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EXHIBIT 1.1
UNDERWRITING AGREEMENT (FORM)
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LUMINEX LIGHTING, INC.
500,000 Shares of Common Stock
and
500,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
_____________ ___, 1998
Platinum Equities, Inc.
80 Pine Street, 32nd Floor
New York, New York 10005
Dear Sirs:
LUMINEX LIGHTING, INC., a California corporation (the "Company") hereby
confirms the agreement made with respect to the retention of Platinum Equities,
Inc. (the "Underwriter") as the exclusive agent of the Company to publicly offer
and sell, pursuant to the terms of this Underwriting Agreement (the
"Agreement"), an aggregate of 500,000 shares ("Shares") of Common Stock, no par
value per share (the "Common Stock"), and 500,000 redeemable Common Stock
purchase warrants (the "Warrants," and collectively with the Common Stock, the
"Securities") of the Company on a "best efforts, minimum 250,000 Shares and
250,000 Warrants ("Minimum Offering"), maximum 500,000 Shares and 500,000
Warrants ("Maximum Offering")" basis. The offering of the Securities
contemplated hereby may sometimes be referred to as the "Offering."
1. Description of the Securities.
(a) The Warrants.
Each Warrant shall entitle the holder to purchase one share of Common Stock
at an exercise price of $6.00, subject to adjustment. The Warrants are
exercisable at any time during the five year-period commencing on the effective
date of the Registration Statement, as defined in Paragraph 2(a) herein (the
"Effective Date"), subject to prior redemption by the Company. The Shares of
Common Stock issuable upon the exercise of the Warrants are hereinafter referred
to as the "Warrant Shares."
The Warrants will be redeemable at a price of $0.10 per Warrant, commencing
twelve (12) months after the Effective Date, or earlier with the prior written
consent of the Underwriter, upon at least 30 days prior written notice provided
that the closing bid price of the Common Stock (or closing sales price if listed
on an exchange or on a reporting system that provides last sales prices) for
twenty (20) consecutive trading days ending on the third day prior to the date
on which notice of redemption is given, shall exceed $7.50 per share, subject to
the right of the holder to exercise his purchase rights thereunder until
redemption.
(b) Underwriter's Warrants.
On the Closing Date, the Company will sell to the Underwriter, for $10, a
warrant to purchase one share of Common Stock and one Warrant for each ten
Shares of Common Stock and ten Warrants sold in this Offering (a maximum of
50,000 Shares of Common Stock and 50,000 Warrants) at a price equal to $6.60 per
share of Common Stock and $.12 per Warrant (the "Warrants," and collectively
with the Securities underlying the Underwriter's Warrants, the "Underwriter's
Securities"). The Warrants underlying the Underwriter's Warrants shall be
exercisable at a price of $6.00 per Warrant. The Underwriter's Warrants shall be
non-transferable (other than to (i) officers of the Underwriter, and (ii)
members of the selling group and their officers or partners) for a period of 12
months following the Effective Date. Thereafter, they are transferable for a
period of four years. If the Warrants underlying the Underwriter's Warrants are
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not exercised during their term, they shall, by their terms, automatically
expire. The Underwriter's Securities shall be registered for sale to the public
and shall be included in the Registration Statement filed in connection with the
Offering.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Underwriter that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission"), a registration statement on Form SB-2 (File No.
333-__), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities under the Securities Act of
1933 (the "Act"). The Company will file further amendments to said registration
statement in the form to be delivered to you and will not, before the
registration statement becomes effective, file any other amendment thereto to
which you shall have objected in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
exhibits and all other documents filed as a part thereof or incorporated
therein), is hereinafter called the "Registration Statement", and the
prospectus, in the form filed with the Commission pursuant to Rule 424(b) of the
General Rules and Regulations of the Commission under the Act (the
"Regulations") or, if no such filing is made, the definitive prospectus used in
the Offering, is hereinafter called the "Prospectus". The Company has delivered
to you copies of each Preliminary Prospectus as filed with the Commission and
has consented to the use of such copies for purposes permitted by the Act.
(b) The Commission has not issued any orders preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
Act and has not included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, subject to the provisions set forth below and except as such
untrue statement or omission has been cured in the a subsequent preliminary
prospectus or in the final prospectus.
(c) When the Registration Statement becomes effective under the Act
and at all times subsequent thereto including the Closing Dates (hereinafter
defined) and for such longer periods as in the opinion of counsel for the
Underwriter, a Prospectus is required to be delivered in connection with the
sale of the Securities by the Underwriter, the Registration Statement and
Prospectus, and any amendment thereof or supplement thereto, will contain all
material statements which are required to be stated therein in accordance with
the Act and the Regulations, and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with written
information furnished to the Company by you, for use in connection with the
preparation of the Registration Statement or Prospectus, or in any amendment
thereof or supplement thereto. It is understood that (i) the statements set
forth under the heading "Underwriting" in the Prospectus with respect to the
amounts of the selling concession; (ii) the information in the Risk Factor
entitled "Inexperienced Underwriter;" (iii) the identity of counsel to the
Underwriter under the heading "Legal Matters"; and (iv) the information
concerning the NASD affiliation of the Underwriter constitute for purposes of
this Section 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.
(d) The Company is, and at each Closing Date will be, a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company is duly qualified or licensed and
in good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its operations
requires such qualification or licensing, except those jurisdictions in which
the failure to so qualify would not have a material adverse effect. The Company
has all requisite corporate powers and authority, and, except as set forth in
the Registration Statement, the Company and its employees have all material and
necessary authorizations, approvals, orders, licenses, certificates and permits
of and from all governmental regulatory officials and
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bodies to own or lease its properties and conduct its businesses as described in
the Prospectus, and the Company is doing business and has been doing business
during the period described in the Registration Statement in compliance with all
such material authorizations, approvals, orders, licenses, certificates and
permits and all material federal, state and local laws, rules and regulations
concerning the businesses in which the Company is engaged. The disclosures in
the Registration Statement concerning the effects of federal, state and local
regulation on the Company's business as currently conducted and as contemplated
are correct in all material respects and do not omit to state a material fact.
The Company has all corporate power and authority to enter into this Agreement
and carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained or will have been obtained prior to the dates of the closings (the
"Closing Dates") of the Offering.
(e) This Agreement has been duly and validly authorized and
executed by the Company. The Securities (including the Common Stock and the
Warrants), the Warrant Shares, the Underwriter's Warrants to be issued and sold
by the Company pursuant to this Agreement, the Securities issuable upon exercise
of the Underwriter's Warrants and payment therefor, and the Common Stock and
Warrant Shares underlying such Underwriter's Warrants, have been duly authorized
(and, in the case of the Common Stock and the Warrant Shares, have been duly
reserved for issuance) and, when issued and paid for in accordance with this
Agreement (and, in the case of the Warrant Shares, upon exercise of the Warrants
and payment to the Company of the exercise price therefor), the Common Stock and
Warrant Shares will be validly issued, fully paid and non-assessable; the Common
Stock, Warrants, Warrant Shares, Underwriter's Warrants and Underwriter's
Warrant Shares are not and will not be subject to the preemptive rights of any
shareholder of the Company and conform and at all times up to and including
their issuance will conform in all material respects to all statements with
regard thereto contained in the Registration Statement and Prospectus; and all
corporate action required to be taken for the authorization, issuance and sale
of the Common Stock, Warrants, Warrant Shares and Underwriter's Warrants has
been taken, and this Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, to issue and sell, upon
exercise in accordance with the terms thereof, the number and kind of securities
called for thereby.
