in the
Prospectus.
(g) The Company will deliver to the Underwriter as promptly as practicable
three signed copies of the Registration Statement and all amendments thereto,
including all exhibits filed therewith or incorporated therein by reference, and
signed consents, certificates and opinions of accountants and of any other
persons named in the Registration Statement as having prepared, certified or
reviewed any part thereof, and will deliver to the Underwriter such number of
unsigned copies of the Registration Statements, without exhibits, and of all
amendments thereto, as the Underwriter may reasonably request. The Company will
deliver to the Underwriter or upon its order, on the effective date of the
Registration Statement and thereafter, subject to the provisions of Section 4(c)
hereof, from time to time, as many copies of the Prospectus in final form or as
thereafter amended or supplemented, as the Underwriter may reasonably request.
The Company will deliver to the Underwriter, promptly after the Closing Date,
three (3) bound volumes of all of the documents, papers, exhibits correspondence
and records forming the materials involved in this public offering.
(h) The Company will make generally available to its security holders, as
soon as is practicable to do so (in no event later than fifteen months after the
effective date of the Registration Statement), an Earning Statement of the
Company (which need not be audited) covering a period of at least twelve months
beginning not later than the first day of the fiscal quarter next succeeding
such effective date which shall satisfy the provisions of Section 11(a) of the
Act.
(i) For a period of at least five years from the date hereof, the Company
will supply to the Underwriter, (i) as soon as practicable after the end of each
fiscal year an annual report of the Company and its consolidated subsidiaries
(if any) for such period, (iii) copies of such financial statements and reports
as the Company may, from time to time, furnish generally to holders of any class
of its stock, (iv) copies of each report which it shall be required to file with
the Commission or any securities exchange at the same time as such reports are
filed and (v) copies of the daily stock transfer sheets of the Company, and (vi)
from time to time such other information concerning the Company as the
Underwriter may reasonably request.
(j) Simultaneously with the purchase and payment by the Underwriter for the
Shares on the Closing Date the Company has agreed to sell to the Underwriter, at
the closing of this offering and for an aggregate purchase price of $.001 per
warrant, warrants to purchase one share of Common Stock for each 10 shares sold
in the offering (the "Underwriter's Warrants"). For a period of one year
following the date of this Prospectus, the Underwriter's Warrants are restricted
from sale, transfer, assignment or hypothecation, except to the Underwriters and
persons who are officers or partners of the Underwriters. In addition, neither
the Underwriter's Warrants nor the underlying shares of Common Stock may be sold
without registration or an exemption from the registration provisions of the
Securities Act. The Underwriter's Warrants are exercisable at a price of 120% of
the public offering price (i.e., $6.90 per share, assuming a price of $5.75 per
share in this offering) for a period of four years beginning one year from the
date of this Prospectus. The exercise price of the Underwriter's Warrants and
the number of shares of Common Stock underlying said Underwriter's Warrants are
subject to adjustment under certain circumstances to prevent dilution to the
holders in the event of stock dividends, stock splits, stock combinations or
upon a sale of assets, merger or consolidation.
The Underwriter and persons to whom the Underwriter may transfer the
Underwriter's Warrants have the right to join in any registration statement or
5
offering filed by the Company under the Securities Act to register the
Underwriter's Warrants and underlying securities for a period of four years
commencing one year from the date of this Prospectus. In addition, for a period
of six years commencing one year from the date of this Prospectus, the Company
has agreed, upon request of the holders of not less than 50% of the
Underwriter's Warrants or underlying securities, to file, not more than once, a
registration statement under the Securities Act registering or qualifying the
Underwriter's Warrants and/or the underlying shares of Common Stock at the
Company's expense. All expenses of such registration or qualification (except
for selling commissions and expenses and fees and expenses of counsel for the
selling security holders) including, but not limited to, legal, accounting,
state and federal filing fees and the cost of printing prospectuses, will be
borne by the Company, which will be a substantial cost to the Company.
Both the Underwriter's Warrants and any profits realized by the Underwriter
on the sale of the shares of Common Stock underlying the Underwriter's Warrants
may be considered additional underwriting compensation.
(k) The Company grants to the undersigned a right of first refusal for a
period of two (2) years after the closing date of the Public Offering for any
public sale of securities of the Company to be made by the company or any
subsidiary and/or its principal shareholders.
(l) The Company shall, within thirty (30) days after the closing of the
public offering, apply for listing in Standard & Poors Corporation Reports and
shall use its best efforts to have the Company continuously listed in such
reports, for at least five (5) years from the date of the Closing Date.
