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EXHIBIT 1.1
CASTLE SECURITIES CORP.
45 Church Street, Suite #25
Freeport, New York 11520
(516) 868-2000
with
EXHAUST TECHNOLOGIES, INC.
Up to 1,000,000 Units
and
1,000,000 Class A Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
Exhaust Technologies, Inc.
230 North Division
Spokane, Washington 99201
Dear Sirs:
Exhaust Technologies, Inc., a Washington corporation (the
"Company"), with principal offices located at 230 North Division,
Spokane, Washington 99201, has an authorized capitalization of
100,000,000 shares of Common Stock, $.00001 par value per share
("Common Stock"), of which 3,000,000 shares of Common Stock are
presently issued and outstanding. The Company proposes to offer and
sell to the public up to 1,000,000 Units at $5.10 per Unit and
1,000,000 Class A Common Stock Purchase Warrants ("Additional
Warrants") at $.10 per Warrant. Each Unit shall consist of one
(1) share of Common Stock, $.00001 par value per share, and one (1)
Class A Common Stock Purchase Warrant. Each Class A Warrant
included in the Units as well each Additional Warrant shall
entitle the holder thereof to purchase one share of Common Stock,
par value $.00001 per share, at a price of $7.00 exercisable at any
time from the Separation Date (as hereinafter defined) through
____________, 2001 ("Exercise Period One") and at a price of $9.00
from __________, 2001 to ___________, 2002 ("Exercise Period Two").
Moreover, the respective exercise prices may be adjusted pursuant
to the anti-dilution provisions contained therein. In addition, the
Class A Common Stock Purchase Warrants shall be callable at any
time solely during the exercise period at $.01 per Warrant on at
least thirty (30) days' written notice and provided that the
closing bid price for the Common Stock of the Company on each day
during the thirty (30) trading days immediately preceding the date
of the notice during Exercise Period One is at least $10.00 per
share and is at least $15.00 per share during Exercise Period Two.
None of the Class A Common Stock Warrants shall be exercisable,
detachable or transferable until the "Closing Date" (as hereinafter
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defined). The date on which the Class A Common Stock Purchase
Warrants shall become detachable is referred to herein as the
"Separation Date". The Units and the Common Stock and Warrants of
which they consist as well as the Additional Warrants are to be
sold as more fully set forth in the "Registration Statement" and
"Prospectus" hereinafter mentioned.
1. Certain Definitions
The following shall constitute the definitions of certain
additional terms used in this Agreement.
(a) "Act" shall refer to the Securities Act of 1933, as
amended.
(b) "Closing Date" shall be the time and date set for
payment and delivery of the offered Units and Additional Warrants.
(c) "Commission" shall refer to the Securities and Exchange
Commission.
(d) "Common Stock" shall refer to the Common Stock, $.00001
par value, of the Company.
(e) "Company" shall refer to Exhaust Technologies, Inc.
(f) "Effective Date" shall be the date upon which the
Registration Statement becomes effective pursuant to notice from
the Securities Exchange Commission (the "SEC") and/or the passage
of time in accordance with the Act.
(g) "Preliminary Prospectus" refers to and means any
Prospectus included in the Registration Statement before the
Registration Statement becomes effective.
(h) "Prospectus" shall refer to the Prospectus filed as part
of the Registration Statement as finally amended and revised prior
to the Effective Date.
(i) "Public Warrants" shall refer to the Class A Common Stock
Purchase Warrant included in the Units and the Additional Warrants
which the Company proposes to offer and sell pursuant to this
Agreement.
(j) "Registration Statement" shall refer to the Registration
Statement filed by the Company, including exhibits and financial
statements as finally amended and revised prior to the Effective
Date.
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(k) "Regulations" shall refer to the rules and regulations of
the Commission.
(l) "Securities Being Offered" shall mean the Units and
Additional Warrants which the Company proposes to offer and sell to
the public pursuant to this Agreement.
(m) "Share" shall mean one (1) share of Common Stock,
$.00001 par value of the Company.
(n) "Termination Date" shall refer to the date upon which
this Agreement shall terminate for whatever reason.
(o) "Underwriter" shall refer to Castle Securities Corp.
(p) "Underwriter's Public Warrants" shall mean the Public
Warrants except that (i) the initial exercise date thereof shall be
the date of exercise of the Underwriter's Warrant, and the
expiration thereof shall be the expiration date of the Public
Warrants, (ii) the initial exercise prices thereof shall be $11.55
per share during Exercise Period One and $13.05 during Exercise
Period Two; and, thereafter determined as hereinafter set forth, ,
provided any change herein is consistent with the terms of the
Warrant Agreement (iii) the Company may redeem such Underwriter's
Public Warrants, (iv) no terms of the Underwriter's Public Warrants
may be modified without the consent of the Underwriter and (v) the
Common Shares subject to the Underwriter's Public Warrants shall
initially be as set forth in the Warrant Agreement and thereafter
determined as hereinafter set forth provided such terms are
consistent with those within the Warrant Agreement.
(q) "Underwriter's Warrants" shall mean the Warrants referred
in Section 2(d) hereof.
(r) "Units" shall refer to the 1,000,000 Units which the
Company proposes to offer and sell pursuant to this Agreement.
(s) "Warrants" shall refer to the Class A Common Stock
Purchase Warrants issued in connection with the sale of the Units..
(t) "Warrant Agreement" shall refer to an agreement between
the Company and American Securities Transfer & Trust, Inc. with
respect to the Warrants and Additional Warrants.
2. Underwriter's Compensation
(a) The Company hereby appoints the Underwriter as
its exclusive agent for a period of ninety (90) days from the
Effective Date (unless extended by mutual written consent for an
additional ninety (90) days) to sell and to obtain purchasers for
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the purchase of up to 1,000,000 Units at a price of $5.10 per Unit
(the "Public Offering Unit Price") and the purchase of up to
1,000,000 Additional Warrants at a per of $.10 per Warrant (the
"Public Offering Additional Warrant Price") all on a "best efforts"
basis. Unless at least one (1) Unit and/or one (1) Additional
Warrant is sold and paid for within 90 days from the Effective Date
(unless further extended as specified in Paragraph 4 hereof), the
Underwriter will not receive any of the commissions or expense
allowances hereinafter mentioned unless otherwise hereinafter
provided. Moreover, it is understood that if the required funds
relating to one Unit and/or one (1) Additional Warrant or such
greater amount sold are received and deposited within the Escrow
Account referred in Paragraph 4 hereof, but not cleared within the
time set forth above, then up to an additional five (5) business
days shall be allowed for the sole purpose of clearance of such
funds and the Closing of the offering. Such exclusive agency shall
be good and irrevocable unless and until terminated as herein and
hereinafter set forth.
(b) Subject to the filing and the becoming effective of a
Registration Statement in compliance with the provisions of the Act
and the availability for sale to the public of the Units and
Additional Warrants, pursuant to law, and subject to the
fulfillment of all of the obligations of the Company and compliance
with all of the terms and conditions hereof by the Company 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
within Agreement to sell the Units and Additional Warrants when and
as issuable at the public offering price set forth above; and to
make a public offering of the Units and Additional Warrants as soon
as reasonably practicable after the Registration Statement has
become effective and the Units and Additional Warrants have become
available for public offering.
(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 at least one (1) Unit and/or one (1)
Additional Warrant to be offered herein, a sales commission or
discount of Ten Percent (10%) of the Public Offering Price on all
offered Units and Additional Warrants to be sold hereunder. The
Underwriter may organize a selling group (the "Selected Dealers",
each of whom shall be a member of the National Association of
Securities Dealers, Inc.), which group may include the Underwriter;
in such event, the Underwriter may allow to such Selected Dealers
such part of the aforementioned commission or discount as it may,
in its sole discretion, determine. The Selected Dealers, other than
the Underwriter itself, are not to be deemed agents of the Company
and shall not offer or sell the offered Units and Additional
Warrants except at the price of $5.10 per Unit and $.10 per
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Additional Warrant. The Underwriter shall be paid a non-accountable
expense allowance of $.153 for each Unit sold and $.003 for each
Additional Warrant sold, subject to the conditions set forth in
Section 6(m) hereof. Such commission and expense allowance shall
be deductible by the Underwriter at closing prior to remittance by
it to the Company on account of the Units and Additional Warrants
sold.
(d) At the closing of this offering the Company shall,
subject to the sale and receipt of funds for at least one Unit to
be offered herein, sell and deliver to the Underwriter for each 10
offered Units sold herein, 1 Underwriter's Warrant at a purchase
price of $.0001 per Underwriter's Warrant, up to a maximum of
100,000 Underwriter's Warrants.
The said Underwriter's Warrants shall represent the right to
purchase one Unit, each consisting of one (1) Share of Common Stock
and one (1) Public Warrant for each Underwriter's Warrant owned and
shall be exercisable only during a term of 4 years commencing 12
months after the Effective Date, at an exercise price of $8.415 per
Unit. The sale and delivery to the Underwriter of the
Underwriter's Warrants will take place at the Closing Date. The
Underwriter's Warrants shall contain customary anti-dilution
clauses, protecting warrant holders in the event the Company pays
stock dividends, effects stock splits, or effects a sale of assets,
merger or consolidation. The Underwriter represents that for a
period of not less than 12 months commencing from the Effective
Date of the offering the Underwriter will not sell, transfer,
assign or hypothecate any of the said Underwriter's Warrants or the
securities underlying said Underwriter's Warrants except to
officers or partners of the Underwriter, Selected Dealers or
officers or partners of the Selected Dealers and that upon the
purchase by the Underwriter of the said Underwriter's Warrants, the
Underwriter will not thereafter resell any of the said
Underwriter's Warrants or the underlying securities thereof, except
in conformity with the applicable provisions of the Act and all
applicable "Blue Sky" laws.
