Exhibit 1.1
___________, 2006
Public Securities, Inc.
300 North Argonne Road
Suite 202
Spokane, Washington 99212
Gentlemen:
Newtown Lane Marketing, Incorporated, a Delaware corporation (the "Company"),
with principal offices located at 33 Newtown Lane, East Hampton, New York 11937,
has an authorized capitalization of 100,000,000 shares of Common Stock, $.001
par value. The Company proposes to issue and sell through Public Securities,
Inc., (the "Underwriter") a minimum of 500,000 Shares and a maximum of 1,000,000
Shares at the offering price of $0.40 per share. The Shares are being offered on
a "best efforts, minimum or maximum" basis
The Company wishes to confirm as follows its agreements with you.
1. Certain Definitions
The following shall constitute the definitions of certain terms used in
this Agreement:
(a) "Underwriter" shall refer to Public Securities, Inc. and members of
a selling group (which group may include the Underwriter) or such
other associate underwriters as it may deem necessary as long as
such underwriters or members of the selling group are members of the
NASD.
(b) "Company" shall refer to Newtown Lane Marketing, Incorporated, its
affiliates, and subsidiaries.
(c) "Commission" shall refer to the Securities and Exchange Commission.
(d) "Act" shall refer to the Securities Act of 1933 as amended.
(e) "Regulations" shall refer to the rules and regulations of the
Commission.
(f) "Share(s)" shall refer to the shares of the Company's Common Stock,
$0.001 par value being registered pursuant to the Registration
Statement. The Shares are being offered on a "best efforts, minimum
or maximum" basis.
(g) "Effective Date" shall be the first date upon which the Registration
Statement filed pursuant to this Agreement is declared effective by
the Commission, i.e., the date when the Shares may be offered for
sale to the public.
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(h) "Registration Statement" shall refer to the Registration Statement,
Form SB-2 (File No.333-XXXXXXXX) filed for the proposed sale of the
Shares, including any related preliminary prospectus, exhibits and
financial statements as finally amended and revised prior to the
Effective Date or as may be amended after the Effective Date. 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, any schedules, exhibits and all other documents and
information filed as a part thereof or that may be incorporated
therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Rules and
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 Rules and Regulations, is
hereinafter called the "Prospectus.
(i) "NASD" shall refer to the National Association of Securities
Dealers, Inc.
(j) "Initial Closing Date" shall refer to such date that the proceeds
from the offering of the Shares sold by the Underwriter and received
by the Escrow Agent equals at least $200,000, but not more than
$400,000, and the Company and the Underwriter have determined that
funds should be released from Escrow and the offering is not yet
closed. "Final Closing Date" shall refer to such date that the
cumulative proceeds from the offering of the Shares sold by the
Underwriter and received by the Escrow Agent does not exceed
$400,000, and the Company and the Underwriter have determined that
the terms and conditions of the offering have been completed and the
offering should be closed.
(k) "Material" shall refer to the definitions of "Material" under
Generally Accepted Accounting Principles, Regulation S-X of the
Securities Exchange Act of 1934, as well as judicial interpretations
of such term.
2. Underwriter's Compensation
(a) The Company hereby appoints the Underwriter as its exclusive agent
during the continuance of the authorization hereunder to sell and
obtain purchasers for 1,000,000 Shares at a public offering price of
$0.40 per Share and at an aggregate public offering price of
$400,000 on a "best efforts, minimum or maximum basis." Unless
500,000 Shares are sold and payment received by the Company
therefore within 180 days from the Effective Date, no Shares will be
sold, and in that event the Underwriter will not receive any of the
commissions mentioned, but will be entitled to all accountable
out-of-pocket expenses, not to exceed $XXXXXX. Such exclusive agency
shall be good and irrevocable unless and until terminated as
hereinafter set forth.
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(1) If the sale of the Shares by the Underwriter is not
consummated for any reason not attributable to the
Underwriter, or if (i) the Company unilaterally withdraws the
Registration Statement or does not proceed with the public
offering for reasons other than the Underwriter's failure to
comply with or perform the obligations required by its
representations, covenants or agreements hereunder , or (ii)
the representations in Section 3 hereof are not correct or the
covenants cannot be complied with, or (iii) there has been a
materially adverse change in the condition, prospects or
obligations of the Company or a materially adverse change in
stock market conditions from current conditions, or (iv) the
"road show" presentation produced a negative affect on the
intended syndicate members, the Company will reimburse the
Underwriter for its accountable expenses up to a maximum of
$XXXXX, but any funds remaining unused from a $XXXXX advance
to be paid upon signing of this Agreement, will be returned to
the Company.
(b) Subject to the filing and the becoming effective of a post-effective
amendment to the Registration Statement and a prospectus disclosing
this Agreement in compliance with the provisions of the Act and the
availability for sale to the public, pursuant to law, of the offered
Shares and subject to the fulfillment of all of the obligations of
the Company and compliance with all of the terms and conditions
thereof by the Company in all material respects and in reliance upon
the warranties, representations and covenants made by the Company
herein, the Underwriter accepts the foregoing exclusive agency and
agrees to use its best efforts during the term of the this Agreement
and the continuance of the authorization provided herein to sell the
offered Shares when and as issuable at the public offering price set
forth above; and to make such public offering at such time as
Underwriter so determines and after the following have been
completed:
(1) a post effective amendment to Registration Statement and
prospectus disclosing this Agreement has become effective.
(2) Approval of offering by the NASD.
(3) Blue Sky clearance from the states required by Underwriter and
listed on Exhibit A attached to this Agreement.
(4) Shares and/or Certificates are available for public offering.
(5) Company furnishes Underwriter with sufficient number of
prospectuses.
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(c) As compensation for the services of the Underwriter herein, the
Company shall allow the Underwriter, subject to the sale and receipt
of funds for 500,000 Shares minimum and 1,000,000 Shares maximum to
be offered herein, a sales commission of ten percent (10%) of the
public offering price on all offered Shares actually sold hereunder.
The Underwriter may organize a selling group (which group may
include the Underwriter) or associate itself with such other
Underwriters as it may deem necessary as long as such underwriters
or members of the selling group are members of the NASD for the
purpose of distributing the offered Shares and in such event, the
Underwriter may allow to members of such selling group, or such
other underwriters, such part of the aforementioned commission or
discount as it may, in its sole discretion determine. Shares sold by
members of the selling group may only be sold at the price of $0.40
per Share. The Underwriter shall be paid a non-accountable expense
allowance of two percent (2%) of the public offering price on all
Shares sold (of which $XXXXXX will be pre-paid by the Company to the
Underwriter as of the date of this letter) and granted warrants to
purchase up to 100,000 shares of Common Stock for $100, having an
exercise price equal to 140% of the Public Offering price, at the
rate of one Underwriter's warrant for every ten Shares sold in this
offering (the "Underwriter's Common Stock Purchase Warrant")subject
to the sale of the minimum number of Shares.
(1) Underwriter's Common Stock Purchase Warrant: At the Final
Closing Date, the Company will sell to the Underwriter for a
purchase price of $100, warrants to purchase shares at 140% of
the offering price of the Shares (the "Underwriter's Common
Stock Purchase Warrant" or "Underwriter's Warrants") in the
form attached as Exhibit B. The total number of shares which
may be purchased on the exercise of the Underwriter's Warrants
will be 10% of the Shares sold in the offering. The
Underwriter's Warrants shall be non-exercisable and
nontransferable for a period of twelve (12) months after the
effective date of post-effective amendment to the Registration
Statement disclosing this Agreement.
The Company and the Underwriter agree that, prior to the
effective date of post-effective amendment to the Registration
Statement disclosing this Agreement, the Underwriter may
designate that the Underwriter's Warrants be issued in varying
amounts directly to its officers and not to the Underwriter,
and to other Underwriters and their designees, provided that
such designation will only be made by the Underwriter if it
determines that such issuances would not violate the
interpretation of the Board of Governors of the NASD. The
Underwriter has disclosed to the Company, and the Company has
agreed, that the Underwriter may transfer, after twelve (12)
months from the date of the Underwriter's Warrants, a portion
or all of the Underwriter's Warrants to certain persons,
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including, but not limited to, the Underwriter's officers,
directors, shareholders, employees, or registered
representatives. The Underwriter and the Company agree that
such transfers will only be made if they do not violate the
registration provisions of the Act and the Underwriter will
deliver an opinion of counsel to that effect to the Company.
The Company agrees that if, at any time during the term of the
Underwriter's Warrants, it should file a Registration
Statement with the Commission pursuant to the Act (or file a
Notification on Form l-A) under the Act for a public offering
of equity securities for cash, either for the account of the
Company or Selling Shareholders, or in the event that Company
Counsel is unable to furnish the opinion letter under section
7(b)(i)(L), then upon the demand of the Underwriter the
Company will at its own expense, except commissions, offer to
the then holder(s) of Underwriter's Warrants the opportunity
to register the resale of the shares underlying the
Underwriter's Warrants for public offering.
