Exhibit 1.1
GAIAM, INC.
2,000,000 SHARES OF CLASS A COMMON STOCK
UNDERWRITING AGREEMENT
November ____, 1999
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Gull
As Representative of the Underwriters
Identified in Schedule I Annexed Hereto
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
SECTION 1. INTRODUCTION. Gaiam, Inc., a Colorado corporation (the
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"Company"), proposes to sell a total of 2,000,000 shares (the "Firm Shares") of
Class A common stock, $.0001 par value per share (the "Class A Common Stock" and
together with the Company's Class B common stock, $.0001 par value per share,
the "Common Stock"), to the several underwriters identified in Schedule I
annexed hereto (the "Underwriters"), who are acting severally and not jointly.
In addition, the Company has agreed to grant to the Underwriters an option to
purchase up to 300,000 additional shares of Class A Common Stock (the "Optional
Shares") as provided in Section 5 hereof. The Firm Shares and, to the extent
such option is exercised, the Optional Shares are hereinafter collectively
referred to as the "Shares."
You, as representative of the Underwriters (the "Representative"), have
advised the Company that the Underwriters propose to make a public offering of
the Shares as soon hereafter as in your judgment is advisable and that the
public offering price of the Shares initially will be $5.00 per Share for all
Shares ( the "Offering Price"). It is hereby acknowledged and agreed that the
determination of "customers of the Company" and the allocation of the Shares to
"customers of the Company" shall be made by the Company in its sole discretion.
The Company hereby confirms its agreements with the Underwriters as
follows:
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
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represents and warrants to, and agrees with, the several Underwriters, and shall
be deemed
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/*/ Plus an option to acquire up to 300,000 additional shares of Class A Common
Stock from the Company solely to cover over-allotments.
to represent and warrant to the several Underwriters on each Closing
Date (as hereinafter defined), that:
(a) The Company and each of the subsidiaries of the Company, the
significant of which subsidiaries are listed on Exhibit 21.1 of the
Registration Statement (as hereinafter defined) (individually, a
"Subsidiary" and collectively, the "Subsidiaries"), has been duly
incorporated or formed and is validly existing as a entity in good standing
under the laws of its jurisdiction of incorporation or formation, with full
power and authority to own, lease and operate its properties and to conduct
its business as presently conducted and described in the Prospectus (as
hereinafter defined) and the Registration Statement; each of the Company
and the Subsidiaries is duly registered and qualified to do business as a
foreign corporation or other entity under the laws of, and is in good
standing as such in, each jurisdiction in which such registration or
qualification is required, except where the failure to so register or
qualify would not be reasonably expected to have or result in a material
adverse effect on the financial condition, business, property or results of
operations of the Company and the Subsidiaries, taken as a whole (a
"Material Adverse Effect"); and, to the Company's knowledge, 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. Complete and correct copies of the certificate
of incorporation, articles of incorporation, or other organizational
documents, as amended or restated (collectively, the "Articles of
Incorporation"), and by-laws, as amended or restated ("By-laws"), of the
Company and each of the Subsidiaries or the equivalent documents to the
Articles of Incorporation and By-laws for those Subsidiaries that are
entities other than corporations or that have been formed in jurisdictions
in which Articles of Incorporation and By-laws are not applicable, as in
effect on the date hereof, have been delivered to the Representative, and
no changes thereto will be made on or subsequent to the date hereof and
prior to each Closing Date, except as contemplated by the Registration
Statement.
