1,200,000 Shares
ECOMAT, INC.
UNDERWRITING AGREEMENT
October , 1996
Patterson Travis, Inc.
12835 E. Arapahoe Road #1-700
Englewood, Colorado 80112
ECOMAT, INC. a Delaware corporation (the "Company"), proposes to issue
and sell to you, the Underwriter, (the "Underwriter") pursuant to this
Underwriting Agreement (the "Agreement"), an aggregate of 1,200,000 shares of
common stock ("Shares"). In addition, the Company proposes to grant to the
Underwriter the option referred to in Section 2(b) to purchase all or any part
of an aggregate of 180,000 additional Shares. Unless the context otherwise
indicates, the term "Shares" shall include the 180,000 additional Shares
referred to above.
You have advised the Company that the Underwriter desires to purchase the
Shares and that you are authorized to execute this Agreement on behalf of the
Underwriter. The Company confirms the Agreement made by it with respect to the
sale of the Shares as follows:
1. Representations and Warranties.
The Company represents and warrants to, and agrees with, the
Underwriter that:
(a) A registration statement (File No. 333-1524) on Form SB-2
relating to the public offering of the Shares, including a preliminary
form of prospectus, copies of which have heretofore been delivered to
you, has been prepared by the Company in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed
with the Commission under the Act. The Company proposes to file, prior
to the effective date of such registration statement (the "Effective
Date"), an additional amendment or amendments to such registration
statement, as are required by applicable law copies of which shall be
delivered to you. "Preliminary Prospectus" shall mean each prospectus
filed pursuant to Rule 430 of the Rules and Regulations. The
registration statement (including all financial statements and
exhibits) as amended at the time it becomes effective and the final
prospectus included therein are respectively referred to as the
"Registration Statement" and the "Prospectus", except that (i) if the
prospectus first filed by the Company pursuant to Rule 424(b) of the
Rules and Regulations shall differ from said prospectus as then
amended the terms "Prospectus" shall mean the prospectus first filed
pursuant to Rule 424(b), and (iii) if such registration statement or
prospectus is amended or such prospectus is supplemented, after the
Effective Date of such registration statement and prior to the Closing
Date (as hereinafter defined), the terms "Registration Statement" and
"Prospectus"
shall include each registration statement and prospectus as so amended, and
the term Prospectus" shall include the prospectus as so supplemented, or
both, as the case may be.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When the Registration
Statement becomes effective and at all times subsequent thereto up to the
Closing Date (as hereinafter defined) (i) the Registration Statement and
Prospectus and any amendments or supplements thereto will contain all
statements which are required to be stated therein in accordance with the
Act and the Rules and Regulations, and will in all respects conform to the
requirements of the Act and the Rules and Regulations; and (ii) neither the
Registration Statement nor the Prospectus will include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make statements therein not misleading; provided,
however, that the Company makes no representations, warranties or
agreements as to information contained in or omitted from the Registration
Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus under the heading "Underwriting" and
the identity of counsel to the Underwriter under the heading "Legal
Matters" constitute the only information furnished in writing by or on
behalf of the Underwriter for inclusion in the Registration Statement and
Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate
and other) to own its properties and conduct its business as described in
the Prospectus and is duly qualified to do business as a foreign
corporation and is in good standing in all other jurisdictions in which the
nature of its business or the character or location of its properties
requires such qualification, except where failure to so qualify will not
materially affect the business, properties or financial condition of the
Company.
(d) The authorized, issued and outstanding capital stock of the
Company as of June 30, 1996 is as set forth in the Prospectus under
"Capitalization"; the shares of issued and outstanding capital stock of the
Company set forth thereunder have been, or will be when issued as set forth
in the Prospectus, duly authorized, validly issued, fully paid and
non-assessable; except as set forth in the Prospectus, no options, warrants
or other rights to purchase, agreements or other obligations to issue or
agreements or other rights to convert any obligation into, any Shares of
capital stock of the Company have been granted or entered into by the
Company; and the Common Stock conforms to all statements relating thereto
contained in the Registration Statement and Prospectus.
(e) The Shares are duly authorized, and when issued and delivered
pursuant to this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights of any security
holder of the Company. Neither the filing of the Registration Statement nor
the offering or sale of the Shares as contemplated in this Agreement gives
rise to any rights, other than those which have been
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waived or satisfied, for or relating to the registration of any Shares of
Common Stock except as described in the Registration Statement.
The Shares contained in the Underwriter's Purchase Option ("PO")
(described in Section 11 herein) have been duly authorized and, when duly
issued and delivered, such PO will constitute the valid and legally binding
obligation of the Company enforceable in accordance with their terms and
entitled to the benefits provided by the PO. The Shares included in the PO
when issued and sold, will be duly authorized, validly issued, fully paid
and non-assessable and free of preemptive rights and no personal liability
will attach to the ownership thereof.
(f) This Agreement has been duly and validly authorized, executed
and delivered by the Company, and assuming due execution of this Agreement
by the Underwriter, constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other
laws affecting the rights of creditors generally and also subject to any
limitations on enforceability which may be imposed by application of
equitable principles. The Company has full power and lawful authority to
authorize, issue and sell the Shares to be sold by it hereunder on the
terms and conditions set forth herein, and no consent, approval,
authorization or other order of any governmental authority is required in
connection with such authorization, issue and sale except, such as may be
required under the Act or state securities laws.
(g) Except as described in the Prospectus, the Company is not in
violation, breach or default of or under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach of, any of the
terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company is a party or by which the Company may be bound or to
which any of the property or assets of the Company is subject, nor will
such action result in a violation of the by-laws of the Company, as
amended, or any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental
body having jurisdiction over the Company.
