ALL-TECH INVESTMENT GROUP, INC.
6,250,000 Shares of Common Stock and
3,125,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
----------------------
New York, New York
__________, 1998
SECURITY CAPITAL TRADING, INC.
As Representative of the
several Underwriters named
in Schedule A
annexed hereto
520 Madison Avenue
10th Floor
New York, New York 10022
Ladies and Gentlemen:
All-Tech Investment Group, Inc., a Delaware corporation (the "Company"),
confirms its agreement with Security Capital Trading, Inc. ("Security Capital"),
each of the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 12), for whom Security Capital is acting as
Representative (in such capacity, Security Capital shall hereinafter be referred
to as "you" or the "Representative"), and certain persons named in Schedule B
(the "Primary Selling Shareholders"), with respect to the sale by the Company
and the Primary Selling Shareholders and the purchase by the Underwriters,
acting severally and not jointly, of the respective number of shares of the
Company's common stock, $.001 par value per share ("Common Stock") and
redeemable common stock purchase warrants (the "Redeemable Warrants"), each to
purchase one share of Common Stock, set forth in Schedule A.
The aggregate 6,250,000 shares of Common Stock and 3,125,000 Redeemable
Warrants will be separately tradable upon issuance and are hereinafter referred
to as the "Firm Securities." Unless previously redeemed by the Company, each
Redeemable Warrant is exercisable to purchase, at any time commencing ________,
1998 [6 months from the date of prospectus] until 5:30 p.m. New York time
on_________, 2003 [30 months after the date of prospectus], one
share of Common Stock at a price of $___ [150% of the initial public offering
price of the Common Stock]. per share, and from such date until 5:30 p.m. New
York time on ______, 2003 [60 months after the date hereof], one share of Common
Stock at a price of $___ [175% of the initial public offering price of the
Common Stock] per share. The Redeemable Warrants may be redeemed by the Company
at a redemption price of $.10 per Redeemable Warrant at any time after
_________, 1999 on thirty (30) days' prior written notice, provided that the
closing sale price of the Common stock equals or exceeds $20.00 per share, for
any twenty (20) trading days within a period of thirty (30) consecutive trading
days ending on the fifth trading day prior to the notice of redemption, all in
accordance with the terms and conditions of the Warrant Agreement (herein
defined).
Upon your request, as provided in Section 3(b) of this Agreement, the
Company shall also sell to the Underwriters, acting severally and not jointly,
up to an additional 468,750 shares of Common Stock and/or 468,750 Redeemable
Warrants and certain persons named in Schedule C (the "Option Selling
Shareholders") shall also sell to the Underwriters, acting severally and not
jointly, up to an additional 468,750 shares of Common Stock in the aggregate for
the purpose of covering over-allotments, if any. Such aggregate 937,500 shares
of Common Stock and 468,750 Redeemable Warrants are hereinafter referred to as
the "Option Securities." The Firm Securities and, to the extent the
over-allotment option is exercised, the Option Securities, are hereinafter
collectively referred to as the "Securities." The Company also proposes to issue
and sell to you warrants (the "Representative's Warrants") pursuant to the
Representative's Warrant Agreement (the "Representative's Warrant Agreement")
for the purchase of an additional 625,000 shares of Common Stock and/or 312,500
Redeemable Warrants. The shares of Common Stock and Redeemable Warrants issuable
upon exercise of the Representative's Warrants are hereinafter referred to as
the "Representative's Securities." The Firm Securities, the Option Securities,
the Representative's Warrants and the Representative's Securities (collectively,
hereinafter referred to as the "Offering Securities") are more fully described
in the Registration Statement and the Prospectus referred to below.
The Primary Selling Shareholders and the Option Selling Shareholders are
hereinafter collectively referred to as the "Selling Shareholders." Each Selling
Shareholder has executed and delivered a Letter of Transmittal and Custody
Agreement ("Custody Agreement"), a Stock Power ("Stock Power"), and a Power of
Attorney ("Power of Attorney") pursuant to which each Selling Shareholder has
placed his shares of Common Stock in custody and appointed the persons
designated therein with authority to execute and deliver this Agreement on
behalf of such Selling Shareholder and to take certain other actions with
respect thereto and hereto.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters as of the date
hereof, and as of the Closing Date (as hereinafter defined) and each Option
Closing Date (as hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (No. 333-________), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Offering Securities under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or
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amendments have been prepared by the Company in conformity with the requirements
of the Act, and the rules and regulations (the "Regulations") of the Commission
under the Act. The Company will promptly file a further amendment to said
registration statement in the form heretofore delivered to the Underwriters and
will not file any other amendment thereto to which the Underwriters shall have
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein
(including, but not limited to those documents or information incorporated by
reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Regulations), is
hereinafter called the "Registration Statement", and the form of prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." For purposes hereof, "Rules
and Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any Preliminary Prospectus, the
Registration Statement or Prospectus or any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or threatened. Each of the Preliminary Prospectus, the Registration Statement
and Prospectus at the time of filing thereof conformed with the requirements of
the Act and the Rules and Regulations, and none of the Preliminary Prospectus,
the Registration Statement or Prospectus at the time of filing thereof contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements made in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration Statement or
Prospectus or any amendment thereof or supplement thereto. The Company
acknowledges that the statements with respect to the public offering of the
Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriters expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date (as defined herein) and each Option
Closing Date (as defined herein), if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriters or a dealer, the Registration Statement and the Prospectus will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and will conform to the requirements
of the Act and the Rules and Regulations; neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided,
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however, that this representation and warranty does not apply to statements made
or statements omitted in reliance upon and in strict conformity with information
furnished to the Company in writing with respect to the Underwriters by or on
behalf of any Underwriter, expressly for use in the Preliminary Prospectus,
Registration Statement or Prospectus or any amendment thereof or supplement
thereto. The Company acknowledges that the statements with respect to the public
offering of the Securities set forth under the heading "Underwriting" and the
stabilization legend in the Prospectus have been furnished by the Underwriters
expressly for use therein and constitute the only information furnished in
writing by or on behalf of the Underwriters for inclusion in the Prospectus.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of its incorporation.
Except as set forth in the Prospectus, the Company does not own an interest in
any corporation, partnership, trust, joint venture or other business entity. The
Company is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such qualification or
licensing. The Company has all requisite power and authority (corporate and
other), and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without limitation,
those having jurisdiction over environmental or similar matters), to own or
lease its properties and conduct its business as described in the Prospectus;
the Company is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all applicable federal, state, local and foreign laws, rules and
regulations; and the Company has not received any notice of proceedings relating
to the revocation or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the earnings,
position, prospects, value, operation, properties, business or results of
operations of the Company. The disclosures in the Registration Statement
concerning the effects of federal, state, local, and foreign laws, rules and
regulations on the Company's business as currently conducted and as contemplated
are correct in all material respects and do not omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading in light of the circumstances under which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Capital Stock" and will have the adjusted capitalization set
forth therein on the Closing Date and each Option Closing Date, if any, based
upon the assumptions set forth therein, and the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities, except
for this Agreement, the Representative's Warrant Agreement, the Warrant
Agreement, and as described in the Prospectus. The Offering Securities and all
other securities issued or issuable by the Company conform or, when issued and
paid for, will conform, in all respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable and the holders thereof have no
rights of rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such securities were
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issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company. The Offering
Securities are not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when issued, paid for
and delivered in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable and will conform to the description thereof contained in
the Prospectus; the holders thereof will not be subject to any liability solely
as such holders; all corporate action required to be taken for the
authorization, issue and sale of the Offering Securities has been duly and
validly taken; and the certificates representing the Offering Securities will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Offering Securities to be sold by the Company and Selling
Shareholders hereunder, the Underwriters or the Representative, as the case may
be, will acquire good and marketable title to such Offering Securities free and
clear of any lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever.
(f) The financial statements of the Company, together with the related
notes and schedules thereto, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus fairly present the financial position,
income, changes in cash flow, changes in stockholders' equity and the results of
operations of the Company at the respective dates and for the respective periods
to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved and such
financial statements as are audited have been examined by Wolinetz, Gottlieb &
Lafazan, who are independent certified public accountants within the meaning of
the Act and the Rules and Regulations, as indicated in their reports filed
therewith. There has been no adverse change or development involving a
prospective adverse change in the condition, financial or otherwise, or in the
earnings, position, prospects, value, operation, properties, business, or
results of operations of the Company, whether or not arising in the ordinary
course of business, since the date of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company, conform
in all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. Financial information (including,
without limitation, any pro forma financial information) set forth in the
Prospectus under the headings "Summary Financial Data," "Selected Financial
Data," "Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in the
Prospectus, the information set forth therein, and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus; and, in the case of pro forma financial information,
if any, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein. The amounts shown as accrued for current and
deferred income and other taxes in such financial statements are sufficient for
the payment of all accrued and unpaid federal, state, local and foreign income
taxes, interest, penalties, assessments or deficiencies applicable to the
Company, whether disputed or not, for the applicable period then ended and
periods prior thereto; adequate allowance for doubtful accounts has been
provided for unindemnified losses due to the operations of the Company; and the
statements of income do not contain any items of special or nonrecurring income
not earned in the ordinary course of business, except as specified in the notes
thereto.
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(g) The Company (i) has paid all federal, state, local, and foreign taxes
for which it is liable, including, but not limited to, withholding taxes and
amounts payable under Chapters 21 through 24 of the Internal Revenue Code of
1986, as amended (the "Code"), and has furnished all information returns it is
required to furnish pursuant to the Code, (ii) has established adequate reserves
for such taxes which are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriters in connection with (i) the issuance by the Company of
the Offering Securities, (ii) the sale of shares of Common Stock by the Selling
Shareholders, (iii) the purchase by the Underwriters of the Firm Securities and
the Option Securities from the Company and Selling Shareholders and the purchase
by the Representative of the Representative's Warrants from the Company, (iv)
the consummation by the Company and Selling Shareholders of any of their
respective obligations under this Agreement, or the Company's consummation of
obligations under the Representative's Warrant Agreement, or the Warrant
Agreement, or (v) resales of the Firm Securities and the Option Securities in
connection with the distribution contemplated hereby.
(i) The Company maintains insurance policies, including, but not limited
to, general liability, malpractice and property insurance, which insures each of
the Company and its employees, against such losses and risks generally insured
against by comparable businesses. The Company (A) has not failed to give notice
or present any insurance claim with respect to any matter, including but not
limited to the Company's business, property or employees, under any insurance
policy or surety bond in a due and timely manner, (B) does not have any disputes
or claims against any underwriter of such insurance policies or surety bonds or
has failed to pay any premiums due and payable thereunder, or (C) has failed to
comply with all conditions contained in such insurance policies and surety
bonds. There are no facts or circumstances under any such insurance policy or
surety bond, which would relieve any insurer of its obligation to satisfy in
full any valid claim of the Company.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, the
Company which (i) questions the validity of the capital stock of the Company,
this Agreement, the Warrant Agreement or the Representative's Warrant
Agreement, or of any action taken or to be taken by the Company pursuant to or
in connection with this Agreement, the Warrant Agreement or the
Representative's Warrant Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
material respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results of
operations of the Company.