(b) The shares of Common Stock issued and outstanding immediately
prior to the issuance and sale of the Shares hereunder as set forth in the
Prospectus have been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof contained in the
Prospectus and the Registration Statement. There are no preemptive rights
to subscribe for or purchase any shares of Common Stock (including the
Shares). The Shares have been duly authorized and, when issued, delivered
and paid for pursuant to this Agreement, will be validly issued, fully paid
and nonassessable and will conform to the description thereof contained in
the Prospectus and the Registration Statement. The delivery of
certificates for the Shares to be issued and sold hereunder and payment
therefor pursuant to the terms of this Agreement will pass valid title to
such Shares to the Underwriters, free and clear of any lien, claim,
encumbrance or defect in title. Except as described in the Prospectus,
there are no outstanding options, warrants or other rights of any
description, contractual or otherwise, entitling any person to be issued
any class of security by the Company or any Subsidiary, and there are no
holders of Common Stock or other securities of the Company or any
Subsidiary, or of securities that are convertible or
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exchangeable into Common Stock or other securities of the Company or any
Subsidiary, that have rights to the registration of such Common Stock or
securities under the Securities Act of 1933, as amended, and the
regulations thereunder (together, the "Act") or the securities laws or
regulations of any of the states (the "Blue Sky Laws").
(c) Except for the Subsidiaries, the Company has no subsidiaries and
does not own any equity interest in or control, directly or indirectly, any
other corporation, limited liability company, partnership, joint venture,
association, trust or other business organization. Except as set forth in
the Registration Statement, the Company owns directly or indirectly all of
the issued and outstanding capital stock of each Subsidiary or other equity
interests of any subsidiary that is not a corporation, free and clear of
any and all liens, claims, encumbrances or security interests, other than
liens, claims, encumbrances or security interests in favor of Norwest Bank,
N.A. in respect of amounts owed to Norwest Bank, N.A. under the Company's
revolving credit arrangement with such bank, and all such capital stock or
other equity interest has been duly authorized and validly issued and is
fully paid and nonassessable and was issued free and clear of preemptive
rights. There are no outstanding options, warrants or other rights of any
description, contractual or otherwise, entitling any person to subscribe
for or purchase any shares of capital stock of any Subsidiary.
(d) The Company has the corporate power and authority to enter into
and perform this Agreement, and the execution and delivery by the Company
of this Agreement and the performance by the Company of its obligations
hereunder and the consummation of the transactions described herein, have
been duly authorized with respect to the Company by all necessary corporate
action and will not: (i) violate any provisions of the Articles of
Incorporation or By-laws (or their equivalents) of the Company or any
Subsidiary; (ii) violate any provisions of, or result in the breach,
modification or termination of, or constitute a default under, any
provision of any agreement, lease, franchise, license, indenture, permit,
mortgage, deed of trust, evidence of indebtedness or other instrument to
which the Company or any Subsidiary is a party, other than any violation,
breach, modification, termination or default which would be reasonably
expected to have or result in a Material Adverse Effect; (iii) violate any
statute, ordinance, rule or regulation applicable to the Company or any
Subsidiary, or order or decree of any court, regulatory or governmental
body, arbitrator, administrative agency or instrumentality of the United
States or the States of California, Colorado or Ohio or having jurisdiction
over the Company or any Subsidiary; or (iv) result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company or any Subsidiary. No consent, approval, authorization or
other order of any court, regulatory or governmental body, arbitrator,
administrative agency or instrumentality of the United States or the States
of California, Colorado and Ohio is required for the execution and delivery
of this Agreement by the Company, the performance of its obligations
hereunder or the consummation of the transactions contemplated hereby,
except for compliance with the Act, the Securities Exchange Act of 1934, as
amended, and the regulations thereunder (together, the "Exchange Act"), the
Blue Sky Laws applicable to the public offering of the Shares by the
Underwriters and the clearance of such offering and the
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underwriting arrangements evidenced hereby with the National Association of
Securities Dealers, Inc. (the "NASD"). This Agreement has been duly
authorized, executed and delivered by and on behalf of the Company and is a
valid and binding agreement of the Company enforceable against the Company
in accordance with its terms.