(f) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
the Articles of Incorporation, as amended, or Bylaws of the Company or of any
evidence of indebtedness, lease, contract or other agreement or instrument to
which the Company is a party or by which the Company or any of its properties is
bound, or under any applicable law, rule, regulation, judgment, order or decree
of any government, professional advisory body, administrative agency or court,
domestic or foreign, having jurisdiction over the Company or its properties, or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the properties or assets of the Company; and no consent, approval,
authorization or order of any court or governmental or other regulatory agency
or body is required for the consummation by the Company of the transactions on
its part herein contemplated, except such as may be required under the Act or
under state securities or blue sky laws, except where a breach, violation or
failure to obtain such consent would not have a material adverse effect upon the
business or operation of the Company.
(g) Subsequent to the date hereof, and prior to the Closing Dates
the Company will not issue or acquire any equity securities except that the
Company may make short-term investments as contemplated in the "Use of Proceeds"
section of the Prospectus. Except as described in the Registration Statement,
the Company does not have, and at the Closing Dates will not have, outstanding
any options to purchase or rights or warrants to subscribe for, or any
securities or obligations convertible into, or any contracts or commitments to
issue or sell shares of its Preferred Stock, Common Stock or any such options,
warrants, convertible securities or obligations.
(h) The financial statements and notes thereto included in the
Registration Statement and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved.
(i) Except as set forth in the Registration Statement, the Company
is not, and at the Closing Dates will not be, in violation or breach of, or
default in, the due performance and observance of any term, covenant or
condition
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of any indenture, mortgage, deed of trust, note, loan or credit agreement, or
any other agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company is a party or by which
the Company may be bound or to which any of the property or assets of the
Company is subject, which violations, breaches, default or defaults, singularly
or in the aggregate, would have a material adverse effect on the Company. The
Company has not and will not have taken any action in material violation of the
provisions of the Articles of Incorporation, as amended, or the Bylaws of the
Company or any statute or any order, rule or regulation of any court or
regulatory authority or governmental body having jurisdiction over or
application to the Company, its business or properties.
(j) The Company has, and at the Closing Dates will have, 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, claims,
security interests, restrictions and defects of any material nature whatsoever,
except such as are described or referred to in the Prospectus and liens for
taxes not yet due and payable. All of the material leases and subleases under
which the Company is the lessor or sublessor of properties or assets or under
which the Company holds properties or assets as lessee as described in the
Prospectus are, and will on the Closing Dates be, in full force and effect, and
except as described in the Prospectus, the Company is not and will not be in
default in respect to any of the terms or provisions of any of such leases or
subleases (which would have a material adverse effect on the business, business
prospects or operations of the Company), and no claim has been asserted by
anyone adverse to rights of the Company as lessor, sublessor, lessee or
sublessee 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 referred to in the Prospectus, and the Company owns or leases all
such properties as are necessary to its operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted set forth in
the Prospectus (which would have a material adverse effect on the business,
business prospects or operations of the Company).
(k) The authorized, issued and outstanding capital stock of the
Company as of December 31, 1997 and as of the date of the Prospectus 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 duly
authorized, validly issued and are 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, the Warrants
and all such options and warrants conform in all material respects, to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(l) Except as described in the Prospectus, the Company does not own
or control any capital stock or securities of, or have any proprietary interest
in, or otherwise participate in any other corporation, partnership, joint
venture, firm, association or business organization; provided, however, that
this provision shall not be applicable to the investment, if any, of the net
proceeds from the sale of the Securities sold by the Company in certificates of
deposits, savings deposits, short-term obligations of the United States
Government, money market instruments or other short-term investments.
(m) Stonefield Josephson, Inc., 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.
(n) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money; or (ii) entered into any transaction other than in the
ordinary course of business; or (iii) declared or paid any dividend or made any
other distribution on or in respect to its capital stock.
(o) There is no litigation or governmental proceeding pending or to
the knowledge of the Company threatened against, or involving the properties or
business of the Company which might materially adversely affect the
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value, assets or the operation of the properties or the business of the Company,
except as referred to in the Prospectus. Further, except as referred to in the
Prospectus, there are no pending actions, suits or proceedings related to
environmental matters or related to discrimination on the basis of age, sex,
religion or race, nor is the Company charged with or, to its knowledge, under
investigation with respect to any violation of any statutes or regulations of
any regulatory authority having jurisdiction over its business or operations,
and no labor disturbances by the employees of the Company exist or, to the
knowledge of the Company, have been threatened.
(p) The Company has, and at each Closing Date will have, filed all
necessary federal, state and foreign income and franchise tax returns or has
requested extensions thereof (except in any case where the failure to so file
would not have a material adverse effect on the Company), and has paid all taxes
which it believes in good faith were required to be paid by it except for any
such tax that currently is being contested in good faith or as described in the
Prospectus.
(q) The Company has not at any time (i) made any contribution 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, foreign governmental or professional regulatory agency, officer or
official or other person charged with similar public, quasi-public or
professional regulatory duties, other than payments or contributions required or
allowed by applicable law.
(r) Except as set forth in the Registration Statement, to the
knowledge of the Company, neither the Company nor any of officer, director,
employee or agent of the Company has made any payment or transfer of any funds
or assets of the Company or conferred any personal benefit by use of the
Company's assets or received any funds, assets or personal benefit in violation
of any law, rule or regulation, which is required to be stated in the
Registration Statement or necessary to make the statements therein not
misleading.
(s) On the Closing Date all transfer or other taxes, if any (other
than income tax) which are required to be paid, and are due and payable, in
connection with the sale and transfer of the Securities by the Company to the
Underwriter will have been fully paid or provided for by the Company as the case
may be, and all laws imposing such taxes will have been fully complied with in
all material respects.
(t) There are no contracts or other documents of the Company which
are of a character required to be described in the Registration Statement or
Prospectus or filed as exhibits to the Registration Statement which have not
been so described or filed.
(u) The Company will apply the net proceeds from the sale of the
Securities sold by it for the purposes and in the manner set forth in the
Registration Statement and Prospectus under the heading "Use of Proceeds."
(v) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (1) transactions are executed in
accordance with management's general or specified authorizations; (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (3) access to assets is permitted only in
accordance with management's general or specific authorizations; and (4) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(w) Except as set forth in the Prospectus, no holder of any
securities of the Company has the right to require registration of any
securities because of the filing or effectiveness of the Registration Statement.
(x) To the Company's knowledge, there are no claims for services in
the nature of a finder's origination fee with respect to the sale of the
Securities hereunder, except as set forth in the Prospectus.
(y) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to Underwriter was, when made, or as of the
Closing Date or as of the Option Closing Date will be materially inaccurate,
untrue or incorrect.
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3. Covenants of the Company.
The Company covenants and agrees that:
(a) It will deliver to the Underwriter, without charge, two
conformed copies of each Registration Statement and of each amendment or
supplement thereto, including all financial statements and exhibits.
(b) The Company has delivered to the Underwriter, and each of the
Selected Dealers (as hereinafter defined) without charge, as many copies as have
been requested of each Preliminary Prospectus heretofore filed with the
Commission in accordance with and pursuant to the Commission's Rule 430 under
the Act and will deliver to the Underwriter and to others whose names and
addresses are furnished by the Underwriter or a Selected Dealer, without charge,
on the Effective Date, and thereafter from time to time during such reasonable
period as you may request if, in the opinion of counsel for the Underwriter, the
Prospectus is required by law to be delivered in connection with sales by the
Underwriter or a dealer, as many copies of the Prospectus (and, in the event of
any amendment of or supplement to the Prospectus, of such amended or
supplemented Prospectus) as the Underwriter may request for the purposes
contemplated by the Act. The Company will take all necessary actions to furnish
to whomever directed by the Underwriter, when and as requested by the
Underwriter, all necessary documents, exhibits, information, applications,
instruments and papers as may be reasonably required or, in the opinion of
counsel to the Underwriter desirable, in order to permit or facilitate the sale
of the Securities.