(k) The Company has full legal right, power and authority to authorize,
issue, deliver and sell the Offering Securities, enter into this Agreement, the
Warrant Agreement and the Representative's Warrant Agreement and to consummate
the transactions provided for in this
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Agreement, the Warrant Agreement and the Representative's Warrant Agreement; and
this Agreement, the Warrant Agreement and the Representative's Warrant Agreement
have each been duly and properly authorized, executed and delivered by the
Company. Each of this Agreement, the Warrant Agreement and the Representative's
Warrant Agreement constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, and none
of the Company's issue and sale of the Offering Securities, execution or
delivery of this Agreement, the Warrant Agreement or the Representative's
Warrant Agreement, its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein, or the conduct of its business
as described in the Registration Statement, the Prospectus, and any amendments
or supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company pursuant to the terms of (i)
the certificate of incorporation or by-laws of the Company, (ii) any license,
contract, collective bargaining agreement, indenture, mortgage, deed of trust,
lease, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which the Company is or may be bound or to which its assets (tangible or
intangible) is or may be subject, or any indebtedness, or (iii) any statute,
judgment, decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Offering Securities pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement,
the Warrant Agreement and the Representative's Warrant Agreement and the
transactions contemplated hereby and thereby, including without limitation, any
waiver of any preemptive, first refusal or other rights that any entity or
person may have for the issue and/or sale of any of the Offering Securities,
except such as have been or may be obtained under the Act or may be required
under state securities or Blue Sky laws in connection with the Underwriters'
purchase and distribution of the Firm Securities and the Option Securities, to
be sold by the Company and Selling Shareholders hereunder and the
Representative's Warrants and Representative's Securities to be sold by the
Company.
(m) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or business may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company, enforceable
against it in accordance with its terms. The descriptions in the Registration
Statement of agreements, contracts and other documents are accurate and fairly
present the information required to be shown with respect thereto by Form S-1,
and there are no contracts or other documents which are required by the Act to
be described in the Registration Statement or filed as exhibits to the
Registration Statement which are not described or filed as required, and the
exhibits which have been filed are complete and correct copies of the documents
of which they purport to be copies.
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(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money, (ii) entered into any transaction other than in the ordinary
course of business, or (iii) declared or paid any dividend or made any other
distribution on or in respect of its capital stock of any class, and there has
not been any change in the capital stock, or any change in the debt (long or
short term) or liabilities or material adverse change in or affecting the
general affairs, management, financial operations, stockholders' equity or
results of operations of the Company.
(o) No default exists in the due performance and observance of any
term, covenant or condition of any license, contract, collective bargaining
agreement, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, stockholders' agreement, partnership agreement,
note, loan or credit agreement, purchase order, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which the property or assets (tangible or intangible) of the
Company is subject or affected.
(p) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance with all federal, state,
local and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours. There are no
pending investigations involving the Company by the U.S. Department of Labor, or
any other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any lockout, strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or involving the Company, or any
predecessor entity, and none has ever occurred. No representation question
exists respecting the employees of the Company, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company. No labor dispute with the
employees of the Company exists, or, is imminent.
(q) The Company does not maintain, sponsor or contribute to any program
or arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multiemployer 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"). The Company does not maintain
or contribute, now or at any time previously, to a defined benefit plan, as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, which could subject the
Company to any tax penalty on prohibited transactions and which has not
adequately been corrected. Each ERISA Plan is in compliance with all reporting,
disclosure and other requirements of the Code and ERISA as they relate to any
such ERISA Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply with
Code
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Section 401(a), stating that such ERISA Plan and the attendant trust are
qualified thereunder. The Company has never completely or partially withdrawn
from a "multiemployer plan."
(r) Neither the Company, nor any of its employees, directors,
stockholders, partners, or affiliates (within the meaning of the Rules and
Regulations) of any of the foregoing has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Offering Securities or otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held
by the Company, are in dispute so far as known by the Company or are in any
conflict with the right of any other person or entity. The Company (i) owns or
has the right to use, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all patents, trademarks, service marks, trade
names and copyrights, technology and licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted or proposed to
be conducted without infringing upon or otherwise acting adversely to the
right or claimed right of any person, corporation or other entity under or
with respect to any of the foregoing and (ii) is not obligated or under any
liability whatsoever to make any payment by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(t) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it, free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable.
(u) Wolinetz, Gottlieb & Lafazan, whose reports are filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(v) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which each officer, director and
stockholder of the Company and each holder of securities exchangeable or
exercisable for or convertible into shares of Common Stock has agreed not to,
directly or indirectly, issue, offer, offer to sell, sell, grant any option
for the sale or purchase of, assign, transfer, pledge, hypothecate or
otherwise encumber or dispose of any shares of Common Stock or securities
convertible into, exercisable or exchangeable for or evidencing any right to
purchase or subscribe for any shares of Common Stock (either pursuant to Rule
144 of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein for a period of not less than twelve (12) months following
the effective date of the Registration Statement (the "Lock-Up Period")
without the prior written consent of the Representative and the Company.
During the 12 month period commencing on the effective date of the
Registration Statement, the Company shall not, without the prior written
consent of the
9
Representative, sell, contract or offer to sell, issue, transfer, assign,
pledge, distribute, or otherwise dispose of, directly or indirectly, any shares
of Common Stock or any options, rights or warrants with respect to any shares of
Common Stock. The Company will cause the Transfer Agent (as hereinafter defined)
to mark an appropriate legend on the face of stock certificates representing
all of such securities and to place "stop transfer" orders on the Company's
stock ledgers.
(w) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Offering
Securities hereunder or any other arrangements, agreements, understandings,
payments or issuance with respect to the Company, or any of its officers,
directors, stockholders, partners, employees or affiliates, that may affect
the Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
(x) The Common Stock has been approved for listing on the American
Stock Exchange ("Amex").
(y) None of the Company, nor any of its officers, employees, agents
or any other person acting on behalf of the Company has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business)
to any customer, supplier, employee or agent of a customer or supplier, or
official or employee of any governmental agency (domestic or foreign) or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who was, is, or
may be in a position to help or hinder the business of the Company (or assist
the Company in connection with any actual or proposed transaction) which (a)
might subject the Company, or any other such person to any damage or penalty
in any civil, criminal or governmental litigation or proceeding (domestic or
foreign), (b) if not given in the past, might have had a material adverse
effect on the assets, business or operations of the Company, or (c) if not
continued in the future, might adversely affect the assets, business,
condition, financial or otherwise, earnings, position, properties, value,
operations or prospects of the Company. The Company's internal accounting
controls are sufficient to cause the Company to comply with the Foreign
Corrupt Practices Act of 1977, as amended.
(z) Except as set forth in the Prospectus, no officer, director,
stockholder or partner of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and
Regulations) of any of the foregoing persons or entities has or has had,
either directly or indirectly, (i) an interest in any person or entity which
(A) furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchases from or
sells or furnishes to the Company any goods or services, or (ii) a beneficiary
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus under
"Certain Transactions," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company, and any officer,
director, or 5% or greater securityholder of the Company, or any partner,
affiliate or associate of any of the foregoing persons or entities.
10
(aa) Any certificate signed by any officer of the Company, and
delivered to the Underwriters or to Underwriters' Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
(bb) The minute books of the Company have been made available to the
Underwriters and contain a complete summary of all meetings and actions of the
directors (including committees thereof) and stockholders of the Company, since
the time of its incorporation, and reflect all transactions referred to in such
minutes accurately in all material respects.
(cc) Except and to the extent described in the Prospectus, no holders
of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(dd) The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with each of Harvey I.
Houtkin and Mark D. Shefts, and in the form filed as Exhibits [10.5], and
[10.6], respectively, to the Registration Statement and (ii) purchased term key
person insurance on the lives of each of _________________ and ______________ in
the amount of $________________ each.
(ee) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of Doing Business with Cuba, and the Company
further agrees that if it or any affiliate commences engaging in business with
the government of Cuba or with any person or affiliate located in Cuba after the
date the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's,
or any affiliate's, business with Cuba or with any person or affiliate located
in Cuba changes in any material way, the Company will provide the Department
notice of such business or change, as appropriate, in a form acceptable to the
Department.
(ff) The Company is not, and upon the issuance and sale of the
Offering Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus under the caption "Use of
Proceeds" will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended (the "1940 Act").
(gg) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparations of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorizations; (iv)
transactions are recorded as necessary to comply with applicable record-keeping
regulations of the NASD and under the
11
applicable Rules and Regulations and (v) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(hh) The Company has entered into a warrant agreement substantially in
the form filed as Exhibit [ ] to the Registration Statement (the "Warrant
Agreement") with Continental Stock Transfer & Trust Company, as Warrant Agent,
in form and substance satisfactory to the Representative, with respect to the
Redeemable Warrants.
2. Representations and Warranties of the Selling Shareholders. Each
Selling Shareholder, severally and not jointly, represents, warrants and
covenants to each Underwriter that:
(a) Such Selling Shareholder has full power and authority to enter
into this Agreement and the Custody Agreement and Power of Attorney with
__________ as attorney-in-fact (the "Attorney-in-Fact"). All authorizations and
consents necessary for the execution and delivery by such Selling Shareholder of
the Custody Agreement and Power of Attorney, and for the execution of this
Agreement on behalf of such Selling Shareholder, have been given. Each of the
Custody Agreement and Power of Attorney and this Agreement has been duly
authorized, executed and delivered by or on behalf of such Selling Shareholder
and constitutes a valid and binding agreement of such Selling Shareholder and is
enforceable against such Selling Shareholders in accordance with the terms
thereof and hereof; the Attorney-in-Fact, acting alone, is authorized to execute
and deliver this Agreement and the certificates referred to in Section ___
hereof on behalf of such Selling Shareholder, to authorize the delivery of those
Securities to be sold by such Selling Shareholder under this Agreement and to
duly endorse (in blank or otherwise) the certificate or certificates
representing such Selling Shareholders' Securities or the Stock Power or Powers
with respect thereto, to accept payment therefor, and otherwise to act on behalf
of such Selling Shareholder in connection with this Agreement, and the Custody
Agreement.
(b) Such Selling Shareholder now has, and at the time of delivery
thereof hereunder will have, (i) good and marketable title to the Securities to
be sold by such Selling Shareholder hereunder, free and clear of all liens,
encumbrances and claims whatsoever (other than pursuant to the Custody Agreement
and Power of Attorney) and (ii) full legal right and power, and all
authorizations and approvals required by law, to sell, assign, transfer and
deliver such Securities to the Underwriters hereunder and to make the
representations, warranties and agreements made by such Selling Shareholder
herein. Upon the delivery of and payment for such Securities hereunder, such
Selling Shareholder will deliver good and marketable title thereto, free and
clear of all liens, encumbrances and claims whatsoever to the Underwriters.
