EXHIBIT 10.21
ENTROPIN, INC.
____________ Shares of Common Stock
UNDERWRITING AGREEMENT
----------------------
________________, 1999
Neidiger Xxxxxx Xxxxxxx, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Gentlemen:
Entropin, Inc., a Colorado corporation (the "Company"), hereby
confirms its agreement with Neidiger Xxxxxx Xxxxxxx, Inc. ("NTB"), as
representative (the "Representative") of the several underwriters listed on
Schedule 1 annexed hereto (the "Underwriters"), as set forth below.
The Company proposes to issue and sell to the Underwriters _________
shares of the Company's $.001 par value common stock (the "Common Stock").
The shares of Common Stock being sold by the Company are referred to as the
"Firm Shares."
In addition, for the sole purpose of covering over-allotments from the
sale of the Firm Shares the Company proposes to grant to the Underwriters
an option to purchase an additional ______ shares of Common Stock (the
"Firm Option Shares" or the "Option Shares"), all as provided in Section
2(c) of this agreement (the "Agreement") and to issue to you the
Representative's Warrant (as defined in Section 2 hereof) to purchase
certain further additional shares of Common Stock. The Firm Shares and the
Option Shares are collectively referred to herein as either the "Shares" or
the "Securities."
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) A registration statement on Form SB-2 (File No. 333-_____),
with respect to the Securities and the Representative's Warrant Securities
(as hereinafter defined), including a prospectus subject to completion, has
been filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act "),
and one or more amendments to that registration statement may have been so
filed. Copies of such registration statement and of each amendment
heretofore filed by the Company with the Commission have been delivered to
the Underwriters. After the execution of this Agreement, the Company will
file with the Commission either (i) if the registration statement, as it
may have been amended, has been declared
by the Commission to be effective under the Act, a prospectus in the form
most recently included in that registration statement (or, if an amendment
thereto shall have been filed, in such amendment), with such changes or
insertions as are required by Rule 430A under the Act or permitted by Rule
424(b) under the Act and as have been provided to and approved by the
Underwriters prior to the execution of this Agreement, or (ii) if that
registration statement, as it may have been amended, has not been declared
by the Commission to be effective under the Act, an amendment to that
registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by the Underwriters prior to
the execution of this Agreement. The Company also may file a related
registration statement with the Commission pursuant to Rule 462(b) under
the Act for purposes of registering certain additional Securities, which
registration statement shall become effective upon filing with the
Commission (the "Rule 462(b) Registration Statement"). As used in this
Agreement, the term "Registration Statement" means that registration
statement, as amended at the time it was or is declared effective, and any
amendment thereto that was or is thereafter declared effective, including
all financial schedules and exhibits thereto and any information omitted
therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined), together with any Rule 462(b)
Registration Statement; the term "Preliminary Prospectus" means each
prospectus subject to completion filed with the Registration Statement
(including the prospectus subject to completion, if any, included in the
Registration Statement at the time it was or is declared effective); and
the term "Prospectus" means the prospectus first filed with the Commission
pursuant to Rule 424(b) under the Act or, if no prospectus is so filed
pursuant to Rule 424(b), the prospectus included in the Registration
Statement. The Company has caused to be delivered to the Underwriters
copies of each Preliminary Prospectus and has consented to the use of those
copies for the purposes permitted by the Act. If the Company has elected
to rely on Rule 462(b) and the Rule 462(b) Registration Statement has not
been declared effective, then (i) the Company has filed a Rule 462(b)
Registration Statement in compliance with and that is effective upon filing
pursuant to Rule 462(b) and has received confirmation of its receipt and
(ii) the Company has given irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 promulgated under the
Act or the Commission has received payment of such filing fee.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When each Preliminary
Prospectus and each amendment and each supplement thereto was filed with
the Commission it (i) contained all statements required to be stated
therein, in accordance with, and complied with the requirements of, the Act
and the rules and regulations of the Commission thereunder and (ii) did not
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, not misleading. When
the Registration Statement was or is declared effective, it (i) contained
or will contain all statements required to be stated therein in accordance
with, and complied or will comply with the requirements of, the Act and the
rules and regulations of the Commission thereunder and (ii) did not or will
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading. When
the Prospectus and each amendment or supplement thereto is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment
or supplement is not required so to be filed, when the Registration
Statement containing such Prospectus or amendment
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or supplement thereto was or is declared effective) and on the Firm Closing
Date and any Option Closing Date (as each such term is hereinafter
defined), the Prospectus, as amended or supplemented at any such time, (i)
contained or will contain all statements required to be stated therein in
accordance with, and complied or will comply with the requirements of, the
Act and the rules and regulations of the Commission thereunder and (ii) did
not or will not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The foregoing provisions of this paragraph (b) do not apply to statements
or omissions made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any amendment or supplement thereto in reliance upon
and in conformity with written information furnished to the Company by the
Underwriters specifically for use therein.
(c) The Company is duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is
duly qualified or authorized to transact business as a foreign corporation
and is in good standing in each jurisdiction where the ownership or leasing
of its properties or the conduct of its businesses require such
qualification or authorization. The Company has no subsidiaries.
(d) The Company has full corporate power and authority, and all
necessary material authorizations, approvals, orders, licenses,
certificates and permits of and from all governmental regulatory
authorities, to own or lease its property and conduct its business as now
being conducted and as proposed to be conducted as described in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(e) The Company does not own, directly or indirectly, an
interest in any corporation, partnership, limited liability company, joint
venture, trust or other business entity.
(f) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus (and, if the Prospectus is
not in existence, the most recent Preliminary Prospectus). All of the
issued shares of capital stock of the Company, have been duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights. There are no outstanding options, warrants or other rights granted
by the Company to purchase shares of its Common Stock or other securities,
other than as described in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). The Firm Shares have
been duly authorized, by all necessary corporate action on the part of the
Company and, when the Firm Shares are issued and delivered to and paid for
by the Underwriter pursuant to this Agreement, the Firm Shares will be
validly issued, fully paid, nonassessable and free of preemptive rights and
will conform to the description thereof in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
No holder of outstanding securities of the Company is entitled as such to
any preemptive or other right to subscribe for any of the Securities, and
no person is entitled to have securities registered by the Company under
the Registration Statement or otherwise under the Act other than as
described in the Prospectus (and, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
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(g) The capital stock of the Company conforms to the description
thereof contained in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(h) All issuances of securities of the Company have been
effected pursuant to an exemption from the registration requirements of the
Act. Except as previously disclosed in writing to the Representative, no
compensation was paid to or on behalf of any member of the National
Association of Securities Dealers, Inc. ("NASD"), or any affiliate or
employee thereof, in connection with any such issuance.
(i) The financial statements of the Company included in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) fairly present the
financial position of the Company as of the dates indicated and the results
of operations of the Company for the periods specified. Such financial
statements have been prepared in accordance with generally accepted
accounting principles in effect in the United States of America,
consistently applied, except to the extent that certain footnote
disclosures regarding unaudited interim periods may have been omitted in
accordance with the applicable rules of the Commission under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The financial data set
forth under the caption "Summary Financial Information" in the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly present, on the basis stated in the Prospectus (or such
Preliminary Prospectus), the information included therein.
(j) Xxxxxx Xxxxxx & Xxxxx Inc., Certified Public Accountants,
which has audited certain financial statements of the Company and delivered
its report with respect to the financial statements included in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), is an independent
public accountant with respect to the Company as required by the Act and
the applicable rules and regulations thereunder.
(k) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus (and, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), (i) except as
otherwise contemplated therein, there has been no material adverse change
in the business, operations, condition (financial or otherwise), earnings
or prospects of the Company, whether or not arising in the ordinary course
of business, (ii) except as otherwise stated therein, there have been no
transactions entered into by the Company and no commitments made by the
Company that, individually or in the aggregate, are material with respect
to the Company, (iii) there has not been any change in the capital stock or
indebtedness of the Company, and (iv) there has been no dividend or
distribution of any kind declared, paid or made by the Company in respect
of any class of its capital stock.
(l) The Company has full corporate power and authority to enter
into and perform its obligations under this Agreement and the
Representative's Warrant Agreement (as hereinafter defined). The execution
and delivery of this Agreement and the Representative's Warrant Agreement
have been duly authorized by all necessary corporate action on the part of
the Company and this Agreement and the Representative's Warrant Agreement
have each been duly executed and delivered
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by the Company and each is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other similar laws
affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law), and except as rights to indemnity and contribution under this
Agreement may be limited by applicable law. The issuance, offering and
sale by the Company to the Underwriters of the Securities pursuant to this
Agreement or the Representative's Securities pursuant to the
Representative's Warrant Agreement, the compliance by the Company with the
provisions of this Agreement and the Representative's Warrant Agreement,
and the consummation of the other transactions contemplated by this
Agreement and the Representative's Warrant Agreement do not (i) require the
consent, approval, authorization, registration or qualification of or with
any court or governmental or regulatory authority, except such as have been
obtained or may be required under state securities or blue sky laws and, if
the Registration Statement filed with respect to the Securities (as
amended) is not effective under the Act as of the time of execution hereof,
such as may be required (and shall be obtained as provided in this
Agreement) under the Act, or (ii) conflict with or result in a breach or
violation of, or constitute a default under, any material contract,
indenture, mortgage, deed of trust, loan agreement, note, lease or other
material agreement or instrument to which the Company is a party or by
which the Company or any of its property is bound or subject, or the
certificate of incorporation or by-laws of the Company, or any statute or
any rule, regulation, judgment, decree or order of any court or other
governmental or regulatory authority or any arbitrator applicable to the
Company.
(m) No legal or governmental proceedings are pending to which
the Company is a party or to which the property of the Company is subject,
and no such proceedings have been threatened against the Company or with
respect to any of its property, except such as are described in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). No contract or other document is required to be
described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement that is not described therein
(and, if the Prospectus is not in existence, in the most recent Preliminary
Prospectus) or filed as required.
(n) The Company is not in (i) violation of its certificate of
incorporation, by-laws or other governing documents, (ii) violation in any
material respect of any law, statute, regulation, ordinance, rule, order,
judgment or decree of any court or any governmental or regulatory authority
applicable to it, or (iii) default in any material respect in the
performance or observance of any obligation, agreement, covenant or
condition contained in any material contract, indenture, mortgage, deed of
trust, loan agreement, note, lease or other material agreement or
instrument to which it is a party or by which it or any of its property may
be bound or subject, and no event has occurred which with notice or lapse
of time or both would constitute such a default.
(o) The Company currently owns or possesses adequate rights to
use all intellectual property, including all trademarks, service marks,
trade names, copyrights, inventions, know-how, trade secrets, proprietary
technologies, processes and substances, or applications or licenses
therefor, that are described in the Prospectus (and if the Prospectus is
not in existence, the most recent Preliminary Prospectus), and any other
rights or interests in items of intellectual property
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as are necessary for the conduct of the business now conducted or proposed
to be conducted by them as described in the Prospectus (or, such
Preliminary Prospectus), and, except as disclosed in the Prospectus (and
such Preliminary Prospectus), the Company is not aware of the granting of
any patent rights to, or the filing of applications therefor by, others,
nor is the Company aware of, nor has the Company received notice of,
infringement of or conflict with asserted rights of others with respect to
any of the foregoing. All such intellectual property rights and interests
are (i) valid and enforceable and (ii) to the best knowledge of the
Company, not being infringed by any third parties.
(p) The Company possesses adequate licenses, orders,
authorizations, approvals, certificates or permits issued by the
appropriate federal, state or foreign regulatory agencies or bodies
necessary to conduct its business as described in the Registration
Statement and the Prospectus (and, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), and, except as disclosed in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there are no pending or, to the best knowledge of
the Company, threatened, proceedings relating to the revocation or
modification of any such license, order, authorization, approval,
certificate or permit.
(q) The Company has good and marketable title to all of the
properties and assets reflected in the Company's financial statements or as
described in the Registration Statement and the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
subject to no lien, mortgage, pledge, charge or encumbrance of any kind,
except those reflected in such financial statements or as described in the
Registration Statement and the Prospectus (and such Preliminary
Prospectus). Except as disclosed in the Prospectus, the Company occupies
its leased properties under valid and enforceable leases conforming to the
description thereof set forth in the Registration Statement and the
Prospectus (and such Preliminary Prospectus).
(r) The Company is not and does not intend to conduct its
business in a manner in which it would be an "investment company" as
defined in Section 3(a) of the Investment Company Act of 1940 (the
"Investment Company Act").
