Exhibit 1.1
Converted Organics Inc.
UNDERWRITING AGREEMENT
dated February 13, 2007
XXXXXXX INVESTMENT COMPANY, INC.
UNDERWRITING AGREEMENT
February 13, 2007
Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Ladies and Gentlemen:
Introductory. Converted Organics Inc., a Delaware corporation (the
"Company") proposes to issue and sell to Xxxxxxx Investment Company, Inc. (the
"Underwriter") an aggregate of 1,800,000 Units, as listed on Schedule A, each
Unit consisting of (i) one share of the Company's common stock ("Common Stock"),
(ii) one redeemable Class A warrant to purchase one share of Common Stock (each
a "Class A Warrant" and, collectively, the "Class A Warrants"), and (iii) one
non-redeemable Class B warrant, to purchase one share of Common Stock (each a
"Class B Warrant" and, collectively, the "Class B Warrants" and, together with
the Class A Warrants, the "Warrants"). The Warrants are to be issued under the
terms of a Warrant Agreement (the "Warrant Agreement") by and between the
Company and Computershare Shareholder Services, Inc., as warrant agent (the
"Warrant Agent"), substantially in the form most recently filed as an exhibit to
the Registration Statement (hereinafter defined). The 1,800,000 Units to be sold
by the Company are collectively called the "Firm Units." In addition, the
Company has granted to the Underwriter an option to purchase up to an additional
270,000 Units (the "Optional Units"), as provided in Section 2. The Firm Units
and, if and to the extent such option is exercised, the Optional Units, are
collectively called the "Units."
The Company confirms its agreement with the Underwriter as follows:
SECTION 1. Representations and Warranties of the Company.
The Company represents, warrants and covenants to the Underwriter as
follows:
(a) Filing of the Registration Statement. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") a
registration statement on Form SB-2 (File No. 333-135174), which contains a form
of prospectus to be used in connection with the public offering and sale of the
Units. Such registration statement, as amended, including the financial
statements, exhibits and schedules thereto, and the documents incorporated by
reference in the prospectus contained in the registration statement at the time
such registration statement became effective, in the form in which it was
declared effective by the Commission under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (collectively, the
"Securities Act"), and including any required information deemed to be a part
thereof at the time of effectiveness pursuant to Rule 430A, Rule 430B or Rule
430C under the Securities Act, or pursuant to the Securities Exchange Act of
1934 and the rules and
regulations promulgated thereunder (collectively, the "Exchange Act"), is called
the "Registration Statement." Any registration statement filed by the Company
pursuant to Rule 462(b) under the Securities Act is called the "Rule 462(b)
Registration Statement," and from and after the date and time of filing of the
Rule 462(b) Registration Statement the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. Such prospectus, in the form
first filed pursuant to Rule 424(b) under the Securities Act after the date and
time that this Agreement is executed and delivered by the parties hereto (the
"Execution Time"), or, if no filing pursuant to Rule 424(b) under the Securities
Act is required, the form of final prospectus relating to the Units included in
the Registration Statement at the effective date of the Registration Statement,
is called the "Prospectus." All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, the Company's preliminary
prospectus included in the Registration Statement (each a "preliminary
prospectus"), the Prospectus, or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("XXXXX"). Any
reference herein to any preliminary prospectus or the Prospectus or any
supplement or amendment to either thereof shall be deemed to refer to and
include any documents incorporated by reference therein as of the date of such
reference.
(b) Compliance with Registration Requirements. The Registration Statement
has been declared effective by the Commission under the Securities Act. The
Company has complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order preventing
or suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement is in effect and no proceedings for such purpose have
been instituted or are pending or, to the best knowledge of the Company, are
contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied or will
comply in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to XXXXX (except as may be permitted by
Regulation S-T under the Securities Act), was identical in content to the copy
thereof delivered to the Underwriter for use in connection with the offer and
sale of the Units other than with respect to any artwork and graphics that were
not filed. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times until the expiration of the prospectus
delivery period required under Section 4(3) of the Securities Act, complied and
will comply in all material respects with the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. The Prospectus (including any Prospectus wrapper), as
amended or supplemented, as of its date and at all subsequent times until the
Underwriter has completed its distribution of the offering of the Units, did not
and will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to the
Underwriter furnished to the Company in writing by the Underwriter expressly for
use therein, it being understood and agreed
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that the only such information furnished by the Underwriter consists of the
information described as such in Section 8 hereof. There are no contracts or
other documents required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement that have not been described or filed as
required.
(c) Disclosure Package. The term "Disclosure Package" shall mean (i) the
preliminary prospectus, as amended or supplemented, (ii) the issuer free writing
prospectuses as defined in Rule 433 of the Securities Act (each, an "Issuer Free
Writing Prospectus"), if any, identified in Schedule B hereto, (iii) the pricing
terms set forth in Schedule C to this Agreement, and (iv) any other free writing
prospectus that the parties hereto shall hereafter expressly agree in writing to
treat as part of the Disclosure Package. As of 9:00 a.m. (Eastern time) on the
date of this Agreement (the "Initial Sale Time"), the Disclosure Package did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding sentence
does not apply to statements in or omissions from the Disclosure Package based
upon and in conformity with written information furnished to the Company by the
Underwriter specifically for use therein, it being understood and agreed that
the only such information furnished by or on behalf of the Underwriter consists
of the information described as such in Section 8 hereof.
(d) Company Not Ineligible Issuer. (i) At the time of filing the
Registration Statement and (ii) as of the date of the execution and delivery of
this Agreement (with such date being used as the determination date for purposes
of this clause (ii)), the Company was not and is not an Ineligible Issuer (as
defined in Rule 405 of the Securities Act), without taking account of any
determination by the Commission pursuant to Rule 405 of the Securities Act that
it is not necessary that the Company be considered an Ineligible Issuer.
(e) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus
includes any information that conflicts with the information contained in the
Registration Statement, including any document incorporated by reference therein
that has not been superseded or modified. The foregoing sentence does not apply
to statements in or omissions from any Issuer Free Writing Prospectus based upon
and in conformity with written information furnished to the Company by the
Underwriter specifically for use therein, it being understood and agreed that
the only such information furnished by the Underwriter consists of the
information described as such in Section 8 hereof.
(f) Offering Materials Furnished to Underwriter. The Company has delivered
to the Underwriter five complete manually signed copies of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and preliminary prospectuses and the Prospectus, as amended or supplemented, in
such quantities and at such places as the Underwriter has reasonably requested.
(g) Distribution of Offering Material by the Company. The Company has not
distributed and will not distribute, prior to the later of each Subsequent
Closing Date (as defined below) and the completion of the Underwriter's
distribution of the Units, any offering material in connection with the offering
and sale of the Units other than a preliminary prospectus, the
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Prospectus, any Issuer Free Writing Prospectus reviewed and consented to by the
Underwriter, and the Registration Statement.
(h) The Underwriting Agreement. This Agreement has been duly authorized (to
the extent applicable), executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms, except as
rights to indemnification hereunder may be limited by applicable law and except
as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.
