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Exhibit 1.1
DRAFT 08/06/99
3,450,000 SHARES
DURASWITCH INDUSTRIES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
August ___, 1999
CRUTTENDEN XXXX INCORPORATED
As Representative of the several Underwriters
00 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
DuraSwitch Industries, Inc., a Nevada corporation (the "Company"),
addresses you as the Representative of each of the persons, firms and
corporations listed in Schedule A hereto (herein collectively called the
"Underwriters") and hereby confirms its agreement with the several Underwriters
as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell 3,000,000
shares of its authorized and unissued Common Stock, $.001 par value per share
(the "Firm Shares"), to the several Underwriters. The Company and Blackwater
Capital Partners, L.P. (the "Selling Securityholder") also propose to grant to
the Underwriters an option to purchase up to 450,000 additional shares of the
Company's Common Stock, $.001 par value per share (the "Option Shares"), as
provided in Section 8 hereof. In addition, the Company proposes to sell to you,
individually and not in your capacity as Representative, five-year warrants (the
"Representative's Warrants") to purchase up to 300,000 shares of Common Stock,
$.001 par value per share, of the Company (the "Representative's Warrant
Stock"), which sale will be consummated in accordance with the terms and
conditions of the Representative's Warrant Agreement (the "Representative's
Warrant Agreement"), the form of which is filed as an exhibit to the
Registration Statement described below. As used in this Agreement, the term
"Shares" shall include the Firm Shares and the Option Shares. All shares of
Common Stock, $.001 par value per share, of the Company to be outstanding after
giving effect to the sales contemplated hereby, including the Firm Shares and
the Option Shares, are hereinafter referred to as "Common Stock."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company
represents and warrants to, and agrees with, each Underwriter that:
(a) A registration statement on Form SB-2 (File No. 333- 79969) with
respect to the Shares, including a prospectus, has been prepared by the Company
in conformity with the
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requirements of the Securities Act of 1933, as amended (the "Act"), and the
applicable rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Act and has been filed with
the Commission; such amendments to such registration statement, such
prospectuses and abbreviated registration statements pursuant to Rule 462(b) of
the Rules and Regulations (a "462 Registration Statement") as may have been
required prior to the date hereof have been similarly prepared and filed with
the Commission; and the Company will file such additional amendments to such
registration statement, such amended prospectuses and such 462 Registration
Statements as may hereafter be required. Copies of such registration statement
and amendments, together with each exhibit filed therewith, of each related
prospectus contained or filed as part of any pre-effective amendment to such
registration statement or filed pursuant to Rule 424(a) (the "Preliminary
Prospectuses"), and of any 462 Registration Statement, have been delivered to
you.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare and
promptly file with the Commission the information omitted from the registration
statement pursuant to Rule 430A(a) or, if the Representative, on behalf of the
several Underwriters, shall agree to the utilization of Rule 434 of the Rules
and Regulations, the information required to be included in any term sheet filed
pursuant to Rule 434(b) or (c), as applicable, of the Rules and Regulations
pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared effective under the Act by the
Commission, the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if the
Representative, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information required
to be included in any term sheet filed pursuant to Rule 434(b) or (c), as
applicable, of the Rules and Regulations. The term "Registration Statement" as
used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits (including exhibits incorporated by
reference), in the form in which it became or becomes, as the case may be,
effective (including, if the Company omitted information from the registration
statement pursuant to Rule 430A(a) or files a term sheet pursuant to Rule 434 of
the Rules and Regulations, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule 430A(b)
or Rule 434(d) of the Rules and Regulations) and, in the event of any amendment
thereto or the filing of any 462 Registration Statement after the effective date
of such registration statement, shall also mean (from and after the
effectiveness of such amendment or the filing of any 462 Registration Statement)
such registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Shares as included in such Registration
Statement at the time it becomes effective (including, if the Company omitted
information from the Registration Statement pursuant to Rule 430A(a) of the
Rules and Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the Rules
and Regulations); provided, however, that if in reliance on Rule 434 of the
Rules and Regulations and with the consent of the Representative, on behalf of
the several Underwriters, the Company shall have provided to the Underwriters a
term sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time that
a confirmation is sent or
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given for purposes of Section 2(10)(a) of the Act, the term "Prospectus" shall
mean the "prospectus subject to completion" (as defined in Rule 434(g) of the
Rules and Regulations) last provided to the Underwriters by the Company and
circulated by the Underwriters to all prospective purchasers of the Shares
(including the information deemed to be a part of the Registration Statement at
the time it became effective pursuant to Rule 434(d) of the Rules and
Regulations). Notwithstanding the foregoing, if any revised prospectus shall be
provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "Prospectus" shall refer to such revised prospectus
from and after the time it is first provided to the Underwriters for such use.
If in reliance on Rule 434 of the Rules and Regulations and with the consent of
the Representative, on behalf of the several Underwriters, the Company shall
have provided to the Underwriters a term sheet pursuant to Rule 434(b) or (c),
as applicable, prior to the time that a confirmation is sent or given for
purposes of Section 2(10)(a) of the Act, the Prospectus and the term sheet,
together, will not be materially different from the prospectus in the
Registration Statement.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which Option Shares are to be purchased, (i)
the Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (ii) the Registration Statement, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that none of the representations and
warranties contained in this subparagraph (b) shall apply to information
contained in or omitted from the Registration Statement or Prospectus, or any
amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof. The information set
forth on the inside front cover page of the Prospectus (insofar as such
information relates to the Underwriters) concerning stabilization,
over-allotment and passive market making by the Underwriters, and under the
first, second and eleventh paragraphs under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus constitutes the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement.
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(c) If the Company has elected to rely on Rule 462(b) and the 462
Registration Statement has not been declared effective, (i) the Company has
filed a 462 Registration Statement in compliance with, and that is effective
upon filing pursuant to, Rule 462(b) and has received confirmation of its
receipt and (ii) (a) the Company has given irrevocable instructions for
transmission of the applicable filing fee in connection with the filing of the
462 Registration Statement, in compliance with Rule 111 promulgated under the
Act, or (b) the Commission has received payment of such filing fee.
(d) Each of the Company and its direct and indirect subsidiaries
(hereinafter, the "Subsidiaries") is duly incorporated and validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation with full power and authority (corporate and other) to own, lease
and operate its properties and conduct its business as described in the
Prospectus. Each of the Company and its Subsidiaries is duly qualified to do
business as a foreign corporation and in good standing in each jurisdiction in
which the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or to
be in good standing would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its Subsidiaries, taken as a whole (hereinafter, a "Material
Adverse Effect"); and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification. Except as set forth in the Registration
Statement and Prospectus, each of the Company and the Subsidiaries is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities that are material to the conduct of its business, all of
which are valid and in full force and effect. Neither the Company nor any of its
Subsidiaries is in violation of their respective charter or bylaws and no event
has occurred which, with notice or lapse of time or both, would constitute a
breach or violation of any of the terms and provisions of, or constitute a
default under, any obligation, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness, or in any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which either the Company or any of its
Subsidiaries is a party or by which their properties may be bound. Neither the
Company nor any of its Subsidiaries is in violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, administrative
agency, regulatory body, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any Subsidiary or their
respective properties, except where such violation would not have a Material
Adverse Effect.
(e) The Company has full legal right, power and authority to enter
into this Agreement and the Representative's Warrant Agreement and perform the
transactions contemplated hereby and thereby. The Company has taken all
corporate action required by law, its charter or bylaws, as the case may be, to
be taken by it to authorize the execution, delivery and performance of the
transactions contemplated by this Agreement and the Representative's Warrant
Agreement, including the 4.25 to 1 reverse stock split described in the
Prospectus. Each of this Agreement and the Representative's Warrant Agreement
has been duly authorized, executed and delivered by the Company and is a valid
and binding agreement on the part of the Company, enforceable in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
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insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles and
rules of law governing specific performance, estoppel, waiver, injunctive
relief, and other equitable remedies (regardless of whether enforcement is
sought in a proceeding at law or in equity). The making, execution and
performance of this Agreement and the Representative's Warrant Agreement by the
Company and the consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any of the terms
and provisions of, or constitute a default under, (i) any bond, debenture, note
or other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company or any Subsidiary is a party or by which their
respective properties may be bound, (ii) the charter or bylaws of the Company or
any Subsidiary or (iii) any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, administrative agency, regulatory body,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or their respective properties.
No consent, approval, authorization or order of or qualification with any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or their respective properties
is required for the execution and delivery of this Agreement and the
Representative's Warrant Agreement, the consummation by the Company of the
transactions herein and therein contemplated, and the 4.25 to 1 reverse stock
split described in the Prospectus, all of which requirements have been satisfied
in all material respects, except such as may be required under the Act, by the
National Association of Securities Dealers, Inc. (the "NASD"), or under state or
other securities or Blue Sky laws.
(f) There is not pending or, to the Company's knowledge, threatened,
any action, suit, claim or proceeding against either the Company or any of its
Subsidiaries, any of the Company's or any of its Subsidiaries' officers, any of
their respective properties, assets or rights before any court, administrative
agency, regulatory body, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its Subsidiaries or
their respective officers or properties, or otherwise which (i) might,
individually or in the aggregate, result in any material adverse change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its Subsidiaries, taken as a whole (a "Material
Adverse Change"), or (ii) might prevent consummation of the transactions
contemplated hereby, or (iii) is required to be disclosed in the Registration
Statement or Prospectus and is not so disclosed. For purposes of this Agreement,
the phrases "to the Company's knowledge or "to the knowledge of the Company"
shall mean the knowledge of the senior management personnel of each of the
Company and its Subsidiaries. There are no agreements, contracts, leases or
documents of the Company or any Subsidiary of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement by the Act or the Rules and
Regulations which have not been accurately described in all material respects in
the Registration Statement or Prospectus or filed as exhibits to the
Registration Statement. Neither the Company nor any Subsidiary is a party or
subject to the provisions of any injunction, judgment, decree or order of any
court, administrative agency, regulatory body, government or governmental agency
or body domestic or foreign, that could be expected to result in a Material
Adverse Change. Each of the Company and its Subsidiaries has conducted and is
conducting its business in compliance with all applicable federal, state, local
and foreign statutes, laws, rules, regulations,
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ordinances, codes, decisions, decrees, directives and orders, except where the
failure to do so would not, singly or in the aggregate, have a Material Adverse
Effect.