(s) The Company has obtained and delivered to the Representative
the agreements (the "Lock-up Agreements") with the officers, directors and
certain other security holders owning shares of Common Stock substantially
to the effect that, among other things, each such person will not,
commencing on the date that the Registration Statement is declared
effective by the Commission (the "Effective Date") and continuing until
March 15, 2000, without the prior written consent of the Representative,
directly or indirectly, publicly sell, offer or contract to sell or grant
any option to purchase, transfer, assign or pledge, or otherwise encumber,
or dispose of any shares of Common Stock now or hereafter owned by such
person and that the purchaser or transferee in any private sale agrees to
be bound by the Lock-up Agreement.
(t) No labor dispute with the employees of the Company exists,
is threatened or, to the best of the Company's knowledge, is imminent that
could result in a material adverse change in the condition (financial or
otherwise), business, prospects, net worth or results of operations of the
Company, except as described in or contemplated by the Prospectus (and, if
the Prospectus is not in
6
existence, the most recent Preliminary Prospectus).
(u) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which it is engaged; the Company
has not been refused any insurance coverage sought or applied for; and the
Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition (financial or otherwise), business, prospects, net worth or
results of operations of the Company, except as described in or
contemplated by the Prospectus (and, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
(v) The Representative's Warrant (as hereinafter defined) will
conform to the description thereof in the Registration Statement and in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and, when sold to and paid for by the
Representative in accordance with the Representative's Warrant Agreement,
will have been duly authorized and validly issued and will constitute valid
and binding obligations of the Company entitled to the benefits of the
Representative's Warrant Agreement. The shares of Common Stock issuable
upon exercise of the Representative's Warrant (the "Representative's
Warrant Shares") have been duly authorized and reserved for issuance upon
exercise of the Representative's Warrant by all necessary corporate action
on the part of the Company and, when issued and delivered and paid for upon
such exercise in accordance with the terms of the Representative's Warrant
Agreement and the Representative's Warrant, respectively, will be validly
issued, fully paid, nonassessable and free of preemptive rights and will
conform to the description thereof in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(w) No person has acted as a finder in connection with, or is
entitled to any commission, fee or other compensation or payment for
services as a finder for or for originating, or introducing the parties to,
the transactions contemplated herein and the Company will indemnify the
Underwriter with respect to any claim for finder's fees in connection
herewith. Except as set forth in the Registration Statement and the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), the Company has no management or financial
consulting agreement with anyone except __________. No promoter, officer,
director or stockholder of the Company is, directly or indirectly,
affiliated or associated with an NASD member and no securities of the
Company have been acquired by an NASD member, except as previously
disclosed in writing to the Representative.
(x) The Company has filed all federal, state, local and foreign
tax returns which are required to be filed through the date hereof, or has
received extensions thereof, and has paid all taxes shown on such returns
and all assessments received by it to the extent that the same are material
and have become due.
(y) Neither the Company nor any director, officer, agent,
employee or other person associated with or acting on behalf of the Company
has, directly or indirectly; used any
7
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment. No transaction has occurred between or among the Company and any
of its officers or directors or any affiliates of any such officer or
director, that is required to be described in and is not described in the
Registration Statement and the Prospectus.
(z) Neither the Company nor any of its officers, directors or
affiliates (as defined in the Regulations), has taken or will take,
directly or indirectly, prior to the completion of the Offering, any action
designed to stabilize or manipulate the price of any security of the
Company, or which has caused or resulted in, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation
of the price of any security of the Company, to facilitate the sale or
resale of any of the Securities or the Option Securities.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND THE
REPRESENTATIVE'S WARRANTS.
(a) On the basis of the representations, warranties, agreements
and covenants herein contained and subject to the terms and conditions
herein set forth, the Company agrees to issue and sell to each Underwriter,
and each Underwriter agrees, severally and not jointly, to purchase from
the Company, the number of Firm Shares as set forth opposite its name on
Schedule 1 annexed hereto, at the purchase price indicated in the
Prospectus.
(b) Certificates in definitive form for the Firm Securities that
the Underwriters have agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names as the
Underwriters request upon notice to the Company at least 48 hours prior to
the Firm Closing Date, shall be delivered by or on behalf of the Company to
the Underwriters, against payment by or on behalf of the Underwriters of
the purchase prices therefor by wire transfer of immediately available
funds to a bank account specified by the Company. Such delivery of the
Firm Securities shall be made at the offices of Counsel for the
Underwriters, 0000 XXX Xxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000 at
7:30 A.M., Denver time within five days from the Effective Date of the
Offering, or at such other place, time or date as the Underwriters and the
Company may agree upon, such time and date of delivery against payment
being herein referred to as the "Firm Closing Date." The Company will make
such certificates for the Firm Securities available for checking and
packaging by the Underwriters, at such offices as may be designated by the
Representative, at least 24 hours prior to the Firm Closing Date. In lieu
of physical delivery, the closing may occur by "DTC" delivery.
(c) For the purpose of covering any over-allotments in
connection with the distribution and sale of the Firm Securities as
contemplated by the Prospectus, the Company hereby grants to the
Underwriter an option to purchase any or all of the Option Shares, which
options are exercisable by the Representative on behalf of and for the
account of the Underwriters. The purchase price to be paid for any of the
Option Shares shall be the same price per share for the Firm Securities
8
set forth above in paragraph (a) of this Section 2. The option granted
hereby may be exercised as to all or any part of the Option Shares from
time to time within 45 calendar days after the Firm Closing Date. The
Underwriters shall not be under any obligation to purchase any of the
Option Shares prior to the exercise of such option. The Representative may
from time to time exercise the option granted hereby on behalf of the
Underwriters by giving notice in writing or by telephone (confirmed in
writing) to the Company setting forth the aggregate number of Option Shares
as to which the Underwriters are then exercising the option and the date
and time for delivery of and payment for such Option Shares. Any such date
of delivery shall be determined by the Underwriters but shall not be
earlier than two business days or later than three business days after such
exercise of the option and, in any event, shall not be earlier than the
Firm Closing Date. The time and date set forth in such notice, or such
other time on such other date as the Representative and the Company may
agree upon, is herein called the "Option Closing Date" with respect to such
Option Shares. Upon exercise of the option as provided herein, the Company
shall become obligated to sell to the Underwriters, and, subject to the
terms and conditions herein set forth, each Underwriter shall become
obligated to purchase from the Company, the Option Shares as to which the
Underwriter is then exercising its option. If the option is exercised as to
all or any portion of the Option Shares, certificates in definitive form
for such Option Shares, and payment therefor, shall be delivered on the
related Option Closing Date in the manner, and upon the terms and
conditions, set forth in paragraph (b) of this Section 2, except that
reference therein to the Firm Securities and the Firm Closing Date shall be
deemed, for purposes of this paragraph (c), to refer to such Option Shares
and Option Closing Date, respectively.
(d) On the Firm Closing Date, the Company will further issue and
sell to the Representative or, at the direction of the Representative, to
bona fide officers of the Underwriters, for an aggregate purchase price of
$100, warrants to purchase Common Stock (the "Representative's Warrant")
entitling the holders thereof to purchase an aggregate of ______ shares of
Common Stock for a period of four years, such period to commence on the
first anniversary of the Effective Date. The Representative's Warrant shall
be exercisable at the price indicated in the Prospectus, and shall contain
terms and provisions more fully described herein below and as set forth
more particularly in the warrant agreement relating to the Representative's
Warrant to be executed by the Company on the Effective Date (the
"Representative's Warrant Agreement"), including, but not limited to, (i)
customary anti-dilution provisions in the event of stock dividends, split
mergers, sales of all or substantially all of the Company's assets, sales
of stock below then prevailing market or exercise prices and other events,
and (ii) prohibitions of mergers, consolidations or other reorganizations
of or by the Company or the taking by the Company of other action during
the five-year period following the Effective Date unless adequate provision
is made to preserve, in substance, the rights and powers incidental to the
Representative's Warrant. As provided in the Representative's Warrant
Agreement, the Representative may designate that the Representative's
Warrant be issued in varying amounts directly to bona fide officers of the
Underwriters. As further provided, no sale, transfer, assignment, pledge or
hypothecation of the Representative's Warrant shall be made for a period of
12 months from the Effective Date, except (i) by operation of law or
reorganization of the Company, or (ii) to the Underwriters and bona fide
partners, officers of the Underwriters and selling group members.
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3. OFFERING BY THE UNDERWRITERS. The Underwriters propose to offer
the Firm Securities for sale to the public upon the terms set forth in the
Prospectus (the "Offering").
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, to become effective as promptly as possible. If required, the
Company will file the Prospectus and any amendment or supplement thereto
with the Commission in the manner and within the time period required by
Rule 424(b) under the Act. During any time when a prospectus relating to
the Securities is required to be delivered under the Act, the Company (i)
will comply with all requirements imposed upon it by the Act and the rules
and regulations of the Commission thereunder to the extent necessary to
permit the continuance of sales of or dealings in the Securities in
accordance with the provisions hereof and of the Prospectus, as then
amended or supplemented, and (ii) will not file with the Commission any
prospectus or amendment referred to in the first sentence of section (a)
(i) hereof, any amendment or supplement to such prospectus or any amendment
to the Registration Statement as to which the Underwriters shall not
previously have been advised and furnished with a copy for a reasonable
period of time prior to the proposed filing and as to which filing the
Underwriters shall not have given their consent. The Company will prepare
and file with the Commission, in accordance with the rules and regulations
of the Commission, promptly upon request by the Underwriters or counsel to
the Underwriters, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary or
advisable in connection with the distribution of the Securities by the
Underwriters, and will use its best efforts to cause any such amendment to
the Registration Statement to be declared effective by the Commission as
promptly as possible. The Company will advise the Underwriters, promptly
after receiving notice thereof, of the time when the Registration Statement
or any amendment thereto has been filed or declared effective or the
Prospectus or any amendment or supplement thereto has been filed and will
provide evidence satisfactory to the Underwriters of each such filing or
effectiveness.
(b) The Company will advise the Underwriters, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, (ii) the suspension of the qualification of any Securities for
offering or sale in any jurisdiction, (iii) the institution, threat or
contemplation of any proceeding for any such purpose, or (iv) any request
made by the Commission for amending the Registration Statement, for
amending or supplementing the Prospectus or for additional information. The
Company will use its best efforts to prevent the issuance of any such stop
order and, if any such stop order is issued, to obtain the withdrawal
thereof as promptly as possible.
(c) The Company will, in cooperation with counsel to the
Underwriters, arrange for the qualification of the Securities for offering
and sale under the blue sky or securities laws of such jurisdictions as the
Underwriters may designate and will continue such qualifications in effect
for as
10
long as may be necessary to complete the distribution of the Securities.
(d) If, at any time when a prospectus relating to the Securities
is required to be delivered under the Act, any event occurs as a result of
which the Prospectus, as then amended or supplemented, would include 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, or if for any
other reason it is necessary at any time to amend or supplement the
Prospectus to comply with the Act or the rules or regulations of the
Commission thereunder, the Company will promptly notify the Underwriters
thereof and, subject to Section 4(a) hereof, will prepare and file with the
Commission, at the Company's expense, an amendment to the Registration
Statement or an amendment or supplement to the Prospectus that corrects
such statement or omission or effects such compliance.
(e) Intentionally left blank.
(f) The Company will, without charge, provide to the
Underwriters and to counsel for the Underwriters (i) as many signed copies
of the Registration Statement originally filed with respect to the
Securities and each amendment thereto (in each case including exhibits
thereto) as the Underwriters may reasonably request, (ii) as many conformed
copies of such Registration Statement and each amendment thereto (in each
case without exhibits thereto) as the Underwriters may reasonably request,
and (iii) so long as a prospectus relating to the Securities is required to
be delivered under the Act, as many copies of each Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto as the
Underwriters may reasonably request.
(g) The Company, as soon as practicable, will make generally
available to its security holders and to the Underwriters an earnings
statement of the Company that satisfies the provisions of Section 11 (a) of
the Act and Rule 158 thereunder.
(h) The Company will reserve and keep available for issuance
that maximum number of authorized but unissued shares of Common Stock which
are issuable upon exercise of any outstanding warrants and the
Representative's Warrant (including the underlying securities) outstanding
from time to time.
(i) The Company will apply the net proceeds from the sale of the
Securities being sold by it as set forth under "Use of Proceeds" in the
Prospectus.