(i) Authorization of the Common Stock; Validity of Warrants and Warrant
Agreement.
(i) The Common Stock included in the Units to be purchased by the
Underwriter from the Company (including units purchasable on exercise of
the Underwriter's overallotment option described in Section 2(c) and the
Underwriter's Warrants described in Section 2(h) has been duly authorized
and reserved for issuance and sale pursuant to this Agreement and, in the
case of Common Stock issuable on exercise of the Underwriter's Warrants,
the terms thereof and, when so issued and delivered by the Company, will be
validly issued, fully paid and nonassessable.
(ii) The Warrants included in the Units to be purchased by the Underwriter
from the Company have been duly and validly authorized by all required
corporate actions and will, when issued and delivered by the Company
pursuant to this Agreement, be validly executed and delivered by, and will
be valid and binding agreements of, the Company, enforceable in accordance
with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(iii) The Underwriter's Warrants have been duly and validly authorized by
all required corporate actions and will, when issued and delivered by the
Company pursuant to this Agreement, be validly executed and delivered by,
and will be valid and binding agreements of, the Company, enforceable in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles.
(iv) The Common Stock issuable on exercise of the Warrants has been duly
authorized and reserved for issuance and sale pursuant to their terms and,
when issued and delivered by the Company pursuant to such warrants, will be
validly issued, fully paid and nonassessable.
(v) The Warrant Agreement has been duly and validly authorized by all
required corporate actions of the Company and will, when executed and
delivered (and assuming due and valid execution by the Warrant Agent)
constitute a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as
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the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(vi) Each of the Warrants and the Underwriter's Warrants will, when issued,
possess rights, privileges, and characteristics as represented in the most
recent form of Warrant Agreement or Underwriter's Warrants, as the case may
be, filed as an exhibit to the Registration Statement.
(j) No Applicable Registration or Other Similar Rights. Except as fairly
and accurately described in the Registration Statement, there are no persons
with registration or other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by this Agreement, except for such rights as have been duly waived.
(k) No Material Adverse Change. Except as otherwise disclosed in the
Disclosure Package, subsequent to the respective dates as of which information
is given in the Disclosure Package: (i) there has been no material adverse
change, or any development that could reasonably be expected to result in a
material adverse change, in the condition, financial or otherwise, or in the
earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company or its wholly
owned subsidiary, Converted Organics of Woodbridge, LLC (any such change is
called a "Material Adverse Change"); (ii) the Company has not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company in
respect of its capital stock.
(l) Independent Accountants. Xxxxxx, Xxxxxxx & Xxxxx, LLP, who have
expressed their opinion with respect to the financial statements (which term as
used in this Agreement includes the related notes thereto) filed with the
Commission as a part of the Registration Statement and included in the
Disclosure Package and the Prospectus, is an independent registered public
accounting firm as required by the Securities Act and the Exchange Act.
(m) Preparation of the Financial Statements. Each of the historical and
pro-forma financial statements filed with the Commission as a part of or
incorporated by reference in the Registration Statement, and included or
incorporated by reference in the Disclosure Package and the Prospectus, presents
fairly the information provided as of and at the dates and for the periods
indicated. Such financial statements comply as to form with the applicable
accounting requirements of the Securities Act and have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included or incorporated by reference in the Registration
Statement. Each item of historical or pro-form financial data relating to the
operations, assets or liabilities of the Company and its predecessors set forth
in summary form in each of the preliminary prospectus and the Prospectus fairly
presents such information on a basis consistent with that of the complete
financial statements contained in the Registration Statement. The other
financial and statistical information and data included in the Registration
Statement, or included or
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incorporated by reference into the Disclosure Package or the Prospectus, are
accurately presented and, in the case of financial information and data,
prepared on a basis consistent with such financial statements and/or the books
and records of the Company and its subsidiary.
(n) Incorporation and Good Standing; Subsidiaries. The Company has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Disclosure Package and the Prospectus and to enter
into and perform its obligations under this Agreement. The Company is duly
qualified as a foreign corporation to transact business and is in good standing
in New Jersey and in each other jurisdiction in which such qualification is
required except for such jurisdictions where the failure to so qualify or to be
in good standing would not, individually or in the aggregate, result in a
Material Adverse Change. The Company does not own or control, directly or
indirectly, any corporation, association or other entity, other than Converted
Organics of Woodbridge, LLC.
(o) Capitalization and Other Capital Stock Matters. The authorized, issued
and outstanding capital stock of the Company is as set forth in the each of the
Disclosure Package and the Prospectus under the caption "Capitalization" (other
than for subsequent issuances, if any, pursuant to employee benefit plans
described in each of the Disclosure Package and the Prospectus or upon exercise
of outstanding options or warrants described in the Disclosure Package and
Prospectus, as the case may be). The Common Stock conforms, and, when issued and
delivered as provided in this Agreement, the Class A Warrants, the Class B
Warrants and the Underwriter's Warrants will comply in all material respects to
the description thereof contained in the each of the Disclosure Package and
Prospectus. All of the issued and outstanding shares of Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable and have
been issued in compliance with federal and state securities laws. None of the
outstanding shares of Common Stock were issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company. There are no authorized or outstanding
options, warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or
exercisable for, any capital stock of the Company other than those accurately
described in the Disclosure Package and the Prospectus. The description of the
Company's stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted thereunder, set forth or incorporated by
reference in each of the Disclosure Package and the Prospectus accurately and
fairly presents the information required to be disclosed with respect to such
plans, arrangements, options and rights. All of the membership interests of the
subsidiary of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly by the Company, free and
clear of all liens, encumbrances, equities or claims, except for such liens or
encumbrances on such membership interests to secure indebtedness of the
Company's subsidiary as described in the Disclosure Package or the Prospectus.
(p) Quotation. The Units, the Common Stock, the Class A Warrants and the
Class B Warrants have been approved for quotation on the Nasdaq Capital Market
under the symbols
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"COINU," "COIN," "COINW" and "COINZ," respectively, and on the Boston Stock
Exchange under the symbols "COINU," "COIN," "COINW" and "COINZ," respectively.
(q) Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required. Neither the Company nor its subsidiary is in violation of
its organizational documents or in default (or, with the giving of notice or
lapse of time, would be in default) ("Default") under any indenture, mortgage,
loan or credit agreement, note, contract, franchise, lease or other instrument
to which it is a party or by which it may be bound (including, without
limitation, such agreements and contracts filed as exhibits to the Registration
Statement or to which any of the property or assets of the Company or its
subsidiary is subject (each, an "Existing Instrument")), except for such
Defaults as would not, individually or in the aggregate, result in a Material
Adverse Change. The Company's execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby and by the
Disclosure Package and the Prospectus (i) have been duly authorized by all
necessary corporate action and will not result in any violation of the
provisions of the organizational documents of the Company, (ii) will not
conflict with or constitute a breach of, or Default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to, or require the consent of any other party to,
any Existing Instrument, except for such conflicts, breaches, Defaults, liens,
charges or encumbrances as would not, individually or in the aggregate, result
in a Material Adverse Change and (iii) will not result in any violation of any
law, administrative regulation or administrative or court decree applicable to
the Company. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental or regulatory
authority or agency, is required for the Company's execution, delivery and
performance of this Agreement and consummation of the transactions contemplated
hereby and by the Disclosure Package and the Prospectus, except the registration
or qualification of the Units under the Securities Act and applicable state
securities or blue sky laws and from the National Association of Securities
Dealers, Inc. (the "NASD").