(g) All outstanding shares of capital stock of each of the Company
and its Subsidiaries have been duly authorized and validly issued and are fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities. The
Company has an authorized, issued and outstanding capitalization as set forth in
the Prospectus under the caption "Capitalization." The capital stock of the
Company conforms to the description thereof contained in the Registration
Statement and the Prospectus (and such statements correctly state the substance
of the instruments defining the capitalization of the Company). The Shares to be
issued and sold by the Company hereunder have been duly authorized for issuance
and sale to the Underwriters pursuant to this Agreement, and, when issued and
delivered by the Company against payment therefor in accordance with the terms
of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest assuming the Underwriters are
acquiring such shares in good faith and without actual knowledge of any adverse
claims with respect thereto. No preemptive right, co-sale right, registration
right, right of first refusal or other similar right of stockholders exists with
respect to any of the Shares or the issuance and sale thereof other than those
that have been satisfied or expressly waived prior to the date hereof and those
that will automatically expire upon and will not apply to the consummation of
the transactions contemplated on or before the Closing Date. No further approval
or authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale or transfer of the Shares except as
may be required under the Act or under state or other securities or Blue Sky
laws. Except as disclosed in the Registration Statement, the Prospectus and the
financial statements of the Company, and the related notes thereto included in
the Prospectus, the Company has no outstanding options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted and exercised thereunder, set forth in the Prospectus under
the caption "Management-Stock Option Plans" fairly and accurately presents the
information required to be shown with respect to such plans, arrangements,
options and rights. All outstanding options of the Company have been duly
authorized and issued in compliance with the option plan pursuant to which such
options were granted and with all federal and state securities laws and the
Nevada General Corporation Law.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (i) any
Material Adverse Change, (ii) any transaction that is material to either the
Company or any of its Subsidiaries, (iii) any obligation, direct or contingent,
incurred by either the Company or any of its Subsidiaries, except obligations
incurred in the ordinary course of business, (iv) any change in the capital
stock or outstanding indebtedness of either the Company or any of its
Subsidiaries, (v) any dividend or distribution of any kind declared, paid or
made on the capital stock of either the Company or any of its Subsidiaries, (vi)
any default in the payment of principal of or interest on any outstanding debt
obligations, or (vii) any
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loss or damage (whether or not insured) to the property of either the Company or
any of its Subsidiaries which has been sustained or will have been sustained,
which has a Material Adverse Effect.
(i) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its Subsidiaries has good and marketable
title to all properties and assets described in the Registration Statement and
Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would not
have a Material Adverse Effect, (ii) the agreements to which either the Company
or any of its Subsidiaries is a party described in, or filed as exhibits to, the
Registration Statement and Prospectus are valid agreements, enforceable by the
Company or its Subsidiaries, as the case may be, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles and rules of law governing specific
performance, estoppel, waiver, injunctive relief and other equitable remedies
(regardless of whether enforcement is sought in a proceeding at law or in
equity) and, to the Company's knowledge, the other contracting party or parties
thereto are not in breach or default under any of such agreements, and (iii)
either the Company or one of its Subsidiaries has a valid and enforceable lease
for each real property described in the Registration Statement and Prospectus,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles and
rules of law governing specific performance, estoppel, waiver, injunctive relief
and other equitable remedies (regardless of whether enforcement is sought in a
proceeding at law or in equity). Except as set forth in the Registration
Statement and Prospectus, the Company and its Subsidiaries own or lease all such
properties as are necessary to its operations as now conducted or as proposed to
be conducted.
(j) Deloitte & Touche, L.L.P. ("D&T"), the Company's current
auditors, which have examined the consolidated financial statements of the
Company, together with the related schedules and notes, as of December 31, 1998,
and for the year then ended, filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are independent
accountants within the meaning of the Act and the Rules and Regulations.
McGladrey & Xxxxxx LLP ("M&P"), the Company's former auditors, which have
examined the consolidated financial statements of the Company, together with the
related schedules and notes, as of December 31, 1997, and for the year then
ended, filed with the Commission as a part of the Registration Statement, which
are included in the Prospectus, are independent accountants within the meaning
of the Act and the Rules and Regulations. The audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, forming part of the
Registration Statement and Prospectus, fairly present the financial position and
the results of operations of the Company and its Subsidiaries at the respective
dates and for the respective periods to which they apply; and all audited
consolidated financial statements of the Company, together with the related
schedules and notes, and the unaudited consolidated financial information, filed
with the Commission as part of the Registration Statement, have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved except as may be otherwise stated therein. The
selected and summary consolidated
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financial and statistical data included in the Registration Statement fairly
present the information shown therein and have been compiled on a basis
consistent with the audited consolidated financial statements presented therein.
No other financial statements or schedules are required to be included in the
Registration Statement.
(k) Each of the Company and its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(l) There are no issues related to the Company's, or any of its
Subsidiaries', preparedness for the Year 2000 that (i) are of a character
required to be described or referred to in the Registration Statement or
Prospectus or by the Act or the Rules and Regulations or by the Exchange Act or
the rules and regulations of the Commission thereunder which have not been
accurately described in the Registration Statement or Prospectus or (ii) might
reasonably be expected to result in any Material Adverse Change or have a
Material Adverse Effect. All internal computer systems and each Constituent
Component (as defined below) of those systems and all computer-related products
and each Constituent Component (as defined below) of those products of the
Company and each of its Subsidiaries fully comply with the Year 2000
Qualification Requirements. "Year 2000 Qualification Requirements" means that
the internal computer systems and each Constituent Component (as defined below)
of those systems and all computer-related products and each Constituent
Component (as defined below) of those products of the Company and each of its
Subsidiaries (i) have been reviewed to confirm that they store, process
(including sorting and performing mathematical operations, calculations and
computations), input and output data containing date-related information
correctly regardless of whether the date contains dates and times before, on or
after January 1, 2000, (ii) have been designated to ensure date and time entry
recognition and calculations that accommodate same-century and multi-century
formulas and date values, leap year recognition and calculations, and date-data
interface values that reflect the century, (iii) accurately manage and
manipulate data involving dates and times, including single-century formulas and
multi-century formulas, and will not cause an abnormal ending scenario within
the application or generate incorrect values or invalid results involving such
dates, (iv) accurately process any date rollover, and (v) accept and respond to
two-digit year date input in a manner that resolves any ambiguities as to the
century. "Constituent Component" means all software (including operating
systems, programs, packages and utilities), firmware, hardware, networking
components, and peripherals provided as part of the configuration.
(m) Each of the Company and its Subsidiaries has timely filed all
necessary federal, state, local and foreign income and franchise tax returns and
has paid all taxes shown thereon as due, and there is no tax deficiency that has
been or, might be asserted against the Company or any
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of its Subsidiaries that might have a Material Adverse Effect. All tax
liabilities are adequately provided for on the books of each of the Company and
its Subsidiaries.
(n) Each of the Company and its Subsidiaries maintains insurance
with insurers of recognized financial responsibility of the types and in the
amounts generally deemed prudent for its business and consistent with insurance
coverage maintained by similar companies in similar businesses or as otherwise
required by any agreement to which either the Company or a Subsidiary is a
party, including, but not limited to, insurance covering real and personal
property owned or leased by the Company or its Subsidiaries against theft,
damage, destruction, acts of vandalism, products liability, errors and
omissions, and all other risks customarily insured against, all of which
insurance is in full force and effect. Neither the Company nor any Subsidiary
has been refused any insurance coverage sought or applied for; and the Company
does not have any reason to believe that it will not be able to renew its or any
Subsidiary's existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.
(o) The conditions for use of Form SB-2, as set forth in the General
Instructions thereto, have been satisfied.
(p) No labor disturbance by the employees of the Company or any of
its Subsidiaries exists or, to the Company's knowledge, is imminent. The Company
is not aware of any existing or imminent work stoppage or labor strike by the
employees of any of the Company's or any of its Subsidiaries' principal
suppliers, subcontractors, distributors (domestic or foreign) that might be
expected to result in a Material Adverse Change or to have a Material Adverse
Effect. No collective bargaining agreement exists with any of the Company's or
any of its Subsidiaries' employees and, to the Company's knowledge, no such
agreement is imminent.
(q) If any full-time employee identified in the Prospectus has
entered into any non-competition, non-disclosure, confidentiality or other
similar agreement with any party other than the Company or its Subsidiaries,
such employee is neither in violation thereof nor is expected to be in violation
thereof as a result of the business conducted or expected to be conducted by the
Company or its Subsidiaries as described in the Prospectus or such person's
performance of his or her obligations to the Company or any Subsidiary. To the
Company's knowledge, no consultant or scientific advisor of the Company or any
Subsidiary, excluding the Company's or any Subsidiary's professional advisors
(individually, a "Consultant" and collectively "Consultants"), is in violation
of any non-competition, non-disclosure, confidentiality or similar agreement
between such Consultant and any party other than the Company or a Subsidiary.
Each Consultant engaged by or on behalf of the Company or any of its
Subsidiaries to render services for the Company or any of its Subsidiaries has
entered into an agreement with the Company or such Subsidiary, as the case may
be, providing for terms and conditions of non-competition, non-disclosure and
confidentiality in connection with such services ("Consulting Agreements").
Assuming due authorization, execution and delivery of the Consulting Agreements
by each Consultant, the Consulting Agreements are the legal, valid, binding and
enforceable instruments of the Consultants, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting rights generally or by general
equitable principles and rules of law governing
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specific performance estoppel, waiver, injunctive relief, and other equitable
remedies (regardless of whether enforcement is sought in a proceeding at law or
in equity).
(r) The Common Stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is
approved for quotation on the Nasdaq National Market ("Nasdaq"). The Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from Nasdaq, nor has the Company received any notification that the
Commission, Nasdaq or the NASD is contemplating terminating such registration or
quotation.
(s) Each of the Company and its Subsidiaries owns or possesses
exclusive rights to use all patents, patent rights, patent licenses, inventions,
trade secrets, trademarks, service marks, trade names, copyrights, service
names, mask works, technology, know-how and other proprietary intellectual
rights which are necessary to conduct its business as now conducted and as
described in the Registration Statement and Prospectus. The Company or its
assignor has duly and properly filed with the U.S. Patent and Trademark Office
and/or respective patent offices in foreign countries all pending patent
applications (the "Patent Applications"). All issued United States patents and
Patent Applications have been properly assigned to the Company, and all
documents reflecting such assignment to the Company have been properly recorded
in the U.S. Patent and Trademark Office. The information contained in the
Registration Statement and Prospectus concerning patents owned by or licensed to
the Company or its Subsidiaries is accurate in all material respects. Neither
the Company nor any of its Subsidiaries has received any notice of, nor has it
any knowledge of, any infringement of or conflict with asserted rights of either
the Company or any of its Subsidiaries by others with respect to any patents,
patent rights, inventions, trade secrets, trademarks, service marks, trade
names, copyrights, mask works, technology or know-how. Neither the Company nor
any of it Subsidiaries has received any notice of, nor has it any knowledge of,
any infringement of conflict with asserted rights of others with respect to or
issue regarding the enforceability of, any patent, patent rights, inventions,
trade secrets, know-how, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, might have a Material Adverse Effect, except as disclosed in
the Registration Statement and the Prospectus.
(t) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it is not and will not become an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the 1940 Act and such rules and regulations.
(u) Each of the Company and its Subsidiaries is conducting business
in compliance with all applicable statutes, rules, regulations and orders
administered or issued by any domestic or foreign administrative agency,
regulatory body, government or governmental agency in the jurisdictions in which
each is conducting business except where such noncompliance would not result in
a Material Adverse Effect.