(j) Intentionally left blank.
(k) Prior to the Closing Date or the Option Closing Date (if
any), the Company will not, directly or indirectly, without prior written
consent of the Representative, issue any press release or other public
announcement or hold any press conference with respect to the Company or
its activities with respect to the Offering (other than trade releases
issued in the ordinary course of the Company's business consistent with
past practices with respect to the Company's operations).
11
(l) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance
upon Rule 430A under the Act, then immediately following the execution of
this Agreement, the Company will prepare, and file or transmit for filing
with the Commission in accordance with Rule 430A and Rule 424(b) under the
Act, copies of the Prospectus including the information omitted in reliance
on Rule 430A, or, if required by such Rule 430A, a post-effective amendment
to the Registration Statement (including an amended Prospectus), containing
all information so omitted.
(m) The Company will cause the Securities to be included in The
Nasdaq SmallCap Market on the Effective Date and to maintain such listing
thereafter. The Company will file with The Nasdaq SmallCap Market all
documents and notices that are required by companies with securities that
are traded on The Nasdaq SmallCap Market.
(n) During the period of five years from the Firm Closing Date,
the Company will, as promptly as possible, not to exceed 135 days, after
each annual fiscal period render and distribute reports to its stockholders
which will include audited statements of its operations and changes of
financial position during such period and its audited balance sheet as of
the end of such period, as to which statements the Company's independent
certified public accountants shall have rendered an opinion and shall
timely file all reports required to be filed under the securities laws.
(o) During a period of three years commencing with the Firm
Closing Date, the Company will furnish to the Representative, at the
Company's expense, copies of all periodic and special reports furnished to
stockholders of the Company and of all information, documents and reports
filed with the Commission.
(p) The Company has appointed Corporate Stock Transfer, Inc. as
transfer agent for the Common Stock, subject to the Closing. The Company
will not change or terminate such appointment for a period of three years
from the Firm Closing Date without first obtaining the written consent of
the Representative. For a period of three years after the Effective Date,
the Company shall cause the transfer agent to deliver promptly to the
Underwriters a duplicate copy of the daily transfer sheets relating to
trading of the Securities. The Company shall also provide to the
Representative, on a weekly basis, copies of the DTC special securities
positions listing report.
(q) During the period of 180 days after the date of this
Agreement, the Company will not at any time, directly or indirectly, take
any action designed to or that will constitute, or that might reasonably be
expected to cause or result in, the stabilization of the price of the
Common Stock to facilitate the sale or resale of any of the Securities.
(r) The Company will not take any action to facilitate the sale
of any shares of Common Stock pursuant to Rule 144 under the Act if any
such sale would violate any of the terms of the Lock-up Agreements.
(s) Prior to the 120th day after the Firm Closing Date, the
Company will provide the Underwriters and their designees with three bound
volumes of the transaction documents relating
12
to the Registration Statement and the closing(s) hereunder, in form and
substance reasonably satisfactory to the Representative.
(t) The Company shall consult with the Representative prior to
the distribution to third parties of any financial information news
releases or other publicity regarding the Company, its business, or any
terms of this offering and the Underwriters will consult with the Company
prior to the issuance of any research report or recommendation concerning
the Company's securities. Copies of all documents that the Company or its
public relations firm intend to distribute will be provided to the
Representative for review prior to such distribution.
(u) The Company and the Underwriters will advise each other
immediately in writing as to any investigation, proceeding, order, event or
other circumstance, or any threat thereof, by or relating to the Commission
or any other governmental authority, that could impair or prevent the
Offering. Except as required by law or as otherwise mutually agreed in
writing, neither the Company nor the Underwriters will acquiesce in such
circumstances and each will actively defend any proceedings or orders in
that connection.
(v) The Company shall first submit to the Representative
certificates representing the Securities for approval prior to printing,
and shall, as promptly as possible, after filing the Registration Statement
with the Commission, obtain CUSIP numbers for the Securities.
(w) The Company will prepare and file a registration statement
with the Commission pursuant to section 12 of the 1934 Act, and will use
its best efforts to have such registration statement declared effective by
the Commission on the Effective Date. For this purpose the Company shall
prepare and file with the Commission a General Form of Registration of
Securities (Form 8-A).
(x) For so long as the Securities are registered under the 1934
Act, the Company will hold an annual meeting of stockholders for the
election of directors within 180 days after the end of each of the
Company's fiscal years and within 135 days after the end of each of the
Company's fiscal years will provide the Company's stockholders with the
audited financial statements of the Company as of the end of the fiscal
year just completed prior thereto. Such financial statements shall be those
required by Rule 14a-3 under the 1934 Act and shall be included in an
annual report pursuant to the requirements of such Rule.
(y) The Company will engage a financial public relations firm
reasonably satisfactory to the Representative on or before the Firm Closing
Date, and continuously engage such firm, or a substitute firm reasonably
acceptable to the Representative, for a period of twelve (12) months
following the Firm Closing Date.
(z) The Company will take all necessary and appropriate actions
to be included in Standard and Poor's Corporation Descriptions or other
equivalent manual and to maintain its listing therein for a period of five
(5) years from the Effective Date. Such application shall be made on an
accelerated basis no more than two days following the Effective Date.
13
(aa) On or prior to the Effective Date, the Company will give
written instructions to the transfer agent for the Common Stock directing
said transfer agent to place stop-order restrictions against, and
appropriate legends advising of the Lock-up Agreements on, the certificates
representing the securities of the Company owned by the persons who have
entered into the Lock-up Agreements.
(bb) During the twelve-month period commencing on the later of
the Effective Date and the Closing Date, and provided that the
Representative agrees to a complete or partial release of the restrictions
contained in a Lock-up Agreement, the Company shall grant the
Representative the right to sell, within seven business days of the
effective date of such release, for the account of any person who was a
shareholder of the Company prior to the Offering and who owns at least five
percent (5%) of the Company's Common Stock after the Offering, any
securities sold pursuant to Rule 144 under the Act, provided that such sale
is made in accordance with the applicable shareholder's instructions.
(cc) [???] During the twelve-month period commencing on the later
of the Effective Date or the Firm Closing Date, the Company and each of the
shareholders owning 5% or more of the Company's Common Stock immediately
preceding the Effective Date, shall grant the Representative the right of
first offer to act as lead manager, placement agent, or investment banker
with respect to any proposed underwritten public distribution or private
placement of the Company's securities having an aggregate value of
$5,000,000 or more, or any merger, acquisition or disposition of assets of
the Company and any fairness opinions or valuations. Accordingly, if
during such period, the Company intends to make such a transaction, the
Company shall notify the Representative in writing of such intention and of
the proposed terms of the transaction. The Representative shall notify the
Company within seven (7) days of the receipt of such notice of intention,
of the Representative's election to exercise its right to act as lead
manager, placement agent or investment banker, with respect to such
transaction. If such right is not exercised by the Representative and the
terms of the applicable transaction are subsequently modified, the Company
shall resubmit such modified transaction to the Representative. The
Representative's election not to exercise its rights in any particular
instance shall not affect in any way such right with respect to any
subsequent transaction by the Company.
(dd) Prior to the Effective Date, the Company will have taken all
necessary and appropriate action to have at least two persons be elected to
the Company's Board of Directors who are deemed to be independent of the
Company's management.
4. EXPENSES
(a) The Company shall pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated pursuant to Section 10 hereof, including all costs and expenses
incident to (i) the preparation, printing and filing or other production of
documents with respect to the transactions, including any costs of printing
the Registration Statement originally filed
14
with respect to the Securities and any amendment thereto, any Preliminary
Prospectus and the Prospectus and any amendment or supplement thereto, this
Agreement, the selected dealer agreement and the other agreements and
documents governing the underwriting arrangements and any blue sky
memoranda, (ii) all reasonable and necessary arrangements relating to the
delivery to the Underwriters of copies of the foregoing documents, and the
costs and expenses of the Underwriters in mailing or otherwise distributing
the same including telephone charges, duplications and other accountable
expenses, (iii) the fees and disbursements of the counsel, the accountants
and any other experts or advisors retained by the Company, (iv) the
preparation, issuance and delivery to the Underwriters of any certificates
evidencing the Securities, including transfer agent's, warrant agent's and
registrar's fees or any transfer or other taxes payable thereon, (v) the
qualification of the Securities under state blue sky or securities laws,
including filing fees and fees and disbursements, (vi) the filing fees of
the Commission and the NASD relating to the Securities, (vii) the inclusion
of the Securities on The Nasdaq SmallCap Market and in the Standard and
Poor's Corporation Descriptions Manual, (viii) any "road shows" or other
meetings with prospective investors in the Securities, including
transportation, accommodation, meal, conference room, audio-visual
presentation and similar expenses, but not including such expenses for the
Underwriters or their representatives or designees in excess of $15,000 and
(ix) the publication of "tombstone advertisements" in THE WALL STREET
JOURNAL and/or INVESTOR'S BUSINESS DAILY to be selected by the
Representative, and the manufacture of prospectus memorabilia. In addition
to the foregoing, the Company, shall reimburse the Representative for its
expenses on the basis of a non-accountable expense allowance in the amount
of 3.00% of the gross offering proceeds to be received by the Company. The
non-accountable expense allowance, based on the gross proceeds from the
sale of the Firm Securities, shall be deducted from the funds to be paid by
the Representative in payment for the Firm Securities, pursuant to Section
2 of this Agreement, on the Firm Closing Date. To the extent any Option
Shares are sold, any remaining non-accountable expense allowance based on
the gross proceeds from the sale of the Option Shares shall be deducted
from the funds to be paid by the Representative in payment for the Option
Shares, pursuant to Section 2 of this Agreement, on the Option Closing
Date. The Company warrants, represents and agrees that all such payments
and reimbursements will be promptly and fully made.
(b) Notwithstanding any other provision of this Agreement, if
the Offering is terminated in accordance with the provisions of Section 6
or Section 10(a)(i), the Company agrees that, in addition to the Company
paying its own expenses as described in subparagraph (a) above, the Company
shall reimburse the Representative for its actual accountable out-of-pocket
expenses net of the [$_______] which has previously been advanced to the
Representative, up to a maximum of $100,000. Such expenses shall include,
but are not to be limited to, fees for the services and time of counsel for
the Underwriters to the extent not covered by clause (a) above, plus any
additional expenses and fees, including, but not limited to, travel
expenses, postage expenses, duplication expenses, long-distance telephone
expenses, and other expenses incurred by the Representative in connection
with the proposed offering.
5. Intentionally left blank.
15
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of
the Underwriters to purchase and pay for the Firm Shares shall be subject,
in the Underwriters' sole discretion, to the accuracy of the
representations and warranties of the Company contained herein as of the
date hereof and as of the Firm Closing Date as if made on and as of the
Firm Closing Date, to the accuracy of the statements of the Company's
officers made pursuant to the provisions hereof, to the performance by the
Company of its covenants and agreements hereunder and to the following
additional conditions:
(a) If the Registration Statement, as heretofore amended, has
not been declared effective as of the time of execution hereof, the
Registration Statement, as heretofore amended or as amended by an amendment
thereto to be filed prior to the Firm Closing Date, shall have been
declared effective not later than 5:30 P.M., New York City time, on the
date on which the amendment to such Registration Statement containing
information regarding the initial public offering price of the Securities
has been filed with the Commission, or such later time and date as shall
have been consented to by the Underwriters; if required, the Prospectus and
any amendment or supplement thereto shall have been filed with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act, no stop order suspending the effectiveness of the
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of
the Company or the Underwriters, shall be contemplated by the Commission;
and the Company shall have complied with any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise).
