EXHIBIT 1.1
1,200,000 Units
(Each Unit consisting of one share of Common Stock, par value $.001
per share and one Class A Redeemable Common Stock Purchase Warrant,
each exercisable to purchase one share of Common Stock)
MEDJET INC.
UNDERWRITING AGREEMENT
New York, New York
____________, 1996
Patterson Travis, Inc.
One Battery Park Plaza
New York, NY 10004
Medjet Inc., a Delaware corporation (the "Company"), proposes to issue and
sell to you (the "Underwriter") an aggregate of 1,200,000 Units (each Unit
consisting of one share of Common Stock, par value $.001 per share ("Common
Stock") and one Class A Redeemable Common Stock Purchase Warrant ("Warrants") to
purchase one share of Common Stock at $10.00 per share for a period of eighteen
(18) months commencing ___________, 1996, subject to redemption, in certain
instances. 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 Units.
Unless the context otherwise requires, the aggregate of 1,200,000 shares of
Common Stock and Warrants to be sold by the Company, together with all or any
part of the 180,000 Units which
the Underwriter has the option to purchase, and the shares of Common Stock and
the Warrants comprising such Units, are herein called the "Units." The Common
Stock to be outstanding after giving effect to the sale of the Units are herein
July 3, 1996called the "Shares." The Shares and Warrants included in the Units
(including the Units which the Underwriter has the option to purchase pursuant
to paragraph 2(b), are herein collectively called the "Securities."
You have advised the Company that you desire to purchase the Units. The
Company confirms the agreements made by it with respect to the purchase of the
Units by the Underwriter as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with you that:
(a) A registration statement (File No. 333-3184) on Form SB-2
relating to the public offering of the Units, including a form of prospectus
subject to completion, copies of which have heretofore been delivered to you,
has been prepared 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 and one or more
amendments to such registration statement may have been so filed. After the
execution of this Agreement, the Company will file with the Commission either
(i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a prospectus in the
form most recently included in an amendment to such registration statement (or,
if no such amendment shall have been filed, in such registration statement),
with such changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been provided to and approved
by you prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the Commission
to be effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been furnished to
and approved by you prior to the execution of this Agreement. As used in this
Agreement, the term "Registration Statement" means such registration statement,
as amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto and including any information omitted
therefrom pursuant to
2
Rule 430A under the Act and included in the Prospectus (as hereinafter defined);
the term "Preliminary Prospectus" means each prospectus subject to completion
filed with such registration statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration Statement
or any amendment thereto at the time it was or is declared effective); and the
term "Prospectus" means the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act, or, if no prospectus is required to be filed
pursuant to said Rule 424(b), such term means the prospectus included in the
Registration Statement; except that if such registration statement or prospectus
is amended or such prospectus is supplemented, after the effective date of such
registration statement, the terms "Registration Statement" and "Prospectus"
shall include such 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. At the time the Registration Statement
becomes effective and at all times subsequent thereto up to and on the First
Closing Date (as hereinafter defined) or the Option Closing Date, as the case
may be, (i) the Registration Statement and Prospectus 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 on page __ with respect to stabilization, the paragraph under the
heading "Underwriting" relating to concessions to certain dealers, and the
identity of counsel to the Underwriter under the heading "Legal Matters" and the
amount under "Blue Sky Fees and Expenses" under Item 25 of Part II of the
Registration Statement constitute for purposes of this Section and Section 6(b)
the only information furnished in writing by or on
3
behalf of the Underwriter for inclusion in the Registration Statement and
Prospectus, as the case may be.
(c) The Company has no subsidiaries. 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 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 nature of its business or the
character or location of its properties requires such qualification, except
where the failure to so qualify will not materially adversely affect its
business, properties or financial condition.
(d) The authorized, issued and outstanding capital stock of the
Company, including the predecessors of the Company, 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 nonassessable;
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 capital stock
conforms to all statements relating thereto contained in the Registration
Statement and Prospectus.
(e) The Units and the Shares are duly authorized, and when issued and
delivered pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable 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 Units as contemplated in this Agreement gives rise to
any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock, except as described
in the Registration Statement.
The Warrants have been duly authorized and, when issued and delivered
pursuant to this Agreement, will have been duly executed, issued and delivered
and will constitute valid and legally binding obligations of the Company
enforceable in
4
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the right of creditors generally
or by general equitable principles, and holders thereof will be entitled to the
benefits provided by the warrant agreement pursuant to which such Warrants are
to be issued (the "Warrant Agreement"), which will be substantially in the form
filed as an exhibit to the Registration Statement. The shares of Common Stock
issuable upon exercise of the Warrants have been reserved for issuance upon the
exercise of the Warrants and when issued in accordance with the terms of the
Warrants and Warrant Agreement, will be duly and validly authorized, validly
issued, fully paid and non-assessable, and free of preemptive rights and no
personal liability will attach to the ownership thereof. The Warrant Agreement
has been duly authorized and, when executed and delivered pursuant to this
Agreement, will have been duly executed and delivered and will constitute the
valid and legally binding obligation of the Company enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors generally or by
general equitable principles.
The Shares and the Warrants contained in the Underwriter's Options (as
defined in the Registration Statement) have been duly authorized and, when duly
issued and delivered, such Shares and Warrants will constitute valid and legally
binding obligations of the Company enforceable in accordance with their terms
and entitled to the benefits provided by the Underwriter's Options, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally or by general equitable principles and the
indemnification contained in paragraph 7 of the Underwriter's Options may be
unenforceable. The shares of Common Stock included in the Underwriter's Options
(and the shares of Common Stock issuable upon exercise of the Warrants included
therein) 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 and the Underwriter's Options have been duly and
validly authorized, executed, and delivered by the Company. The Company has
full power and authority to authorize, issue, and sell the Units to be sold by
it hereunder on the terms and conditions set forth herein, and no consent,
approval,
5
authorization or other order of any governmental authority is required in
connection with such authorization, execution and delivery or in connection with
the authorization, issuance, and sale of the Units or the Underwriter's Options,
except such as may be required under the Act, state securities laws or by the
National Association of Securities Dealers, Inc. (The "NASD").