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(v) Each of the Company and its Subsidiaries has submitted all
reports and other documentation necessary to be submitted in accordance with all
foreign regulatory orders, laws and regulations in jurisdictions in which the
Company or such Subsidiary is conducting business except where such failure
would not have a Material Adverse Effect. Neither the Company nor any such
Subsidiaries has received notification of violation of any applicable statute,
rule, regulation or order administered or issued by any foreign administrative
agency, regulatory body, government or governmental agency in foreign
jurisdictions in which it is conducting business.
(w) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its Subsidiaries is in compliance with
all laws, orders, rules and regulations relating to the use, treatment, storage
and disposal of toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to their respective businesses
except where failure to do so would not have a Material Adverse Effect, (ii)
neither the Company nor any of its Subsidiaries has received notice from any
administrative agency, regulatory body, government, governmental authority or
third party of an asserted claim under Environmental Laws, (iii) neither the
Company nor any of its Subsidiaries will be required to make material capital
expenditures to comply or cause its Subsidiaries to comply with Environmental
Laws in the foreseeable future and (iv) no property which is, or has been,
owned, leased or occupied by the Company or any of its Subsidiaries has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended, or otherwise designated as
a contaminated site under applicable state or local law.
(x) Each employee benefit plan, within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
that is maintained, administered or contributed to by the Company or any of its
Subsidiaries for employees or former employees of the Company or any of its
Subsidiaries has been maintained in compliance with its respective terms and the
requirements of any applicable statutes, orders, rules and regulations,
including but not limited to ERISA and the Internal Revenue Code of 1986, as
amended (the "Code"). Each employee benefit plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal Revenue Service
("IRS") a favorable determination letter as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has applied to the IRS for such a
determination letter prior to the requisite period under applicable Treasury
Regulations or IRS pronouncements in which to apply for a determination letter
and to make any amendments necessary to obtain a favorable determination. No
prohibited transaction, within the meaning of Section 406 of ERISA or Section
4975 of the Code, has occurred with respect to any such plan, excluding
transactions effected pursuant to a statutory or administrative exemption. For
each such plan which is subject to the funding rules of Section 412 of the Code
or Section 302 of ERISA, no "accumulated funding deficiency", as defined in
Section 412 of the Code, has been incurred, whether or not waived, and the fair
market value of the assets of each such plan (excluding for these purposes
accrued but unpaid contributions) exceeded the present value of all benefits
accrued under such plan determined using reasonable actuarial assumptions.
Neither the Company nor any of its Subsidiaries has been a party to or made
contributions to or otherwise incurred any obligation under any employee benefit
plan
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that was subject to Title IV of ERISA or Section 412 of the Code, and any
"multi-employer plan" as defined in Section 3(37) of ERISA.
With respect to each employee benefit plan, the Company and each
Subsidiary has complied with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the proposed regulations thereunder, (ii) the applicable
requirements of the Family and Medical Leave Act of 1993 and the regulations
thereunder, and (iii) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996 and the temporary regulations
thereunder. Neither the Company nor any Subsidiary has any material obligations
under COBRA with respect to any former employees or qualifying beneficiaries
thereunder. Neither the Company nor any of its Subsidiaries are parties to a
retiree medical plan.
(y) The Company has not distributed, and will not distribute prior
to the later of (i) the Closing Date or any date on which Option Shares are to
be purchased, as the case may be, and (ii) completion of the distribution of the
Shares, any offering material in connection with the offering and sale of the
Shares other than any Preliminary Prospectuses, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Act.
(z) Neither the Company nor any of its Subsidiaries has at any time
during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(aa) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(bb) Except as otherwise set forth in the Registration Statement and
the Prospectus, each officer and director of the Company, and each person listed
on Schedule 1 attached hereto has agreed in writing that such person will not,
except as described below, for a period of 180 days from the date of the final
Prospectus (the "Lock-Up Period"), sell, offer to sell, solicit an offer to buy,
contract to sell, loan, pledge, grant any option to purchase, or otherwise
transfer or dispose of (collectively, a "Disposition"), any shares of Common
Stock, or any securities convertible into or exercisable or exchangeable for
Common Stock (collectively, "Securities"), now owned or hereafter acquired by
such person or with respect to which such person has or hereafter acquires the
power of disposition otherwise than (i) on the transfer of shares of Common
Stock or Securities during such person's lifetime by bona fide gift or upon
death by will or intestacy, provided that any transferee agrees to be bound by
the Lock-Up Agreement, and (ii) on the transfer or other disposition of shares
of Common Stock or Securities as a distribution to limited partners or
stockholders of such person, provided that the distributees thereof agree to be
bound by the terms of the Lock-Up Agreement. The foregoing restriction has been
expressly agreed to preclude the holder of the Securities from engaging in any
hedging, pledge or other transaction which is designed to or may
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reasonably be expected to lead to or result in a Disposition of Securities
during the Lock-up Period, even if such Securities would be disposed of by
someone other than such stockholder. Such prohibited hedging, pledge or other
transactions would include, without limitation, any short sale (whether or not
against the box), any pledge of shares covering an obligation that matures, or
could reasonably mature during the Lock-Up Period, or any purchase, sale or
grant of any right (including, without limitation, any put or call option) with
respect to any Securities or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from any Securities. Furthermore, such person has
also agreed and consented to the entry of stop transfer instructions with the
Company's transfer agent against the transfer of the Securities held by such
person except in compliance with the restrictions described in this subsection
(bb). The Company has provided to counsel for the Underwriters ("Underwriters'
Counsel") a complete and accurate list of all securityholders of the Company as
of [May 15, 1999] and the number and type of securities held by each
securityholder. In addition, each officer and director of the Company, and each
person listed on Schedule 1 attached hereto (excluding Blackwater Capital Group,
L.L.C., Blackwater Capital Partners, L.P. or their assigns) also has agreed
pursuant to the Lock-Up Agreement that the Representative shall have an
irrevocable preferential right for a period of two years from the termination of
the Lock-Up Period to purchase for its account or to sell for the account of
each such officer, director or securityholder any Securities of the Company that
any of such officers, directors, or stockholders may seek to sell under Rule 144
promulgated under the Act. Each such officer, director, or securityholder will
consult the Representative with regard to any such offering and will offer the
Representative the opportunity to purchase or sell any such Securities on terms
not more favorable to such officer, director or securityholder than they can
secure elsewhere. The Company has provided to Underwriters' Counsel true,
accurate and complete copies of all of the agreements pursuant to which its
officers, directors and stockholders have agreed to such or similar restrictions
(the "Lock-up Agreements") presently in effect or effected hereby. The Company
hereby represents and warrants that it will not release any of its officers,
directors or other stockholders from any Lock-up Agreements currently existing
or hereafter effected without the prior written consent of Cruttenden Xxxx
Incorporated.
(cc) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any stockholder who owns beneficially more than five
percent (5%) of the Common Stock or any of the members of the families of any of
them, except as disclosed in the Registration Statement and the Prospectus.
(dd) Other than the Representative, on behalf of the several
Underwriters, no person is or will be owed any finder's fee or commission or
similar payment in connection with the transactions contemplated by this
Agreement, except as disclosed in the Registration Statement.
(ee) All offers and sales of capital stock of the Company prior to
the date hereof were at all relevant times duly registered or exempt from the
registration requirements of the Act and were duly registered or subject to an
available exemption from the registration requirements of the applicable state
securities or Blue Sky laws. There are no persons with registration or other
similar
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rights to have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the Act, other than those which
have been waived or complied with.
(ff) No relationship, direct or indirect, exists between or among
the Company on the one hand and the directors, officers, stockholders, customers
or suppliers of the Company on the other hand, that is required by the Act or
the 1934 Act or the Rules and Regulations to be described in the Registration
Statement and the Prospectus that is not described as so required.
(gg) The Preliminary Prospectuses and Prospectus delivered to the
Underwriters for use in connection with this offering were identical to the
versions of the Preliminary Prospectuses and Prospectuses created to be
transmitted to the Commission for filing via the Electronic Data Gathering
Analysis and Retrieval System ("XXXXX"), except to the extent permitted by
Regulation S-T.
(hh) The Representative's Warrants have been duly and validly
authorized by the Company and upon delivery to you in accordance with the
Representative's Warrant Agreement will be duly issued and legal, valid and
binding obligations of the Company.
(ii) The Representative's Warrant Stock has been duly authorized and
reserved for issuance upon the exercise of the Representative's Warrants and
when issued upon payment of the exercise price therefore will be validly issued,
fully paid and non-assessable shares of Common Stock of the Company.
3. REPRESENTATIONS AND WARRANTIES OF SELLING SECURITYHOLDER. The Selling
Securityholder represents and warrants to, and agrees with, each of the several
Underwriters that:
(a) The Selling Securityholder has full power to enter into this
Agreement and to sell, assign, transfer and deliver to the Underwriters the
Shares to be sold by the Selling Securityholder hereunder in accordance with the
terms of this Agreement. This Agreement has been duly executed and delivered by
the Selling Securityholder.
(b) The Selling Securityholder has duly executed and delivered a
power of attorney and custody agreement (the "Power-of-Attorney" and the
"Custody Agreement", respectively) in the form heretofore delivered to the
Representative, appointing R. Xxxxxx Xxxxxx and Xxxxxx X. Xxxxxx as the Selling
Securityholder's attorney-in-fact (the "Attorney-in-Fact") with authority to
execute, deliver and perform this Agreement on behalf of the Selling
Securityholder and appointing American Securities Transfer & Trust as custodian
thereunder (the "Custodian"). Certificates in negotiable form, endorsed in blank
or accompanied by blank stock powers duly executed, with signatures
appropriately guaranteed, representing the Shares to be sold by the Selling
Securityholder hereunder have been deposited with the Custodian pursuant to the
Custody Agreement for the purpose of delivery pursuant to this Agreement. The
Selling Securityholder has full power (corporate and other) to enter into the
Custody Agreement and the Power-of-Attorney and to perform its obligations under
the Custody Agreement. The delivery of the Custody Agreement and the
Power-of-Attorney have been duly executed and delivered by the Selling
Securityholder and, assuming due authorization, execution and delivery by the
Custodian, are the legal, valid, binding and enforceable instruments
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of the Selling Securityholder. The Selling Securityholder agrees that each of
the Shares represented by the certificates on deposit with the Custodian is
subject to the interests of the Underwriters hereunder, that the arrangements
made for such custody, the appointment of the Attorney-in-Fact and the right,
power and authority of the Attorney-in-Fact to execute and deliver this
Agreement, to agree on the price at which the Shares (including the Selling
Securityholder's Shares) are to be sold to the Underwriters, and to carry out
the terms of this Agreement, are to that extent irrevocable and that the
obligations of the Selling Securityholder hereunder shall not be terminated,
except as provided in this Agreement or the Custody Agreement, by any act of the
Selling Securityholder, by operation of law or otherwise, or by its liquidation
or dissolution or by the occurrence of any other event. If the Selling
Securityholder shall liquidate or dissolve, or if any other event should occur,
before the delivery of such Shares hereunder, the certificates for such Shares
deposited with the Custodian shall be delivered by the Custodian in accordance
with the respective terms and conditions of this Agreement as if such
liquidation or dissolution or other event had not occurred, regardless of
whether the Custodian or the Attorney-in-Fact shall have received notice
thereof.