(c) The Company has authorized the Underwriter to use, and make
available for use by prospective dealers, the Preliminary Prospectus, and
authorizes the Underwriter, all dealers selected by you in connection with the
distribution of the Securities (the "Selected Dealers") to be purchased by the
Underwriter and all dealers to whom any of such Securities may be sold by the
Underwriter or by any Selected Dealer, to use the Prospectus, as from time to
time amended or supplemented, in connection with the sale of the Securities in
accordance with the applicable provisions of the Act, the applicable Regulations
and applicable state law, until completion of the distribution of the Securities
and for such longer period as you may request if the Prospectus is required
under the Act, the applicable Regulations or applicable state law to be
delivered in connection with sales of the Securities by the Underwriter or the
Selected Dealers.
(d) The Company will use its best efforts to cause the Registration
Statement to become effective and will notify the Underwriter immediately, and
confirm the notice in writing: (i) when the Registration Statement or any
post-effective amendment thereto becomes effective; (ii) of the issuance by the
Commission of any stop order or of the initiation, or to the best of the
Company's knowledge, the threatening, of any proceedings for that purpose; (iii)
the suspension of the qualification of the Securities and the Underwriter's
Warrants, or underlying securities, for offering or sale in any jurisdiction or
of the initiating, or to the best of the Company's knowledge the threatening, of
any proceeding for that purpose; and (iv) of the receipt of any comments from
the Commission. If the Commission shall enter a stop order at any time, the
Company will make every reasonable effort to obtain the lifting of such order at
the earliest possible moment.
(e) During the time when a prospectus is required to be delivered
under the Act, the Company will comply with all requirements imposed upon it by
the Act and the Securities Exchange Act of 1934 (the "Exchange Act"), as now and
hereafter amended and by the Regulations, as from time to time in force, as
necessary to permit the continuance of sales of or dealings in the Securities in
accordance with the provisions hereof and the Prospectus. If at any time when a
prospectus relating to the Securities is required to be delivered under the Act,
any event shall have occurred as a result of which, in the opinion of counsel
for the Company or counsel for the Underwriter, the Prospectus as then amended
or supplemented includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify you promptly and prepare and
file with the Commission an appropriate amendment or supplement in accordance
with Section 10 of the Act and will furnish to you copies thereof.
(f) The Company will endeavor in good faith, in cooperation with
you, at or prior to the time the Registration Statement becomes effective, to
qualify the Securities for offering and sale under the securities laws or blue
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sky laws of such jurisdictions as you may reasonably designate. In each
jurisdiction where such qualification shall be effected, the Company will,
unless you agree that such action is not at the time necessary or advisable,
file and make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction.
(g) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than the first day of the
fifteenth full calendar month following the Effective Date of the Registration
Statement, an earnings statement of the Company, which will be in reasonable
detail but which need not be audited, covering a period of at least twelve
months beginning after the Effective Date of the Registration Statement, which
earnings statements shall satisfy the requirements of Section 11(a) of the Act
and the Regulations as then in effect. The Company may discharge this obligation
in accordance with Rule 158 of the Regulations.
(h) During the period of five years commencing on the Effective
Date of the Registration Statement, the Company will furnish to its stockholders
an annual report (including financial statements audited by its independent
public accountants), in reasonable detail, and, at its expense, furnish each of
the Underwriters (i) within 90 days after the end of each fiscal year of the
Company, a consolidated balance sheet of the Company and its consolidated
subsidiaries and a separate balance sheet of each subsidiary of the Company the
accounts of which are not included in such consolidated balance sheet as of the
end of such fiscal year, and consolidated statements of operations,
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries and separate statements of operations, stockholders' equity and
cash flows of each of the subsidiaries of the Company the accounts of which are
not included in such consolidated statements, for the fiscal year then ended all
in reasonable detail and all certified by independent accountants (within the
meaning of the Act and the Regulations), (ii) within 45 days after the end of
each of the first three fiscal quarters of each fiscal year, similar balance
sheets as of the end of such fiscal quarter and similar statements of
operations, stockholders' equity and cash flows for the fiscal quarter then
ended, all in reasonable detail, and subject to year end adjustment, all
certified by the Company's principal financial officer or the Company's
principal accounting officer as having been prepared in accordance with
generally accepted accounting principles applied on a consistent basis, (iii) as
soon as available, each report furnished to or filed with the Commission or any
securities exchange and each report and financial statement furnished to the
Company's shareholders generally and (iv) as soon as available, such other
material as the Underwriter may from time to time reasonably request regarding
the financial condition and operations of the Company.
(i) For a period of eighteen months from the Effective Date, the
Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit), the Company's financial statements
for each of the first three quarters prior to the announcement of quarterly
financial information, the filing of the Company's 10-Q quarterly report and the
mailing of quarterly financial information to stockholders.
(j) Prior to the Closing Dates, the Company will not issue,
directly or indirectly, without your prior written consent and that of counsel
for the Underwriter, any press release or other public announcement or hold any
press conference with respect to the Company or its activities with respect to
this Offering.
(k) The Company will deliver to you prior to filing, any amendment
or supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date of the Registration Statement and will not file any
such amendment or supplement to which you shall reasonably object after being
furnished such copy.
(l) The Company will apply the net proceeds from the Offering
received by it in the manner set forth under "Use of Proceeds" in the
Prospectus.
(m) Counsel for the Company, the Company's accountants, and the
officers and directors of the Company will, respectively, furnish the opinions,
the letters and the certificates referred to in subsections of Paragraph 10
hereof, and, in the event that the Company shall file any amendment to the
Registration Statement relating to the offering of the Securities or any
amendment or supplement to the Prospectus relating to the offering of the
Securities subsequent to the Effective Date of the Registration Statement, such
counsel, such accountants, such officers and directors, respectively, will, at
the time of such filing or at such subsequent time as you shall specify, so long
as securities being registered by such amendment or supplement are being
underwritten by the Underwriter, furnish to you such opinions,
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letters and certificates, each dated the date of its delivery, of the same
nature as the opinions, the letters and the certificates referred to in said
Paragraph 10, as you may reasonably request, or, if any such opinion or letter
or certificate cannot be furnished by reason of the fact that such counsel or
such accountants or any such officer or director believes that the same would be
inaccurate, such counsel or such accountants or such officer or director will
furnish an accurate opinion or letter or certificate with respect to the same
subject matter.
(n) The Company will comply with all of the provisions of any
undertakings contained in the Registration Statement in all material respects.
(o) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued Shares of Common Stock which are
issuable upon exercise of the Warrants and issuable upon exercise of the
Underwriter's Warrants (including the underlying securities) outstanding from
time to time.
(p) Following the Effective Date and from time to time thereafter,
so long as the Warrants are outstanding, the Company will timely prepare and
file at its sole cost and expense one or more post-effective amendments to the
Registration Statement or a new registration statement as required by law as
will permit Warrant holders to be furnished with a current prospectus in the
event Warrants are exercised, and to use its best efforts and due diligence to
have same be declared effective. The Company will deliver a draft of each such
post-effective amendment or new registration statement to the Underwriter at
least ten days prior to the filing of such post-effective amendment or
registration statement.