(g) Except as described in the Prospectus, or which would not have a
material adverse effect on the condition (financial or otherwise), business
prospects, net worth or properties of the Company taken as a whole (a "Material
Adverse Effect"), 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 or violation 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 material 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 any violation of the provisions of the
articles of incorporation or 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 is the lessor or sublessor of properties or assets or
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, to the best knowledge of the Company, 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
6
subleases mentioned above, or affecting or questioning the right of the Company
to continued 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 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) Rosenberg Rich Baker Berman & Company, P.A. who have given their
report on certain financial statements filed with the Commission as a part of
the Registration Statement, are with respect to the Company, independent public
accountants within the meaning of the Act and the Rules and Regulations.
(j) The financial statements, and schedules together with related
notes, set forth in the Prospectus or the Registration Statement present fairly
the financial position and results of operations and changes in cash flow
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 schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a basis which is consistent
during the periods involved except as disclosed in the Prospectus and
Registration Statement. The information set forth under the caption "Selected
Financial Data" in the Prospectus fairly present, on the basis stated in the
Prospectus, the information included therein.
(k) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus and except as otherwise
disclosed or contemplated therein, 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 would
have a Material Adverse Effect, 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
or any material adverse change or any development involving, so far as the
Company can now reasonably foresee a prospective adverse change in the
condition (financial or other), net worth, results of operations, business,
7
key personnel or properties of them which would have a Material Adverse Effect.
(l) Except as set forth in the Prospectus, there is not now pending
or, to the knowledge of the Company, threatened, 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 a Material Adverse Effect on 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 to the knowledge
of the Company are threatened which might be expected to have a Material Adverse
Effect.
(m) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state, and foreign income and franchise tax returns required
to be filed as of the date hereof (taking into account all extensions of time to
file) and has paid all taxes shown as due thereon; and there is no tax
deficiency which has been asserted against the Company.
(n) Except as disclosed in the Registration Statement, the Company
has sufficient licenses, permits, and other governmental authorizations
currently necessary 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 owns or 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 had not received any notice of conflict
with the asserted rights of others in respect thereof. To the best knowledge of
the Company, none of the activities or business of the Company or its
subsidiaries are in violation of, or cause the Company or its subsidiaries 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
Effect.
(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
8
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's internal accounting controls and
procedures are 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 Dates (as hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Units hereunder will have been
fully paid or provided for by the Company and all laws imposing such taxes will
have been complied with in all material respects.
(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) Intentionally Omitted.
(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 proposed public offering
other than as described in the Registration Statement, including under the
caption "Litigation".
(t) Except as disclosed in the Prospectus, no officer, director, or
stockholder of the Company or its subsidiaries has any NASD affiliation.
(u) No other firm, corporation or person has any rights to underwrite
an offering of any of the Company's securities.
2. PURCHASE, DELIVERY AND SALE OF THE UNITS.
(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 Unit, at the place and time
hereinafter specified, 1,200,000 Units (the "First Units").
9
Delivery of the First Units against payment therefor shall take
place at the offices of Bernstein & Wasserman, LLP, 950 Third Avenue, New York,
New York (or at such other place as may be designated by agreement between the
Underwriter and the Company) at 10:00 a.m., New York time, on ___________, 1996,
or at such later time and date as the Underwriter may designate in writing to
the Company at least two business days prior to such purchase, but not later
than ____________, 1996, such time and date of payment and delivery for the
First Units 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 Units at the
same price per Unit as the Underwriter shall pay for the First Units being sold
pursuant to the provisions of subsection (a) of this Section 2 (such additional
Units being referred to herein as the "Option Units"). This option may be
exercised within 30 days after the effective date of the Registration Statement
upon written notice by the Underwriter to the Company advising as to the amount
of Option Units as to which the option is being exercised, the names and
denominations in which the certificates for such Option Units 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 (but in no event more than 40 days after the First Closing Date),
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 Units
against payment therefor shall take place at the offices of Bernstein &
Wasserman, LLP, 950 Third Avenue, New York, New York (or at such other place as
may be designated by agreement between the Underwriter and the Company). The
Option granted hereunder may be exercised only to cover over-allotments in the
sale by the Underwriter of First Units referred to in subsection (a) above. No
Option Units shall be delivered unless all First Units shall have been delivered
to the Underwriter as provided herein.
(c) The Company will make the certificates for the securities
comprising the Units to be purchased by the Underwriter
10
hereunder available to the Underwriter 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"). The certificates shall
be in such names and denominations as the Underwriter may request, at least
three full business days prior to the Closing Dates. Delivery of the
certificates 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 Units to be
purchased by the Underwriter hereunder will be delivered by the Company to the
Underwriter for the account of the Underwriter against payment of the respective
purchase prices by the Underwriter, by wire transfer in immediately available
funds, payable to the Company.
In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Units pursuant to the
provisions of subsection (b) above, payment for such Units shall be made to or
upon the order of the Company by certified or bank cashier's checks payable in
immediately available funds at the offices of Bernstein & Wasserman, LLP, 950
Third Avenue, New York, New York (or at such other place as may be designated by
agreement between the Underwriter and the Company), at the time and date of
delivery of such Units as required by the provisions of subsection (b) above,
against receipt of the certificates for such Units by the Underwriter for the
Underwriter's account registered in such names and in such denominations as the
Underwriter may reasonably request.
