Exhibit 1.1
EAGLE SUPPLY GROUP, INC.
1,500,000 Shares of Common Stock and
1,500,000 Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
Boca Raton, Florida
_____________, 1996
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
Gentlemen:
Eagle Supply Group, Inc. (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein, hereby
proposes to issue and sell to Barron Chase Securities, Inc. (the "Underwriter"),
pursuant to the terms of this Underwriting Agreement (the "Agreement"), on a
"firm commitment" basis, 1,500,000 shares of Common Stock (the "Shares") at
$5.00 per Share and 1,500,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") at $.125 per Warrant. The Shares and the Warrants are collectively
referred to as the "Securities". Each Warrant is exercisable to purchase one (1)
share of Common Stock (the "Common Stock") at $5.00 per share at any time during
the period between the Effective Date and three (3) years from the Effective
Date. The date upon which the Securities and Exchange Commission ("Commission")
shall declare the Registration Statement of the Company effective shall be the
"Effective Date". The Warrants are subject to redemption under certain
circumstances. 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 225,000 additional Shares and/or 225,000 additional Warrants (the "Option
Securities").
You have advised the Company that you desire to purchase the Securities,
and that you are authorized to execute this Agreement. The Company confirms the
agreements made by it with respect to the purchase of the Securities by the
Underwriter, as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with the Underwriter as
of the Effective Date (as defined above), the Closing Date (as hereinafter
defined) and the Option Closing Date (as hereinafter defined) that:
(a) A registration statement (File No. 333-____) on Form S-1 relating to
the public offering of the Securities, including a preliminary form of the
prospectus, copies of which have heretofore been delivered to you, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Commission thereunder, and has been filed with the
Commission under the Act. The Company has prepared in the same manner and
proposes to file, prior to the Effective Date of such registration statement, an
additional amendment or amendments to such registration statement, including a
final form of Prospectus, copies of which shall be delivered to you.
"Preliminary Prospectus" shall mean each prospectus filed pursuant to the Rules
and Regulations under the Act prior to the Effective Date. The registration
statement (including all financial schedules and exhibits) as amended at the
time it becomes effective and the final prospectus included therein are
respectively referred to as the "Registration Statement" and the "Prospectus",
except that (i) if the prospectus first filed by the Company pursuant to Rule
424(b) of the Rules and Regulations shall differ from said prospectus as then
amended, the term "Prospectus" shall mean the prospectus first filed pursuant to
Rule 424(b), and (ii) if such registration statement or prospectus is amended or
such prospectus is supplemented, after the effective date of such registration
statement and prior to the Option Closing Date (as hereinafter defined), 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) At the Effective Date and at all times subsequent thereto up to the
Option Closing Date, if any, and during such longer period as the Prospectus may
be required to be delivered in connection with sales by the Underwriter or
Selected Dealers: (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, in light of the
circumstances under which they are made, not misleading; provided, however, that
the Company makes no representations, warranties or agreement 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 the Underwriter specifically for use in the preparation thereof. It
is understood that the statements set forth in the Prospectus with respect to
stabilization, under the heading "Underwriting" and regarding the identity of
counsel to the Underwriter under the heading "Legal Matters" constitute the only
information furnished in writing by the Underwriter for inclusion in the
Prospectus.
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(c) Each of the Company and each subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus and is duly qualified to do business as a foreign corporation and is
in good standing in all other jurisdictions in which the nature of its business
or the character or location of its properties requires such qualification,
except where failure to so qualify will not materially affect the Company's
business, properties or financial condition.
(d) The authorized, issued and outstanding securities of the Company as of
the date of the Prospectus is as set forth in the Prospectus under
"Capitalization"; all of the issued and outstanding securities of the Company
have been, or will be when issued as set forth in the Prospectus, duly
authorized, validly issued and fully paid and non-assessable; the issuances and
sales of all such securities complied in all material respects with applicable
Federal and state securities laws; the holders thereof have no rights of
rescission against the Company with respect thereto, and are not subject to
personal liability by reason of being such holders; none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company; 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 securities of the Company have been granted or
entered into by the Company; and all of the securities of the Company, issued
and to be issued as set forth in the Registration Statement, conform to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Shares are duly authorized, and when issued, delivered and paid
for pursuant to this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights of any security holder of
the Company. Neither the filing of the Registration Statement nor the offering
or sale of the Securities 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 securities of the Company, except as described in the
Registration Statement.
The Warrants have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms and 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
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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 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, free of pre-emptive rights and no personal liability will attach
to the ownership thereof. The Warrant exercise price and the Warrant exercise
period may not be changed or revised by the Company, without the prior written
consent of the Underwriter. 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.
The Common Stock Underwriter Warrants, the Warrant Underwriter Warrants,
the Underlying Warrants, the shares of Common Stock issuable upon exercise of
the Common Stock Underwriter Warrants, and the shares of Common Stock issuable
upon exercise of the Underlying Warrants (all as defined in the Underwriter's
Warrant Agreement described in Section 12 herein), have been duly authorized
and, when issued, delivered and paid for, will be validly issued, fully paid,
non-assessable, free of pre-emptive rights and no personal liability will attach
to the ownership thereof, and 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 Warrant Agreement.
(f) This Agreement, the Warrant Agreement, the Financial Advisory
Agreement, the Merger and Acquisition Agreement (the "M/A Agreement") and the
Underwriter's Warrant Agreement have been duly and validly authorized, executed
and delivered by the Company, and assuming due execution of this Agreement by
the other party hereto, constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally. The Company has full power and lawful
authority to authorize, issue and sell the Securities to be sold by it hereunder
on the terms and conditions set forth herein, and no consent, approval,
authorization or other order of any governmental authority is required in
connection with such authorization, execution and delivery or with the
authorization, issue and sale of the Securities or the securities to be issued
pursuant to the Underwriter's Warrant Agreement, except such as may be required
under the Act or state securities laws, or as otherwise have been obtained.
(g) Except as described in the Prospectus, neither the Company nor any
subsidiary is in material violation, breach of or default under, and
consummation of the transactions herein contemplated and the fulfillment of the
terms of this Agreement will not conflict with, or result in a breach of, or
constitute a
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material 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 or each
subsidiary or any of the terms or provisions of any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
each subsidiary is a party or by which the Company or each subsidiary may be
bound or to which any of the property or assets of the Company or each
subsidiary is subject, nor will such action result in any material violation of
the provisions of the articles of incorporation or by-laws of the Company or
each subsidiary, as amended, or any statute or any order, rule or regulation
applicable to the Company or subsidiary of any court or of any regulatory
authority or other governmental body having jurisdiction over the Company or
each subsidiary.
(h) Subject to the qualifications stated in the Prospectus, the Company
and each subsidiary have good and marketable title to all properties and assets
described in the Prospectus as owned by each of them, 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 or each subsidiary is the lessor or
sublessor of properties or assets or under which the Company or each subsidiary
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,
neither the Company nor each subsidiary is in default in any material respect
with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by anyone adverse to rights of the
Company or each subsidiary as lessor, sublessor, lessee, or sublessee under any
of the leases or subleases mentioned above, or affecting or questioning the
right of the Company or each subsidiary 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 and each subsidiary
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) Deloitte & Touche, LLP, who have given their reports on certain
financial statements filed and to be filed with the Commission as part of the
Registration Statement, and which are included in the Prospectus, are with
respect to the Company, independent public accountants as required by the Act
and the Rules and Regulations.
(j) The financial statements and schedules, together with related notes,
set forth in the Prospectus and the Registration Statement present fairly the
financial position and results of operations and changes in financial position
of the Company on the basis stated in the Registration Statement, at the
respective dates
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and for the respective periods to which they apply. Said statements and related
notes and schedules have been prepared in accordance with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved. The Company's internal accounting controls and procedures are
sufficient to cause the Company and each subsidiary to prepare financial
statements which comply in all material respects with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved. During the preceding five (5) year period, nothing has been brought to
the attention of the Company's management that would result in any reportable
condition relating to the Company's internal accounting procedures, weaknesses
or controls.
(k) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus and to and including the
Option Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, (i) neither the Company nor any subsidiary has
incurred and will not have incurred any material liabilities or obligations,
direct or contingent, and has not entered into and will not have entered into
any material transactions other than in the ordinary course of business and/or
as contemplated in the Registration Statement and the Prospectus; (ii) neither
the Company nor any subsidiary has and will not have paid or declared any
dividends or have made any other distribution on its capital stock; (iii) there
has not been any change in the capital stock of, or any incurrence of long-term
debt by, the Company or any subsidiary; (iv) neither the Company nor any
subsidiary has issued any options, warrants or other rights to purchase the
capital stock of the Company or any subsidiary; and (v) there has not been and
will not have been any material adverse change in the business, financial
condition or results of operations of the Company or any subsidiary, or in the
book value of the assets of the Company or any subsidiary, arising for any
reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending or, to the
knowledge of the Company or any subsidiary, threatened, any material action,
suit, proceeding, inquiry, arbitration or investigation against the Company or
any subsidiary, or any of the officers or directors of the Company or any
subsidiary, or any material action, suit, proceeding, inquiry, arbitration, or
investigation, which might result in any material adverse change in the
condition (financial or other), business prospects, net worth, or properties of
the Company or any subsidiary.