(m) The Company shall cooperate with the Underwriter in making available to
their Underwriter such information as it may request in making an investigation
of the Company and its affairs.
(n) At all times, so long as any of the Underwriter Warrants are
outstanding, the Company will have reserved authorized but unissued shares,
available for immediate issuance in amounts necessary for the exercise of all
Underwriter Warrants then outstanding.
(o) The Company will pay the fees and expenses (but not transfer taxes, if
any) of the Company's stock transfer agents, warrant agents, and registrar (if
any), without charge to stockholders and warrant holders, for not less than five
years after the effective date of the Registration Statement.
5. Conditions of the Underwriters' Obligation. The Underwriter's
obligations to purchase and pay for the Shares as provided herein, shall be
subject to the accuracy, as of the date hereof and as of the Closing Date (as if
made on the Closing Date), of the representations and warranties of the Company
herein, to the accuracy of statements of Company officers made in certificates
delivered pursuant to the provisions hereof, to the performance by the Company
of its obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later than
5:00 p.m., New York City time on the day following the date of this Agreement,
unless a later time and date be agreed to by the Underwriter; and no stop order
suspending the effectiveness of the Registration Statement, or order preventing
or suspending the use of any Preliminary Prospectus or of the Prospectus, shall
have been issued and no proceedings for such purpose shall have been instituted
or be pending or, to the knowledge of the Company or the Underwriter, shall be
contemplated by the Commission; and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of the
Underwriter's Counsel.
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(b) On the Closing Date the Underwriter shall have received an opinion of
Xxxxxxxxx & Associates, P.C. counsel to the Company, dated the Closing Date, to
the effect that:
(i) This Agreement and the Warrant Agreement have been duly
authorized, executed and delivered by the Company and constitute the legal,
valid and binding obligations of the Company enforceable in accordance with
their terms (except insofar as enforcement of the indemnification and
contribution provisions thereof may be limited by applicable federal securities
laws or principles of public policy and subject to bankruptcy, insolvency,
moratorium, reorganization and similar laws affecting creditors' rights
generally and to general principles of equity). The Company has full corporate
power and authority to enter into this Agreement and to sell, issue and deliver
the Shares, Underwriter Warrants and all securities underlying the Underwriter
Warrants;
(ii) The Company has an authorized and outstanding capital stock as
set forth under "Capitalization" in the Prospectus; all of the Company's
outstanding shares have been dully authorized and validly issued, and are fully
paid and non assessable; all of the securities sold and the Underwriter Warrants
to be issued by the Company pursuant to this Agreement have been duly and
validly authorized, issued and delivered and are fully paid and non assessable,
and conform to the description thereof in the Prospectus and such description
conforms to the rights duly set forth in the Certificate of Incorporation of the
Company; that this Agreement and the Underwriter Warrants are, when issued in
accordance with the provisions of this Agreement, be valid and legally binding
obligations of the Company in accordance with their respective terms (subject to
bankruptcy, insolvency, moratorium, reorganization and similar laws affecting
creditors' rights generally and to general principles of equity); the securities
underlying the Underwriter Warrants have been validly authorized and reserved
for issuance and any shares when issued in accordance with the terms of the
Underwriter Warrants will be validly issued and will be fully paid and
non-assessable; the holders thereof are not, and will not be, subject to any
personal liability by reason of being holders thereof; and none of such
securities has been issued in violation of the preemptive rights or any other
rights of any shareholder of the Company and no shareholder has any preemptive
right to subscribe for or to purchase any such Shares, Underwriter Warrants or
securities underlying the Underwriter Warrants;
(iii) The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Nevada, has full corporate
power and authority to conduct its business as presently conducted and as
described in the Prospectus and to own its properties and is duly qualified to
do business and is in good standing in such jurisdiction wherein the property
owned or leased by it makes such qualification necessary (except where failure
to so qualify would not have a material adverse effect on the Company);
(iv) The Registration Statement has become effective under the
Securities Act and, to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding for that purpose has been instituted or is pending or contemplated
by the Commission;
(v) The Registration Statement and the Prospectus, and any amendment
or supplement thereto, comply as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations promulgated
thereunder (except that such counsel need express no opinion as to the financial
statements and schedules and financial data included therein);
(vi) Such counsel has assisted in the preparation of the Registration
Statement and the Prospectus and no fact has come to the attention of such
counsel which leads such counsel to believe that, either as of the Effective
Date or the date of the opinion, (a) either the Registration Statement or the
Prospectus or any amendment or supplement thereto (except for the financial
7
statements and schedules and financial data included therein, as to which such
counsel need express no opinion) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (b) there is any legal,
governmental or administrative proceeding pending, threatened or contemplated to
which the Company is or may become a party or of which any of its property is or