(q) Following the Effective Date and from time to time thereafter
so long as any of the Warrants remain outstanding, the Company will timely
deliver and supply to its warrant agent sufficient copies of the Company's
current Prospectus, as will enable such Warrant Agent to deliver a copy of such
Prospectus to any Warrant or other holder where such Prospectus delivery is by
law required to be made.
(r) So long as any of the Warrants remain outstanding, the Company
shall continue to employ the services of a firm of independent certified public
accountants reasonably acceptable to the Underwriter in connection with the
preparation of the financial statements to be included in any registration
statement to be filed by the Company hereunder, or any amendment or supplement
thereto (it being understood that Stonefield Josephson, Inc. is acceptable to
the Underwriter). During the same period, the Company shall employ the services
of a law firm(s) acceptable to the Underwriter in connection with all legal work
of the Company, including the preparation of a registration statement to be
filed by the Company hereunder, or any amendment or supplement thereto.
(s) So long as any of the Warrants remain outstanding, the Company
shall continue to appoint a Warrant Agent for the Warrants, who shall be
reasonably acceptable to the Underwriter.
(t) The Company agrees that it will, upon the Effective Date, for a
period of no less than three (3) years, engage a designee of the Underwriter as
an advisor (the "Advisor") to its Board of Directors where such Advisor shall
attend meetings of the Board, receive all notices and other correspondence and
communications sent by the Company to members of its Board of Directors and
shall be entitled to receive compensation therefor equal to the entitlement of
all non-employee directors. Such Advisor shall also be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings
including, but not limited to, food, lodging, and transportation. The Company
further agrees that during said three (3) year period, it shall schedule no less
than four (4) formal and "in person" meetings of its Board of Directors in each
such year and thirty (30) days advance notice of such meetings shall be given to
the Advisor. Further, during such three (3) year period, the Company shall give
notice to the Underwriter with respect to any proposed acquisitions, mergers,
reorganizations or other similar transactions. In lieu of the Underwriter's
right to designate an Advisor, the Underwriter shall have the right during such
three-year period, in its sole discretion, to designate one person for election
as a Director of the Company and the Company will utilize its best efforts to
obtain the election of such person who shall be entitled to receive the same
compensation, expense reimbursements and other benefits set forth above.
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The Company agrees to indemnify and hold the Underwriter and such Advisor or
Director harmless against any and all claims, actions, damages, costs and
expenses, and judgments arising solely out of the attendance and participation
of your designee at any such meeting described herein. In the event the Company
maintains a liability insurance policy affording coverage for the acts of its of
officers and directors, it agrees, if possible, to include the Underwriter's
designee as an insured under such policy.
(u) The Company's Common Stock and Warrants shall be listed on the
OTC Bulletin Board maintained by the National Association of Securities Dealers,
Inc. (the "OTC Bulletin Board") not later than the final Closing Date.
Immediately following the final Closing Date, the Company will make all filings
required, including registration under the Exchange Act, and will use its best
efforts to obtain the listing of the Common Stock and Warrants on the Nasdaq
Small Cap Market ("Nasdaq") and maintain such listing (unless the Company is
acquired) for at least five years from the date of this Agreement.
(v) The Company will apply for listing in Standard and Poors
Corporation Reports or Moodys OTC Guide and shall use its best efforts to have
the Company included in such publications for at least five years from the final
Closing Date.
(w) Within thirty (30) days following the final Closing Date, the
Company's accountants shall prepare an audited balance sheet as of the month
ending subsequent to such final Closing Date.
(x) For a period of twelve (12) months from the Effective Date, no
officer, director or holder of any securities of the Company prior to the
Offering will, directly or indirectly, offer, sell (including any short sale),
grant any option for the sale of, acquire any option to dispose of, or otherwise
dispose of any Shares of Common Stock, including Shares of Common Stock issuable
upon exercise of options, warrants or any convertible securities of the Company,
without the prior written consent of the Underwriter, other than as set forth in
the Registration Statement. In order to enforce this covenant, the Company shall
impose stop-transfer instructions with respect to the securities owned by every
stockholder prior to the Offering until the end of such period (subject to any
exceptions to such limitation on transferability set forth in the Registration
Statement). If necessary to comply with any applicable Blue-sky Law, the shares
held by such stockholders will be escrowed with counsel for the Company or
otherwise as required.
(y) Except for the issuance of shares of capital stock by the
Company in connection with a dividend, recapitalization, reorganization or
similar transactions or as result of the exercise of warrants or options
disclosed in or issued or granted pursuant to plans disclosed in the
Registration Statement, the Company shall not, for a period of eighteen (18)
months following the Final Closing Date, directly or indirectly, offer, sell,
issue or transfer any shares of its capital stock, or any security exchangeable
or exercisable for, or convertible into, shares of the capital stock or register
any of its capital stock (under any form of registration statement, including
Form S-8), without the prior written consent of the Underwriter. Options granted
pursuant to plans must be exercisable at the fair market value on the date of
grant.
(z) During the three-year period from the Final Closing Date, the
Underwriter shall have a right of first refusal to act as underwriter or agent
of any and all public or private offerings of the securities of the Company, or
any successor to or subsidiary of the Company or any other entity in which the
Company has an equity interest (collectively referred to herein as the
"Company"), by the Company or any secondary offering of the Company's securities
by any of its officers, directors and 5% or greater stockholders ("Principal
Stockholders"). The Company has caused such Principal Stockholders to deliver to
the Underwriter on or before the date of this Agreement, an agreement to this
effect, as it relates to any proposed secondary offering by such Principal
Stockholders, in form and substance satisfactory to the Underwriter and to
counsel for the Underwriter.
(aa) The Company will use its best efforts to obtain, as soon after
the first Closing Date as is reasonably possible, liability insurance covering
its officers and directors.
(bb) The Company agrees that any conflict of interest arising
between a member of the Company's Board of Directors and the Company in
connection with such Director's dealing with, or obligations to, the Company,
shall be resolved by a vote of the majority of the independent members of the
Board of Directors.
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(cc) The Company agrees that, if it deems necessary, in its sole
discretion, it will employ the services of a financial public relations firm
acceptable to the Underwriter for a period of at least twelve months following
the Final Closing Date. The Company will acquire the consent of the Underwriter
for its selection.
4. Appointment of Agent to Sell the Securities.
(a) Subject to the terms and conditions of this Agreement, and upon
the basis of the representations, warranties, and agreements herein contained,
the Company hereby appoints the Underwriter as its exclusive agent for a period
of 120 days from the Effective Date, subject to an extension by mutual agreement
of the Company and the Underwriter for an additional period not to exceed 30
days (the "Offering Period"), to sell the Securities, and the Underwriter, on
the basis of the representations and warranties of the Company herein, accepts
such appointment and agrees to use its best efforts on a "minimum 250,000 Shares
and 250,000 Warrants ("Minimum Offering"), maximum 500,000 Shares and 500,000
Warrants ("Maximum Offering")" basis to find purchasers for the Securities. The
price at which the Underwriter shall sell the Securities to the public as agent
for the Company, shall be $5.50 per share of Common Stock and $.10 per Warrant,
less an underwriting discount of ten percent (10%) of the offering price for
each security. The Underwriter may allow a concession not exceeding $0.25 per
share of Common Stock and $0.005 per Warrant to selected dealers who are members
of the National Association of Securities Dealer, Inc. ("NASD"), and to certain
foreign dealers, but all such sales by selected dealers shall be made by the
Company, acting through the Underwriter as agent, and not for the account of the
Underwriter.