(m) Except as disclosed in the Prospectus, each of the Company and each
subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid all taxes shown as due thereon; and there is
no tax deficiency which has been or to the knowledge of the Company might be
asserted against the
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Company or any subsidiary that has not been provided for in the financial
statements.
(n) Except as set forth in the Prospectus, each of the Company and each
subsidiary has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its property as described in the Prospectus and is in all material
respects in compliance therewith and owns or possesses adequate right to use all
material patents, patent applications, trademarks, service marks, trade-names,
trademark registrations, service mark registrations, copyrights, and licenses
necessary for the conduct of such business and has not received any notice of
conflict with the asserted rights of others in respect thereof. To the best of
the Company's knowledge, none of the activities or business of the Company or
any subsidiary are in violation of, or cause the Company or any subsidiary to
violate, any law, rule, regulation or order of the United States, any state,
county or locality, or of any agency or body of the United States or of any
state, county or locality, the violation of which would have a material adverse
impact upon the condition (financial or otherwise), business, property,
prospective results of operations, or net worth of the Company and any
subsidiary.
(o) Neither the Company nor any subsidiary has, directly or indirectly, at
any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution, in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law.
(p) On the Closing Dates (herein 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 Securities to the Underwriter hereunder will
have been fully paid or provided for by the Company and all laws imposing such
taxes will have been fully complied with.
(q) All contracts and other documents which are required to be described
in or filed as exhibits to the Registration Statement have been so described
and/or filed.
(r) Except as described in the Registration Statement and Prospectus, no
holders of Common Stock or of any other securities of the Company have the right
to include such Common Stock or other securities in the Registration Statement
and Prospectus.
(s) Except as set forth in or contemplated by the Registration Statement
and the Prospectus, neither the Company nor
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any subsidiary has any material contingent liabilities.
(t) The Company has no subsidiary corporations except as disclosed in the
Registration Statement and Prospectus, nor has it any equity interest in any
partnership, joint venture, association or other entity except as disclosed in
the Registration Statement or Prospectus. Except as described in the
Registration Statement and Prospectus, the Company owns all of the outstanding
securities of each of its subsidiaries.
(u) The Commission has not issued an order preventing or suspending the
use of any Preliminary Prospectus with respect to the offer and sale of the
Securities and each Preliminary Prospectus, as of its date, has conformed fully
in all material respects with the requirements of the Act and the Rules and
Regulations and did not include any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein not
misleading.
(v) Neither the Company, nor, to the Company's knowledge, any of its
officers, directors, employees or stockholders, have taken or will take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any of the securities of the
Company.
(w) Item 15 of Part II of the Registration Statement accurately discloses
all unregistered securities sold by the Company within the three year period
prior to the date as of which information is presented in the Registration
Statement. All of such securities were sold in transactions which were exempt
from the registration provisions of the Act and not in violation of Section 5
thereof.
(x) Other than as set forth in the Prospectus, 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 offering, and the Company agrees to indemnify and
hold harmless the Underwriter against any losses, claims, damages or
liabilities, which shall include, but not be limited to, all costs to defend
against any such claim, so long as such claim arises out of agreements made or
allegedly made by the Company.
(y) Based upon written representations received by the Company, no
officer, director or five percent (5%) or greater stockholder of the Company or
any subsidiary has any direct or indirect affiliation or association with any
member of the National Association of Securities Dealers, Inc. ("NASD"), except
as disclosed to the Underwriter in writing, and no beneficial owner of the
Company's unregistered securities has any direct or indirect affiliation or
association with any NASD member except as disclosed
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to the Underwriter in writing. The Company will advise the Underwriter and the
NASD if any five percent (5%) or greater shareholder of the Company or any
subsidiary is or becomes an affiliate or associated person of an NASD member
participating in the distribution.
(z) The Company and each subsidiary is in compliance in all material
respects with all federal, state and local laws and regulations respecting the
employment of its employees and employment practices, terms and conditions of
employment and wages and hours relating thereto. There are no pending
investigations involving the Company or any subsidiary by the U.S. Department of
Labor, or any other governmental agency responsible for the enforcement of such
federal, state or local laws and regulations. There is no unfair labor practice
charge or complaint against the Company or any subsidiary pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or to the knowledge of the Company, threatened
against or involving the Company or any subsidiary or any predecessor entity. No
question concerning representation exists respecting the employees of the
Company or any subsidiary and no collective bargaining agreement or modification
thereof is currently being negotiated by the Company or any subsidiary. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company or any subsidiary, if any.
(aa) Neither the Company nor any subsidiary maintains, sponsors nor
contributes to, nor is it required to contribute to, any program or arrangement
that is an "employee pension benefit plan", an "employee welfare benefit plan",
or a "multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). Neither the Company nor any subsidiary
maintained or contributed to a defined benefit plan, as defined in Section 3(35)
of ERISA.
(ab) Based upon written representations received from the officers and
directors of the Company and each subsidiary, except as disclosed in the
Prospectus, during the past five years, none of the officers or directors of the
Company or any subsidiary have been:
(1) Subject of a petition under the Federal bankruptcy laws or
any state insolvency law filed by or against them, or by a receiver,
fiscal agent or similar officer appointed by a court for their
business or property, or any partnership in which either or them was
a general partner at or within two years before the time of such
filing, or any corporation or business association of which either
of them was an executive officer at or within two years before the
time of such
9
filing;
(2) Convicted in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining either
of them from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator,
floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance
company, or engaging in or continuing any conduct or practice
in connection with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection
with any violation of Federal or State securities law or
Federal Commodity laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any Federal or State
authority barring, suspending or otherwise limiting for more than
sixty (60) days either of their right to engage in any activity
described in paragraph (3)(i) above, or be associated with persons
engaged in any such activity;
(5) Found by any court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have violated
any Federal or State securities law, and the judgment in such civil
action or finding by the Commission has not been subsequently
reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any Federal Commodities Law,
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and the judgment in such civil action or finding by the Commodity
Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
(ac) Based upon written representations received from the officers and
directors of the Company, each of the officers and directors of the Company has
reviewed the sections in the Prospectus relating to their biographical data and
equity ownership position in the Company, and all information contained therein
is true and accurate.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement and upon the
basis of the representations, warranties and agreements herein contained, the
Company hereby agrees to issue and sell to the Underwriter an aggregate of
1,500,000 Shares at $4.50 per Share and 1,500,000 Warrants at $.1125 per Warrant
(the public offering price less ten percent (10%)), at the place and time
hereinafter specified. The price at which the Underwriter shall sell the
Securities to the public shall be $5.00 per Share and $.125 per Warrant.
Delivery of the Securities against payment therefor shall take place at
the offices of Barron Chase Securities, Inc., 7700 West Camino Real, Suite 200,
Boca Raton, Florida 33433 (or at such other place as may be designated by the
Underwriter) at 10:00 a.m., Eastern Time, on such date after the Registration
Statement has become effective as the Underwriter shall designate, but not later
than ten (10) business days (holidays excepted) following the first date that
any of the Securities are released to you, such time and date of payment and
delivery for the Securities being herein called the "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 225,000 Shares and 225,000
Warrants at the same price per Share and Warrant as the Underwriter shall pay
for the Securities being sold pursuant to the provisions of subsection (a) of
this Section 2 (such additional Securities being referred to herein as the
"Option Securities"). This option may be exercised within thirty (30) days after
the Effective Date of the Registration Statement upon notice by the Underwriter
to the Company advising as to the amount of Option Securities as to which the
option is being exercised, the names and denominations in which the certificates
for such Option Securities 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 later than ten (10) full business days after the
exercise of said option, nor in any event prior to the Closing Date, and such
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time and date is referred to herein as the "Option Closing Date". Delivery of
the Option Securities against payment therefor shall take place at the offices
of the Underwriter. The Option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriter of the Securities referred to in
subsection (a) above. In the event the Company declares or pays a dividend or
distribution on its Common Stock, whether in the form of cash, shares of Common
Stock or any other consideration, prior to the Option Closing Date, such
dividend or distribution shall also be paid on the Option Closing Date.
(c) The Company will make the certificates for the Securities to be sold
hereunder available to you for inspection at least two (2) full business days
prior to the Closing Date at the offices of the Underwriter, and such
certificates shall be registered in such names and denominations as you may
request. Time shall be of the essence and delivery at the time and place
specified in this Agreement is a further condition to the obligations of the
Company to the Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered by the Company to you
for the account of the Underwriter against payment of the purchase prices by the
Underwriter, by certified or bank cashier's checks in New York Clearing House
funds, payable to the order of the Company or by wire transfer in New York
Clearing House funds.