In addition to the rights above provided, the Company will
cooperate with the then holder(s) of the Underwriter's
Warrants and shares issued upon the exercise of the
Underwriter's Warrants in preparing and signing any
Registration Statement or Notification, in addition to the
Registration Statement and Notifications discussed above,
required in order to sell or transfer the aforesaid
Underwriter's Warrants and/or underlying shares and will use
its best efforts to supply all information required therefore.
3. Representations and Warranties of the Company. As material inducements to
the Underwriter to enter into this Agreement, the Company hereby
represents and warrants to, and agrees with the Underwriter which
representations, warranties and agreements shall survive the Initial and
Final Closings, as follows:
(a) The Company has prepared and filed with the Commission a
registration statement, and an amendment or amendments thereto, on
Form SB-2 (No. 333-XXXXXX), including any related preliminary
prospectus ("Preliminary Prospectus"), for the registration of the
Shares, under the Act, which registration statement and amendment or
amendments have been prepared by the Company in conformity in all
material respects with the requirements of the Act, and the Rules
and Regulations, a copy of which has been delivered to the
Underwriter. The Company will promptly file a further amendment to
said registration statement in the form heretofore delivered to the
Underwriter and will not file any other amendment thereto to which
the Underwriter shall have objected verbally or in writing after
having been furnished with a copy thereof.
Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any Prospectus or the
Registration Statement and no proceeding for an order suspending the
effectiveness of the Registration Statement or any of the Company's
Shares has been instituted or is pending or threatened. Each such
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Prospectus and/or any supplement thereto has conformed in all
material respects with the requirements of the Act and the Rules and
Regulations and on its date did not include any untrue statement of
a material fact or omit to state a material fact necessary to make
the statements therein not misleading, in light of the circumstances
under which they were made ; provided, however, that no
representations, warranties or agreements are made hereunder as to
information contained in or omitted from the Prospectus in reliance
upon, and in conformity with, the written information furnished to
the Company by you as set forth in Section 2(c) above.
(c) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its
incorporation, with full power and authority (corporate and other)
to own its properties and conduct its businesses as described in the
Prospectus and is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which the
nature of its business or the character or location of its
properties requires such qualification, except where the failure to
so qualify would not have a material adverse effect on the business,
properties or operations of the Company and the subsidiaries as a
whole.
(d) The Company has full legal right, power and authority to authorize,
issue, deliver and sell the Shares, to enter into this Agreement, to
grant the Underwriter's Common Stock Purchase Warrant dated as of
the Final Closing Date to be exercised and delivered by the Company
to the Underwriter (the "Underwriter's Common Stock Purchase Warrant
Agreement"), and to consummate the transactions provided for in such
agreements, and each of such agreements has been duly and properly
authorized, and on the Final Closing Date will be duly and properly
executed and delivered by the Company. This Agreement constitutes
and on the Final Closing Date the Underwriter's Common Stock
Purchase Warrant will then constitute valid and binding agreements,
enforceable in accordance with their respective terms (except as the
enforceability thereof may be limited by bankruptcy or other similar
laws affecting the rights of creditors generally or by general
equitable principles and except as the enforcement of
indemnification or contribution provisions may be limited by federal
or state securities laws or principles of public policy).
(e) Except as disclosed in the Prospectus, the Company is not in
violation of its respective certificate or articles of incorporation
or bylaws or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in
any material bond, debenture, note or other evidence of indebtedness
or in any material contract, indenture, mortgage, loan agreement,
lease, joint venture, partnership or other agreement or instrument
to which the Company is a party or by which it may be bound or is
not in material violation of any law, order, rule, regulation, writ,
injunction or decree of any governmental instrumentality or court,
domestic or foreign; and the execution and delivery of this
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Agreement, the Underwriter's Common Stock Purchase Warrant and the
consummation of the transactions contemplated therein and in the
Prospectus and compliance with the terms of each such agreement will
not conflict with, or result in a material breach of any of the
terms, conditions or provisions of, or constitute a material default
under, or result in the imposition of any material lien, charge or
encumbrance upon any of the property or assets of the Company
pursuant to, any material bond, debenture, note or other evidence of
indebtedness or any material contract, indenture, mortgage, loan
agreement, lease, joint venture, partnership or other agreement or
instrument to which the Company is a party nor will such action
result in the material violation by the Company of any of the
provisions of its respective certificate or articles of
incorporation or bylaws or any law, order, rule, regulation, writ,
injunction, decree of any government, governmental instrumentality
or court, domestic or foreign, except where such violation will not
have a material adverse effect on the financial condition of the
Company.
(f) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus and the Company will have the
adjusted capitalization set forth therein on the Initial and Final
Closing Date; all of the shares of issued and outstanding capital
stock of the Company set forth therein have been duly authorized,
validly issued and are fully paid and nonassessable; the holders
thereof do not have any rights of rescission and are not subject to
personal liability for any obligations of the Company by reason of
being stockholders under the laws of the State in which the Company
is incorporated; none of such outstanding capital stock is subject
to or was issued in violation of any preemptive or similar rights of
any stockholder of the Company; and such capital stock (or
derivative securities thereof) conforms in all material respects to
all statements relating thereto contained in the Prospectus.
(g) 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 shares, except for this Agreement
or as described in the Prospectus. The Shares, and the shares
issuable upon exercise of the Underwriter's Common Stock Purchase
Warrant 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 in all material respects to the respective descriptions
thereof contained in the Prospectus; except for payment of the
applicable purchase price paid upon exercise of the options or
warrants, as the case may be, 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 Shares and the shares issuable upon exercise of the
Underwriter's Common Stock Purchase Warrant has been duly and
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validly taken; and the certificates representing the Shares and
shares issuable upon exercise of the the Underwriter's Common Stock
Purchase Warrant will be in due and proper form. Upon the issuance
and delivery pursuant to the terms hereof of the shares issuable
upon exercise of the Underwriter's Common Stock Purchase Warrant to
be granted by the Company hereunder, the Underwriter will acquire
good and marketable title to such shares free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or
other restriction of any kind whatsoever other than restrictions as
may be imposed under applicable securities laws.
(h) The Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of
all liens, charges, encumbrances or restrictions, except such as are
described or referred to in the Prospectus or which are not
materially significant or important in relation to its business or
which have been incurred in the ordinary course of business; except
as described in the Prospectus all of the leases and subleases under
which the Company holds properties or assets as lessee or sublessee
as described in the Prospectus are in full force and effect, and the
Company is not in material default in respect of any of the terms or
provisions of any of such leases or subleases, and no claim has been
asserted by anyone adverse to the Company's rights as lessor,
sublessor, lessee or sublessee under any of the leases or subleases
mentioned above or affecting or questioning the Company's right to
the continued possession of the leased or subleased premises or
assets under any such lease or sublease; and the Company owns or
leases all such properties as are necessary to its operations as now
conducted and as contemplated to be conducted, except as otherwise
stated in the Prospectus.
(i) The financial statements, together with related notes, set forth in
the Prospectus in all material respects fairly present the financial
position and results of operations of the Company at the respective
dates and for the respective periods to which they apply. Said
statements and related notes have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a basis
which is consistent in all material respects during the periods
involved. Any "stub" period has not been audited by an independent
accounting firm, but was prepared in accordance with GAAP. There has
been no material adverse change or material development involving a
prospective change in the condition, financial or otherwise, or in
the prospects, value, operation, properties, business or results of
operations of the Company whether or not arising in the ordinary
course of business considered as a whole, since the date of the
financial statements included in the Registration Statement and the
Prospectus.
(j) Subsequent to the respective dates as of which information is given
in the Prospectus as it may be amended or supplemented, and except
as described in the Prospectus, the Company has not, directly or
indirectly, incurred any liabilities or obligations, direct or
contingent, not in the ordinary course of business or entered into
any transactions not in the ordinary course of business, which are
material to the business of the Company as a whole and there has not
been any change in the capital stock of, or any incurrence of long
term debts by, the Company or any issuance of options, warrants or
rights to purchase the capital stock of the Company or declaration
or payment of any dividend on the capital stock of the Company or
any material adverse change in the condition (financial or other),
net worth or results of operations of the Company as a whole.
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(k) To the knowledge of the Company, there is no pending or threatened,
action, suit or proceeding to which the Company is a party before or
by any court or governmental agency or body, which might result in
any material adverse change in the condition (financial or other),
business or prospects of the Company as a whole or might materially
and adversely affect the properties or assets of the Company as a
whole nor are there any actions, suits or proceedings against the
Company related to environmental matters or related to
discrimination on the basis of age, sex, religion or race which
might be expected to materially and adversely affect the conduct of
the business, property, operations, financial condition or earnings
of the Company as a whole; and no labor disturbance by the employees
of the Company individually exists or is, to the knowledge of the
Company, imminent which might be expected to materially and
adversely affect the conduct of the business, property, operations,
financial condition or earnings of the Company as a whole.
(l) Except as may be disclosed in the Prospectus, the Company has
properly prepared and filed all necessary federal, state, local and
foreign income and franchise tax returns, or if not filed, has
obtained all necessary extensions, has paid all taxes shown as due
thereon, has established adequate reserves for such taxes which are
not yet due and payable, and does not have any material tax
deficiency or claims outstanding, proposed or assessed against it.