(r) No Material Actions or Proceedings. Except as otherwise disclosed in
the Disclosure Package and the Prospectus, there are no legal or governmental
actions, suits or proceedings pending or, to the best of the Company's
knowledge, threatened (i) against or affecting the Company or its subsidiary,
(ii) which have as the subject thereof any officer or director (in such
capacities) of, or property owned or leased by, the Company or its subsidiary or
(iii) relating to environmental or discrimination matters, where in any such
case (A) there is a reasonable possibility that such action, suit or proceeding
might be determined adversely to the Company and (B) any such action, suit or
proceeding, if so determined adversely, would reasonably be expected to result
in a Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement. No material labor dispute with the
employees of the Company or its subsidiary exists or, to the best of the
Company's knowledge, is threatened or imminent except for such disputes as would
not, individually or in the aggregate, result in a Material Adverse Change.
(s) Intellectual Property Rights. The Company owns or possesses adequate
rights or licenses to use all patents, patent applications, trademarks, trade
names, copyrights, domain names, licenses, approvals, trade secrets and other
similar rights (collectively, "Intellectual Property Rights") reasonably
necessary to conduct its businesses as proposed to be conducted as set forth in
the Disclosure Package and the Prospectus; and the expected expiration of any of
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such Intellectual Property Rights would not result in a Material Adverse Change.
The Company has not received any notice of infringement or conflict with
asserted Intellectual Property Rights of others, which infringement or conflict,
if the subject of an unfavorable decision, would result in a Material Adverse
Change. The Company is not a party to or bound by any options, licenses or
agreements with respect to the Intellectual Property Rights of any other person
or entity that are required to be set forth in the Disclosure Package and the
Prospectus and are not described in all material respects. None of the
technology employed by the Company has been obtained or is being used by the
Company in violation of any contractual obligation binding on the Company or, to
the Company's knowledge, any of its officers, directors or employees or
otherwise in violation of the rights of any persons.
(t) All Necessary Permits, etc. Except as otherwise disclosed in the
Disclosure Package and the Prospectus or except as would not result in a
Material Adverse Change, the Company and its subsidiary possess such valid and
current certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct its
businesses, and the Company has not received any notice of proceedings relating
to the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could result in a
Material Adverse Change.
(u) Title to Properties. The Company and its subsidiary have good and
marketable title to all the properties and assets reflected as owned in the
financial statements referred to in Section 1(m) above (or elsewhere in the
Disclosure Package and the Prospectus), in each case free and clear of any
security interests, mortgages, liens, encumbrances, equities, claims and other
defects, except such as do not materially and adversely affect the value of such
property and do not materially interfere with the use made or proposed to be
made of such property by the Company and its subsidiary. The real property,
buildings, improvements, equipment and personal property held under lease by the
Company and its subsidiary are held under valid, subsisting and enforceable
leases, with such exceptions as are not material and do not materially interfere
with the use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company and its subsidiary.
(v) Tax Law Compliance. The Company has filed all necessary federal, state
and foreign income and franchise tax returns and has paid all taxes required to
be paid by it and, if due and payable, any related or similar assessment, fine
or penalty levied against it. The Company has made adequate charges, accruals
and reserves in the applicable financial statements referred to in Section 1(m)
above in respect of all federal, state and foreign income and franchise taxes
for all periods as to which the tax liability of the Company has not been
finally determined.
(w) Company Not an "Investment Company." The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Units and the application of the proceeds thereof as contemplated under
the caption "Use of Proceeds" in each of the preliminary prospectus and the
Prospectus will not be, an "investment company" within the meaning of the
Investment Company Act and will conduct its business in a manner so that it will
not become subject to the Investment Company Act.
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(x) Insurance. The Company and its subsidiary are insured by recognized,
financially sound and reputable institutions with policies in such amounts and
with such deductibles and covering such risks as the Company reasonably believes
are adequate and customary for its business including, but not limited to,
policies covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and earthquakes. The
Company reasonably believes that it will be able (i) to renew its existing
insurance coverage as and when such policies expire or (ii) to obtain comparable
coverage from similar institutions as may be necessary or appropriate to conduct
its business as now conducted and at a cost that would not result in a Material
Adverse Change. The Company has not been denied any insurance coverage which it
has sought or for which it has applied.
(y) No Price Stabilization or Manipulation. The Company has not taken and
will not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of any securities of the Company to facilitate the sale or resale of the
Units or the underlying securities. The Company acknowledges that the
Underwriter may engage in passive market making transactions in the Units on the
Nasdaq Capital Market in accordance with Regulation M under the Exchange Act.
(z) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any other person required to
be described in the preliminary prospectus or the Prospectus that have not been
described as required.
(aa) Disclosure Controls and Procedures. The Company has established and
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the Exchange Act), which (i) are designed to ensure that
material information relating to the Company and its subsidiary is made known to
the Company's principal executive officer and its principal financial officer by
others within those entities, particularly during the periods in which the
periodic reports required under the Exchange Act are being prepared, (ii) will
be evaluated for effectiveness as of the end of each fiscal quarter and fiscal
year of the Company and (iii) are effective in all material respects to perform
the functions for which they were established. The Company is not aware of (a)
any significant deficiency in the design or operation of internal controls which
could adversely affect the Company's ability to record, process, summarize and
report financial data or any material weaknesses in internal controls or (b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the Company's internal controls.
(bb) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
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
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(cc) No Unlawful Contributions or Other Payments. Neither the Company nor,
to the best of the Company's knowledge, any employee or agent of the Company or
its subsidiary has
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made any contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the character
required to be disclosed in the Disclosure Package and the Prospectus.
(dd) Compliance with Environmental Laws. Except as would not, individually
or in the aggregate, result in a Material Adverse Change (i) the Company and its
subsidiary are not in violation of any federal, state, local or foreign law or
regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum products
(collectively, "Materials of Environmental Concern"), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations required for
the operation of the business of the Company or its subsidiary under applicable
Environmental Laws, or noncompliance with the terms and conditions thereof, nor
has the Company or its subsidiary received any written communication, whether
from a governmental authority, citizens group, employee or otherwise, that
alleges that the Company or its subsidiary is in violation of any Environmental
Law; (ii) there is no claim, action or cause of action filed with a court or
governmental authority, no investigation with respect to which the Company or
any of its subsidiary has received written notice, and no written notice by any
person or entity alleging potential liability for investigatory costs, cleanup
costs, governmental responses costs, natural resources damages, property
damages, personal injuries, attorneys' fees or penalties arising out of, based
on or resulting from the presence, or release into the environment, of any
Material of Environmental Concern at any location owned, leased or operated by
the Company or its subsidiary, now or in the past (collectively, "Environmental
Claims"), pending or, to the best of the Company's knowledge, threatened against
the Company or any person or entity whose liability for any Environmental Claim
the Company has retained or assumed either contractually or by operation of law;
and (iii) to the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or against any person or entity whose
liability for any Environmental Claim the Company has retained or assumed either
contractually or by operation of law.