(e) The Company agrees that upon written request of the
holders (including the Underwriter or its specific authorized
designee) of at least a 40% of the Underwriter's Warrants and/or
the underlying securities, together with the Underwriter's or its
specific authorized designee's consent, made at any time after 12
months following the Effective Date (and during the Underwriter's
exercise period) but, in any event for a period not to exceed five
(5) years following the Effective Date, the Company will file no
more than one Registration Statement under the Act or Notification
under Regulation A (or any successor thereto) registering or
qualifying the Underwriter's Warrants and/or the securities
underlying the Underwriter's Warrants, and the Company agrees to
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use its best efforts to cause the above filing to become effective
and to keep said Registration Statement current for two (2) years
after it has been cleared by the SEC. The expenses of such
registration or qualification, including but not limited to
printing charges (including sufficient number of Prospectuses to
permit the sale of the securities), all legal fees and
disbursements of the Company's counsel and all accounting fees, and
all filing and miscellaneous expenses, will be borne by the
Company. The Company agrees that if at any time during the period
when the Underwriter or its specific authorized designee and/or the
holders have the right to exercise their Warrants but in any event
for a period not to exceed seven (7) years following the Effective
Date it should file a Registration Statement or Notification with
the Commission pursuant to the Act regardless of whether the
Underwriter specific authorized designee and/or the holders shall
have theretofore availed themselves of the right hereinabove
provided, the Company, at its own expense, will offer to the
Underwriter and/or the holders the opportunity to register or
qualify the Underwriter's Warrants and/or securities underlying the
Underwriter's Warrants, limited, in the case of a Regulation A
offering, to the amount of any available exemption, but unless such
registration or qualification includes all of the Underwriter's
Warrants and/or underlying securities it will not relieve the
Company of such foregoing obligation to qualify the same. In
addition to the rights hereinabove provided, the Company will
cooperate with the Underwriter or its specific authorized designee
and/or the holders in preparing any additional Registration
Statement or Notification required to sell or transfer the
underlying securities and will supply information required
therefore, but such additional Registration Statement or
Notification shall be at the holders of the Warrants and/or
securities issuable thereunder, and not at the expense of the
Company.
(f) If at any time any condition of the material obligations
of the Company hereunder shall not have been met or shall cease to
be met after five (5) days written notice of such deficiency by the
Underwriter and the Underwriter shall have given the Company
further notice of the desire of the Underwriter to terminate this
Agreement on account of the non-fulfillment of any such condition
or obligation, then upon such notice, the within Agreement shall
terminate, saving all such rights as the respective parties may
then by law possess. Any such notice must be in writing. If the
within Agreement shall not be sooner terminated as provided in the
within paragraph, then, and in all events, the Agreement herein
shall terminate at such time as all of the offered Units shall have
been subscribed for pursuant to the terms of the public offering
herein.
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3. Representations and Warranties of the Company
As a material inducement 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 closing, as follows:
(a) A Registration Statement with respect to the Units and
Additional Warrants, copies of which have heretofore been delivered
by the Company to the Underwriter, has been carefully prepared by
the Company in conformity with the requirements of the Act, and
such Registration Statement has been filed with the Commission, and
one or more amendments to said Registration Statement copies of
which have heretofore been delivered to the Underwriter, has or
have been filed; and the Company may file on or prior to the
Effective Date an additional amendment to said Registration
Statement.
(b) The Commission has not issued any order preventing or
suspending the use of any Prospectus with respect to the Units and
Additional Warrants and each Prospectus has conformed in all
material respects with the requirements of the Act and the
Regulations and has not included any fact required to be stated
therein or necessary to make the statements therein not
misleading. When the Registration Statement becomes effective and
on the Closing Date hereinafter mentioned, it will conform in all
material respects with the requirements of the Act and the
applicable Regulations and the Registration Statement and any
further amendments or supplements thereto will contain all
statements which are required to be stated therein or necessary to
make the statements therein not misleading; provided, however the
Company does not make any representations or warranties as to
information contained in or omitted from the Registration Statement
or Prospectus in reliance upon written information furnished on
behalf of the Underwriter or by the Underwriter, specifically for
use therein or in any amendments or supplements thereto.
(c) The financial statements of the Company together with the
related schedules and notes as set forth in the Registration
Statement and Prospectus, as reported upon by an independent
certified public accountant, fairly present the financial position
of the Company at the respective dates or for the respective
periods to which they apply; such financial statements have been
prepared in accordance with generally accepted principles of
accounting consistently applied throughout the periods concerned
except as otherwise stated therein.
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(d) Except as may be reflected in or contemplated by the
Registration Statement or the Prospectus, subsequent to the dates
as of which information is given in the Registration Statement and
the Prospectus, and prior to the Closing Date (i) there shall not
be any material adverse change in the condition, financial or
otherwise, or in the results of operations or the general affairs
of the Company or in its business taken as a whole; (ii) there
shall not have been any material transaction entered into by the
Company other than transactions in the ordinary course of business;
(iii) the Company shall not have incurred any material obligations,
contingent or otherwise, which are not disclosed in the Prospectus;
and (iv) there shall not have been, nor will there be any change in
the common stock or long term debt (except current payments) of the
Company.
(e) Except as may be set forth in the Registration Statement
or Prospectus, the Company is not in violation of any term or
provision of its Charter or By-Laws, or of any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to the Company.
(f) The execution and delivery of this Agreement by the
Company has been duly authorized by all necessary corporate action,
and this Agreement is the valid, binding and legally enforceable
obligation of the Company; the execution and delivery of, and
compliance with, this Agreement, and the issuance and delivery of
the securities being offered do not conflict with or constitute a
breach of or default under the Certificate of Incorporation or
By-Laws of the Company, any indenture, agreement, or other
instrument by which the Company is, or on the Closing Date will be
bound, or any order, rule or regulation applicable to the Company
of any court or any law, administrative regulation or court decree.
(g) The Company is, and at the Closing Date will be, duly
incorporated and validly existing in good standing as a corporation
under the laws of its jurisdiction of incorporation, with an
authorized and outstanding common stock as set forth in the
Registration Statement and the Prospectus, and with full power and
authority (corporate and other) to own its property and conduct its
business, present and proposed, as described in the Registration
Statement and Prospectus; the Company has full power and authority
to enter into this Agreement; the Company has no subsidiaries; and
the Company is duly qualified and in good standing as a foreign
corporation in each jurisdiction, other than its jurisdiction of
incorporation, in which such qualification is required by the laws
of such jurisdiction.
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(h) The Company has an authorized and outstanding
capitalization as set forth in the Registration Statement and
Prospectus; all of the outstanding securities of the Company have
been validly authorized and issued and are fully paid and
nonassessable; no sales of securities have been made by the Company
in violation of the Act; the securities being offered hereunder
have been validly authorized and, upon delivery and payment
therefor pursuant to this Agreement, will have been validly issued
and will be fully paid and non-assessable; the Warrants and
Underwriter's Warrants will represent the binding obligations of
the Company; the holders of the Underwriter's Warrants and or
underlying securities thereof and any of the Units and Additional
Warrants to be sold by the Company are not and will not be subject
to any liability as shareholders; and except as set forth in the
Prospectus there are no preemptive or other rights to subscribe for
or purchase any of the securities being offered, or any options,
warrants, agreements or similar rights calling for the issuance by
the Company of any of its securities outstanding as of the Closing
Date.
(i) The securities being offered conform to the description
thereof contained in the Prospectus.
(j) No consent, approval, authorization or other order of any
governmental authority is required in connection with the execution
and delivery by the Company of this Agreement or the issuance and
sale by the Company of the Units and Additional Warrants, except
such as may be required under the Act or state securities laws.
(k) Except as set forth in the Registration Statement and
Prospectus there is, and at the Closing Date there will be, no
action, suit or proceeding before any court or governmental agency,
authority or body pending or, to the knowledge of the Company,
threatened, which might result in judgments against the Company not
adequately covered by insurance or which collectively might result
in any material adverse change in the condition (financial or
otherwise), business or prospects of the Company or would
materially affect its properties or assets.
(l) Upon delivery of any payment for the Underwriter's
Warrants to be sold by the Company as set forth in Paragraph 2(d)
of this Agreement, the Underwriter will receive good and marketable
title thereto free and clear of any and all liens, encumbrances,
charges and claims whatsoever; and the Company will have, on the
Effective Date and at the time of delivery of such Underwriter's
Warrants, full legal right and power and all authorization and
approval required by law to sell, transfer and deliver such
Underwriter's Warrants in the manner provided hereunder.
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(m) The Company knows of no outstanding claims for services
in the nature of a finder's fee or origination fee with respect to
the sale of the Units hereunder resulting from its acts for which
the Underwriter may be responsible.