In addition, in the event the Underwriter exercises the option to purchase
from the Company all or any portion of the Option Securities pursuant to the
provisions of subsection (b) above, payment for such Securities shall be made
payable in New York Clearing House funds at the offices of the Underwriter, or
by wire transfer in New York Clearing House funds, at the time and date of
delivery of such Securities as required by the provisions of subsection (b)
above, against receipt of the certificates for such Securities by the
Underwriter for the account of the Underwriter registered in such names and in
such denominations as the Underwriter may request.
It is understood that the Underwriter proposes to offer the Securities to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement is declared
effective by the Commission.
3. Covenants of the Company. The Company covenants and agrees with the
Underwriter that:
(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you and will not at
any time, whether before or after the Effective Date, file any amendment to the
Registration Statement or
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supplement to the Prospectus of which you shall not previously been advised and
furnished with a copy or to which you or your counsel shall have objected in
writing, acting reasonably, or which is not in compliance with the Act and the
Rules and Regulations. At any time prior to the later of (i) the completion by
the Underwriter of the distribution of the Securities as contemplated hereby; or
(ii) 25 days after the date on which the Registration Statement shall have
become or been declared effective, the Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary or advisable in
connection with the distribution of the Securities and as mutually agreed by the
Company and the Underwriter.
After the Effective Date and as soon as the Company is advised thereof,
the Company will advise you, and confirm the advice in writing, of the receipt
of any comments of the Commission, of the effectiveness of any post-effective
amendment to the Registration Statement, of the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the Commission for
amendment of the Registration Statement or for supplementing of the Prospectus
or for additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Securities 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 you copies of each Preliminary
and Final Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriter and Selected Dealers to use the Prospectus in connection with
the sale of the Securities for such period as in the opinion of counsel to the
Underwriter the use thereof is required to comply with the applicable provisions
of the Act and the Rules and Regulations. In case of the happening, at any time
within such period as a Prospectus is required under the Act to be delivered in
connection with sales by the Underwriter or Selected Dealers, 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 or
counsel for the Underwriter, should be set forth in an amendment to 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
Securities, or in case it shall be necessary to amend or supplement the
Prospectus to comply with law or with the
13
Act and the Rules and Regulations, the Company will notify you promptly and
forthwith prepare and furnish to you copies of such amended Prospectus or of
such supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material 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.
The Company will comply with the Act, the Rules and Regulations
thereunder, the Securities Exchange Act of 1934 (the "1934 Act"), and the rules
and regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will act in good faith and use its best efforts and
cooperate with you and your counsel to qualify to register the Securities for
sale under the securities or "blue sky" laws of such jurisdictions as the
Underwriter may 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 to service of process
in any jurisdiction in any action other than one arising out of the offering or
sale of the Securities. The Company will, from time to time, prepare and file
such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriter may reasonably
request.
(c) If the sale of the Securities provided for herein is not consummated,
the Company shall pay all costs and expenses incident to the performance of the
Company's obligations hereunder, including, but not limited to, all such
expenses itemized in Section 8(a) and 8(c) hereof, and either (i) the
out-of-pocket expenses of the Underwriter, not to exceed the $50,000 previously
paid if the Underwriter elects to terminate the offering for any reason; or (ii)
the out-of-pocket expenses of the Underwriter if the Company elects to terminate
the offering for any reason. For the purposes of this sub-paragraph, the
Underwriter shall be deemed to have assumed such expenses when they are billed
or incurred, regardless of whether such expenses have been paid. The Underwriter
shall not be responsible for any expenses of the Company or others, or for any
charges or claims relative to the proposed public offering if it is not
consummated.
(d) The Company will deliver to you at or before the Closing Date two
signed copies of the Registration Statement, including all financial statements
and exhibits filed therewith, and of each
14
amendment or supplement thereto. The Company will deliver to or upon the order
of the Underwriter, 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 the Registration Statement as the
Underwriter may reasonably request. The Company will deliver to the Underwriter
on 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.
(e) For so long as the Company is a reporting company under either Section
12 or 15 of the 1934 Act, the Company, at its expense, will furnish to the
Underwriter during the period ending five (5) years from the Effective Date, (i)
as soon as practicable after the end of each fiscal year, a balance sheet of the
Company and any of its subsidiaries as at the end of such fiscal year, together
with statements of income, surplus and 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 they are available, a copy of all reports (financial or other) mailed to
security holders; (iii) as soon as they are available, a copy of all
non-confidential documents, including annual reports, periodic reports and
financial statements, furnished to or filed with the Commission under the Act
and the 1934 Act; (iv) copies of each press release, news item and article with
respect to the Company's affairs released by the Company; and (v) such other
information as you may from time to time reasonably request.
(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 make generally available to its stockholders and to
the registered holders of its Warrants and deliver to you as soon as it is
practicable, but in no event later than the first day of the sixteenth full
calendar month following the Effective Date, an earnings statement (which need
not be audited) covering a period of at least twelve consecutive months
beginning with the Effective Date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the necessary action
to become a reporting company under Section 12 of the 1934 Act, and the Company
will make all filings required to, and will have obtained approval for the
listing of the Shares and Warrants on The NASDAQ National Market System, and
will use its best efforts to maintain such listing for at least seven (7) years
15
from the date of this Agreement.
(i) For such period as the Company's securities are registered under the
1934 Act, the Company will hold an annual meeting of stockholders for the
election of Directors within 180 days after the end of each of the Company's
fiscal years and, within 150 days after the end of each of the Company's fiscal
years will provide the Company's stockholders with the audited financial
statements of the Company as of the end of the fiscal year just completed prior
thereto. Such financial statements shall be those required by Rule 14a-3 under
the 1934 Act and shall be included in an annual report pursuant to the
requirements of such Rule.
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption "Use
of Proceeds" in the Prospectus, and will file such reports with the Commission
with respect to the sale of the Securities and the application of the proceeds
therefrom as may be required by Sections 12, 13 and/or 15 of the 1934 Act and
pursuant to Rule 463 under the Act.
(k) The Company will, promptly upon your request, prepare and file with
the Commission any amendments or supplements to the Registration Statement,
Preliminary Prospectus or Prospectus and take any other action, which in the
reasonable opinion of counsel to the Underwriter and the Company may be
reasonably necessary or advisable in connection with the distribution of the
Securities and will use its best efforts to cause the same to become effective
as promptly as possible.
(l) On the Closing Date, the Company shall execute and deliver to you the
Underwriter's Warrant Agreement. The Underwriter's Warrant Agreement and Warrant
Certificates will be substantially in the form of the Underwriter's Warrant
Agreement filed as an Exhibit to the Registration Statement.
(m) The Company will reserve and keep available for issuance that maximum
number of its authorized but unissued securities which are issuable upon
exercise of the Underwriter's Warrants outstanding from time to time.
(n) All beneficial owners of the Company's securities (including Warrants,
Options and Common Stock of the Company), as of the Effective Date, shall agree
in writing, in a form satisfactory to the Underwriter, not to sell, transfer or
otherwise dispose of any of such securities or underlying securities for a
period of twenty-four (24) months from the Effective Date, or any longer period
required by any State, without the prior written consent of the Underwriter. All
sales of the Company's securities by officers and/or directors of the Company
shall be effected through the Underwriter.
16
(o) The Company will obtain, on or before the Closing Date, key person
life insurance on each of the lives of Douglas P. Fields and Frederick M.
Friedman in an amount of not less than $1,000,000 each, and will use its best
efforts to maintains such insurance for a period of at least five (5) years from
the Effective Date.
(p) At the Closing Date, the Company will engage the Underwriter as a
non-exclusive financial advisor to the Company for a period of thirty-six (36)
months commencing on the first day of the month following the Company's receipt
of the proceeds of this offering, at an aggregate fee of $108,000, all of which
shall be payable to the Underwriter on the Closing Date. The financial advisory
agreement will provide that the Underwriter shall, at the Company's request,
provide advice and consulting services to the Company concerning potential
merger and acquisition proposals and the obtaining of short or long-term
financing for the Company, whether by public financing or otherwise.
(q) Prior to the Closing Date, the Company shall, at its own expense,
undertake to list the Company's securities in the appropriate recognized
securities manual or manuals published by Standard & Poor's Corporation and such
other manuals as the Underwriter may designate, such listings to contain the
information required by such manuals and the Uniform Securities Act. The Company
hereby agrees to use its best efforts to maintain such listing for a period of
not less than five (5) years. The Company shall take such action as may be
reasonably requested by the Underwriter to obtain a secondary market trading
exemption in such states as may be reasonably requested by the Underwriter.
(r) During the one hundred eighty (180) day period commencing on the
Closing Date, the Company will not, without the prior written consent of the
Underwriter, grant options or warrants to purchase the Company's Common Stock at
a price less than the initial per share public offering price.
(s) Prior to the Closing Date, neither the Company nor any subsidiary will
issue, directly or indirectly, without your prior consent, any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering of the Securities other than routine customary
advertising of the Company's products and services, and except as required by
any applicable law or the directives of any relevant regulatory authority in any
relevant jurisdiction.