(ee) ERISA Compliance. The Company and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company or its "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA. "ERISA
Affiliate" means, with respect to the Company, any member of any group of
organizations described in Sections 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company or any of its ERISA Affiliates. No "employee benefit
10
plan" established or maintained by the Company or any of its ERISA Affiliates,
if such "employee benefit plan" were terminated, would have any "amount of
unfunded benefit liabilities" (as defined under ERISA). Neither the Company nor
any of its ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or
4980B of the Code. Each "employee benefit plan" established or maintained by the
Company, or any of its ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualification.
(ff) Compliance with Xxxxxxxx-Xxxxx Act of 2002. The Company and, to the
best of its knowledge, its officers and directors are in compliance with
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 and the rules and
regulations promulgated in connection therewith (the "Xxxxxxxx-Xxxxx Act") and
are actively taking steps to ensure that they will be in compliance with
applicable provisions of the Xxxxxxxx-Xxxxx Act upon the effectiveness of such
provisions, including Section 402 related to loans and Sections 302 and 906
related to certifications.
(gg) Material Understandings, Generally. Except as fairly described in the
Prospectus and the Disclosure Package, the Company has not made a determination
to take any action and is not a party to any understanding, whether or not
legally binding, with any other person with respect to the taking of any action
that, if known to prospective purchasers of the Units, would be likely to affect
their assessment of the value or prospects of the Company or their decision to
invest in the Units.
Any certificate signed by an officer of the Company and delivered to the
Underwriter or to counsel for the Underwriter shall be deemed to be a
representation and warranty by the Company to the Underwriter as to the matters
set forth therein.
The Company acknowledges that the Underwriter and, for purposes of the
opinions to be delivered pursuant to Section 5 hereof, counsel to the Company
and counsel to the Underwriter, will rely upon the accuracy and truthfulness of
the foregoing representations and hereby consents to such reliance.
SECTION 2. Purchase, Sale and Delivery of the Units.
(a) The Firm Units. Upon the terms herein set forth, the Company agrees to
issue and sell the Firm Units to the Underwriter. On the basis of the
representations, warranties and agreements herein contained, and upon the terms
but subject to the conditions herein set forth, the Underwriter agrees to
purchase the Firm Units from the Company. The purchase price per Firm Unit to be
paid by the Underwriter to the Company shall be $5.115 per Unit.
(b) The First Closing Date. Delivery of the Firm Units to be purchased by
the Underwriter and payment therefor shall be made at 11:00 a.m. New York time
on February 16, 2007, or such other time and date as the Underwriter shall
designate by notice to the Company (the time and date of such closing are called
the "First Closing Date"). The Company hereby acknowledges that circumstances
under which the Underwriter may provide notice to postpone
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the First Closing Date as originally scheduled include, but are in no way
limited to, any determination by the Company or the Underwriter to recirculate
to the public copies of an amended or supplemented Prospectus or Disclosure
Package.
(c) The Optional Units; Each Subsequent Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the Underwriter to purchase up to an aggregate of
270,000 Optional Units from the Company at the purchase price per share to be
paid by the Underwriter for the Firm Units. The option granted hereunder may be
exercised at any time and from time to time upon notice by the Underwriter to
the Company, which notice may be given at any time within 45 days from the date
of this Agreement. Such notice shall set forth (i) the aggregate number of
Optional Units as to which the Underwriter is exercising the option, (ii) the
names and denominations in which the Optional Units are to be registered and
(iii) the time, date and place at which such Optional Units will be delivered
(which time and date may be simultaneous with, but not earlier than, the First
Closing Date; and in such case the term "First Closing Date" shall refer to the
time and date of delivery of the Firm Units and the Optional Units). Each time
and date of delivery, if subsequent to the First Closing Date, is called the
"Subsequent Closing Date" and shall be determined by the Underwriter and shall
not be earlier than three nor later than five full business days after delivery
of such notice of exercise.
(d) Public Offering of the Units. The Underwriter hereby advises the
Company that the Underwriter intends to offer for sale to the public, as
described in the Prospectus, the Units as soon after this Agreement has been
executed and the Registration Statement has been declared effective as the
Underwriter, in its sole judgment, has determined is advisable and practicable.
(e) Payment for the Units. Payment for the Units to be sold by the Company
shall be made at the First Closing Date (and, if applicable, at any Subsequent
Closing Date) by wire transfer of immediately available funds to the order of
the Company.
It is understood that the Underwriter has been authorized to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Units and any Optional Units the Underwriter has agreed to purchase.
(f) Delivery of the Units. Delivery of the Firm Units and the Optional
Units shall be made through the facilities of The Depository Trust Company
unless the Underwriter shall otherwise instruct. Time shall be of the essence,
and delivery at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriter.
(g) Delivery of Prospectus to the Underwriter. Not later than 10:00 p.m.
New York time on the second business day following the date the Units are first
released by the Underwriter for sale to the public, the Company shall deliver or
cause to be delivered, copies of the Prospectus in such quantities and at such
places as the Underwriter shall request.
(h) Underwriter's Warrants. In addition to the sums payable to the
Underwriter as provided elsewhere herein, the Underwriter shall be entitled to
receive at the closing occurring on the First Closing Date as additional
compensation for its services, Underwriter's Warrants for
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the purchase of up to 180,000 Units at a price of $6.60 per Unit, upon the terms
and subject to adjustment and conversion as described in the form of
Underwriter's Warrants filed as an exhibit to the Registration Statement.
SECTION 3. Covenants of the Company.
The Company covenants and agrees with the Underwriter as follows:
(a) Underwriter's Review of Proposed Amendments and Supplements. During the
period beginning at the Initial Sale Time and ending on the later of the First
Closing Date or such date as, in the opinion of counsel for the Underwriter, the
Prospectus is no longer required by law to be delivered in connection with sales
by an Underwriter or dealer, including under circumstances where such
requirement may be satisfied pursuant to Rule 172 under the Securities Act (the
"Prospectus Delivery Period"), prior to amending or supplementing the
Registration Statement or the Prospectus, including any amendment or supplement
through incorporation by reference of any report filed under the Exchange Act,
the Company shall furnish to the Underwriter for review a copy of each such
proposed amendment or supplement, and the Company shall not file any such
proposed amendment or supplement to which the Underwriter shall reasonably
object.