(b) Provided that the Minimum Offering is sold and paid for, the
Company agrees to pay the Underwriter for its expenses a non-accountable expense
allowance equal to 3% of the gross proceeds of the offering, subject to the
provisions of Paragraph 9 herein.
(c) It is a condition of this Agreement that the Underwriter shall
use its best efforts to sell the Securities on behalf of the Company, that any
and all funds received from such sale, without any deduction therefrom
whatsoever, including, but not limited to, any underwriting commission or any
dealer concession or otherwise, shall be forthwith deposited into an escrow
account with American Stock Transfer & Trust Company as Escrow Agent, pursuant
to the terms of an Escrow Agreement entered into by and among the Company, the
Underwriter and the Escrow Agent. In the event the Minimum Offering is not sold
within the Offering Period, all funds will be promptly refunded to the
subscribes in full, without deduction therefrom or interest thereon.
Certificates will be issued to purchasers only if the proceeds from the
Securities offered hereby are released from escrow to the Company. Until such
time as the funds have been released and the certificates delivered to the
purchasers thereof, such purchasers, if any, will be deemed subscribers and not
stockholders. The funds in escrow will be held for the benefit of those
subscribers until released to the Company and will not be subject to creditors
of the Company or utilized for the expenses of this Offering. When certificates
for the Securities are to be issued in the name of a participating dealer for
the benefit of its customer, the Escrow Agent may hold such funds with the
dealer reflected as the subscriber.
5. Delivery and Payment.
(a) In the event the Minimum Offering is sold during the Offering
Period, delivery of the certificates representing the Shares and Warrants
against payment therefor shall take place at the offices of Platinum Equities,
Inc., 80 Pine Street, 32nd Floor, New York, New York 10005 (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 such date after the Offering has been completed as the
Underwriter shall designate, on at least three (3) full business days' prior
written notice, such time and date of payment and delivery of the Securities
being herein called the "Closing Date." After the Minimum Offering is sold,
subsequent Closings shall be held at the discretion of the Company and the
Underwriter with respect to additional Shares and Warrants up to the Maximum
Offering during the Offering Period.
(b) The Company will make the certificates for the Shares and
Warrants sold hereunder available to the Underwriter for checking at least two
full business days prior to a Closing Date at the offices of the Company's
transfer agent. The certificates shall be in such names and denominations as you
may request, at least two full business days prior to a Closing Date.
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(c) The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Securities by the Company to the
Underwriter shall be borne by the Company. The Company will pay and hold the
Underwriter, and any subsequent holder of the Securities, harmless from any and
all liabilities with respect to or resulting from any failure or delay in paying
federal and state stamp taxes, if any, which may be payable or determined to be
payable in connection with the original issuance or sale to the Underwriter of
the Securities or any portions thereof.
6. Offering of Securities on Behalf of the Company.
It is understood that the Underwriter proposes to offer the Securities to
the public solely as agent for the Company, upon the terms and conditions set
forth in the Registration Statement. The Underwriter shall commence making such
offer as agent for the Company on the Effective Date, or as soon thereafter as
the Underwriter deems advisable.
7. Warrant Solicitation Fee.
The Company agrees to pay to the Underwriter, commencing one year from the
Effective Date, a fee of seven percent (7%) of the aggregate exercise price of
the Warrants if: (i) the market price of the Common Stock is greater than the
exercise price of the Warrants on the date of exercise; (ii) the exercise of the
Warrants are solicited by the Underwriter; (iii) the Warrants are not held in a
discretionary account; (iv) the disclosure of compensation arrangements was made
both at the time of the Offering and at the time of the exercise of the Warrant;
and (v) the solicitation of the Warrant is not in violation of Regulation M
promulgated under the Exchange Act. The Company agrees not to solicit the
exercise of any Warrants other than through the Underwriter and will not
authorize any other dealer to engage in such solicitation without the prior
written consent of the Underwriter which will not be unreasonably withheld. The
Warrant solicitation fee will not be paid in a non-solicited transaction. No
Warrant solicitation by the Underwriter will occur prior to one year from the
Effective Date. Additionally, there will be no warrant solicitation by the
Underwriter without the prior written authorization of the Company.
8. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the Company that:
(a) The Underwriter is a member in good standing of the National
Association of Securities Dealers, Inc., and has complied with all NASD
requirements concerning net capital and compensation to be received in
connection with the Offering.
(b) To the Underwriter's knowledge, there are no claims for
services in the nature of a finder's origination fee with respect to the sale of
the Securities hereunder to which the Company is, or may become, obligated to
pay.
9. Payment of Expenses.
(a) Whether or not this Agreement becomes effective or the sale of
the Securities by the Company is completed, the Company will pay and bear all
costs, fees, taxes and expenses incident to and in connection with: (i) the
issuance, offer, sale and delivery of the Securities, including all expenses and
fees incident to the preparation, printing, filing and mailing (including the
payment of postage with respect to such mailing) of the Registration Statement
(including all exhibits thereto), each Preliminary Prospectus, the Prospectus,
and amendments and post- effective amendments thereof and supplements thereto,
and this Agreement and related documents, Preliminary and Final Blue Sky
Memoranda, including the cost of preparing and copying all copies thereof in
quantities deemed necessary by the Underwriter; (ii) the costs of preparing and
printing all "Tombstone" and other appropriate advertisements; (iii) the
printing, engraving, issuance and delivery of the Common Stock, Warrants,
Warrant Shares, Underwriter's Warrants and the securities underlying the
Underwriter's Warrant, including any transfer or other taxes payable thereon in
connection with the original issuance thereof; (iv) the qualification of the
Common Stock and Warrants under the state or foreign securities or "Blue Sky"
laws selected by the Underwriter and the Company, and disbursements and
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reasonable fees of counsel for the Underwriter in connection therewith (not to
exceed $35,000) plus the filing fees for such states; (v) fees of counsel for
the Underwriter for the preparation of a secondary trading memorandum ($15,000);
(vi) fees and disbursements of counsel and accountants for the Company; (vii)
other expenses and disbursements incurred on behalf of the Company (viii) the
filing fees payable to the Commission and the National Association of Securities
Dealers, Inc. ("NASD"); and (ix) any listing of the Common Stock and Warrants on
a securities exchange or on NASDAQ.
(b) In addition to the expenses to be paid and borne by the Company
referred to in Paragraph 9(a) above, the Company shall reimburse you at each
Closing Date for expenses incurred by you in connection with the Offering (for
which you need not make any accounting), in the amount of 3% of the price to the
public of the Securities sold in the Offering. This 3% non-accountable expense
allowance shall cover the fees of your legal counsel, but shall not include any
expenses for which the Company is responsible under Paragraph 9(a) above,
including the reasonable fees and disbursements of your legal counsel with
respect to Blue Sky matters. As of the date hereof, no funds have been advanced
by the Company to the Underwriter with respect to such non-accountable expense
allowance.
(c) In the event that the Company does not or cannot, for any
reason whatsoever other than a default by the Underwriters, expeditiously
proceed with the Offering, or if any of the representations, warranties or
covenants contained in this Agreement are not materially correct or cannot be
complied with by the Company, or business prospects or obligations of the
Company are adversely affected and the Company does not commence or continue
with the Offering at any time or terminates the proposed transaction prior to a
Closing Date, the Company shall reimburse the Underwriter on an accountable
basis for all out-of-pocket expenses actually incurred in connection with the
Underwriting, this Agreement and all of the transactions hereby contemplated,
including, without limitation, the Underwriter's legal fees and expenses, less
such sums which have already been paid.