(h) Subject to the qualifications stated in the Prospectus, the
Company has good and marketable title to all properties and assets
described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to its business; all of the material
leases and subleases under which the Company holds properties or assets as
lessee or sublessee as described in the Prospectus are in full force and
effect, and, except as described in the Prospectus, the Company is not in
default in any material respect with respect to any of the terms or
provisions of any of such leases or subleases and no claim has been
asserted by anyone under any of the leases or subleases mentioned above, or
affecting or questioning the right of the Company to continue possession of
the leased or subleased premises or assets under any such lease or
sublease, except as described or
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referred to in the Prospectus; and the Company owns or leases all such
properties described in the Prospectus as are necessary to its operations
as now conducted and, except as otherwise stated in the Prospectus, as
proposed to be conducted as set forth in the Prospectus.
(i) Grant Thornton, LLP, who have given their reports on
certain financial statements filed and to be filed with the Commission as
a part of the Registration Statement, which are incorporated in the
Prospectus, are with respect to the Company, independent public accountants
as required by the Act and the Rules and Regulations.
(j) The Company shall obtain a report from Grant Thornton, LLP
stating that the financial statements, together with related notes,
set forth in the Prospectus present fairly the financial position and
results of operations and changes in financial position of the Company
on the basis stated in the Registration Statement, at the respective
dates and for the respective periods to which they apply. Said
statements and related notes have been prepared in accordance with
generally accepted accounting principles applied on a basis which is
consistent during the periods involved.
(k) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and prior to the
Closing Date (as hereinafter defined) the Company has not incurred any
liabilities or obligations, direct or contingent, not in the ordinary
course of business, or entered into any transaction not in the ordinary
course of business, which is material to the business of the Company, and
there has not been any change in the capital stock of, or any incurrence of
long-term debt by, the Company, or any issuance of options, warrants or
other rights to purchase the capital stock of the Company other than as set
forth in the Registration Statement or pursuant to the Company's Stock
Option Plan, and assuming the Company receives the proceeds of the offering
contemplated hereby it does not now reasonably foresee a prospective
adverse change in the condition (financial or other), net worth, results of
operations, business, key personnel or properties which would be material
to the business or financial condition of the Company, and the Company has
not become the subject of, any material litigation whether or not in the
ordinary course of business.
(l) Except as set forth in the Prospectus, there is not now pending
or, to the knowledge of the Company, threatened or any action, suit or
proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse
change in the condition (financial or other), business prospects, net
worth, or properties of the Company, nor are there any actions, suits or
proceedings related to environmental matters or related to discrimination
on the basis of age, sex, religion or race; and no labor disputes involving
the employees of the Company exist or are imminent which might be expected
to adversely affect the conduct of the business, property or operations or
the financial condition or earnings of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed
all necessary federal, state and foreign income and franchise tax returns
and has paid all taxes shown as due thereon; and there is no tax deficiency
which has been or to the knowledge of the Company might be asserted against
the Company.
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(n) The Company and its subsidiaries have sufficient licenses,
permits and other governmental authorizations as required for the conduct
of its business or the ownership of its properties as described in the
Prospectus and is in all material respects complying therewith and to the
best of its knowledge owns and possesses adequate rights to use all
material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service mark registrations,
copyrights and licenses necessary for the conduct of such business and has
not received any notice of conflict with the asserted rights of other in
respect thereof. To the best knowledge of the Company, none of the
activities or business of the Company are in violation of, or cause the
Company to violate, any law, rule, regulation or order of the United
States, any state, county or locality or of any agency or body of the
United States or of any state, county or locality, the violation of which
would have a material adverse impact upon the condition (financial or
otherwise), business, property, prospective results of operations, or net
worth of the Company.
(o) The Company has not directly or indirectly, at any time
(i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution in violation of law or (ii)
made any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi-public
duties, other than payments or contributions required or allowed by
applicable law. The Company shall implement internal accounting controls
and procedures which shall be sufficient to cause the Company to comply in
all material respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(p) On the Closing Date (as hereinafter defined) all transfer or
other taxes which are required to be paid by the Company in connection with
the sale and transfer of the Shares will have been fully paid or provided
for by the Company and all laws imposing such taxes will have been fully
complied with.
(q) All contracts and other documents of the Company which are,
under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has no subsidiaries other than as described in the
Prospectus.
(s) The Company has not entered into any agreement pursuant to
which any person is entitled, either directly or indirectly, to
compensation from the Company for services as a finder in connection with
the public offering referred to herein.
2. Purchase, Delivery and Sale of the Shares.
(a) Subject to the terms and conditions of this Agreement, and upon
the basis of the representations, warranties and agreements herein
contained, the Company agrees to issue and sell to the Underwriter, and the
Underwriter agrees to buy from the Company at $4.50 per Share, at the place
and time hereinafter specified, the 1,200,000 Shares (the "First Shares").
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Delivery of the First Shares against payment therefor shall take
place at the offices of Patterson Travis, Inc., New York, New York 10004
(or at such other place as may be designated by agreement between you and
the Company) at 10:00 a.m., New York time, on __________, 1996 or at such
later time and date as you may designate, such time and date of payment and
delivery for the First Shares being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and
agreements herein contained, the Company hereby grants an option to the
Underwriter to purchase all or any part of an aggregate of an additional
180,000 Shares at the same price per Share as the Underwriter shall pay for
the First Shares being sold pursuant to the provisions of subsection (a) of
this Section 2 (such additional Shares being referred to herein as the
"Option Shares"). This option may be exercised within 30 days after the
effective date of the Registration Statement upon notice by the Underwriter
to the Company advising it as to the amount of Option Shares as to which
the option is being exercised, the names and denominations in which the
certificates for such Option Shares are to be registered and the time and
date when such certificates are to be delivered. Such time and date shall
be determined by the Underwriter but shall not be earlier than four nor
later than ten full business days after the exercise of said option, nor in
any event prior to the First Closing Date, and such time and date is
referred to herein as the "Option Closing Date." Delivery of the Option
Shares against payment therefor shall take place at the office of Patterson
Travis, Inc., One Battery Park Plaza, New York, New York, 10004. The Option
granted hereunder may be exercised only to cover over-allotments in the
sale by the Underwriter of First Shares referred to in subsection (a)
above.