(e) A registration statement on Form S-1 (Reg. No. 333-83283) with
respect to the Shares, including a preliminary form of prospectus, has been
prepared by the Company and complies in all material respects with the
requirements of the Act and Form S-1 promulgated thereunder and has been
filed with the Securities and Exchange Commission (the "Commission"). Such
registration statement, as finally amended and revised at the time such
registration statement was or is declared effective by the Commission
(including the information contained in the form of final prospectus, if
any, filed with the Commission pursuant to Rule 424(b) and Rule 430A under
the Act and deemed to be part of the registration statement if the
registration statement has been declared effective pursuant to Rule
430A(b)) and as thereafter amended by post-effective amendment, if any, is
herein referred to as the "Registration Statement." The related final
prospectus in the form first filed with the Commission pursuant to Rule
424(b) or, if no such filing is required, as included in the Registration
Statement, or any supplement thereto, is herein referred to as the
"Prospectus." The prospectus, subject to completion in the form included
in the Registration Statement at the time of the initial filing of the
Registration Statement with the Commission, and each such prospectus as
amended from time to time until the date of the Prospectus, is referred to
herein as the "Preliminary Prospectus." Each Preliminary Prospectus filed
as part of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the Act, complied
when so filed in all material respects with the Act. The Company has
prepared and filed such amendments to the Registration Statement since its
initial filing with the Commission, if any, as may have been required to
the date hereof, and will file such additional amendments thereto as may
hereafter be required. There have been delivered to the Representative two
(2) signed copies of the Registration Statement and each amendment thereto,
if any, together with one copy of each exhibit filed therewith or
incorporated by reference therein, and such number of conformed copies for
each of the Underwriters of the Registration Statement and each amendment
thereto, if any (but without exhibits), and of each Preliminary Prospectus
and of the Prospectus as the Representative has requested. All material
information concerning the offering and the Company (excluding information
about specific products and services) that was made available to customers
of the Company prior to providing such customers with a Prospectus is
included in the Prospectus provided to those customers.
(f) Neither the Commission nor any state securities commission has
issued any order preventing or suspending the use of any Preliminary
Prospectus, nor, to the knowledge of the Company, have any proceedings for
that purpose been initiated or threatened, and each Preliminary Prospectus
filed with the Commission as part of the Registration Statement as
originally filed or as part of any amendment or supplement thereto complied
in all material respects when so filed with the requirements of the Act
and, as of its date, did not include
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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. As of the effective date of the Registration Statement, and
at all times subsequent thereto up to each Closing Date, the Registration
Statement and the Prospectus contained or will contain all statements that
are required to be stated therein in accordance with the Act and conformed
or will conform in all material respects with the requirements of the Act,
and neither the Registration Statement nor the Prospectus included or will
include any untrue statement of a material fact or omitted or will omit to
state a material fact required to be stated therein or necessary to make
the statements therein, not misleading. Neither the Company, nor, to the
Company's knowledge, any person that controls, is controlled by (including
the Subsidiaries) or is under common control with the Company, has
distributed or will distribute prior to each Closing Date any offering
material in connection with the offering and sale of the Shares other than
the Prospectus, the Registration Statement or other materials permitted by
the Act and provided to the Representative. There has not occurred any
material adverse change, or any development involving a prospective
material adverse change, in the financial condition, or in the earnings,
business, prospects or operations of the Company, from that set forth in
the Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement).
(g) Each of Ernst & Young LLP and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and Associates,
P.C., who have expressed their opinions with respect to the audited
consolidated financial statements filed with the Commission or incorporated
by reference and included as a part of each Preliminary Prospectus, the
Prospectus or the Registration Statement, are independent accountants as
required by the Act.