(c) On the Closing Date or Option Closing Date, as the case may be,
all stock transfer or other taxes (other than income taxes) which are required
to be paid in connection with the sale and transfer of the shares to be sold by
such Selling Shareholder to the several Underwriters hereunder will have been
fully paid or provided for by such Selling Shareholder and all laws imposing
such taxes will have been fully complied with.
12
(d) None of the execution, delivery or performance of this Agreement,
the Stock Power or the Custody Agreement nor the consummation of the
transactions contemplated hereby or thereby will result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets of such
Selling Shareholder pursuant to the terms or provisions of, or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the acceleration of any obligation under, if such
Selling Shareholder is a corporation or partnership, the organizational
documents of such Selling Shareholder, or, as to all such Selling Shareholders,
any indenture, mortgage, deed of trust, voting trust agreement, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument to which such Selling Shareholder is a
party or by which such Selling Shareholder or any of its property is bound or
affected, or under any ruling, decree, judgment, order, statute, rule or
regulation of any court or other governmental agency or body having jurisdiction
over such Selling Shareholder or the property of such Selling Shareholder.
(e) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
consummation by such Selling Shareholder of the transactions on its part
contemplated herein and in the Custody Agreement and Power of Attorney, except
such as have been obtained under the Act or the Rules and Regulations and such
as may be required under state securities or Blue Sky laws or the by-laws and
rules of the NASD in connection with the purchase and distribution by the
Underwriters of the Securities to be sold by such Selling Shareholder.
(f) Such Selling Shareholder has no knowledge of any material fact or
condition not set forth in the Registration Statement or Prospectus which has
adversely affected, or may adversely affect, the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company, and the sale of the Securities proposed to be sold by such Selling
Shareholder is not prompted by any such knowledge.
(g) All information with respect to such Selling Shareholder contained
in the Registration Statement and the Prospectus (as amended or supplemented, if
the Company shall have filed with the Commission any amendment or supplement
thereto) complied and will comply with all applicable provisions of the Act and
the Rules and Regulations, contains and will contain all statements required to
be stated therein in accordance with the Act and the Rules and Regulations, and
does not and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
(h) To the best knowledge of such Selling Shareholder, the
representations and warranties of the Company contained in Section 1 are true
and correct.
(i) Other than as permitted by the Act and the Rules and Regulations,
such Selling Shareholder has not distributed and will not distribute any
preliminary prospectus, the Prospectus or any other offering material in
connection with the offering and sale of the Securities. Such Selling
Shareholder has not taken, directly or indirectly, any action designed, or which
might reasonably be expected, to cause or result in, under the Act or otherwise,
or which has caused or resulted in, stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Securities.
13
(j) Certificates in negotiable form for the Securities to be sold
hereunder by such Selling Shareholder have been placed in custody, for the
purpose of making delivery of such
(k) under this Agreement, under the Custody Agreement and Power of
Attorney which appoints Continental Stock Transfer and Trust Company as
custodian (the "Custodian") for each Selling Shareholder. Such Selling
Shareholder agrees that the Securities represented by the certificates held in
custody for him or it under the Agreement and Power of Attorney are for the
benefit of and coupled with and subject to the interest hereunder of the
Custodian, the Underwriters, each other Selling Shareholder and the Company,
that the arrangements made by such Selling Shareholder for such custody and the
appointment of the Custodian by such Selling Shareholder are irrevocable, and
that the obligations of such Selling Shareholder hereunder shall not be
terminated by operation of law, whether by the death, disability, incapacity or
liquidation of any Selling Shareholder or the occurrence of any other event. If
any Selling Shareholder should die, become disabled or incapacitated or is
liquidated or if any other such event should occur before the delivery of the
Securities hereunder, certificates for the Securities shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement and
actions taken by the Custodian pursuant to the Agreement and Power of Attorney
shall be as valid as if such death, liquidation, incapacity or other event had
not occurred, regardless of whether or not the Custodian shall have received
notice thereof.
(l) There is not pending or threatened against such Selling
Shareholder any action, suit or proceeding which (A) questions the validity of
this Agreement, the Stock Power, the Power of Attorney, the Custody Agreement or
of any action taken or to be taken by such Selling Shareholder pursuant to or in
connection with this Agreement, the Stock Power, the Power of Attorney or the
Custody Agreement or (B) is required to be disclosed in the Registration
Statement which is not so disclosed, and such actions, suits or proceedings as
are summarized in the Registration Statement, if any, are accurately summarized.
(m) Except as set forth in the Prospectuses or waived in connection
with the offering of the Offering Securities, such Selling Shareholder does not
have any registration rights or other similar rights with respect to any
securities of the Company; and such Selling Shareholder does not have any right
of first refusal or other similar right to purchase any securities of the
Company upon the issuance or sale thereof by the Company or upon the sale
thereof by any other shareholder of the Company.
(n) Any certificate signed by or on behalf of such Selling Shareholder
and delivered to the Underwriters shall be deemed a representation and warranty
by such Selling Shareholder to the Underwriters as to the matters covered
thereby.
3. Purchase, Sale and Delivery of the Offering Securities.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company and the Primary Selling Shareholders agree to sell to each
Underwriter, and each Underwriter, severally and not jointly, agrees to purchase
at a price of $_______ per share [93.5% of the initial public offering price per
share of Common Stock] of Common Stock and $______ per share [93.5% of the
initial public offering price per Redeemable Warrant] that number of Firm
Securities set forth
14
in Schedule A opposite the name of such Underwriter, subject to such adjustment
as the Representative in its sole discretion shall make to eliminate any sales
or purchases of fractional shares, plus any additional number of Firm Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 12 hereof.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company and the Option Selling Shareholders
hereby grant an option to the Underwriters, severally and not jointly, to
purchase all or any part of an additional 937,500 shares of Common Stock at a
price of $__________ per share [93.5% of the initial public offering price per
share of Common Stock] of Common Stock and/or an additional 468,750 Redeemable
Warrants at a price of $______ per Redeemable Warrant [93.5% of the initial
public offering price per Redeemable Warrant]. The option granted hereby will
expire forty-five (45) days after (i) the date the Registration Statement
becomes effective, if the Company has elected not to rely on Rule 430A under the
Rules and Regulations, or (ii) the date of this Agreement if the Company has
elected to rely upon Rule 430A under the Rules and Regulations, and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for any such Option Securities. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Representative, but shall not
be later than seven (7) full business days after the exercise of said option,
nor in any event prior to the Closing Date, as hereinafter defined, unless
otherwise agreed upon by the Representative and the Company. Nothing herein
contained shall obligate the Underwriters to make any over-allotments. No Option
Securities shall be delivered unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Securities shall be made at the offices of Security Capital
Trading, Inc. at 520 Madison Avenue, 10th Floor, New York, New York 10022, or at
such other place as shall be agreed upon by the Representative and the Company.
Such delivery and payment shall be made at 10:00 a.m. (New York City time) on
__________, 1998 or at such other time and date as shall be agreed upon by the
Representative and the Company, but not less than three (3) nor more than five
(5) full business days after the effective date of the Registration Statement
(such time and date of payment and delivery being herein called the "Closing
Date"). In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
office of the Representative or at such other place as shall be agreed upon by
the Representative and the Company on each Option Closing Date as specified in
the notice from the Representative to the Company. Delivery of the certificates
for the Firm Securities and the Option Securities, if any, shall be made to the
Underwriters against payment by the Underwriters, severally and not jointly, of
the purchase price for the Firm Securities and the Option Securities, if any, to
the order of the Company and the Primary Selling Shareholders or Option Selling
Shareholders, as the case may be, for the Firm Securities and the Option
Securities, if any, by New York Clearing House funds. In the event such option
is exercised, each of the Underwriters, acting severally and not jointly, shall
purchase that proportion of the Underwriters' portion of Option Securities
15
then being purchased which the number of Firm Securities set forth in Schedule A
hereto opposite the name of such Underwriter bears to the total number of Firm
Securities, subject in each case to such adjustments as the Representative in
its discretion shall make to eliminate any sales or purchases of fractional
shares. Certificates for the Firm Securities and the Option Securities, if any,
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Underwriters may request in writing at least two (2) business days prior to the
Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the Firm Securities and the Option Securities, if any, shall be
made available to the Representative at such office or such other place as the
Representative may designate for inspection, checking and packaging no later
than 9:30 a.m. on the last business day prior to the Closing Date or the
relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative Representative's Warrants at a purchase price of $.0001 per
warrant, which Representative's Warrants shall entitle the holders thereof to
purchase an aggregate of 625,000 shares of Common Stock and/or 312,500
Redeemable Warrants. The Representative's Warrants shall be exercisable for a
period of four (4) years commencing one (1) year from the effective date of the
Registration Statement at a price equaling one hundred twenty percent (120%) of
the respective initial public offering price of the shares of Common Stock and
the Redeemable Warrants. The Representative's Warrant Agreement and form of
Warrant Certificate shall be substantially in the form filed as Exhibit __ to
the Registration Statement. Payment for the Representative's Warrants shall be
made on the Closing Date.
4. Public Offering of the Securities. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Securities (other than to
residents of or in any jurisdiction in which qualification of the Securities
is required and has not become effective) at the price and upon the other
terms set forth in the Prospectus. The Representative may from time to time
increase or decrease the public offering price after distribution of the
Securities has been completed to such extent as the Representative, in its
sole discretion deems advisable. The Underwriters may enter into one of more
agreements as the Underwriters, in each of their sole discretion, deem
advisable with one or more broker-dealers who shall act as dealers in
connection with such public offering.
5. Covenants and Agreements of the Company and Each Selling Shareholder.
The Company covenants and agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or Exchange
Act before termination of the offering of the Securities by the Underwriters of
which the Representative shall not previously have been advised and furnished
with a copy, or to which the Representative shall have objected or which is not
in compliance with the Act, the Exchange Act or the Rules and Regulations.
16
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representative and confirm the notice in writing
(i) when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or
the threatening, of any proceeding suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of the
Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution of proceedings for that purpose; (iii) of the
issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Offering
Securities for offering or sale in any jurisdiction or of the initiation, or
the threatening, of any proceeding for that purpose; (iv) of the receipt of
any comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If the Commission or any state
securities commission shall enter a stop order or suspend such qualification
at any time, the Company will make every effort to obtain promptly the lifting
of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Representative,
pursuant to Rule 424(b)(4)) not later than the Commission's close of business
on the earlier of (i) the second business day following the execution and
delivery of this Agreement and (ii) the fifth business day after the effective
date of the Registration Statement.