(n) Each contract to which the Company is a party and to
which reference is made in the Registration Statement and
Prospectus has been duly and validly executed, is in full force and
effect in all material respects in accordance with their respective
terms, and none of such contracts have been assigned by the Company
and the Company knows of no present situation or condition or fact
which would prevent compliance with the terms of such contracts, as
amended to date. The Company has no intention of exercising any
right which it may have to cancel any of its rights or obligations
under any of such contracts and has no knowledge that any other
party to any of such contracts has any intention not to render full
performance under such contracts.
(o) The Company has filed all federal and state tax returns
which are required to be filed, and will pay all taxes shown due on
such returns and all assessments received by it to the extent such
taxes have become due. All taxes with respect to which the Company
is obligated have been paid or adequate accruals have been set up
to cover any such unpaid taxes.
(p) Except as otherwise set forth in the Prospectus, (i) the
Company has good and marketable title, free and clear of all liens,
encumbrances and defects, except liens for current taxes not due
and payable, to all property and assets which are described in the
Registration Statement and the Prospectus as being owned by the
Company, subject only to such exceptions as are not material and do
not adversely affect the present or prospective business of the
Company; and, (ii) the properties, including any equipment,
referred to in the Registration Statement and the Prospectus as
being held under lease by the Company are held under valid,
subsisting and enforceable leases with only such exceptions which
collectively are not material and do not adversely affect the
present or prospective business of the Company.
4. Escrow Account
(a) Notwithstanding anything contained herein to the
contrary, unless the Underwriter shall sell at least one (1) Unit
and/or one (1) Additional Warrant, none of the Units and Additional
Warrant, as the case may be, will be sold to the public and this
Agreement shall automatically be terminated with respect to the
security not sold. The Underwriter agrees to open an appropriate
escrow account to be maintained at HSBC Bank USA, 140 Broadway, New
York, New York, at the Company's expense, if any, for all monies to
be received from the sale of the securities being offered. Such
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monies shall be deposited in full without any deductions for
commissions and/or expenses. In the event that none of the Units
and/or Additional Warrants are sold and paid for within ninety (90)
days from the Effective Date (unless extended by mutual written
consent for an additional Ninety (90) days) the proposed offering
herein will be withdrawn. However, it is understood that if the
required funds relating to one (1) Unit and/or one (1) Additional
Warrant or such greater amount sold are received and deposited
within the Escrow Account referred in Paragraph 4 hereof, but not
cleared within the time set forth above, then up to an additional
five (5) business days shall be allowed for the sole purpose of
clearance of such funds and the Closing of the offering.
(b) Appropriate arrangements will be made by the Underwriter
to provide for the receipt of funds from the subscribers of the
securities being offered and to provide for the disposition
thereof, in accordance with the provisions of this section.
(c) Unless the Underwriter shall have sold at least one (1)
Unit and/or one Additional Warrant and the proceeds thereof shall
have been received by the Company, it shall not be entitled to
receive any expense allowance or commissions, or be entitled to
purchase any Underwriter's Warrants from the Company (except as
otherwise stated hereinafter).
(d) The "Closing Date" shall take place at the office of the
HSBC Bank USA, 140 Broadway, New York, New York or the Underwriter
at such time as will be fixed by notice in writing to be given by
the Underwriter to the Company, such date to be not less than five
(5) full business days after the date on which such notice shall
have been given and not less than five (5) and not more than ten
(10) full business days after the date on which any of the
conditions allowing the release of the proceeds from the escrow
account to the Company, and Underwriter as provided in the Escrow
Agreement shall have occurred. The Closing Date and place may be
changed by agreement of the Underwriter and the Company.
(e) 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 noon of the next
business day subsequent to the receipt of funds all funds received
from the sale of the offered Units and/or Additional Warrant, which
funds shall be made payable to the escrow agent, in an escrow
account, to be maintained at a bank as escrow agent for the benefit
of the Subscribers, and the same shall be held in such bank account
until the Closing Date, and upon such Closing Date the said funds,
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 may reasonably deem
necessary or appropriate under the circumstances.
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5. Selected Dealers
(a) In selling the securities being offered the Underwriter
shall offer them 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 as soon
after the Effective Date as it may deem advisable.
(b) The Underwriter may offer and sell the securities being
offered for the Company's account to Selected Dealers pursuant to
a form of Selling Agreement pursuant to which the Underwriter may
allow such concession (out of its underwriting commission) as it
may determine, within the limits set forth in the Registration
Statement and Prospectus. All purchases by selected dealers, shall
be as agents for the accounts of their customers, and the
Underwriter shall have no authority to employ any such dealers as
agents for the Company.
(c) On each sale by the Underwriter of any of the securities
being offered to selected dealers, the Underwriter shall require
any selected dealer purchasing any such securities being offered to
agree to re-offer 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.
(d) The Selected Dealer 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 Selected Dealer shall deposit by 12 noon of the next
business day subsequent to the receipt of funds all funds received
from the sale of the offered Units, which funds shall be made
payable to the escrow agent, in an escrow account, to be maintained
at a bank as escrow agent for the benefit of the Subscribers, and
the same shall be held in such bank account until the Closing Date,
and upon such Closing Date the said funds, 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 may reasonably deem necessary or appropriate
under the circumstances.
6. Covenants of the Company
The Company covenants and agrees with the Underwriter as
follows:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and will advise the
Underwriter immediately and, if requested by the Underwriter, will
confirm such advice in writing (i) when the Registration Statement
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has become effective and when any post-effective amendment thereto
becomes effective, or when any supplement to the Prospectus or any
amended Prospectus has been filed; (ii) of any request by the
Commission for any amendments or supplements to the Registration
Statement or the Prospectus or for additional information; (iii) of
the issuance by the Commission of any order suspending the
effectiveness of the Notification for the sale of the Units
hereunder or of any order preventing or suspending the use of any
Prospectus or the institution of any proceedings for any such
purposes; (iv) of the happening of any event which in the judgment
of the Company makes any statement in the Registration Statement or
Prospectus untrue or which requires the making of any changes in
the Registration Statement or the Prospectus in order to make the
statements therein not misleading; and (v) of the refusal to
qualify or the suspension of the qualifications of the Units and
the Additional Warrants for offering or sale in any jurisdiction,
or of the institution of any proceedings for any of such purposes.
The Company will use its best efforts to prevent the issuance of
any such order or of any order preventing or suspending such use,
to prevent any such refusal to qualify or any such suspension, and
to obtain as soon as possible a lifting of any such order, the
reversal of any such refusal and the termination of any such
suspension.
(b) The Company will not at any time, whether before, after
or on the Effective Date, file any amendment to the Registration
Statement or supplement to the Prospectus of which the Underwriter
shall not previously have been advised and furnished with copies or
to which the Underwriter shall have objected in writing or which is
not in compliance with the Act and the Regulations.
(c) To deliver to the Underwriter, without charge, three (3)
signed copies of the Registration Statement, including all
financial statements and exhibits filed therewith and any
amendments or supplements thereto, and to deliver without charge to
the Underwriter three (3) conformed copies of the Registration
Statement and any amendment or supplement thereto, including such
financial statements and exhibits.
(d) Prior to the Effective Date of the Registration Statement
the Company will have delivered to the Underwriter, without charge,
in such quantities as the Underwriter may reasonably request,
copies of each form of Preliminary Prospectus. The Company
consents to the use of each form of Prospectus by the Underwriter
and by dealers prior to the Effective Date of the Registration
Statement, if permitted under the Act.
<PAGE> 71
(e) To deliver to the Underwriter, without charge, as soon as
practicable after the Effective Date of the Registration Statement
and thereafter from time to time as many copies as it may
reasonably request of the Prospectus and of any amended or
supplemented Prospectus as the Underwriter may reasonably request.
(f) If, during such period of time as in the opinion of the
Underwriter or its counsel a Prospectus relating to this financing
is required to be delivered, any event occurs as a result of which
the Prospectus as then amended or supplemented would include an
untrue statement of a material fact, or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it
is necessary at any time after the Effective Date of the
Registration Statement to amend or supplement the Prospectus to
comply with the Act, the Company will forthwith notify the
Underwriter thereof and prepare and file with the Commission and
furnish and deliver to the Underwriter and to others whose names
and addresses are designated by the Underwriters, all at the cost
of the Company, a reasonable number of the amended or supplemented
Prospectus which as so amended or supplemented will not contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the Prospectus not misleading in
the light of the circumstances when it is delivered to a purchaser
or prospective purchaser, and which will comply in all respects
with the Act; and, in the event the Underwriter is required to
deliver a Prospectus 90 days or more after the Effective Date upon
request to prepare promptly such Prospectus as may be necessary to
permit compliance with the requirements of the Act.