(c) The Company will make the certificates for the Shares to be
purchased by the Underwriter hereunder available to you for checking at
least two full business days prior to the First Closing Date or the Option
Closing Date (which are collectively referred to herein as the "Closing
Dates" and individually as a "Closing Date"). The certificates shall be in
such names and denominations as you may request, at least two full business
days prior to the Closing Dates. Delivery at the time and place specified
in this Agreement is a further condition to the obligations of the
Underwriter.
Definitive certificates in negotiable form for the Shares to be
purchased by the Underwriter hereunder will be delivered by the Company to
you for the account of the Underwriter against payment of the purchase
prices by the Underwriter, by certified or bank cashier's checks in New
York Clearing House funds, payable to the order of the Company.
In addition, in the event the Underwriter exercise the option to
purchase from the Company all or any portion of the Option Shares pursuant
to the provisions of subsection (b) above, payment for such Shares shall be
made to or upon the order of the Company by certified or bank cashier's
checks payable in New York Clearing House funds at the offices of the
Underwriter at the time and date of delivery of such Shares as required by
the provisions of subsection (b) above, against receipt of the certificates
for such Shares
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by the Underwriter for the account of the Underwriter registered in such
names and in such denominations as the Underwriter may request.
It is understood that the Underwriter propose to offer the Shares to
be purchased hereunder to the public upon the terms and conditions set
forth in the Registration Statement, after the Registration Statement
becomes effective.
(d) At the "First Closing" the Company shall grant to the Underwriter
the Purchase Option for 120,000 Shares.
3. Covenants of the Company.
The Company covenants and agrees with the Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective and upon notification from the Commission
that the Registration Statement has become effective, will so advise you
and will not at any time, whether before or after the effective date, file
any amendment to the Registration Statement or supplement to the Prospectus
of which you shall not previously have been advised and furnished with a
copy or to which you or your counsel shall have reasonably objected in
writing or which is not in compliance with the Act and the Rules and
Regulations. At any time prior to the later of (A) the completion by the
Underwriter of the distribution of the Shares contemplated hereby (but in
no event more than nine months after the date on which the Registration
Statement shall have become or been declared effective, or (B) 25 days
after the date on which the Registration Statement shall have become or
been declared effective, the Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements to
the Registration Statement or Prospectus which, in your reasonable opinion,
may be necessary or advisable in connection with the distribution of the
Shares.
As soon as the Company is advised thereof, the Company will
advise you, and confirm the advice in writing, of the receipt of any
comments of the Commission, of the effectiveness of any post-effective
amendment to the Registration Statement, of the filing of any supplement to
the Prospectus or any amended Prospectus, of any request made by the
Commission for amendment of the Registration Statement or for supplementing
of the Prospectus or for additional information with respect thereto, of
the issuance by the Commission for amendment of the Registration Statement
or for supplementing of the Prospectus or for additional information with
respect thereto, of the issuance by the Commission or any state or
regulatory body of any stop order or other order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of
the qualification of the Shares for offering in any jurisdiction, or of the
institution of any proceedings for any of such purposes, and will use its
utmost efforts to prevent the issuance of any such order, and, if issued,
to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you such copies of the
Preliminary Prospectus which you have reasonably requested, and the Company
has
7
consented and hereby consents to the use of such copies for the purposes
permitted by the Act. The Company authorizes the Underwriter and dealers to
use the Prospectus in connection with the sale of the Shares for such
period as in the opinion of counsel to the Underwriter the use thereof is
required to comply with the applicable provisions of the Act and the Rules
and Regulations. In case of the happening, at any time within such period
as a Prospectus is required under this Act to be delivered any event of
which the Company has knowledge and which materially affects the Company or
the securities of the Company, or which in the opinion of counsel for the
Company or counsel for the Underwriter should be set forth in an amendment
of the Registration Statement or a supplement to the Prospectus in order to
make the statements therein not then misleading, in light of the
circumstances existing at the time the Prospectus is required to be
delivered to a purchaser of the Shares or in case it shall be necessary to
amend or supplement the Prospectus to comply with law or with Rules and
Regulations, the Company will notify you promptly and forthwith prepare and
file with the Commission and furnish to you copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as you may reasonably request, in order that the Prospectus, as
so amended or supplemented, will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements in the Prospectus, in the light of the circumstances under
which they are made, not misleading. The preparation and furnishing of any
such amendment or supplement to the Registration Statement or amended
Prospectus or supplement to be attached to the Prospectus shall be without
expense to the Underwriter, except that in case any Underwriter is
required, in connection with the sale of the Shares, to deliver a
Prospectus nine months or more after the effective date of the Registration
Statement, the Company will upon request of and at the expense of the
Underwriter, amend or supplement the Registration Statement and Prospectus
and furnish the Underwriter with reasonable quantities of prospectuses
complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the applicable Rules and
Regulations and the Securities Exchange Act of 1934 and the rules and
regulations thereunder in connection with the offering and issuance of the
Shares.
(b) The Company will use its best efforts to qualify to register
the Shares for sale under the securities or "blue sky" laws of such
jurisdictions as the Underwriter may reasonably request and will make such
applications and furnish such information as may be required for that
purpose and to comply with such laws, provided the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or
to execute a general consent to service of process in any jurisdiction in
any action other than one arising out of the offering or sale of the
Shares. The Company will, from time to time, prepare and file such
statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriter may
reasonably request.