(m) The Company has sufficient licenses, permits, right to use trade or
service marks and other governmental authorizations currently
required for the conduct of its business as now being conducted and
as contemplated to be conducted and the Company is in all material
respects complying therewith. Except as set forth in the Prospectus,
the expiration of any such licenses, permits, or other governmental
authorizations would not materially affect the Company's operations.
To its knowledge, none of the activities or businesses of the
Company are in material violation of, or cause the Company to
materially violate any law, rule, regulations, or order of the
United States, any state, county or locality, or of any agency or
body of the United States or of any state, county or locality.
(n) The Company has not in the last five years (i) made any
contributions to any candidate for political office in violation of
law, or failed to disclose fully any such contribution, or (ii) made
any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi
public duties, other than payments required or allowed by applicable
law.
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(o) Except as set forth in the Prospectus the Company knows of no
outstanding claims for services either in the nature of a finder's
fee, brokerage fee or otherwise with respect to this financing for
which the Company or the Underwriter may be responsible or which to
the knowledge of the Company, may affect the Underwriter's
compensation.
(p) The Company has its property adequately insured against loss or
damage by fire and maintains such other insurance as is customarily
maintained by companies in the same or similar business.
(q) The Underwriter's Warrants herein described are duly and validly
authorized and upon delivery to the Underwriter in accordance
herewith will be duly issued and legal, valid and binding
obligations of the Company, except as the enforceability thereof may
be limited by bankruptcy or other similar laws affecting the rights
of creditors generally or by equitable principles, and except as the
enforcement of indemnification provisions may be limited by federal
or state securities laws. The Underwriter's securities issuable upon
exercise of any of the Underwriter's Common Stock Purchase Warrant
have been duly authorized, and when issued upon payment of the
exercise price therefor, will be validly issued, fully paid and
nonassessable.
(r) Except as set forth in the Prospectus, no default exists in the due
performance and observance of any term, covenant or condition of any
material license, contract, indenture, mortgage, installment sale
agreement, lease, deed of trust, voting trust agreement,
stockholders 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.
(s) To the best of the Company's knowledge it has generally enjoyed a
satisfactory employer-employee relationship with its employees and,
to the best of its knowledge, is in substantial compliance in all
material respects with all federal, state, local, and foreign laws
and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours. To the best
of the Company's knowledge, 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. To the best of the
Company's knowledge, there is no unfair labor practice charge or
complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown
or stoppage pending or threatened against or to its knowledge
involving the Company, or any predecessor entity, and none has ever
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occurred. To the best of the Company's knowledge, no representation
question is pending respecting the employees of the Company, and no
collective bargaining agreement or modification thereof is currently
being negotiated by the Company. To the best of the Company's
knowledge, no grievance or arbitration proceeding is pending or to
its knowledge threatened under any expired or existing collective
bargaining agreements of the Company. No labor dispute with the
employees of the Company is pending, or, to its knowledge is
imminent; and the Company is not aware of any pending or imminent
labor disturbance by the employees of any of its principal
suppliers, manufacturers or contractors which may result in any
material adverse change in the condition, financial or otherwise, or
in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the
Company.
(t) Except as may be set forth in the Registration Statement, 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(l) 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
Internal Revenue Code (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
material 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
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."
(u) None of the Company, or any of its employees, directors,
stockholders, or affiliates (within the meaning of the Rules and
Regulations) 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
Shares, Underwriter's Common Stock Purchase Warrant, or otherwise.
(v) None of the patents, patent applications, trademarks, service marks,
trade names, copyrights, licenses, intellectual property of any
kind, and rights to the foregoing presently owned or held by the
Company, are in dispute or, to the best knowledge of the Company's
management or Counsel are in any conflict with the right of any
other person or entity. The Company (i) except as disclosed in the
Prospectus, has received no notice with respect to any patent,
trademark, service mark, trade name, copyright, technology, or
intellectual property that it owns or has the right to use, and that
are used in the conduct of its business as now conducted or proposed
to be conducted, infringes upon or is adverse to the right or
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claimed right of any person, corporation or other entity under or
with respect to any of the foregoing; and (ii) except as set forth
in the Prospectus or otherwise disclosed to the Underwriter in
writing, to the best knowledge of the Company's management is not
obligated or under any liability whatsoever to make any material
payments 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, intellectual
property of any kind, or other intangible asset, with respect to the
use thereof or in connection with the conduct of its business or
otherwise. There is no suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental or other proceeding,
domestic or foreign, pending or, to the best of the Company's
knowledge, threatened (or circumstances that may give rise to the
same) against the Company which challenges the rights of the Company
with respect to any trademarks, trade names, service marks, service
names, copyrights, patents, patent applications, licenses,
intellectual property of any kind or rights to the foregoing used in
the conduct of its business.
(w) Except as disclosed in the Prospectus the Company owns and has
adequate right to use to the best knowledge of the Company's
management all trade secrets, patent, trademark, service mark, trade
name, copyright ,"know-how" (including all other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), inventions, designs, processes, works of authorship,
computer programs and technical data and information (collectively
herein "intellectual property") required for or incident to the
development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company, free and clear
of and without violating any right, lien or claim of others,
including without limitation, former employers of its employees. The
Company is not aware of any such development of similar or identical
trade secrets or technical information by others the existence of
which would cause a material adverse affect to the Company's
business taken as a whole. The Company has valid and binding
employment agreements with all of its officers (subject to the
equitable powers of any court), which agreements have remaining
terms of at least two years from the effective date of the
Registration Statement except where the failure to have such
agreements would not materially and adversely effect the Company's
business taken as a whole.
(x) Malone & Bailey, PC, independent registered public accountants,
whose independent auditor report was 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.
(y) The Company has agreed to cause to be duly executed, agreements
pursuant to which each of the Company's officers, directors,
consultants, and holders of more than 5% of the outstanding Common
Page -12-
Stock calculated as of the date immediately preceding the
commencement of the public offering, and any person or entity deemed
to be an affiliate of the Company pursuant to SEC Rules and
Regulations, has agreed not to, directly or indirectly, sell,
assign, transfer, or otherwise 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) for a period commencing on the effective
date until after 180 days from the Final Closing date of the
offering, unless the price of the Common Stock, adjusted for any
splits, trades at 175% of the public offering price for 20
consecutive days. Any shares of common stock released from the
foregoing restrictions will remain restricted Shares subject however
to the resale provisions of Rule 144, insider trading rules, and
insider reporting rules.
Shares issued upon the exercise of any options held by the Company's
officers, directors or holders of 5% or more of the Company's Common
Stock, shall be locked up in accordance with the terms of the
preceding paragraph.
The Company will cause the Transfer Agent, as defined below, to mark
an appropriate legend on the face of stock certificates representing
all of such shares and to place "stop transfer" orders on the
Company's stock ledgers. The Company president or CEO, and the
Underwriter will have their signatures on the lock-up agreements.
The Company also agrees that it will not release any shares subject
to this Agreement without the signatures of all parties referred to.
(z) The Company shall cooperate with the Underwriter to effect such
additional and further actions necessary to have the Shares approved
for listing on NASDAQ or the Bulletin Board Exchange
(aa) Except as set forth in the Prospectus or disclosed in writing to the
Underwriter (which writing specifically refers to this Section), no
officer or director of the Company, holder of 5% or more of Shares
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" or disclosed in writing to the
Underwriter (which writing specifically refers to this Section)
Page -13-
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, principal stockholder of the Company, or any partner,
affiliate or associate of any of the foregoing persons or entities.
(bb) Any certificate signed by any officer of the Company, and delivered
to the Underwriter or to the Underwriter's counsel (as defined
herein) shall be deemed a representation and warranty by the Company
to the Underwriter as to the matters covered thereby.
(cc) Each of the minute books of the Company has been made available to
the Underwriter and contains a complete summary of all meetings and
actions of the directors and stockholders of the Company, since the
time of its incorporation and reflect all transactions referred to
in such minutes accurately in all respects.
(dd) Except as described or referenced in the Prospectus or disclosed in
writing to the Underwriter (which writing specifically refers to
this Section), no holders of any shares of the Company or of any
options, warrants or other convertible or exchangeable securities of
the Company have the right to include any shares 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 shares of the Company.
Except as disclosed in the Prospectus, all rights so described or
disclosed have been waived or have not been triggered with respect
to the transactions contemplated by this Agreement and the
Underwriter's Common Stock Purchase Warrant (including the
securities issuable thereunder).
(ee) The Company has not entered into any employment agreements with its
executive officers, except as disclosed in the Prospectus.
(ff) 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 Registered
Securities pursuant to the Prospectus and the Registration
Statement, the issuance of the Underwriter's Common Stock Purchase
Warrant, the performance of this 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
Shares, and the Underwriter's Common Stock Purchase Warrant, except
such as have been or may be obtained under the Act, otherwise or may
be required under state securities or "blue sky" laws in connection
with the Underwriter's purchase and distribution of the Shares and
the Underwriter's Common Stock Purchase Warrant to be sold by the
Company hereunder or may be required by the Rules of the National
Association of Shares Dealer, Inc. ("NASD").