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Underwriter in writing (i) when the
Registration Statement, if not effective at the Execution Time, shall have
become effective, (ii) of the receipt of any comments of, or requests for
additional or supplemental information from, the Commission, (iii) of the time
and date of any filing of any post-effective amendment to the Registration
Statement or any amendment or supplement to any preliminary prospectus or the
Prospectus, (iv) of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or of any order or notice
preventing or suspending the use of the Registration Statement, any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which it is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any of
such purposes. The Company shall use its best efforts to prevent the issuance of
any such stop order or prevention or suspension of such use. If the Commission
shall enter any such stop order or order or notice of prevention or suspension
at any time, the Company will use its best efforts to obtain the lifting of such
order at the earliest possible moment, or will file a new registration statement
and use its best efforts to have such new registration statement declared
effective as soon as practicable. Additionally, the Company agrees that it shall
comply with the provisions of Rules 424(b) and 430A, as applicable, under the
Securities Act, including with respect to the timely filing of documents
thereunder, and will use its reasonable efforts to confirm that any filings made
by the Company under such Rule 424(b) were received in a timely manner by the
Commission.
(c) Exchange Act Compliance. During the Prospectus Delivery Period, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.
13
(d) Amendments and Supplements to the Registration Statement, Prospectus
and Other Securities Act Matters. If, during the Prospectus Delivery Period, any
event or development shall occur or condition exist as a result of which the
Disclosure Package or the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein in the light of the
circumstances under which they were made, as the case may be, not misleading, or
if it shall be necessary to amend or supplement the Disclosure Package or the
Prospectus, or to file under the Exchange Act any document incorporated by
reference in the Disclosure Package or the Prospectus, in order to make the
statements therein, in the light of the circumstances under which they were
made, as the case may be, not misleading, or if in the opinion of the
Underwriter it is otherwise necessary to amend or supplement the Registration
Statement, the Disclosure Package or the Prospectus, or to file under the
Exchange Act any document incorporated by reference in the Disclosure Package or
the Prospectus, or to file a new registration statement containing the
Prospectus, in order to comply with law, including in connection with the
delivery of the Prospectus, the Company agrees to (i) notify the Underwriter of
any such event or condition (unless such event or condition was previously
brought to the Company's attention by the Underwriter during the Prospectus
Delivery Period) and (ii) promptly prepare (subject to Section 3(a) and 3(e)
hereof), file with the Commission (and use its best efforts to have any
amendment to the Registration Statement or any new registration statement be
declared effective) and furnish at its own expense to the Underwriter and to
dealers, amendments or supplements to the Registration Statement, the Disclosure
Package or the Prospectus, or any new registration statement, necessary in order
to make the statements in the Disclosure Package or the Prospectus as so amended
or supplemented, in the light of the circumstances under which they were made,
as the case may be, not misleading or so that the Registration Statement, the
Disclosure Package or the Prospectus, as amended or supplemented, will comply
with law.
(e) Permitted Free Writing Prospectuses. The Company represents that it has
not made, and agrees that, unless it obtains the prior written consent of the
Underwriter, it will not make, any offer relating to the Units that would
constitute an Issuer Free Writing Prospectus or that would otherwise constitute
a "free writing prospectus" (as defined in Rule 405 of the Securities Act)
required to be filed by the Company with the Commission or retained by the
Company under Rule 433 of the Securities Act; provided that the prior written
consent of the Underwriter hereto shall be deemed to have been given in respect
of the Free Writing Prospectuses included in Schedule B hereto. Any such free
writing prospectus consented to by the Underwriter is hereinafter referred to as
a "Permitted Free Writing Prospectus." The Company agrees that (i) it has
treated and will treat, as the case may be, each Permitted Free Writing
Prospectus as an Issuer Free Writing Prospectus, and (ii) has complied and will
comply, as the case may be, with the requirements of Rules 164 and 433 of the
Securities Act applicable to any Permitted Free Writing Prospectus, including in
respect of timely filing with the Commission, legending and record keeping.
(f) Copies of any Amendments and Supplements to the Prospectus. The Company
agrees to furnish the Underwriter, without charge, during the Prospectus
Delivery Period, as many copies of each of the preliminary prospectus, the
Prospectus and the Disclosure Package and any amendments and supplements thereto
(including any documents incorporated or deemed incorporated by reference
therein) as the Underwriter may reasonably request.
14
(g) Blue Sky Compliance. The Company shall cooperate with the Underwriter
and counsel for the Underwriter to qualify or register the Units for sale under
(or obtain exemptions from the application of) the state securities or blue sky
laws of those jurisdictions designated by the Underwriter, shall comply with
such laws and shall continue such qualifications, registrations and exemptions
in effect so long as required for the distribution of the Units. The Company
shall not be required to qualify as a foreign corporation or to take any action
that would subject it to general service of process in any such jurisdiction
where it is not presently qualified or where it would be subject to taxation as
a foreign corporation. The Company will advise the Underwriter promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Units for offering, sale or trading in any jurisdiction or any
initiation or threat of any proceeding for any such purpose, and in the event of
the issuance of any order suspending such qualification, registration or
exemption, the Company shall use its best efforts to obtain the withdrawal
thereof at the earliest possible moment.
(h) Use of Proceeds. The Company shall apply the net proceeds from the sale
of the Units sold by it in the manner described under the caption "Use of
Proceeds" in the Disclosure Package and the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Common Stock.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Underwriter an earnings
statement (which need not be audited) covering the twelve-month period ending
June 30, 2008 that satisfies the provisions of Section 11(a) of the Securities
Act and Rule 158 under the Securities Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery Period,
the Company shall file, on a timely basis, with the Commission, the Nasdaq
Capital Market and the Boston Stock Exchange all reports and documents required
to be filed under the Exchange Act. Additionally, the Company shall report the
use of proceeds from the issuance of the Units as may be required under Rule 463
under the Securities Act.
(l) Company to Provide Interim Financial Statements. Prior to the First
Closing Date and, if applicable, each Subsequent Closing Date, the Company will
furnish the Underwriter, as soon as they have been prepared by or are available
to the Company, a copy of any unaudited interim financial statements of the
Company for any period subsequent to the period covered by the most recent
financial statements appearing in the Registration Statement and the Prospectus.
(m) Quotation. The Company will use its best efforts to include, subject to
notice of issuance, the Units on the Nasdaq Capital Market and to list the Units
on the Boston Stock Exchange.
(n) Agreement Not to Offer or Sell Additional Securities. During the period
commencing on the date hereof and ending on the 365h day following the date of
the Prospectus, the Company will not, without the prior written consent of the
Underwriter (which consent may be withheld at the Underwriter's sole
discretion), directly or indirectly, sell, offer, contract or
15
grant any option to sell, pledge, transfer or establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Exchange Act, or
otherwise dispose of or transfer, or announce the offering of, or file any
registration statement under the Securities Act in respect of, any shares of
Common Stock, options or warrants to acquire shares of the Common Stock or
securities exchangeable or exercisable for or convertible into shares of Common
Stock (other than as contemplated by this Agreement with respect to the Units);
provided, however, that the Company may issue shares of its Common Stock or
options to purchase its Common Stock, or shares of Common Stock upon exercise of
options, in each case, pursuant to any stock option, stock bonus or other stock
plan, arrangement or contractual obligation described in the Prospectus, but
only if the holders of such shares, options, or shares issued upon exercise of
such options, agree in writing not to sell, offer, dispose of or otherwise
transfer any such shares or options during such 365-day period without the prior
written consent of the Underwriter (which consent may be withheld at the
Underwriter's sole discretion).