(b) The Underwriters shall have received an opinion, dated the
Firm Closing Date, of Xxxxxxx Xxxxxxxx & Xxxxxxxxxx, P.C., counsel to the
Company, as to law, substantially to the effect that:
(1) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its organization and is duly qualified to transact business
as a foreign corporation and is in good standing under the laws of each
other jurisdiction in which its ownership or leasing of any properties or
the conduct of its business requires such qualification, except where the
failure to be in good standing or so qualify would not have a materially
adverse effect upon the Company;
(2) the Company has full corporate power and authority to
own or lease its property and conduct its business as it is now being
conducted and as it is proposed to be conducted, as described in the
Registration Statement and the Prospectus, and the Company has full
corporate power and authority to enter into this Agreement and the
Representative's Warrant Agreement and to carry out all the terms and
provisions hereof and thereof to be carried out by it;
(3) to the knowledge of such counsel, there are no
outstanding options, warrants or other rights granted by the Company to
purchase shares of its Common Stock, preferred stock or other securities
other than as described in the Prospectus; the Shares have been duly
authorized and the Representative's Warrant Shares have been duly reserved
for issuance by all necessary corporate action on the part of the Company
and the Shares when issued and delivered to and paid for by the
Representative, pursuant to this Agreement, the Representative's Warrant
when
16
issued and delivered and paid for in accordance with this Agreement and the
Representative's Warrant Agreement by the Underwriters, and the
Representative's Warrant Shares when issued upon payment of the exercise
price specified in the Representative's Warrant, will be validly issued,
fully paid, nonassessable and free of preemptive rights and will conform to
the description thereof in the Prospectus; to the knowledge of such
counsel, no holder of outstanding securities of the Company is entitled as
such to any preemptive or other right to subscribe for any of the Shares or
the Representative's Warrant Shares; and to the knowledge of such counsel,
no person is entitled to have securities registered by the Company under
the Registration Statement or otherwise under the Act other than as
described in the Prospectus;
(4) the execution and delivery of this Agreement and the
Representative's Warrant Agreement have been duly authorized by all
necessary corporate action on the part of the Company and this Agreement
and the Representative's Warrant Agreement have been duly executed and
delivered by the Company, and each is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other similar laws
affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law) and except as rights to indemnity and contribution under this
Agreement and the Representative's Warrant Agreement may be limited by
applicable securities laws and the public policy underlying such laws;
(5) the Representative's Warrant is duly authorized and
upon payment of the purchase price therefore specified in Section 2(d) of
this Agreement will be validly issued and constitute valid and binding
obligations of the Company; and the certificates representing the
Securities are in due and proper form under law;
(6) the statements set forth in the Prospectus under the
caption "Description of Securities" insofar as those statements purport to
summarize the terms of the capital stock and warrants of the Company,
provide a fair summary of such terms; to the knowledge of such counsel, the
statements set forth in the Prospectus describing statutes and regulations
and the descriptions of the consequences to the Company under such statutes
and regulations are fair summaries of the information set forth therein and
are accurate in all material respects; to the knowledge of such counsel,
the statements in the Prospectus, insofar as those statements constitute
summaries of the contracts, instruments, leases or licenses referred to
therein, constitute a fair summary in all material respects of those
contracts, instruments, leases or licenses and include all material terms
thereof, as applicable;
(7) none of (A) the execution and delivery of this
Agreement and the Representative's Warrant Agreement, (B) the issuance,
offering and sale by the Company to the Underwriters of the Securities
pursuant to this Agreement and the Representative's Warrant Shares pursuant
to the Representative's Warrant Agreement, or (C) the compliance by the
Company with the other provisions of this Agreement and the
Representative's Warrant Agreement and the consummation of the transactions
contemplated hereby and thereby, to the knowledge of such counsel (1)
requires the consent, approval, authorization, registration or
qualification of or with any
17
court or governmental authority known to us, except such as have been
obtained and such as may be required under state blue sky or securities
laws as to which we express no opinion or (2) conflicts with or results in
a breach or violation of, or constitutes a default under, any material
contract, indenture, mortgage, deed of trust, loan agreement, note, lease
or other material agreement or instrument known to such counsel to which
the Company is a party or by which the Company or any of its property is
bound or subject, or the certificate of incorporation or by-laws of the
Company, or any material statute or any judgment, decree, order, rule or
regulation of any court or other governmental or regulatory authority known
to us applicable to the Company;
(8) to the knowledge of such counsel, (A) no legal or
governmental proceedings are pending to which the Company is a party or to
which the property of the Company is subject except those arising in the
ordinary course of business and fully covered by insurance and (B) no
contract or other document is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described therein or filed as required;
(9) to the knowledge of such counsel, the Company possesses
adequate licenses, orders, authorizations, approvals, certificates or
permits issued by the appropriate federal, state or local regulatory
agencies or bodies necessary to conduct its business as described in the
Registration Statement and the Prospectus, and, there are no pending or
threatened proceedings relating to the revocation or modification of any
such license, order, authorization, approval, certificate or permit, except
as disclosed in the Registration Statement and the Prospectus, which would
have a material adverse effect on the Company;
(10) The Company is not in violation or breach of, or in
default with respect to, any term of its certificate of incorporation or
by-laws, and to the knowledge of such counsel, the Company is not in (i)
violation in any material respect of any law, statute, regulation,
ordinance, rule, order, judgment or decree of any court or any governmental
or regulatory authority applicable to it, or (ii) default in any material
respect in the performance or observance of any obligation, agreement,
covenant or condition contained in any material contract, indenture,
mortgage, deed of trust, loan agreement, note, lease or other material
agreement or instrument to which it is a party or by which it or any of its
property may be bound or subject, and no event has occurred which with
notice, lapse of time or both would constitute such a default.
(11) The Shares have been approved for inclusion on The
Nasdaq SmallCap Market;
(12) The Registration Statement is effective under the Act;
any required filing of the Prospectus pursuant to Rule 424(b) has been made
in the manner and within the time period required by Rule 424(b); and to
our knowledge, no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to the
best knowledge of such counsel, are contemplated by the Commission;
18
(13) The Registration Statement originally filed with
respect to the Securities and each amendment thereto and the Prospectus (in
each case, other than the financial statements, the notes, schedules and
other financial and statistical information contained therein, as to which
such counsel need express no opinion) comply as to form in all material
respects with the applicable requirements of the Act and the rules and
regulations of the Commission thereunder; and
(14) the Company is not an "investment company" as defined
in Section 3(a) of the Investment Company Act of 1940 and, if the Company
conducts its business as set forth in the Prospectus, it will not become an
"investment company" and will not be required to register under the
Investment Company.
Such counsel also shall state in its opinion that it has
participated in the preparation of the Registration Statement and the
Prospectus and that nothing has come to its attention that has caused it to
believe that the Registration Statement, at the time it became effective
(including the information deemed to be a part of the Registration
Statement at the time of effectiveness pursuant to Rule 430A(b), if
applicable), contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus, as of its
date or as of the Firm Closing Date, contained an untrue statement of
material fact or omitted 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.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and public officials, copies of which
certificates will be provided to the Underwriters, and, as to matters of
the laws of certain jurisdictions, on the opinions of other counsel to the
Company, which opinions shall also be delivered to the Underwriters, in
form and substance acceptable to the Underwriters, if such other counsel
expressly authorize such reliance and counsel to the Company expressly
states in their opinion that such counsel's and the Underwriters' reliance
upon such opinion is justified.
(d) A. At the time this Agreement is executed, the
Representative shall have received a letter, dated such date, addressed to
the Underwriters in form and substance satisfactory (including the non-
material nature of the changes or decreases, if any, referred to in clause
(iii) below) in all respects to the Representative and Representative's
counsel, from Xxxxxx Xxxxxx & Xxxxx Inc., Certified Public Accountants:
(i) confirming that it is a independent certified public
accountant with respect to the Company within the meaning of the Act and
the applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial
statements of the Company included in the Registration Statement comply as
to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations thereunder and that
the Representative may rely upon the opinion of the Certified Public
Accountants with respect to the financial statements included in the
Registration Statement;
19
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim
financial statements of the Company, a reading of the latest available
minutes of the stockholders and board of directors and the various
committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries (which, as
to the interim financial statements included in the Registration Statement,
shall constitute a review as described in SAS No. 71, Interim Financial
Statements), nothing has come to the Certified Public Accountants'
attention which would lead them to believe that (A) the unaudited financial
statements of the Company included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration Statement,
or (B) at a specified date not more than five (5) days prior to the
Effective Date, there has been any change in the capital stock or long-term
debt of the Company, or any decrease in the stockholders' equity or net
current assets or net assets of the Company as compared with amounts shown
in the December 31, 1998 balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the Registration
Statement, or, if there was any change or decrease, setting forth the
amount of such change or decrease, and (C) during the period from December
31, 1998 to a specified date not more than five (5) days prior to the
Effective Date, there was any decrease (increase) in net revenues, net
income (loss) or in net earnings (loss) per common share of the Company, in
each case as compared with the corresponding period in December 31, 1998,
other than as set forth in or contemplated by the Registration Statement,
or, if there was any such decrease, setting forth the amount of such
decrease (increase);
(iv) setting forth, at a date not later than five (5) days
prior to the Effective Date, the amount of liabilities of the Company;
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company set
forth in the Prospectus in each case to the extent that such amounts,
numbers, percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel, with
the results obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not constitute an
examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
B. At the Firm Closing Date and the Option Closing Date, if
any, the Representative shall have received from the Certified Public
Accountants, a letter, dated as of the Firm Closing Date or the Option
Closing Date, as the case may be, to the effect that it reaffirms that
statements made in the letter furnished pursuant to subsection A of this
Section 6(e), except that the specified date referred to shall be a date
not more than five (5) days prior to the Firm Closing Date
20
or the Option Closing Date, as the case may be, and, if the Company has
elected to rely on Rule 430A of the Rules and Regulations, to the further
effect that they have carried out procedures as specified in clause (v) of
subsection A of this Section 6(e) with respect to certain amounts,
percentages and financial information as specified by the Representative
and deemed to be a part of the Registration Statement pursuant to Rule
430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (v).
(e) The representations and warranties of the Company contained
in this Agreement shall be true and correct as if made on and as of the
Firm Closing Date; the Registration Statement shall not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein in order to make the statements therein not misleading,
and the Prospectus, as amended or supplemented as of the Firm Closing Date,
shall not 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, not misleading; and
the Company shall have performed all covenants and agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to the
Firm Closing Date.
(f) No stop order suspending the effectiveness of the
Registration Statement or any amendment thereto shall have been issued, and
no proceedings for that purpose shall have been instituted or threatened or
contemplated by the Commission.
(g) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there shall not
have been any material adverse change, or any development involving a
prospective material adverse change, in the business, operations, condition
(financial or otherwise), earnings or prospects of the Company, except in
each case as described in or contemplated by the Prospectus (exclusive of
any amendment or supplement thereto).
(h) The Underwriters shall have received a certificate, dated
the Firm Closing Date, of the Chief Executive Officer and the Secretary of
the Company to the effect set forth in subparagraphs (d) through (f) above.
(i) The Common Stock shall be qualified in such jurisdictions as
the Underwriters may reasonably request pursuant to Section 4(c), and each
such qualification shall be in effect and not subject to any stop order or
other proceeding on the Firm Closing Date.
(j) The Company shall have executed and delivered to the
Underwriters the Representative's Warrant Agreement and a certificate or
certificates evidencing the Representative's Warrant, in each case in a
form acceptable to the Underwriters.
(k) The Underwriters shall have received Lock-up Agreements
executed by the persons listed on Schedule 2 annexed hereto.
(l) On or before the Firm Closing Date, the Underwriters and
counsel for the Underwriters shall have received such further certificates,
documents, letters or other information as
21
they may have reasonably requested from the Company and other security
holders of the Company.
All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Underwriters and
counsel for the Underwriters. The Company shall furnish to the Underwriters
such conformed copies of such opinions, certificates, letters and documents
in such quantities as the Underwriters and counsel for the Underwriters
shall reasonably request.
The obligation of the Underwriters to purchase and pay for any Option
Shares shall be subject, in its discretion, to each of the foregoing
conditions, except that all references to the Firm Securities and the Firm
Closing Date shall be deemed to refer to such Option Shares and the related
Option Closing Date, respectively.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the
Underwriters and each person, if any, who controls the Underwriters within
the meaning of Section 15 of the Act or Section 20 of the 1934 Act against
any losses, claims, damages, or liabilities, joint or several, to which the
Underwriters, or such controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(1) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Securities under the Blue Sky or
securities laws thereof or filed with the Commission or any securities
association or securities exchange (each an "Application"), or
(2) the omission or alleged omission to state in such
Registration Statement or any amendment thereto, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, or any
Application a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse, as
incurred, the Underwriters and such controlling person for any legal or
other expenses reasonably incurred by the Underwriters or such controlling
person in connection with investigating or defending against any loss,
claim, damage, liability, action, investigation, litigation or proceeding;
PROVIDED, HOWEVER, that the Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or
is based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in such Registration Statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or any Application in reliance upon and in conformity
with written information furnished to the Company by the Underwriters,
specifically for use therein. This indemnity agreement will be in addition
to any liability which the Company may otherwise have. The Company will
not, without the prior written consent of the Underwriters, or controlling
person, settle
22
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not the Underwriters or
any person who controls the Underwriters or within the meaning of Section
15 of the Act or Section 20 of the 1934 Act is a party to such claim,
action, suit or proceeding), unless such settlement, compromise or consent
includes an unconditional release of the Underwriters and each such
controlling person from all liability arising out of such claim, action,
suit or proceeding.