(h) The consolidated financial statements and the related notes
thereto included in each Preliminary Prospectus, the Prospectus and the
Registration Statement present fairly the financial position, results of
operations and cash flows of the Company as of their respective dates or
for the respective periods covered thereby, all in conformity with
generally accepted accounting principles consistently applied throughout
the periods involved. The financial statement schedules, if any, included
in the Registration Statement present fairly the information required to be
stated therein on a basis consistent with the consolidated financial
statements of the Company contained therein. The Company had an
outstanding capitalization as set forth in the Registration Statement and
under "Capitalization" in the Prospectus as of the date indicated therein,
and there has been no material change thereto since such date except as
disclosed in the Prospectus. The financial and statistical information and
data relating to the Company in each Preliminary Prospectus, the Prospectus
and the Registration Statement are accurately and fairly presented and
prepared on a basis consistent with the audited consolidated financial
statements and books and records of the Company. The consolidated financial
statements and schedules and the related notes thereto included in each
Preliminary Prospectus, the Prospectus or the Registration Statement are
the only such financial statements and schedules required under the Act to
be set forth therein.
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(i) Neither the Company nor any Subsidiary is, nor with the giving of
notice or passage of time or both, would be, in violation or in breach of:
(i) its respective Articles of Incorporation or By-laws (or
their equivalents);
(ii) any statute, ordinance, order, rule or regulation
applicable to the Company or such Subsidiary;
(iii) any order or decree of any court, regulatory body,
arbitrator, administrative agency or other instrumentality of the
United States or other country or jurisdiction having
jurisdiction over the Company or such Subsidiary; or
(iv) any provision of any agreement, lease, franchise, license,
indenture, permit, mortgage, deed of trust, evidence of
indebtedness or other instrument to which the Company or such
Subsidiary is a party or by which any property owned or leased by
the Company or such Subsidiary is bound or affected, except for
any such violation or breach that would not be reasonably
expected to have or result in a Material Adverse Effect.
(j) Neither the Company nor any Subsidiary has received notice of any
violation of any applicable statute, ordinance, order, rule or regulation
applicable to the Company or any Subsidiary. The Company and each
Subsidiary have obtained and hold, and are in compliance with, all permits,
certificates, licenses, approvals, registrations, franchises, consents and
authorizations of governmental or regulatory authorities required under all
laws, rules and regulations in connection with their businesses
(hereinafter "permit" or "permits") except where the failure to obtain and
hold any such permit would not be reasonably expected to have or result in
a Material Adverse Effect, and all of such permits are in full force and
effect; and the Company and each Subsidiary have fulfilled and performed
all of their respective obligations with respect to each such permit, and
no event has occurred which would result in, or after notice or lapse of
time would result in, revocation or termination of any such permit or
result in any other impairment of the rights of the holder of such permit
which would be reasonably expected to have or result in a Material Adverse
Effect. Neither the Company nor any Subsidiary is or has been (by virtue
of any action, omission to act, contract to which it is a party or other
occurrence) in violation of any applicable foreign, federal, state,
municipal or local statutes, laws, ordinances, rules, regulations or orders
(including those relating to environmental protection, occupational safety
and health and equal employment practices) heretofore or currently in
effect, the violation of which would be reasonably expected to have a
Material Adverse Effect.
(k) There are no legal or governmental proceedings or investigations
pending or, to the Company's knowledge, threatened, to which the Company
or any Subsidiary is or may be a party or to which any property owned or
leased by the Company or any Subsidiary is or may be subject, including,
without limitation, any such proceedings that are related to
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environmental or employment discrimination matters, which are required to
be described in the Registration Statement or the Prospectus which are not
so described, or which question the validity of this Agreement or any
action taken or to be taken pursuant hereto. Except as described in the
Registration Statement or the Prospectus, neither the Company nor any
Subsidiary: (i) is in violation of any statute, ordinance, rule or
regulation, or any decision, order or decree of any court, regulatory body,
arbitrator, administrative agency or other instrumentality of the United
States or other country or jurisdiction having jurisdiction over the
Company or such Subsidiary relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environmental or human exposure to "Hazardous" Materials (as
hereinafter defined) (collectively, "environmental laws"); (ii) owns,
operates or occupies any real property contaminated, to the Company's
knowledge, with any Hazardous Material that is subject to any environmental
laws; (iii) is, to the Company's knowledge, liable for any off-site
disposal or contamination pursuant to any environmental laws; or (iv) is
subject to any claim relating to any environmental laws; which violation,
contamination, liability or claim identified in (i) through (iv) above
would be reasonably expected to have or result in a Material Adverse
Effect. For purposes of this Agreement, "Hazardous Materials(s)" shall mean
(i) any substance, the presence in a quantity of which requires
investigation or remediation under any environmental laws; (ii) any toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous substance present in a quantity such that
it is regulated by any environmental laws; (iii) any substance in a
quantity the presence of which poses a hazard to the health or safety of
persons on or about the real property owned, operated or occupied by the
Company or any of its Subsidiaries; and (iv) urea-formaldehyde, PCBs,
asbestos or asbestos-containing materials and radon.