(d) The Company will give the Representative notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Offering Securities which
differs from the corresponding prospectus on file at the Commission at the
time the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Representative with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Representative or Orrick, Herrington & Sutcliffe LLP ("Underwriters'
Counsel") shall object.
(e) The Company shall endeavor in good faith, in cooperation with
the Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Offering Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications, file
such documents and furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or file a general or limited consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification shall
be effected, the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all reasonable efforts
17
to file and make such statements or reports at such times as are or may
reasonably be required by the laws of such jurisdiction to continue such
qualification.
(f) During the time when a prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings
in the Offering Securities in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If at any time when a
prospectus relating to the Offering Securities is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or Underwriters' Counsel, the Prospectus,
as then amended or supplemented, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time
to amend the Prospectus to comply with the Act, the Company will notify the
Representative promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the Act,
each such amendment or supplement to be satisfactory to Underwriters' Counsel,
and the Company will furnish to the Underwriters copies of such amendment or
supplement as soon as available and in such quantities as the Underwriters may
request.
(g) As soon as practicable, but in any event not later than
forty-five (45) days after the end of the 12-month period beginning on the day
after the end of the fiscal quarter of the Company during which the effective
date of the Registration Statement occurs (ninety (90) days in the event that
the end of such fiscal quarter is the end of the Company's fiscal year), the
Company shall make generally available to its security holders, in the manner
specified in Rule 158(b) of the Rules and Regulations, and to the
Representative, an earnings statement which will be in the detail required by,
and will otherwise comply with, the provisions of Section 11(a) of the Act and
Rule 158(a) of the Rules and Regulations, which statement need not be audited
unless required by the Act, covering a period of at least twelve (12)
consecutive months after the effective date of the Registration Statement.
(h) During a period of seven (7) years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly reports to
its stockholders, statements of income of the Company for each quarter
in the form furnished to the Company's stockholders and certified by
the Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
certified public accountants;
18
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission,
the NASD or any securities exchange;
(v) every press release and every material news item or
article of interest to the financial community in respect of the
Company, or its affairs, which was released or prepared by or on
behalf of the Company; and
(vi) any additional information of a public nature
concerning the Company (and any future subsidiary) or its businesses
which the Representative may request.
During such seven-year period, if the Company has an active
subsidiary, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiary(ies) are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) The Company will maintain a transfer agent and warrant agent
("Transfer Agent") and, if necessary under the jurisdiction of incorporation of
the Company, a Registrar (which may be the same entity as the Transfer Agent)
for its Common Stock and Redeemable Warrants.
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative
may designate, copies of each Preliminary Prospectus, the Registration
Statement and any pre-effective or post-effective amendments thereto (two of
which copies will be signed and will include all financial statements and
exhibits), the Prospectus, and all amendments and supplements thereto,
including any prospectus prepared after the effective date of the Registration
Statement, in each case as soon as available and in such quantities as the
Representative may request.
(k) On or before the effective date of the Registration Statement,
the Company shall provide the Representative with true original copies of duly
executed, legally binding and enforceable agreements pursuant to which, for a
period of twelve (12) months from the effective date of the Registration
Statement, each of the Company's officers, directors and stockholders and
holders of securities exchangeable or exercisable for or convertible into
shares of Common Stock agrees that it or he or she will not, directly or
indirectly, issue, offer to sell, sell, grant an option for the sale or
purchase of, assign, transfer, pledge, hypothecate or otherwise encumber or
dispose of any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144 of the
Rules and Regulations or otherwise) or dispose of any beneficial interest
therein without the prior consent of the Representative (collectively, the
"Lock-up Agreements"). During the 12 month period commencing on the effective
date of the Registration Statement, the Company shall not, without the prior
written consent of the Representative, sell, contract or offer to sell, issue,
19
transfer, assign, pledge, distribute, or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any options, rights or warrants with
respect to any shares of Common Stock. On or before the Closing Date, the
Company shall deliver instructions to the Transfer Agent authorizing it to
place appropriate legends on the certificates representing the securities
subject to the Lock-up Agreements and to place appropriate stop transfer
orders on the Company's ledgers.
(l) Each Selling Shareholder agrees to deliver to the Representative,
on or prior to the Closing Date, a properly completed and executed United States
Treasury Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
(m) None of the Company, nor any of its officers, directors,
stockholders, nor any of its affiliates (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed to, or which
might in the future reasonably be expected to cause or result in, stabilization
or manipulation of the price of any securities of the Company.
(n) The Selling Shareholders will not, without the prior written
consent of the Representative, make any bid for or purchase any shares of Common
Stock or Redeemable Warrants during the six month period commencing on the date
hereof.
(o) As soon as any Selling Shareholder is advised thereof, such
Selling Shareholder will advise the Representative and confirm such advice in
writing, (1) of receipt by such Selling Shareholder, or by any representative
of such Selling Shareholder, of any communication from the Commission relating
to the Registration Statement, the Prospectus or any preliminary prospectus,
or any notice or order of the Commission relating to the Company or any of the
Selling Shareholders in connection with the transactions contemplated by this
Agreement and (2) of the happening of any event during the period from and
after the effective date that in the judgment of such Selling Shareholder
makes any statement made in the Registration Statement or Prospectus untrue or
that requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(p) The Company shall apply the net proceeds from the sale of the
Offering Securities in the manner, and subject to the conditions, set forth
under "Use of Proceeds" in the Prospectus. No portion of the net proceeds will
be used, directly or indirectly, to acquire any securities issued by the
Company.
(q) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
(r) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
20
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in their letters to be
furnished pursuant to Sections 7(j) and 7(k) hereof.
(s) The Company shall cause the Common Stock and Redeemable Warrants
to be quoted on Amex and, for a period of seven (7) years from the date hereof,
use its best efforts to maintain the Amex listing of the Common Stock and
Redeemable Warrants to the extent outstanding.
(t) For a period of five (5) years from the Closing Date, the Company
shall furnish to the Representative at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Common Stock and Redeemable
Warrants (ii) the list of holders of all of the Company's securities and (iii) a
Blue Sky "Trading Survey" for secondary sales of the Company's securities
prepared by counsel to the Company.
(u) As soon as practicable, (i) but in no event more than five (5)
business days before the effective date of the Registration Statement, file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Offering Securities and (ii) but in no event more than thirty (30)
days after the effective date of the Registration Statement, take all
necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and Moody's OTC Manual and to continue such inclusion
for a period of not less than seven (7) years.
(v) The Company hereby agrees that it will not, for a period of
twelve (12) months from the effective date of the Registration Statement,
adopt, propose to adopt or otherwise permit to exist any employee, officer,
director, consultant or compensation plan or similar arrangement permitting
(i) the grant, issue, sale or entry into any agreement to grant, issue or sell
any option, warrant or other contract right (x) at an exercise price that is
less than the greater of the public offering price of the Securities set forth
herein and the fair market value on the date of grant or sale or (y) to any of
its executive officers or directors or to any, direct or indirect, holder of
5% or more of the Common Stock; (ii) the maximum number of shares of Common
Stock or other securities of the Company purchasable at any time pursuant to
options or warrants issued by the Company to exceed the aggregate shares
reserved for future issuance under the Company's Stock Option Plan and the
Representative's Warrant Agreement (excluding the overallotment option); (iii)
the payment for such securities with any form of consideration other than
cash; or (iv) the existence of stock appreciation rights, phantom options or
similar arrangements.
(w) Until the completion of the distribution of the Offering
Securities, the Company shall not, without the prior written consent of the
Representative and Underwriters' Counsel, issue, directly or indirectly, any
press release or other communication or hold any press conference with respect
to the Company or its activities or the offering contemplated hereby, other
than trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's operations.
(x) For a period equal to the lesser of (i) seven (7) years from the
date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent
21
or disqualify the Company's use of Form S-1 (or other appropriate form) for
the registration under the Act of the Representative's Securities. The Company
further agrees to use its best efforts to file such post-effective amendments
to the Registration Statement, as may be necessary, in order to maintain its
effectiveness and to keep such Registration Statement effective while any of
the Redeemable Warrants or Representative's Warrants remain outstanding.
6. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date and
the Option Closing Date (to the extent not paid at the Closing Date) all
expenses and fees (other than (i) fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company and the Selling Shareholders under this Agreement, of the Company
under the Warrant Agreement, Representative's Warrant Agreement and of the
Selling Shareholders under the Custody Agreement, the Power of Attorney and
the Stock Power, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company [and the Selling Shareholders], (ii)
all costs and expenses incurred in connection with the preparation,
duplication, printing (including mailing and handling charges), filing,
delivery and mailing (including the payment of postage with respect thereto)
of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of
postage with respect thereto) and delivery of this Agreement, the Warrant
Agreement, the Representative's Warrant Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreements, the Custody Agreements, the
Stock Powers, the Powers of Attorney and related documents, including the cost
of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters and such dealers as the Underwriters may request, in quantities
as hereinabove stated, (iii) the printing, engraving, issuance and delivery of
the Offering Securities including, but not limited to, (x) the purchase by the
Underwriters of the Firm Securities and the Option Securities and the purchase
by the Representative of the Representative's Warrants from the Company, (y)
the consummation by the Company of any of its obligations under this
Agreement, the Warrant Agreement and the Representative's Warrant Agreement,
and the consummation by the Selling Shareholders of any of their obligations
under this Agreement, the Custody Agreement, the Stock Powers or the Powers of
Attorney, and (z) resale of the Firm Securities and the Option Securities by
the Underwriters in connection with the distribution contemplated hereby, (iv)
the qualification of the Offering Securities under state or foreign securities
or "Blue Sky" laws and determination of the status of such securities under
legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum", the "Supplemental Blue Sky Memorandum" and
"Legal Investments Survey," if any, fees and disbursements of counsel in
connection therewith, (v) advertising costs and expenses, including but not
limited to costs and expenses in connection with the "road show", information
meetings and presentations, bound volumes and prospectus memorabilia and
"tombstone" advertisement expenses (vi) fees and expenses of the Transfer
Agent and registrar and all issue and transfer taxes, if any, (vii)
applications for assignment of a rating of the Offering Securities by
qualified rating agencies, (viii) the fees payable to the Commission and the
NASD, (ix) costs and expenses in connection with copyright due diligence
expert, and (x) the fees and expenses incurred in connection with the
quotation of the Offering Securities on Amex and any other exchange.
22
(b) If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 7, Section 10(a) or Section 13, the Company shall
reimburse and indemnify the Underwriters for all of their actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel, less
any amounts already paid pursuant to Section 6(c) hereof. The Company shall
remain liable for all Blue Sky counsel fees and expenses and Blue Sky filing
fees as provided in Section 6(a) above.