(gg) 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
Page -14-
which it may be bound or to which its assets, properties or
businesses 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 the
Company, in accordance with their respective 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 SB-2, 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.
(ii) Within the past five (5) years, none of the Company's independent
public accountants has brought to the attention of the Company's
management any "material weakness" as defined in the Statement of
Auditing Standard No. 60 in any of the Company's internal controls.
(jj) Except as otherwise may be indicated herein or disclosed to the
Underwriter in writing, from the date hereof to a date as of the
post-effective date of the Registration Statement, the Company will
not: (1) issue any securities or incur any liability or obligation
direct or contingent, for borrowed money, or (2) enter into any
material transactions not in the ordinary course of business, or (3)
declare or pay any dividend on its stock.
4. Escrow Account.
(a) Notwithstanding anything contained herein to the contrary, unless
the Underwriter shall sell 500,000 Shares, none of the Shares will
be distributed to the public. The Underwriter agrees to open an
appropriate interest-bearing Impound Account maintained at XXXXXXX
Bank, NA, New York, New York for all monies received from the sale
of these Shares. Such monies shall be deposited in full without any
deductions for commissions and/or expenses. In the event that less
than 500,000 Shares are sold and paid for within 180 days from the
date the Underwriter commences the sale of said Shares, the proposed
offering herein will be withdrawn and the sums paid will be returned
in full to each such purchaser, plus interest, without deduction
therefrom.
(b) Appropriate arrangements will be made by the Underwriter to provide
for the receipt of funds from the subscribers of the Shares and to
provide for the disposition thereof in accordance with the
provisions of this Agreement.
(c) Unless the Underwriter shall have sold 500,000 Shares, it shall not
be entitled to receive any commission (except accountable
out-of-pocket expenses as stated hereinafter).
Page -15-
(d) The Underwriter shall comply in all respects with the requirements
of Rule 15c2-4 of the rules and regulations made by the Commission
under the Securities Exchange Act of 1934, as amended. The
Underwriter shall deposit, by 12:00 noon the following business day,
the proceeds of the sale of the offered Shares in an Escrow bank
account, as agent for the Company, and the same shall be held in
such bank account by the bank until the Initial Closing Date, and
upon such Initial Closing Date, the said funds (less the
commissions, expenses and fees due to the Underwriter) shall be
promptly transmitted to the Company, who shall at said time provide
such documents, certificates, receipts and any and all other papers
or instruments as counsel for the Underwriter may reasonably deem
necessary or appropriate under the circumstances. The Escrow shall
continue until the Final Closing Date, at which time said funds
(less the commissions, expenses and fees due to the Underwriter)
shall be promptly transmitted to the Company, who shall at said time
provide such documents, certificates, receipts and any and all other
papers or instruments as counsel for the Underwriter may reasonably
deem necessary or appropriate under the circumstances, and the
Escrow shall terminate.
5. Sale of the Shares - Selected Dealers
(a) In offering the Shares for sale, the Underwriter shall offer it
solely as agent for the Company and such offer shall be made upon
the terms and subject to the conditions set forth in the
Registration Statement and Prospectus. The Underwriter shall
commence making such offer as agent for the Company) after all
conditions of this Agreement have been satisfied.
(b) The Underwriter may offer and sell the Shares for the Company's
account through registered dealers selected by it, except that only
members of the NASD may be included in the selling group pursuant to
a form of Selling Agreement pursuant to which it may allow such
concession (out of its underwriting commission) as it may determine,
within the limits set forth in the Registration Statement and
prospectus, but all such sales through selected dealers shall be
made by the Company acting through the Underwriter as agent, and not
by the Underwriter for its own account. All sales through selected
dealers shall be as agents for the accounts of their customers, and
the Underwriter shall not have authority to employ such dealers as
agents for the Company.
(c) On each sale by the Underwriter of any of the Shares to selected
dealers, the Underwriter shall require the selected dealer
purchasing any such Shares to agree to reoffer the same on the terms
and conditions of offering set forth in the prospectus and to comply
with all Commission requirements that the Underwriter is required to
comply with and not to offer or sell the offered Shares to the
Public or to any broker/dealer not a member of the NASD, including
foreign broker/dealer registered pursuant to the Securities Act of
1934, at a price of less than $0.40 per Share.
Page -16-
(d) With respect to residents of California, the Underwriter agrees that
the subscription documents used to evidence the sale of any Shares
to a California resident will specifically contain the following
suitability standards: "I am a California resident and I have 1) a
minimum net worth of at least $75,000 and minimum gross income of
not less than $50,000 or 2) a liquid net worth of $150,000 in both
instances exclusive of my home, home furnishings and automobile. My
investment in these securities will not exceed ten percent (10%) of
my net worth. In lieu of the foregoing, please consider me a "small
investor" who, including the instant offering, has not purchased
more than $2,500 worth of the Company's securities in the past
twelve (12) months."
6. Covenants of the Company. The Company covenants and agrees with the
Underwriter as follows:
(a) It will cooperate in all respects in making the Prospectus effective
and will not at any time, whether before or after the effective
date, file any amendment to or supplement to the Prospectus of which
Underwriter shall not previously have been advised and furnished
with a copy or to which Underwriter or Underwriter's counsel shall
have reasonably objected or which is not in material compliance with
the Act and the Rules and Regulations or applicable state law.
(i) As soon as the Company is advised thereof, the Company will
advise Underwriter, and confirm the advice in writing, of the
receipt of any comments of the Commission or any state
securities department, when the Registration Statement 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, of the effectiveness of any
post-effective amendment to the Registration Statement or
Prospectus, or the filing of any supplement to the Prospectus
or any amended Prospectus, of any request made by the
Commission or any state securities department for amendment of
the Prospectus or for supplementing of the Prospectus or for
additional information with respect thereto, of the issuance
of any stop order suspending the effectiveness of the
Prospectus or any order preventing or suspending the use of
any Prospectus or any order suspending trading in the Common
Stock of the Company, or of the suspension of the
qualification of the Shares, or of the institution of any
proceedings for any such purposes, and will use its best
efforts to prevent the issuance of any such order and, if
issued, to obtain as soon as possible the lifting or dismissal
thereof.
(ii) The Company will or has caused to be delivered to the
Underwriter copies of such Prospectus, and the Company has
consented and hereby consents to the use of such copies for
the purposes permitted by law. The Company authorizes the
Page -17-
Underwriter and the dealers to use the Prospectus and such
copies of the Prospectus in connection with the sale of the
Shares for such period as in the opinion of Underwriter's
counsel and the Company's counsel the use thereof is required
to comply with the applicable provisions of the Act and the
Rules and Regulations. The Company will prepare and file with
the states, promptly upon the Underwriter's request, any such
amendments or supplements to the Prospectus, and take any
other action, as, in the opinion of Underwriter's counsel, may
be necessary or advisable in connection with the initial sale
of the Shares and will use its best efforts to cause the same
to become effective as promptly as possible.
(iii) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriter) or transmit the Prospectus by
a means reasonably calculated to result in filing with the
Commission pursuant to rule 424(b)(1) or pursuant to Rule
424(b)(3) 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.
(iv) In case of the happening, at any time within such period as a
Prospectus is required under the Act to be delivered in
connection with the initial sale of the Shares of any event of
which the Company has knowledge and which materially affects
the Company, or the securities thereof, and which should be
set forth in an amendment of or a supplement to the Prospectus
in order to make the statements therein not then misleading,
in light of the circumstances existing at the time the
Prospectus is required under the Act to be delivered, or in
case it shall be necessary to amend or supplement the
Prospectus to comply with the Act, the Rules and Regulations
or any other law, the Company will forthwith prepare and
furnish to the Underwriter copies of such amended Prospectus
or of such supplement to be attached to the Prospectus, in
such quantities as Underwriter may reasonably request, in
order that the Prospectus, as so amended or supplemented, will
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances under which they are made. The
preparation and furnishing of any such amendment or supplement
to the Prospectus or supplement to be attached to the
Prospectus shall be without expense to the Underwriter.
(v) The Company will to the best of its ability, comply with the
Act, the Exchange Act and applicable state securities laws so
as to permit the initial offer and sales of the Shares, under
the Act, the Rules and Regulations, and applicable state
securities laws.
Page -18-
(b) It will cooperate to qualify the Shares for initial sale under the
securities laws of such jurisdictions as designated by the
Underwriter and the Company and listed on Exhibit A and will make
such applications and furnish such information as may be required
for that purpose, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities. The
Company will, from time to time, prepare and file such statements
and reports as are or may be required to continue such qualification
in effect for so long as the Underwriter may reasonably request.
(c) So long as any of the Shares remain outstanding in the hands of the
public, the Company, at its expense, will annually furnish to its
shareholders a report of its operations to include financial
statements audited by independent public accountants, and will
furnish to the Underwriter as soon as practicable after the end of
each fiscal year, a balance sheet of the Company as at the end of
such fiscal year, together with statements of operations,
shareholders' equity, and changes in cash flow of the Company for
such fiscal year, all in reasonable detail and accompanied by a copy
of the certificate or report thereon of independent public
accountants.