10. Conditions of Underwriter's Obligations.
The obligations of the Underwriter to consummate the transactions
contemplated by this Agreement shall be subject to the continuing accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of the Closing Dates, the accuracy of the statements of the
Company and its officers and directors made pursuant to the provisions hereof,
and to the performance by the Company of its covenants and agreements hereunder
and under each certificate, opinion and document contemplated hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date following the date of this
Agreement, or such later date and time as shall be consented to in writing by
you and, on or prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Securities under the securities laws of any jurisdiction shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission or any such authorities of any jurisdiction and
any request on the part of the Commission or any such authorities for additional
information shall have been complied with to the reasonable satisfaction of the
Commission or such authorities and counsel to the Underwriter and after the date
hereof no amendment or supplement shall have been filed to the Registration
Statement or Prospectus without your prior consent.
(b) The Registration Statement or the Prospectus or any amendment
thereof or supplement thereto shall not contain an untrue statement of a fact
which is material, or omit to state a fact which is material and is required to
be stated therein or is necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) Between the time of the execution and delivery of this
Agreement and the Closing Date, there shall be no litigation instituted against
the Company or any of its officers or directors and between such dates there
shall be no proceeding instituted or, to the Company's knowledge, threatened
against the Company or any of its officers or directors before or by any
federal, state or county commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, in which litigation or proceeding
an unfavorable ruling, decision or finding
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would have a material adverse effect on the Company or its business, business
prospects or properties, or have a material adverse effect on the financial
condition or results of operation of the Company.
(d) Each of the representations and warranties of the Company
contained herein and each certificate and document contemplated under this
Agreement to be delivered to you shall be true and correct at the Closing Dates
as if made at the Closing Dates, and all covenants and agreements contained
herein and in each such certificate and document to be performed on the part of
the Company, and all conditions contained herein and in each such certificate
and document to be fulfilled or complied with by the Company at or prior to the
Closing Dates shall be fulfilled or complied with.
(e) At each Closing Date, you shall have received the opinion of
Horwitz & Beam, counsel to the Company, dated as of such Closing Date, addressed
to the Underwriter and in form and substance satisfactory to counsel to the
Underwriter, to the effect that:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation with full corporate power and authority, and all licenses,
permits, certifications, registrations, approvals, consents and franchises to
own or lease and operate its properties and to conduct its business as described
in the Registration Statement. The Company is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company;
(ii) The Company has full corporate power and authority to
execute, deliver and perform the Underwriting Agreement, the Consulting
Agreement, the Warrant Agreement and the Underwriter's Warrants and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreement and the Underwriter's Warrants by the Company, the consummation by the
Company of the transactions therein contemplated and the compliance by the
Company with the terms of the Underwriting Agreement, the Consulting Agreement,
the Warrant Agreement and the Underwriter's Warrants have been duly authorized
by all necessary corporate action, and each of the Underwriting Agreement, the
Consulting Agreement, the Warrant Agreement and the Underwriter's Warrants have
been duly executed and delivered by the Company. Each of the Underwriting
Agreement, the Consulting Agreement, the Warrant Agreement and the Underwriter's
Warrants is a valid and binding obligation of the Company, enforceable in
accordance with their respective terms, subject, as to enforcement of remedies,
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and the discretion of courts in
granting equitable remedies and except that enforceability of the
indemnification provisions and the contribution provisions set forth in the
Underwriting Agreement may be limited by the federal securities laws or public
policy underlying such laws;
(iii) The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and the
Underwriter's Warrants by the Company, the consummation by the Company of the
transactions therein contemplated and the compliance by the Company with the
terms of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreement and the Underwriter Warrants do not, and will not, with or without the
giving of notice or the lapse of time, or both, (A) result in a violation of the
Certificate of Incorporation, as the same may be amended, or Bylaws of the
Company or any of its Subsidiaries, (B) to the best of our knowledge, result in
a breach of, or conflict with, any terms or provisions of or constitute a
default under, or result in the modification or termination of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or any of its Subsidiaries
pursuant to, any indenture, mortgage, note, contract, commitment or other
material agreement or instrument to which the Company or any of its Subsidiaries
are a party or by which the Company or any of its Subsidiaries or any of their
properties or assets are or may be bound or affected, except where any of the
foregoing would not result in a material adverse effect upon the Company's or
any Subsidiaries business or operations; (C) to the best of our knowledge,
violate any existing applicable law, rule or regulation or judgment, order or
decree known to us of any governmental agency or court, domestic or foreign,
having jurisdiction over the Company or any of its Subsidiaries or any of their
properties or businesses; or (D) to the best of our knowledge, have any effect
on any permit, certification, registration, approval, consent, license or
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franchise necessary for the Company or any of its Subsidiaries to own or lease
and operate their properties and to conduct their business or the ability of the
Company or any of its Subsidiaries to make use thereof;
(iv) To the best of our knowledge, no authorization,
approval, consent, order, registration, license or permit of any court or
governmental agency or body (other than under the Act, the Regulations and
applicable state securities or Blue Sky laws) is required for the valid
authorization, issuance, sale and delivery of the Securities, the Common Stock,
the Warrants, the Warrant Shares, or the Underwriter's Warrants, and the
consummation by the Company of the transactions contemplated by the Underwriting
Agreement, the Consulting Agreement, the Warrant Agreement or the Underwriter's
Warrants;
(v) The Registration Statement was declared effective under
the Act on _______, 1998; to the best of our knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued, and no
proceedings for that purpose have been instituted or are pending, threatened or
contemplated under the Act or applicable state securities laws;
(vi) The Registration Statement and the Prospectus, as of
the Effective Date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which we express no opinion),
comply as to form in all material respects with the requirements of the Act and
Regulations and the conditions for use of a registration statement on Form SB-2
have been satisfied by the Company;
(vii) The description in the Registration Statement and the
Prospectus of statutes, regulations, contracts and other documents have been
reviewed by us, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed, and to the
best of our knowledge, there are no material statutes or regulations, or, to the
best of our knowledge, material contracts or documents, of a character required
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement, which are not so described or filed
as required.