It is understood that the Underwriter proposes to offer the Units to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
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. If required, the Company will file the
Prospectus and any amendment or supplement
11
thereto with the Commission in the manner and within the time period required by
Rule 424(b) under the Act. Upon notification from the Commission that the
Registration Statement has become effective, the Company will so advise the
Underwriter 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 the Underwriter shall not previously have been advised and
furnished with a copy or to which the Underwriter or its 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 Units 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) and (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
the Underwriter's request, any amendments or supplements to the Registration
Statement or Prospectus which, in the opinion of counsel to the Company and the
Underwriter, may be reasonably necessary or advisable in connection with the
distribution of the Units.
As soon as the Company is advised thereof, the Company will advise the
Underwriter, and provide the Underwriter copies of any written advice, 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 an 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 or threat thereof 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 Units
for offering in any jurisdiction, or of the institution of any proceedings for
any of such purposes, and will use its best 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 the Underwriter copies of
each Preliminary Prospectus, and the Company has
12
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 Units for such period as in
the opinion of counsel to the Underwriter and the Company 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 the Act to be delivered in connection with sales by
the Underwriter or dealer, of 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 and 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 Units or in case it shall be necessary to amend
or supplement the Prospectus to comply with law or with the Rules and
Regulations, the Company will notify the Underwriter promptly and forthwith
prepare and furnish to the Underwriter copies of such amended Prospectus or of
such supplement to be attached to the Prospectus, in such quantities as the
Underwriter 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 facts 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 the Underwriter is required, in connection with the sale of the Units 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 Rules and Regulations and
the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations thereunder in connection with the offering and issuance of the
Units.
13
(b) The Company will furnish such information as may be required and
will otherwise cooperate and use its best efforts to qualify to register the
Units for sale under the securities or "blue sky" laws of such jurisdictions as
the Underwriter may reasonably designate 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 of service
of process in any jurisdiction in any action other than one arising out of the
offering or sale of the Units. 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 counsel to the Company and
the Underwriter deem reasonably necessary, but not for a period of less than
three (3) years.
(c) If the sale of the Units provided for herein is not consummated
as a result of the Company's actions or failure to take such actions as the
Underwriter believes are reasonably required to complete the transaction, the
Company shall pay all costs and expenses incurred by it which are incident to
the performance of the Company's obligations hereunder, including but not
limited to, all of the expenses itemized in Section 8, including the actual
accountable out-of-pocket expenses of the Underwriter which shall not exceed
$150,000 (including the reasonable fees and expenses of counsel to the
Underwriter). If the sale of the Units provided herein is not consummated and
the reasons therefore are reasonably related to a Material Adverse Effect on the
Company, the Company shall pay the Underwriter promptly its actual out-of-pocket
expenses not to exceed $100,000.
(d) The Company will use its best efforts (i) to cause a registration
statement under the Securities Exchange Act of 1934 to be declared effective
concurrently with the completion of this offering and will notify you in writing
immediately upon the effectiveness of such registration statement, and (ii) to
obtain and keep current a listing in the Standard & Poors or Moody's OTC
Industrial Manual for a period of five (5) years from the Effective Date.
(e) 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
14
stockholders an annual report (including financial statements audited by
independent public accountants), in reasonable detail and at its expense, will
furnish to the Underwriter during the period ending five (5) years from the date
hereof, (i) as soon as practicable after the end of each fiscal year, but no
earlier than the filing of such information with the Commission, 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 cash flow 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 practicable after the end of each of the first three fiscal quarters of
each fiscal year, but no earlier than the filing of such information with the
Commission, consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are publicly available, a
copy of all reports (financial or other) mailed to security holders; (iv) as
soon as they are available, a copy of all non-confidential reports and financial
statements furnished to or filed with the Commission or any securities exchange
or automated quotation system on which any class of securities of the Company is
listed; and (v) such other information as you may from time to time reasonably
request. In addition, the Company shall deliver to the Underwriter for a three
(3) year period following the effective date, copies of all transfer sheets
relating to the Company's securities.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) 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.
(g) The Company will deliver to the Underwriter 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 the Underwriter such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon the Underwriter's order, from time
to time until the effective date of the Registration Statement, as many copies
of any Preliminary Prospectus filed with the Commission prior to the effective
date of
15
the Registration Statement as the Underwriter may reasonably request. The
Company will deliver to the Underwriter on or promptly after the effective date
of the Registration Statement 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.
(h) The Company will deliver to the Underwriter as soon as it is
practicable copies of all reports filed with the Commission under the Exchange
Act.
(i) The Company will apply the net proceeds from the sale of the
Units substantially 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 Units and the application of the proceeds therefrom as may be
required pursuant to Rule 463 under the Act.
(j) The Company will promptly 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 opinion of
counsel to the Underwriter and counsel to the Company, may be reasonably
necessary or advisable in connection with the distribution of the Units, and
will use its best efforts to cause the same to become effective as promptly as
possible.
(k) The Company will reserve and keep available that maximum number
of its authorized but unissued securities which are issuable upon exercise of
the Warrants and Underwriter's Options and warrants thereunder outstanding from
time to time.