(c) The Selling Securityholder is the lawful owner of the Shares to
be sold by the Selling Securityholder hereunder and upon sale and delivery of,
and payment for, such Shares, as provided herein, the Selling Securityholder
will convey good and marketable title to such Shares, free and clear of any
security interests, liens, encumbrances, equities, claims or other defects
(assuming the Underwriters are acquiring such Shares in good faith and without
actual knowledge of any adverse claims with respect thereto).
(d) The Selling Securityholder has not, directly or indirectly, (i)
taken any action designed to cause or result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares or (ii) since the filing of the Registration Statement
(A) sold, bid for, purchased, or paid anyone any compensation for soliciting
purchases of, the Shares or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company (except for the sale of Shares by the Selling Securityholder under this
Agreement).
(e) To the extent that any statements or omissions are made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
information furnished to the Company by the Selling Securityholder, such
Preliminary Prospectus did, and the Registration Statement and the Prospectus
and any amendments or supplements thereto, when they become effective or are
filed with the Commission, as the case may be, will, conform in all material
respects to the requirements of the Act and the Rules and Regulations thereunder
and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. The Selling Securityholder has reviewed the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) and
the Registration Statement, and the information regarding the Selling
Securityholder set forth therein under the caption "Security Ownership of
Certain Beneficial Owners and Management" is complete and accurate.
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(f) The sale of the Shares by the Selling Securityholder pursuant to
this Agreement is not prompted by any adverse information concerning the Company
that is not set forth in the Registration Statement or the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(g) The sale of the Shares to the Underwriters by the Selling
Securityholder pursuant to this Agreement, the compliance by the Selling
Securityholder with the other provisions of this Agreement, the Custody
Agreement and the consummation of the other transactions herein contemplated do
not (i) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have been
obtained, such as may be required under state securities or Blue Sky laws and,
if the registration statement filed with respect to the Shares (as amended) is
not effective under the Act as of the time of execution hereof, such as may be
required (and shall be obtained as provided in this Agreement) under the Act or
(ii) conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Selling
Securityholder is a party or by which the Selling Securityholder or any of the
Selling Securityholder's properties are bound, or any statute or any judgment,
decree, order, rule or regulation of any court or other governmental authority
or any arbitrator applicable to the Selling Securityholder.
4. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
respective number of Firm Shares which is set forth opposite the name of such
Underwriter in Schedule A hereto (subject to adjustment as provided in Section
11).
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 4 shall be made against
payment of the purchase price therefor by the several Underwriters by certified
or official bank check or checks drawn in same-day funds, payable to the order
of the Company or by wire transfer in same day funds, at the offices of Xxxxx &
Xxxxxx L.L.P., Phoenix, Arizona (or at such other place as may be agreed upon
between the Representative and the Company), at 7:00 A.M. Pacific daylight
savings time, (a) on the third (3rd) full business day following the first day
that Shares are traded or (b) if this Agreement is executed and delivered after
1:30 P.M. Pacific daylight savings time, the fourth (4th) full business day
following the day that this Agreement is executed and delivered or (c) at such
other time and date not later than seven (7) full business days following the
first day that Shares are traded as the Representative and the Company may
determine (or at such time and date to which payment and delivery shall have
been postponed pursuant to Section 11 hereof), such time and date of payment and
delivery being herein called the "Closing Date;" provided, however, that if the
Company has not made available to the Representative copies of the Prospectus
within the time provided in Section 5(a)(4) hereof, the Representative may, in
its sole discretion, postpone the Closing Date until no later than two (2) full
business days following delivery of copies of the Prospectus to the
Representative. The certificates for the Firm Shares to be so delivered will be
made available to you at such office
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or such other location as you may reasonably request for checking at least one
(1) full business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two (2) full
business days prior to the Closing Date. If the Representative so elects,
delivery of the Firm Shares may be made by credit through full fast transfer to
the accounts at The Depository Trust Company designated by the Representative.
It is understood that you, individually, and not as the
Representative of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make a public offering (as such term is described in
Section 12 hereof) of the Firm Shares at a public offering price of $_____ per
share. After the public offering, the several Underwriters may, in their
discretion, vary the public offering price.
5. FURTHER AGREEMENTS OF THE COMPANY AND SELLING SECURITYHOLDER.
(a) The Company covenants and agrees with each of Underwriters that:
(1) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible. The Company will use its best efforts
to cause any 462 Registration Statement as may be required subsequent to the
date the Registration Statement is declared effective to become effective as
promptly as possible. The Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any 462 Registration
Statement has become effective or any supplement to the Prospectus has been
filed. If the Company omitted information from the Registration Statement at the
time it was originally declared effective in reliance upon Rule 430A(a) of the
Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus contains such information and has been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (1) or (4)
of Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to such Registration Statement as originally declared effective which
is declared effective by the Commission. If the Company files a term sheet
pursuant to Rule 434 of the Rules and Regulations, the Company will provide
evidence satisfactory to you that the Prospectus and term sheet meeting the
requirements of Rule 434(b) or (c), as applicable, of the Rules and Regulations
have been filed, within the time period prescribed, with the Commission pursuant
to subparagraph (7) of Rule 424(b) of the Rules and Regulations. If for any
reason the filing of the final form of Prospectus is required under Rule
424(b)(3) of the Rules and Regulations, it will provide evidence satisfactory to
you that the Prospectus contains such information and has been filed with the
Commission within the time period prescribed. The Company will notify you
promptly of any request by the Commission for the amending or supplementing of
the Registration Statement or
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the Prospectus or for additional information. Promptly upon your request, the
Company will prepare and file with the Commission any amendments or supplements
to the Registration Statement or Prospectus which, in the opinion of
Underwriters' Counsel, may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters. The Company will promptly
prepare and file with the Commission, and promptly notify you of the filing of,
any amendments or supplements to the Registration Statement or Prospectus which
may be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act, any
event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. In case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, it will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Act. The Company will file no amendment or supplement to the Registration
Statement or Prospectus which shall not previously have been submitted to you a
reasonable time prior to the proposed filing thereof or to which you shall
reasonably object in writing, subject, however, to compliance with the Act and
the Rules and Regulations and the provisions of this Agreement.
(2) The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued.
(3) The Company will arrange for qualification (including by
providing full cooperation with Underwriter's Counsel, whose services in this
matter are required and which you and the Company will seek to expedite) of the
Shares for offering and sale under the securities laws of such jurisdictions as
you may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, provided,
however, that the Company shall not be required in connection therewith or as a
condition thereof to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction in which it is not otherwise
required to be so qualified or to so execute a general consent to service of
process. In each jurisdiction in which the Shares shall have been qualified as
above provided, the Company will make and file such statements and reports in
each year as are or may be required by the laws of such jurisdiction for such
purpose.
(4) The Company will furnish to you, as soon as available,
and, in the case of the Prospectus and any term sheet or abbreviated term sheet
under Rule 434, in no event later than the first full business day following the
first day that Shares are traded, copies of each Registration Statement (two of
which will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments or supplements to such documents,
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including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Act, all in such quantities as you may from time to time reasonably request.
Notwithstanding the foregoing, if the Representative, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the Company shall provide to you copies of a Preliminary Prospectus
updated in all respects through the date specified by you in such quantities as
you may from time to time reasonably request.
(5) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration Statement,
an earnings statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the Act and covering
a twelve (12) month period beginning after the effective date of the
Registration Statements.
(6) During a period of five (5) years after the date hereof,
the Company will furnish to its stockholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and, upon request by a
stockholder, unaudited quarterly reports of operations for each of the first
three quarters of the fiscal year, and will furnish to you and the other several
Underwriters hereunder, upon request (i) concurrently with furnishing such
reports to its stockholders, statements of operations of the Company for each of
the first three (3) quarters in the form furnished to the Company's
stockholders, (ii) concurrently with furnishing to its stockholders, a balance
sheet of the Company as of the end of such fiscal year, together with statements
of operations, of stockholders' equity, and of cash flows of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon of
independent certified public accountants, (iii) as soon as they are available,
copies of all reports (financial or other) mailed to stockholders, (iv) as soon
as they are available, copies of all reports and financial statements furnished
to or filed with the Commission, any securities exchange or Nasdaq, (v) every
material press release and every material news item or article in respect of the
Company or its affairs which was generally released to stockholders or prepared
by the Company, and (vi) any additional information of a public nature
concerning the Company, or its business which you may reasonably request. During
such five (5) year period, if the Company shall have active subsidiaries, the
foregoing financial statements shall be on a consolidated basis to the extent
that the accounts of the Company and such subsidiaries are consolidated, and
shall be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(7) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(8) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(9) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations
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hereunder, or if the Company shall terminate this Agreement, or if the
Underwriters shall terminate this Agreement pursuant to Section 12(b)(i), the
Company will pay the several Underwriters for all out-of-pocket expenses
(including fees and disbursements of Underwriters' counsel) incurred by the
Underwriters in investigating or preparing to market or marketing the Shares and
to the extent any advances to the Underwriters exceed such expenses, the
Underwriters shall return such excess to the Company.
(10) If at any time during the ninety (90) day period after
the Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(11) During the Lock-up Period, the Company will not, without
the prior written consent of the Representative, effect the Disposition of,
directly or indirectly, any Securities other than the sale of the Firm Shares
and the Option Shares hereunder and the Company's issuance of options or Common
Stock under the Company's presently authorized stock option and stock purchase
plans described in the Registration Statement and the Prospectus.
(12) The Company will cause the Securities to be included for
quotation on the Nasdaq National Market on or prior to the Closing Date.
(13) The Company will take all necessary corporate action to
effect the 4.25 to 1 reverse stock split as contemplated by the Prospectus on or
prior to the Effective Date.
(14) Promptly following the Closing Date, the Compensation
Committee of the Company's Board of Directors will hold a meeting or meetings to
discuss, consider, and establish annual compensation levels for the Company's
Chief Executive Officer, Chief Operating Officer, and President and Chief
Financial Officer in accordance with their employment agreements.
(b) If the Underwriters purchase the Option Shares from the Selling
Securityholder, then the Selling Securityholder covenants and agrees with each
of the Underwriters that:
(1) The Selling Securityholder will not, directly or
indirectly, without the prior written consent of the Representative, on behalf
of the Underwriters, offer, sell, offer to sell, contract to sell, pledge, grant
any option to purchase or otherwise sell or dispose (or announce any offer,
sale, offer of sale, pledge, grant of any option to purchase or other sale or
disposition) of any Securities legally or beneficially owned by the Selling
Securityholder or any securities convertible into, or exchangeable or
exercisable for, Securities for a period of 180 days after the date hereof
except as provided in this Agreement.