(o) Future Reports to the Underwriter. During the period of five years
hereafter the Company will furnish, if not otherwise available on XXXXX, to the
Underwriter at 000 XX Xxxxx Xxxxxxx, Xxxxxxxx, Xxxxxx 00000 Attention: Syndicate
Department: (i) as soon as practicable after the end of each fiscal year, copies
of the Annual Report of the Company containing the balance sheet of the Company
as of the close of such fiscal year and statements of income, stockholders'
equity and cash flows for the year then ended and the opinion thereon of the
Company's independent public or certified public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K
or other report filed by the Company with the Commission, the NASD or any
securities exchange; and (iii) as soon as available, copies of any report or
communication of the Company mailed generally to holders of its capital stock.
(p) Investment Limitation. The Company shall not invest, or otherwise use
the proceeds received by the Company from its sale of the Units in such a manner
as would require the Company to register as an investment company under the
Investment Company Act.
(q) No Manipulation of Price. The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
(r) Existing Lock-Up Agreements. Except as described in the Prospectus, and
those entered into with the State of Washington, there are no existing
agreements between the Company and its security holders that prohibit the sale,
transfer, assignment, pledge or hypothecation of any of the Company's
securities. The Company will direct the transfer agent to place stop transfer
restrictions upon the securities of the Company that are bound by such "lock-up"
agreements for the duration of the periods contemplated therein.
SECTION 4. Payment of Expenses.
(a) The Underwriter shall be entitled to reimbursement from the Company to
a non-accountable expense allowance equal to 3% of the aggregate initial public
offering price of the Firm Units purchased by the Underwriter. The Underwriter
shall be entitled to withhold this allowance on the Closing Date related to the
purchase of the Firm Units.
16
(b) In addition to the payment described in Paragraph (a) of this Section
4, the Company agrees to pay all costs, fees and expenses incurred in connection
with the performance of its obligations hereunder and in connection with the
transactions contemplated hereby, including without limitation (i) all expenses
incident to the issuance and delivery of the Units (including all printing and
engraving costs, if any), (ii) all fees and expenses of the registrar and
transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Units to the
Underwriter, (iv) all fees and expenses of the Company's counsel, independent
public or certified public accountants and other advisors, (v) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of the Registration Statement (including financial statements,
exhibits, schedules, consents and certificates of experts), each Issuer Free
Writing Prospectus, each preliminary prospectus and the Prospectus, and all
amendments and supplements thereto, and this Agreement, (vi) all filing fees,
attorneys' fees and expenses incurred by the Company or the Underwriter in
connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Units for offer and
sale under the state securities or blue sky laws, and, if requested by the
Underwriter, preparing and printing a "Blue Sky Survey" or memorandum, and any
supplements thereto, advising the Underwriter of such qualifications,
registrations and exemptions, (vii) the filing fees incident to the NASD's
review and approval of the Underwriter's participation in the offering and
distribution of the Units, (viii) the fees and expenses associated with
including the Units on the Nasdaq Capital Market and the Boston Stock Exchange,
and (ix) all other fees, costs and expenses referred to in Item 25 of Part II of
the Registration Statement. Except as provided in this Section 4, Section 6,
Section 8 and Section 9 hereof, the Underwriter shall pay its own expenses,
including the fees and disbursements of its counsel.
SECTION 5. Conditions of the Obligations of the Underwriter. The
obligations of the Underwriter to purchase and pay for the Firm Units as
provided herein on the First Closing Date and, with respect to the Optional
Units, each Subsequent Closing Date, shall be subject to (1) the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date and each
Subsequent Closing Date as though then made; (2) the timely performance by the
Company of its covenants and other obligations hereunder; and (3) each of the
following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Underwriter shall
have received from Xxxxxx, Xxxxxxx & Xxxxx, LLP, independent registered public
accounting firm of the Company, a letter dated the date hereof addressed to the
Underwriter, in form and substance satisfactory to the Underwriter, containing
statements and information of the type ordinarily included in accountant's
"comfort letters" to underwriters, delivered according to Statement of Auditing
Standards No. 72 (or any successor bulletin), with respect to the audited and
unaudited financial statements and certain financial information contained in
the Registration Statement and the Prospectus.
(b) Effectiveness of Registration Statement; Compliance with Registration
Requirements; No Stop Order. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the Optional
Units, any Subsequent Closing Date:
17
(i) the Company shall have filed the Prospectus with the Commission
(including the information required by Rule 430A under the Securities
Act) in the manner and within the time period required by Rule 424(b)
under the Securities Act; or the Company shall have filed a
post-effective amendment to the Registration Statement containing the
information required by such Rule 430A, and such post-effective
amendment shall have become effective; and
(ii) no stop order suspending the effectiveness of the Registration
Statement, or any post-effective amendment to the Registration
Statement, shall be in effect and no proceedings for such purpose
shall have been instituted or threatened by the Commission.
(c) No Material Adverse Change. For the period from and after the date of
this Agreement and prior to the First Closing Date and, with respect to the
Optional Units, each Subsequent Closing Date, in the judgment of the Underwriter
there shall not have occurred any Material Adverse Change.
(d) Opinion of Counsel for the Company. On each of the First Closing Date
and each Subsequent Closing Date the Underwriter shall have received the opinion
of Holland & Knight LLP, counsel for the Company, dated as of the First Closing
Date or the Subsequent Closing Date, as applicable, substantially in the form
attached as Exhibit A.
(e) Opinion of Counsel for the Underwriter. On each of the First Closing
Date and each Subsequent Closing Date the Underwriter shall have received the
opinion of Xxxxxx Xxxx LLP, counsel for the Underwriter, dated as of the First
Closing Date or the Subsequent Closing Date, as applicable, in a form
satisfactory to the Underwriter.
(f) Officers' Certificate. On each of the First Closing Date and each
Subsequent Closing Date the Underwriter shall have received a written
certificate executed by the Chairman of the Board, Chief Executive Officer or
President of the Company and the Chief Financial Officer or Chief Accounting
Officer of the Company, dated as of such Closing Date, to the effect that the
signers of such certificate have reviewed the Registration Statement, the
Prospectus and any amendment or supplement thereto, any Issuer Free Writing
Prospectus and any amendment or supplement thereto and this Agreement, to the
effect set forth in subsection (b)(ii) of this Section 5, and further to the
effect that:
(i) for the period from and after the date of this Agreement and prior
to such Closing Date, there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the Company set
forth in Section 1 of this Agreement are true and correct with the
same force and effect as though expressly made on and as of such
Closing Date; and
(iii) the Company has complied with all the agreements hereunder and
satisfied all the conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date.