(c) If the sale of the Shares provided for herein is not
consummated for any reason caused by the Company, the Company shall pay
all costs and expenses incident to the performance of the Company's
obligations hereunder, including, but not limited to, all of the expenses
itemized in Section 8, on an actual out-of-pocket accountable basis.
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(d) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Securities Exchange Act of 1934, the
Company, at its expense, will furnish to its stockholders an annual report
(including financial statements audited by independent public accountants),
in reasonable detail, and at its expense, will furnish to you during the
period ending five (5) years from the Effective Date, (i) as soon as
practicable after the end of each fiscal year, a balance sheet of the
Company and any of its subsidiaries as at the end of such fiscal year,
together with statements of income, surplus and source and application of
funds of the Company and any subsidiaries for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report
thereon of independent accountants; (ii) as soon as they are available, a
copy of all reports (financial or other) mailed to stockholders; (iii) as
soon as they are available, a copy of all non-confidential reports and
financial statements furnished to or filed with the Commission; and (iv)
such other information as you may from time to time reasonably request.
(e) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (d) above will be on a
consolidated basis to the extent the accounts of the Company and its
subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(f) The Company will deliver to you at or before the First Closing Date
two signed copies of the Registration Statement, including all financial
statements and exhibits filed therewith, and of all amendments thereto, and
will deliver to you such number of copies of the Registration Statement,
including such financial statements but without exhibits, and of all
amendments thereto, as you may reasonably request. The Company will deliver to
or upon the order of the Underwriter, from time to time until the Effective
Date as many copies of any Preliminary Prospectus filed with the Commission
prior to the Effective Date as the Underwriter may reasonably request.
The Company will deliver to the Underwriter on the Effective Date and thereafter
for so long as a Prospectus is required to be delivered under the Act, from time
to time, as many copies of the Prospectus, in final form, or as thereafter
amended or supplemented, as the Underwriter may from time to time reasonably
request.
(g) The Company will make generally available to its security
holders and deliver to you as soon as it is practicable to do so, an
earnings statement (which need not be audited) covering a period of at
least twelve consecutive months beginning after the Effective Date which
shall satisfy the requirements of Section 11(a) of the Act.
(h) The Company will apply the net proceeds from the sale of the
Shares for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to
the sale of the Shares and the application of the proceeds therefrom as may
be required pursuant to Rule 463 under the Act.
(i) The Company will, promptly upon your request, prepare and
file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action,
which in the reasonable opinion of Gerald A. Kaufman, counsel to the
Underwriter may be reasonably necessary or advisable in connection with the
distribution of the Shares, and will use its best efforts to cause the same
to become effective as promptly as possible.
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(j) Prior to the Effective Date, the Company shall have obtained
agreements on your behalf stating that for a period of twenty-four months
from the Closing Date, the officers, directors and beneficial holders of
more than 5% of the outstanding Shares of Common Stock of the Company
currently outstanding will not publicly sell any Shares of Common Stock
without the prior written consent of the Underwriter.
(k) Upon completion of this offering, the Company will make
all filings required, including registration under the Securities Exchange
Act of 1934, to obtain the listing of the Shares in the NASDAQ system, and
will effect and maintain such listing for at least five (5) years from the
Closing Date.
(l) [Intentionally Omitted]
(m) On the Closing Date and simultaneously with the delivery of
the Shares, the Company shall execute and deliver to you the Underwriter's
Purchase Option. The Purchase Option will be substantially in the form of
the Underwriter's Purchase Option filed as Exhibit to the Registration
Statement.
(n) During the 90 day period commencing as of the Closing Date,
the Company will not, without the prior written consent of the Underwriter
grant options to purchase Shares of Common Stock at a price less than the
initial public offering price.
(o) The Company and each 5% or more shareholder represent that
it or he has not taken and agree not to take any action designed to or
which might cause or result in the stabilization or manipulation of the
price of the Shares or to facilitate the sale or resale of the Shares.
(p) [Intentionally Omitted]
4. Conditions of Underwriter's Obligation.
The obligation of the Underwriter to purchase and pay for the Shares
which they have agreed to purchase hereunder is subject to the accuracy (as
of the date hereof, and as of the Closing Dates) and compliance with the
representations and warranties of the Company herein, to the accuracy of
statements of officers of the Company made pursuant to the provisions
hereof, to the performance by the Company of its obligations to be
performed hereunder, and to the following conditions.
(a) The Registration Statement shall have become effective and
prior to the Closing Dates no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for
that or similar purpose shall have been instituted or shall be pending or,
to your knowledge or to the knowledge of the Company, shall be contemplated
by the Commission; any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Gerald A. Kaufman, counsel to the Underwriter; and no stop order shall be
in effect denying or suspending effectiveness of such qualification nor
shall any stop order proceedings with respect thereto be instituted or
pending or threatened under such law.
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(b) The Underwriter shall not have advised the Company
that the Registration Statement, the Prospectus, or any amendment or
supplement thereto contains any untrue statement of fact which, in the
reasonable opinion of Gerald A. Kaufman, counsel, is material and is
required to be stated therein or necessary to make the statements therein
no misleading.
(c) At the First Closing Date, you shall have received the
opinion, dated as of the Closing Date, of Bernstein & Wasserman, LLP,
counsel for the Company, in form and substance reasonably satisfactory to
counsel for the Underwriter, to the effect that:
(i) the Company, has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with full corporate power and authority to own its properties and
conduct its business as described in the Registration Statement and
Prospectus and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each other jurisdiction in which the
ownership or leasing of its properties or conduct of its business requires
such qualification, except where the failure to be so qualified would not
have a material affect upon the Company.