(t) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the financial
statements to be included in any registration statement or similar disclosure
document to be filed by the Company hereunder, or any amendment or supplement
thereto. 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)
17
the Company's financial statements for each of the first three (3) fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's quarterly report and the mailing of quarterly financial
information to stockholders.
(u) The Company shall retain Continental Stock Transfer & Trust Company as
the transfer agent for the securities of the Company, or such other transfer
agent as you may agree to in writing. In addition, the Company shall direct such
transfer agent to furnish the Underwriter with daily transfer sheets as to each
of the Company's securities as prepared by the Company's transfer agent and
copies of lists of stockholders and warrantholders as reasonably requested by
the Underwriter, for a five (5) year period commencing from the Closing Date.
(v) The Company shall cause the Depository Trust Company, or such other
depository of the Company's securities, to deliver a "special security position
report" to the Underwriter on a daily and weekly basis at the expense of the
Company, for a five (5) year period from the Effective Date.
(w) Following the Effective Date, the Company shall, at its sole cost and
expense, prepare and file such Blue Sky applications with such jurisdictions as
the Underwriter shall designate and the Company may reasonably agree.
(x) On the Effective Date and for a period of three (3) years thereafter,
the Company's Board of Directors shall consist of a minimum of five (5) persons,
two (2) of whom shall be independent and not otherwise affiliated with the
Company or associated with any of the Company's affiliates. The Underwriter
shall have the opportunity to invite an observer to attend Board of Directors
meetings of the Company at the expense of the Company.
(y) On the Closing Date, the Company shall execute and deliver to you a
non-exclusive M/A Agreement with the Underwriter in a form satisfactory to the
Underwriter, providing:
(1) The Underwriter will be paid a finder's fee, of from five
percent (5%) of the first $1,000,000 ranging in $1,000,000 increments down
to one percent (1%) of the excess, if any, over $4,000,000 of the
consideration involved in any transaction introduced in writing by the
Underwriter (including mergers, acquisitions, joint ventures, and any
other business for the Company introduced by the Underwriter) consummated
by the Company, as an "Introduced, Consummated Transaction", by which the
Underwriter introduced the other party to the Company during a period
ending five (5) years from the date of the M/A Agreement; and
(2) That any such finder's fee due to the Underwriter will be paid
in cash or stock as mutually agreed at the
18
closing of the particular Introduced, Consummated Transaction
for which the finder's fee is due.
(z) After the Closing Date, the Company shall prepare and publish
"tombstone" advertisements of at least 5 x 5 inches in publications to be
designated by the Underwriter at a total cost not to exceed $15,000.
(aa) For such period as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement or a new 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 the
Underwriter or such dealer may reasonably request. Such post-effective
amendments or new Registration Statements shall also register the Underwriter's
Warrants and all the securities underlying the Underwriter's Warrants. The
Company shall not call for redemption of 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. In addition, the Warrants shall not be redeemable during
the first year after the Effective Date without the written consent of the
Underwriter.
(ab) Until such time as the securities of the Company are listed or quoted
on either the New York Stock Exchange or the American Stock Exchange, the
Company shall engage the Company's legal counsel to deliver to the Underwriter a
written opinion detailing those states in which the Shares and Warrants of the
Company may be traded in non-issuer transactions under the Blue Sky laws of the
fifty states ("Secondary Market Trading Opinion"). The initial Secondary Market
Trading Opinion shall be delivered to the Underwriter on the Effective Date, and
the Company shall continue to update such opinion and deliver same to the
Underwriter on a timely basis, but in any event at the beginning of each fiscal
quarter, for a five (5) year period, if required.
(ac) As promptly as practicable after the Closing Date, the Company will
prepare, at its own expense, hard cover "bound volumes" relating to the
offering, and will distribute such volumes to the individuals designated by the
Underwriter or counsel to the Underwriter.
4. Conditions of Underwriters' Obligations. The obligations of the
Underwriter to purchase and pay for the Securities which they have agreed to
purchase hereunder from the Company are subject, as of the date hereof and as of
each Closing Date, to the continuing accuracy of, and compliance with, the
representations
19
and warranties of the Company herein, to the accuracy of statements of officers
of the Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) (i) The Registration Statement shall have become effective not later
than 5:00 p.m., Eastern Time, on the date of this Agreement, or at such later
time or on such later date as you may agree to in writing; (ii) at or prior to
the Closing Date, no stop order suspending the effectiveness of the Registration
Statement shall have been issued by the Commission and no proceeding for that
purpose shall have been initiated or pending, or shall be threatened, or to the
knowledge of the Company, contemplated by the Commission; (iii) no stop order
suspending the effectiveness of the qualification or registration of the
Securities under the securities or "blue sky" laws of any jurisdiction (whether
or not a jurisdiction which you shall have specified) shall be threatened or to
the knowledge of the Company contemplated by the authorities of any such
jurisdiction or shall have been issued and in effect; (iv) any request for
additional information on the part of the Commission or any such authorities
shall have been complied with to the satisfaction of the Commission and any such
authorities, and to the satisfaction of counsel to the Underwriter; and (v)
after the date hereof no amendment or supplement to the Registration Statement
or the Prospectus shall have been filed unless a copy thereof was first
submitted to the Underwriter and the Underwriter did not object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus, (i)
there shall not have been any material change in the capital stock or other
securities of the Company or any subsidiary or any material adverse change in
the long-term debt of the Company or any subsidiary except as set forth in or
contemplated by the Registration Statement, (ii) there shall not have been any
material adverse change in the general affairs, business, properties, condition
(financial or otherwise), management, or results of operations of the Company or
any subsidiary, whether or not arising from transactions in the ordinary course
of business, in each case other than as set forth in or contemplated by the
Registration Statement or Prospectus; (iii) neither the Company nor any
subsidiary shall have sustained any material interference with its business or
properties from fire, explosion, flood or other casualty, whether or not covered
by insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not set forth in the Registration
Statement and Prospectus; and (iv) 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
20
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, in light of the
circumstance under which they are made, not misleading.
(c) Except as set forth in the Prospectus, there is not pending or, to the
knowledge of the Company or any subsidiary, threatened, any material action,
suit, proceeding, inquiry, arbitration or investigation against the Company or
any subsidiary, or any of the officers or directors of the Company or any
subsidiary, or any material action, suit, proceeding, inquiry, arbitration, or
investigation, which might result in any material adverse change in the
condition (financial or other), business prospects, net worth, or properties of
the Company or any subsidiary.
(d) Each of the representations and warranties of the Company contained
herein shall be true and correct as of this date and at the Closing Date as if
made at the Closing Date, and all covenants and agreements herein contained to
be performed on the part of the Company and all conditions herein contained to
be fulfilled or complied with by the Company at or prior to the Closing Date
shall have been duly performed, fulfilled or complied with.