(b) The Underwriters will indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the 1934 Act
against, any losses, claims, damages or liabilities to which the Company or
any such director, officer, or controlling person may become subject under
the Act or otherwise, but only insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application, or (ii) the omission or the alleged omission
to state therein a material fact required to be stated in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application, 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 reliance upon
and in conformity with written information furnished to the Company by the
Underwriters specifically for use therein; and, subject to the limitation
set forth immediately preceding this clause, will reimburse, as incurred,
any legal or other expenses reasonably incurred by the Company or any such
director, officer, or controlling person in connection with investigating
or defending against any such loss, claim, damage, liability, action
investigation, litigation or proceedings, in respect thereof. This
indemnity agreement will be in addition to any liability which the
Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party 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 otherwise than under this Section 7. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party;
PROVIDED, HOWEVER, that 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 there may be one or more legal
defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party,
the indemnifying party shall not have the right to direct the defense of
such action on behalf of such indemnified party or parties and such
indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party
of its election so to assume the
23
defense thereof and approval by such indemnified party of counsel appointed
to defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses,
other than reasonable costs of investigation, 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 or (ii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. After such notice from the indemnifying
party to such indemnified party, the indemnifying party will not be liable
for the costs and expenses of any settlement of such action effected by
such indemnified party without the consent of the indemnifying party.
(d) In circumstances in which the indemnity obligation provided
for in the preceding paragraphs of this Section 7 is unavailable or
insufficient to hold harmless an indemnified party in respect of any
losses, claims, damages or liabilities (or actions in respect thereof),
each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Securities, or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by applicable law,
not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total proceeds from the Offering
(net of underwriting discounts and commissions but before deducting
expenses) received by the Company bear to the total underwriting discounts
and commissions received by the Underwriters. The relative fault of the
parties shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and the other equitable considerations appropriate
in the circumstances. The Company and the Underwriters agree that it would
not be equitable if the amount of such contribution were determined by pro
rata or per capita allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the
first sentence of this paragraph (d). Notwithstanding any other provision
of this paragraph (d), the Underwriters shall not be obligated to make
contributions hereunder that in the aggregate exceeding the total public
offering price of the Securities purchased by the Underwriters under this
Agreement, less the aggregate amount of any damages that the Underwriters
have otherwise been required to pay in respect of the same or any
substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Act) shall
be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each
person, if any, who controls an Underwriter within the meaning of Section
15 of the Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Underwriters, 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
24
Section 15 of the Act or Section 20 of the 1934 Act, shall have the same
rights to contribution as the Company.
8. SUBSTITUTION OF UNDERWRITERS.
If any Underwriter shall for any reason not permitted hereunder cancel
its obligations to purchase the Firm Securities hereunder, or shall fail to
take up and pay for the number of Firm Securities set forth opposite names
in Schedule 1 hereto upon tender of such Firm Securities in accordance with
the terms hereof, then:
(a) If the aggregate number of Firm Securities which such
Underwriter or Underwriters agreed but failed to purchase does not exceed
10% of the total number of Firm Securities, the other Underwriters shall be
obligated to purchase the Firm Securities which such defaulting Underwriter
agreed but failed to purchase.
(b) If any Underwriter so defaults and the agreed number of Firm
Securities with respect to which such default or defaults occurs is more
than 10% of the total number of Firm Securities, the remaining Underwriters
shall have the right to take up and pay for the Firm Securities which the
defaulting Underwriter agreed but failed to purchase. If such remaining
Underwriters do not, at the Firm Closing Date, take up and pay for the Firm
Securities which the defaulting Underwriter agreed but failed to purchase,
the time for delivery of the Firm Securities shall be extended to the next
business day to allow the remaining Underwriters the privilege of
substituting within twenty-four hours (including nonbusiness hours) another
underwriter or underwriters satisfactory to the Company. If no such
underwriter or underwriters shall have been substituted as aforesaid,
within such twenty-four hour period, the time of delivery of the Firm
Securities may, at the option of the Company, be again extended to the next
following business day, if necessary, to allow the Company the privilege of
finding within twenty-four hours (including nonbusiness hours) another
underwriter or underwriters to purchase the Firm Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If it
shall be arranged for the remaining Underwriter or substituted Underwriters
to take up the Firm Securities of the defaulting Underwriter as provided in
this section, (i) the Company or the Underwriters shall have the right to
postpone the time of delivery for a period of not more than seven business
days, in order to effect whatever changes may thereby be made necessary in
the Registration Statement or the Prospectus, or in any other document or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby
be made necessary, and (ii) the respective numbers of Firm Securities to be
purchased by the remaining Underwriters or substituted Underwriters shall
be taken as the basis of the underwriting obligation for all purposes of
this agreement.
If in the event of a default by any Underwriter and the remaining
Underwriters shall not take up and pay for all the Firm Securities agreed
to be purchased by the defaulting Underwriter or substitute another
underwriter or underwriters as aforesaid, the Company shall not find or
shall not elect to seek another underwriter or underwriters for such Firm
Securities as aforesaid, then this Agreement shall terminate.
25
If, following exercise of the option provided in Section 2(c) hereof,
any Underwriter or Underwriters shall for any reason not permitted
hereunder cancel their obligations to purchase Option Shares at the Option
Closing Date, or shall fail to take up and pay for the number of Option
Shares, which it became obligated to purchase at the Option Closing Date
upon tender of such Option Shares in accordance with the terms hereof, then
the remaining Underwriters or substituted Underwriters may take up and pay
for the Option Shares of the defaulting Underwriters in the manner provided
in Section 8(b) hereof. If the remaining Underwriters or substituted
Underwriters shall not take up and pay for all such Option Shares, the
Underwriters shall be entitled to purchase the number of Option Shares for
which there is no default or, at their election, the option shall
terminate, the exercise thereof shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of
termination, there shall be no liability on the part of any non-defaulting
Underwriter to the Company, provided that the provisions of this Section 8
shall not in any event affect the liability of any defaulting Underwriter
to the Company arising out of such default.
9. SURVIVAL. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, any of its
officers or directors and the Underwriter set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement
shall remain in full force and effect, regardless of (i) any investigation
made by or on behalf of the Company, any of its officers or directors, the
Underwriter or any controlling person referred to in Section 7 hereof, and
(ii) delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 4 and 7
hereof shall remain in full force and effect, regardless of any termination
or cancellation of this Agreement.
10. TERMINATION.
(a) This Agreement may be terminated with respect to the Firm
Securities or any Option Shares in the sole discretion of the
Representative by notice to the Company given prior to the Firm Closing
Date or the related Option Closing Date, respectively, in the event that
the Company shall have failed, refused or been unable to perform all
obligations and satisfy all conditions on its part to be performed or
satisfied under Section 6 hereunder at or prior thereto or if at or prior
to the Firm Closing Date or such Option Closing Date, respectively:
(1) the Company sustains a loss by reason of explosion,
fire, flood, accident or other calamity, which, in the opinion of the
Underwriter, substantially affects the value of the properties of the
Company or which materially interferes with the operation of the business
of the Company regardless of whether such loss shall have been insured;
there shall have been any material adverse change, or any development
involving a prospective material adverse change (including, without
limitation, a change in management or control of the Company), in the
business, operations, condition (financial or otherwise), earnings or
prospects of the Company, except in each case as described in or
contemplated by the Prospectus (exclusive of any amendment or supplement
thereto);
26
(2) any action, suit or proceeding shall be threatened,
instituted or pending, at law or in equity, against the Company, by any
person or by any federal, state, foreign or other governmental or
regulatory commission, board or agency wherein any unfavorable result or
decision could materially adversely affect the business, operations,
condition (financial or otherwise), earnings or prospects of the Company;
(3) trading in the Common Stock shall have been suspended
by the Commission, the NASD or on Nasdaq, or trading in securities
generally on the New York Stock Exchange shall have been suspended or
minimum or maximum prices shall have been established on either such
exchange or quotation system;
(4) a banking moratorium shall have been declared by New
York or United States authorities;
(5) there shall have been (A) an outbreak of hostilities
between the United States and any foreign power (or, in the case of any
ongoing hostilities, a material escalation thereof), (B) an outbreak of any
other insurrection or armed conflict involving the United States or (C) any
other calamity or crisis or material change in financial, political or
economic conditions, having an effect on the financial markets that, in any
case referred to in this clause (5), in the sole judgment of the
Underwriter makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities as contemplated by the
Registration Statement; and
(6) termination of this Agreement pursuant to this Section
10 shall be without liability of any party to any other party, except as
provided in Section 5(b) and Section 7 hereof.
11. INFORMATION SUPPLIED BY THE UNDERWRITER. The statements set
forth in the "Underwriting Section" in any Preliminary Prospectus or the
Prospectus constitute the only information furnished by the Underwriter to
the Company for the purposes of Section 7(b) hereof. The Underwriter
confirms that such statements (to such extent) are correct.
12. NOTICES. All notice hereunder to or upon either party hereto
shall be deemed to have been duly given for all purposes if in writing and
(i) delivered in person or by messenger or an overnight courier service
against receipt, or (ii) send by certified or registered mail, postage
paid, return receipt requested, or (iii) sent by telegram, facsimile, telex
or similar means, provided that a written copy thereof is sent on the same
day by postage paid first-class mail, to such party at the following
address:
To the Company: At the address listed in the Prospectus
27
To the Representative: Neidiger Xxxxxx Xxxxxxx, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
or such other address as either party hereto may at any time, or from time
to time, direct by notice given to the other party in accordance with this
section. The date of giving of any such notice shall be, in the case of
clause (i), the date of the receipt; in the case of clause (ii), five
business days after such notice or demand is sent; and, in the case of
clause (iii), the business day next following the date such notice is sent.
13. AMENDMENT. Except as otherwise provided
herein, no amendment of this Agreement shall be valid or effective, unless
in writing and signed by or on behalf of the parties hereto.
14. WAIVER. No course of dealing or omission or
delay on the part of either party hereto in asserting or exercising any
right hereunder shall constitute or operate as a waiver of any such right.
No waiver of any provision hereof shall be effective, unless in writing and
signed by or on behalf of the party to be charged therewith. No waiver
shall be deemed a continuing waiver or waiver in respect of any other or
subsequent breach or default, unless expressly so stated in writing.
15. APPLICABLE LAW. This agreement shall be
governed by, and interpreted and enforced in accordance with, the laws of
the State of Colorado without regard to principles of choice of law or
conflict of laws.
16. JURISDICTION. Each of the parties hereto
hereby irrevocably consents and submits to the exclusive jurisdiction of
the Colorado courts and the United States District Court for the District
of Colorado in connection with any suit, action or other proceeding arising
out of or relating to this Agreement or the transactions contemplated
hereby, waives any objection to venue in the City and County of Denver,
State of Colorado, or such District and agrees that service of any summons,
complaint, notice or other process relating to such suit, action or other
proceeding may be effected in the manner provided by clause (ii) of Section 12.
17. REMEDIES. In the event of any actual or
prospective breach or default by either party hereto, the other party shall
be entitled to equitable relief, including remedies in the nature of
rescission, injunction and specific performance. All remedies hereunder are
cumulative and not exclusive, and nothing herein shall be deemed to
prohibit or limit either party from pursuing any other remedy or relief
available at law or in equity for such actual or prospective breach or
default, including the recovery of damages.
18. ATTORNEYS' FEES. The prevailing party in any
suit, action or other proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby, shall be entitled to
recover its costs and reasonable attorneys' fees.
28
19. SEVERABILITY. The provisions hereof are
severable and in the event that any provision of this Agreement shall be
determined to be invalid or unenforceable in any respect by a court of
competent jurisdiction, the remaining provisions hereof shall not be
affected, but shall, subject to the discretion of such court, remain in
full force and effect, and any invalid or unenforceable provision shall be
deemed, without further action on the part of the parties hereto, amended
and limited to the extent necessary to render the same valid and
enforceable.