(l) There is no transaction, relationship, obligation, agreement or
other document required to be described in the Registration Statement or
the Prospectus or to be filed or deemed to be filed as an exhibit to the
Registration Statement by the Act, which has not been described or filed as
required. All contracts or agreements filed as an exhibit to the
Registration Statement to which the Company or any Subsidiary is a party
have been duly authorized, executed and delivered by the Company or such
Subsidiary, are in full force and effect, constitute valid and binding
agreements of the Company or such Subsidiary, and are enforceable by and
against the Company or such Subsidiary, in accordance with the respective
terms thereof, subject to bankruptcy, insolvency, and moratorium laws,
fraudulent transfer and other laws affecting creditors' rights generally
and other principles of equity. None of such contracts or instruments has
been assigned by the Company; and the Company knows of no default or breach
by any party to any such contract or instrument or of any present situation
or condition or fact which would prevent compliance by the parties with the
terms of such contracts or instruments as amended to date. Except for
amendments or modifications of such contracts or instruments in the
ordinary course of business, the Company has no intention of exercising any
right which would cause any other party to the contract to cancel any of
their obligations under any of such contracts or instruments, and, except
as described in the Registration Statement, the Company has no knowledge
that any
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other party to any of such contracts or instruments is in material breach
or violation of any such contact or agreement or has any intention not to
render full performance thereunder.
(m) The Company or a Subsidiary has good and valid title to all
property and assets reflected as owned by the Company or such Subsidiary in
the Company's consolidated financial statements included in the
Registration Statement (or the Prospectus), free and clear of all liens,
claims, mortgages, security interests or other encumbrance of any kind or
nature whatsoever except those, if any, reflected in such financial
statements (or elsewhere in the Registration Statement or the Prospectus).
All property (real and personal) held or used by the Company or a
Subsidiary under leases, licenses, franchises or other agreements is held
by the Company or such Subsidiary under valid, subsisting, binding and
enforceable leases, franchises, licenses or other agreements, and the
Company or such Subsidiary, as the case is in full compliance with each
such lease, license, franchise or other agreements and the Company has no
knowledge that any other party thereto is not in full compliance with each
such lease, license, franchise or other agreements, except in either case
where the failure to be in compliance would not be reasonably expected to
have or result in a Material Adverse Effect. The Company has no knowledge
that any other party thereto is not in material compliance with each such
lease, license, franchise or other agreement.
(n) Neither the Company nor, to the Company's knowledge, any person
that controls, is controlled by (including the Subsidiaries) or is under
common control with the Company has taken or will take, directly or
indirectly, any action designed to cause or result in, or which
constituted, or which could cause or result in, stabilization or
manipulation, under the Exchange Act or otherwise, of the price of any
security of the Company to facilitate the sale or resale of the Common
Stock.