(l) For a period of twenty-four (24) months from the Effective Date,
no officers or directors, nor any shareholder of the Company's securities prior
to the offering, as well as all holders of restricted securities of the Company,
will, directly or indirectly, offer, sell (including any short sale), grant any
option for the sale of, transfer or gift (except for estate planning or
charitable transfers or other privates sales, provided the transferees agree to
be bound by the same restrictions on transfer), acquire any option to dispose
of, or otherwise dispose of any shares of capital stock without the prior
written consent of
16
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 shares owned by such persons 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). In
addition, all such persons shall waive any of their registration rights with
respect to all such securities for such twenty-four (24) month period. In
addition, the Company agrees not to file any other registration statement
(excluding a registration statement on Form S-8 or successor form so long as the
shares of Common Stock offered thereby are also subject to this paragraph 3(l))
to register any securities of the Company for such twenty-four (24) month
period, and will not grant any future registration rights without the prior
written consent of the Underwriter for the same twenty-four (24) month period.
If necessary to comply with any applicable Blue-sky Law, the shares held by such
shareholders will be escrowed, as required by such Blue-sky Laws. In addition,
the Company shall not issue any shares of its capital stock (or securities
convertible into capital stock) for a twenty four (24) month period following
the Effective Date other than (i) pursuant to the Warrants, (ii) pursuant to the
options already granted under the Company's stock option plan, and (iii) options
to purchase up to 200,000 shares of Common Stock under employee stock option
plans in accordance with the succeeding sentence, and (iv) Common Stock issued
on or after the first anniversary of the Closing Date for consideration at least
equal to the Market Price as defined below in this paragraph (l). The Company
may grant options to purchase up to 200,000 (150,000 if only 1,200,000 Units are
sold) shares of Common Stock under employee stock option plans to the Company's
employees, officers, directors or other consultants or advisors during the
twenty-four (24) month period following the Effective Date without the prior
written consent of the Underwriter; provided that the shares underlying such
options do not vest until one (1) year following the grant of such options. The
grant of additional options during such period will require the Underwriter's
prior written consent. Of the options to purchase such 200,000 shares, the
Company may not grant options for 50,000 shares at exercise prices which are
less than the Market Price at the date of the grant without the prior written
consent of the Underwriter.
For purposes of this Agreement, Market Price shall mean (i) the average
closing bid price for any ten (10) consecutive trading
17
days within a period of thirty (30) consecutive trading days ending within five
(5) days prior to the date of issuance of the Common Stock as reported by the
National Association of Securities Dealers, Inc. Automatic Quotation System, or
(ii) the last reported sale price, for ten (10) consecutive business days ending
within five (5) days of the date of issuance on the primary exchange on which
the Common Stock is traded, if the Common Stock is traded on a national
securities exchange.
(m) 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 Units, Common Stock and Class A Warrants in
the NASDAQ system, and will use its best efforts to effect and maintain such
listing for at least five years from the date of this Agreement to the extent
that the Company has at least 300 record holders of Common Stock.
(n) Except for the transactions contemplated by this Agreement, the
Company represents that it has not taken and agrees that it will not take,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Units, Shares, or the Warrants or to facilitate
the sale or resale of the Securities.
(o) On the First Closing Date and simultaneously with the delivery of
the Units, the Company shall execute and deliver to you the Underwriter's
Options. The Underwriter's Options will be substantially in the form filed as
an Exhibit to the Registration Statement.
(p) Intentionally omitted.
(q) Upon the Closing Dates, the Company will have in force key
person life insurance on the life of Eugene Gordon, in the amount of not less
than $1,000,000.00 and will use its best efforts to maintain such insurance
during the three year period commencing with the First Closing Date.
(r) So long as any Warrants are outstanding and the exercise price of
the Warrants is less than the market price of the Common Stock, the Company
shall use its best efforts to cause post-effective amendments, if required by
the Act, to the
18
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant and to furnish to the Underwriter and each
dealer as many copies of each such Prospectus as such Underwriter or dealer may
reasonably request. The Company shall not call for redemption any of the
Warrants unless a registration statement covering the securities underlying the
Warrants has been declared effective by the Commission and remains current at
least until the date fixed for redemption.
(s) For a period of five (5) years 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 (3) fiscal quarters prior to the announcement of
quarterly financial information and the filing of the Company's 10-Q quarterly
report, provided that the Company shall not be required to file a report of such
accountants relating to such review with the Commission.
(t) The Underwriter shall have the right to request the Company to
use its best efforts to nominate one (1) nominee of the Underwriter for election
to the Board of Directors for three (3) years following the Effective Date, and
in each case the Company will use its best efforts to cause such nominee to be
elected to the Board of Directors. Until such time as the Underwriter exercises
its right to require the Company to use its best efforts to cause a nominee of
the Underwriter to be elected to the Board of Directors and until such time as
such nominee begins to serve on the Board of Directors, the Company agrees to
allow a representative designated by the Underwriter from time to time to
receive timely, written notice of all Board of Directors meetings and notice of
all telephonic Board meetings and the right to attend all Board meetings and
participate in all telephonic Board meetings. The Underwriter shall also have
the right to obtain copies of the minutes from all Board of Directors meetings
for three (3) years following the Effective Date of the Registration Statement,
whether or not a representative of the Underwriter attends or participates in
any such Board meeting. The Company agrees to reimburse the Underwriter
immediately upon the Underwriter's request therefor of any reasonable travel and
lodging
19
expenses directly incurred by the Underwriter in connection with its
representative attending Company Board meetings on the same basis for other
Board members. In addition, the Company shall compensate such representative as
it does all other outside directors of the Company.
(u) Intentionally omitted.
(v) The Company agrees to pay the Underwriter a Warrant Solicitation
fee of 8.0% of the exercise price of any of the Warrants exercised beginning one
(1) year after the Effective Date if (a) the Market Price of the Company's
Common Stock on the date the Warrant is exercised in greater than the exercise
price of the Warrant, (b) the exercise of the Warrant is solicited by the
Underwriter and the Underwriter is designated in writing by the holder of such
Warrant as the soliciting broker, (c) the Warrant is not held in a discretionary
account, (d) disclosure of the compensation arrangement is made upon the sale
and exercise of the Warrants, (e) soliciting the exercise is not in violation of
Rule 10b-6 under the Securities Exchange Act of 1934, and (f) solicitation of
the exercise is in compliance with the NASD Notice to Members 81-38 (September
22, 1981).