may become subject, or any basis for any legal, governmental or administrative
proceeding, required to be described in the Prospectus which is not described as
required, or (c) there is any contract or document of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required;
(vii) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated therein have not
and will not conflict with or result in a breach or violation of any of the
terms or provisions of, constitute a default under, the Certificate of
Incorporation or By-Laws of the Company or any indenture, mortgage, deed of
trust, note agreement or other agreement or instrument known to such counsel to
which the Company is a party or by which it is bound or to which any or its
property is subject, or any federal or state statute, law, rule or regulation,
or any judgment, order or decree of any court or governmental agency or body
known to such counsel having jurisdiction over the Company or any of its
property;
(viii) No consent, approval, authorization or order of, or declaration
or filing with, any government, governmental instrumentality or court, is
required for the valid consummation by the Company of the transactions
contemplated by this Agreement except such as may be required under the
Securities Act or any state securities or "blue sky" laws in connection with the
purchase, sale and distribution of the Shares; and
(ix) To the best of such counsel's knowledge after due inquiry, the
Company possesses all permits, certificates of compliance, approvals, licenses,
waivers, consents and other rights from governmental authorities which are
requisite for the material conduct of its business as presently conducted and as
described in the Prospectus (except such as in the aggregate would not
materially affect the business or operations of the Company), for the
consummation of the transactions contemplated in this Agreement and for the
offering contemplated by the Prospectus, such permit, certificate of compliance,
approval, license, waiver, consent and right is valid and in full force and
effect.
(c) On the Closing Date, the Underwriters shall have received from Winter,
Sheifley, and Associates, P.C., a letter dated as of such date, to the effect
that:
(i) They are independent accountants with respect to the Company
within the meaning of the Act and the applicable published Rules and Regulations
thereunder;
(ii) In their opinion, the financial statement (including the
schedules, if any) in the Registration Statement examined by such firm, comply
as to form in all material respects with applicable accounting requirements of
the Act and the published Rules and Regulations thereunder with respect to
registration statements on Form SB-2; and
(iii) On the basis of procedures (in accordance with generally
accepted accounting standards) consisting of reading the minutes of meetings of
the shareholders and the Board of Directors of the Company since the date of the
latest audited balance sheet as set forth in the minute book through a specified
date not more than five business days prior to the Closing Date, reading the
unaudited interim financial statements (if any), including the schedules (if
any), of the Company included in the Registration Statement and making inquires
of certain officials of the Company who have responsibility for financial and
8
accounting matters regarding the specific items for which representations are
requested below, nothing has come to their attention as a result of the
foregoing procedures that caused them to believe that (a) the unaudited
financial statements (if any), including the schedules (if any), of the Company
included in the Registration Statement do not comply as to form in all material
respects with applicable accounting requirements of the Act and the published
Rules and Regulations thereunder; (b) said financial statements including the
schedules (if any), are not presented fairly, in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited financial statements, or (c) during the period from the date
of the latest balance sheet covered by their report(s) included in the
Registration Statement to a specific date not more than five business days prior
to the Closing Date, there has been any change in the capital stock or long-term
debt of the Company as compared with the amounts shown in the balance sheet
included in the Registration Statement, except as set forth in or contemplated
by the Registration Statement, and for the period from the date of the last
balance sheet contained in the Prospectus to a specified date not more than five
days prior to the date of such letter, there has been any decrease, except as
described in such letter and previously discussed with the Underwriter, in
consolidated gross revenues, net income, consolidated assets or total
stockholders' equity as compared with the amounts shown on such balance sheet,
except for such changes or decreases which the Registration Statement discloses
have occurred or may occur.
(d) The Underwriter shall have received a certificate or certificates,
dated the Closing Date, executed by the Chairman of the Board or the President
or a Vice President of the Company and by a principal financial or accounting
officer of the Company to the effect that, to the best of their knowledge based
on a reasonable investigation:
(i) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceeding for that purpose have been
instituted or are pending or contemplated under the Act;
(ii) Neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statement therein not misleading and since the effective date of the
Registration Statement, there has occurred no event required to be set forth in
an amendment or supplemented Prospectus which has not been so set forth;
(iii) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, the Company has not incurred any material liabilities or
obligations, direct or contingent, or entered into any material transaction, not
in the ordinary course of business, and there has not been any material change
in the capital stock or funded debt of the Company, or any material adverse
change in the condition (financial or other) or results of operations of the
Company.