(c) The Company and the Selling Shareholders further agree that, in
addition to the expenses payable by the Company pursuant to subsection (a) of
this Section 6, they will pay to the Representative on the Closing Date by
certified or bank cashier's check or, at the election of the Representative,
by deduction from the proceeds of the offering of the Firm Securities, a
non-accountable expense allowance equal to 1 1/2% of the gross proceeds
received by the Company, and Selling Shareholders from the sale of the Firm
Securities, $50,000 of which has been paid to date. In the event the
Representative elects to exercise the overallotment option described in
Section 3(b) hereof, the Company and the Selling Shareholders further agree to
pay to the Representative on each Option Closing Date, by certified or bank
cashier's check, or at the Representative's election, by deduction from the
proceeds of the Option Securities purchased on such Option Closing Date, a
non-accountable expense allowance equal to 1 1/2% of the gross proceeds
received by the Company and Selling Shareholders from the sale of such Option
Securities. The Company and Selling Shareholders agree they will pay their
respective proportion of the 1 1/2% non-accountable expense allowance for the
Firm Securities and Option Securities based on the amount of gross proceeds
each receives for the sale of their Firm Securities and/or Options Securities,
as the case may be.
7. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company and Selling Shareholders herein
as of the date hereof and as of the Closing Date and each Option Closing Date,
if any, as if they had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date
or Option Closing Date, if any, of the statements of the officers of the
Company and Selling Shareholders made pursuant to the provisions hereof; and
the performance by the Company and Selling Shareholders on and as of the
Closing Date and each Option Closing Date, if any, of its covenants and
obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 12:00 P.M., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Representative, and,
at the Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of
the Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected
to rely upon Rule 430A of the Rules and Regulations, the price of the
Securities and any price-related information previously omitted from the
effective Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the Rules
and Regulations within the prescribed time period and, prior to the Closing
Date, the Company shall have provided evidence satisfactory to the
Representative of such timely filing, or a post-effective amendment providing
23
such information shall have been promptly filed and declared effective in
accordance with the requirements of Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state
a fact which, in the Representative's opinion, is material and is required to
be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material,
or omits to state a fact which, in the Representative's opinion, is material
and is required to be stated therein or is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) On or prior to each of the Closing Date and each Option Closing
Date, if any, the Representative shall have received from Underwriters' Counsel,
such opinion or opinions with respect to the organization of the Company, the
validity of the Offering Securities, the Registration Statement, the Prospectus
and other related matters as the Representative may request and Underwriters'
Counsel shall have received such papers and information as they request to
enable them to pass upon such matters.
(d) At the Closing Date, the Underwriters shall have received the
favorable opinion of Sichenzia, Ross & Friedman, LLP, counsel to the Company and
Selling Shareholders, dated the Closing Date, addressed to the Underwriters and
in form and substance satisfactory to Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction, (B) is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such
qualification or licensing, and (C) has all requisite corporate power and
authority, and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of and
from all governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state and local laws,
rules and regulations; and, the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially adversely affect the
business, operations, condition, financial or otherwise, or the earnings,
business affairs, position, prospects, value, operation, properties,
business or results of operations of the Company. The disclosures in the
Registration Statement concerning the effects of federal, state and local
laws, rules and regulations on the Company's business as currently
conducted and as contemplated are correct in all material respects and do
not omit to state a fact required to be stated therein or necessary to make
24
the statements contained therein not misleading in light of the
circumstances in which they were made.
(ii) except as described in the Prospectus, the Company does not
own an interest in any other corporation, partnership, joint venture, trust
or other business entity;
(iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "Capitalization", and the Company is not a party
to or bound by any instrument, agreement or other arrangement providing for
it to issue, sell, transfer, purchase or redeem any capital stock, rights,
warrants, options or other securities, except for this Agreement, the
Warrant Agreement and the Representative's Warrant Agreement and as
described in the Prospectus. The Offering Securities and all other
securities issued or issuable by the Company conform in all material
respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued and
are fully paid and non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability
by reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company or any similar rights granted by the Company. The Offering
Securities to be sold by the Company hereunder and under the Warrant
Agreement and Representative's Warrant Agreement are not and will not be
subject to any preemptive or other similar rights of any stockholder, have
been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof, will be validly issued, fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely
as such holders; all corporate action required to be taken for the
authorization, issue and sale of the Offering Securities has been duly and
validly taken; and the certificates representing the Offering Securities
are in due and proper form. The Representative's Warrants and Redeemable
Warrants constitute valid and binding obligations of the Company to issue
and sell, upon exercise thereof and payment therefor, the number and type
of securities of the Company called for thereby. Upon the issuance and
delivery pursuant to this Agreement of the Firm Securities and the Option
Securities and the Representative's Warrants to be sold by the Company, the
Underwriters and the Representative, respectively, will acquire good and
marketable title to the Firm Securities, the Option Securities and the
Representative's Warrants free and clear of any pledge, lien, charge,
claim, encumbrance, pledge, security interest, or other restriction or
equity of any kind whatsoever. No transfer tax is payable by or on behalf
of the Underwriters in connection with (A) the issuance by the Company of
the Securities, (B) the purchase by the Underwriters of the Firm Securities
and the Option Securities from the Company, and the purchase by the
Representative of the Representative's Warrants or the Representative's
Securities from the Company (C) the consummation by the Company of any of
its obligations under this Agreement, the Warrant Agreement or the
Representative's Warrant Agreement, or (D) resales of the Firm Securities
and the Option Securities in connection with the distribution contemplated
hereby.
25
(iv) the Registration Statement is effective under the Act, and,
if applicable, filing of all pricing information has been timely made in
the appropriate form under Rule 430A, and no stop order suspending the use
of the Preliminary Prospectus, the Registration Statement or Prospectus or
any part of any thereof or suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or, to the best of such counsel's knowledge,
threatened or contemplated under the Act;
(v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements thereto
(other than the financial statements and other financial and statistical
data included therein, as to which no opinion need be rendered) comply as
to form in all material respects with the requirements of the Act and the
Rules and Regulations.
(vi) to the best of such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus and filed as
exhibits to the Registration Statement other than those described in the
Registration Statement (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in part, by
reference therein) and the Prospectus and filed as exhibits thereto, and
the exhibits which have been filed are correct copies of the documents of
which they purport to be copies; (B) the descriptions in the Registration
Statement and the Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company is a party or by which
it is bound, including any document to which the Company is a party or by
which it is bound, incorporated by reference into the Prospectus and any
supplement or amendment thereto, are accurate and fairly represent the
information required to be shown by Form S-1; (C) there is not pending or
threatened against the Company any action, arbitration, suit, proceeding,
inquiry, investigation, litigation, governmental or other proceeding
(including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, pending or
threatened against (or circumstances that may give rise to the same), or
involving the properties or business of the Company which (x) is required
to be disclosed in the Registration Statement which is not so disclosed
(and such proceedings as are summarized in the Registration Statement are
accurately summarized in all respects), (y) questions the validity of the
capital stock of the Company or this Agreement, the Warrant Agreement or
the Representative's Warrant Agreement, or of any action taken or to be
taken by the Company pursuant to or in connection with any of the
foregoing; (D) no statute or regulation or legal or governmental proceeding
required to be described in the Prospectus is not described as required;
and (E) there is no action, suit or proceeding pending, or threatened,
against or affecting the Company before any court or arbitrator or
governmental body, agency or official (or any basis thereof known to such
counsel) in which there is a reasonable possibility of a decision which may
result in a material adverse change in the condition, financial or
otherwise, or the earnings, position, prospects, stockholders' equity,
value, operation, properties, business or results of operations of the
Company, which could adversely affect the present or prospective ability of
the Company to perform its obligations under this Agreement, the Warrant
Agreement or the Representative's Warrant Agreement or which in any manner
26
draws into question the validity or enforceability of this Agreement, the
Warrant Agreement or the Representative's Warrant Agreement;
(vii) the Company has full legal right, power and authority to
enter into each of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement, and to consummate the transactions
provided for therein; and each of this Agreement, the Warrant Agreement and
the Representative's Warrant Agreement has been duly authorized, executed
and delivered by the Company. Each of this Agreement, the Warrant Agreement
and the Representative's Warrant Agreement, assuming due authorization,
execution and delivery by each other party thereto constitutes a legal,
valid and binding agreement of the Company enforceable against the Company
in accordance with its terms (except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any
action, legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law), and none of the Company's
execution or delivery of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement, its performance hereunder or
thereunder, its consummation of the transactions contemplated herein or
therein, or the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto,
conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company pursuant to the terms of,
(A) the certificate of incorporation or by-laws of the Company, (B) any
license, contract, collective bargaining agreement, indenture, mortgage,
deed of trust, lease, voting trust agreement, stockholders' agreement,
note, loan or credit agreement or any other agreement or instrument to
which the Company is a party or by which it is or may be bound or to which
any of its properties or assets (tangible or intangible) is or may be
subject, or any indebtedness, or (C) any statute, judgment, decree, order,
rule or regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or
body (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having jurisdiction
over the Company or any of its activities or properties.