(w) Intentionally omitted.
(x) Intentionally omitted.
(y) On or prior to the date hereof, the Company shall have entered
into an employment agreement with Eugene Gordon on terms and conditions
satisfactory to the Underwriter.
4. CONDITIONS OF UNDERWRITERS' OBLIGATION. The obligations of the
Underwriter to purchase and pay for the Units which it has agreed to purchase
hereunder are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder,
and to the following conditions:
(a) The Registration Statement shall have become effective and you
shall have received notice thereof not later than 10:00 a.m., New York time, on
the day following the date of this Agreement, or at such later time or on such
later date as to which
20
the Underwriter may agree in writing; on or 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 a similar purpose shall have been
instituted or shall be pending or, to the Underwriter's 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 satisfaction of the Commission; 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. If required, the Prospectus shall have been filed with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act.
(b) (A) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of Kelley Drye & Warren, counsel
for the Company, in form and substance 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 all requisite corporate power and authority to own its properties
and conduct its business as described in the Registration Statement and
Prospectus and, to its knowledge, 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 qualify or be licensed
will not have a Material Adverse Effect;
(ii) the authorized capitalization of the Company as of the date
of the prospectus is as set forth under "Capitalization" in the Prospectus; all
shares of the Company's outstanding capital stock have been duly authorized,
validly issued, fully paid and non-assessable and conform in all material
respects to the description thereof contained in the Prospectus; to such
counsel's knowledge the outstanding shares of capital 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
21
transfer of any of the capital stock except as provided in the Prospectus; the
Common Stock, the Warrants, the Underwriter's Options, and the Warrant Agreement
conform in all material respects to the respective descriptions thereof
contained in the Prospectus; the Shares have been, and the shares of Common
Stock to be issued upon exercise of the Warrants and the Underwriter's Options,
upon issuance in accordance with the terms of such Warrants, the Warrant
Agreement and Underwriter's Options will have been duly authorized and, when
issued and delivered in accordance with their respective terms and applicable
Delaware law, will be duly and validly issued, fully paid, non-assessable, free
of preemptive rights and no personal liability will attach to the ownership
thereof; all prior sales by the Company of the Company's securities have been
made in compliance with or under an exemption from registration under the Act
and applicable state securities laws; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the Warrants and
Underwriter's Options (giving effect to the conversion ratio in effect on the
First Closing Date) and to the best of such counsel's knowledge, neither the
filing of the Registration Statement nor the offering or sale of the Units as
contemplated by this Agreement gives rise to any registration rights other than
(i) those which have been waived or satisfied for or relating to the
registration of any shares of Common Stock or (ii) those contained in the
Underwriter's Options.
(iii) this Agreement, the Underwriter's Options, and the
Warrant Agreement have been duly and validly authorized, executed, and delivered
by the Company;
(iv) the certificates evidencing the shares of Common Stock
comply with the Delaware General Corporation Law; the Warrants will be
exercisable for shares of Common Stock in accordance with the terms of the
Warrants and the Warrant Agreement and at the prices therein provided for;
(v) except as otherwise disclosed in the Registration Statement,
such counsel knows of no pending or threatened legal or governmental proceedings
to which the Company is a party which would materially adversely affect the
business, property, financial condition, or operations of the Company; or which
question the validity of the Securities, this Agreement, the Warrant Agreement,
or the Underwriter's Options, or of any action taken or to be taken by the
Company pursuant to this Agreement, the
22
Warrant Agreement, or the Underwriter's Options; to such counsel's knowledge
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;
(vi) the execution and delivery of this Agreement, the
Underwriter's Options, or the Warrant Agreement and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated, will not result in a breach or
violation of, or constitute a default under the certificate or articles of
incorporation or by-laws of the Company, or to the best knowledge of counsel, in
the performance or observance of any material obligations, agreement, covenant,
or condition contained in any bond, debenture, note, or other evidence of
indebtedness or in any material contract, indenture, mortgage, loan agreement,
lease, joint venture, or other agreement or instrument to which the Company is a
party or by which they or any of their properties is bound or in violation of
any order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality, or court, domestic or foreign, the result of which
would have a Material Adverse Effect;
(vii) the Registration Statement has become effective under
the Act, and to the best of such counsel's knowledge, (a) no stop order
suspending the effectiveness of the Registration Statement is in effect, and (b)
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 (i) the financial statements and other financial data and (ii)
certain information relating to patent law and regulatory matters relating to
the Federal Food and Drug Administration) contained therein, or omitted
therefrom, as to which such counsel need express no opinion) as of the Effective
Date comply as to form in all material respects with the applicable requirements
of the Act and the Rules and Regulations;
(viii) in the course of preparation of the Registration Statement
and the Prospectus such counsel has participated in conferences with the
President of the Company with respect to the Registration Statement and
Prospectus and such discussions did not disclose to such counsel any information
which gives such counsel reason to believe that the Registration Statement or
any amendment thereto at the time it became effective
23
contained 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 (including without limitation, the pro
forma financial information) and schedules contained therein, as to which such
counsel need express no opinion);
(ix) except for the exceptions set forth in paragraph (vii)
above, all descriptions in the Registration Statement and the Prospectus, and
any amendment or supplement thereto, of contracts and other agreements to which
the Company is a party are accurate and fairly present in all material respects
the information required to be shown, and such counsel is familiar with all
contracts and other agreements 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
agreements to which the Company is a party 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;
(x) 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 Units 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 Underwriter's Options or the
Securities underlying the Underwriter's Options, other than registrations or
qualifications of the Units under applicable state or foreign securities or Blue
Sky laws and registration under the Act and the NASD; and
(xi) the Units, Common Stock and Warrants have been duly
authorized for quotation on the National Association of Securities Dealers, Inc.