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(g) Bring-down Comfort Letter. On each of the First Closing Date and each
Subsequent Closing Date, the Underwriter shall have received from Xxxxxx,
Xxxxxxx & Xxxxx, LLP, independent public or certified public accountants for the
Company, a letter dated such date, in form and substance satisfactory to the
Underwriter, to the effect that they reaffirm the statements made in the letter
furnished by them pursuant to subsection (a) of this Section 5, except that the
specified date referred to therein for the carrying out of procedures shall be
no more than three business days prior to the First Closing Date or Subsequent
Closing Date, as the case may be.
(h) Lock-Up Agreement from Certain Securityholders of the Company. On or
prior to the date hereof, the Company shall have furnished to the Underwriter an
agreement in the form of Exhibit B hereto from each stockholder of the Company,
and such agreement shall be in full force and effect on each of the First
Closing Date and each Subsequent Closing Date.
(i) Concurrent Bond Offering. On or before the First Closing Date, the
Underwriter shall have received confirmation satisfactory to it of the execution
of the Bond Placement Agreement among the New Jersey Economic Development
Authority, Converted Organics of Woodbridge, LLC and Ferris, Baker, Xxxxx, Inc.
and the receipt of the net proceeds by the Company from the sale of 20-year
tax-exempt New Jersey Economic Development Authority bonds in the principal
amount of not less than $17.5 million and bearing interest at a rate not greater
than 8.0%.
(j) Additional Documents. On or before each of the First Closing Date and
each Subsequent Closing Date, the Underwriter and counsel for the Underwriter
shall have received such information, documents and opinions as they may
reasonably require for the purposes of enabling them to pass upon the issuance
and sale of the Units as contemplated herein, or in order to evidence the
accuracy of any of the representations and warranties, or the satisfaction of
any of the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Underwriter by
notice to the Company at any time on or prior to the First Closing Date and,
with respect to the Optional Units, at any time prior to each Subsequent Closing
Date, which termination shall be without liability on the part of any party to
any other party, except that Section 4, Section 6, Section 8 and Section 9 shall
at all times be effective and shall survive such termination.
SECTION 6. Reimbursement of Underwriter's Expenses. If this Agreement is
terminated by the Underwriter pursuant to Section 5 or Section 10, or by the
Company pursuant to Section 7, or if the sale to the Underwriter of the Units on
the First Closing Date or Subsequent Closing Date is not consummated because of
any refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse the Underwriter upon demand for all out-of-pocket expenses that shall
have been reasonably incurred by the Underwriter in connection with the proposed
purchase and the offering and sale of the Units, including but not limited to
fees and disbursements of counsel, printing expenses, travel expenses, postage,
facsimile and telephone charges.
19
SECTION 7. Effectiveness of this Agreement. This Agreement shall become
effective upon the execution of this Agreement by the parties hereto.
Section 8. Indemnification.
(a) Indemnification of the Underwriter. The Company agrees to indemnify and
hold harmless the Underwriter, its officers and employees, and each person, if
any, who controls the Underwriter within the meaning of the Securities Act and
the Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Underwriter or such controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based (i) upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, or any amendment thereto,
including any information deemed to be a part thereof pursuant to Rule 430A,
Rule 430B and Rule 430C under the Securities Act, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading; or (ii) upon any untrue statement
or alleged untrue statement of a material fact contained in any Issuer Free
Writing Prospectus, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; or (iii)
in whole or in part upon any inaccuracy in the representations and warranties of
the Company contained herein; or (iv) in whole or in part upon any failure of
the Company to perform its obligations hereunder or under law; or (v) upon any
act or failure to act or any alleged act or failure to act by the Underwriter in
connection with, or relating in any manner to, the Common Stock or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon any matter
covered by clause (i) or (ii) above, provided that the Company shall not be
liable under this clause (v) to the extent that a court of competent
jurisdiction shall have determined by a final judgment that such loss, claim,
damage, liability or action resulted directly from any such acts or failures to
act undertaken or omitted to be taken by such Underwriter through its bad faith
or willful misconduct; and to reimburse the Underwriter and each such
controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by the Underwriter) as such expenses are
reasonably incurred by such Underwriter or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the
foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of or
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Underwriter expressly for use in the
Registration Statement, any Issuer Free Writing Prospectus, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto). The
indemnity agreement set forth in this Section 8(a)(1) shall be in addition to
any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. The
Underwriter agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers
20
who signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, against
any loss, claim, damage, liability or expense, as incurred, to which the
Company, or any such director, officer, or controlling person may become
subject, under the Securities Act, the Exchange Act, or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Issuer Free Writing Prospectus, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is 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, any Issuer Free
Writing Prospectus, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), in reliance upon and in conformity with
written information furnished to the Company by the Underwriter expressly for
use therein; and to reimburse the Company, or any such director, officer, or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer, or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. The Company hereby acknowledges that the
only information that the Underwriter has furnished to the Company expressly for
use in the Registration Statement, any Issuer Free Writing Prospectus, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) are the statements set forth in the table in the first paragraph, in
the fifth paragraph (relating to market making) and in the eighth and ninth
paragraphs (relating to stabilization activities) under the caption
"Underwriting" in the preliminary prospectus and the Prospectus; and the
Underwriter confirms that such statements are correct. The indemnity agreement
set forth in this Section 8(b) shall be in addition to any liabilities that the
Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, 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; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it
21
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of such indemnifying party's election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with local counsel), approved by the indemnifying
party (the Underwriter in the case of Section 8(b) and Section 9), representing
the indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
SECTION 9. Contribution. If the indemnification provided for in Section 8
is for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying parties on the one hand, and the
indemnified parties, on the other hand, from the offering of the Units pursuant
to this Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the indemnifying
22
parties, on the one hand, and the indemnified parties, on the other hand, in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the indemnifying parties, on
the one hand, and the indemnified parties, on the other hand, in connection with
the offering of the Units pursuant to this Agreement shall be deemed to be in
the same respective proportions as the total net proceeds from the offering of
the Units pursuant to this Agreement (before deducting expenses) received by the
indemnifying parties, and the total underwriting discount received by the
indemnified parties, in each case as set forth on the front cover page of the
Prospectus bear to the aggregate initial public offering price of the Units as
set forth on such cover. The relative fault of the indemnifying parties, on the
one hand, and the indemnified parties, on the other hand, shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact or any such inaccurate or alleged inaccurate representation or warranty
relates to information supplied by indemnifying parties, on the one hand, or the
indemnified parties, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 8(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8(c) for purposes of indemnification.
The Company and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, the Underwriter shall not
be required to contribute any amount in excess of the underwriting commissions
received by the Underwriter in connection with the Units underwritten by it and
distributed to the public. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each officer and employee of
an Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter; and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of the Securities Act and the
Exchange Act shall have the same rights to contribution as the Company.