(d) It will deliver to the Underwriter at or before the Initial Closing
Date three signed copies of the signature pages to the Registration
Statement, as well as any amendments thereto. The Company will
deliver to the Underwriter, from time to time until the effective
date of the Prospectus, as many copies of the Prospectus and
Registration Statement (including all financial statements and
exhibits filed therewith, whether or not incorporated by reference )
as well as any amendments thereto as the Underwriter may reasonably
request. The Company will deliver to the Underwriter on the
effective date of the Prospectus and thereafter for so long as a
Prospectus is required to be delivered under the Act and the Rules
and Regulations as many copies of the Prospectus, in final form, or
as thereafter amended or supplemented, as the Underwriter may from
time to time reasonably request.
(e) The Company will apply the net proceeds from the sale of the Shares
substantially in the manner set forth under "Use of Proceeds" in the
Prospectus. No portion of the proceeds shall be used, directly or
indirectly, to acquire any securities issued by the Company, without
the prior written consent of the Underwriter.
(f) As soon as it is practicable, but in any event not later than the
first (lst) day of the fifteenth (15th) full calendar month
following the effective date of the Registration Statement, the
Company will make available to its security holders and the
Underwriter an earnings statement (which need not be audited)
covering a period of at least twelve (12) consecutive months
beginning after the effective date of the Registration Statement,
which shall satisfy the requirements of Section 11(a) of the Act and
Rule 158(a) of the Rules and Regulations.
Page -19-
7. Conditions of Underwriter's Obligations. The Underwriter's obligation to
act as agent of the Company hereunder and to find purchasers for the
Shares and to make payment to the Company on the Initial and Final Closing
Dates is subject to the accuracy of and compliance with the
representations and warranties an the part of the Company herein as of the
date hereof and as of the Initial and Final Closing Dates, to the
performance by the Company of its obligations and covenants hereunder, to
the accuracy of certificates of the Company and officers of the Company to
be delivered pursuant to this Agreement, all as at the Final Closing Date,
and to the following further conditions:
(a) The Registration Statement shall have become effective as and when
cleared by the Commission, and the Underwriter shall have received
notice thereof, on or prior to any closing date no stop order
suspending the effectiveness of the Prospectus shall have been
issued and no proceedings for that or similar purpose shall have
been instituted or shall be pending, or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the Commission;
any request on the part of the Commission for additional information
shall have been complied with to the reasonable satisfaction of
counsel to the Underwriter; and qualification, under the securities
laws of such states as the Underwriter may designate, of the issue
and sale of the Securities upon the terms and conditions herein set
forth or contemplated and containing no provision unacceptable to
the Underwriter shall have been secured, and no stop order shall be
in effect denying or suspending effectiveness of such qualification
nor shall any stop order proceedings with respect thereto be
instituted or pending or threatened under such law.
(b) On the Final Closing Date and, with respect to the letter referred
to in subparagraph (iii), as of the date hereof, the Underwriter
shall have received:
(i) the opinion, together with such number of signed or facsimile
copies of such opinion as the Underwriter may reasonably
request, addressed to the Underwriter by Eaton & Van Winkle
LLP counsel for the Company, (who may rely on the opinion of
other counsel for certain legal matters), in form and
substance reasonably satisfactory to the Underwriter and
Charles A. Cleveland, P.S., counsel to the Underwriter, dated
each such closing date, to the effect that:
(A) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of
the jurisdiction in which it is incorporated and has all
necessary corporate power and authority to carry on its
business as described in the Prospectus.
(B) The Company is qualified to do business in each
jurisdiction in which conducting its business requires
such qualification, except where the failure to be so
qualified would not have a material adverse effect on
the Company's business or assets.
Page -20-
(C) The Company has the full corporate power and authority
to enter into this Agreement, the Underwriter's Common
Stock Purchase Warrant and to consummate the
transactions provided for therein and each such
Agreement has been duly and validly authorized, executed
and delivered by the Company. Each of this Agreement and
the Underwriter's Common Stock Purchase Warrant,
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, subject to
bankruptcy, insolvency or similar laws governing the
rights of creditors and to general equitable principles,
and provided that no opinion need be given as to the
enforceability of any indemnification or contribution
provisions, and to counsel's knowledge none of the
Company's execution or delivery of this Agreement, or
the Underwriter's Common Stock Purchase Warrant, 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 material breach or
violation of any of the terms or provisions of, or
constitutes or will constitute a material default under,
or result in the creation or imposition of any material
lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction of any kind
whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of (A)
the articles of incorporation or by-laws of the Company,
(B) to the knowledge of such counsel, any material
license, contract, indenture, mortgage, deed of trust,
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 (C) to the knowledge of such
counsel, any statute, judgment, decree, order, rule or
regulation applicable to the Company, whether domestic
or foreign.
(D) The Company has authorized and outstanding capital stock
as set forth in the Prospectus under the heading
"Capitalization" as of the date set forth therein, and
based on counsel's review of the Company's certificate
of incorporation and bylaws, minutes, consents, and upon
representations of the Company's officers, all of such
issued and outstanding shares of capital stock have been
duly and validly authorized and issued, and to the
Page -21-
knowledge of such counsel are fully paid and
nonassessable, and to the knowledge of such counsel no
stockholder of the Company is entitled to any preemptive
rights to subscribe for, or purchase shares of the
capital stock and to the knowledge of such counsel none
of such securities were issued in violation of the
preemptive rights of any holders of any securities of
the Company.
(E) To the knowledge of such counsel, 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 Underwriter's Common Stock
Purchase Warrant, and except as described in the
Prospectus. The Shares, underlying Securities, and the
Underwriter's Common Stock Purchase Warrant each conform
in all material respects to the respective descriptions
thereof contained in the Prospectus. The outstanding
shares, shares of Common Stock and the Underwriter's
Common Stock Purchase Warrant and the underlying
securities, upon issuance and delivery and payment
therefore in the manner described herein, the
Underwriter's Warrant will be, duly authorized, validly
issued, fully paid and nonassessable. Except as set
forth in the Prospectus, there are no preemptive or
other rights to subscribe for or to purchase, or any
restrictions upon the voting or transfer of, any shares
of Common Stock pursuant to the Company's articles of
incorporation, by-laws, other governing documents or any
agreement or other instrument known to such counsel to
which the Company is a party or by which it is bound.
(F) The certificates representing the Shares are in due and
proper form and the Underwriter's Common Stock Purchase
Warrant has been duly authorized and reserved for
issuance and to the extent the shares issuable upon the
proper exercise of the Underwriter's Common Stock
Purchase Warrant are issued and delivered in accordance
with the respective terms of the Underwriter's Common
Stock Purchase Warrant, such shares will be duly and
validly issued, fully paid and nonassessable.
(G) To the knowledge of such counsel, there are no claims,
suits or other legal proceedings pending or threatened
against the Company in any court or before or by any
governmental body which would materially affect the
business of the Company or the financial condition of
the Company as a whole, except as set forth in or
contemplated by the Prospectus.
Page -22-
Based on oral and/or written advice from the staff of
the Commission, the Registration Statement has become
effective and, to the knowledge of such counsel, no stop
order suspending the effectiveness of the Prospectus is
in effect and no proceedings for that purpose are
pending before, or threatened by, federal or by a state
securities administrator.
(H) To the knowledge of such counsel, there are no legal or
governmental proceedings, actions, arbitrations,
investigations, inquiries or the like pending or
threatened against the Company of a character required
to be disclosed in the Prospectus which have not been so
disclosed, questioning the validity of the capital stock
of the Company or this Agreement or the Underwriter's
Common Stock Purchase Warrant or which might adversely
affect the condition, financial or otherwise, or the
prospects of the Company or which could materially
adversely affect the Company's ability to perform any of
its obligations under this Agreement, or the
Underwriter's Common Stock Purchase Warrant.
(I) To such counsel's knowledge, there are no material
agreements, contracts or other documents known to such
counsel required by the Act to be described in the
Registration Statement and the Prospectus not filed as
exhibits to the Registration Statement and the
Prospectus, and to such counsel's knowledge (A) 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 in all
material respects and fairly represent the information
required to be shown by Form SB-2.
(J) No consent, approval, order or authorization from any
regulatory board, agency or instrumentality having
jurisdiction over the Company, or its properties (other
than registration under the Act or qualification under
state or foreign securities law or approval by the NASD)
is required for the valid authorization, issuance, sale
and delivery of the Shares or the Underwriter's Common
Stock Purchase Warrant.
(K) The statements in the Prospectus under "Risk Factors"
"Description of the Securities," and "Shares Eligible
For Future Sale" have been reviewed by such counsel, and
Page -23-
insofar as they refer to statements of law, descriptions
of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects.