(e) At each Closing Date, you shall have received the opinion, dated as of
each Closing Date, from Gusrae, Kaplan & Bruno, counsel for the Company, in form
and substance satisfactory to counsel for the Underwriter, to the effect that:
(i) the Company and each subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, with full corporate power and authority
to own its properties and conduct its business as described in the
Registration Statement and Prospectus and is duly qualified or licensed to
do business as a foreign corporation and is in good standing in each other
jurisdiction in which the ownership or leasing of its properties or
conduct of its business requires such qualification except for
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the Company and each subsidiary as a whole;
(ii) the authorized capitalization of the Company is as set forth
under "Capitalization" in the Prospectus; all shares of the Company's
outstanding stock and other securities requiring authorization for
issuance by the Company's Board of Directors have been duly authorized,
validly issued, are fully paid and non-assessable and conform to the
description thereof contained in the Prospectus; the outstanding shares of
Common Stock of the Company and other securities have not been issued in
violation of the preemptive rights of any shareholder and
21
the shareholders of the Company do not have any preemptive rights or, to
such counsel's knowledge, other rights to subscribe for or to purchase
securities of the Company, nor, to such counsel's knowledge, are there any
restrictions upon the voting or transfer of any of the securities of the
Company, except as disclosed in the Prospectus; the Common Stock, the
Shares, the Warrants, and the securities contained in the Underwriter's
Warrant Agreement conform to the respective descriptions thereof contained
in the Prospectus; the Common Stock, the Shares, the Warrants, the shares
of Common Stock to be issued upon exercise of the Warrants and the
securities contained in the Underwriter's Warrant Agreement, have been
duly authorized and, when issued, delivered and paid for, will be duly
authorized, validly issued, fully paid, non-assessable, free of
pre-emptive 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 and no shareholders of the
Company have any rescission rights against the Company with respect to the
Company's securities; a sufficient number of shares of Common Stock has
been reserved for issuance upon exercise of the Warrants and the
Underwriter Warrants, and to the best of such counsel's knowledge, neither
the filing of the Registration Statement nor the offering or sale of the
Securities as contemplated by this Agreement gives rise to any
registration rights or other rights, other than those which have been
waived or satisfied or described in the Registration Statement;
(iii) this Agreement, the Underwriter's Warrant Agreement, the
Warrant Agreement, the Financial Advisory Agreement and the M/A Agreement
have been duly and validly authorized, executed and delivered by the
Company and, assuming the due authorization, execution and delivery of
this Agreement by the Underwriter, are the valid and legally binding
obligations of the Company, enforceable in accordance with their terms,
except (a) as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws from time to time
in effect which effect creditors' rights generally; and (b) no opinion is
expressed as to the enforceability of the indemnity provisions or the
contribution provisions contained in this Agreement;
(iv) the certificates evidencing the outstanding securities of the
Company, the Shares, the Common Stock and the Warrants are in valid and
proper legal form;
(v) to the best of such counsel's knowledge, except as set forth in
the Prospectus, there is not pending or, to the
22
knowledge of the Company, threatened, any material action, suit,
proceeding, inquiry, arbitration or investigation against the Company or
any subsidiary or any of the officers of directors of the Company or any
subsidiary, nor any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might materially and adversely affect
the condition (financial or otherwise), business prospects, net worth, or
properties of the Company or any subsidiary;
(vi) the execution and delivery of this Agreement, the Underwriter's
Warrant Agreement, the Warrant Agreement, the Financial Advisory Agreement
and the M/A 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 violation of, or constitute a
default under (a) the Articles of Incorporation or By-Laws of the Company
and each subsidiary; (b) to the best of such counsel's knowledge, any
material obligations, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness or in any
contract, indenture, mortgage, loan agreement, lease, joint venture or
other agreement or instrument to which the Company or any subsidiary is a
party or by which it or any of its properties is bound; or (c) to the best
of such counsel's knowledge, any material order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality or
court, domestic or foreign;
(vii) the Registration Statement has become effective under the Act,
and to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in effect, and no
proceedings for that purpose have been instituted or are pending before,
or threatened by, the Commission; the Registration Statement and the
Prospectus (except for the financial statements and other financial data
contained therein, or omitted therefrom, as to which such counsel need
express no opinion) comply as to form in all material respects with the
applicable requirements of the Act and the Rules and Regulations; and
(viii) 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
Securities 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 Warrants or the Securities underlying the Underwriter's
Warrants, other than registrations or qualifications of the Securities
under applicable state or foreign securities or Blue Sky laws and
registration under the Act.
23
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, upon opinions of counsel
satisfactory to you and counsel to the Underwriter. The opinion of such counsel
to the Company shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and that the Underwriter is justified in relying
thereon.
Such counsel shall also include a statement to the effect that such
counsel has participated in the preparation of the Registration Statement and
the Prospectus and nothing has come to the attention of such counsel to lead
such counsel to believe that the Registration Statement or any amendment thereto
at the time it became effective contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, 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 required to be stated therein or necessary in order to make
statements therein, in light of the circumstances under which they are made, not
misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other financial information and
statistical data contained therein, as to which such counsel need express no
opinion).
(f) You shall have received on each Closing Date a certificate dated as of
each Closing Date, signed by the Chief Executive Officer and the Chief Financial
Officer of the Company and such other officers of the Company as the Underwriter
may request, certifying that:
(i) No Order suspending the effectiveness of the Registration
Statement or stop order regarding the sale of the Securities in effect and
no proceedings for such purpose are pending or are, to their knowledge,
threatened by the Commission;
(ii) They do not know of any litigation instituted or, to their
knowledge, threatened against the Company or any subsidiary or any officer
or director of the Company or any subsidiary of a character required to be
disclosed in the Registration Statement which is not disclosed therein;
they do not know of any contracts which are required to be summarized in
the Prospectus which are not so summarized; and they do not know of any
material contracts required to be filed as exhibits to the Registration
Statement which are not so filed;
24
(iii) They have each carefully examined the Registration Statement
and the Prospectus and, to the best of their knowledge, neither the
Registration Statement nor the Prospectus nor any amendment or supplement
to either of the foregoing contains an untrue statement of any material
fact or omits to state any material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances
under which they are made, not misleading; and since the Effective Date,
to the best of their knowledge, there has occurred no event required to be
set forth in an amended or supplemented Prospectus which has not been so
set forth;
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition of the Company or any subsidiary,
financial or otherwise, or in the results of its operations, except as
reflected in or contemplated by the Registration Statement and the
Prospectus and except as so reflected or contemplated since such date,
there has not been any material transaction entered into by the Company or
any subsidiary;
(v) The representations and warranties set forth in this Agreement
are true and correct in all material respects and the Company has complied
with all of its agreements herein contained;
(vi) Neither the Company nor any subsidiary is delinquent in the
filing of any federal, state and municipal tax return or the payment of
any federal, state or municipal taxes; they know of no proposed
redetermination or reassessment of taxes, adverse to the Company or any
subsidiary, and the Company and each subsidiary has paid or provided by
adequate reserves for all known tax liabilities;
(vii) They know of no material obligation or liability of the
Company or any subsidiary, contingent or otherwise, not disclosed in the
Registration Statement and Prospectus;
(viii) This Agreement, the Underwriter's Warrant Agreement, the
Warrant Agreement, the Financial Advisory Agreement and the M/A Agreement,
the consummation of the transactions therein contemplated, and the
fulfillment of the terms thereof, will not result in a breach by the
Company of any terms of, or constitute a default under, its Articles of
Incorporation or By-Laws, any indenture, mortgage, lease, deed or trust,
bank loan or credit agreement or any other material agreement or
undertaking of the Company or any subsidiary including, by way of
specification but not by way of limitation, any agreement or instrument to
which the Company or any subsidiary is now a party or pursuant to which
the
25
Company or any subsidiary has acquired any right and/or obligations by
succession or otherwise;
(ix) The financial statements and schedules filed with and as part
of the Registration Statement present fairly the financial position of the
Company as of the dates thereof all in conformity with generally accepted
principles of accounting applied on a consistent basis throughout the
periods involved. Since the respective dates of such financial statements,
there have been no material adverse change in the condition or general
affairs of the Company, financial or otherwise, other than as referred to
in the Prospectus;
(x) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as may
otherwise be indicated therein, neither the Company nor any subsidiary
has, prior to the Closing Date, either (i) issued any securities or
incurred any material liability or obligation, direct or contingent, for
borrowed money, or (ii) entered into any material transaction other than
in the ordinary course of business. The Company has not declared, paid or
made any dividend or distribution of any kind on its capital stock;
(xi) They have reviewed the sections in the Prospectus relating to
their biographical data and equity ownership position in the Company, and
all information contained therein is true and accurate; and
(xii) Except as disclosed in the Prospectus, during the past five
years, they have not been:
(1) Subject of a petition under the Federal bankruptcy laws or
any state insolvency law filed by or against them, or by a receiver,
fiscal agent or similar officer appointed by a court for their
business or property, or any partnership in which either or them was
a general partner at or within two years before the time of such
filing, or any corporation or business association of which either
of them was an executive officer at or within two years before the
time of such filing;
(2) Convicted in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining either
of them from, or otherwise limiting, any of the following
activities:
26
(i) acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator,
floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance
company, or engaging in or continuing any conduct or practice
in connection with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection
with any violation of Federal or State securities law or
Federal Commodity laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any Federal or State
authority barring, suspending or otherwise limiting for more than
sixty (60) days either of their right to engage in any activity
described in paragraph (3)(i) above, or be associated with persons
engaged in any such activity;
(5) Found by any court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have violated
any Federal or State securities law, and the judgment in such civil
action or finding by the Commission has not been subsequently
reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any Federal Commodities Law, and the judgment in such civil
action or finding by the Commodity Futures Trading Commission has
not been subsequently reversed, suspended or vacated.