Automatic Quotation System.
24
(xii) Except as disclosed in the Registration Statement, to the
best knowledge of such counsel, the Company has sufficient licenses, permits,
and other governmental authorizations currently necessary 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. To the best knowledge of such
counsel, the business of the Company is not in violation of, or will not 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 Effect and are in compliance with all rules and regulations
pertaining to the business of the Company.
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; and may rely as to all matters of law other than the law of
the United States or of the State of Delaware upon opinions of counsel
satisfactory to the Underwriter, in which case the opinion shall state that they
have no reason to believe that the Underwriter and they are not entitled to so
rely.
(B) At the First Closing Date, you shall have received the opinion of
Graham & James, special patent counsel, in form and substance satisfactory to
you, identifying any patent searches conducted with respect to the Company's
patent applications and providing that the description in the Registration
Statement with respect to the status of such patent applications is accurate,
that the Company owns the entire right, title and interest in and to such
applications as described in the Prospectus and has not received any notice of
conflict with the asserted rights of others in respect thereof and that the
statements on the Prospectus under the captions "Prospectus Summary-The
Company", "Risk Factors-Dependence on Patents and Proprietary Rights"
and"Business-Patent Application" are true and correct.
(C) At the First Closing Date, you shall have received the opinion of
Dean E. Snyder, Esq., special regulatory counsel, in form and substance
satisfactory to you, providing that (i) the description in the Registration
Statement regarding the FDA and
25
governmental regulation related thereto is true, complete and accurate in all
material respects including those statements relating thereto contained in the
following sections: "Prospectus Summary -- The Company", "Risk Factors -- FDA
Regulation," "Plan of Operation -- 510(k) Notification," "Business -- The
Company," "Business -- U.S. Government Regulation" and "Business -- Foreign
Government Regulation" and (ii) where any conclusion with respect to likely
treatment of the Company's products by the FDA is stated in the Prospectus,
after reasonable investigation, reasonable bases exist for such conclusion and
the conclusion is reasonable to the extent qualified in the Prospectus, there
being no qualifications known other than those described in the Prospectus.
(c) 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 Bernstein & Wasserman, LLP,
counsel to the Underwriter.
(d) The Underwriter shall have received a letter prior to the
effective date of the Registration Statement and again on and as of the First
Closing Date from Rosenberg Rich Baker Berman & Company, independent public
accountants for the Company, substantially in the form reasonably acceptable to
the Underwriter.
(e) At the Closing Dates, (i) the representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects with the same effect as if made on and as of the Closing Dates
taking into account for the Option Closing Date the effect of the transactions
contemplated hereby and the Company shall have performed all of its obligations
hereunder and satisfied all the conditions on its part to be satisfied at or
prior to such Closing Dates; (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 shall 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, or to the Company's knowledge, any
26
development involving a prospective material adverse change, in the business,
properties, 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 of the Registration Statement, and the Company shall not have
incurred any material liabilities or entered into any material agreement not in
the ordinary course of business other than as referred to in the Registration
Statement and Prospectus; (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, or 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 operations, or general affairs of the Company and (v) the
Underwriter shall have received, at the First Closing Date, a certificate signed
by each of the President and the principal operating officer of the Company,
dated as of the First Closing Date, evidencing compliance with the provisions of
this subsection (e).
(f) Intentionally Omitted.
(g) Upon exercise of the option provided for in Section 2(b) hereof,
the obligations of the Underwriter to purchase and pay for the Option Units will
be subject (as of the date hereof and 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 pending, or, to your knowledge or the knowledge of the
Company, shall be contemplated by the Commission, and any reasonable request on
the part of the Commission for additional information shall have been complied
with to the satisfaction of the Commission.
(ii) At the Option Closing Date there shall have been delivered
to you the signed opinions of Kelley Drye & Warren,
27
Graham & James, and Dean E. Snyder, Esq., counsel, special counsel and special
regulatory counsel to the Company, respectively, dated as of the Option Closing
Date, in form and substance reasonably satisfactory to Bernstein & Wasserman,
LLP, counsel to the Underwriter, which opinions shall be substantially the same
in scope and substance as the opinions furnished to you at the initial Closing
Date pursuant to Sections 4(b) hereof, except that such opinions, where
appropriate, shall cover the Option Units.
(iii) At the Option Closing Date there shall have been delivered
to you a certificate of the President and the principal operating officer of the
Company, dated the Option Closing Date, in form and substance reasonably
satisfactory to Bernstein & Wasserman, LLP, 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(e) hereof.
(iv) At the Option Closing Date there shall have been delivered
to you a letter in form and substance satisfactory to you from Rosenberg Rich
Baker Berman & Company, P.A. dated the Option Closing Date and addressed to the
Underwriter confirming the information in their letter referred to in Section
4(d) hereof and stating that 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 Units shall be reasonably
satisfactory in form and substance to you, and you and Bernstein & Wasserman,
LLP, counsel to the Underwriter, shall have been furnished with all such
documents, certificates, and opinions as you may reasonably 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
herein.
(h) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to either of the
Closing Dates (unless cured by the Company
28
within ten (10) business days of notice to the Company of such action), for
members of the NASD to execute transactions (as principal or agent) in the
Units, Common Stock or the Warrants and no proceedings for the taking of such
action shall have been instituted or shall be pending, or, to the knowledge of
the Underwriter or the Company, shall be contemplated by the Commission or the
NASD. The Company represents that at the date hereof it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD.
