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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 550,000 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 550,000 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
defined). Furthermore, Each initial purchaser of the Units who shall
retain the shares of Common Stock included in the Units for a period
of one (1) year after the Closing Date of the offering, as
hereinafter defined, shall be entitled to receive from the Company,
without cost, one (1) share for each such share retained (Loyalty
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Shares). 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.
(k) "Regulations" shall refer to the rules and regulations of
the Commission.
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(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 other than the Additional Warrants under the definition
referred to above and 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 $14.85
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 the purchase
of up to 550,000 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
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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 willnot
receive any of the commissions orexpense 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 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.
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(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
orconsolidation. 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 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
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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.
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
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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.
(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
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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.
(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
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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.
(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.
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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 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
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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.
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:
<PAGE> 77
(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
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.
(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.
<PAGE> 78
(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 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.
<PAGE> 79
(h) The Company will enter into employment contracts no later
then the Effective Date but to begin on the Closing Date and provided
at least $1,000,000.00 is received by the Company from the proposed
offering with Robert Teed, its proposed President and Chief Executive
Officer, Robert E. Sterling, its proposed Chief Operating Officer,
and Matthew R. Sterling, its proposed Vice-President, which
agreements shall remain in effect for at least three (3) years and
provide that their annual compensation shall be $125,000.00,
$100,00.00 and $75,000.00, 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 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
<PAGE> 80
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 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.
<PAGE> 81
(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 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.
<PAGE> 82
(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.
(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.
<PAGE> 83
(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 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.
<PAGE> 84
(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.
(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 Underwriter 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
<PAGE> 85
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 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 Robert Sterling with respect to 550,000 shares of Common
Stock owned by him whereby he agrees to place such securities
(550,000) 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 $19,250,000.00 and $4,125,000.00, 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 be cancelled.
The 550,000 shares as well as the dollar amount of sales and pretax
income set forth above shall be prorated downward if less than
$2,805,000 is raised in the offering contemplated herein.
<PAGE> 86
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 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
<PAGE> 87
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; 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
<PAGE> 88
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
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
<PAGE> 89
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;
(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;
<PAGE> 90
(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 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
<PAGE> 91
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 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.
<PAGE> 92
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.
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
<PAGE> 93
with, written information furnished to the 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 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
<PAGE> 94
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 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
<PAGE> 95
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 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
<PAGE> 96
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 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.
<PAGE> 97
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.
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.
<PAGE> 98
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.
(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.
<PAGE> 99
(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.
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> 100
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