(viii) no consent, approval, authorization or order, and no
filing with, any court, regulatory body, government agency or other body
(other than such as may be required under Blue Sky laws, as to which no
opinion need be rendered) is required in connection with the issuance of
the Firm Securities and the Option Securities pursuant to the Prospectus
and the Registration Statement, the issuance of the Representative's
Warrants, the performance of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement, and the transactions contemplated
hereby and thereby;
(ix) the properties and business of the Company conforms in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus; and the Company has good and marketable title
27
to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or leased by it, in
each case free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of
any kind whatsoever, other than those referred to in the Prospectus and
liens for taxes not yet due and payable;
(x) the Company is not in breach of, or in default under, any
term or provision of any license, contract, collective bargaining
agreement, indenture, mortgage, installment sale agreement, deed of trust,
lease, voting trust agreement, stockholders' agreement, partnership
agreement, note, loan or credit agreement or any other agreement or
instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the
Company may be bound or to which the properties or assets (tangible or
intangible) of the Company is subject or affected; and the Company is not
in violation of any term or provision of its Articles of Incorporation or
By-Laws or in violation of any franchise, license, permit, judgment,
decree, order, statute, rule or regulation;
(xi) the statements in the Prospectus under "RISK FACTORS," "THE
COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "SELLING
SHAREHOLDERS," "CERTAIN TRANSACTIONS," "DESCRIPTION OF SECURITIES," and
"SHARES ELIGIBLE FOR FUTURE SALE" have been reviewed by such counsel, and
insofar as they refer to statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions, are correct in all
material respects;
(xii) the Offering Securities have been accepted for quotation on
Amex;
(xiii) the persons listed under the caption "PRINCIPAL AND
SELLING STOCKHOLDERS" in the Prospectus are the respective "beneficial
owners" (as such phrase is defined in regulation 13d-3 under the Exchange
Act) of the securities set forth opposite their respective names thereunder
as and to the extent set forth therein;
(xiv) none of the Company, nor any of its officers, stockholders,
employees or agents, nor any other person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent
of a customer or supplier, or official or employee of any governmental
agency or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other
person who is or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed
transaction) which (A) might subject the Company to any damage or penalty
in any civil, criminal or governmental litigation or proceeding, (B) if not
given in the past, might have had an adverse effect on the assets, business
or operations of the Company, as reflected in any of the financial
statements contained in the Registration Statement, or (C) if not continued
in the future, might adversely affect the assets, business, operations or
prospects of the Company;
28
(xv) no person, corporation, trust, partnership, association or
other entity has the right to include and/or register any securities of the
Company in the Registration Statement, require the Company to file any
registration statement or, if filed, to include any security in such
registration statement;
(xvi) except as described in the Prospectus, there are no claims,
payments, issuances, arrangements or understandings for services in the
nature of a finder's or origination fee with respect to the sale of the
Offering Securities hereunder or financial consulting arrangements or any
other arrangements, agreements, understandings, payments or issuances that
may affect the Underwriters' compensation, as determined by the NASD;
(xvii) assuming due execution by the parties thereto other than
the Company, the Lock-up Agreements are legal, valid and binding
obligations of the parties thereto, enforceable against the party and any
subsequent holder of the securities subject thereto in accordance with its
terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and
the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by
applicable law);
(xviii) except as described in the Prospectus, the Company does
not (A) maintain, sponsor or contribute to any ERISA Plans, (B) maintain or
contribute, now or at any time previously, to a defined benefit plan, as
defined in Section 3(35) of ERISA, and (C) has ever completely or partially
withdrawn from a "multiemployer plan";
(xix) the Company is in compliance with all provisions of Section
1 of Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of
Doing Business with Cuba;
(xx) none of the Company or any of its affiliates shall be
subject to the requirements of or shall be deemed an "Investment Company,"
pursuant to and as defined under, respectively, the Investment Company Act;
(xxi) to the best knowledge of such counsel and except as
described in the Prospectus, the Company owns or possesses, free and clear
of all liens or encumbrances and rights thereto or therein by third
parties, the requisite licenses or other rights to use all trademarks,
service marks, copyrights, service names, trade names, patents, patent
applications and licenses necessary to conduct its business (including,
without limitation, any such licenses or rights described in the Prospectus
as being owned or possessed by the Company), and there is no claim or
action by any person pertaining to, or proceeding, pending or threatened,
which challenges the exclusive rights of the Company with respect to any
trademarks, service marks, copyrights, service names, trade names, patents,
patent applications and licenses used in the conduct of the Company's
business (including, without limitation, any such licenses or rights
described in the Prospectus as being owned or possessed by the Company);
29
and the Company's current products, services and processes do not and will
not infringe on the patents currently held by third parties;
(xxii) to the best of our knowledge, after due inquiry, except as
described in the Prospectus, the Company is not under any obligation to pay
royalties or fees to any third party, with respect to any technology or
intellectual properties developed, employed, licensed or used by the
Company; and
(xxiii) each Selling Shareholder has the full right, power and
authority to enter into the Underwriting Agreement and the Custody
Agreement and to carry out all the terms and provisions thereof;
(xxiv) the Underwriting Agreement, the Custody Agreement, Stock
Power and Power of Attorney have been duly authorized, executed and
delivered by each Selling Shareholder and, assuming due authorization,
execution and delivery by the Representative and/or Custodian, as
applicable, the Underwriting Agreement, the Custody Agreement, Stock Power
and Power of Attorney are legal, valid, binding and enforceable agreements
or instruments of such Selling Shareholder, except insofar as the
indemnification and contribution provisions of the Underwriting Agreement
may be limited by public policy concerns and except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or by general equitable
principles;
(xxv) assuming that (i) the Underwriters have no notice of any
adverse claims with respect to the Securities being sold hereunder by such
Selling Shareholder, and (ii) the certificates representing the Securities
being sold by such Selling Shareholder are delivered to the Underwriters
duly endorsed or accompanied by a duly executed assignment separate from
the certificate, the delivery by such Selling Shareholder to the several
Underwriters of certificates for the Securities being sold hereunder by
such Selling Shareholder against payment therefor as provided herein, will
convey good and marketable to such Securities to the several Underwriters,
free and clear of all adverse claims; and
(xxvi) the sale of the Securities to the Underwriters by such
Selling Shareholder pursuant to the Underwriting Agreement, the compliance
by such Selling Shareholder with the other provisions of the Underwriting
Agreement and the Custody Agreement, and the consummation of the other
transactions therein contemplated do not (i) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained and such as may be required
under state securities or blue sky laws, or (ii) conflict with or result in
a breach or violation of any of the terms and provisions of, or constitute
a default under, any statute or, to the knowledge of such counsel, any
articles of incorporation, by-laws, indenture, mortgage, deed of trust,
lease or other agreement or instrument to which such Selling Shareholder is
a party or by which such Selling Shareholder or any of such Selling
Shareholder's properties are bound or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any arbitrator
applicable to such Selling Shareholder.
30
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company, and
representatives of the independent public accountants for the Company, at
which conferences such counsel made inquiries of such officers,
representatives and accountants and discussed the contents of the Preliminary
Prospectus, the Registration Statement, the Prospectus, and related matters
and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Preliminary Prospectus, the Registration Statement and
Prospectus, on the basis of the foregoing, no facts have come to the attention
of such counsel which lead them to believe that either the Registration
Statement or any amendment thereto, at the time such Registration Statement or
amendment became effective or the Preliminary Prospectus or Prospectus or
amendment or supplement thereto as of the date of such opinion contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and schedules and other financial and
statistical data included in the Preliminary Prospectus, the Registration
Statement or the Prospectus). Such counsel shall further state that its
opinions may be relied upon by Underwriters' Counsel in rendering its opinion
to the Underwriters.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the
applicable laws; (B) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of the Company and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence
or good standing of the Company, provided that copies of any such statements
or certificates shall be delivered to Underwriters' Counsel if requested. The
opinion of such counsel for the Company shall state that the opinion of any
such other counsel is in form satisfactory to such counsel and that the
Representatives, Underwriters' Counsel and they are each justified in relying
thereon. Any opinion of counsel for the Company shall not state that it is to
be governed or qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including,
without limitation, the Legal Opinion Accord of the ABA Section of Business
Law (1991) or any comparable state accord.
(e) The Underwriters shall have received the favorable opinion of
____________________________________, intellectual property counsel to the
Company, dated the Closing Date, addressed to the Underwriters, in substantially
the form attached as Exhibit A to this Agreement.
(f) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Sichenzia, Ross & Friedman, LLP, in its
capacity as counsel to the Company and as counsel to the Selling Shareholders,
dated such Option Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel confirming as of such Option
Closing Date the statements made by Sichenzia, Ross & Friedman, LLP, in their
opinion delivered on the Closing Date.
31
(g) On or prior to each of the Closing Date and each Option Closing
Date, if any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 7, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company, or herein contained. -------
(h) Prior to each of the Closing Date and each Option Closing Date,
if any, (i) there shall have been no material adverse change nor development
involving a prospective change in the condition, financial or otherwise,
earnings, position, value, properties, results of operations, prospects,
stockholders' equity or the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii)
there shall have been no transaction, not in the ordinary course of business,
entered into by the Company, from the latest date as of which the financial
condition of the Company is set forth in the Registration Statement and
Prospectus which is adverse to the Company; (iii) the Company shall not be in
default under any provision of any instrument relating to any outstanding
indebtedness; (iv) the Company shall not have issued any securities (other
than the Offering Securities) or declared or paid any dividend or made any
distribution in respect of its capital stock of any class and there has not
been any change in the capital stock or any material change in the debt (long
or short term) or liabilities or obligations of the Company (contingent or
otherwise); (v) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement
and Prospectus; (vi) no action, suit or proceeding, at law or in equity, shall
have been pending or threatened (or circumstances giving rise to same) against
the Company, or affecting any of its properties or businesses before or by any
court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may adversely affect
the business, operations, earnings, position, value, properties, results of
operations, prospects or financial condition or income of the Company; and
(vii) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated, threatened or contemplated by the
Commission.
(i) At each of the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Closing Date or
the Option Closing Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all conditions contained in
this Agreement on its part to be performed or satisfied at or prior to such
Closing Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or, to the
32
best of each of such person's knowledge, are contemplated or threatened
under the Act;
(iii) The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and neither the Preliminary Prospectus or any supplement
thereto included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (a) the Company
has not incurred up to and including the Closing Date or the Option Closing
Date, as the case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct or contingent;
(b) the Company has not paid or declared any dividends or other
distributions on its capital stock; (c) the Company has not entered into
any transactions not in the ordinary course of business; (d) there has not
been any change in the capital stock or long-term debt or any increase in
the short-term borrowings (other than any increase in the short-term
borrowings in the ordinary course of business) of the Company; (e) the
Company has not sustained any loss or damage to its properties or assets,
whether or not insured; (f) there is no litigation which is pending or
threatened (or circumstances giving rise to same) against the Company or
any affiliated party which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (g) there has
occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(h) are to such documents as amended and supplemented at the date of such
certificate.
(j) By the Closing Date, the Underwriters will have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(k) At the time this Agreement is executed, the Underwriters shall
have received a letter, dated such date, addressed to the Underwriters in form
and substance satisfactory (including the non-material nature of the changes or
decreases, if any, referred to in clause (iii) below) in all respects to the
Underwriters and Underwriters' Counsel, from Wolinetz, Gottlieb & Lafazan:
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act and
the applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with the
33
applicable accounting requirements of the Act and the Rules and Regulations
thereunder and that the Underwriters may rely upon the opinion of Wolinetz,
Gottlieb & Lafazan with respect to the financial statements and supporting
schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company, a reading of the latest available minutes of the
stockholders and board of directors and the various committees of the board
of directors of the Company, consultations with officers and other
employees of the Company responsible for financial and accounting matters
and other specified procedures and inquiries, nothing has come to their
attention which would lead them to believe that (A) the unaudited financial
statements and supporting schedules of the Company included in the
Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent
with that of the audited financial statements of the Company included in
the Registration Statement, or (B) at a specified date not more than five
(5) days prior to the effective date of the Registration Statement, there
has been any change in the capital stock or long-term debt of the Company,
or any decrease in the stockholders' equity or net current assets or net
assets of the Company as compared with amounts shown in the March 31, 1998
balance sheet included in the Registration Statement, other than as set
forth in or contemplated by the Registration Statement, or, if there was
any change or decrease, setting forth the amount of such change or
decrease, and (C) during the period from March 31, 1998 to a specified date
not more than five (5) days prior to the effective date of the Registration
Statement, there was any decrease in net revenues, net earnings or increase
in net earnings per common share of any of the Company or the Subsidiaries,
in each case as compared with the corresponding period beginning March 31,
1997, other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount of
such decrease;
(iv) setting forth, at a date not later than five (5) days prior
to the date of the Registration Statement, the amount of liabilities of the
Company and the Subsidiaries taken as a whole (including a break-down of
commercial paper and notes payable to banks);
(v) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company and excluding any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination
in accordance with generally accepted auditing standards) set forth in the
letter and found them to be in agreement;
34
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request;
(l) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from Wolinetz, Gottlieb & Lafazan a letter,
dated as of the Closing Date or the Option Closing Date, as the case may be,
to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (k) of this Section, except that the specified date
referred to shall be a date not more than five (5) days prior to the Closing
Date or the Option Closing Date, as the case may be, and, if the Company has
elected to rely on Rule 430A of the Rules and Regulations, to the further
effect that Wolinetz, Gottlieb & Lafazan have carried out procedures as
specified in clause (v) of subsection (k) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Representative and deemed to be a part of the Registration Statement pursuant
to Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (v).