(i) If any of the conditions herein provided for in this Section
shall not have been fulfilled in all material respects 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, either of the Closing Dates 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 Units 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) At the Closing Dates, 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 Units on exercise of the
option provided for in Section 2(b) hereof shall be affected.
29
6. INDEMNIFICATION.
(a) The Company agrees (i) to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act 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 reasonable attorneys' fees), to which
such Underwriter or such controlling person may become subject, under the Act or
otherwise, and (ii) to reimburse, as incurred, the Underwriter and such
controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages, or liabilities; insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
relate to and arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (B) any blue sky application or other document executed by
the Company specifically for that purpose containing written information
specifically furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Units under the securities
laws thereof (any such application, document or information 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 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 required to indemnify the Underwriter and any controlling person or
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 is 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,
30
provided, further that the indemnity with respect to any Preliminary Prospectus
shall not be applicable on account of any losses, claims, damages, liabilities,
or litigation arising from the sale of Units to any person if the misstatement
or omission was corrected in the Prospectus but a copy of the Prospectus was not
delivered to such person by the Underwriter in accordance with this Agreement at
or prior to the written confirmation of the sale to such person. This indemnity
will be in addition to any liability which the Company may otherwise have.
(b) The Underwriter will indemnify and hold harmless the Company,
each of its directors, each 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 Section 15
of the Act or Section 20(a) of the Exchange Act, 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
reasonable 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, or any Blue
Sky Application in reliance upon and in conformity with written information
furnished to the Company by the Underwriter specifically for use in the
preparation thereof and for any violation by the Underwriter in the sale of such
Units of any applicable state or federal law or any rule, regulation or
instruction thereunder relating to violations based on unauthorized statements
by Underwriter or its representative, provided that such violation is not based
upon any violation of such law, rule, or regulation or instruction by the party
claiming indemnification or inaccurate or misleading information furnished by
the Company or its representatives,
31
including information furnished to the Underwriter as contemplated herein. 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;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section unless the omission so to notify prejudices the indemnifying party.
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 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 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 indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that the reasonable 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
indemnified party and the indemnifying party and in the reasonable judgment of
the counsel to the indemnified party, there is a conflict of interest between
the indemnifying party and the indemnified party in the conduct of the defense
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party, it being understood,
however, that the indemnifying party shall not, in connection with any one
32
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 the indemnified party, which firm shall be designated in writing
by the indemnified party). No settlement of any action against an indemnified
party shall be made without the consent of the indemnified party, which shall
not be unreasonably withheld in light of all factors of importance to such
indemnified party. If it is ultimately determined that indemnification is not
permitted, then an indemnified party will return all monies advanced to the
indemnifying party with interest thereon.
7. CONTRIBUTION. In order to provide for just and equitable contribution
under the Act in any case in which the indemnification provided in Section 6
hereof is requested 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,
then the Company and the 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 be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) (after
contribution from others) such proportional amount of such losses, claims,
damages, or liabilities represented by the percentage that the underwriting
discount per Unit appearing on the cover page of the Prospectus plus all other
compensation paid to the Underwriter bears to the public offering price
appearing thereon and the Company shall be responsible for the remaining
portion, provided, however, that if such allocation is not permitted by
applicable law, then allocated in such proportion as is appropriate to reflect
relative benefits but also 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
omission relates to information supplied by the Company or the Underwriter and
the parties' relative intent,
33
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 this Section 7. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 1(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, its
officers, directors, and controlling persons, and the Company, its officers,
directors, and controlling persons shall be entitled to contribution from the
Underwriter 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. COSTS AND EXPENSES.
(a) Whether or not this Agreement becomes effective or the sale of
the Units by 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 statements therein and all amendments and exhibits
thereto), Preliminary Prospectus, and the Prospectus, as amended or
supplemented, the fee of the NASD in connection with the filing required by the
NASD relating to the offering of the Units contemplated hereby; all documented
expenses, including reasonable fees and disbursements of counsel to the
34
Underwriter, in connection with the qualification of the Units under the state
securities or blue sky laws which the Underwriter shall designate (which legal
fees (not including filing fees or expenses) shall not exceed $35,000); the cost
of printing and furnishing to the Underwriter copies of the Registration
Statement, each Preliminary Prospectus, if applicable, the Prospectus, this
Agreement, and the Blue Sky Memorandum, any fees relating to the listing of the
Units, Common Stock, and Warrants on NASDAQ or any other securities exchange;
the cost of printing the certificates representing the securities comprising the
Units; the fees of the transfer agent and warrant agent, reasonable and
traditional advertising costs, meetings and presentation costs; reasonable fees
to due diligence experts, if any, incurred by the Underwriter for intellectual
property matters not to exceed $25,000; and reasonable costs of bound volumes
and prospectus memorabilia. The Company shall pay any and all taxes (including
any transfer, franchise, capital stock, or other tax imposed by any
jurisdiction) on sales of the Units 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 in the
aggregate equal to 3.0% of the gross proceeds received upon exercise of the
over-allotment option. In the event the transactions contemplated hereby are not
consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant,
representation, or warranty contained herein or because any other condition to
the Underwriter's obligations hereunder required to be fulfilled by the Company
is not fulfilled other than because the Underwriter failed to take an action
necessary to such fulfillment) the Company shall not be liable for any expenses
of the Underwriter, including the Underwriter's legal fees. In the event the
transactions contemplated hereby are not consummated by reason of the Company's
actions or failure to take such actions as the Underwriter believes are
reasonably required to complete the transaction contemplated herein, the Company
shall be liable for the actual accountable
35
out-of-pocket expenses of the Underwriter, including reasonable legal fees which
shall not exceed $150,000 (less any amount previously paid or payable pursuant
to the next sentence). In the event the transactions contemplated hereby are
not consummated due to a material adverse change in the business or financial
results, prospects or condition of the Company or to adverse market conditions,
the Company shall be liable for the actual out-of-pocket expenses of the
Underwriter, including reasonable legal fees, not to exceed in the aggregate
$100,000.