(ii) to the best knowledge of such counsel, the Company or its
subsidiaries, has obtained all material licenses, registrations, permits
and other governmental authorizations which are reasonably necessary to the
conduct of its business and such licenses, registrations, permits and
governmental authorizations are in full force and effect other than same
relates to franchise law inasmuch as such counsel does not know whether any
material changes to the information contained in the Company's Uniform
Franchise Offering Circular ("UFOC") have occurred requiring amendments
thereto inasmuch as any such change would negate the validity of the
Company's UFOC and franchise and business opportunity registrations. In
addition, counsel has no knowledge of the means, manner or procedures
governing the Company's offer and sale of franchises. In addition, such
counsel has no way of knowing whether the Company has employed any sales
practices which violates state or federal franchise laws, rules or
regulations and such counsel has no knowledge of any franchise or other
liabilities that may have accrued by virtue of the performance or non
performance under contracts. All such counsel knows is that at the time the
franchise registrations for the Company was secured in various states thatr
officers of the Company verified to various state agencies regulating
franchises and business opportunities that the information contained in the
Company's UFOC was true and correct. Such counsel has no independent means
of ascertainin such truth.
(iii) the authorized capitalization of the Company as of June 30,
1996 is set forth under "Capitalization" in the Prospectus; all shares of
the Company's outstanding stock requiring authorization for issuance by
the Company's board of directors have been duly authorized, validly issued,
are fully paid and non-assessable and conform to the description thereof
contained in the Prospectus; the outstanding shares of Common Stock of the
Company have not been issued in violation of the preemptive rights of any
shareholder and the shareholders of the Company do not have any preemptive
rights or other rights to subscribe for or to purchase, nor are there any
restrictions upon the voting or
11
transfer of any of the shares other than aas set forth in the Prospectus;
the Common Stock conforms to the description thereof contained in the
Prospectus; the Shares have been duly authorized and when issued and
delivered, will be duly and validly issued, fully paid, non-assessable,
free of preemptive rights and no personal liability will attach to the
ownership thereof; and to the best of such counsel's knowledge, neither the
filing of the Registration Statement nor the offering or sale of the Shares
as contemplated by this Agreement gives rise to any registration rights or
other rights, other than those which have been waived or satisfied for or
relating to the registration of any Shares of Common Stock or thosed
contained in the PO.
(iv) this Agreement and the Underwriter's PO have been duly and
validly authorized, executed and delivered by the Company, and assuming due
execution and delivery of this Agreement by the Underwriter, are the valid
and legally binding obligations of the Company, subject to applicable
bankruptcy, reorganization, insolvency, moratorium, and other similar laws
applicable to creditor's rights generally and also subject to any
limitations on enforceability which may be imposed by application of
equitable principles. except no opinion need be expressed as to the
enforceability of the indemnity provisions contained in Section 6 or the
contribution provisions contained in Section 7 of this Agreement.
(v) the certificates evidencing the Shares are in valid and proper
legal form; the PO will be exercisable for shares of Common Stock of the
Company in accordance with the terms of the PO and at the prices therein
provided for; at all times during the term of the PO the Shares of Common
Stock of the Company issuable upon exercise of the PO will have been duly
authorized and reserved for issuance upon such exercise of PO and at the
price provided for, will be duly and validly issued, fully paid and non-
assessable.
(vi) such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which could
materially adversely affect the business, property financial condition or
operations of the Company; or which question the validity of the Shares of
Common Stock, this Agreement, or any action taken or to be taken by the
Company pursuant to this Agreement; and no such proceedings are known to
such counsel to be contemplated against the Company; to the best knowledge
of such counsel, there are no governmental proceedings or regulations
required to be described or referred to in the Registration Statement which
are not so described or referred to.
(vii) Neither the Company nor its subsidiaries is in violation of or
default under, nor will the execution and delivery of this Agreement and
the incurrence of the obligations herein or therein contemplated, result in
a violation of, or constitute a default under the certificate or articles
of incorporation or by-laws, or to the best knowledge of such counsel, in
the performance or observance of any material obligations, agreements,
covenants or conditions contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to which
the Company is a party or by which it or any of its properties may be bound
or in violation of any material order, rule, regulation, writ,
12
injunction, or decree of any government, governmental instrumentality or
court, domestic or foreign.
(viii) the Registration Statement has become effective under the
Act, and to the best of such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement is in effect and no
proceedings for that purpose have been instituted or are pending before, or
threatened by, the Commission; the Registration Statement and the
Prospectus (except for the financial statements and other financial data
contained therein, or omitted therefrom, 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.
(ix) such counsel has participated in the preparation of the
Registration Statement and the Prospectus and nothing has come to the
attention of such counsel to cause such counsel to have reason to believe
that the Registration Statement or any amendment thereto at the time it
became effective contained any untrue statement of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus or any supplement thereto contains any
untrue statement of a material fact required to be stated therein or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus or any supplement thereto contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
statements therein, in light of the circumstances under which they were
made, not misleading (except, in the case of both the Registration
Statement and any amendment thereto and the Prospectus and any supplement
thereto, for the financial statements, notes thereto and other financial
information and statistical data contained therein, as to which such
counsel need express no opinion).
(x) all descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and
other documents are accurate and fairly present the information required to
be shown, and such counsel has examined all contracts and other documents
referred to in the Registration Statement and the Prospectus and any such
amendment or supplement or filed as exhibits to the Registration Statement,
and such counsel does not know of any contracts or documents of a character
required to be summarized or described therein or to be filed as exhibits
thereto which are not so summarized, described or filed.