(g) The Underwriter shall have received from Deloitte & Touche, LLP,
independent auditors to the Company, certificates or letters, one dated and
delivered on the Effective Date and one dated and delivered on the Closing Date,
in form and substance satisfactory to the Underwriter, stating that:
(i) they are independent certified public accountants with respect
to the Company within the meaning of the Act and
27
the applicable Rules and Regulations;
(ii) the financial statements and the schedules included in the
Registration Statement and the Prospectus were examined by them and, in
their opinion, comply as to form in all material respects with the
applicable accounting requirements of the Act, the Rules and Regulations
and instructions of the Commission with respect to Registration Statements
on Form S-1;
(iii) on the basis of inquiries and procedures conducted by them
(not constituting an examination in accordance with generally accepted
auditing standards), including a reading of the latest available unaudited
interim financial statements or other financial information of the Company
(with an indication of the date of the latest available unaudited interim
financial statements), inquiries of officers of the Company who have
responsibility for financial and accounting matters, review of minutes of
all meetings of the shareholders and the Board of Directors of the Company
and other specified inquiries and procedures, nothing has come to their
attention as a result of the foregoing inquiries and procedures that
causes them to believe that:
(a) during the period from (and including) the date of the
financial statements in the Registration Statement and the
Prospectus to a specified date not more than five days prior to the
date of such letters, there has been any change in the Common Stock,
long-term debt or other securities of the Company (except as
specifically contemplated in the Registration Statement and
Prospectus) or any material decreases in net current assets, net
assets, shareholder's equity, working capital or in any other item
appearing in the Company's financial statements as to which the
Underwriter may request advice, in each case as compared with
amounts shown in the balance sheet as of the date of the financial
statement in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred
or will occur;
(b) during the period from (and including) the date of the
financial statements in the Registration Statement and the
Prospectus to such specified date there was any material decrease in
revenues or in the total or per share amounts of income or loss
before extraordinary items or net income or loss, or any other
material change in such other items appearing in the Company's
financial statements as to which the Underwriter may request advice,
in each case as compared with the fiscal period ended as of the date
of the financial statement in the Prospectus, except in each case
for increases, changes or
28
decreases which the Prospectus discloses have occurred or will
occur;
(c) the unaudited interim financial statements of the Company
appearing in the Registration Statement and the Prospectus (if any)
do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally
accepted accounting principles and practices on a basis
substantially consistent with the audited financial statements
included in the Registration Statements or the Prospectus.
(iv) they have compared specific dollar amounts, numbers of shares,
percentages of revenues and earnings, statements and other financial
information pertaining to the Company set forth in the Prospectus in each
case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including
work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries and other appropriate
procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the
letter and found them to be in agreement; and
(v) they have not during the immediately preceding five (5) year
period brought to the attention of the Company's management any reportable
condition related to the Company's internal accounting procedures,
weaknesses and/or controls.
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriter. Any changes, increases or decreases in
the items set forth in such letters which, in the judgment of the Underwriter,
are materially adverse with respect to the financial position or results of
operations of the Company shall be deemed to constitute a failure of the Company
to comply with the conditions of the obligations to the Underwriter hereunder.
(h) Upon exercise of the option provided for in Section 2(b) hereof, the
obligation of the Underwriter to purchase and pay for the Option Securities
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the Option
Closing Date, and no stop order suspending the effectiveness thereof shall
have been issued and no proceedings for that purpose shall have been
instituted or
29
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 counsel to the Underwriter.
(ii) At the Option Closing Date, there shall have been delivered to
you the signed opinion from Gusrae, Kaplan & Bruno, counsel for the
Company, dated as of the Option Closing Date, in form and substance
satisfactory to counsel to the Underwriter, which opinion shall be
substantially the same in scope and substance as the opinion furnished to
you at the Closing Date pursuant to Section 4(e) hereof, except that such
opinion, where appropriate, shall cover the Option Securities.
(iii) At the Option Closing Date, there shall have been delivered to
you a certificate of the Chief Executive Officer and Chief Financial
Officer of the Company, dated the Option Closing Date, in form and
substance satisfactory to counsel to the Underwriter, substantially the
same in scope and substance as the certificate furnished to you at the
Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been delivered to
you a letter in form and substance satisfactory to you from Deloitte &
Touche, LLP, independent auditors to the Company, dated the Option Closing
Date and addressed to the Underwriter confirming the information in their
letter referred to in Section 4(g) hereof and stating that nothing has
come to their attention during the period from the ending date of their
review referred to in said letters 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 Securities shall be
satisfactory in form and substance to the Underwriter, and the Underwriter
and counsel to the Underwriter shall have been furnished with all such
documents, certificates, and opinions as you may request in connection
with this transaction in order to evidence the accuracy and completeness
of any of the representations, warranties or statements of the Company or
its compliance with any of the covenants or conditions contained herein.
(i) 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 the Closing Date,
for members of the NASD to execute transactions (as principal or agent) in the
Common Stock and no proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the
30
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. The Company shall
advise the Underwriter of any NASD affiliations of any of its officers,
directors, or stockholders or their affiliates in accordance with paragraph 1(y)
of this Agreement.
(j) At the Effective Date, you shall have received from counsel to the
Company, dated as of the Effective Date, in form and substance satisfactory to
counsel for the Underwriter, a written Secondary Market Trading Opinion
detailing those states in which the Shares and Warrants may be traded in
non-issuer transactions under the Blue Sky laws of the fifty (50) states after
the Effective Date, in accordance with paragraph 3(ab) of this Agreement.
(k) The authorization and issuance of the Securities and delivery thereof,
the Registration Statement, the Prospectus, and all corporate proceedings
incident thereto shall be satisfactory in all respects to counsel for the
Underwriter, and such counsel shall be furnished with such documents,
certificates and opinions as they may reasonably request to enable them to pass
upon the matters referred to in this sub-paragraph.
(l) Prior to the Effective Date, the Underwriter shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriter, as described in the Registration Statement.
(m) If any of the conditions herein provided for in this Section shall not
have been fulfilled as of the date indicated, this Agreement and all obligations
of the Underwriter under this Agreement may be canceled at, or at any time prior
to, the Closing Date and/or the Option Closing Date by the Underwriter notifying
the Company of such cancellation in writing or by telegram or facsimile 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 Securities is subject to the following
conditions:
(i) The Registration Statement shall have become effective not later
than 5:00 p.m., Eastern Time, on the date of this Agreement, or on such
later time or date as the Company and the Underwriter may agree in
writing; and
(ii) At the Closing Date and the Option Closing Date, no stop orders
suspending the effectiveness of the Registration Statement shall have been
issued under the Act or any
31
proceedings therefore 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 Closing Date but are not fulfilled after the
Closing Date and prior to the Option Closing Date, then only the obligation of
the Company to sell and deliver the Securities on exercise of the option
provided for in Section 2(b) hereof shall be affected.
6. Indemnification. (a) The Company indemnifies and holds harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities (which
shall, for all purposes of this Agreement, include but not be limited to, all
reasonable costs of defense and investigation and all attorneys' fees), to which
the Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in (i) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (ii) any blue sky application or other document executed by
the Company specifically for that purpose or based upon written information
furnished by the Company and filed in any state or other jurisdiction in order
to qualify any or all of the Securities 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 liable in any such cases to the extent, but only to the extent, that any
such losses, claim, damages or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriter specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such Preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto. Notwithstanding the
foregoing, the Company shall have no liability under this section if such untrue
statement or omission made in a Preliminary Prospectus is cured in the
Prospectus and the Prospectus is not delivered to the person or persons alleging
the liability upon which indemnification is being sought. This indemnity will be
in addition to any liability which the Company may otherwise have.
(b) The Underwriter indemnifies and holds harmless the
32
Company, each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees) to which the Company or any such
director, nominee, officer or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statements or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by you or by any Underwriter through you specifically
for use in the preparation thereof. Notwithstanding the foregoing, the
Underwriter shall have no liability under this section if such untrue statement
or omission made in a Preliminary Prospectus is cured in the Prospectus and the
Prospectus is not delivered to the person or persons alleging the liability upon
which indemnification is being sought through no fault of the Underwriter. 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. 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
33
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 if the indemnified party is an Underwriter or a person who controls such
Underwriter within the meaning of the Act, the fees and expenses of such counsel
shall be at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party or
(ii) the named parties to any such action (including any impleaded parties)
include both the Underwriter or such controlling person and the indemnifying
party and in the reasonable judgment of the Underwriter, it is advisable for the
Underwriter or controlling persons to be represented by separate counsel (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of the Underwriter or such controlling person, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for all such Underwriter and controlling persons,
which firm shall be designated in writing by you). No settlement of any action
against an indemnified party shall be made without the consent of the
indemnifying party, which shall not be unreasonably withheld in light of all
factors of importance to such indemnifying party.
7. Contribution. In order to provide for just and equitable contribution
under the Act in any case in which (i) the Underwriter makes claim for
indemnification pursuant to Section 6 hereof but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the fact
that the express provisions of Section 6 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of the
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and the Underwriter shall contribute to the aggregate losses, claims,
damages or liabilities to which it 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) in either such
case (after contribution from others) in such proportions that the Underwriter
is responsible in the aggregate for that portion of such losses, claims, damages
or liabilities represented by the percentage that the underwriting discount per
Share and per Warrant appearing on the cover page of the Prospectus bears to the
public offering price appearing thereon, and the Company shall be responsible
for the remaining
34
portion, provided, however, that (a) if such allocation is not permitted by
applicable law then the relative fault of the Company and the Underwriter and
controlling persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be determined
by reference to, among other things, whether in the case of an untrue statement
of a material fact or the omission to state a material fact, such statement or
omission relates to information supplied by the Company, or the Underwriter and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if the respective
obligations of the Company and the Underwriter to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita allocation of the
aggregate damages (even if the Underwriter and their controlling persons in the
aggregate were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the first sentence of this Section. No person ultimately determined to be
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who is not ultimately
determined to be guilty of such fraudulent misrepresentation. As used in this
paragraph, the term "Underwriter" includes any officer, director, or other
person who controls the Underwriter within the meaning of Section 15 of the Act,
and the word "Company" includes any 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
to the full extent permitted by law. This foregoing 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 Securities to the Underwriter is consummated, the Company
will pay all costs and expenses incident to the performance of this Agreement by
the Company including but not limited to the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
35
supplemented; the fee of the National Association of Securities Dealers, Inc.