In addition, such counsel shall state that such counsel
has participated in conferences with officials and other
representatives of the Company, the Underwriter,
Underwriters' Counsel and the independent certified
public accountants of the Company, at which such
conferences the contents of the Registration Statement
and Prospectus and related matters were discussed, and
although they have not certified the accuracy or
completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has
come to the attention of such counsel which leads them
to believe that, at the time the Registration Statement
became effective and at all times subsequent thereto up
to and on the Final Closing Date, the Registration
Statement and any amendment or supplement, when such
documents became effective or were filed with the
Commission (other than the financial statements
including the notes thereto and supporting schedules and
other financial and statistical information derived
therefrom, as to which such counsel need express no
comment) 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, or up to and at the Final
Closing Date , the Prospectus and any amendment or
supplement thereto (other than the financial statements
including the notes thereto and other financial and
statistical information derived therefrom, as to which
such counsel need express no comment) contained any
untrue statement of a material fact or omitted to state
a material fact necessary to make the statements
therein, in the light of the circumstances under which
they were made, not misleading.
(L) As of the date of the opinion, with respect to common
stock of the Company issuable upon exercise of the
Underwriter's Common Stock Purchase Warrant (the
"Warrant Securities") that have not theretofore been
subject to an effective registration statement pursuant
to Sections 8 or 9 of the Underwriter's Common Stock
Purchase Warrant, the opinion will provide that to the
extent Warrant Securities were acquired through the Net
Issuance Exercise of the Underwriter's Common Stock
Purchase Warrant as provided in Section 7(G.1) thereof
without the payment of any cash, the holder's date of
acquisition of such Warrant Securities will be the date
of acquisition of the Underwriter's Common Stock
Page -24-
Purchase Warrant. The issuance of any opinion relating
to the transferability of any Warrant Securities will be
conditioned upon the Holder providing evidence
satisfactory to such counsel of the proper acquisition
and exercise of the Underwriter's Common Stock Purchase
Warrant, the completion and filing of all forms or other
documents required to comply with federal and state
securities laws and the continued applicability of the
current interpretation of Rule 144(d)(3)(ii) as
expressed in items 4, 61 and 64 of the Division of
Corporation Finance Manual of Publicly Available
Telephone Interpretations. Such opinion will be issued
in a professional and timely manner. Any costs or legal
fees attendant to the opinion letters, shall be borne by
the Company. Such opinion shall also cover such other
matters incident to the transactions contemplated hereby
and the offering Prospectus as the Underwriter or
counsel to the Underwriter shall reasonably request. In
rendering such opinion, to the extent deemed reasonable
by them, such counsel may rely upon certificates of any
officer of the Company or public officials as to matters
of fact of which the maker of such certificate has
knowledge.
(ii) a certificate, signed by the Chief Executive Officer and the
Principal Financial or Accounting Officer of the Company dated
the Final Closing Date, to the effect that with regard to the
Company, each of the conditions set forth in Section 7 have
been satisfied; as well as a representation that the Company
will have caused to be issued at its sole cost and expense,
such opinion of Counsel for the Company, with respect to the
resale of the Underwriter's Common Stock Purchase Warrant
and/or underlying securities, including any opinions under
Rule 144 (if applicable), as well as assurance that there were
no significant deficiencies or material weaknesses in the
Company's Internal Controls (as set forth under Section 404 of
the Sarbanes-Oxley Act of 2002). Such opinion shall be subject
to all the conditions and limitations specified in Section
7(b)(i))L) above and shall specifically represent that the
Underwriter's date of acquisition or beneficial ownership date
of the underlying securities shall be the date of acquisition
of the Common Stock Purchase Warrant. Upon the demand of the
Underwriter, the Company will register the Common Stock
Purchase Warrant and the underlying securities to be obtained
upon payment of the Exercise Price. The Company represents and
warrants, it will not hinder, delay or impede in any fashion,
the assignment and/or exercise of the Underwriter's Common
Stock Purchase Warrant, the issuance of any underlying
securities, and/or the resale of such underlying securities.
To effect such transaction, the Company shall cause to be
issued any legal opinions within seven (7) days demand by the
Underwriter.
(iii) a letter, addressed to the Underwriter and in form and
substance satisfactory to the Underwriter in all respects
(including the nonmaterial nature of the changes or decreases,
if any, referred to in clause (D) below), from Malone &
Bailey, PC, independent registered public accountants, dated,
respectively, as of the effective date of the Registration
Page -25-
Statement and as of the Final Closing Date, as the case may
be:
(A) Confirming that they are independent public accountants
with respect to the Company and its consolidated
subsidiaries, if any, within the meaning of the Act and
the applicable published Rules and Regulations.
(B) Stating that, in their opinion, the financial
statements, related notes and schedules of the Company
and its consolidated subsidiaries, if any, included in
the Registration Statement examined by them comply as to
form in all material respects with the applicable
accounting requirements of the Act and the published
Rules and Regulations thereunder.
(C) Stating that, with respect to the period from September
26, 2005 to a specified date (the "specified date") not
earlier than five (5) business days prior to the date of
such letter, they have read the minutes of meetings of
the stockholders and board of directors (and various
committees thereof) of the Company and its consolidated
subsidiaries, if any, for the period from September 26,
2005 through the specified date, and made inquiries of
officers of the Company and its consolidated
subsidiaries, if any, responsible for financial and
accounting matters and, especially as to whether there
was any decrease in sales, income before extraordinary
items or net income as compared with the corresponding
period in the preceding year; or any change in the
capital stock of the Company or any change in the long
term debt or any increase in the short-term bank
borrowings or any decrease in net current assets or net
assets of the Company or of any of its consolidated
subsidiaries, if any, and further stating that while
such procedures and inquiries do not constitute an
examination made in accordance with generally accepted
auditing standards, nothing came to their attention
which caused them to believe that during the period from
September 26, 2005, through the specified date there
were any decreases as compared with the corresponding
period in the preceding year in sales, income before
extraordinary items or net income; or any change in the
capital stock of the Company or consolidated subsidiary,
if any, or any change in the long term debt or any
increase in the short-term bank borrowings (other than
any increase in short-term bank borrowings in the
ordinary course of business) of the Company or any
consolidated subsidiary, if any, or any decrease in the
net current assets or net assets of the Company or any
consolidated subsidiary, if any; and
Page -26-
(D) Stating that they have carried out certain specified
procedures (specifically set forth in such letter or
letters) as specified by the Underwriter (after
consultations with Malone & Bailey, PC, independent
registered public accountants relating to such
procedures), not constituting an audit, with respect to
certain tables, statistics and other financial data in
the Prospectus specified by the Underwriter and such
financial data not included in the Prospectus but from
which information in the Prospectus is derived, and
which have been obtained from the general accounting
records of the Company or consolidated subsidiaries, if
any, or from such accounting records by analysis or
computation, and having compared such financial data
with the accounting records of the Company or the
consolidated subsidiaries, if any, stating that they
have found such financial data to agree with the
accounting records of the Company.
(c) All corporate proceedings and other legal matters relating to this
Agreement, the Prospectus and other related matters shall be
satisfactory to or approved by counsel to the Underwriter and the
Underwriter shall have received from Eaton & Van Winkle LLP a signed
opinion dated as of each closing date, with respect to the
incorporation of the Company, the validity of the Shares, the form
of the Prospectus, (other than the financial statements together
with related notes and other financial and statistical data
contained in the Prospectus or omitted therefrom, as to which such
counsel need express no opinion), the execution of this Agreement
and other related matters as you may reasonably require.
(d) At each closing date, (i) the representations and warranties of the
Company contained in this Agreement shall be true and correct in all
material respects with the same effect as if made on and as of such
closing date; (ii) the Prospectus and any amendments or supplements
thereto shall contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations and
in all material respects conform to the requirements thereof, and
neither the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary, in light
of the circumstances under which they were made, in order to make
the statements therein not misleading; (iii) there shall have been
since the respective dates as of which information is given no
material adverse change in the business, properties or condition
(financial or otherwise), results of operations, capital stock, long
term debt or general affairs of the Company from that set forth in
the Prospectus, except changes which the Prospectus indicates might
Page -27-
occur after the effective date of the Prospectus, and the Company
shall not have incurred any material liabilities or material
obligations, direct or contingent, or entered into any material
transaction, contract or agreement not in the ordinary course of
business other than as referred to in the Prospectus and which would
be required to be set forth in the Prospectus; and (iv) except as
set forth in the Prospectus, no action, suit or proceeding at law or
in equity shall be pending or threatened against the Company which
would be required to be set forth in the Prospectus, and no
proceedings shall be pending or threatened against the Company or
any subsidiary before or by any commission, board or administrative
agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect
the business, property, condition (financial or otherwise), results
of operations or general affairs of the Company.
(e) On the Final Closing Date, the Company shall have executed and
delivered to the Underwriter, (i) the Underwriter's Common Stock
Purchase Warrant substantially in the form filed as an Exhibit to
the Registration Statement in final form and substance satisfactory
to the Underwriter, and (ii) the Representative's Warrants in such
denominations and to such designees as shall have been provided to
the Company.
(f) On or before Final Closing Date, the Shares shall have been duly
approved for listing on an exchange or on the OTC-Electronic
Bulletin Board Exchange.
On or before the Final Closing Date, there shall have been delivered
to the Underwriter all of the Lock-up Agreements required to be
delivered pursuant to Section 3(y), in form and substance
satisfactory to the Underwriter and Underwriter's counsel.