(xi) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in connection
with the authorization, issuance, transfer, sale or delivery of the Shares
by the Company, in connection with the execution, delivery and performance
of this Agreement by the Company, or in connection with the taking of any
action contemplated herein, or the issuance of the Shares (other than
necessary amendments to the Registration Statement) other than (a)
registrations or qualifications of the Shares under applicable state or
foreign securities or Blue Sky laws and (b) registration under the Act, and
(c) "clearance" from the National Association of Securities Dealers, Inc.
13
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such
counsel may rely upon certificates of any officer of the Company or public
officials as to matters of fact. Notwithstanding the foregoing, such
counsel may rely as to all matters of law other than the law of the United
States or of the States of Delaware or New York upon opinions of counsel
satisfactory to you, in which case the opinion shall state that such
counsel has no reason to believe that you and they are not entitled to so
rely.
(d) All corporate proceedings and other legal matters
relating to this Agreement, the Registration Statement, the Prospectus
and other related matters shall be satisfactory to or approved by Gerald A.
Kaufman, counsel to the Underwriter, and you shall have received from such
counsel a signed opinion, dated as of the Closing Date, with respect to the
validity of the issuance of the Shares, the form of the Registration
Statement and Prospectus (other than the financial statements and other
financial data contained therein), the execution of this Agreement and
other related matters as you may reasonably require. The Company shall have
furnished to counsel to the Underwriter such document as he may reasonably
request for the purpose of enabling him to render such opinion.
(e) You shall have received letters prior to the Effective Date
and again on and as of the First Closing Date from Grant Thornton, LLP
independent public accountants for the Company, substantially in the form
approved by you.
(f) At the First Closing Date, (i) the representations and
warranties of the Company contained in this Agreement shall be true and
correct with the same effect as if made on and as of the Closing Date and
the Company shall have performed all of its obligations hereunder and
satisfied all conditions to be satisfied at or prior to such Closing Date,
(ii) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be
stated therein in accordance with the Act and the Rules and Regulations,
and in all material respects conform to the requirements thereof, and
neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, (iii) there shall have been,
since the respective dates as of which information is given, no material
adverse change in the business, properties or condition (financial or
otherwise), results of operations, capital stock, long-term or short-term
debt or general affairs of the Company from that set forth in the
Registration Statement and the Prospectus, except changes which the
Registration Statement and Prospectus indicate might occur after the
Effective Date, and the Company shall not have incurred any material
liabilities or agreement not in the ordinary course of business other than
as referred to in the Registration Statement and Prospectus; and (iv)
except as set forth in the Prospectus, no action, suit or proceeding at law
or in equity shall be pending or threatened against the Company which would
be required to be set forth in the Registration Statement, and no
proceedings shall be pending or threatened against the Company before or by
any commission, board of administrative agency in the United States or
elsewhere, wherein an unfavorable decision, ruling or finding would
materially and adversely affect the business, property, condition
(financial or otherwise), results of
14
operations or general affairs of the Company, and (v) you shall have
received, at the Closing Date, a certificate signed by the Chairman of the
Board or President and the principal financial officer of the Company,
dated as of the Closing Date, evidencing compliance with the provisions of
this subsection (f).
(h) Upon exercise of the option provided for in Section 2(b)
hereof, the obligations of the Underwriter to purchase and pay for the
Option Shares referred to therein will be subject (as of the date hereof
and as of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued, and no proceedings for that purpose shall
have been instituted or shall be contemplated by the Commission for
additional information shall have been complied with to the satisfaction of
Gerald A. Kaufman, counsel to the Underwriter.
(ii) At the Option Closing Date there shall have been delivered
to you, the signed opinion of Bernstein & Wasserman, LLP, counsel for the
Company, dated as of the Option Closing Date, in form and substance
satisfactory to Gerald A. Kaufman, counsel to the Underwriter, which
opinion shall be substantially the same in scope and substance as the
opinion furnished to you at the First Closing Date pursuant to Section 4(c)
hereof, except that such opinion, where appropriate, shall cover the Option
Shares rather than the First Shares. If the First Closing Date is the same
as the Option Closing Date, such opinions may be combined.
(iii) At the Option Closing Date, there shall have been
delivered to you a certificate of the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the Option Closing Date, in form and substance reasonably
satisfactory to Gerald A. Kaufman, counsel to the Underwriter,
substantially the same in scope and substance as the certificate furnished
to you at the First Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been
delivered to you a letter in form and substance satisfactory to you from
Grant Thornton, LLP dated the Option Closing Date and addressed to the
Underwriter, confirming the information in their letter referred to in
Section 4(e) hereof as of the date thereof and stating that, without any
additional investigation required, nothing has come to their attention
during the period from the ending date of their review referred to in said
letter to a date not more than five business days prior to the Option
Closing Date which would require any change in said letter if it were
required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing Date in
connection with the sale and issuance of the Option Shares shall be
satisfactory in form
15
and substance to the Underwriter and Gerald A. Kaufman, counsel to the
Underwriter, shall have been furnished with all such documents,
certificates and opinions as you may request in connection with this
transaction in order to evidence the accuracy and completeness of any of
the representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained therein.
(i) If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated this Agreement and
all obligations of the Underwriter under this Agreement may be canceled at,
or at any time prior to, each Closing Date by the Underwriter notifying the
Company of such cancellation in writing or by telegram at or prior to the
applicable Closing Date. Any such cancellation shall be without liability
of the Underwriter to the Company.
5. Conditions of the Obligations of the Company.
The obligation of the Company to sell and deliver the Shares is
subject to the following conditions:
(a) The Registration Statement shall have become effective not later
than 10:00 A.M., New York time, on the day following the date of this
Agreement, or on such later date as the Company and the Underwriter may
agree in writing.