To the best of our knowledge, none of the material provisions of the
contracts or instruments described above violates any existing applicable law,
rule or regulation or judgment, order or decree known to us of any United States
governmental agency or court having jurisdiction over the Company or any of its
assets or businesses;
(viii) The outstanding Common Stock and Warrants have been
duly authorized and validly issued. The outstanding Common stock is fully paid
an nonassessable. To the best of our knowledge, none of the outstanding Common
Stock has been issued in violation of the preemptive rights of any stockholder
of the Company. None of the holders of the outstanding Common Stock is subject
to personal liability solely by reason of being such a holder. The authorized
Common Stock conforms to the description thereof contained in the Registration
Statement and Prospectus. To the best of our knowledge, except as set forth in
the Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act;
(ix) The issuance and sale of the Securities, the Common
Stock, the Warrants, the Warrant Shares and the Underwriter's Warrants have been
duly authorized and when issued will be validly issued, fully paid and
nonassessable, and the holders thereof will not be subject to personal liability
solely by reason of being such holders. Neither the Securities, nor the Common
Stock are subject to preemptive rights of any stockholder of the Company. The
certificates representing the Securities are in proper legal form;
(x) The issuance and sale of the Warrant Shares and the
Underwriter's Warrants have been duly authorized and, when paid for, issued and
delivered pursuant to the terms of the Warrant Agreement or the Underwriter's
Warrants, as the case may be, the Warrants, the Warrant Shares and the
Underwriter's Warrants will constitute the valid and binding obligations of the
Company, enforceable in accordance with their terms, to issue and sell the
Warrants, the Warrant Shares and/or Underwriter's Warrants. All corporate action
required to be taken for the authorization, issuance and sale of the securities
has been duly, validly and sufficiently taken. The Common Stock and the Warrants
have been duly authorized by the Company to be offered in the form of the
Securities. The Warrants, the Warrant Shares and the Underwriter Warrants
conform to the descriptions thereof contained in the Registration Statement and
Prospectus;
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(xi) The Underwriter has acquired good title to the
Securities, free and clear of all liens, encumbrances, equities, security
interests and claims, provided that the Underwriter are bona fide purchasers as
defined in Section8-302 of the Uniform Commercial Code;
(xii) To the best of our knowledge, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any governmental agency, court or tribunal, foreign or domestic, or before any
private arbitration tribunal, pending or threatened against the Company or any
of its Subsidiaries or involving their properties or businesses, other than as
described in the Prospectus, such description being accurate, and other than
litigation incident to the kind of business conducted by the Company or any of
its Subsidiaries which, individually and in the aggregate, is not material, and,
except as otherwise disclosed in the Prospectus and the Registration Statement,
the Company and its Subsidiaries have complied with all federal and state laws,
statutes and regulations concerning its business;
(xiii) We have participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus. Although we are not passing upon and do not assume responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement, no facts came to our attention which lead us to believe
that (A) the Registration Statement (except as to the financial statements and
other financial data contained therein, as to which we express no opinion), on
the Effective Date, contained any untrue statement of a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which we express no opinion) contains any untrue
statement or a material fact or omits 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;
(f) On or prior to each Closing Date, counsel for the Underwriter
shall have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review the matters
referred to in subparagraphs (e) of this Paragraph 10, or in order to evidence
the accuracy, completeness or satisfaction of any of the representations,
warranties or conditions herein contained.
(g) Prior to each Closing Date:
(i) There shall have been no material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus;
(ii) There shall have been no transaction, outside the
ordinary course of business, entered into by the Company from the latest date as
of which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is material to the Company, which is either (x)
required to be disclosed in the Prospectus or Registration Statement and is not
so disclosed, or (y) likely to have material adverse effect on the Company's
business or financial condition;
(iii) The Company shall not be in default under any
material provision of any instrument relating to any outstanding indebtedness,
except as described in the Prospectus;
(iv) No material amount of the assets of the Company shall
have been pledged, mortgaged or otherwise encumbered, except as set forth in the
Registration Statement and Prospectus;
(v) No action, suit or proceeding, at law or in equity,
shall have been pending or to its knowledge threatened against the Company or
affecting any of its properties or businesses before or by any court or federal
or state commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
operations, prospects or financial condition or income of the Company, taken as
a whole, except as set forth in the Registration Statement and Prospectus; and
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(vi) No stop order shall have been issued under the Act and
no proceedings therefor shall have been initiated or, to the Company's
knowledge, threatened by the Commission.
(vii) Each of the representations and warranties of the
Company contained in this Agreement and in each certificate and document
contemplated under this Agreement to be delivered to you was, when originally
made and is at the time such certificate is dated, true and correct.
(h) Concurrently with the execution and delivery of this Agreement
and at each Closing Date, you shall have received a certificate of the Company
signed by the Chief Executive Officer of the Company and the principal financial
officer of the Company, dated as of the Closing Date, to the effect that the
conditions set forth in subparagraph (g) above have been satisfied and that, as
of the Closing Date, the representations and warranties of the Company set forth
in Paragraph 2 herein and the statements in the Registration Statement and
Prospectus were and are true and correct. Any certificate signed by any of
officer of the Company and delivered to you or for counsel for the Underwriter
shall be deemed a representation and warranty by the Company to the Underwriter
as to the statements made therein.
(i) At the time this Agreement is executed, and at each Closing
Date, you shall have received a letter, addressed to the Underwriter and in form
and substance satisfactory in all respects to you and counsel for the
Underwriter, from Stonefield Josephson, Inc., dated as of the date of this
Agreement and as of each Closing Date.
(j) All proceedings taken in connection with the authorization,
issuance or sale of the Common Stock, Warrants, Warrant Shares, the
Underwriter's Warrants and the Underwriter's Warrant Shares as herein
contemplated shall be satisfactory in form and substance to you and to counsel
to the Underwriter, and the Underwriter shall have received from such counsel an
opinion, dated as each Closing Date with respect to such of these proceedings as
you may reasonably require.
(k) The Company shall have furnished to you such certificates,
additional to those specifically mentioned herein, as you may have reasonably
requested in a timely manner as to the accuracy and completeness, at each
Closing Date, of any statement in the Registration Statement or the Prospectus,
as to the accuracy, at each Closing Date, of the representations and warranties
of the Company herein and in each certificate and document contemplated under
this Agreement to be delivered to you, as to the performance by the Company of
its obligations hereunder and under each such certificate and document or as to
the fulfillment of the conditions concurrent and precedent to your obligations
hereunder.
(l) On each Closing Date there shall have been duly tendered to you
for your account the appropriate number of Shares of Common Stock and Warrants
constituting the Securities.
11. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company agrees
to indemnify and hold harmless the Underwriter and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act, against any and all
losses, liabilities, claims, damages, actions and expenses or liability, joint
or several, whatsoever (including but not limited to any and all expense
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), joint or
several, to which it or such controlling persons may become subject under the
Act, the Exchange Act or under any other statute or at common law or otherwise
or under the laws of foreign countries, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any Preliminary Prospectus or the Prospectus (as from
time to time amended and supplemented); in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
the Warrant Shares of the Company issued or issuable upon exercise of the
Warrants, or Underwriter' Warrant Shares upon exercise of the Underwriter'
Warrants; or in any application or other document or written communication (in
this Paragraph 10 collectively called "application") executed by the Company or
based upon written information furnished by the Company filed in any
jurisdiction in order to qualify the Common Stock, Warrants, Warrant Shares,
Underwriter's
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Warrants and Underwriter's Warrant Shares (including the Shares issuable upon
exercise of the Warrants underlying the Underwriter's Warrants) under the
securities laws thereof or filed with the Commission or any securities exchange;
or the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of the Prospectus, in the light of the circumstances under which they
were made), unless such statement or omission was made in reliance upon or in
conformity with written information furnished to the Company with respect to the
Underwriter by or on behalf of the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in application, as the case may be.
Notwithstanding the foregoing, the Company shall have no liability under this
Paragraph 11(a) if any such untrue statement or omission made in a Preliminary
Prospectus, is cured in the Prospectus and the Underwriter failed to deliver to
the person or persons alleging the liability upon which indemnification is being
sought, at or prior to the written confirmation of such sale, a copy of the
Prospectus. This indemnity will be in addition to any liability which the
Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the
Company and each of the officers and directors of the Company who have signed
the Registration Statement and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
the Underwriter in Paragraph 11(a), but only with respect to any untrue
statement or alleged untrue statement of any material fact contained in or any
omission or alleged omission to state a material fact required to be stated in
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or necessary to make the statements therein not
misleading or in any application made solely in reliance upon, and in conformity
with, written information furnished to the Company by you specifically expressly
for use in the preparation of such Preliminary Prospectus, the Registration
Statement or Prospectus directly relating to the transactions effected by the
Underwriter in connection with this Offering. This indemnity agreement will be
in addition to any liability which the Underwriter may otherwise have.