("NASD") in connection with the filing required by the NASD relating to the
offering of the Securities contemplated hereby; all state filing fees, expenses
and disbursements and legal fees of counsel to the Underwriter who shall serve
as Blue Sky counsel to the Company in connection with the filing of applications
to register the Securities under the state securities or blue sky laws (which
legal fees shall be payable by the Company in the sum of $20,000, of which
$10,000 has been paid); the cost of printing and furnishing to the Underwriter
copies of the Registration Statement, each Preliminary Prospectus, the
Prospectus, this Agreement, the Selected Dealers Agreement, and the Blue Sky
Memorandum; the cost of printing the certificates evidencing the securities
comprising the Securities; the cost of preparing and delivering to the
Underwriter and its counsel bound volumes containing copies of all documents and
appropriate correspondence filed with or received from the Securities and
Exchange Commission and the National Association of Securities Dealers, Inc.,
and all closing documents; and the fees and disbursements of the transfer agent
for the Company's securities. The Company shall pay any and all taxes (including
any original issue, transfer, franchise, capital stock or other tax imposed by
any jurisdiction) on sales to the Underwriter hereunder. The Company will also
pay all costs and expenses incident to the furnishing of any amended Prospectus
or of any supplement to be attached to the Prospectus. The Company shall also
engage the Company's counsel to provide the Underwriter with a written Secondary
Market Trading Opinion in accordance with paragraphs 3(ab) and 4(j) of this
Agreement.
(b) In addition to the foregoing expenses, the Company shall at the
Closing Date pay to the Underwriter a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds received from the sale of the
Securities, of which an advance of $50,000 has been paid to date. In the event
the overallotment option is exercised, the Company shall pay to the Underwriter
at the Option Closing Date an additional amount equal to three percent (3%) of
the gross proceeds received upon exercise of the overallotment option.
(c) Other than as disclosed in the Registration Statement, no person is
entitled 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,
which shall, for all purposes of this Agreement, include, but not be limited to,
all costs of defense and investigation and all attorneys' fees, to which the
Underwriter 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
36
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 you may, at your option, delay its effectiveness until 11:00 a.m.,
Eastern time, on the first full business day following the effective date of the
Registration Statement, or at such earlier time after the effective date of the
Registration Statement as you in your discretion shall first commence the public
offering by the Underwriter of any of the Securities. The time of the public
offering shall mean the time after the effectiveness of the Registration
Statement when the Securities are first generally offered by you to the Selected
Dealers. This Agreement may be terminated by you at any time before it becomes
effective as provided above, except that Sections 3(c), 6, 7, 8, 12, 13, 14, 15,
16 and 17 shall remain in effect notwithstanding such termination.
10. Termination. (a) This Agreement, except for Sections 3(c), 6, 7, 8,
12, 13, 14, 15, 16, and 17 hereof, may be terminated at any time prior to the
Closing Date, and the option referred to in Section 2(b) hereof, if exercised,
may be cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriter for the resale of the Securities agreed to be purchased
hereunder by reason of: (i) the Company having sustained a material adverse
loss, whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action, order
or decree; (ii) trading in securities on the New York Stock Exchange or the
American Stock Exchange having been suspended or limited; (iii) material
governmental restrictions having been imposed on trading in securities generally
(not in force and effect on the date hereof); (iv) a banking moratorium having
been declared by Federal or New York or Florida state authorities; (v) an
outbreak of major international hostilities or other national or international
calamity having occurred involving the United States; (vi) the passage by the
Congress of the United States or by any state legislative body of similar
impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
the Underwriter to have a material adverse impact on the business, financial
condition or financial statements of the Company or the market for the
securities offered hereby; (vii) any material adverse change in the financial or
securities markets beyond normal market fluctuations having occurred since the
date of this Agreement; (viii) any material adverse change having occurred,
since the respective dates as of which information is given in the Registration
Statement and Prospectus, in the earnings, business prospects or general
condition of the Company, financial or
37
otherwise, whether or not arising in the ordinary course of business; (ix) 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 could, in the
reasonable judgment of the Underwriter, materially adversely affect the Company;
(x) except as contemplated by the Prospectus, the Company is merged 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; or (xi) the Company shall not have complied in all
material respects with any term, condition or provisions on their part to be
performed, complied with or fulfilled (including but not limited to those set
forth in this Agreement) within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section, the Company shall be
promptly notified by you, by telephone, telegram or facsimile, confirmed by
letter.
11. Underwriter's Warrant Agreement. At the Closing Date, the Company will
issue to the Underwriter and/or persons related to the Underwriter, for an
aggregate purchase price of $10, and upon the terms and conditions set forth in
the form of Underwriter's Warrant Agreement annexed as an exhibit to the
Registration Statement, Underwriter Warrants to purchase up to an aggregate of
150,000 Shares and 150,000 Warrants, in such denominations as the Underwriter
shall designate. In the event of conflict in the terms of this Agreement and the
Underwriter's Warrant Agreement, the language of the form of Underwriter's
Warrant Agreement shall control.
12. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and its principal officers, where appropriate, and the
Underwriter set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriter, the Company or any of its officers or directors or any controlling
person and will survive delivery of and payment for the Securities and the
termination of this Agreement.
13. Notice. All communications hereunder will be in writing
and, except as otherwise expressly provided herein, will be mailed,
delivered or telegraphed and confirmed:
If to the Underwriter: Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
38
Copy to: David A. Carter, P.A.
355 West Palmetto Park Road
Boca Raton, Florida 33432
If to the Company: Douglas P. Fields, Chairman
Eagle Supply Group, Inc.
100 Midwood Road
Greenwich, Connecticut 06830
Copy to: Robert Perez, Esq.
Gusrae, Kaplan & Bruno
120 Wall Street
New York, New York 10005
14. Parties in Interest. This Agreement herein set forth is made solely
for the benefit of the Underwriter, the Company and, to the extent expressed,
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 of the Securities, as such purchaser,
from the Underwriter.
15. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida applicable to contracts made
and to be performed entirely within the State of Florida. The parties agree that
any action brought by any party against another party in connection with any
rights or obligations arising out of this Agreement shall be instituted properly
in a federal or state court of competent jurisdiction with venue only in the
Fifteenth Judicial Circuit Court in and for Palm Beach County, Florida or the
United States District Court for the Southern District of Florida, West Palm
Beach Division. A party to this Agreement named as a Defendant in any action
brought in connection with this Agreement in any court outside of the above
named designated county or district shall have the right to have the venue of
said action changed to the above designated county or district or, if necessary,
have the case dismissed, requiring the other party to refile such action in an
appropriate court in the above designated county or federal district.
16. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
17. Entire Agreement. This Agreement and the agreements referred to within
this Agreement constitute the entire agreement of the parties, and supersedes
all prior agreement, understanding, negotiations and discussions, whether
written or oral, of the
39
parties hereto.
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,
EAGLE SUPPLY GROUP, INC.
BY:___________________________________
Thomas W. Havnes, President
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
BARRON CHASE SECURITIES, INC.
BY:___________________________________
Robert T. Kirk, President
40
EAGLE SUPPLY GROUP, INC.
1,500,000 Shares of Common Stock and
1,500,000 Common Stock Purchase Warrants
SELECTED DEALER AGREEMENT
Boca Raton, Florida
_____________, 1996
Gentlemen:
1. Barron Chase Securities, Inc. (the "Underwriter") is offering for sale
an aggregate of 1,500,000 Shares of Common Stock (the "Shares") and 1,500,000
Warrants (the "Warrants") (collectively the "Firm Securities") of Eagle Supply
Group, Inc. (the "Company"), which the Underwriter has agreed to purchase from
the Company, and which are more particularly described in the Registration
Statement, Underwriting Agreement and Prospectus. In addition, the Underwriter
has been granted an option to purchase from the Company up to an additional
225,000 Shares and an additional 225,000 Warrants (the "Option Securities") to
cover overallotments in connection with the sale of the Firm Securities. The
Firm Securities and any Option Securities purchased are herein called the
"Securities". The Securities and the terms under which they are to be offered
for sale by the Underwriter is more particularly described in the Prospectus.
2. The Securities are to be offered to the public by the Underwriter at
the price per Share and price per Warrant set forth on the cover page of the
Prospectus (the "Public Offering Price"), in accordance with the terms of
offering set forth in the Prospectus.