(b) On the Closing Date, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing
Date, then only the obligation of the Company to sell and deliver the
Option Shares on exercise of the option provided for in Section 2(b) hereof
shall be affected.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
the Act from and against any losses, claims, damages or liabilities, joint
or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and
all attorneys' fees), to which such Underwriter 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 any untrue statement alleged untrue statement of any
material fact contained in (A) the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment thereof or supplement thereto,
(B) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished
by the Company filed in any state or other jurisdiction in order to qualify
any or all of the Shares under the securities laws thereof (any such
application, document or information
16
being hereinafter called a "Blue Sky Application"), or arise out of or are
based upon the omission or alleged omission to state in the Registration
Statement, any Preliminary Prospectus, Prospectus; or any amendment thereof
or supplement thereto, or in any Blue Sky Application, a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company will not be liable in
any such case to the extent, but only to the extent, that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriter specifically for use in the
preparation of the Registration Statement or any such amendment or
supplement thereof or any such Blue Sky Application or any such Preliminary
Prospectus or the Prospectus or any such amendment or supplement thereto.
This indemnity will be in addition to any liability which the Company may
otherwise have.
(b) The Underwriter agree to indemnify and hold harmless the Company,
each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration
Statement, and each person, if any, who controls the Company within the
meaning of the Act, from and against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such director, nominee,
officer or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, in
reliance upon and in conformity with written information furnished to the
Company by you specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify in writing the indemnifying party of the
commencement thereof. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate in and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
subject to the provisions herein stated, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so as to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The
indemnified party shall have the right to
17
employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall not be at
the expense of the indemnifying party if the indemnified party has assumed
the defense of the action with counsel reasonably satisfactory to the
indemnified party; provided that if the indemnified party is the
Underwriter or a person who controls such Underwriter within the meaning of
the Act, the fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party or (ii) the
named parties to any such action (including any impleaded parties) include
both the Underwriter or such controlling person and the indemnifying party
and in the judgment of the Underwriter, it is advisable for the Underwriter
or controlling persons to be represented by separate counsel (in which case
the indemnifying party shall not have the right to assume the defense of
such action on behalf of the Underwriter or such controlling person, it
being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for all such
Underwriter and controlling persons, which firm shall be designated in
writing by you). No settlement of any action against an indemnified party
shall be made without the consent of the indemnified party, specified in
this paragraph which shall not be unreasonably withheld in light of all
factors of importance to such indemnified party.
7. Contribution.
In order to provide for just and equitable contribution under the Act
in any case in which (i) the Underwriter makes claim for indemnification
pursuant to Section 6 hereof but it is judicially determined (by the entry
of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding
the fact that the express provisions of Section 6 provide for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of the Underwriter, then the Company and each person
who controls the Company, in the aggregate, and any such Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (which shall, for all purposes of this Agreement,
include, but not limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) in either such case
(after contribution from others) in such proportions that all such
Underwriter are responsible in the aggregate for that portion of such
losses, claims, damages or liabilities represented by the percentage that
the underwriting discount per Share appearing on the cover page of the
Prospectus bears to the public offering price appearing thereon, and the
Company shall be responsible for the remaining portion, provided, however,
that (a) if such allocation is not permitted by applicable law, then the
relative fault of the Company and the Underwriter and controlling persons,
in the aggregate, in connection with the statements or omissions which
resulted in such damages and other relevant equitable considerations shall
also be considered. The relative fault shall be determined by reference to,
among other things, whether in the case of an untrue statement of a
material fact or the omission to state a material fact, such statement or
omissions relates to information supplied by the Company or the
Underwriter, and the
18
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company and
the Underwriter agree that it would not be just and equitable if the
respective obligations of the Company and the Underwriter to contribute
pursuant to this Section 7 were to be determined by pro rata or per capita
allocation of the aggregate damages or by any other method of allocation
that does not take account of the equitable considerations referred to in
the first sentence of this Section 7 and no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. As used in this paragraph, the word "Company"
includes any officer, director, or person who controls the Company within
the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then the
Underwriter and each person who controls the Underwriter shall be entitled
to contribution from the Company to the full extent permitted by law. The
foregoing contribution agreement shall in no way affect the contribution
liabilities of any persons having liability under Section 11 of the Act
other than the Company and the Underwriter. No contribution shall be
requested with regard to the settlement of any matter from any party who
did not consent to the settlement; provided, however, that such consent
shall not be unreasonably withheld in light of all factors of importance to
such party.
8. Cost and Expenses.
(a) Whether or not this Agreement becomes effective or the sale of the
Shares to the Underwriter is consummated, the Company will pay all costs
and expenses incident to the performance of this Agreement by the Company,
including but not limited to the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident
to the preparation, printing, filing and distribution under the Act of the
Registration Statement (including the financial statement therein and all
amendments and exhibits thereto), each Preliminary Prospectus and the
Prospectus, as amended or supplemented, the fee of the National Association
of Securities Dealers, Inc. ("NASD") in connection with the filing required
by the NASD relating to the offering of the Shares contemplated hereby; all
expenses, including reasonable fees and disbursements of counsel in
connection with the qualification of the Shares under the state securities
or blue sky laws which the Underwriter shall designate; the cost of
printing and furnishing to the Underwriter copies of the Registration
Statement, and the Preliminary Prospectus, the Prospectus, this Agreement,
the Dealers' Agreement, and the Blue Sky Memorandum and the cost of
printing and certificates representing the securities comprising the
Shares. The Company shall pay any and all taxes (including any transfer,
franchise, capital stock or other tax imposed by any jurisdiction) on sales
to the Underwriter hereunder. The Company will also pay all costs and
expenses incident to the furnishing of any amended Prospectus or of any
supplement to be attached to the Prospectus as called for in Section 3(a)
of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company shall at the
First Closing Date pay to the Underwriter a non-accountable expense
allowance of $180,000. In the event the over-allotment option is exercised,
the Company shall pay to the Underwriter at the Option Closing Date an
additional amount equal to 3% of the gross proceeds received upon exercise
of the over-allotment option. In the event the transactions contemplated
19
hereby are not consummated by reason of the Company's unwillingness to
proceed or because of a breach by the Company of any covenant,
representation or warranty herein, the Company shall be liable for the
accountable out of pocket expenses of the Underwriter, including legal fees
but not in excess of $35,000.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Underwriter from any other person
for services as a finder in connection with the proposed offering, and the
Company agrees to indemnify and hold harmless the Underwriter from and
against any losses, claims, damages or liabilities, joint or several which
shall, for all purposes of this Agreement, include, but not be limited to,
all costs of defense and investigation and all attorneys' fee), to which
the indemnified party may become subject insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon the claim of any person (other than an employee of the party
claiming indemnity) or entity that he or it is entitled to a finder's fee
in connection with the proposed offering by reason of such person's or
entity's influence or prior contact with the indemnifying party.