SECTION 10. Termination of this Agreement. Prior to the First Closing Date
and, with respect to Optional Units, each Subsequent Closing Date, whether
before or after notification by the Commission to the Company of the
effectiveness of the Registration Statement under the
23
Securities Act, this Agreement may be terminated by the Underwriter by notice
given to the Company if at any time (i) trading or quotation in any of the
Company's securities shall have been suspended or limited by the Commission or
by the Nasdaq Capital Market or by the Boston Stock Exchange, or trading in
securities generally on either the Nasdaq Stock Market, the Boston Stock
Exchange or the New York Stock Exchange shall have been suspended or limited, or
minimum or maximum prices shall have been generally established on any of such
stock exchanges by the Commission or the NASD; (ii) a general banking moratorium
shall have been declared by any of federal, New York or Delaware authorities;
(iii) there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective substantial change in United States' or
international political, financial or economic conditions that, in the judgment
of the Underwriter is material and adverse and makes it impracticable to market
the Units in the manner and on the terms described in the Prospectus or to
enforce contracts for the sale of securities; or (iv) in the judgment of the
Underwriter there shall have occurred any Material Adverse Change (regardless of
whether any loss associated with such Material Adverse Change shall have been
insured). Any termination pursuant to this Section 10 shall be without liability
on the part of (a) the Company to the Underwriter, except that the Company shall
be obligated to reimburse the expenses of the Underwriter pursuant to Sections 4
and 6 hereof, (b) the Underwriter to the Company, or (c) of any party hereto to
any other party except that the provisions of Section 8 and Section 9 shall at
all times be effective and shall survive such termination.
SECTION 11. No Advisory or Fiduciary Responsibility. The Company
acknowledges and agrees that: (i) the purchase and sale of the Units pursuant to
this Agreement, including the determination of the public offering price of the
Units and any related discounts and commissions, is an arm's-length commercial
transaction between the Company, on the one hand, and the Underwriter, on the
other hand, and the Company is capable of evaluating and understanding and
understands and accepts the terms, risks and conditions of the transactions
contemplated by this Agreement; (ii) in connection with each transaction
contemplated hereby and the process leading to such transaction the Underwriter
is and has been acting solely as a principal and is not the financial advisor,
agent or fiduciary of the Company or its affiliates, stockholders, creditors or
employees or any other party; (iii) the Underwriter has not assumed or will not
assume an advisory, agency or fiduciary responsibility in favor of the Company
with respect to any of the transactions contemplated hereby or the process
leading thereto (irrespective of whether such Underwriter has advised or is
currently advising the Company on other matters) and the Underwriter has no
obligation to the Company with respect to the offering contemplated hereby
except the obligations expressly set forth in this Agreement; (iv) the
Underwriter and their respective affiliates may be engaged in a broad range of
transactions that involve interests that differ from those of the Company and
that the Underwriter has no obligation to disclose any of such interests by
virtue of any advisory, agency or fiduciary relationship; and (v) the
Underwriter has not provided any legal, accounting, regulatory or tax advice
with respect to the offering contemplated hereby and the Company has consulted
its own legal, accounting, regulatory and tax advisors to the extent it deemed
appropriate. The Company hereby waives and releases, to the fullest extent
permitted by law, any claims that the Company may have against the Underwriter
with respect to any breach or alleged breach of agency or fiduciary duty.
24
This Agreement supersedes all prior agreements and understandings (whether
written or oral) between the Company and the Underwriter, with respect to the
subject matter hereof.
SECTION 12. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, and of the Underwriter set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Underwriter or the
Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Units sold hereunder and any termination of this Agreement.
SECTION 13. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Underwriter:
Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Syndicate Department
with a copy to:
Xxxxxx Xxxx LLP
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
If to the Company:
Converted Organics Inc.
0X Xxxxxxxxxx Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Holland & Knight LLP
2300 US Bancorp Tower
000 XX 0xx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. xxx Xxxxxx
Any party hereto may change the address for receipt of communications by
giving written notice to the others.
25
SECTION 14. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto, and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 8 and Section 9,
and in each case their respective successors, and personal representatives, and
no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of the Units as such from the
Underwriter merely by reason of such purchase.
SECTION 15. Partial Unenforceability. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 16. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
SECTION 17. Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in Portland, Oregon or the courts of the State
of Oregon in each case located in Portland, Oregon (collectively, the "Specified
Courts"), and each party irrevocably submits to the exclusive jurisdiction
(except for proceedings instituted in regard to the enforcement of a judgment of
any such court (a "Related Judgment"), as to which such jurisdiction is
non-exclusive) of such courts in any such suit, action or proceeding. Service of
any process, summons, notice or document by mail to such party's address set
forth above shall be effective service of process for any suit, action or other
proceeding brought in any such court. The parties irrevocably and
unconditionally waive any objection to the laying of venue of any suit, action
or other proceeding in the Specified Courts and irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such suit,
action or other proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 18. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
Each of the parties hereto acknowledges that it is a sophisticated business
person who was adequately represented by counsel during negotiations regarding
the provisions hereof,
26
including, without limitation, the indemnification provisions of Section 8 and
the contribution provisions of Section 9, and is fully informed regarding said
provisions. Each of the parties hereto further acknowledges that the provisions
of Sections 8 and 9 hereto fairly allocate the risks in light of the ability of
the parties to investigate the Company, its affairs and its business in order to
assure that adequate disclosure has been made in the Registration Statement, any
preliminary prospectus and the Prospectus (and any amendments and supplements
thereto), as required by the Securities Act and the Exchange Act.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the Underwriter set forth in
or made pursuant to this Agreement shall remain operative and in full force and
effect, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Underwriter, the officers or employees of
the Underwriter, any person controlling the Underwriter, the Company, the
officers or employees of the Company, or any person controlling the Company,
(ii) acceptance of the Units and payment for them hereunder and (iii)
termination of this Agreement.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriter, the
Underwriter's officers and employees, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Units from the Underwriter
merely because of such purchase.
[Remainder of Page Intentionally Left Blank]
27
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.
Very truly yours,
CONVERTED ORGANICS INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Underwriter as of the date first above written.
XXXXXXX INVESTMENT COMPANY, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Signature Page to Underwriting Agreement
SCHEDULE A
NUMBER OF FIRM
UNITS TO
UNDERWRITER BE PURCHASED
----------- --------------
Xxxxxxx Investment Company, Inc.... 1,800,000
Total........................... 1,800,000
SCHEDULE B
ISSUER FREE WRITING PROSPECTUSES
Issuer Free Writing Prospectus dated September 13, 2006
Issuer Free Writing Prospectus dated November 21, 2006
Issuer Free Writing Prospectus dated February 8, 2007
SCHEDULE C
PRICING TERMS
Price per Unit to public: $5.50
Underwriting discounts and commissions per share: $0.385
Offering proceeds to the Company, before expenses: $9,900,000
Closing Date: February 16, 2007
EXHIBIT A
FORM OF
OPINION OF COUNSEL FOR THE COMPANY
TO BE DELIVERED PURSUANT TO SECTION 5(D) OF THE UNDERWRITING AGREEMENT
EXHIBIT B
FORM OF LOCK-UP AGREEMENT