(m) At the Closing Date and, as to the Option Securities, the Option
Closing Date, there shall have been furnished to the Representative an
accurate certificate, dated the date of its delivery, signed by the
attorney-in-fact on behalf of each of the Selling Shareholders, in form and
substance satisfactory to the Representatives, to the effect that the
representations and warranties of each of the Selling Shareholders contained
herein are true and correct in all material respects on and as of the date of
such certificate as if made on and as of the date of such certificate, and
each of the covenants and condition required herein to be performed or
complied with by the Selling Shareholders on or prior to the date of such
certificate has been duly, timely and fully performed or complied with.
(n) On each of the Closing Date and each Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Offering Securities.
(o) No order suspending the sale of the Offering Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 5 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(p) On or before the Closing Date, the Company shall have executed and
delivered to the Representative, (i) the Representative's Warrant Agreement
substantially in the form filed as Exhibit ____ to the Registration Statement,
in final form and substance satisfactory to the Representative, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(q) On or before the Closing Date, the Firm Securities and Option
Securities shall have been duly approved for quotation on Amex, subject to
official notice of issuance.
(r) On or before the Closing Date, there shall have been delivered to
the Representative all of the Lock-up Agreements, in form and substance
satisfactory to Underwriters' Counsel.
35
(s) On or before the Closing Date, the Company shall have executed and
delivered to the Representative and the Transfer Agent the Warrant Agreement
substantially in the form filed as Exhibit [ ] to the Registration Statement, in
final form and substance satisfactory to the Representatives.
If any condition to the Underwriters' obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Option Closing Date, as the case
may be, is not so fulfilled, the Representative may terminate this Agreement or,
if the Representative so elects, it may waive any such conditions which have not
been fulfilled or extend the time for their fulfillment.
8. Indemnification.
(a) The Company and Selling Shareholders, jointly and severally,
agree to indemnify and hold harmless each of the Underwriters (for purposes of
this Section 8 "Underwriter" shall include the officers, directors, partners,
employees, agents and counsel of the Underwriter, including specifically each
person who may be substituted for an Underwriter as provided in Section 12
hereof), and each person, if any, who controls the Underwriter ("controlling
person") within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, from and against any and all losses, claims, damages, expenses
or liabilities, joint or several (and actions, proceedings, investigations,
inquiries, suits and litigation in respect thereof), whatsoever (including but
not limited to any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any such claim, action,
proceeding, investigation, inquiry, suit or litigation, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon (A) any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus, the Registration Statement or the Prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment
or amendments or any new registration statement and prospectus in which is
included securities of the Company issued or issuable upon exercise of the
Offering Securities; or (iii) in any application or other document or written
communication (in this Section 8 collectively called "application") executed
by the Company or Selling Shareholders or based upon written information
furnished by the Company or Selling Shareholders in any jurisdiction in order
to qualify the Offering Securities under the securities laws thereof or filed
with the Commission, any state securities commission or agency, Nasdaq or any
other securities exchange; (B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of the Prospectus, in the light
of the circumstances under which they were made), or (C) any breach of any
representation, warranty, covenant or agreement of the Company or Selling
Shareholders contained herein or in any certificate by or on behalf of the
Company or Selling Shareholders or any of its officers delivered pursuant
hereto, unless, in the case of clause (A) or (B) above, such statement or
omission was made in reliance upon and in strict conformity with written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary Prospectus,
the Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, or in any application, as the case may be. The indemnity
agreement in this subsection (a) shall be in addition to any liability which
the Company and Selling Shareholders may have at common law or otherwise.
36
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company and Selling Shareholders, as the case
may be, each of their directors, each of their officers who has signed the
Registration Statement, and each other person, if any, who controls the
Company or the Selling Shareholders within the meaning of the Act, to the same
extent as the foregoing indemnity from the Company and Selling Shareholders to
the Underwriters but only with respect to statements or omissions, if any,
made in any Preliminary Prospectus, the Registration Statement or Prospectus
or any amendment thereof or supplement thereto or in any application made in
reliance upon, and in strict conformity with, written information furnished to
the Company with respect to any Underwriter by such Underwriter expressly for
use in such Preliminary Prospectus, the Registration Statement or Prospectus
or any amendment thereof or supplement thereto or in any such application,
provided that such written information or omissions only pertain to
disclosures in the Preliminary Prospectus, the Registration Statement or
Prospectus directly relating to the transactions effected by the Underwriters
in connection with this Offering. The Company and Selling Shareholders
acknowledge that the statements with respect to the public offering of the
Firm Securities and the Option Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the
only information furnished in writing by or on behalf of the Underwriters for
inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any claim, action, suit,
investigation, inquiry, proceeding or litigation, such indemnified party
shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 8, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such claim, action, suit,
investigation, inquiry, proceeding or litigation is brought against any
indemnified party, and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties will be entitled to
participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case but the fees and expenses of such
counsel shall be at the expense of such indemnified party or parties unless
(i) the employment of such counsel shall have been authorized in writing by
the indemnifying parties in connection with the defense of thereof at the
expense of the indemnifying party, (ii) the indemnifying parties shall not
have employed counsel reasonably satisfactory to such indemnified party to
have charge of the defense thereof within a reasonable time after notice of
commencement thereof, or (iii) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have
the right to direct the defense thereof on behalf of the indemnified party or
parties), in any of which events such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one claim, action, suit,
37
investigation, inquiry, proceeding or litigation or separate but similar or
related claims, actions, suits, investigations, inquiries, proceedings or
litigation in the same jurisdiction arising out of the same general
allegations or circumstances. Anything in this Section 8 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement
of any claim, action, suit, investigation, inquiry, proceeding or litigation
effected without its written consent; provided, however, that such consent was
not unreasonably withheld. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle, compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit, investigation, inquiry, proceeding or litigation in respect of
which indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim, action,
suit, investigation, inquiry, proceeding or litigation), unless such
settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such claim, action,
suit, investigation, inquiry, proceeding or litigation and (ii) does not
include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 8, 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 this Section 8 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of
any indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of the Firm Securities and the Option Securities
or (B) if the allocation provided by clause (A) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as
well as any other relevant equitable considerations. In any case where the
Company or Selling Shareholders is the contributing party and the Underwriters
are the indemnified party, the relative benefits received by the Company or
Selling Shareholders on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Firm Securities and the Option Securities (before
deducting expenses) bear to the total underwriting discounts received by the
Underwriters hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or Selling Shareholders, or by
the Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, expenses or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), the Underwriters shall
not be required to contribute any amount in excess of the underwriting
38
discount applicable to the Firm Securities and the Option Securities purchased
by the Underwriters hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls the Company, Selling Shareholders, or the Underwriter within the
meaning of the Act, each officer of the Company or Selling Shareholders who
has signed the Registration Statement, and each director of the Company or
Selling Shareholders shall have the same rights to contribution as the
Company, Selling Shareholders, or the Underwriter, as the case may be, subject
in each case to this subsection (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subsection (d), notify
such party or parties from whom contribution may be sought, but the omission
so to notify such party or parties shall not relieve the party or parties from
whom contribution may be sought from any obligation it or they may have
hereunder or otherwise than under this subsection (d), or to the extent that
such party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any liabilities
which any indemnifying party may have at common law or otherwise.
9. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant
hereto, shall be deemed to be representations, warranties and agreements at
the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the indemnity
agreements contained in Section 8 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter, the Company, any controlling person of any Underwriter or the
Company, and shall survive termination of this Agreement or the issuance and
delivery of the Offering Securities to the Underwriters and the
Representative, as the case may be.
10. Effective Date. This Agreement shall become effective at 10:00 a.m.,
New York City time, on the next full business day following the date hereof, or
at such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Offering Securities for
sale to the public; provided, however, that the provisions of Sections 6, 8 and
11 of this Agreement shall at all times be effective. For purposes of this
Section 10, the Offering Securities to be purchased hereunder shall be deemed to
have been so released upon the earlier of dispatch by the Representative of
telegrams to securities dealers releasing such securities for offering or the
release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Offering
Securities.
11. Termination.
(a) Subject to subsection (b) of this Section 11, the Representative
shall have the right to terminate this Agreement, (i) if any domestic or
international event or act or occurrence has materially adversely disrupted,
or in the Representative's opinion will in the immediate future materially
adversely disrupt, the financial markets; or (ii) if any material adverse
change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the
case may be, any of the New York Stock Exchange, the American Stock Exchange,
39
the NASD, the Boston Stock Exchange, the Commission or any governmental
authority having jurisdiction over such matters; or (iv) if trading of any of
the securities of the Company shall have been suspended, or any of the
securities of the Company shall have been delisted, on any exchange or in any
over-the-counter market; (v) if the United States shall have become involved
in a war or major hostilities, or if there shall have been an escalation in an
existing war or major hostilities or a national emergency shall have been
declared in the United States; or (vi) if a banking moratorium has been
declared by a state or federal authority; or (vii) if a moratorium in foreign
exchange trading has been declared; or (viii) if the Company shall have
sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
offering, sale and/or delivery of the Offering Securities; or (ix) if there
shall have been such a material adverse change in the conditions or prospects
of the Company, or such material adverse change in the general market,
political or economic conditions, in the United States or elsewhere, that, in
each case, in the Representative's judgment, would make it inadvisable to
proceed with the offering, sale and/or delivery of the Offering Securities or
(x) if either Harvey Houtkin or Mark Shefts shall no longer serve the Company
in their respective present capacities.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 11(a) or Section 13 hereof the
Company shall promptly reimburse and indemnify the Representative for all of
its actual out-of-pocket expenses, including the fees and disbursements of
counsel for the Underwriters (less amounts previously paid pursuant to Section
6(c) above). Notwithstanding any contrary provision contained in this
Agreement, if this Agreement shall not be carried out within the time
specified herein, or any extension thereof granted to the Representative, by
reason of any failure on the part of the Company to perform any undertaking or
satisfy any condition of this Agreement by it to be performed or satisfied
(including, without limitation, pursuant to Section 7, Section 11(a) or
Section 13) then, the Company shall promptly reimburse and indemnify the
Representative for all of its actual out-of-pocket expenses, including the
fees and disbursements of counsel for the Underwriters (less amounts
previously paid pursuant to Section 6(c) above). In addition, the Company
shall remain liable for all Blue Sky counsel fees and disbursements, expenses
and filing fees. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 7, 11, 12 and 13 hereof),
and whether or not this Agreement is otherwise carried out, the provisions of
Section 6 and Section 8 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
12. Substitution of the Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination
of this Agreement under the provisions of Section 7, Section 11 or Section 13
hereof) to purchase the Offering Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
40
(a) if the number of Defaulted Securities does not exceed
10% of the total number of Firm Securities to be purchased on such
date, the non-defaulting Underwriters shall be obligated to purchase
the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Securities, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriters (or,
if such default shall occur with respect to any Option Securities to
be purchased on an Option Closing Date, the Underwriters may at the
Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option
Securities from the Company on such date).