9. Effective Date.
The Agreement shall become effective upon its execution, except that
the Underwriter may, at its option, delay its effectiveness until 11:00
A.M., New York time, on the first full business day following the effective
date of the Registration Statement, or at such earlier time after the
effective date of the Registration Statement as the Underwriter in its
discretion shall first commence the initial public offering of any of the
Shares. The time of the initial public offering shall mean the time of
release by you of the first newspaper advertisement with respect to the
Shares, or the time when the Shares are first generally offered by you to
dealers by letter or telegram, whichever shall first occur. This Agreement
may be terminated by you at any time before it becomes effective as
provided above, except that Sections 3(c), 6, 7, 8, 12, 13, 14 and 15 shall
remain in effect notwithstanding such termination.
10. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 12, 13, 14 and
15 may be terminated at any time prior to the First Closing Date, and the
option referred to in Section 2(b), if exercised, may be canceled, at any
time prior to the Option Closing Date, by the Underwriter if in its
judgment it is impracticable to offer for sale or to enforce contracts made
for the resale of the Shares agreed to be purchased hereunder by reason of
(i) the Company having sustained a material loss, whether or not insured by
reason of fire, earthquake, flood, accident or other calamity, or from any
labor dispute or court or government action, order or decree, (ii) trading
in securities on the New York Stock Exchange or the American Stock Exchange
having been suspended or limited, (iii) material governmental restrictions
having been imposed on trading in securities generally (which are not in
force and effect on the date hereof), (iv) a banking moratorium having been
declared by federal or New York state authorities, (v) an outbreak of major
international hostilities or other national or international calamity
having occurred, (vi) the passage by the Congress of the United States or
by any state legislative body of similar impact, of any
20
act or measure, or the adoption of any orders, rules or regulations by any
government body or any authoritative accounting institute or board, or any
governmental executive, which is reasonably believed likely by the
Underwriter to have a material adverse impact on the business, financial
condition or financial statements of the Company, (vii) any material
adverse change in the financial or securities markets in the United States
having occurred since the date of this Agreement, or (viii) any material
adverse change having occurred, since the respective dates of which
information is given in the Registration Statement and Prospectus, in the
earnings, business prospects or general condition of the Company, financial
or otherwise, whether or not arising in the ordinary course of business.
(b) If the Underwriter elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10 or
in Section 9, the Company shall be promptly notified by the Underwriter, by
telephone or telegram, confirmed by letter.
11. Underwriter's Option.
On the First Closing Date, the Company will sell to the Underwriter
for a consideration of $120, and upon the terms and conditions set forth in
the form of annexed as an exhibit to the Registration Statement, an option
to purchase an aggregate of 120,000 Shares (the "PO"). In the event of
conflict in the terms of this Agreement and the PO, the language of the PO
shall control.
12. Representations, Warranties, and Agreements to Survive Delivery.
The respective indemnities, agreements, representations, warranties
and other statements of the Company or its Principal Stockholders, where
appropriate, and the Underwriter set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Underwriter, the Company or any
of its officers or directors or any controlling person and will survive
delivery of any payment of the Shares and the termination of this
Agreement.
13. Notice.
All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to the Underwriter, will be
mailed, delivered or telegraphed and confirmed to them at Patterson Travis,
Inc. One Battery Park Plaza, New York, New York, 10004 with a copy sent to
Gerald A. Kaufman, 33 Walt Whitman Road, Huntington Station, New York 11746
of if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at 171 Palmer Road, Mamaroneck, New York 10538 with a copy
to Bernstein & Wasserman, LLP, 950 Third Avenue, New York, New York 10022,
Attn: Stuart Neuhauser, Esq.
14. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of the
Underwriter, the Company and, to the extent expressed, the Principal
Stockholders, any person
21
controlling the Company or the Underwriter, and directors of the Company,
nominees for directors of the Company (if any) named in the Prospectus, the
officers of the Company who have signed the Registration Statement, and
their respective executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any
purchasers, as such purchaser, from the Underwriter of the Shares.
15. Director
For a period of three years from Effective Date, the Underwriter will
have the right to designate one person to be elected as a director of the
Company or to be an observer at the meeting.
16. Applicable Law.
This Agreement will be governed by, and construed in accordance with,
the laws of the State of New York applicable to agreements made and to be
entirely performed within New York the Company and the Underwriter in
accordance with its terms.
Very truly yours,
ECOMAT, INC.
By: _________________________
Diane Weiser, President
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
Patterson Travis, Inc.,
By: ______________________
We hereby agree to be bound by the provisions of Sections 3(j),
and (o) and 12 hereof.
Palatin, AG
___________________________ by __________________________
Diane Weiser Astrid Hindemith, President
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