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(2) The Selling Securityholder will not, directly or
indirectly, (i) take any action designed to cause or result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (ii) (A) sell, bid for, purchase,
or pay anyone any compensation for soliciting purchases of, the Shares or (B)
pay or agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Company (except for the sale of Shares by
the Selling Securityholder under this Agreement).
(3) The Selling Securityholder acknowledges the receipt of
valuable consideration under this Agreement in connection with the sale of the
Shares hereunder and agrees to be bound by all terms of this Agreement
applicable to the Selling Securityholder.
6. EXPENSES.
(a) The Company agrees with each Underwriter that:
(1) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus and any amendments or supplements thereto; the
printing of this Agreement, the Agreement Among Underwriters, the Selected
Dealer Agreement, all Blue Sky filing fees and related expenses, the
Underwriters' Questionnaire and Power of Attorney, and any instruments related
to any of the foregoing; the issuance and delivery of the Shares hereunder to
the several Underwriters, including transfer taxes, if any, the cost of all
certificates representing the Shares and transfer agents' and registrars' fees;
the fees and disbursements of counsel for the Company; all fees and other
charges of the Company's independent certified public accountants; the cost of
furnishing to the several Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus and the Prospectus, and
any amendments or supplements to any of the foregoing; NASD filing fees and the
cost of qualifying the Shares under the laws of such jurisdictions as you may
designate (including filing fees and fees and disbursements of Underwriters'
Counsel in connection with such NASD filings and Blue Sky qualifications); and
all other expenses directly incurred by the Company in connection with the
performance of its obligations hereunder. The provisions of this Section 6(a)(1)
are intended to relieve the Underwriters from the payment of the expenses and
costs which the Company hereby agrees to pay.
(2) In addition to its other obligations under Section 6(a)(1)
hereof, the Company will pay to you a nonaccountable expense allowance equal to
_____% of the gross sales price of the Shares to the public. This nonaccountable
expense allowance with respect to the Firm Shares shall be paid to you on the
Closing Date and the nonaccountable expense allowance with respect to the Option
Shares shall be paid to you on the closing of the sale to you of such Option
Shares. The Company has previously paid to you a fee of $25,000, which shall be
credited to this nonaccountable expense allowance.
(3) In addition to its other obligations under Section 9(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation,
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inquiry or other proceeding described in Section 9(a) hereof, it will reimburse
the Underwriters on a monthly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, the Underwriters shall promptly return
such payment to the Company together with interest, compounded daily, determined
on the basis of the prime rate (or other commercial lending rate for borrowers
of the highest credit standing) listed from time to time in The Wall Street
Journal which represents the base rate on corporate loans posted by a
substantial majority of the nation's thirty (30) largest banks (the "Prime
Rate"). Any such interim reimbursement payments which are not made to the
Underwriters within thirty (30) days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request.
(b) In addition to their other obligations under Section 9(b)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 9(b) hereof, they will reimburse the
Company on a monthly basis for all reasonable legal or other expenses incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company shall
promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
(c) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in Sections 6(a)(3) and 6(b)
hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the reimbursing parties, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 6(a)(3) and 6(b)
hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses which is created by the provisions of
Sections 9(a) and 9(b) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 9(d) hereof.
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7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the several
Underwriters to purchase and pay for the Shares as provided herein shall be
subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company herein, to the performance by
the Company of its obligations hereunder, and to the following additional
conditions:
(a) The Registration Statement shall have become effective not later
than 2:00 P.M., Pacific Standard time, on the date following the date of this
Agreement, or such later date and time as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, the
registration, authorization, issue, sale and delivery of the Shares, and the
one-for- 4.25 reverse stock split contemplated by the Prospectus, shall have
been satisfactory to Underwriters' Counsel, and such counsel shall have been
furnished with such papers and information as they may have requested to enable
them to pass upon the matters referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its Subsidiaries, taken as a whole, from that set
forth in the Registration Statement or Prospectus, which, in your sole judgment,
is material and adverse and that makes it, in your sole judgment, impracticable
or inadvisable to proceed with the public offering of the Shares as contemplated
by the Prospectus.
(d) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, the
following opinion of Xxxxxxx & Xxxxx, LLP, counsel for the Company, dated the
Closing Date or such later date on which Option Shares are to be purchased, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by Xxxxx & Xxxxxx, L.L.P., Underwriters' counsel, in rendering its
opinion pursuant to Section 7(g) of this Agreement) and with reproduced copies
or signed counterparts thereof for each of the Underwriters, to the effect that:
(1) Each of the Company and its Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation;
(2) Each of the Company and its Subsidiaries has the corporate
power and authority to own, lease and operate its properties and to conduct its
respective business as described in the Registration Statement and the
Prospectus;
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(3) Each of the Company and its Subsidiaries is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or leasing of its respective
properties or the conduct of its respective businesses requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its Subsidiaries, taken as a whole;
(4) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption "Capitalization"
as of the dates stated therein; the issued and outstanding shares of capital
stock of the Company have been duly and validly issued and are fully paid and
nonassessable, and will not have been issued in violation of the Company's
charter or bylaws or, to such counsel's knowledge, in violation of or subject to
any preemptive right, co-sale right, registration right, right of first refusal
or other similar right, and all offers and sales of the Company's capital stock
were at all relevant times exempt from the registration or qualification
requirements of the Act and state securities laws. The Company's outstanding
options as described in the Prospectus have been duly authorized and shares of
Common Stock have been reserved for issuance pursuant to the terms of the
Company's stock option plans;
(5) The Firm Shares or the Option Shares, as the case may be,
to be issued by the Company pursuant to the terms of this Agreement have been
duly authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be duly and validly issued and fully paid
and nonassessable and will not have been issued in violation of or subject to
any preemptive right, co-sale right, registration right, right of first refusal
or, other similar right contained in the Company's charter or bylaws or, to such
counsel's knowledge, in any other agreement or contract to which the Company is
a party; and the forms of certificates evidencing the Shares comply with Nevada
law;
(6) The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(7) The Company has the corporate power and authority to enter
into the Representative's Warrant Agreement and to issue, sell and deliver to
the Representative the Representative's Warrants to be issued and sold by it
thereunder;
(8) Each of this Agreement and the Representative's Warrant
Agreement has been duly authorized by all necessary corporate action on the part
of the Company and has been duly executed and delivered by the Company and,
assuming due authorization, execution and delivery by you, is a valid and
binding agreement of the Company, enforceable in accordance with its terms,
except insofar as indemnification and contribution provisions may be limited by
applicable law and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles;
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(9) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted or are
pending or, to such counsel's knowledge, threatened under the Act;
(10) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules), financial data derived therefrom and other financial and
statistical information included therein, as to which such counsel need express
no opinion), as of the effective date of the Registration Statement, and with
respect to the Prospectus as of August ___, 1999, complied as to form in all
material respects with the requirements of the Act and the applicable Rules and
Regulations;
(11) The information in the Prospectus under the captions (a)
"Description of Securities," "Market for Common Stock and Related Stockholder
Matters - Shares Eligible For Future Sale" and "Business-Legal Proceedings," to
the extent that it constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is a fair summary of such matters and conclusions;
(12) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the Act and the
applicable Rules and Regulations;
(13) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement that are
not described or referred to therein or filed as required;
(14) The performance of this Agreement and the
Representative's Warrant Agreement and the consummation of the transactions
herein and therein contemplated (other than performance of the Company's
indemnification obligations hereunder or under the Representative's Warrant
Agreement, concerning which no opinion need be expressed) will not (a) result in
any violation of the charter or bylaws of the Company or any of its Subsidiaries
or (b) conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which its properties are
bound, and which is known to such counsel, or any applicable statute, rule or
regulation generally applicable to transactions of the type contemplated
hereunder or to such counsel's knowledge, any order, writ or decree of any
court, government or governmental agency or body having jurisdiction over the
Company or any of its Subsidiaries or any of their respective properties or
operations which such breach, conflict, violation or default is reasonably
likely to have a Material Adverse effect.;
(15) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body having
jurisdiction over the Company or any of its Subsidiaries or any of the Company's
or its Subsidiaries' properties or operations is necessary
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in connection with the consummation by the Company of the transactions herein
contemplated, except such as have been obtained under the Act or such as may be
required under state or other securities or Blue Sky laws in connection with the
purchase and the distribution of the Shares by the Underwriters;
(16) The 4.25 to one reverse stock split contemplated by the
Prospectus has been duly authorized by all necessary corporate action, no
consent, approval, authorization or order of or qualification with any court,
government or governmental agency or body having jurisdiction over the Company
or any of its Subsidiaries or any of the Company's or its Subsidiaries'
properties or operations, or the Company's stockholders and Board of Directors,
is necessary to effect the reverse stock split as contemplated by the
Prospectus, except such as have been obtained prior to the date hereof, and the
Company has effected the reverse stock split as contemplated by the Prospectus
on or prior to the Effective Date.
(17) There are no legal or governmental proceedings pending
or, to such counsel's best knowledge, threatened against the Company or any of
its Subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus by the Act or the Rules and Regulations, other than
those described therein;
(18) To such counsel's knowledge, each of the Company and its
Subsidiaries is not in violation of its respective charter or bylaws and no
breach or default exists, and to such counsel's knowledge, no event has occurred
which, with notice or lapse of time or both, would constitute a breach or
violation of any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which either the Company or any of its
Subsidiaries is a party or by which their respective properties are bound, and
which is known to such counsel, or any applicable statute, rule or regulation or
any order, writ or decree of any court, government or governmental agency or
body having jurisdiction over the Company or any of its Subsidiaries or any of
the Company's or any of its Subsidiaries properties or operations, except such
breaches, violations or defaults which would not have a Material Adverse Effect.
(19) Each of the Company and its Subsidiaries is not, and upon
the sale of the Shares as herein contemplated will not be, an "investment
company,' as defined under the Investment Company Act of 1940, as amended.
(20) Each of the Company and its Subsidiaries is in compliance
with, and conducts its respective businesses in conformity with, all applicable
laws and regulations under the laws of the states of its incorporation and
foreign qualifications and the federal laws of the United States, relating to
the operation of its business as described in the Registration Statement, except
to the extent that any failure so to comply or conform would not have a Material
Adverse Effect;
(21) Except as set forth in the Registration Statement and
Prospectus, no holders of Common Stock or other securities of the Company have
registration rights with respect to securities of the Company and, except as set
forth in the Registration Statement and Xxxxxxxxxx,
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all holders of securities of the Company having rights to registration of such
shares of Common Stock or other securities, because of the filing of the
Registration Statement by the Company, have, with respect to the offering
contemplated thereby, waived such rights or such rights have expired by reason
of lapse of time following notification of the Company's intent to file the
Registration Statement;
(22) The Representative's Warrants have been duly and validly
authorized by the Company and upon delivery to the Representative in accordance
with the Representative's Warrant Agreement will be duly issued and legal, valid
and binding obligations of the Company;
(23) The Representative's Warrant Stock to be issued by the
Company pursuant to the terms of the Representative's Warrant has been duly
authorized and, upon issuance and delivery against payment therefore in
accordance with the terms of the Representative's Warrant Agreement, will be
duly and validly issued and fully paid and nonassessable, and to such counsel's
knowledge, will not have been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first refusal or
other similar right of stockholders;
(24) If the Company elects to rely on Rule 434, the Prospectus
is not "materially different," as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time of its
effectiveness or an effective post-effective amendment thereto (including such
information that is permitted to be omitted pursuant to Rule 430A); and
(25) The conditions for use of Form SB-2, as set forth in the
General Instructions thereto, have been satisfied.