(iv) There are no legal proceedings pending or threatened against the
Company of a character effecting the validity of this Agreement or required to
be disclosed in the Prospectus which are not disclosed therein; there are no
transactions or contracts which are required to be filed as exhibits to the
Registration Statement which are not so filed;
(v) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
sustained any material loss or damage to its properties, whether or not insured;
and
(vi) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date; and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date.
9
(e) All corporate proceedings and related matters in connection with the
organization of the Company and the qualification, authorization, issuance, sale
and delivery of the Shares shall be satisfactory to the Law Offices of Xxxx X.
Xxxxxx, Esq., counsel to the Underwriter, and such counsel shall have been
furnished with such papers and information as he may reasonably have requested
in this connection.
(f) All such opinions, letters, certificates and documents will be in
compliance with the provisions hereof only if they are satisfactory to the
Underwriter and to its counsel. The Company will furnish the Underwriter with
such signed or conformed copies of such opinions, letters, certificates and
documents and with such additional documents, certificates or letters as the
Underwriter may reasonably request.
(g) If any condition to the Underwriter's obligations hereunder to be
satisfied at or prior to the Closing Date is not so satisfied, the Underwriter
may terminate this Agreement without liability on their part or on the part of
the Company, except for the expenses to be paid or reimbursed by the Company
pursuant to Section 4(e) of this Agreement and except for any liability under
Section 6 of this Agreement.
6. Indemnification.
(a) The Company will indemnify and hold harmless the Underwriter and each
person, if any, who controls the Underwriter within the meaning of the Act
against any losses, claims, damages or liabilities, joint or several, to which
it or such controlling person may become subject, under the Act or otherwise,
insofar as such loses, claims, damages or liabilities ( or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or in any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Shares under the securities laws thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and will reimburse it and each such controlling person for any legal or other
expenses reasonably incurred by it or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, such Preliminary Prospectus, the
Prospectus or such amendment or supplement, or in such blue sky application or
such other document, in reliance upon and in conformity with written information
furnished to the Company by the Underwriter specifically for use in the
preparation thereof; and provided, further, that the Company will not be liable
under this indemnity agreement, insofar as it relates to any Preliminary
Prospectus, to the extent that any such loss, claim, damage, liability or action
results from the fact that the Underwriter sold Shares to a person to whom there
was not sent or given, at or prior to the written confirmation of such sales, a
copy of the Prospectus (or of the Prospectus as then amended or supplemented if
the Company had previously furnished copies thereof to you). This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
(b) The Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Company or any such director, officer or controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in the
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Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or in any blue sky application or other
document executed by the Company specifically for that purpose filed in any
state or other jurisdiction in order to qualify any or all of the Shares under
the securities laws thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, such Preliminary Prospectus, the Prospectus or such amendment or
supplement, or in such blue sky application or such other document, in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter specifically for use in the preparation thereof; and will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which an Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 6, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 6. In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party, similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
7. Contribution.
(a) In order to provide for just and equitable contribution under the Act
in any case in which (i) an Underwriter (or any person who controls the
Underwriter within the meaning of the Act) makes claim for indemnification
pursuant to Paragraph 6 (a) hereof but it is judicially determined by the entry
of 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 Paragraph 6 (a) provides for indemnification in such case or (ii)
contribution under the Act may be required on the part of the Underwriter or any
such controlling person in circumstances for which indemnification is provided
under Paragraph 6(b), then, and in each such case, the Company and the
Underwriter shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Underwriter is responsible for an aggregate of 10%
(being the amount of the Underwriter commission) and the Company is responsible
for the remaining portion; provided, however, that, in any such case, no person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(b) Promptly after receipt by any party to this Agreement of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party (the
"contributing party"), notify the contributing party of the commencement
thereof; but the omission so to notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution under the Act. In case any such action, suit or proceeding is
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brought against any party, any such party notifies a contributing party of the
commencement thereof, the contributing party will be entitled to participate
with the notifying party and any other contributing party similarly notified.