(g) For a period of three (3) years after the Closing Date,
the Company will, as soon as practicable and in any event within
120 days after the close of each fiscal year, deliver (i) to its
security holders and to the Underwriter a copy of the annual report
of the Company containing a balance sheet setting forth the
financial condition of the Company as of the end of such fiscal
year, together with statements of income and surplus of the Company
for such fiscal year, all reasonably detailed. Such balance sheet
and statements of income and surplus shall be accompanied by a copy
of the accountant's report with respect thereto of independent
public accountants, who may be the regular accountants for the
Company; and (ii) to the Underwriter, (a) a copy of all reports
which the Company shall file with the Commission or with any
national securities exchange promptly after the same have been
forwarded to the Commission or exchange and a copy of all financial
statements and other reports which the Company shall send to its
security holders, and (b) from time to time such other information
as the Underwriter may reasonably request. In the event the
Company shall have any subsidiaries the account of which are
customarily consolidated with those of the Company, the financial
<PAGE> 72
statements to be furnished in this paragraph shall be the
consolidated financial statements of the Company and such
subsidiaries. In addition, and for a period of three (3) years
after the Closing Time, the Company shall furnish unaudited monthly
financial statements to the Underwriter on a timely basis. In
addition, the Company will make generally available to its security
holders, as soon as practicable, but in no event later than 15
months after the Effective Date, an earnings statement of the
Company (which need not be audited) in reasonable detail, covering
a period of at least twelve months beginning after the Effective
Date, which earnings statement shall satisfy the provisions of
Section 11(a) of the Act.
(h) The Company will enter into employment contracts no later
then the Effective Date but to begin on the Closing Date with its
President and Chief Executive Officer, Robert E. Sterling, and its
Vice-President, Matthew R. Sterling, which agreements shall remain
in effect for at least three (3) years and provide that their
annual compensation shall be $125,000.00 and $100,00.00,
respectively. In addition, the Company will enter into employment
contracts no later then the Effective Date but to begin on the
Closing Date with its other key personnel, which agreements shall
remain in effect for at least three (3) years and provide that
their annual compensation shall be subject to the approval of the
Underwriter.
(i) The Company will provide the Underwriter for its
confidential use, at the Company's expense, with copies of its
quarterly transfer sheets and annual lists of shareholders for a
period of three (3) years from the Closing Date.
(j) The Company will deliver to the Underwriter true and
correct copies of its Articles of Incorporation and all amendments
thereto, such copies to be certified by the Secretary of the
Company; true and correct copies of the By-Laws of the Company and
of the minutes of all meetings of the directors and stockholders of
the Company held prior to the Closing Date; and true and correct
copies of all contracts to which the Company is a party.
(k) Prior to the Effective Date the Company will cooperate
with the Underwriter and its counsel in connection with the
registration or qualification of the securities being offered for
offering and sale by the Underwriter and dealers under the
Securities or Blue Sky laws of such states as the Underwriter may
reasonably designate and will file such consents to service of
process or other documents as may be necessary in order to effect
such registration or qualification. The Company shall bear the
expenses incurred in qualifying the securities being offered under
the Securities or Blue Sky laws of such states including the fees
and charges of the various states, the cost of a printed memorandum
<PAGE> 73
with respect thereto, and reasonable legal fees and expenses. The
Company shall not be required, however, to sign a general consent
to service of process in any jurisdiction where it is not now
subject to such service.
(l) The Company will pay and bear, whether or not the
transactions contemplated hereunder are consummated or this
Agreement is prevented from becoming effective, or is terminated,
all costs and expenses incident to the performance of its
obligations under this Agreement, including all expenses incident
to the authorization of the securities being offered and their
issue and delivery to the Underwriter, any original issue taxes in
connection therewith, all transfer taxes, if any, incident to the
initial sale of the securities being offered by the Underwriter to
the public and to Selected Dealers; the fees and expenses of the
Company's counsel and accountants, the costs and expenses incident
to the issuance, sale and delivery of the Underwriter's Warrants to
the Underwriter, the costs and expenses incident to the
preparation, printing and filing under the Act, the Registration
Statement (including financial statements), any Preliminary
Prospectus and the Prospectus and any amendments or supplements
thereto; the reproduction and distribution of this Agreement, the
Agreement Among Underwriters, if any, the Selected Dealers
Agreement, the Underwriter's Questionnaire, the Blue Sky survey,
the Certificates for the Shares and Warrants, the issue and
delivery of the securities being offered, the filing fees of the
Commission and the National Association of Securities Dealers,
Inc., and any state regulatory agencies, the cost of preparing and
filing all exhibits to the Registration Statement, the cost of
furnishing the Underwriter copies of the Registration Statement and
Prospectus as herein provided; the cost and fees of qualifying the
securities being offered under the Securities or Blue Sky laws as
herein provided, and disbursements incurred by counsel for the
Company, in connection with the Blue Sky filing of this offering;
and, the costs and fees of any escrow agent referred to in
Paragraph 4(a).
In addition, the Company shall also bear the cost of
investigative reports (such as Bishop's Reports) of the Company's
principal executive officers, directors and substantial
shareholders which cost shall not exceed the sum of $5,000.
(m) Provided that at least one (1) Unit and/or one (1)
Additional Warrant is sold during the offering, the Company will
pay to the Underwriter a non-accountable expense allowance of $.153
for each Unit sold and $.003 for each Additional Warrant sold,
i.e., $.303 if one (1) Unit is sold and $.003 if one (1) Additional
Warrant is sold; and adjusted proportionately upwards ($25,000 of
which has been advanced to the Underwriter and shall be credited as
a part payment of this allowance) if all of the securities being
<PAGE> 74
offered are sold for the fees and disbursements of counsel to the
Underwriter and for the actual costs of advertising, traveling,
postage, due diligence expenses, telephone and telegraph expenses
and other miscellaneous expenses incurred by or on behalf of the
Underwriter in preparation for, or in connection with, the offering
and sale and distribution of the securities being offered, and the
Underwriter shall not be obligated to account to the Company for
such disbursements and expenses.
(n) If the Underwriter is unable to attempt or complete the
proposed offering and sale of the securities being offered
mentioned hereinabove because of (i) any failure or non-willingness
of the Company to act as contemplated herein or to qualify the
Units and Additional Warrants contemplated to be offered herein, or
(ii) any material discrepancy in any representations made to the
Underwriter, or (iii) any reason within the control of the Company,
then the Company will reimburse the Underwriter for any actual
costs and expenses, on an accountable basis, incurred by the
Underwriter relative to the offering contemplated hereby (including
counsel fees of the Underwriter) up to but not exceeding $50,000
inclusive of the $25,000 previously paid and referred to in 6(m)
hereof.
(o) Prior to the Closing Date, the Company will cooperate
with the Underwriter in such investigation as the Underwriter may
make or cause to be made of the properties, business and operations
of the Company in connection with the purchase and public offering
of the securities being offered and will make available to the
Underwriter in connection therewith such information in its
possession as the Underwriter may request, provided the Underwriter
agrees to treat any such information as confidential information.
(p) The Company has appointed or shall promptly hereafter
appoint American Securities Transfer and Trust Co., Inc. as its
Transfer and Warrant Agent, which entity shall agree to provisions
of Paragraph 9(b) of the Underwriter's Warrant, for the securities
being offered. Subject to the closing, for a period of five (5)
years following the Closing Date the Company will not change or
terminate any such appointments without the written consent of the
Underwriter, which consent shall not be unreasonably withheld.
(q) The Company will use all reasonable efforts to comply or
cause to be complied with, the conditions precedent to the several
obligations of the Underwriter specified in this Agreement.
(r) On or prior to the Effective Date, unless waived, in part
or in whole, by the Underwriter in writing, the Company shall
deliver an agreement of each officer and director of the Company as
well as one from Matthew Sterling (except that Robert Sterling and
Matthew Sterling, combined, shall be allowed to sell up to in the
<PAGE> 75
aggregate 200,000 shares after one (1) year following the Effective
Date provided the bid price for the common stock is at least $10.00
and all sales of such stock are effected through the Underwriter)
setting forth a representation to the effect that such individuals
not to sell, transfer or convey by registration or otherwise,
without the prior consent of the Underwriter, any of the securities
of the Company owned directly or beneficially for a period of two
(2) years from the Effective Date without the written consent of
the Underwriter or its specific authorized designee or any greater
period required by any state in which the offering of the
securities being offered is to be registered; and that, thereafter,
and for a period of two (2) years, all sales pursuant to Rule 144
shall be effected through the Underwriter. An appropriate legend
shall be marked on the face of the stock certificates representing
all of such securities.
(s) The Company will deliver to the Underwriter and its
counsel bound volumes of copies of all documents and appropriate
correspondence filed or received from the Commission and the NASD
and all closing documents.
(t) The Company shall use its best efforts to obtain on or
before the Closing Date a "Key Man" life insurance policy in the
amount of $500,000 each on the lives of its key personnel and the
Company shall pay the premiums therefor for a period of not less
than five (5) years from the Closing Date.
(u) The Company will use its best efforts promptly to do and
perform all things to be done and performed by it hereunder prior
to the Closing Date and to satisfy all conditions which it is
required to satisfy prior to the delivery by it of the securities
being offered.
(v) The Company will use the net proceeds to be received by
it from the sale of the securities being offered in the manner and
for the purposes set forth in the Prospectus and will comply with
all reporting and other requirements of the Act respecting the use
of the proceeds.
(w) The Company will comply with the Act and Regulations and
the Securities Exchange Act of 1934 and the rules and regulations
of the Commission thereunder so as to permit the continuance of
sales of and dealings in the securities being offered under the Act
and the Securities Exchange Act of 1934, as and if required under
said Act.
(x) The Company will pay and bear the full cost of
"Tombstone" advertisements of at least 5 x 5 inches in publications
to be designated by the Underwriter the cost of which shall not
exceed $4,000.