(c) Except as disclosed in the Registration Statement, including
under the caption "Litigation," no person is entitled to the Company's
knowledge, either directly or indirectly to compensation from the Company, from
the Underwriter or 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, 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 reasonable
attorneys' fees), to which the Underwriter or person 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 on such business day after the effective date of the Registration Statement
as the Underwriter in its discretion shall first commence the initial public
offering of the Units. This Agreement may be terminated by the Underwriter 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.
36
10. TERMINATION.
(a) After this Agreement becomes effective, this Agreement, except
for Sections 3(c), 6, 7, 8, 12, 13, 14, and 15 hereof, may be terminated at any
time prior to the Closing Date, by the Underwriter if in the Underwriter's
reasonable judgment it is impracticable to offer for sale or to enforce
contracts made by the Underwriter for the resale of the Units 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 Nasdaq having been suspended or
limited, (iii) material governmental restrictions having been imposed on trading
in securities generally (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 involving the
United States or other substantial national or international calamity having
occurred, (vi) a pending or threatened legal or governmental proceeding or
action relating generally to the Company's business, or a notification having
been received by the Company of the threat of any such proceeding or action,
which would materially adversely affect the Company; (vii) except as
contemplated by the Prospectus, the Company is merged with or consolidated into
or acquired by another company or group or there exists a binding legal
commitment for the foregoing or any other material change of ownership or
control occurs; (viii) the adoption of a federal law, rule or regulation which,
in the reasonable belief of the Underwriter, would have a material adverse
impact on the business or financial condition of the Company, (ix) any material
adverse change in the financial or securities markets beyond normal market
fluctuations having occurred since the date of this Agreement, or (x) 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, the
Company shall be promptly notified by the Underwriter, by telephone or telegram,
confirmed by letter.
37
11. UNDERWRITER'S OPTIONS. At or before the First Closing Date, the
Company will sell the Underwriter or its designees for a consideration of $.001
per option and upon the terms and conditions set forth in the form of the
Underwriter's Options annexed as an exhibit to the Registration Statement,
Underwriter's Options to purchase 120,000 Units. In the event of conflict in the
terms of this Agreement and the Underwriter's Options with respect to language
relating to the Underwriter's Options, the language of the Underwriter's Options
shall control.
12. COVENANTS OF THE UNDERWRITER. You covenant and agree with the Company
as follows:
(a) COMPLIANCE WITH LAWS. In connection with the offer and sale of
Units, you shall comply with any applicable requirements of the Act, the
Exchange Act, the NASD and the applicable state securities or "blue sky" laws,
and the rules and regulations thereunder.
(b) ACCURACY OF INFORMATION. No information supplied by you for use
in the Registration Statement, Preliminary Prospectus, Prospectus or Blue Sky
Application will contain any untrue statements of a material fact or omit to
state any material fact necessary to make such information not misleading.
(c) NO ADDITIONAL INFORMATION. You will not give any information or
make any representation in connection with the offering of the Units other than
that contained in the Prospectus.
(d) SALE OF UNITS. You shall solicit, directly or through Selected
Dealers, purchasers of the Units only in the jurisdictions in which you have
been advised by the Company that such solicitation can be made, and in which you
or the soliciting Selected Dealer, as the case may be, are qualified to so act.
13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties, and other
statements of the Company and the Underwriter and the undertakings set forth in
or made pursuant to this Agreement will remain in full force and effect until
three years from the date of this Agreement, 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
38
delivery of and payment of the Units and the termination of this Agreement.
14. NOTICE. Any communications specifically required hereunder to be in
writing, if sent to the Underwriter, will be mailed, delivered, or telecopied
and confirmed to them at Patterson Travis, Inc., One Battery Park Place, 2nd
Fl., New York, NY 10004, with a copy sent to Bernstein & Wasserman, LLP, 950
Third Avenue, New York, NY 10022, Attention: Stuart Neuhauser, Esq., or if
sent to the Company, will be mailed, delivered, or telecopied and confirmed to
it at 1090 King Georges Post Road, Suite 301, Edison, NJ 08837, Attention:
Eugene Gordon with a copy sent to Kelley Drye & Warren, 101 Park Avenue, New
York, NY 10178 Attention: Jane E. Jablons, Esq. Notice shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication.
15. PARTIES IN INTEREST. The Agreement herein set forth is made solely
for the benefit of the Underwriter, the Company, any person controlling the
Company or the Underwriter, and directors of the Company, nominees for directors
(if any) named in the Prospectus, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors, 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 purchaser,
as such purchaser, from the Underwriter of the Units.
16. APPLICABLE LAW. This Agreement will be governed by, and construed in
accordance with, of the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each of the
parties hereto and delivered to the other parties (including by fax, followed by
original copies by overnight mail).
18. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the entire
agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings, and negotiations with respect to the subject matter
hereof. This Agreement may not be
39
amended except in writing, signed by the Underwriter and the Company.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this agreement, whereupon it will become a binding
agreement between the Company and the Underwriter in accordance with its terms.
Very truly yours,
MEDJET INC.
By: __________________________
Its
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
PATTERSON TRAVIS, INC.
By: __________________________
Its
40