(h) The Underwriter shall have received, on the Closing Date, a
certificate dated as of the Closing Date, signed by the President,
Treasurer and Secretary of the company, certifying that: (i) no
order suspending the effectiveness of the Registration Statement of
the sale of the Shares is in effect and no proceedings for such
purpose are pending or are, to their knowledge, threatened by the
Commission; (ii) they do not know of any litigation, instituted or
threatened, against the Company of a character required to be
disclosed in the Registration Statement which are not disclosed
therein; they do not know of any contracts which are required to be
summarized in the prospectus which are not so summarized; and they
do not know of any material contacts required to be summarized in
the prospectus which are not so summarized; and they do not know of
any material contracts required to be filed as exhibits to the
Registration which are not so filed; (iii) they have each carefully
examined the Registration Statement and the prospectus and, to the
best of their knowledge, neither the Registration Statement or the
prospectus, nor any amendment or supplement to either of the
foregoing, contains any untrue statement of any material fact or
Page -28-
omits to state any material fact required to be set forth in an
amended or supplemented prospectus which has not been so set forth:
(iv) the Shares have been registered and qualified for sale in all
states required by the Underwriter and as listed on Exhibit A; (v)
since the respective dates as of which information is given in the
Registration Statement and the prospectus, there has not been any
material adverse change in the condition of the Company, financial
or otherwise, or in the results of its operation except as reflected
in or contemplated by the Registration Statement and the prospectus
and, except as so reflected or contemplated since such date, there
has not been any material transaction entered into by the Company;
(vi) the representations and warranties set forth in this Agreement
are true and correct and the Company has complied with all of its
agreements herein contained; (vii) the Company is not delinquent in
the filing of any federal ,state, county, and/or municipal taxes;
they know of no proposed redetermination or reassessment of taxes
adverse to the Company; and the Company has paid or provided by
adequate reserves, for all known tax liabilities; (viii) they know
of no material obligation or liability of the Company, contingent or
otherwise, not disclosed in the Registration Statement and
prospectus; (ix) this Agreement, the consummation of the transaction
herein contemplated, and the fulfillment of the terms hereof, will
not result in the breach by the Company of any terms or, or
constitute a default under its Certificate of Incorporation or
By-Laws, any indenture, mortgage, lease, deed of trust, bank loan,
line of credit, or credit agreement or instrument to which the
Company is now a party or pursuant to which the Company has acquired
any right and/or obligations by succession or otherwise; and any
existing agreement substantially affecting the Company in any way
has been filed as an exhibit to the Registration Statement; (x) the
financial statements and schedules filed with and as part of the
Registration Statement present fairly the financial position of the
Company as of the dates thereof, all in conformity with generally
accepted accounting principles of accounting applied on a consistent
basis throughout the period involved. Since the respective dates of
such financial statements, there has been no material adverse change
in the condition or general affairs of the Company financial or
otherwise, other than as referred to in the prospectus; and (xi)
subsequent to the respective dates as of which the information is
given in the Registration Statement and the prospectus, except as
may otherwise be indicated therein, the Company has not, prior to
the closing date, either (A) issued any securities or incurred any
liability or obligation, direct or indirect, contingent or otherwise
for borrowed money, or (B) entered into any material transaction
other than in the ordinary course of business. The Company has not
declared, paid, or made any dividend or distribution of any kind on
its capital stock.
(i) Upon registration of the Company under the Securities Exchange Act
of 1934, the Company will comply with all relevant and applicable
provisions of Sarbanes-Oxley Act of 2002 ("SOA"), as well as related
SEC releases, including but not limited to: (I) pension plan
"blackout periods" for the purchase and/or sale of securities; (II)
Management's assessment of internal controls (AICPA, Auditing
Standard 319), as required by section 404 of SOA; (III) designating
Page -29-
a "financial expert" for the Company's Audit Committee, as is
understood under section 407 of SOA; and, (IV) adoption of a Code of
Ethics for Financial Officers, as set forth under section 406 of
SOA. The Company agrees to furnish Underwriter copies of all Audit
Committee reports for a period not to exceed three years from the
Final Closing Date of the Offering.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Final Closing Date are not so fulfilled, the
Underwriter may terminate this Agreement or, if the Underwriter 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, its Board of Directors, will indemnify and hold
harmless the Underwriter, and each person who controls the
Underwriter or is affiliated with the Underwriter within the meaning
of the Securities and Exchange Act of 1933 ("Act") and the
Securities Exchange Act of 1934 ("Act") (including officers,
directors, employees, controlling persons, affiliates, consultants,
professional advisors, accountants, attorneys, or agents, of the
Underwriter or any broker, underwriter, select dealer/selling agent
connected with this offering of Shares), from and against any and
all losses, claims, damages, expenses or liabilities, joint or
several, to which they or any of them may become subject under the
Act or under any other statutes or at common law or otherwise; and
will reimburse and indemnify the Underwriter and each such
person/entity specified above for any legal or other expenses
[including the cost of any investigation and preparation] reasonably
incurred by them or any of them in connection with investigating or
defending any litigation or claim, whether or not resulting in any
liability insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained
in the Registration Statement, any post-effective amendment thereto,
any Blue Sky application, the prospectus as the case may be, or any
untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or preliminary prospectus (as amended or
as supplemented thereof) or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; or any negligent
misrepresentation of any officer, director, agent, consultant,
accountant, attorney or employee of the Company; or any failure to
perform any of the terms or conditions of this Agreement incident to
any of the foregoing, or arising out of any act or occurrence
related to or connected to this offering of Shares. The defense of
such action shall be conducted by counsel of recognized standing and
reasonably satisfactory to the Underwriter or such other person
agreed to be indemnified by the Company. The Underwriter, each
controlling person of the Underwriter, or an affiliate thereof,
agree after their receipt of written notice of the commencement of
any action against them as aforesaid, in respect of which indemnity
may be sought from the Company, its Directors on account of the
Page -30-
indemnity agreement contained in the subsection, to notify the
Company promptly in writing of the commencement thereof. The Company
agrees to notify the Underwriter promptly of the commencement of any
litigation or proceeding against it or against any of the officers
or directors of the Company of which it may be advised, in
connection with the issue, offer, and/or sale of any of its
securities.
(b) The Underwriter, will indemnify and hold harmless the Company, the
directors of the Company, the officers of the Company who shall have
signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Securities and
Exchange Act of 1933 ("Act") and the Securities Exchange Act of 1934
("Act"), from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they or any of
them may become subject under the Act or under any other statutes or
at common law or otherwise, and, except as hereinafter provided,
will reimburse the Company and such directors or controlling person
identified above for any legal or other expenses [including the cost
of any investigation and preparation] reasonably incurred by them or
any of them in connection with investigating or defending any
litigation or claims, whether or not resulting in any liability,
only insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, any post-effective amendment thereto, any
Blue Sky application, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not
misleading, all as of the date when the Registration Statement or
such post-effective amendment, or the date the filing of any such
Blue Sky application, as the case may be, becomes effective, or any
untrue statement of alleged untrue statement of a material fact
contained in the Preliminary prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the
Commission any amendments thereof or supplements thereto), or the
omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, not misleading,
or any negligent misrepresentation of any officer, director, agent,
consultant, accountant, attorney or employee of the Underwriter, but
only if insofar as such statement or omission was made in reliance
upon information furnished in writing to the Company by the
Underwriter specifically for use in connection with the preparation
of the Registration Statement, the preliminary prospectus or the
Prospectus, or any such amendment thereafter supplement hereto or
Blue Sky application. The Underwriter shall not be liable for
amounts paid in settlement of any such litigation, if such
settlement was affected without the Underwriter and its Counsel's
consent. In case of the commencement of any action in respect of
which indemnity may be sought from the Underwriter on account of its
indemnity agreement contained in this subsection the Company, and
each person to be indemnified by the Underwriter herein, shall have
the same obligation to notify such Underwriter and the underwriter
Page -31-
shall have the same right to participate in (and, to the extent that
it shall desire, to direct) as set forth in subsection (a) above,
the defense of such action at its own expense but such defense shall
be conducted by counsel of recognized standing and reasonably
satisfactory to the Company or such other person agreed to be
indemnified by the Underwriter, The Underwriter agrees to notify the
Company promptly of the commencement of any such litigation or
proceeding against it or against any such controlling person of
which it may be advised in connection with the offer, and/or sale of
any of securities of the Company.