<PAGE> 76
(y) Prior to the Closing time the Company will not issue
directly or indirectly without the Underwriter's prior written
consent any press release or other communication or hold any press
conference with respect to the Company or its activities or the
offering of the securities.
(z) If at least one (1) Unit and/or one Additional Warrant is
sold and for a period of five (5) years commencing from the Closing
Date, the Company shall continue to employ the services of a firm
of independent certified public accountants acceptable to the
Underwriter in connection with the preparation of the financial
statements to be included in any Registration Statement to be filed
by the Company hereunder, or any amendment or supplement thereto.
For the purposes of the foregoing, BDO Seidman LLP and any
"Regional" accounting firm shall be deemed to be acceptable to the
Underwriter.
(aa) If at least one (1) Unit and/or one Additional Warrant
is sold and for a period of five (5) years after the Closing Time,
the Underwriter shall have the right to have a designated non-
voting advisor appointed by the Company. Said designee shall be
entitled to attend meetings of the Company's Board of Directors
and shall be entitled to receive reimbursement for all reasonable
costs incurred in attending such meetings, including, but not
limited to food, lodging and transportation.
(bb) The Company will, within thirty (30) days after the
Closing Time, apply for listing in Standard and Poor's Corporation
Reports and Moody's Over-the-Counter Guide, and will use its best
efforts to have itself listed in such reports.
(cc) The Company will employ an investor relations firm
reasonably satisfactory to the Underwriter for a period of not less
than three (3) years from the closing date.
(dd) Within ten (10) days after the end of the first three
(3) month period following the Effective Date of the Registration
Statement, the Company shall prepare and file with the Commission
a report on Form SR as prescribed by Rule 463 of Regulation C under
the Securities Act of 1933, as amended. Within thirty (30) days
after the Closing Date, the Company shall prepare and file with the
Commission a Registration Statement on Form 8-A with respect to the
Securities being offered pursuant to and as contemplated by Section
12(g) of the Securities Exchange Act of 1934, as amended (the "34
Act"), regardless of whether the Company would be required
otherwise by the terms of such Section to file such a Registration
Statement, and shall file a request for acceleration of the
effective date under Section 12(g) in connection therewith. The
Company shall thereafter comply with all periodic reporting and
<PAGE> 77
proxy solicitation requirements imposed by the Commission pursuant
to the 34 Act, and shall promptly furnish the Underwriter with
copies of all materials filed with the Commission pursuant to the
34 Act or otherwise furnished to shareholders of the Company.
(ee) The Company will pay to you a commission in an amount
equal to ten (10%) percent of the exercise price of the Warrants
included in the Units and the Additional Warrants for each Warrant
exercised commencing one year after the Effective Date provided (1)
the market price for the Common Stock is greater than the exercise
price of the Warrant; (2) that the Underwriter had solicited the
holder to exercise the Warrant with such solicitation being
confirmed in writing by each holder; and (3) that the compensation
arrangements were disclosed to holders at the time of exercise as
well as in the Prospectus, such disclosure being confirmed in
writing by each holder. The commission is further conditioned upon
the Warrant Agent being furnished by the Underwriter with a
certificate stating that:
i) the Warrants exercised were not held in a
discretionary account;
ii) the Underwriter did not, within the required time
period (2 or 9 business days) immediately preceding the
solicitation of the exercise of the Warrant or the date of
such exercise, bid for or purchase the Common Stock of the
Company or any securities of the Company immediately
convertible into or exchangeable for the Common Stock
(including the Warrants) or otherwise engage in any activity
that would be prohibited by Regulation M under the Securities
Exchange Act of 1934, as amended, with one engaged in a
distribution of the Company's securities, and
iii) in connection with the solicitation, the Underwriter
disclosed the compensation it would receive upon exercise of
the Warrant.
(ff) At the Closing Time, the Company shall enter into a
financial consulting agreement with us pursuant to which we will
receive a consulting fee in an amount equal to one (1%) of the
gross proceeds of the total dollar amount raised payable at the
Closing for services for a period of one (1) year from the
Effective Date which shall include, but not be limited to, advising
the Company regarding shareholder relations including the
preparation of the annual report and other releases, assisting in
long-term financial planning, advice in connection with corporate
re-organizations and expansion and capital structure, and other
financial assistance.
<PAGE> 78
(gg) If at least one (1) Unit and/or one Additional Warrant
is sold and for a period of five (5) years after the Closing Time,
the Company may not adopt a qualified and/or non-qualified stock
option plan for its employees without the prior written consent of
the Underwriter, which consent shall not be unreasonably withheld.
(hh) For a period of five (5) years following the Effective
Date or until such time as the securities of the Company are listed
on the New York Stock Exchange or the American Stock Exchange, the
Company shall cause its legal counsel to provide the Underwriter
with a list, to be updated at least annually, of those states in
which the securities of the Company may be traded in non-issuer
transactions under the Blue Sky laws of the states and the basis
for such authority with the first list to be given at the time of
Closing.
(ii) For a period of three (3) years following the Closing
Date, the Company, at its expense, shall cause its regularly
engaged independent certified public accountants to review (but not
audit) the Company's financial statements for each of the first
three (3) fiscal quarters prior to the announcement of quarterly
financial information, the filing of the Company's 10-Q quarterly
report and the mailing of quarterly financial information to
security holders.
(jj) If at least one (1) Unit and/or one Additional Warrant is
sold, the Company shall grant the Underwriter a right of first
refusal with respect to the public sale of any securities of the
Company to be made by the Company, its principal shareholders or
subsidiaries at any time during the period commencing at the
completion of the offering and ending three (3) years thereafter
except (1) securities which are the issued in connection with or
pursuant to mergers, acquisitions, recapitalizations,
reorganizations or stock option plans, solely by the Company and/or
its subsidiaries, and (2) private or broker sales pursuant to Rule
144 or otherwise by shareholders on a principal basis provided such
sales do not result in the loss of control of the Company by those
shareholders presently having such control. In connection with
such right, the Company covenants and agrees to furnish the Under-
writer with the terms and conditions of any bona fide proposed
public sale of securities to be made by it, its principal
shareholders or subsidiaries, and the name and address of the
Underwriter, broker or dealer proposing to effectuate such sale,
together with all compensation terms. The Underwriter shall have
the right within ten (10) days from such notification by the
Company to notify the Company whether the Underwriter will exercise
its right to effect such proposed financing on the terms no less
favorable to the Company than those proposed by such other broker
or dealer. In the event the Underwriter declines to exercise its
<PAGE> 79
right of first refusal, such action shall only relate to the
financing and terms and conditions contained in the specific notice
furnished to the Underwriter and not to any other proposed
financing thereafter.
(kk) If at least one (1) Unit and/or one Additional Warrant
is sold, should the Company shall within five (5) years from the
Effective Date, enter into any agreement or understanding
introduced by the Underwriter involving (I) the sale of all or
substantially all of the assets and properties of the Company, (ii)
the merger or consolidation of the Company (other than a merger or
consolidation effected for the purpose of changing the Company's
domicile) or (iii) the acquisition by the Company of the assets or
stock of another business entity, which agreement or understanding
is thereafter consummated, whether or not during such five (5) year
period, the Company, upon such consummation, shall pay to the
Underwriter an amount equal to the following percentages of the
consideration paid by the Company in connection with such
transaction:
5% of the first $1,000,000, or portion thereof, of such
consideration;
4% of the second $1,000,000, or portion thereof, of such
consideration;
3% of such consideration in excess of the first
$2,000,000 of such consideration.
(ll) If at least one (1) Unit and/or one Additional Warrant
is sold, the Company, provided its meets the financial
requirements, shall use its best reasonable efforts at its cost and
expense to take all necessary and appropriate action such that the
Securities are listed for trading in the NASDAQ System immediately
upon the closing of the proposed offering and, that the Securities
remain listed for at least five years from said Closing Date
provided that the Company otherwise complies with the prevailing
requirements of NASDAQ.
(mm) The Company shall deliver to the Underwriter an agreement
executed by the founders of the Company owning 1,000,000 shares of
Common Stock whereby each of them agree to place their securities
(1,000,000) in escrow with the Company's counsel at the time of
closing of the offerings contemplated herein subject to the Company
reflecting on an audited financial statement sales and pretax
income in excess of $35,000,000.00 and $7,500,000.00, respectively,
no later than January 31, 2004. In the event such sales and pretax
income are not achieved by January 31, 2004, then the shares shall
<PAGE> 80
be cancelled. The 1,000,000 shares as well as the dollar amount of
sales and pretax income set forth above shall be prorated downward
if less than $5,000,000 is raised in the offering contemplated
herein.
7. Conditions of Underwriter's Obligations
The Underwriter's obligation to act as Agents of the Company
hereunder and to find purchasers for the securities being offered
and to make payment to the Company on the Closing Date is subject
to the accuracy of and compliance with the representations and
warranties on the part of the Company herein as of the date hereof
and as of the Closing Date, 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 to the Closing Date,
and to the following further conditions:
(a) The Registration Statement shall become effective on or
at such reasonable date as the Underwriter may agree to. No stop
order or order suspending the effectiveness of the Registration
Statement for the sale of the securities being offered shall have
been issued at or before the Closing Date and no proceedings for
that purpose shall have been instituted or shall be pending or, to
the knowledge of the Company, contemplated by the Commission, and
any request for additional information on the part of the
Commission to be included in the Registration Statement or the
Prospectus or otherwise shall have been complied with, and no
amendments to the Registration Statement or Prospectus shall have
been filed to which the Underwriter and its counsel have not given
their consent in writing.