(o) Except as described in the Registration Statement or the
Prospectus, since the respective dates as of which information is given in
the Registration Statement or the Prospectus and prior to each Closing
Date:
(i) neither the Company nor any Subsidiary has or will have
incurred any liability or obligation, direct or contingent, or
entered into any transaction, in each case, that is material to
the Company, except in the ordinary course of business;
(ii) the Company has not and will not have paid or declared any
dividend or other distribution with respect to its capital stock
and neither the Company nor any Subsidiary is or will be
delinquent in the payment of principal or interest on any
outstanding debt obligation; and
(iii) there has not been and will not have been any change in the
capital stock, any material change in the indebtedness of the
Company or any Subsidiary, or any change or development involving
or which would be reasonably expected
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to have or result in a Material Adverse Effect, whether or not
arising from transactions in the ordinary course of business.
(p) Neither the Company nor any person that controls, is controlled
by (including the Subsidiaries) or is under common control with the Company
has, directly or indirectly:
(i) made any unlawful contribution to any candidate for
political office, or failed to disclose fully any contribution in
violation of law; or
(ii) made any payment to any federal, state or foreign
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 or applicable foreign jurisdictions.
(q) The Company or a Subsidiary owns or possesses adequate rights to
use all patents, patent applications, trademarks, service marks, trade
names, trademark registrations, service ▇▇▇▇ registrations, copyrights and
licenses presently used in or necessary for the conduct of its business or
ownership of its properties, and neither the Company nor any Subsidiary has
violated or infringed upon the rights of others, or received any notice of
conflict with the asserted rights of others, in respect thereof, which
violation or infringement would be reasonably expected to have or result in
a Material Adverse Effect.
(r) Neither the Company nor any Subsidiary has been refused any
insurance coverage sought or applied for; and, except as described in the
Prospectus, neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage
as and when such coverage expires or to obtain similar coverage from
insurers of similar standing as may be necessary to continue its business
at a cost that would not have or result in a Material Adverse Effect.
(s) No labor dispute with the employees of the Company or any
Subsidiary, which dispute would reasonably be expected to have or result in
a Material Adverse Effect, exists or, to the knowledge of the Company, is
imminent, and neither the Company nor any Subsidiary, except as disclosed
in the Registration Statement, is a party to any collective bargaining
agreement and, to the knowledge of the Company, no union organizational
attempts are pending. There has been no change in the relationship of the
Company or any Subsidiary with any of its suppliers, manufacturers,
contractors or customers resulting in or that would reasonably be expected
to have or result in a Material Adverse Effect.
(t) Neither the Company nor any Subsidiary is an "investment
company", an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (without regard to the second
sentence of Section 3(c)(1) of such Act insofar as such sentence applies to
the status of Synergom, Inc. as an "affiliated person" with respect to the
Company).
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(u) All federal, state and local tax returns required to be filed by
or on behalf of the Company or any Subsidiary have been filed (or are the
subject of valid extension) with the appropriate federal, state and local
authorities, and all such tax returns, as filed, are accurate in all
material respects; all federal, state and local taxes (including estimated
tax payments) required to be shown on all such tax returns or claimed to be
due from or with respect to the business of the Company or such Subsidiary
have been paid or reflected as a liability on the financial statements of
the Company or such Subsidiary for all appropriate periods; all
deficiencies asserted as a result of any federal, state or local tax audits
have been paid or finally settled, and no issue has been raised in any such
audit which, by application of the same or similar principles, would be
reasonably expected to result in a proposed material deficiency for any
other period not so audited; no state of facts exist (or has existed with
respect to any period for which a taxing authority may lawfully assess the
Company for any penalty, interest assessment or other charges) which would
reasonably be expected to constitute grounds for the assessment of any tax
liability with respect to the periods which have not heretofore been
audited by appropriate federal, state or local authorities; there are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any federal, state or local tax return of any
period; and neither the Company nor any Subsidiary has ever been a member
of an affiliated group of corporations filing consolidated federal income
tax returns, other than a group of which the Company is and has been the
common parent.
(v) Neither the Company nor any Subsidiary is a participating employer
or plan sponsor with respect to any employee pension benefit plan as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), including, without limitation, any multi-
employer pension plan. The Company is in material compliance with all
applicable laws and regulations, including ERISA and the Code.