No action taken pursuant to this Section 12 shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination of
this Agreement, the Representative shall have the right to postpone the Closing
Date for a period not exceeding seven (7) days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.
13. Default by the Company or Selling Shareholders. If either the Company
or any Selling Shareholder shall fail at the Closing Date or at any Option
Closing Date, as applicable, to sell and deliver the number of Offering
Securities which it or they are obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect
to any Option Securities to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any
liability on the part of any non-defaulting party other than pursuant to
Section 6, Section 8 and Section 11 hereof. No action taken pursuant to this
Section 13 shall relieve the Company and/or any Selling Shareholder, as the
case may be, from liability, if any, in respect of such default.
14. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to
have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative c/o Security Capital Trading, Inc., 520 Madison Avenue, 10th
Floor, New York, New York 10022, Attention: Raymond Dirks, Chairman, with a
copy to Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New
York 10103, Attention: Lawrence B. Fisher, Esq. Notices to the Company shall
be directed to the Company at 160 Summit Avenue, Montvale, NJ 07645,
Attention: Harvey I. Houtkin, Chief Executive Officer, with a copy to:
Sichenzia, Ross & Friedman, LLP, 135 West 50th Street, 20th Floor, New York,
New York 10020, Attention: Richard Friedman, Esq.
15. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company, the Selling Shareholders
and the controlling persons, directors and officers referred to in Section 8
hereof, and their respective successors, legal representatives and assigns,
41
and no other person shall have or be construed to have any legal or equitable
right, remedy or claim under or in respect of or by virtue of this Agreement
or any provisions herein contained. No purchaser of Offering Securities from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
16. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
18. Entire Agreement; Amendments. This Agreement, the Warrant Agreement and
the Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in writing, signed by the Representative,
the Company and the Selling Shareholders.
42
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among us.
Very truly yours,
ALL-TECH INVESTMENT GROUP, INC.
By:_________________________________
Harvey I. Houtkin
Chief Executive Officer
The Selling Shareholders Named on
Schedule B and C hereto
By:_________________________________
Attorney-In-Fact
Confirmed and accepted as of
the date first above written.
SECURITY CAPITAL TRADING, INC.
For itself and as Representative of the
several Underwriters named in
Schedule A hereto.
By:________________________________
Ronald Heineman
President
43
SCHEDULE A
Number of
Number of Shares Redeemable Warrants
Name of Underwriters to be Purchased to be Purchased
- -------------------- --------------- ---------------
Security Capital Trading, Inc. .....
Total............................... _______________ ______________
6,250,000 3,125,000
A-1
SCHEDULE B
PRIMARY SELLING SHAREHOLDERS
Name Number of Shares
- ---- ----------------
Total.................................................. 625,000
B-1
SCHEDULE C
OPTION SELLING SHAREHOLDERS
Name Number of Shares
- ---- ----------------
Total.................................................. 468,750
C-1
EXHIBIT A
[FORM OF INTELLECTUAL PROPERTY OPINION]
___________________, 1998
Security Capital Trading, Inc.
520 Madison Avenue, 10th Floor
New York, New York 10022
Re: Public Offering of Securities of
All-Tech Investment Group, Inc.
-------------------------------
Ladies and Gentlemen:
We have acted as special counsel to All-Tech Investment
Group, Inc., a Delaware corporation (the "Company"), in connection with the
entering into by the Company of that certain Underwriting Agreement by and
among Security Capital Trading, Inc., the Company, and certain Selling
Shareholders, dated _______, 1998 (the "Underwriting Agreement"). This opinion
is provided to you pursuant to Section ___ of the Underwriting Agreement.
For the purpose of rendering the opinions set forth below we
have reviewed the following (collectively, the "Documents"):
(i) the Underwriting Agreement;
(ii) that certain Registration Statement on Form S-1
(Registration No. 333- ____) filed on __________,
1998 and all amendments thereto (the "Registration
Statement");
(iii) a search of the United States Patent and Trademark
Office records relevant to ownership of any and all:
trademarks, trademark applications, service marks and
service mark applications (collectively, the "Marks")
(including, without limitation, the Marks listed on
Schedule 1 annexed hereto and hereby incorporated by
reference herein (collectively, the "Trademarks")),
owned, purportedly owned or licensed by the Company
(including, those Marks licensed, without limitation,
pursuant to the licenses listed on Schedule 2 annexed
hereto and hereby incorporated by reference herein
(collectively, the "Licenses")), conducted by
______________________________ and certified as true
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and correct as of _______________________, 1998 (no
earlier than 5 days prior to the effective date of
the Registration Statement (the "Effective Date");
(v) a search of the United States Copyright Office
records relevant to ownership of any and all
copyrighted material (including, without limitation,
the copyright in, or license permitting the Company's
actual use of, the material licensed or otherwise
distributed by the Company and listed on Schedule 3
annexed hereto and hereby incorporated by reference
herein (collectively, the "Copyrighted Material")),
owned, purportedly owned or licensed by the Company
conducted by _____________________ and certified as
true and correct as of __________________, 1998 (no
earlier than 5 days prior to the Effective Date);
(vi) an intellectual property litigation search with
respect to all Trademarks, Licenses and Copyrighted
Material, listed on Schedules 1, 2 and 3,
respectively;
(vii) a search of the Uniform Commercial Code ("UCC")
recordation offices, in the following jurisdictions
-- [New York, New Jersey, Delaware and ________],
with respect to the following two categories of
general intangibles:
(a) the intellectual property general intangibles of
the Company, including, without limitation, the
Company's, inventions, know how, trademarks, service
marks, copyrights, service and trade names,
intellectual property licenses and other rights, and
(b) the intellectual property general intangibles
licensed to the Company, including, without
limitation, inventions, know how, trademarks, service
marks, copyrights, service and trade names and other
intellectual property rights licensed to the Company
pursuant to the Licenses (listed on Schedule 2),
said search certified to us as complete and accurate by
________________ and current through ________________________,
1998 (no earlier than 5 days prior to the Effective Date) and
said jurisdictions being the only jurisdictions in which
filing of UCC financing statements or other documents may be
filed to effectively evidence a security or other interest in
said general intangibles; and
(viii) any and all records, documents, instruments and
agreements in our possession or under our control
relating to the Company.
We have also examined such corporate records, documents,
instruments and agreements, and inquired into such other matters, as we have
deemed necessary or appropriate as a basis for the opinions set forth herein.
Whenever our opinion herein is qualified by the phrase "to the best of our
knowledge" or "to the best of our knowledge, after due inquiry," such language
means that, based upon (i) our inquiries of officers of the Company, (ii) our
review of the Documents, and (iii) our review of such other corporate records,
D-2
documents, instruments and agreements described in the first sentence of this
paragraph, we believe that such opinions are factually correct.
To the best of our knowledge, as to all matters of fact
represented to you by the Company, we advise you that nothing has come to our
attention that would cause us to believe that such facts are incorrect,
incomplete or misleading or that reliance thereon is not warranted under the
circumstances. We call to your attention that our opinion is limited to such
facts as they exist on the date hereof and do not take into account any change
of circumstances, fact or law subsequent thereto.
Based upon and subject to the foregoing, we are of the
opinion that:
1. To the best of our knowledge, after due inquiry,
except as described in the Memorandum, the Company owns or has
the right to use, free and clear of all liens, encumbrances,
pledges, security interests, defects or other restrictions or
equities of any kind whatsoever,
(i) all trademarks and service marks (including,
without limitation, the Trademarks),
(ii) all copyrights (including, without limitation,
the Copyrighted Material),
(iii) all service and trade names, and
(iv) all intellectual property licenses (including,
without limitation, the Licenses),
used in, or required for, the conduct of the Company's
business.
2. To the best of our knowledge, after due inquiry,
the Company possesses all material intellectual property
licenses or rights used in, or required for, the conduct of
its business (including, the Licenses and without
limitation, any such licenses or rights described in the
Registration Statement as being owned, possessed or licensed
by the Company), such licenses and rights are in full force
and effect, and the Company's products, methods and services
do not infringe any unlicensed intellectual property of any
third parties.
3. To the best of our knowledge, after due inquiry,
there is no claim, action, or opposition pending, threatened
or potential, which affects or could affect the rights of the
Company with respect to any trademarks, service marks,
copyrights, service names, trade names, or licenses used in,
or required for, the conduct of the Company's business, and
all trademarks, service marks, copyrights, service names,
tradenames and patents, owned or licensed to the Company are
valid.
D-3
4. To the best of our knowledge, after due inquiry,
there is no intellectual property based claim or action,
pending, threatened or potential, which affects or could
affect the rights of the Company with respect to any products,
services, processes or licenses, including, without
limitation, the Licenses used in the conduct of the Company's
business.
5. To the best of our knowledge, after due inquiry,
except as described in the Registration Statement, the Company
is not under any obligation to pay royalties or fees to any
third party with respect to any material, technology or
intellectual properties developed, employed, licensed or used
by the Company.
6. To the best of our knowledge, after due inquiry,
the statements in the Memorandum under the headings, "Risk
Factors - Protection of Intellectual Property" are accurate in
all material respects, fairly represent the information
disclosed therein and do not omit to state any fact necessary
to make the statements made therein complete and accurate.
7. To the best of our knowledge, after due inquiry,
the statements in the Registration Statement do not contain
any untrue statement of a material fact with respect to the
intellectual property position of the Company or omit to state
any material fact relating to the intellectual property
position of the Company which is required to be stated in the
Registration Statement or is necessary to make the statements
therein not misleading.
We call your attention to the fact that the members of this
firm are licensed to practice law in the State of ______________ and before the
United States Patent and Trademark Office as Registered Patent Attorneys.
Accordingly, we express no opinion with respect to the laws, rules and
regulations of any jurisdictions other than the State of ___________ and the
United States of America.
The opinions expressed herein are for the sole benefit of,
and may be relied upon only by All-Tech Investment Group, Inc. and Orrick,
Herrington & Sutcliffe LLP.
Very truly yours,
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