(b) All corporate action taken and all legal opinions and
proceedings relating to the securities being offered and the
Underwriter's Warrants, the Registration Statement and Prospectus
and all other matters incident thereto and to the transaction to
which this Agreement relates shall be satisfactory in all respects
to Robert C. Beers, P.C. and Stephen W. Wilk, Esq., counsel for the
Underwriter and he shall have been furnished with such
certificates, documents and information as he may request in this
connection.
(c) On the Closing Date, (i) the Registration Statement and
Prospectus and any amendments or supplements thereto shall contain
all statements which are required to be stated therein in
accordance with the Act and shall in all material respects conform
to the requirements of the Act and neither the Registration
Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
<PAGE> 81
necessary to make the statements therein not misleading, (ii) since
the respective dates as of which information is given in the
Notification there shall have been no material adverse change in
the business, properties or financial condition of the Company from
that set forth in the Registration Statement and Prospectus and
there shall not have been any material transaction, contract or
agreement entered into by the Company which is not referred to in
the Registration Statement, (iii) no action, suit or proceeding at
law or in equity shall be pending or, to the knowledge of the
Company, threatened against the Company which would be required to
be set forth in the Registration Statement other than as set forth
therein, and no proceedings shall be pending or, to the knowledge
of the Company, threatened against the Company before or by any
federal, state or other commission, board or administrative agency
wherein an unfavorable decision, ruling or finding would have a
material adverse effect upon the business, property, financial
condition or income of the Company, and (iv) the Company shall not
have declared dividends or made any payments or made any
acquisitions or capital stock or made any other distribution on
outstanding shares of capital stock other than as set forth in the
Registration Statement.
(d) Prior to the Closing Date the Company shall not have
sustained a loss on account of fire, flood, accident or other
calamity which, in the judgment of the Underwriter materially and
adversely affects the Company, regardless of whether or not such
loss shall have been insured.
(e) The Underwriter shall receive on and as of the Closing
Date an opinion of , counsel for the Company, to
the effect that (i) the Company is a corporation in good standing,
duly organized and validly existing under the laws of the state of
incorporation, and is authorized by its Certificate of
Incorporation to own its properties and to conduct its business,
present and proposed, as set forth in the Prospectus; (ii) the
Company is duly qualified to transact the business in which it is
engaged and is in good standing in each jurisdiction in which its
ownership of property or its conduct of business requires such
qualification or registration (naming such jurisdiction); the
Company does not own or control any subsidiaries; (iii) the Company
has an authorized and outstanding capitalization as set forth in
the Prospectus all of the outstanding securities of the Company
have been validly authorized and issued, and are fully paid and
non-assessable; the securities being offered to be sold by the
Company have been validly authorized and when issued will be fully
paid and non-assessable; the securities issuable upon exercise of
the Underwriter's Warrants has been validly authorized and reserved
for issuance and when issued, will be validly issued and will be
fully paid and nonassessable; there are no preemptive or other
rights to subscribe for or purchase the securities being offered;
<PAGE> 82
there are no options, warrants, agreements or similar rights
calling for the issuance by the Company of any of its securities
except as described in the Registration Statement; (iv) the
securities being offered by the Company conform as to their
legality with the description thereof contained in the Registration
Statement; (v) this Agreement has been duly authorized, executed
and delivered by the Company and is a valid and binding agreement
of the Company in accordance with its terms; the Company has the
legal power to sell and deliver the securities being offered
pursuant to the provisions of this Agreement and will deliver to
the purchasers valid marketable title thereto, free and clear of
any claims, liens and encumbrances; to the best of such counsel's
knowledge, (1) the execution, performance and delivery of this
Agreement and the consummation of the transactions contemplated
hereby will not result in any breach of violation (a) of any of
the terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, note, agreement or
other agreement or instrument known to counsel to which the Company
is a party or by which it is bound or of which any of its property
is the subject, and (b) the Company's Articles of Incorporation, as
amended, or By-Laws, or any order, rule or regulation known to
counsel of any court or governmental agency or body having
jurisdiction over the Company or any of their activities or
properties, and, (2) no consent, approval, authorization or order
of any court or governmental agency or body is required for the
consummation of the transaction contemplated hereby except such as
have been obtained under the Act or Regulations or under state
securities laws; (vi) the sale of the Company's securities (other
than the securities being offered) prior to the Closing Date was
made pursuant to exemptions from the registration requirements of
the Act; (vii) the Registration Statement has become effective
under the Act and the public offering and sale of the securities
being offered is made pursuant to such effective Registration
Statement and, to the best knowledge of such counsel, no order
suspending the effectiveness of such Registration Statement for the
sale of securities being offered has been issued and no proceedings
for such for such purposes have been instituted or are pending or
contemplated by the Commission and to such counsel's knowledge and
belief no grounds exist for the suspension of such Registration
Statement the Registration Statement and Prospectus and any
supplement or amendment thereto (except as to the financial
statements and schedules included therein as to which counsel need
not express opinion) comply as to form in all material respects
with the Act and such counsel has received no information which
would indicate that the Registration Statement or Prospectus or any
supplement or amendment thereto contains any untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein
not misleading; (viii) such counsel does not know of any legal or
government proceedings required to be described in the Registration
<PAGE> 83
Statement or Prospectus or of any contract or document of a
character required to be described in the Registration Statement or
Prospectus or required to be filed as an exhibit to the
Registration Statement which is not described or filed as required;
(ix) the Company has good marketable title in fee simple, except as
stated in the Registration Statement or Prospectus to all of the
real property described therein as being owned by it, free and
clear of all liens and encumbrances, except liens and encumbrances,
if any, which in the opinion of such counsel, are not material and
do not interfere with the use made and proposed to be made of such
property, and holds such valid leases, property rights and
easements as are set forth in the Registration Statement or the
Prospectus are necessary to the operations and proposed operations
of the Company (such counsel being entitled to rely with respect to
the opinions called for by this subdivision (x) on certificates of
the Company as to the use or proposed use of properties and as to
the materiality and non-interference of liens and encumbrances and
on opinions of local counsel or on abstracts of title and
certificates; reports or title policies of title insurance
companies); and (xi) the Underwriter's Warrants to be sold by the
Company have been duly authorized and constitute valid and binding
obligations of the Company; the Company had at the date of this
Agreement and has at the Closing Date full legal right and
authority to sell and deliver in the manner provided in this
Agreement, the Underwriter's Warrants sold by it hereunder; and the
delivery by the Company as described in the Registration Statement
of certificates for the Underwriter's Warrants sold hereunder, will
pass good and marketable title to such Underwriter's Warrants, free
and clear of all liens, encumbrances, charges and claims
whatsoever, except as may be provided by federal and state
securities laws. The opinion referred to in this subsection shall
also cover such other legal matters relating to this Agreement and
the transactions contemplated hereby as the Underwriter or their
counsel may reasonably request.
In expressing their opinion on the matters set forth in this
Paragraph 7(e), said counsel shall be entitled to rely, as to any
questions of fact upon which such opinion is predicated, on the
representations of the officers of the Company or opinions of other
counsel.
(f) The Underwriter shall have received on the Closing Date
certificates, 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 or stop order regarding the sale of the securities being
offered is in effect and no proceedings for such purpose are
pending or are, to their knowledge, threatened by the Commission;
<PAGE> 84
(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 contracts required to be filed as
exhibits to the Registration Statement 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 nor the Prospectus nor any
amendment or supplement to either of the foregoing contains an
untrue statement of any material fact or omits to state any
material fact required to be stated therein or necessary to make
the statement therein not misleading; and since the Effective Date,
to the best of their knowledge, there has occurred no event
required to be set forth in an amended or supplemented Prospectus
which has not been so set forth;
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus there has
not been any material adverse change in the condition of the
Company, financial or otherwise, or in the results of its
operations, except as reflected in or contemplated by the
Registration Statement and the Prospectus, and except as so
reflected or contemplated since such date there has not been any
material transaction entered into by the Company;
(v) The representations and warranties set forth in this
Agreement are true and correct and the corporation has complied
with all of its agreements herein contained;
(vi) The Company is not delinquent in the filing of any
federal, state and municipal tax return or the payment of any
federal, state or municipal taxes; they know of no proposed
redetermination or re-assessment of taxes, adverse to the Company,
and the Company has paid or provided by adequate reserves for all
known tax liabilities;
(vii) They know of no material obligation or liability of the
Company, contingent or otherwise, not disclosed in the Registration
Statement and Prospectus;
(viii) This Agreement, the consummation of the transactions
herein contemplated, and the fulfillment of the terms hereof, will
not result in a breach by the Company of any terms of, or
constitute a default under, its Certificate of Incorporation or
By-Laws, any indenture, mortgage, lease, deed or trust, bank loan
or credit agreement or any other agreement or undertaking of the
<PAGE> 85
Company including, by way of specification but not by way of
limitation, any 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;
(ix) The financial statements and schedules filed with and as
part of the Registration Statement present fairly the financial
position of the Company as of the dates thereof all in conformity
with generally accepted principles of accounting applied on a
consistent basis throughout the periods involved. Since the
respective dates of such financial statements there 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,
(x) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
except as may otherwise be indicated therein, the Company has not
prior to the Closing Date, either (i) issued any securities or
incurred any liability or obligation, direct or contingent, for
borrowed money, or (ii) entered into any material transaction other
than in the ordinary course of business. The Company has not
declared, paid or made any dividend or distribution of any kind on
its capital stock.