20. COUNTERPARTS. This Agreement may be executed
in counterparts, each of which shall be deemed an original and which
together shall constitute one and the same agreement.
21. SUCCESSORS. This Agreement shall inure to
the benefit of and be binding upon the Underwriter, the Company and their
respective successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any
legal or equitable right, remedy or claim under or in respect of this
Agreement or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person except that (i) the indemnities of the Company contained in Section
7 of this Agreement shall also be for the benefit of any person or persons
who control any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the 1934 Act, and (ii) the indemnities of the Underwriter
contained in Section 7 of this Agreement shall also be for the benefit of
the directors of the Company, the officers of the Company who have signed
the Registration Statement and any person or persons who control the
Company within the meaning of Section 15 of the Act or Section 20 of the
1934 Act. No purchaser of Securities from the Underwriter shall be deemed
a successor because of such purchase.
22. TITLES AND CAPTIONS. The titles and captions
of the articles and sections of this Agreement are for convenience of
reference only and do not in any way define or interpret the intent of the
parties or modify or otherwise affect any of the provisions hereof.
23. GRAMMATICAL CONVENTIONS. Whenever the
context so requires, each pronoun or verb used herein shall be construed in
the singular or the plural sense and each capitalized term defined herein
and each pronoun used herein shall be construed in the masculine, feminine
or neuter sense.
24. REFERENCES. The terms "herein," "hereto,"
"hereof," "hereby," and "hereafter," and other terms of similar import,
refer to this Agreement as a whole, and not to any Article, Section or
other part hereof.
25. ENTIRE AGREEMENT. This Agreement embodies
the entire agreement of the parties hereto with respect to the subject
matter hereof and supersedes any prior agreement, commitment or arrangement
relating thereto.
29
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute an agreement binding the
Company, and the Underwriter.
Very truly yours,
Entropin , Inc.
By:_______________________________________
Chief Executive Officer
The foregoing agreement is hereby confirmed and accepted as of the date
first above written.
Neidiger Xxxxxx Xxxxxxx, Inc.
as representative of the several underwriters listed
on Schedule l annexed hereto
By:______________________________________
Chief Executive Officer
30
Schedule 1
Underwriter Number of Shares
----------- ----------------
31
SCHEDULE 2
Lock Up period ends March 15, 2000 with respect to the following
shareholders:
[LIST NAMES OF ALL SHAREHOLDERS]
32
ENTROPIN, INC.
AND
NEIDIGER XXXXXX XXXXXXX, INC.
REPRESENTATIVE'S
WARRANT AGREEMENT
REPRESENTATIVE'S WARRANT AGREEMENT dated as of ____________, 1999
by and between ENTROPIN, INC., (the "Company") and NEIDIGER XXXXXX XXXXXXX,
INC. ("Representative").
W I T N E S S E T H:
-------------------
WHEREAS, the Company proposes to issue to the Representative _______
warrants (each a "Representative's Warrant") each to purchase one share of
the Company's $.001 par value common stock, (the "Common Stock").
WHEREAS, the Representative has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated _________, 1999 by and
between the Representative and the Company, to act as the Representative in
connection with the Company's proposed public offering (the "Public
Offering") of _________ shares of Common Stock (the "Offering Securities");
and
WHEREAS, the Representative's Stock Warrants to be issued pursuant to
this Agreement will be issued on the Firm Closing Date (as such term is
defined in the Underwriting Agreement) by the Company to the Representative
in consideration for, and as part of, the Representative's compensation in
connection with the Representative's acting as the Representative pursuant
to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of One Hundred Dollars ($100.00), the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. GRANT. The Holder (as defined in Section 3 below) is hereby
granted the right to purchase, at any time from ____________, 2000 until
5:00 p.m., New York time, __________, 2004, up to ________ shares of
Common Stock, at an initial purchase price (subject to adjustment as
provided in Section 8 hereof) of $______ per share of Common Stock subject
to the terms and conditions of this Agreement. The securities issuable
upon exercise of the Representative's Warrant are sometimes referred to
herein as the "Representative's Securities."
2. WARRANT CERTIFICATES. The warrant certificate (the
"Representative's Warrant Certificate") to be delivered pursuant to this
Agreement shall be in the form set forth in Exhibit A attached hereto and
made a part hereof, with such appropriate insertions, omissions,
substitutions, and other variations as required or permitted by this Agreement.
3. EXERCISE OF REPRESENTATIVE'S WARRANT.
(a) The Representative's Warrant is exercisable during the term
set forth in Section 1 hereof payable by certified or cashier's check or
money order in lawful money of the United States. Upon surrender of
Representative's Warrant Certificate with the annexed Form of Election to
Purchase duly executed, together with payment of the Purchase Price (as
hereinafter defined) for the Representative's Securities (and such other
amounts, if any, arising pursuant to Section 4 hereof) at the Company's
principal office, the registered holder of a Representative's Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a
certificate or certificates for the Representative's Securities so
purchased. The purchase rights represented by each Representative's
Warrant Certificate are exercisable at the option of the Holder or Holders
thereof, in whole or in part as to Representative's Securities. The
Representative's Warrant may be exercised to purchase all or any part of
the Representative's Securities represented thereby. In the case of the
purchase of less than all the Representative's Securities purchasable on
the exercise of the Representative's Warrant represented by a
Representative's Warrant Certificate, the Company shall cancel the
Representative's Warrant Certificate represented thereby upon the surrender
thereof and shall execute and deliver a new Representative's Warrant
Certificate of like tenor for the balance of the Representative's
Securities purchasable thereunder.
(b) In lieu of the payment of cash upon exercise of the
Representative's Warrant as provided in Section 3(a), the Holder may
exercise the Representative's Warrant by surrendering the Representative's
Warrant Certificate at the principal office of the Company, accompanied by
a notice stating (i) the Holder's intent to effect such exercise by an
exchange, (ii) the Common Stock to be issued upon the exchange, (iii)
whether Representative's Warrants are to be surrendered in connection with
the exchange, and (iv) the date on which the Holder requests that such
exchange is to occur. The Purchase Price for the Representative's
Securities to be acquired in the exchange shall be paid by the surrender as
indicated in the notice, of Representative's Warrants, having a "Value", as
defined below, equal to the Purchase Price. "Value" as to each
Representative's Warrant shall mean the difference between the "Market
Price", as hereinafter defined, of a share of Common Stock and the then
Purchase Price for a share of Common Stock.
By way of example of the application of the formula, assume that
the Market Price of the Common Stock is $8.00, the Purchase Price of the
Representative's Warrant is $6.00. On such assumptions, the Value of a
Representative's Warrant is $2.00 ($8.00-$6.00) and therefore for each
three (3) Representative's Warrants surrendered, the Holder could acquire
one (1) share of Common Stock in the exchange. Notwithstanding the
example, the Holder shall not be limited to exchanging Representative's
Warrants for Common Stock.
2
The Warrant Exchange shall take place on the date specified in the
notice or if the date the notice is received by the Company is later than
the date specified in the notice, on the date the notice is received by the
Company.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the
Representative's Warrant and payment of the Purchase Price therefor, the
issuance of certificates representing the Representative's Securities or
other securities, properties or rights underlying such Representative's
Warrant, shall be made forthwith (and in any event within five (5) business
days thereafter) without further charge to the Holder thereof, and such
certificates shall (subject to the provisions of Sections 5 and 7 hereof)
be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in
the issuance and delivery of any such certificates in a name other than
that of the Holder, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax
or shall have established to the satisfaction of the Company that such tax
has been paid. The Representative's Warrant Certificates and the
certificates representing the Representative's Securities or other
securities, property or rights (if such property or rights are represented
by certificates) shall be executed on behalf of the Company by the manual
or facsimile signature of the then present Chairman or Vice Chairman of the
Board of Directors or President or Vice President of the Company, attested
to by the manual or facsimile signature of the then present Secretary or
Assistant Secretary or Treasurer or Assistant Treasurer of the Company.
The Representative's Warrant Certificates shall be dated the date of
issuance thereof by the Company upon initial issuance, transfer or exchange.
5. RESTRICTION ON TRANSFER OF REPRESENTATIVE'S WARRANT. The Holder
of a Representative's Warrant Certificate (and its Permitted Transferee, as
defined below), by its acceptance thereof, covenants and agrees that until
____________, 2000 (one year following the effective date of the Public
Offering), the Representative's Warrant may not be sold, transferred,
assigned, hypothecated or otherwise disposed of, in whole or in part,
except to officers and partners of the Representatives, or any Public
Offering selling group member and their respective officers and partners,
("Permitted Transferees"). Thereafter the Representative's Warrant may be
transferred, assigned, hypothecated or otherwise disposed of in compliance
with applicable law.
6. PURCHASE PRICE.
(a) INITIAL AND ADJUSTED PURCHASE PRICE. Except as otherwise
provided in Section 8 hereof, the initial purchase price of the
Representative's Securities is set forth in Section 1. The adjusted
purchase price shall be the price which shall result from time to time from
any and all adjustments of the initial purchase price in accordance with
the provisions of Section 8 hereof.
(b) PURCHASE PRICE. The term "Purchase Price" herein shall mean
the initial purchase price or the adjusted purchase price, depending upon
the context.
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7. REGISTRATION RIGHTS.
(a) REGISTRATION UNDER THE SECURITIES ACT OF 1933 AS AMENDED
("ACT"). The Representative's Warrant may have not been registered under
the Act. The Representative's Warrant Certificates may bear the following
legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act"), and may not be
offered for sale or sold except pursuant to (i) an effective registration
statement under the Act, or (ii) an opinion of counsel, if such opinion and
counsel shall be reasonably satisfactory to counsel to the issuer, that an
exemption from registration under the Act is available."
(b) DEMAND REGISTRATION. (1) At any time commencing on the
first anniversary of and expiring on the fifth anniversary of the effective
date of the Company's Registration Statement relating to the Public
Offering (the "Effective Date"), the Holders of a Majority (as hereinafter
defined) in interest of the Representative's Warrant, or the Majority in
interest of the Representative's Securities (assuming the exercise of all
of the Representative's Warrant) shall have the right, exercisable by
written notice to the Company, to have the Company prepare and file with
the U.S. Securities and Exchange Commission (the "Commission"), on one (1)
occasion, a registration statement on Form S-1 or SB-2 or other
appropriate form, and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for
the Holders, in order to comply with the provisions of the Act, so as to
permit a public offering and sale, of the Representative's Securities by
such Holders and any other Holders of the Representative's Warrant and/or
the Representative's Securities who notify the Company within fifteen (15)
business days after receipt of the notice described in Section 7(b)(2).
(2) The Company covenants and agrees to give written notice
of any registration request under this Section 7(b) by any Holders to all
other registered Holders of the Representative's Warrant and the
Representative's Securities within ten (10) calendar days from the date of
the receipt of any such registration request.
(3) For purposes of this Agreement, the term "Majority" in
reference to the Holders of the Representative's Warrant or
Representative's Securities, shall mean in excess of fifty percent (50%) of
the then outstanding Representative's Warrant or Representative's
Securities that (i) are not held by the Company, an affiliate, officer,
creditor, employee or agent thereof or any of their respective affiliates,
members of their family, persons acting as nominees or in conjunction
therewith, or (ii) have not been resold to the public pursuant to a
registration statement filed with the Commission under the Act.
(4) The Company shall have no obligation to prepare and
file a registration statement pursuant to this Section 7(b) if, within
twenty (20) days after the Company receives such a demand for
registration, the Company agrees, or insiders who own individually more
than 5% of the Company's outstanding Common Stock agree, to purchase the
Holder's Warrants and/or Warrant Shares from the requesting Holders at a
price equal to the difference between the Exercise Price then
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in effect and the then current market price of the Company's Common Stock.
The market price of the Company's Common Stock shall be the average of the
closing asked prices for the Company's Common Stock during the ten (10)
business days period preceding such request.