In addition, such counsel shall state that such counsel has acted as
outside corporate legal counsel to the Company and participated in conferences
with officials and other representatives of the Company, the Representative,
Underwriters' Counsel and the independent certified public accountants of the
Company, at which such conferences the contents of the Registration Statement
and Prospectus and related matters were discussed, and although they have not
verified the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the attention of
such counsel which leads such counsel to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the Closing Date and on any later date on which Option Shares are to
be purchased, the Registration Statement and any amendment or supplement thereto
(other than the financial statements including supporting schedules, other
financial information derived therefrom and other financial and statistical
information included therein, as to which such counsel need express no opinion)
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or at the Closing Date or any later date on which the Option
Shares are to be purchased, as the case may be, the Registration Statement, the
Prospectus and any amendment or supplement thereto (except as aforesaid)
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
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Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the State of Arizona upon
opinions of local counsel, and as to matters of fact, to the extent such counsel
deems proper, upon certificates of responsible officers of the Company, and of
government officials, in which case their opinion is to state that they are so
relying and that they have no knowledge of any material misstatement or
inaccuracy in any such opinion, representation or certificate. References to the
Registration Statement and the Prospectus in this subsection (d) shall include
any amendment or supplement thereto at the date of such opinion. Copies of any
opinion, representation or certificate so relied upon shall be delivered to you,
as Representative of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later date on
which Option Shares are to be purchased, as the case may be, the following
opinion of Dorn, McEachran, Xxxxxx & Xxxxxxx, intellectual property counsel for
the Company, dated the Closing Date or such later date on which Option Shares,
as the case may be, are to be purchased, addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the Underwriters:
(1) "Intellectual Property" means: (a) currently existing
domestic and foreign patents and patent applications; (b) currently existing
domestic (including federal and state) and foreign trademarks, service marks,
trade names, trade dress, domain names, and all applications, registrations,
renewals related thereto; and (c) currently existing domestic and foreign
copyright applications and copyright registrations, including renewals related
thereto.
(2) Exhibit A attached hereto is a complete and accurate
listing of all Intellectual Property owned by, registered to, or assigned to the
Company. All right, title, and interest to the Intellectual Property listed in
Exhibit A is valid and subsisting.
(3) The Intellectual Property has been properly assigned to
the Company, and, except as otherwise stated in counsel's opinion, the Company
is currently listed as the sole assignee of record in the respective patent
office, trademark office, copyright office, or other appropriate government or
administrative office.
(4) The Company is unaware of any irregularities in the chain
of title to any of the Intellectual Property.
(5) The Company has taken all necessary and desirable action
to maintain and protect each item of Intellectual Property. In this respect, all
currently pending domestic and foreign applications related to the procurement,
establishment, or registration of the Intellectual Property are being diligently
prosecuted, and none of the pending domestic and foreign applications has been
fully rejected or abandoned.
(6) The Company has not licensed, assigned, sold, or otherwise
transferred any of the rights (or any portion of the rights) to the Intellectual
Property to any third party, with the exception that Monopanel Technologies,
Inc. has a nonexclusive license under U.S. patents 5,523,730, 5,666,096 and
5,867,082 that may be terminated by the Company on any anniversary date thereof
upon sixty days notice. The anniversary date is April 10.
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(7) All domestic and foreign applications related to the
procurement, establishment, or registration of the Intellectual Property have
been properly executed by the respective inventor(s), an authorized
representative of a corporate applicant, an authorized attorney or legal
representative, or an appropriate person or entity in accordance with the
respective governing laws, rules, regulations, and procedures.
(8) All domestic and foreign applications related to the
procurement, establishment, or registration of the Intellectual Property have
been properly filed and prosecuted by the respective inventor(s), an authorized
representative of a corporate applicant, an authorized attorney or legal
representative, or an appropriate person or entity in accordance with the
respective governing laws, rules, regulations, and procedures.
(9) In the opinion of counsel, all pertinent prior art
references known to the Company or the Company's representative during the
prosecution of the U.S. patents and the U.S. applications were disclosed to the
PTO or cited by the PTO. To the best of such counsel's knowledge, no
misrepresentations or mischaracterizations of the prior art were made during the
prosecution of any foreign or domestic patent application related to the
Intellectual Property. To the best of such counsel's knowledge, the provisions
of 37 C.F.R. Section 1.56 were fully complied with during the prosecution of the
U.S. patents and the U.S. applications related to the Intellectual Property.
(10) Counsel is unaware of any irregularities in the
prosecution of any foreign or domestic applications relating to the procurement,
establishment, or registration of the Intellectual Property, where such
irregularities may impact the validity or enforceability of the Intellectual
Property or otherwise impact the Company's rights in the Intellectual Property.
(11) Regarding any pending patent applications listed in
Exhibit A, counsel is unaware of any circumstances that would adversely affect
the ability of the Company to obtain validly issued patents having reasonable
claim scope.
(12) Except as set forth in the Registration Statement,
counsel is unaware of any actual or threatened legal, governmental, or other
third party action, suit, claim, or proceeding (including those relating to
infringement) relating to Intellectual Property rights owned by or affecting the
business operations of the Company which are pending or threatened against the
Company and which action, suit, claim, or proceeding would, with respect to any
of the foregoing, have a material adverse effect on the condition (financial or
other), earnings, operations, business, or business prospects of the Company.
(13) Except as set forth in the Registration Statement, to the
best of such counsel's knowledge, the Company is not infringing or otherwise
violating any Intellectual Property rights of any third party, and, to the best
of such counsel's knowledge, no third party is infringing or otherwise violating
any of the Company's Intellectual Property in a way that would have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business, or business prospects of the Company.
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(14) Except as set forth in the Registration Statement, based
on all relevant information known to such counsel, none of the Company's
Intellectual Property is subject to a pending or threatened action by any
governmental agency that would materially and adversely affect the scope,
validity, or ownership of any Intellectual Property, except to the extent that
such action would not have a material adverse effect on the Company's ability to
market, manufacture, use, import, sell, or offer to sell the products described
in the Prospectus, whether existing or under development.
(15) The information in the Registration Statement and the
Prospectus under the caption "Business - Intellectual Property" has been
reviewed by such counsel and is a fair and accurate summary of such matters,
except such counsel has no involvement in and no knowledge of confidentiality
agreements, employee agreements to disclose and assign inventions, or intentions
to enter into licensing agreements.
(16) To such counsel's knowledge, there are no facts or
circumstances which would require the Company to obtain licenses under third
party Intellectual Property rights which are necessary to allow the Company to
conduct the business now being conducted or proposed to be conducted by the
Company as described in the Prospectus.
(17) Counsel is unaware of any asserted, unasserted, or
threatened claims relating to the scope, validity, or ownership of any of the
Intellectual Property.
References to the Registration Statement and the Prospectus in
this subsection (e) shall include any amendment or supplement thereto at the
date of such opinion.
(f) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, the
following opinion of Vedder, Price, Xxxxxxx & Kammholz, counsel for the Selling
Securityholder, dated the Closing Date, to the effect that:
(1) The Selling Securityholder has full corporate power to
enter into this Agreement, the Custody Agreement and the Power-of-Attorney and
to sell, transfer and deliver the Shares being sold by the Selling
Securityholder hereunder in the manner provided in this Agreement and to perform
its obligations under the Custody Agreement. The execution and delivery of this
Agreement, the Custody Agreement and the Power-of-Attorney have been duly
authorized by all necessary action (corporate or other) of the Selling
Securityholder. This Agreement, the Custody Agreement and the Power-of-Attorney
have been duly executed and delivered by the Selling Securityholder. Assuming
due authorization, execution and delivery by the Custodian, the Custody
Agreement and the Power-of-Attorney are the legal, valid, binding and
enforceable instruments of the Selling Securityholder, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law);
(2) The delivery by the Selling Securityholder to the several
Underwriters of certificates for the Shares being sold hereunder by the Selling
Securityholder against payment therefor as provided herein, will convey good and
marketable title to such Shares to the several Underwriters, free and clear of
all security interests, liens, encumbrances, equities, claims or other
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defects, assuming that the purchasers do not have notice of an adverse claim and
purchase the Shares in good faith; and
(3) The sale of the Shares to the several Underwriters by the
Selling Securityholder pursuant to this Agreement, the compliance by the Selling
Securityholder with the other provisions of this Agreement, the Custody
Agreement and the consummation by the Selling Securityholder of the other
transactions herein contemplated do not, (i) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained and such as may be required under
state securities or blue sky laws, or (ii) conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a default
under any indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Selling Securityholder is a party or by which such
Selling Securityholder or any of the Selling Securityholder's respective
properties are bound, and which is known to such counsel, or the charter
documents or by-laws of the Selling Securityholder, if applicable, or any
statute or any judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to the Selling
Securityholder and which is known to such counsel.
In rendering such opinion, such counsel may rely, as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible officers
of the Company and public officials. Copies of such opinion shall be delivered
to the Representative and Underwriters' Counsel.
References to the Registration Statement and the Prospectus in this
subsection (f) shall include any amendment or supplement thereto at the date of
such opinion.
(g) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, an opinion
of Xxxxx & Xxxxxx, L.L.P. in form and substance satisfactory to you, with
respect to the sufficiency of all such corporate proceedings and other legal
matters relating to this Agreement and the transactions contemplated hereby as
you may reasonably require, and the Company shall have furnished to such counsel
such documents as they may have requested for the purpose of enabling them to
pass upon such matters.
(h) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a letter or
letters from D&T, addressed to the Underwriters, dated the Closing Date or such
later date on which Option Shares are to be purchased, as the case may be (in
each case, the "Bring Down Letter"), confirming that they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the applicable published Rules and Regulations and based upon the
procedures described in the letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), dated the
date hereof, or such later date on which Option Shares are to be purchased, as
the case may be, (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of the Closing Date
or such later date on which Option Shares are to be purchased, as the case may
be, and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter that are necessary to reflect any
changes in the facts described in the Original Letter since its date, or to
reflect the availability of more recent financial statements, data or
information. The Bring Down Letter shall not disclose any change in the
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condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. The Original
Letter from D&T shall be addressed to or for the use of the Underwriters in form
and substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations, (ii) set forth their opinion with respect to their examination
of the consolidated balance sheets of the Company as of December 31, 1998
(including the balance sheets of Aztec Industries, Inc. as of January 31, 1998),
and related consolidated statements of operations and common stockholders'
equity (deficit) and cash flows for the twelve (12) months ended December 31,
1998, (iii) state that D&T has performed the procedures set out in Statement on
Auditing Standards No. 71 ("SAS 71") on the unaudited, interim financial
information for the periods ended March 31, 1999 and 1998 (the "Quarterly
Financial Statements"), (iv) state that , as a result of the foregoing
procedures, nothing came to their attention that leads them to believe that any
material modifications need to be made to any of the Quarterly Financial
Statements in order for them to be in compliance with generally accepted
accounting principles consistently applied across the periods presented, (v)
state that nothing came to their attention that caused them to believe that the
financial statements included in the Registration Statement and Prospectus do
not comply as to form in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X , and (vi) address other matters
agreed upon by D&T and you. In addition, you shall have received from D&T a
letter addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's financial statements as of and for
the twelve (12) months ended December 31, 1998 did not disclose any weaknesses
in internal controls that they considered to be material weaknesses.