3. The Underwriter, subject to the terms and conditions hereof, is
offering a portion of the Securities for sale to certain dealers who are
actually engaged in the investment banking or securities business and who are
either (a) members in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"), or (b) dealers with their principal places of
business located outside the United States, its territories and its possessions
and not registered as brokers or dealers under the Securities Exchange Act of
1934, as amended (the "1934 Act"), who have agreed not to make any sales within
the United States, its territories or its possessions or to persons who are
nationals thereof or residents therein (such dealers who shall agree to sell
Securities hereunder being herein called "Selected Dealers") at the public
offering price, less a selling concession (which may be changed) of not in
excess of $____ per Share and/or $____ per Warrant payable as hereinafter
provided, out of which concession an amount not exceeding $____ per Share and/or
$____ per
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Warrant may be reallowed by Selected Dealers to members of the NASD or foreign
dealers qualified as aforesaid. The Selected Dealers who are members of the NASD
agree to comply with all of the provisions of the NASD Conduct Rules. Foreign
Selected Dealers agree to comply with the provisions of Section 2740 of the NASD
Conduct Rules, and, if any such dealer is a foreign dealer and not a member of
the NASD, such Selected Dealer also agrees to comply with the NASD's
Interpretation with Respect to Free-Riding and Withholding, and to comply, as
though it were a member of the NASD, with the provisions of Sections 2730 and
2750 of the NASD Conduct Rules, and to comply with Section 2420 thereof as that
section applies to non-member foreign dealers. The Underwriter has agreed that,
during the term of this Agreement, it will be governed by the terms and
conditions hereof.
4. Barron Chase Securities, Inc. shall act as Underwriter and shall have
full authority to take such action as we may deem advisable in respect to all
matters pertaining to the public offering of the Securities.
5. If you desire to act as a Selected Dealer, and purchase any of the
Securities, your application should reach us promptly by facsimile or telegraph
at the offices of Barron Chase Securities, Inc., 7700 West Camino Real, Suite
200, Boca Raton, Florida 33433. We reserve the right to reject subscriptions in
whole or in part, to make allotments, and to close the subscription books at any
time without notice. The Securities allotted to you will be confirmed, subject
to the terms and conditions of this Agreement.
6. The privilege of subscribing for the Securities is extended to you only
on the condition that the Underwriter may lawfully sell the Securities to
Selected Dealers in your state or other applicable jurisdiction.
7. Any Securities to be purchased by you under the terms of this Agreement
may be immediately reoffered to the public in accordance with the terms of
offering as set forth herein and in the Prospectus, subject to the securities or
Blue Sky laws of the various states or other jurisdictions.
You agree to pay us on demand for the account of the Underwriter an amount
equal to the Selected Dealer concession as to any Securities purchased by you
hereunder which, prior to the completion of the public offering as defined in
paragraph 8 below, we may purchase or contract to purchase for our account and,
in addition, we may charge you with any broker's commission and transfer tax
paid in connection with such purchase or contract to purchase. Certificates for
Securities delivered on such repurchases need not be the identical certificates
originally purchased.
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You agree to advise us from time to time, upon request, of the number of
Securities purchased by you hereunder and remaining unsold at the time of such
request, and, if in our opinion any such Securities shall be needed to make
delivery of the Securities sold or overallotted for the account of the
Underwriter, you will, forthwith upon our request, grant to us for the account
of the Underwriter the right, exercisable promptly after receipt of notice from
you that such right has been granted, to purchase, at the Public Offering Price
less the selling concession or such part thereof as we shall determine, such
number of Securities owned by you as shall have been specified in our request.
No expenses shall be charged to Selected Dealers. A single transfer tax,
if payable, upon the sale of the Securities by the Underwriter to you will be
paid when such Securities are delivered to you. However, you shall pay any
transfer tax on sales of Securities by you and you shall pay your proportionate
share of any transfer tax (other than the single transfer tax described above)
in the event that any such tax shall from time to time be assessed against you
and other Selected Dealers as a group or otherwise.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the sale of the
Securities other than as contained in the Prospectus.
8. The first three paragraphs of Section 7 hereof will terminate when we
shall have determined that the public offering of the Securities has been
completed and upon telefax notice to you of such termination, but, if not
theretofore terminated, they will terminate at the close of business on the 30th
full business day after the date hereof; provided, however, that we shall have
the right to extend such provisions for a further period or periods, not
exceeding an additional 30 days in the aggregate upon telefax notice to you.
9. For the purpose of stabilizing the market in the Securities, we have
been authorized to make purchases and sales of the Securities of the Company, in
the open market or otherwise, for long or short account, and, in arranging for
sales, to overallot.
10. On becoming a Selected Dealer, and in offering and selling the
Securities, you agree to comply with all the applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the 1934 Act. You
confirm that you are familiar with Rule 15c2-8 under the 1934 Act relating to
the distribution of preliminary and final prospectuses for securities of an
issuer (whether or not the issuer is subject to the reporting requirements of
Section 13 or 15(d) of the 1934 Act) and confirm that you have complied and will
comply therewith.
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We hereby confirm that we will make available to you such number of copies
of the Prospectus (as amended or supplemented) as you may reasonably request for
the purposes contemplated by the 1933 Act or the 1934 Act, or the rules and
regulations thereunder.
11. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Securities are qualified
for sale under the respective securities or Blue Sky laws of such states and
other jurisdictions, but we shall not assume any obligation or responsibility as
to the right of any Selected Dealer to sell the Securities in any state or other
jurisdiction or as to the eligibility of the Securities for sale therein. We
will, if requested, file a Further State Notice in respect of the Securities
pursuant to Article 23-A of the General Business Law of the State of New York.
12. No Selected Dealer is authorized to act as agent for the Underwriter,
or otherwise to act on our behalf, in offering or selling the Securities to the
public or otherwise or to furnish any information or make any representation
except as contained in the Prospectus.
13. Nothing will constitute the Selected Dealers an association or other
separate entity or partners with the Underwriter, or with each other, but you
will be responsible for your share of any liability or expense based on any
claim to the contrary. We shall not be under any liability for or in respect of
value, validity or form of the Securities, or the delivery of the certificates
for the Securities, or the performance by anyone of any agreement on its part,
or the qualification of the Securities for sale under the laws of any
jurisdiction, or for or in respect of any other matter relating to this
Agreement, except for lack of good faith and for obligations expressly assumed
by us or by the Underwriter in this Agreement and no obligation on our part
shall be implied herefrom. The foregoing provisions shall not be deemed a waiver
of any liability imposed under the 1933 Act.
14. Payment for the Securities sold to you hereunder is to be made at the
Public Offering Price less the above-mentioned selling concession on such time
and date as we may advise, at the office of Barron Chase Securities, Inc., 7700
West Camino Real, Suite 200, Boca Raton, Florida 33433, by a certified or
official bank check or wire transfer in current New York Clearing House funds,
payable to the order of Barron Chase Securities, Inc., as Underwriter, against
delivery of certificates for the Securities so purchased. If such payment is not
made at such time, you agree to pay us interest on such funds at the prevailing
broker's loan rate.
15. Notices to us should be addressed to us at the offices of Barron Chase
Securities, Inc., 7700 West Camino Real, Suite 200, Boca Raton, Florida 33433,
Attention: Robert T. Kirk. Notices to you shall be deemed to have been duly
given if telephoned,
4
telefaxed, telegraphed or mailed to you at the address to which this letter is
addressed.
16. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida without giving effect to the choice of law or
conflicts of law principles thereof.
17. If you desire to purchase any Securities and act as a Selected Dealer,
please confirm your application by signing and returning to us your confirmation
on the duplicate copy of this letter enclosed herewith, even though you may have
previously advised us thereof by telephone or telegraph. Our signature hereon
may be by facsimile.
Very truly yours,
BARRON CHASE SECURITIES, INC.
BY:_________________________________
Authorized Officer
5
Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
We hereby subscribe for ___________ Shares and/or ___________ Warrants of
Eagle Supply Group, Inc. in accordance with the terms and conditions stated in
the foregoing Selected Dealers Agreement and letter. We hereby acknowledge
receipt of the Prospectus referred to in the Selected Dealers Agreement and
letter. We further state that in purchasing said Shares and/or Warrants we have
relied upon said Prospectus and upon no other statement whatsoever, whether
written or oral. We confirm that we are a dealer actually engaged in the
investment banking or securities business and that we are either (i) a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
or (ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions and not registered as a broker or
dealer under the Securities Exchange Act of 1934, as amended, who hereby agrees
not to make any sales within the United States, its territories or its
possessions or to persons who are nationals thereof or residents therein. As a
member of the NASD, we hereby agree to comply with all of the provisions of NASD
Conduct Rules. If we are a foreign Selected Dealer, we agree to comply with the
provisions of Section 2740 of the Conduct Rules, and if we are a foreign dealer
and not a member of the NASD, we agree to comply with the NASD's interpretation
with respect to free-riding and withholding, and agree to comply, as though we
were a member of the NASD, with provisions of Sections 2730 and 2750 of such
Conduct Rules, and to comply with Section 2420 thereof as that Section applies
to non-member foreign dealers.
Firm:____________________________
By:____________________________
(Name and Position)
Address:____________________________
____________________________
Telephone No.:____________________________
Dated: __________________, 1996
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