(g) The Company shall have performed all agreements herein
contained to be performed on its part at or before the Closing Date
and all other covenants and conditions set forth in Paragraph 6
shall have been performed.
(h) At the time that this Agreement is executed by the
Company and at the Closing Date, the Underwriter shall have
received a letter from BDO Seidman LLP, dated as of the date this
Agreement is executed by the Company and as of the Closing Date,
confirming that it is an independent public accountant with the
meaning of the Securities Act and the published Rules and
Regulations and that the answer to Item 25 of the Registration
Statement is correct insofar as it related to it and stating in
effect (a) that in its opinion the financial statements and
schedules examined by it and included or incorporated by reference
in the Registration Statement and Prospectus comply as to form in
all material respects with the applicable accounting requirements
of the Securities Act and the published Rules and Regulations, and
(b) that on the basis of a reading of the unaudited financial
statements and the schedules included in the Registration Statement
and of the latest available unaudited interim financial statement
prepared by the Company, consultations with and inquiries of
officials of the Company, responsible for financial and accounting
matters, a reading of the Minute Book of the Company, and such
other procedures and inquiries (if any) as may be specified in such
<PAGE> 86
letter, nothing has come to its attention which gave it reason to
believe that (i) the unaudited financial statements and schedules
included in the Registration Statement and Prospectus do not comply
as to form in all material respects with the applicable accounting
requirements of the Securities Act and the published Rules and
Regulations or were not prepared in accordance with generally
accepted accounting principles and practices applied on a basis
consistent with those followed in the preparation of such audited
financial statements or that (ii) during the period from ,
199 to a specified date not more than five days prior to the date
of such letter there was any change in the capital stock or long
term debt of the Company as compared with corresponding amounts
shown in the , 199 Balance Sheet included in the
Registration Statement or (iii) during the period from June 1, 1993
to the date of the Company's most recent financial statement there
was any decreases in net current assets or net assets as compared
with corresponding amounts shown in the , 199 Balance Sheet
included in the Registration Statement or any decreases in net
sales or in the total or per share amounts of income before
extraordinary items or of net income of the Company compared with
the corresponding period of the preceding year, except as set forth
in or contemplated by the Registration Statement or Prospectus.
(i) All of the securities being offered by the Company shall
be tendered for delivery in accordance with the terms and
provisions of this Agreement.
(j) The securities being offered shall be qualified in such
states as the Underwriter may reasonably request and each such
qualification shall be in effect and not subject to any stop order
or other proceeding on the Effective Date, and Closing Date.
(k) The Company shall have furnished to the Underwriter such
other and further certificates, documents, and opinions as the
Underwriter may reasonably request or its counsel may request
(including certificates of officers) as to the accuracy, at and as
of the Closing Date, of the representations and warranties of the
Company herein, as to the performance by the Company of its
obligations hereunder, and as to other conditions concurrent and
precedent to its obligations hereunder.
All the opinions, affidavits, letters, evidence and
certificates specified in this Paragraph 7 or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions
hereof only if they are in form reasonably satisfactory to the
Underwriter and its counsel.
<PAGE> 87
Any certification signed by an officer of the Company and
delivered to the Underwriter or to its counsel will be deemed a
representation and warranty by the Company to the Underwriter as to
the statements made therein.
In the event that any of the conditions specified in this
Paragraph 7 shall not have been fulfilled, the Underwriter shall
have the right, upon written notice to the Company, and upon the
Company's failure to cure the condition within ten (10) days from
the date of such notice, to terminate the obligations of the
Underwriter under this Agreement.
8. Indemnification
(a) The Company will indemnify and hold harmless the
Underwriter and each person who controls the Underwriter within the
meaning of Section 15 of the 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 statute or at common law or otherwise and will
reimburse the Underwriter and each such person specified as above
for any legal or other expenses (including the cost of any
investigation and preparation) reasonably incurred by them or
any one them in connection with investigating or defending any
litigation or claim 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 or any post-effective amendment thereto or
in 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 necessary to make the statements
therein not misleading, all as of the date when the Registration
Statement or such post-effective amendment, the filing of any such
Blue Sky application as the case may be, becomes effective or any
untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Prospectus or Prospectus (as amended
or as supplemented thereto), 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; provided, however, that the
indemnity agreement contained in this subsection (a) shall not
apply to amounts paid in settlement of any such litigation if such
settlement is effected without the consent of the Company, nor
shall it extend to any Underwriter or any person controlling any
Underwriter in respect of any such losses, claims, damages,
expenses, liabilities, or actions arising out of, or based upon any
such untrue statement or alleged untrue statement, or any such
omission, if such statement or omission was made in reliance upon
and in conformity with, written information furnished to the
<PAGE> 88
Company by the Underwriter on behalf of such Underwriter
specifically for use in connection with the preparation of the
Registration Statement, the Prospectus, or any such amendment
thereof or supplement thereto or Blue Sky Application.
The Underwriter and each controlling person of the Underwriter
agree after their receipt of written notice of the commencement of
any action against such Underwriter or against any such person
controlling any Underwriter as aforesaid, in respect of which
indemnity may be sought from the Company on account of the
Indemnity agreement contained in this subsection (a), to notify the
Company within ten (10) days in writing of the commencement thereof
and to supply a copy of any legal documents served upon such
Underwriter or such controlling person in connection with such
action. The omission of such Underwriter or such controlling
person of such Underwriter to so notify the Company of any such
action shall relieve the Company from any liability which it may
have to such Underwriter or such controlling persons as to any such
action on account of the indemnity agreement contained in this
subsection (a), but shall not relieve the Company from any other
liability which it may have to such Underwriter, to such
controlling person or to any other underwriter or controlling
person. In case any such action shall be brought against any
Underwriter or any controlling person, such Underwriter or
controlling person of such Underwriter shall promptly notify the
Company of the commencement thereof and the Company shall be
entitled to participate in (and, to the extent it shall wish, to
direct) the defense thereof at its own expense but such defense
shall be conducted by counsel of recognized standing and reasonably
satisfactory to such Underwriter and to such controlling person or
persons who are defendant or defendants in such litigation. The
Underwriter or any such controlling person shall have the right to
employ separate counsel in any such action and to participate in
the defense thereof subject to the Company's reasonable right to
approve such counsel which will not be unreasonably withheld, but
the fees and expenses of such counsel shall not be at the expense
of the Company unless (i) the employment of such counsel has been
specifically authorized by the Company, or (ii) the Company shall
not have employed counsel to have charge of the defense of such
action,. or (iii) there is a conflict of interest which would
prevent counsel for the Company from representing both the Company
and the Underwriter or such controlling person, in any of which
cases the Company shall not have the right to direct the defense of
such action on behalf of the Underwriter or such controlling
person. It is understood that, regardless of whether such counsel
is representing all of the parties entitled to indemnification
under this subsection (a), the Company shall not be liable, under
clause (iii) above, for the fees and expenses of more than one
separate counsel who shall be approved by the Underwriter. The
Company agrees to notify each Underwriter promptly of the
<PAGE> 89
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 and sale of any of its
securities, and to furnish the Underwriter, at the Underwriter's
request, with copies of all pleadings therein and to permit the
Underwriter to be an observer therein and to apprise it of all of
the developments therein, all at the Company's expense. The
provisions of this paragraph 8(a) shall also apply to the
subsequent registration of the Underwriter's Warrants and/or the
securities underlying the Underwriter's Warrants.
(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 Section 15
of the 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 statute or
at common law or otherwise and, except as hereinafter provided,
will reimburse the Company and such officers or controlling person
indemnified for as 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 or any post-effective amendment
thereto or in 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
statements 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 or 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, in the light of the circumstances under which
they were made, not misleading, 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 thereof or supplement thereto or Blue Sky
application. This indemnity agreement is in addition to any other
liability which the Underwriter may have to the Company. The
Underwriter shall not be liable for amounts paid in settlement of
<PAGE> 90
any such litigation, if such settlement was effected without its
consent. In case of the commencement of any action, respect of
which indemnity may be sought from any such Underwriter on account
of its indemnity agreement contained in this subsection (b), the
Company and each person agreed to be indemnified by such
Underwriter shall have the same obligation to notify such
Underwriter and such Underwriter shall have the same right to
participate in (and, to the extent that it shall wish, 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 such Underwriter.
The Underwriter agrees to notify the Company promptly of the
commencement of any litigation or proceeding against it or against
any such controlling person of which it may be advised in
connection with the issue or sale of any of the securities of the
Company. The provisions of this subparagraph shall also apply to
the subsequent registration of the Underwriter's Warrants and/or
securities underlying the Underwriter's Warrants.
(c) The respective indemnity agreements of the Company, and
the Underwriter contained in subsections (a) and (b) above, and the
representations and warranties of the Company set forth in this
Agreement, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any such
officer or controlling person of the Company, and shall survive the
delivery of the Units and/ additional Warrants, and any successor
of the Underwriter, or of such controlling person of the Company or
of any controlling person of the Company, as the case may be, shall
be entitled to the benefit of these respective indemnity
agreements.