9. Termination. This Agreement may be terminated:
(a) in the event the Shares are not sold as provided in Paragraphs 2 and
5, at any time prior to the Closing Date by the Underwriter by
written notice to the Company if, in the sole discretion of the
Underwriter, it is impracticable to offer for sale, the Shares by
reason of (i) the Company having sustained a material loss, whether
or not insured, by reason of fire, flood, accident, loan
foreclosure, borrowings, litigation, or other calamity, which in the
opinion of the Underwriter substantially affects the value of the
property of the Company or materially interferes with the operation
of the business of the Company, (ii) trading in securities on the
New York Stock Exchange, Inc. or the American Stock Exchange, Inc.
or the National Association of Securities Dealers Automated
Quotation System, the Over-the-Counter Bulletin Board, or the
over-the-counter market, having been suspended or limited or minimum
prices having been established on such Exchange or NASDAQ or
Bulletin Board; (iii) a banking moratorium having been declared by
either federal or state authorities; (iv) an outbreak of major
hostilities or other national or international calamity having
occurred; (v) any action having taken by any government in respect
of its monetary affairs which, in the opinion of the Underwriter,
has a material adverse effect on the securities markets of the
United States; (vi) the Underwriter believes no favorable public
market exists for the sale of Shares, or (vii) misstatement,
misrepresentations of the Company; (viii) failure by the Company to
perform any act required by this Agreement; (ix) or the Shares are
not listed on NASDAQ or the Electronic OTC Bulletin Board or the
Over-the-Counter Bulletin Board Exchange.
If this Agreement shall be terminated pursuant to paragraph 7 or this
paragraph 9, or if the purchase provided for herein is not consummated
because any conditions to the Underwriter's obligations hereunder is not
satisfied or because of any refusal, inability or failure on the part of
the Company to comply with any of the terms or to fulfill any of the
conditions of this Agreement, or if for any reason the Company shall be
unable to perform all of its obligations under this Agreement, the Company
shall not be liable to the Underwriter for damages on account of loss of
anticipated profits arising out of the transactions covered by this
Agreement, but the Company shall remain liable to the extent provided in
paragraphs 6,7, and 8 herein. Where termination occurs pursuant to clauses
(i) through (ix) of this paragraph, the Company will pay all accountable
out-of-pocket expenses not to exceed $XXXXX incurred by the Underwriter in
contemplation of the performance by it of its obligations hereunder,
Page -32-
including fees and disbursements of counsel for the Underwriter, and
printing and traveling expenses of the Underwriter, "due diligence
investigation" costs of the Underwriter, and any and all other expenses
incurred by the Underwriter in connection with its preparation of the
proposed public offering of Shares herein. Any notice under this paragraph
9 may be given by telephone, telefacsimile transmission, electronic or
digital format but shall be subsequently confirmed by letter.
10. Miscellaneous.
(a) The Company and the Underwriter know of no claims for services in
the nature of a finder's fee or origination fee with respect to this
financing resulting from the respective acts of their officers,
directors, or employees, for which the Underwriter and/or Company
may be responsible except as disclosed in the prospectus, and agree
to indemnify and hold each other harmless from any claims for any
services of such nature arising from any act of the Underwriter and
the Company and their officers, directors, and employees, unless
otherwise disclosed herein.
(b) The Underwriter represents and warrants that it is registered as a
broker/dealer pursuant to the provisions of the Securities and
Exchange Act of 1934 ,is a member in good standing of the National
Association of Securities Dealers, Inc., and is duly registered as a
broker/dealer in each state listed on Exhibit A.
(c) The Underwriter covenants and agrees to conduct the offering in a
manner intended to be in compliance with the requirements of the Act
and the Securities and Exchange Act of 1934 and the Rules and
Regulations thereunder and to provide each offeree with a copy of
the Prospectus during the course of the offering and prior to sale
obtain acknowledgement or receipt of the Prospectus.
(I) The Underwriter covenants and agrees to conduct the offering
in compliance with the requirements of that this offering will
be conducted in compliance with Exchange Act Rule 10b-9.
(d) The Company agrees that immediately upon request of the Underwriter,
it will give instructions to its transfer agent to issue the Shares
in the names and denominations submitted to it by the Underwriter at
its own expense. The Underwriter agrees, when funds in sufficient
amount as required by this Agreement are in liquid form, to submit
within 5 days thereafter, to the transfer Agent, a list of the names
and addresses of the subscribers and the dominations of the
certificates to be issued by them. The Transfer Agent shall be
required by the Company to issue said certificates within 5 days
after receipt of the aforesaid list from the Underwriter and the
delivery of the certificates shall be made to the Underwriter within
5 days thereafter against receipt of payment as provided in this
Agreement. Further, the Company agrees to pay all expenses for and
Page -33-
in connection with the preparation and issuance of the stock
certificates. The Company agrees that immediately upon the exercise
of the Underwriter's Common Stock Purchase Warrant and the request
of the Holder, it will give instructions to its transfer agent to
issue the Common Stock underlying the Warrant and the Company will
pay all expenses for and in connection with the preparation and
issuance of common stock certificates.
11. Survival of Representations, Warranties and Agreements. The respective
indemnities, agreements, representations, warranties, and other statements
of the Company or the Underwriter or their respective officers, and
directors as set forth in or made pursuant to this Agreement and the
indemnity Agreements of the Company and the Underwriter contained herein,
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the Company or the Underwriter or
any controlling person and/or affiliate thereof, and will survive
termination of this Agreement and the delivery of any payment for the
Shares and the Closing Date.
12. Benefits. This Agreement has been made solely for the benefit of and shall
be binding upon the Underwriter, the Company, and the extent expressed,
any person controlling the Company or the Underwriter and the officers,
directors of the Company, and their respective legal representative,
successors and assigns, all as and to the extent provided herein, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "legal representatives, successors, and assigns" shall
not include any purchaser of any of the Shares from the Underwriter merely
because of such purchase.
13. Washington Law/Arbitration. Any controversy arising out of, connected to,
or relating to any matters herein of the transactions between the Company
or the Underwriter (including for purposes of arbitration, officers,
directors, employees, controlling persons, affiliates, consultants,
professional advisors, accountants, attorneys, or agents, of the
Underwriter or Company, or any broker, underwriter, select dealer, selling
agent of the offering of Shares herein), on behalf of the undersigned, or
this Agreement, or the breach thereof, including, but not limited to any
claims of violations of Federal and/or State Securities Acts, Banking
Statutes, Consumer Protection Statutes, Federal and/or State
anti-Racketeering (e.g. RICO) claims as well as any common law claims and
any State Law claims of fraud, negligence, negligent misrepresentations,
and/ar conversion shall be settled by arbitration; and in accordance with
this paragraph and judgment on the arbitrator's award may be entered in
any court having jurisdiction thereof in accordance with the provisions of
Revised Code of Washington, Chapter 7.04. In the event of such a dispute,
each party to the conflict shall select an arbitrator, both of whom shall
select a third arbitrator, which shall constitute the three person
arbitration board. The decision of a majority of the board of arbitrators,
who shall render their decision within thirty (30) days of appointment of
the final arbitrator, shall be binding upon the parties. Venue shall lie
in the County of Spokane, Spokane, Washington. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Washington.
14. Notices. All notices or other communications hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally or
sent by registered or certified mail postage prepaid, addressed as
follows:
Page -34-
If to the Company, its officers, directors, or shareholders to:
Richard M. Cohen, Chief Executive Officer
Newtown Lane Marketing, Incorporated
33 Newtown Lane
East Hampton, New York 11937
and to:
Vincent J. McGill, Esq.
Eaton & Van Winkle LLP
3 Park Avenue, 16th Floor
New York, NY 10016
If to the Underwriter to:
William F. Ross
300 North Argonne Road
Suite 202
Spokane, Washington 99212
and to:
Charles A. Cleveland
Suite 304/ Rock Pointe Center
North 1212 Washington
Spokane, Washington 99201-2401
15. Waiver. By it's signature below, the Company agrees to immediately provide
to the Underwriter and its counsel, copies of any disclosures,
communications, or correspondence, by its Counsel or auditors for the
Company alleging any untrue statements of a material fact contained in the
Registration Statement, any post-effective amendment thereto, any Blue Sky
application, the Prospectus, or any filings with any State "Blue Sky"
agency or the U.S. Securities and Exchange Commission as the case may be,
or any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or preliminary prospectus (as amended or as
supplemented thereof) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; or any negligent misrepresentations, or potential material
violations of accounting standards or State or Federal corporate
governance provisions. If the Sarbanes-Oxley Act and attendant releases
are applicable to the Company, it agrees to furnish you with copies of any
information supplied by an attorney pursuant to sections 307(1) or 307(2)
Page -35-
of SOA, as well as authorizing the release of any audit committee
information.
16. Compliance With Miscellaneous Regulations. By it's signature below, to the
extent applicable to its business, the Company represents and warrants
that it has established appropriate and applicable programs, practices,
and guidelines in compliance with rules and regulations of the Office of
Foreign Assets Control, United States Treasury Department, including
prohibition against trading with certain identified terrorist
organizations.
If the foregoing correctly states and sets forth in full the agreement
between us, please indicate by signing this letter in the space provided below
for that purpose. The within Agreement may executed simultaneously in two or
more counterparts, each of which shall be deemed the original, but all of which
together shall constitute one and the some instrument and shall be valid and
binding between us,
Yours Truly,
NEWTOWN LANE MARKETING, INCORPORATED
By:
-----------------------------
Its:
-----------------------------
AGREED AND ACCEPTED:
PUBLIC SECURITIES, INC.
By:
-----------------------------
William F. Ross, President Dated:
Page -36-
EXHIBIT A
Page -37-
EXHIBIT B
Form of Warrant
Page -38-