8. Representations and Indemnities to Survive Delivery. All representations
and warranties of the Company contained herein and in the certificate or
certificates delivered pursuant to Section 5(d) hereof, and the indemnity
agreements contained in Section 6 and 7 hereof, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
the Underwriter or any controlling person, or by or on behalf of the Company or
any officer, director or controlling person, or any termination of this
Agreement, shall survive delivery of any payment for the Shares.
9. Effective Date of this Agreement and Termination Thereof.
(a) This Agreement shall become effective at 10:00 a.m., New York City
time, on the first full business day after the Registration Statement has become
effective, or at such earlier time after the Registration Statement has become
effective as the Underwriter in its discretion shall first release the Shares
for sale to the public. For the purposes of this Section 9, the Shares shall be
deemed to have been released for sale to the public upon release by the
Underwriter of the publication of a newspaper advertisement relating to the
Shares or upon release by the Underwriter of telegrams offering the Shares for
sale, whichever shall first occur. The Underwriter or the Company may prevent
this Agreement from becoming effective without liability of any party to any
other party, except as noted below, by giving the notice hereinafter specified
at or before the time this Agreement becomes effective; provided, however, that
the provisions of this Section 6 and of Section 4(e) hereof shall at all times
be effective.
(b) The Underwriter shall have the right to terminate this Agreement by
giving the notice hereinafter specified at any time at or prior to the Closing
Date if (i) the Company shall have failed, refused or been unable, at or prior
to the Closing Date, to perform any agreement on its part or be performed
hereunder, or because any other condition precedent to the Underwriter's
obligation hereunder required to be fulfilled by the Company is not fulfilled,
or if (ii) trading on the New York Stock Exchange or Over-the-Counter Markets
for the trading of securities shall have been generally suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been generally required, on the Over-the-Counter
Markets, by the New York Stock Exchange or the National Association of
Securities Dealers, Inc., or by order of the Commission or any other
governmental authority having jurisdiction, or if there has been a substantial
adverse change in general market or economic conditions, or if a banking
moratorium shall have been declared by Federal or New York authorities, or if an
outbreak of hostilities or other national or international calamity of such
nature as to disorganize the securities markets in the United States shall have
occurred since the execution hereof.
If the Underwriter elects to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 9, the Underwriter
shall notify the Company promptly by telephone or telegram, confirmed by letter.
If the Company elects to prevent this Agreement from becoming effective, the
Company shall notify the Underwriter promptly by telephone or telegram,
confirmed by letter.
10. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to the Underwriter shall
be mailed, delivered or telegraphed and confirmed to Xxxxxx Xxxxxxx, Inc. 000
Xxxxxxx Xxxxxx, Xxx. 000, Xxx Xxxx, N.Y. 10017, with a copy to Xxxx X. Xxxxxx,
Esq., 000 Xxxxx Xxxxxx, Xxxxxxx, X.X. 00000 or if sent to the Company shall be
mailed, delivered or telegraphed and confirmed to it at 0 Xxxxxx Xxxxx, X000,
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St. Xxxxx, N.Y., 11780 with a copy to Xxxxxxxxx & Associates, P.C., 0000
Xxxxxxxxxxx Xxxxxx, Xxx. 0000, Xxxxxx, XX 00000.
11. Parties. This Agreement shall insure to the benefit of and be binding
upon the Underwriter and the Company and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any person or corporation, other than the parties hereto
and their respective successors and assigns, and the controlling persons and the
officers and directors referred to in Section 6 hereof, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained, this Agreement and all conditions and provision hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective successors and assigns, and said selling security
holders and said controlling persons and said officers and directors, and for
the benefit of no other person or corporation. No purchaser of any of the Shares
from any Underwriter shall be construed a successor or assign by reason merely
of such purchase.
12. Information Furnished by Underwriters. The statement set forth in the
last paragraph on the cover page and under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus and in blue sky reports of sales,
if any, constitute written information furnished by or on behalf of the
Underwriter referred to in Sections 2(b), 6(a) and 6(b) hereof.
13. Miscellaneous. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York and the
Company hereby consents and will submit to the jurisdiction of the courts of the
State of New York and if any federal court sitting in the City of New York with
respect to controversies arising under this Agreement.
If the foregoing correctly sets forth the understanding between the Company
and the Underwriter, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between the
Company and the Underwriter.
Very truly yours,
PATCOMM CORPORATION
By:
----------------------------------
Xxxxx Define, President
Accepted as of the date first above written:
XXXXXX XXXXXXX, INC.
By:
--------------------------------
Xxxx Xxxxxx, President
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