Notwithstanding the foregoing, the Underwriter shall have no liability under
this Paragraph 11(b) if any such untrue statement or omission made in a
Preliminary Prospectus is cured in the Prospectus, and the Prospectus is
delivered to the person or persons alleging the liability upon which
indemnification is being sought.
(c) If any action is brought against any indemnified party (the
"Indemnitee") in respect of which indemnity may be sought against another party
pursuant to the foregoing (the "Indemnitor"), the Indemnitor shall assume the
defense of the action, including the employment and fees of counsel (reasonably
satisfactory to the Indemnitee) and payment of expenses. Any Indemnitee shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee unless
the employment of such counsel shall have been authorized in writing by the
Indemnitor in connection with the defense of such action. If the Indemnitor
shall have employed counsel to have charge of the defense or shall previously
have assumed the defense of any such action or claim, the Indemnitor shall not
thereafter be liable to any Indemnitee in investigating, preparing or defending
any such action or claim. Each Indemnitee shall promptly notify the Indemnitor
of the commencement of any litigation or proceedings against the Indemnitee in
connection with the issue and sale of the Common Stock, Warrants, Warrants
Shares, Underwriter's Securities or in connection with the Registration
Statement or Prospectus.
(d) In order to provide for just and equitable contribution under
the Act in any case in which: (i) the Underwriter makes a claim for
indemnification pursuant to Paragraph 11 hereof, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the time to appeal has expired or the last right of appeal has been denied)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Paragraph 11 provides for indemnification of such case; or (ii)
contribution under the Act may be required on the part of the Underwriter in
circumstances for which indemnification is provided under this Paragraph 11,
then, and in each such case, the Company and the Underwriter shall contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after any contribution from others) in such proportion so that the
Underwriter is responsible for the portion represented by dividing the total
compensation received by the Underwriter herein by the total purchase price of
all Securities sold in the public offering and the Company is responsible for
the remaining portion; provided, that in any such case, no person guilty of a
fraudulent misrepresentation (within the meaning of
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Section 11 (f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
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. As used in this Paragraph 11, the term
"Underwriter" includes any officer, director, or other person who controls the
Underwriter within the meaning of Section 15 of the Act, and the word "Company"
includes any of 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. No contribution shall be
requested with regard to the settlement of any matter from any party who did not
consent to the settlement.
(e) Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission so to notify
the contributing party will not relieve it from any liability it may have to any
other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against any party,
and such party notifies a contributing party or his or its representative of the
commencement thereof within the aforesaid fifteen (15) days, the contributing
party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified. Any such contributing party shall
not be liable to any party seeking contribution on account of any settlement of
any claim, action or proceeding effected by such party seeking contribution
without the written consent of such contributing party. The indemnification
provisions contained in this Paragraph 11 are in addition to any other rights or
remedies which either party hereto may have with respect to the other or
hereunder.
12. Representations Warranties Agreements to Survive Delivery.
The respective indemnity and contribution agreements by the Underwriter and
the Company contained in Paragraph 11 hereof, and the covenants, representations
and warranties of the Company and the Underwriter set forth in this Agreement,
shall remain operative and in full force and effect regardless of (i) any
investigation made by the Underwriter or on its behalf or by or on behalf of any
person who controls the Underwriter, or by the Company or any controlling person
of the Company or any director or any of officer of the Company, (ii) acceptance
of any of the Securities and payment therefor, or (iii) any termination of this
Agreement, and shall survive the delivery of the Securities and any successor of
the Underwriter or the Company, or of any person who controls you or the Company
or any other indemnified party, as the case may be, shall be entitled to the
benefit of such respective indemnity and contribution agreements. The respective
indemnity and contribution agreements by the Underwriter and the Company
contained in this Paragraph 12 shall be in addition to any liability which the
Underwriter and the Company may otherwise have.
13. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 10:00 A.M., New York
time, on the first full business day following the day on which you and the
Company receive notification that the Registration Statement became effective.
(b) This Agreement may be terminated by the Underwriter by
notifying the Company at any time on or before the Closing Date, if any domestic
or international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, securities markets; or
if trading on the New York Stock Exchange, the American Stock Exchange, or in
the over-the-counter market shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required on the over-the-counter market by the NASD
or NASDAQ or by order of the Commission or any other governmental authority
having jurisdiction; or if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or if the Company shall have
sustained a loss material or substantial to the Company taken
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as a whole by fire, flood, accident, hurricane, earthquake, theft, sabotage or
other calamity or malicious act which, whether or not such loss shall have been
insured, will, in your opinion, make it inadvisable to proceed with the delivery
of the Securities; or if there shall have been a material adverse change in the
conditions of the securities market in general, as in your reasonable judgment
would make it inadvisable to proceed with the offering, sale and delivery of the
Securities; or if there shall have been a material adverse change in the
financial or securities markets, particularly in the over-the-counter market, in
the United States having occurred since the date of this Agreement.
(c) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Paragraph 12, the Company
shall be notified promptly by you by telephone or facsimile, confirmed by
letter.
(d) If this Agreement shall not become effective by reason of an
election of the Underwriter pursuant to this Paragraph 13 or if this Agreement
shall not be carried out within the time specified herein by reason of any
failure on the part of the Company to perform any undertaking, or to satisfy any
condition of this Agreement by it to be performed or satisfied, the sole
liability of the Company to the Underwriter, in addition to the obligations
assumed by the Company pursuant to Paragraph 8 herein, will be to reimburse the
Underwriter for the following: (i) Blue Sky counsel fees and expenses to the
extent set forth in Paragraph 9(a)(iv); (ii) Blue Sky filing fees; and (iii)
such reasonable out-of-pocket expenses of the Underwriter (including the fees
and disbursements of their counsel), to the extent set forth in Paragraph 9(c),
in connection with this Agreement and the proposed offering of the Securities,
less such amounts already paid.
Notwithstanding any contrary provision contained in this Agreement, any
election hereunder or any termination of this Agreement, and whether or not this
Agreement is otherwise carried out, the provisions of Paragraph 9 and 11 hereof
shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
14. Notices.
All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Underwriter, shall be mailed,
delivered or telegraphed and confirmed to the Underwriter at Platinum Equities,
Inc., 80 Pine Street, 32nd Floor, New York, New York 10005, Attention: John
Kenny, with a copy thereof to Lawrence Nusbaum, Esq., Gusrae, Kaplan & Bruno,
120 Wall Street, New York, New York 10005, and, if sent to the Company, shall be
mailed, delivered or telegraphed and confirmed to the Company at 13710 Ramona
Avenue, Chino, California 91710, Attention: Wasif Siddiqui, President, with a
copy thereof to Horwitz & Beam, Two Venture Plaza, Suite 350, Irvine, California
92618, Attention: Lawrence W. Horwitz, Esq.
15. Parties.
This Agreement shall inure solely to the benefit of and shall be binding
upon, the Underwriter, the Company and the controlling persons, directors and
officers referred to in Paragraph 11 hereof, and their respective successors,
legal representatives and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
16. Construction.
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of New York and shall supersede any agreement or
understanding, oral or in writing, express or implied, between the Company and
you relating to the sale of any of the Securities.
17. Jurisdiction and Venue.
The Company agrees that the courts of the State of New York shall have
jurisdiction over any litigation arising from this Agreement, and venue shall be
proper in the Southern District of New York.
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18. Counterparts.
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
LUMINEX LIGHTING, INC.
By:__________________________
Wasif Siddiqui, President
Accepted as of the date first
above written:
PLATINUM EQUITIES, INC.
By:_________________________