(i) At the time of the execution of this Agreement, the Underwriters
shall have received from M&P, former independent public accountants for the
Company, a letter dated such date and addressed to the Underwriters, in form and
substance satisfactory to the Underwriters, containing statements and
information of the type ordinarily included in accountants' "comfort letters" to
underwriters, delivered according to Statement of Auditing Standards No. 72 (or
any successor bulletin), with respect to the audited and unaudited financial
statements and certain financial and capital stock information contained in the
Registration Statement and the Prospectus.
(j) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, to the effect
that, and you shall be satisfied that:
(1) The representations and warranties of the Company in this
Agreement are true and correct in all material respects, as if made on and as of
the Closing Date and such later date on which Option Shares are to be purchased,
as the case may be, and the Company has complied
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with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date or any later date on
which Option Shares are to be purchased, as the case may be;
(2) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(3) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein by
the Act and the Rules and Regulations, and in all material respects conformed to
the requirements of the Act and the Rules and Regulations, the Registration
Statement, and any amendment or supplement thereto, did not and does not include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, the Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(4) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been (a)
any material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company or any of its
Subsidiaries, (b) any transaction that is material to the Company or any of its
Subsidiaries, except transactions entered into in the ordinary course of
business or that were contemplated by and disclosed in the Registration
Statement and the Prospectus, (c) any obligation, direct or contingent, that is
material to the Company or any of its Subsidiaries, incurred by the Company or
any of its Subsidiaries, except obligations incurred in the ordinary course of
business, (d) any change in the capital stock or outstanding indebtedness of the
Company or any of its Subsidiaries that is material to the Company or such
Subsidiary or is out of the ordinary course of business of the Company or such
Subsidiary , (e) any dividend or distribution of any kind declared, paid or made
on the capital stock of the Company, or (f) any loss or damage (whether or not
insured) to the property of the Company or any of its Subsidiaries which has
been sustained or will have been sustained which has a Material Adverse Effect.
(k) The Representative shall have received a certificate from the
Selling Securityholder, signed by the Selling Securityholder, dated the Closing
Date and such later date on which Option Shares are to be purchased, as the case
may be, to the effect that:
(1) The representations and warranties of the Selling
Securityholder in this Agreement are true and correct in all material respects
as if made on and as of the Closing Date, or the date on which Option Shares are
to be purchased, as the case may be;
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(2) The Selling Securityholder has performed all covenants and
agreements on its part to be performed or satisfied at or prior to the Closing
Date, or the date on which Option Shares are to be purchased, as the case may
be;
(3) To the extent that any statements or omissions are made in
the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
information furnished to the Company by the Selling Securityholder, as amended
as of the Closing Date, the Registration Statement does not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading, and the Prospectus, as amended or
supplemented as of the Closing Date, does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and
(l) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company, each person set forth
on Schedule B attached hereto and each entity that is a stockholder and is
affiliated with an officer or director of the Company in writing prior to the
date hereof that such person will not, except as described below, during the
Lock-up Period, effect the Disposition of any Securities now owned or hereafter
acquired by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) on the transfer of shares
of Common Stock or Securities during such person's lifetime by bona fide gift or
upon death by will or intestacy, provided that any transferee agrees in writing
to be bound by the Lock-Up Agreement, and (ii) on the transfer or other
disposition of shares of Common Stock or Securities as a distribution to limited
partners or stockholders of such person, provided that the distributees thereof
agree in writing to be bound by the terms of the Lock-Up Agreement. The
foregoing restriction shall have been expressly agreed to preclude the holder of
the Securities from engaging in any hedging, pledge or other transaction which
is designed to or may reasonably be expected to lead to or result in a
Disposition of Securities during the Lock-Up Period, even if such Securities
would be disposed of by someone other than the such holder. Such prohibited
hedging, pledge or other transactions would include, without limitation, any
short sale (whether or not against the box), any pledge of shares covering an
obligation that matures or could reasonably mature during the Lock-Up Period, or
any purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Furthermore, such
person will have also agreed and consented to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of the
Securities held by such person except in compliance with this restriction. In
addition, each officer and director of the Company, and each person listed on
Schedule 1 attached hereto (excluding Blackwater Capital Group, L.L.C.,
Blackwater Capital Partners, L.P. or their assigns) also has agreed pursuant to
the Lock-Up Agreement that the Representative shall have an irrevocable
preferential right for a period of two years from the termination of the Lock-Up
Period to purchase for its account or to sell for the account of each such
officer, director or securityholder any Securities of the Company that any of
such officers, directors, or stockholders may seek to sell under Rule 144
promulgated under the Act. Each such officer, director, or securityholder will
consult the Representative with regard to any such
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offering and will offer the Representative the opportunity to purchase or sell
any such Securities on terms not more favorable to such officer, director or
securityholder than they can secure elsewhere.
(m) The Representative's Warrant Agreement shall have been entered
into by the Company and you, and the Representative's Warrants shall have been
issued and sold to you pursuant thereto.
(n) The Company and the Selling Stockholder, if applicable, shall
have furnished to you such further certificates and documents as you shall
reasonably request (including certificates of officers of the Company) as to the
accuracy of the representations and warranties of the Company herein, as to the
performance by the Company of its obligations hereunder and as to the other
conditions concurrent and precedent to the obligations of the Underwriters
hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are satisfactory to
Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
8. OPTION SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company and the Selling Securityholder hereby grant to the several Underwriters,
for the purpose of covering over-allotments in connection with the distribution
and sale of the Firm Shares only, a nontransferable option to purchase up to an
aggregate of 450,000 Option Shares at the purchase price per share for the Firm
Shares set forth in Section 4 hereof (the "Option"). The Option may be exercised
by the Representative on behalf of the several Underwriters on one (1) or more
occasions in whole or in part during the period of forty five (45) days after
the date on which the Firm Shares are initially offered to the public by giving
written notice (the "Option Notice") to the Company and the Selling
Securityholder. The number of Option Shares to be purchased by each Underwriter
upon the exercise of the Option shall be the same proportion of the total number
of Option Shares to be purchased by the several Underwriters pursuant to the
exercise of the Option as the number of Firm Shares purchased by such
Underwriter (set forth in Schedule A hereto) bears to the total number of Firm
Shares purchased by the several Underwriters (set forth in Schedule A hereto),
adjusted by the Representative in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the Option
granted by this Section 8 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in same day funds, payable to the order of the Company and the
Selling Securityholder or by wire transfer in same day funds. In the event of
any breach of the foregoing, the Company and the Selling Securityholder shall
reimburse the Underwriters for the interest lost and any other expenses borne by
them by reason of such breach. Such delivery and payment shall take place at the
offices of Xxxxx & Xxxxxx L.L.P., Phoenix, Arizona, or at such other place as
may be agreed upon between the Representative and the Company (i) on the Closing
Date, if written
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notice of the exercise of the Option is received by the Company at
least two (2) full business days prior to the Closing Date, or (ii) on a date
which shall not be later than the third (3rd) full business day following the
date the Company receives written Notice of the Option, if such notice is
received by the Company after the date two (2) full business days prior to the
Closing Date.
The certificates for the Option Shares to be so delivered will be
made available to you at such office or such other location, as you may
reasonably request for checking at least one (1) full business day prior to the
date of payment and delivery and will be in such names and denominations as you
may request, such request to be made at least two (2) full business days prior
to such date of payment and delivery. If the Representative so elects, delivery
of the Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representative.
It is understood that you, individually, and not as the
Representative of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of the Option provided for in Section 8(a) hereof,
the obligations of the several Underwriters to purchase such Option Shares will
be subject (as of the date hereof and as of the date of payment and delivery for
such Option Shares) to the accuracy of and compliance with the representations,
warranties and agreements of the Company herein, to the accuracy of the
statements of the Company and officers of the Company made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, to the conditions set forth in Section 7 hereof, and to the condition
that all proceedings taken at or prior to the payment date in connection with
the sale and transfer of such Option Shares shall be satisfactory in form and
substance to you and to Underwriters' Counsel, and you shall have been furnished
with all such documents, certificates and opinions as you may request in order
to evidence the accuracy and completeness of any of the representations,
warranties or statements, the performance of any of the covenants or agreements
of the Company, or the satisfaction of any of the conditions herein contained.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, and each person, if any, who controls any Underwriter within the
meaning of the Act or the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such controlling
person may become subject (including, without limitation, in its capacity as an
Underwriter or as a "qualified independent underwriter" within the meaning of
Schedule E of the Bylaws of the NASD), under the Act, the Exchange Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities (or actions in respect thereof) arising out of or based upon (i)
any breach of any representation, warranty, agreement or covenant of the Company
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the
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Registration Statement or any amendment or supplement thereto, or 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, (iii) any
untrue statement or alleged untrue statement of any material fact contained in
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or
(iv) any untrue statement or alleged untrue statement of any material fact
contained in any audio or visual materials used in connection with the marketing
of the Shares and furnished by the Company, including without limitation,
slides, videos, films and tape recordings, and agrees to reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
such Preliminary Prospectus or the Prospectus, or any such amendment or
supplement thereto, in reliance upon, and in conformity with, written
information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through the Representative, specifically for use in the
preparation thereof and, provided further, that the indemnity agreement provided
in this Section 9(a) with respect to any Preliminary Prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any losses,
claims, damages, liabilities or actions based upon any untrue statement or
alleged untrue statement of material fact or omission or alleged omission to
state therein a material fact purchased Shares, if a copy of the Prospectus in
which such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 5(a)(4) hereof. This
indemnity agreement shall be in addition to any liabilities which the Company
may otherwise have.