(c) PIGGYBACK REGISTRATION. (1) If, at any time within the
period commencing on the first anniversary and expiring on the sixth
anniversary of the Effective Date, the Company should file a registration
statement with the Commission under the Act (other than in connection with
a merger or other business combination transaction or pursuant to Form
S-8), it will give written notice at least twenty (20) calendar days prior
to the filing of each such registration statement to the Representative and
to all other Holders of the Representative's Warrant and/or the
Representative's Securities of its intention to do so. If a Representative
or other Holders of the Representative's Warrant and/or the
Representative's Securities notify the Company within fifteen (15) calendar
days after receipt of any such notice of its or their desire to include any
Representative's Securities in such proposed registration statement, the
Company shall afford the Representative and such Holders of the
Representative's Warrant and/or Representative's Securities the opportunity
to have any such Representative's Securities registered under such
registration statement. Notwithstanding the provisions of this Section
7(c)(1) and the provisions of Section 7(d), the Company shall have the
right at any time after it shall have given written notice pursuant to this
Section 7(c)(1) (irrespective of whether a written request for inclusion of
any such securities shall have been made) to elect not to file any such
proposed registration statement, or to withdraw the same after the filing
but prior to the effective date thereof.
(2) If the managing underwriter of an offering to which the
above piggyback rights apply, in good faith and for valid business reasons,
objects to such rights, such objection shall preclude such inclusion.
(d) COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registrations under Sections 7(b) and 7(c) hereof, the
Company covenants and agrees as follows:
(1) The Company shall use its best efforts to file a
registration statement within thirty (30) calendar days of receipt of any
demand therefor pursuant to Section 7(b); provided, however, that the
Company shall not be required to produce audited or unaudited financial
statements for any period prior to the date such financial statements are
required to be filed in a report on Form 10-K or Form 10-Q (or Form 10-KSB
or Form 10-QSB), as the case may be. The Company shall use its best
efforts to have any registration statement declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell
Representative's Securities such number of prospectuses as shall reasonably
be requested.
(2) The Company shall maintain the effectiveness of the
registration statement for a period of time equal to the lesser of 9 months
or until such time as all of the Warrant Shares have been sold pursuant to
the registration statement.
(3) The Company shall pay all costs (excluding fees and
expenses of Holders' counsel and any underwriting discounts or selling
fees, expenses or commissions), fees and
5
expenses in connection with any registration statement filed pursuant to
Sections 7(b) and 7(c) hereof including, without limitation, the Company's
legal and accounting fees, printing expenses, blue sky fees and expenses.
(4) The Company will use its best efforts to qualify or
register the Representative's Securities included in a registration
statement for offering and sale under the securities or blue sky laws of
such states as reasonably are requested by the Holders, provided that the
Company shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do business
under the laws of any such jurisdiction.
(5) The Company shall indemnify the Holders of the
Representative's Securities to be sold pursuant to any registration
statement and each person, if any, who controls such Holders within the
meaning of Section 15 of the Act or Section 20(a) of the Securities
Exchange Act of 1934 (the "Exchange Act"), against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which any of them may become subject under the Act, the Exchange Act or
otherwise, arising from such registration statement, but only to the same
extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify the Representative contained in Section 8
of the Underwriting Agreement.
(6) The Holders of the Representative's Securities to be
sold pursuant to a registration statement, and their successors and
assigns, shall indemnify the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against all loss, claim,
damage or expense or liability to which they may become subject under the
Act, the Exchange Act or otherwise, arising from information furnished by
or on behalf of such Holders, or their successors or assigns, for specific
inclusion in such registration statement to the same extent and with the
same effect as the provisions contained in Section 8 of the Underwriting
Agreement pursuant to which the Representative has agreed to indemnify the
Company.
(7) Nothing contained in this Agreement shall be construed
as requiring the Holders to exercise their Representative's Warrant prior
to the initial filing of any registration statement or the effectiveness
thereof, provided that such Holders have made arrangements reasonably
satisfactory to the Company to pay the exercise price from the proceeds of
such offering.
(8) The Company shall furnish to each Representative for
the offering, if any, such documents as such Representative may reasonably
require.
(9) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within 15
months thereafter, make "generally available to its security holders"
(within the meaning of Rule 158 under the Act) an earnings statement (which
need not be audited) complying with Section 11(a) of the Act and covering
a period of at least 12 consecutive months beginning after the effective
date of the registration statement.
6
(10) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence described below
and any managing Representative copies of all correspondence between the
Commission and the Company, its counsel or auditors with respect to the
registration statement and permit each Holder and Representative to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems
reasonably necessary to comply with applicable securities laws or rules of
the National Association of Securities Dealers, Inc. ("NASD"). Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable
times and as often as any such Holder shall reasonably request.
(11) The Company shall enter into an underwriting agreement
with the managing underwriter selected for such underwriting by Holders
holding a Majority of the Representative's Securities requested to be
included in such underwriting, provided, however that such managing
underwriter shall be reasonably acceptable to the Company, except that in
connection with an offering for which the Holders have piggyback rights,
the Company shall have the sole right to select the managing underwriter or
underwriters. Such underwriting agreement shall be satisfactory in form
and substance to the Company, a Majority of such Holders (in respect of a
registration under Section 7(b) only) and such managing underwriter, and
shall contain such representations, warranties and covenants by the Company
and such other terms as are customarily contained in agreements of that
type. The Holders shall be parties to any underwriting agreement relating
to an underwritten sale of their Representative's Securities. Such Holders
shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters except as they may relate
to such Holders and their intended methods of distribution.
8. ADJUSTMENTS TO PURCHASE PRICE AND NUMBER OF SECURITIES.
(a) COMPUTATION OF ADJUSTED PURCHASE PRICE. Except as
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock (other than the issuances
referred to in Section 8(g) hereof), including shares held in the Company's
treasury, for a consideration per share less than the "Market Price" (as
defined in Section 8(a)(6) hereof) per share of Common Stock on the date
immediately prior to the issuance or sale of such shares, or without
consideration, then forthwith upon any such issuance or sale, the Purchase
Price of the Common Stock shall (until another such issuance or sale) be
reduced to the price (calculated to the nearest full cent) determined by
dividing (1) the product of (a) the Purchase Price in effect immediately
before such issuance or sale and (b) the sum of (i) the total number of
shares of Common Stock outstanding immediately prior to such issuance or
sale, and (ii) the number of shares determined by dividing (A) the
aggregate consideration, if any, received by the Company upon such sale or
issuance, by (B) the Market Price, and by (2) the total number of shares of
Common Stock outstanding immediately after such issuance or sale provided,
however, that in no event shall the Purchase Price be adjusted pursuant to
this computation to an amount in excess of the Purchase Price in effect
immediately prior to such computation, except in the case of a combination
of outstanding shares of Common Stock, as provided by Section 8(c) hereof.
7
For the purposes of this Section 8, the term "Purchase Price"
shall mean the Purchase Price of the Common Stock forming a part of the
Representative's Securities set forth in Section 6 hereof, as adjusted from
time to time pursuant to the provisions of this Section 8.
For the purposes of any computation to be made in accordance with
this Section 8(a), the following provisions shall be applicable:
(1) In case of the issuance or sale of shares of Common
Stock (or of other securities deemed hereunder to involve the issuance or
sale of shares of Common Stock) for a consideration part or all of which
shall be cash, the amount of the cash consideration therefor shall be
deemed to be the amount of cash received by the Company for such shares
(or, if shares of Common Stock are offered by the Company for subscription,
the subscription price, or, if such securities shall be sold to
Representatives or dealers for public offering without a subscription
offering, the initial public offering price) before deducting therefrom any
compensation paid or discount allowed in the sale, underwriting or purchase
thereof by Representatives or dealers or others performing similar
services, or any expenses incurred in connection therewith.
(2) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company, and otherwise
than on the exercise of options, rights or warrants or the conversion or
exchange of convertible or exchangeable securities) of shares of Common
Stock (or of other securities deemed hereunder to involve the issuance or
sale of shares of Common Stock) for a consideration part or all of which
shall be other than cash, the amount of the consideration therefor other
than cash shall be deemed to be the value of such consideration as
determined in good faith by the Board of Directors of the Company.
(3) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the
record date for the determination of stockholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued
without consideration.
(4) The reclassification of securities of the Company other
than shares of Common Stock into securities including shares of Common
Stock shall be deemed to involve the issuance of such shares of Common
Stock for a consideration other than cash immediately prior to the close of
business on the date fixed for the determination of security holders
entitled to receive such shares, and the value of the consideration
allocable to such shares of Common Stock shall be determined as provided in
Section 8(a)(2).
(5) The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares of Common Stock
issued or issuable (subject to readjustment upon the actual issuance
thereof) upon the exercise of options, rights or warrants and upon the
conversion or exchange of convertible or exchangeable securities.
8
(6) As used herein in the phrase "Market Price" at any date
shall be deemed to be the last reported sale price, or, in the case no such
reported sale takes place on such day, the average of the last reported
sales prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the
Common Stock is listed or admitted to trading, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange, the
average closing bid price as furnished by the NASD through the NASD
Automated Quotation System ("NASDAQ") or similar organization if NASDAQ is
no longer reporting such information, or if the Common Stock is not quoted
on NASDAQ, as determined in good faith by resolution of the Board of
Directors of the Company, based on the best information available to it.
(b) OPTIONS, RIGHTS, WARRANT AND CONVERTIBLE AND EXCHANGEABLE
SECURITIES. Except in the case of the Company issuing rights to subscribe
for shares of Common Stock distributed to all the stockholders of the
Company and Holders of Representative's Warrant pursuant to Section 8(i)
hereof, if the Company shall at any time after the date hereof issue
options, rights or warrants to purchase shares of Common Stock, or issue
any securities convertible into or exchangeable for shares of Common Stock
(other than the issuances referred to in Section 8(g) hereof), (i) for a
consideration per share less than the Market Price (including the issuance
thereof without consideration such as by way of dividend or other
distribution), or (ii) without consideration, the Purchase Price in effect
immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making a computation in accordance with
the provisions of Section 8(a) hereof, provided that:
(1) The aggregate maximum number of shares of Common Stock
issuable or that may become issuable under such options, rights or warrants
(assuming exercise in full even if not then currently exercisable or
currently exercisable in full) shall be deemed to be issued and outstanding
at the time such options, rights or warrants were issued, and for a
consideration equal to the minimum purchase price per share provided for in
such options, rights or warrants at the time of issuance, plus the
consideration (determined in the same manner as consideration received on
the issue or sale of shares in accordance with the terms of the
Representative's Warrant), if any, received by the Company for such
options, rights or warrants; provided, however, that upon the expiration or
other termination of such options, rights or warrants, if any thereof shall
not have been exercised, the number of shares of Common Stock deemed to be
issued and outstanding pursuant to this Section 8(b)(1) (and for the
purposes of Section 8(a)(5) hereof) shall be reduced by such number of
shares as to which options, warrants and/or rights shall have expired or
terminated unexercised, and such number of shares shall no longer be deemed
to be issued and outstanding, and the Purchase Price then in effect shall
forthwith be readjusted and thereafter be the price which it would have
been had adjustment been made on the basis of the issuance only of shares
actually issued or issuable upon the exercise of those options, rights or
warrants as to which the exercise rights shall not be expired or terminated
unexercised.
(2) The aggregate maximum number of shares of Common Stock
issuable upon conversion or exchange of any convertible or exchangeable
securities (assuming conversion or exchange in full even if not then
currently convertible or exchangeable in full) shall be deemed to be issued
and outstanding at the time of issuance of such securities, and for a
consideration equal to the
9
consideration (determined in the same manner as consideration received on
the issue or sale of shares of Common Stock in accordance with the terms of
the Representative's Warrant) received by the Company for such securities,
plus the minimum consideration, if any, receivable by the Company upon the
conversion or exchange thereof; provided, however, that upon the expiration
or other termination of the right to convert or exchange such convertible
or exchangeable securities (whether by reason or redemption or otherwise),
the number of shares deemed to be issued and outstanding pursuant to this
Section 8(b)(2) (and for the purpose of Section 8(a)(5) hereof) shall be
reduced by such number of shares as to which the conversion or exchange
rights shall have expired or terminated unexercised, and such number of
shares shall no longer be deemed to be issued and outstanding and the
Purchase Price then in effect shall forthwith be readjusted and thereafter
be the price which it would have been had adjustment been made on the basis
of the issuance only of the shares actually issued or issuable upon the
conversion or exchange of those convertible or exchangeable securities as
to which the conversion or exchange rights shall not have expired or
terminated unexercised.