9. Contribution.
In order to provide for just and equitable contribution under
the Act in any case in which (i) the Underwriter makes claims for
indemnification pursuant to Section 8 hereto but it is judicially
determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification
may not be enforced in such case, notwithstanding the fact that the
express provisions of Section 8 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the
part of the Underwriter, then the Company and each person who
controls the Company, in the aggregate, and the Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys' fees) in
either such case (after contribution from others) in such
<PAGE> 91
proportions that the Underwriter is responsible in the aggregate
for that portion of such losses, claims, damages or liabilities
represented by the percentage that the underwriting commission per
Unit appearing on the cover page of the Prospectus bears to the
public offering price appearing thereon, and the Company shall be
responsible for the remaining portion, provided, however, that (a)
if such allocation is not permitted by applicable law, then the
relative fault of the Company and the Underwriter and controlling
persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things,
whether in the case of an untrue statement of a material fact or
the omission to state a material fact, such statement or omission
relates to information supplied by the Company or the Underwriter,
and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriter agree that it would not
be just and equitable if the representative obligations of the
Company and the Underwriter to contribute pursuant to this Section
9 were to be determined by pro rata or per capita allocation of the
aggregate damages or by any other method of allocation that does
not take account of the equitable considerations referred to in the
first sentence of this Section 9; and, (b) the contribution of the
Underwriter shall not be in excess of its proportionate share of
the portion of such losses, claims, damages or liabilities for
which the Underwriter is responsible. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. As used in
this paragraph, the word "Company" includes any officer, director,
or person who controls the Company within the meaning of Section 15
of the Act. If the full amount of the contribution specified in
this paragraph is not permitted by law, then the Underwriter and
each person who controls any Underwriter shall be entitled to
contribution from the Company to the full extent permitted by law.
The foregoing contribution agreement shall in no way affect the
contribution liabilities of any persons having liability under
Section 11 of the Act other than the Company and the Underwriter.
No contribution shall be requested with regard to the settlement of
any matter from any party who did not consent to the settlement;
provided, however, that such consent not be unreasonably withheld
in light of all factors of importance to such party.
10. Termination
This Agreement shall be terminated (a) in the event that all
the Securities Being Offered are not sold as provided in sections
2 and 4 above; (b) at any time prior to the Closing Date by the
Underwriter by written notice to the Company if in the sole and
<PAGE> 92
absolute judgment of the Underwriter it is impracticable to offer
the Securities Being Offered for sale, by reason of (i) an outbreak
of major hostilities or other national or international calamity
having occurred; (ii) any loss of whatsoever nature, whether or not
insured, which, in the sole and absolute 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; (iii) any material adverse change in the business,
property or financial condition of the Company; (iv) any action,
suit or proceeding at law or in equity against the Company, or by
any Federal, State or other Commission, board or agency wherein any
unfavorable decision would materially adversely effect the
business, property, financial condition or income of the Company;
(v) adverse market conditions including but not limited to the
suspension and\or limitations of trading in securities on the New
York Stock Exchange, Inc., or the American Stock Exchange, Inc.
and\or minimum prices having been established on either such
Exchange; (vi) any action having been taken by any government in
respect of its monetary affairs which, in the sole and absolute
opinion of the Underwriter, has a material adverse effect on the
United States securities markets, or (vii) conditions arising
subsequent to the execution hereof, the Underwriter believes no
favorable public market exists for the sale of the Securities Being
Offered.
If this Agreement shall be terminated pursuant to section 7 or
this section 10, or if the transaction provided for herein is not
consummated 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 liability of any character 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(l), 6(m), 6(n) and 8(a) hereof, and except
where termination occurs pursuant to clauses (i), (iv), (v), (vi)
or (vii) of this Section 10, the Company shall pay in addition
thereto all out-of-pocket expenses incurred by the Underwriter, on
an accountable basis, in contemplation of the performance by it of
its obligations hereunder, including fees and disbursements of
counsel and printing and traveling expenses and postage, due
diligence expenses, charges of the Underwriter which charges shall
not exceed the sum of $50,000; and, if termination should occur
pursuant to clauses (i), (iv), (v), (vi) or (vii) of this section
10, the Company shall reimburse the Underwriter for the aforesaid
expenses incurred by it, on an accountable basis, in the sum of not
more than $25,000.
<PAGE> 93
Any notice under this section 10 may be given by telephone or
telegraph, but shall be subsequently confirmed by letter within
three (3) days of such notification. Moreover, nothing in this
section 10 shall be construed so to permit the Underwriter to be
reimbursed for expenses by it in excess of its actual expenses as
described above.
11. Finders
(a) The Company knows 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 its officers, directors or
employees, for which the Underwriter may be responsible, and the
Company agrees to indemnify and hold the Underwriter free and
harmless from any claims for any services of such nature arising
from any act of the Company or its employees, and will reimburse
the Underwriter for any counsel fees, legal or other expenses
reasonably incurred by the Underwriter in investigating or
defending against any such claim.
(b) The Underwriter knows 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 its officers,
directors, or employees, for which the Company may be responsible,
and the Underwriter agrees to indemnify and hold the Company free
and harmless from any claims for any services of such nature
arising from any act of such Underwriter or their employees or
agents, and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in investigating or
defending against any such claim.
11. Underwriter's Covenant
The Underwriter covenants and agrees with the Company as
follows:
(a) By the Closing Date the Underwriter will supply the
Company with all information requested by the Company with regard
to the names and addresses of all subscribers to the securities
being offered; and,
(b) The Underwriter and all Selected Dealers are registered
as a broker-dealers with the Commission and are members in good
standing with the NASD, and the Underwriter and all Selected
Dealers will be registered as broker-dealers with the Commission
and members in good standing of the NASD.
<PAGE> 94
(c) There is not now pending or threatened or to the best
knowledge of the Underwriter or its counsel, contemplated against
the Underwriter any action or proceeding, either in any court of
competent jurisdiction or before the Commission or any state
securities commission, or administrative body or tribunal, except
as fully disclosed or required to be disclosed in the Prospectus.
(d) In the event of any action or proceeding of the type
referred to in subparagraph (c) above shall be instituted or
threatened against the Underwriter at any time prior to the
Effective Date, or in the event that the Underwriter shall cease to
be a member in good standing of the National Association of
Securities Dealers, Inc. ("NASD"), or in the event there shall be
filed by or against the Underwriter in any court pursuant to any
federal, state, local or municipal statute, a petition in
bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of its assets or if the
Underwriter makes an assignment for the benefit of creditors, the
Underwriter shall give written notice of the occurrence of such
event or events to the Company, and the Company shall have the
right on three (3) days' written notice to the Underwriter to
terminate this Agreement without any liability to the Underwriter
of any kind.
(e) The Company agrees that, upon the closing and immediately
upon the request of the Underwriter it will give instructions to
its Transfer Agent to issue Share and Warrant Certificates in the
names and denominations submitted to it by the Underwriter. The
Underwriter agrees that when funds in sufficient amount as required
by this Agreement are in liquid form it will submit, within three
(3) days thereafter, to the Transfer Agent a list of the names and
addresses of the subscribers and the denominations of the
certificates to be issued to them. The Transfer Agent shall be
required by the Company to issue said certificates within seven (7)
days after receipt of the aforesaid list from the Underwriter and
the delivery of the certificates shall be made to the Underwriter
within seven (7) days thereafter against receipt of payments as
provided in this Agreement.
(f) Whether or not the transactions contemplated hereunder
are consummated or this Agreement is prevented from becoming
effective, the Underwriter will pay and bear all costs and expenses
incident to the performance of its obligations of this Agreement
except as otherwise specified herein.
<PAGE> 95
12. Survival of Representation, Warranties and Agreements
The respective indemnities, agreements, representations,
warranties and other statements of the Company or its officers as
set forth in or made pursuant to this Agreement and the respective
indemnities, agreements, representations, warranties, covenants and
other statements of the Underwriter or its officers as set forth in
or made pursuant to this Agreement 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 will survive termination of this Agreement and the
delivery of any payment for the securities being offered, on the
Closing Date.
13. Benefit
This Agreement has been made solely for the benefit of and
shall be binding upon the Underwriter, the Company and, to the
extent expressed, any person controlling the Company or the
Underwriter and the officers and directors of the Company, and
their respective legal representatives, 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 securities being offered from
the Underwriter merely because of such purchase.
14. New York Law
This Agreement shall be construed in accordance with the laws
of the State of New York and subject to the exclusive jurisdiction
of the courts of said state.
15. Notices
All communications hereunder shall be in writing and, if to
the Underwriter, shall be mailed by certified mail or delivered to
the Underwriter at its address appearing on Page 1 hereof, or if to
the Company, shall be mailed by certified mail or delivered to it
at its address appearing on Page 1 hereof, or sent to Counsel to
such parties named in the Prospectus at the respective addresses
indicated therein.
<PAGE> 96
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 be
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 same instrument and shall be valid and
binding between us.
Very truly yours,
CASTLE SECURITIES CORP.
BY: ______________________________
Michael T. Studer, President
Dated: Spokane, Washington
______________, 2000
ACCEPTED AND AGREED:
EXHAUST TECHNOLOGIES, INC.
By: ____________________________
Robert Sterling, President