(b) The Selling Securityholder agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act or the Exchange Act against any losses, claims, damages,
damages or liabilities, joint or several, to which such Underwriter or such
controlling person may become subject under the Act, the Exchange Act or
otherwise, arising out of or are based upon: (i) any breach of any
representation, warranty, agreement or covenant of the Selling Securityholder
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any amendment
thereto or (B) any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto based upon information furnished by or on behalf of the
Selling Securityholder, or (iii) the omission or alleged omission to state in
the Registration Statement or any amendment thereto, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, a material fact
required to be stated therein or necessary to make the statements therein
relating to the Selling Securityholder not misleading, and agrees to reimburse
each Underwriter and each such controlling person for any legal or other
expenses reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending against or appearing as a third-party
witness in connection with any such loss, claim,
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damage, liability or action; provided, however, that the Selling Securityholder
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omissions made in the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any such Application
in reliance upon and in conformity with written information furnished to the
Company or to the Selling Securityholder by any Underwriter through the
Representative specifically for use therein and (ii) the Selling Securityholder
will not be liable to any Underwriter or any person controlling such Underwriter
with respect to any such untrue statement or omission made in any Preliminary
Prospectus that is corrected in the Prospectus (or any amendment or supplement
thereto) if the person asserting such loss, claim, damage or liability purchased
Shares from such Underwriter but was not sent or given a copy of the Prospectus
(as amended or supplemented) at or prior to the written confirmation or the sale
of such Shares to such person in any case where such delivery of the Prospectus
(as amended and supplemented) is required by the Act, unless such failure to
deliver the Prospectus (as amended and supplemented) was a result of
noncompliance by the Company with Section 5(a)(4) of this Agreement. This
indemnity agreement shall be in addition to any liability which the Selling
Securityholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company and the Selling Stockholder against any losses,
claims, damages or liabilities, joint or several, to which the Company and the
Selling Stockholder may become subject under the Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of such Underwriter herein
contained, (ii) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment or supplement
thereto, or 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, or (iii) any untrue statement or alleged untrue statement of any
material fact contained in any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in the case of
subparagraphs (ii) and (iii) of this Section 9(c) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company or to the Selling Securityholder by such
Underwriter, directly or through the Representative, specifically for use in the
preparation thereof, and agrees to reimburse the Company and the Selling
Securityholder for any legal or other expenses reasonably incurred by the
Company or by the Selling Securityholder in connection with investigating or
defending any such loss, claim, damage, liability or action.
The indemnity agreement in this Section 9(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company, and each person, if any, who controls the Company within the meaning of
the Act or the Exchange Act. This indemnity agreement shall be in addition to
any liabilities which such Underwriter may otherwise have.
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(d) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 9, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 9 except to the extent that it has been
prejudiced by such omission. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it shall elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of the indemnifying party's election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Section 9(a),
9(b), or 9(c) hereof who are parties to such action), (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; provided that such
consent shall not be unreasonably withheld. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnification could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on all claims that are the subject
matter of such proceeding.
(e) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 9
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 this Section 9 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally
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and not jointly are responsible pro rata for the portion represented by the
percentage that the underwriting discount bears to the public offering price,
and the Company and the Selling Securityholder are responsible for the remaining
portion, provided, however, that (i) no Underwriter shall be required to
contribute any amount in excess of the amount by which the underwriting discount
applicable to the Shares purchased by such Underwriter exceeds the amount of
damages which such Underwriter has otherwise been required to pay and (ii) 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. The contribution agreement in this
Section 9(e) shall extend upon the same terms and conditions to, and shall inure
to the benefit of, each person, if any, who controls any Underwriter, or the
Company, or the Selling Securityholder within the meaning of the Act or the
Exchange Act and each officer of the Company who signed the Registration
Statement and each director of the Company.
(f) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 9, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 9 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
(g) The liability of the Selling Securityholder under this Section 9
shall not exceed an amount equal to the total proceeds received by the Selling
Securityholder from the sale of the Option Shares.
10. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company, the Selling Securityholder and the Underwriters herein or in
certificates delivered pursuant hereto, and the indemnity and contribution
agreements contained in Section 9 hereof shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter within the meaning of the
Act or the Exchange Act, or by or on behalf of the Company, or any of its
officers, directors or controlling persons within the meaning of the Act or the
Exchange Act, and shall survive the delivery of the Shares to the several
Underwriters hereunder or termination of this Agreement.
11. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters shall
fail to take up and pay for the number of Firm Shares agreed by such Underwriter
or Underwriters to be purchased hereunder upon tender of such Firm Shares in
accordance with the terms hereof, and if the aggregate number of Firm Shares
which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for
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exceeds 10% of the Firm Shares, the remaining Underwriters shall have the right,
but shall not be obligated, to take up and pay for (in such proportions as may
be agreed upon among them) the Firm Shares which the defaulting Underwriter or
Underwriters so agreed but failed to purchase. If such remaining Underwriters do
not, at the Closing Date, take up and pay for the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase, the
Closing Date shall be postponed for twenty-four (24) hours to allow the several
Underwriters the privilege of substituting within twenty-four (24) hours
(including non-business hours) another underwriter or underwriters (which may
include any nondefaulting Underwriter) satisfactory to the Company. If no such
underwriter or underwriters shall have been substituted as aforesaid by such
postponed Closing Date, the Closing Date may, at the option of the Company, be
postponed for a further twenty-four (24) hours, if necessary, to allow the
Company the privilege of finding another underwriter or underwriters,
satisfactory to you, to purchase the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase. If it shall be
arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section 11, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven (7)
full business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement, supplements to the Prospectus or other
such documents which may thereby be made necessary, and (ii) the respective
number of Firm Shares to be purchased by the remaining Underwriters and
substituted underwriter or underwriters shall be taken as the basis of their
underwriting obligation. If the remaining Underwriters shall not take up and pay
for all such Firm Shares so agreed to be purchased by the defaulting Underwriter
or Underwriters or substitute another underwriter or underwriters as aforesaid
and the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 11, then the Company shall not be liable to
any Underwriter (except as provided in Sections 6 and 9 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 6 and 9 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 11.
12. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., Pacific Standard time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the public offering shall mean the time
of the release by you, for publication, of the first newspaper advertisement
relating to the Shares, or the
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time at which the Shares are first generally offered by the Underwriters to the
public by letter, telephone or telecopy, whichever shall first occur. By giving
notice as set forth in Section 13 before the time this Agreement becomes
effective, you, as Representative of the several Underwriters, or the Company,
may prevent this Agreement from becoming effective without liability of any
party to any other party, except as provided in Sections 5(a)(9), 6 and 9
hereof.
(b) You, as Representative of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
shall have failed, refused or been unable to perform any agreement on its part
to be performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled is not fulfilled, including, without
limitation, any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse, or (ii) if additional governmental restrictions, not in
force and effect on the date hereof, shall have been imposed upon trading in
securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock Exchange or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your
judgment makes it inadvisable or impracticable to proceed with the offering,
sale and delivery of the Shares, or (v) if there shall have been an outbreak or
escalation of hostilities or of any other insurrection or armed conflict or the
declaration by the United States of a national emergency which, in the opinion
of the Representative, makes it impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. In the event of
termination pursuant to subparagraph (i) above, the Company shall remain
obligated to pay costs and expenses pursuant to Sections 5(a)9, 6 and 9 hereof.
Any termination pursuant to any of subparagraphs (ii) through (v) above shall be
without liability of any party to any other party except as provided in Sections
6 and 9 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 12, you shall promptly
notify the Company by telephone or telecopy , in each case confirmed by letter.
If the Company shall elect to prevent this Agreement from becoming effective,
the Company shall promptly notify you by telephone or telecopy , in each case
confirmed by letter.
13. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, or telecopied (and confirmed by letter) to you, c/o
Cruttenden Xxxx Incorporated, 00 Xxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000,
telecopier number (000) 000-0000, Attention: General Counsel, with a copy to
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Xxxxx & Xxxxxx, LLP, Xxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000, telecopier
number (602) 382- 6070, Attention: Xxxxxx X. Xxxxxxx, Esq.; if sent to the
Company, such notice shall be mailed, delivered or telecopied (and confirmed by
letter) to DuraSwitch Industries, Inc., 000 X. Xxxxxxxxx Xxxx, Xxxxx 000, Xxxx,
Xxxxxxx 00000, telecopier number (000) 000-0000, Attention: Chief Executive
Officer, with a copy to Xxxxxxx & Xxxxx LLP, Xxx X. Xxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxx 00000, telecopier number (000) 000-0000, Attention: P. Xxxxxx
Xxxx, Esq; if sent to the Selling Securityholder, such notice shall be mailed,
delivered (and confirmed by letter) or telecopied (and confirmed by letter) to
Blackwater Capital Partners, L.P., 0000 Xxxxxxxx Xxxx, Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, telecopier number (000) 000-0000, with a copy to
Vedder, Price, Xxxxxxx & Kammholz, 000 X. Xx Xxxxx Xxxxxx, Xxxxxxx, XX 00000,
telecopier number (000) 000-0000, Attention: Xxxx X. XxXxxxx, Esq.
14. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and their respective executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or entity, other
than the parties hereto and their respective executors, administrators,
successors and assigns, and the controlling persons within the meaning of the
Act or the Exchange Act, officers and directors referred to in Section 9 hereof,
any legal or equitable right, remedy or claim in respect of this Agreement or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective executors, administrators,
successors and assigns and said controlling persons and said officers and
directors, and for the benefit of no other person or entity. No purchaser of any
of the Shares from any Underwriter shall be construed a successor or assign by
reason merely of such purchase.
In all dealings with the Company under this Agreement, you shall act
on behalf of each of the several Underwriters, and the Company shall be entitled
to act and rely upon any statement, request, notice or agreement made or given
by you jointly or by Cruttenden Xxxx Incorporated on behalf of you.
15. APPLICABLE LAW. The validity and interpretation of this Agreement, and
the terms and conditions set forth herein, shall be governed by, and construed
in accordance with, the laws of the State of California.
16. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial
proceedings arising out of or relating to this Agreement shall be initiated and
tried exclusively in the state and federal courts located in the State of
California. The aforementioned choice of venue is intended by the parties to be
mandatory and not permissive in nature, thereby precluding the possibility of
litigation between the parties with respect to or arising out of this Agreement
in any jurisdiction other than that specified in this Section 16. The Company
and the Selling Securityholder accepts for itself and in connection with its
properties, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts and waives any defense of forum non conveniens and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. Each party hereby authorizes and accepts service of process
sufficient for personal jurisdiction in any action against
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it as contemplated by this Section 16 by registered or certified mail, return
receipt requested, postage prepaid, to its address for the giving of notices as
set forth in this Agreement.
17. COUNTERPARTS. This Agreement may be signed in several counterparts,
each of which will constitute an original.
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If the foregoing correctly sets forth the understanding among the
Company and the several Underwriters, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement between the Company and the several Underwriters.
Very truly yours,
DURASWITCH INDUSTRIES, INC.
By: ____________________________________
R. Xxxxxx Xxxxxx
Chief Executive Officer
BLACKWATER CAPITAL PARTNERS, L.P.
By:_____________________________________
Its:_________________________________
Accepted as of the date first above written:
CRUTTENDEN XXXX INCORPORATED
On its behalf and on behalf of each of the several
Underwriters named in Schedule A hereto.
By: CRUTTENDEN XXXX INCORPORATED
By: ___________________________________
Authorized Signatory
For and on behalf of the Representative
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SCHEDULE A
Number of Firm Shares
Underwriters To Be Purchased
------------ ---------------
Cruttenden Xxxx Incorporated...............
TOTAL..........................
1