(3) If any change shall occur in the price per share
provided for in any of the options, rights or warrants referred to in
Section 8(b)(1), or in the price per share at which the securities referred
to in Section 8(b)(2) are convertible or exchangeable, and if a change in
the Purchase Price has not occurred by reason of the event giving rise to
the change in the price per share of such other options, rights, warrants,
or convertible or exchangeable securities, such options, rights or warrants
or conversion or exchange rights, as the case may be, to the extent not
theretofore exercised, the shall be deemed to have expired or terminated
on the date when such price change became effective in respect of shares
not theretofore issued pursuant to the exercise or conversion or exchange
thereof, and the Company shall be deemed to have issued upon such date new
options, rights or warrants or convertible or exchangeable securities at
the new price in respect of the number of shares issuable upon the exercise
of such options, rights or warrants or the conversion or exchange of such
convertible or exchangeable securities.
(c) SUBDIVISION AND COMBINATION. In case the Company shall at
any time issue any shares of Common Stock in connection with a stock
dividend in shares of Common Stock or subdivide or combine the outstanding
shares of Common Stock, the Purchase Price shall forthwith be
proportionately decreased in the case of a stock dividend or a subdivision
or increased in the case of combination.
(d) ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of
the Purchase Price pursuant to the provisions of this Section 8, the number
of Representative's Securities issuable upon the exercise of the
Representative's Warrant shall be adjusted to the nearest whole share by
multiplying a number equal to the Purchase Price in effect immediately
prior to such adjustment by the number of Representative's Securities
issuable upon exercise of the Representative's Warrant immediately prior to
such adjustment and dividing the product so obtained by the adjusted
Purchase Price.
(e) DEFINITION OF COMMON STOCK. For the purpose of this
Agreement, the term "Common Stock" shall mean the class of stock designated
as Common Stock in the Certificate of Incorporation, of the Company as it
may be amended as of the date hereof.
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(f) RECLASSIFICATION, MERGER OR CONSOLIDATION. The Company will
not merge, reorganize or take any other action which would terminate the
Representative's Warrant without first making adequate provision for the
Representative's Warrant. In case of any reclassification or change of the
outstanding shares of Common Stock issuable upon exercise of the
outstanding warrants (other than a change in par value to no par value, or
from nor par value to par value, or as a result of a subdivision or
combination), or in case of any consolidation of the Company with, or
merger of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is
the continuing corporation and which does not result in any
reclassification or change of the outstanding Common Stock except a change
as a result of a subdivision or combination of such shares or a change in
par value, as aforesaid), or in the case of a sale or conveyance to another
corporation or other entity of the property of the Company as an entirety
or substantially as an entirety, the Holders of each Representative's
Warrant then outstanding or to be outstanding shall have the right
thereafter (until the expiration of such Representative's Warrant) to
purchase, upon exercise of such Representative's Warrant, the kind and
number of shares of stock and other securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance as
if the Holders were the owner of the shares of Common Stock underlying the
Representative's Warrant immediately prior to any such events at a price
equal to the product of (x) the number of shares issuable upon exercise of
the Representative's Warrant and (y) the Purchase Price in effect
immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance, as if such Holders had exercised
the Representative's Warrant. In the event of a consolidation, merger,
sale or conveyance of property, the corporation formed by such
consolidation or merger, or acquiring such property, shall execute and
deliver to the Holders a supplemental Representative's warrant agreement to
such effect. Such supplemental Representative's warrant agreement shall
provide for adjustments which shall be identical to the adjustment provided
for in this Section 8. The provisions of this Section 8(f) shall similarly
apply to successive consolidations or mergers.
(g) NO ADJUSTMENT OF PURCHASE PRICE IN CERTAIN CASES. No
adjustment of the Purchase Price shall be made:
(1) Upon the issuance or sale of (i) the Representative's
Warrant or the securities underlying the Representative's Warrant, (ii) the
securities sold pursuant to the Public Offering (including those sold upon
exercise of the Representative's over-allotment option), or (iii) the
shares issuable pursuant to the options, warrants, rights, stock purchase
agreements or convertible or exchangeable securities outstanding or in
effect on the date hereof as described in the prospectus relating to the
Public Offering.
(2) If the amount of said adjustments shall aggregate less
than two ($.02) cents for one (1) share of Common Stock; provided, however,
that in such case any adjustment that would otherwise be required then to
be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any
adjustment so carried forward, shall aggregate at least two ($.02) cents
for one (1) share of Common Stock. In addition, Registered Holders shall
not be entitled to cash dividends paid by the Company prior to the exercise
of any warrant or warrants held by them.
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9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each
Representative's Warrant Certificate is exchangeable without expense, upon
the surrender thereof by the registered Holders at the principal executive
office of the Company, for a new Representative's Warrant Certificate of
like tenor and date representing in the aggregate the right to purchase the
same number of Representative's Securities in such denominations as shall
be designated by the Holders thereof at the time of such surrender.
10. LOSS, THEFT, ETC. OF CERTIFICATES Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Representative's Warrant Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of the
Representative's Warrant Certificates, if mutilated, the Company will make
and deliver a new Representative's Warrant Certificate of like tenor, in
lieu thereof.
11. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Representative's Warrant, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests;
provided, however, that if a Holder exercises all Representative's Warrant
held of record by such Holder the fractional interests shall be eliminated
by rounding any fraction to the nearest whole number of shares of Common
Stock or other securities, properties or rights.
12. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the
Representative's Warrant, such number of shares of Common Stock or other
securities and properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of
Representative's Warrant and payment of the Purchase Price therefor, all
the shares of Common Stock issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any stockholder. As long as the Representative's
Warrant shall be outstanding, the Company shall use its best efforts to
cause the Common Stock to be listed (subject to official notice of
issuance) on all securities exchanges on which the Common Stock issued to
the public in connection herewith may then be listed or quoted.
13. NOTICES TO REPRESENTATIVE'S WARRANT HOLDERS. Nothing contained in
this Agreement shall be construed as conferring upon the Holders the right
to vote or to consent or to receive notice as a stockholder in respect of
any meetings of stockholders for the election of directors or any other
matter, or as having any rights whatsoever as a stockholder of the Company.
If, however, at any time prior to the expiration of the Representative's
Warrant and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on
the books of the Company; or
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(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all
or substantially all of its property, assets and business as an entirety
shall be proposed; then, in any one or more of said events, the Company
shall give written notice of such event at least fifteen (15) calendar days
prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the stockholders entitled to such
dividend, distribution, convertible or exchangeable securities or
subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such record date
or the date of closing the transfer books, as the case may be. Failure to
give such notice or any defect therein shall not affect the validity of any
action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
14. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have
been duly made when delivered, or five days after being mailed by
registered or certified mail, return receipt requested:
(a) If to the registered Holders of the Representative's
Warrant, to the address of such Holders as shown on the books of the
Company; or
(b) If to the Company to the address shown in the Underwriting
Agreement or to such other address as the Company may designate by notice
to the Holders.
15. SUPPLEMENTS AND AMENDMENTS. The Company and the Representative
may from time to time supplement or amend this Agreement without the
approval of any Holders of Representative's Warrant Certificates (other
than the Representative) in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or
inconsistent with any provisions herein, or to make any other provision in
regard to matters or questions arising hereunder which the Company and the
Representative may deem necessary or desirable and which the Company and
the Representative deem shall not adversely affect the interests of the
Holders of Representative's Warrant Certificates.
16. SUCCESSORS. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the
Representative, the Holders and their respective successors and assigns
hereunder.
17. TERMINATION. This Agreement shall terminate at the close of
business on _____________, 2005. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall survive such termination
until the close of business on the expiration of any applicable statue of
limitations.
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18. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and
each Representative's Warrant Certificate issued hereunder shall be deemed
to be a contract made under the laws of the State of Colorado and for all
purposes shall be construed in accordance with the laws of said state
without giving effect to the rules of said state governing the conflicts of
laws.
19. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including the
Underwriting Agreement, to the extent portions thereof are referred to
herein) contains the entire understanding between the parties hereto with
respect to the subject matter hereof and thereof. This Agreement may not
be modified or amended except by a writing duly signed by the Company and
the Holders of a Majority in Interest of the Representative's Securities
(for this purpose, treating all then outstanding Representative's Warrants
as if they had been exercised).
20. SEVERABILITY. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
21. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they
be construed as, a part of this Agreement and shall be given no substantive
effect.
22. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and
the Representative and any other registered Holders of the Representative's
Warrant Certificates or Representative's Securities any legal or equitable
right, remedy or claim under this Agreement; and this Agreement shall be
for the sole and exclusive benefit of the Company and the Representative
and any other Holders of the Representative's Warrant Certificates or
Representative's Securities.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one
and the same instrument.
24. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the Company, the Representative and their respective
successors and assigns and the Holders from time to time of the
Representative's Warrant Certificates or any of them.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, as of the day and year first above written.
ENTROPIN, INC.
By:__________________________________________
Chief Executive Officer
NEIDIGER XXXXXX XXXXXXX, INC., for itself
and as Representative of the Several
Underwriters listed On Schedule A
By:__________________________________________
Chief Executive Officer
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Schedule A
to
Representative's Warrant Agreement
Between
Entropin, Inc.
and
Neidiger Xxxxxx Xxxxxxx, Inc.
Representative
Neidiger Xxxxxx Xxxxxxx, Inc.
Underwriters:
16
ENTROPIN, INC.
--------------
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND MAY NOT BE OFFERED FOR
SALE OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT, OR (ii) AN OPINION OF COUNSEL, IF SUCH OPINION AND COUNSEL
SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE COMMENCING _________, 2000 THROUGH
5:00 P.M., NEW YORK TIME ON ___________, 0000
Xxxxxxx covering 110,000 shares of
Common Stock
No. UW-1
This Warrant Certificate certifies that Neidiger Xxxxxx Xxxxxxx,
Inc. or registered assigns, is the registered holder of this Warrant to
purchase initially, at any time from ___________, 2000, until 5:00 p.m.,
New York time on __________, 2005 (the "Expiration Date"), up to 110,000
shares of Common Stock, $[___] par value (the "Common Stock") of Entropin,
Inc. ("Company") exercisable to purchase one share of Common Stock at a
purchase price of $_____ per share (the "Purchase Price"), upon the
surrender of this Warrant Certificate and payment of the applicable
Purchase Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Representative's Warrant Agreement,
dated as of _______, 1999, by and between the Company and Neidiger Xxxxxx
Xxxxxxx, Inc. (the "Warrant Agreement"). Payment of the Purchase Price
shall be made by certified or cashier's check or money order payable to the
order of the Company.
No Warrant may be exercised after 5:00 p.m., New York time, on
the Expiration Date, at which time all Warrant evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
The Warrant evidenced by this Warrant Certificate is part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement
between the Company and the Representative, which Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument
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and is hereby referred to for a description of the rights, limitation of
rights, obligations, duties and immunities thereunder of the Company and
the holders (the words "holders" or "holder" meaning the registered holders
or registered holder) of the Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Purchase Price and the type and/or number of the
Company's securities issuable upon the exercise of this Warrant, may,
subject to certain conditions, be adjusted. In such event, the Company
will, at the request of the holder, issue a new Warrant Certificate
evidencing the adjustment in the Purchase Price and the number and/or type
of securities issuable upon the exercise of the Warrant; provided, however,
that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrant shall be issued to the transferee(s) in
exchange as provided herein, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by
this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof, and of any distribution to the holder(s)
hereof, and for all other purposes, and the Company shall not be affected
by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in
the Warrant Agreement shall have the meanings assigned to them in the
Warrant Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate
this ____day of ________________, 1999.
ENTROPIN, INC.
By:______________________________________
Chief Executive Officer
ATTEST:
By:__________________________________
Secretary
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED___________________________
hereby sells, assigns and transfers unto _____________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_____________________ Attorney, to transfer the within Warrant Certificate
on the books of Entropin, Inc., with full power of substitution.
Dated:_____________________
Signature_____________________
(Signature must conform in all respects to
the name of holder as specified on the face of the Warrant Certificate.)
[Signature guarantee] ________________________________
(Insert Social Security or Other
Identifying Number of Holders)
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FORM OF ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ shares of
Common Stock Warrant and herewith tenders in payment for such securities a
certified or cashier's check or money order payable to the order of
Entropin, Inc in the amount of $______, all in accordance with the terms
hereof. The undersigned requests that certificates for such securities be
registered in the name of ___________________________ whose address is
_____________________ and that such certificates be delivered to
______________________________ whose address is ____________________
________________________________________.
Dated:__________________________________
Signature_______________________
(Signature must conform in all respects to the name of holder as specified
on the face of the Warrant Certificate.)
___________________________
(Insert Social Security or Other
Identifying Number of Holders)
[Signature guarantee]
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