(w) The Company and each Subsidiary maintain 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 consolidated financial statements in conformity
with generally accepted accounting principles and to maintain
accountability for assets;
(iii) access to assets is permitted only in accordance with
management's general or specific authorizations; 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.
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(x) None of the Company, any Subsidiary, any officer or director of
the Company or any Subsidiary, or, to the Company's knowledge, any person
who owns, of record or beneficially, any class of securities issued by the
Company is: (i) an officer, director or partner of any brokerage firm,
broker or dealer that is a member of the NASD ("NASD Member"); or (ii)
directly or indirectly, a "person associated with" an NASD member or an
"affiliate", of an NASD member, as such terms are used in the NASD Rules of
the Association.
(y) The Class A Common Stock has been registered pursuant to Section
12(g) of the Exchange Act. The Company has prepared and filed with the
Commission a registration statement for the Class A Common Stock pursuant
to Section 12(g) of the Exchange Act. Such registration statement either
has been declared effective by the Commission under the Exchange Act or
will be declared effective by the Commission prior to or concurrently with
the commencement of the public offering of the Shares. The Class A Common
Stock (including the Shares) has been approved for designation upon notice
of issuance as a Nasdaq National Market security on The Nasdaq Stock Market
("Nasdaq") concurrently with the execution and delivery of this Agreement.
(z) All offers and sales of the securities of the Company and each
Subsidiary prior to the date hereof were made in compliance with the Act,
the Blue Sky Laws and all other applicable state and federal laws or
regulations.
(aa) The Company has obtained for the benefit of the Underwriters an
agreement (a "Lock-Up Agreement"), enforceable by the Representative,
executed and delivered by each of the persons listed on Schedule II hereof,
who owns of record the number of shares of Common Stock set forth on
Schedule II opposite such shareholder's name, that for a period of 180 days
after the First Closing Date, such persons will not, without the prior
written consent of the Representative, directly or indirectly, offer, sell,
transfer, or pledge, contract to sell, transfer or pledge, or cause or in
any way permit to be sold, transferred, pledged, or otherwise disposed of,
any:
(i) shares of Common Stock;
(ii) rights to purchase shares of Common Stock (including,
without limitation, shares of Common Stock that may be deemed to
be beneficially owned by any such shareholder in accordance with
the applicable regulations of the Commission and shares of Common
Stock that may be issued upon the exercise of a stock option,
warrant or other convertible security); or
(iii) securities that are convertible or exchangeable into shares
of Common Stock.
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In addition, each person listed in the Registration Statement under the
caption "Our Shareholders" from whom the Company has not obtained a Lock-Up
Agreement owns his or her respective shares of Common Stock subject to
subscription, or similar agreements containing restrictions on transfers
that are no less restrictive than a Lock-Up Agreement, are as of the date
hereof specifically enforceable against such persons and will be
continuously specifically enforceable against each such person for the
period from the date hereof through and including 180 days after the First
Closing Date. The Company has heretofore delivered to the Representative a
true copy of each such subscription or similar agreement.
(bb) The Company has complied with all provisions of Section 517.075
of the Florida Statutes, relating to doing business with the government of
Cuba or with any person or affiliate located in Cuba.
(cc) The Company represents that no finder's fee has been or will be
paid in connection herewith. It is understood that, should a claim be made
for any finder's fee in connection with the sale of the Shares and based
upon any agreement by the Company, the Company will indemnify the
Underwriters with respect to any such claim.
(dd) All documents and other information relating to the Company's
affairs shall be made available upon request to the Representative and
counsel to the Underwriters at the Company's office, and copies of any such
documents shall be furnished upon request to the Representative or counsel
to the Underwriters. Included within the documents to be made available
are the Company's articles of incorporation, as amended, and related
charter documents, bylaws and amendments thereto, minutes of all meetings
and other actions taken by the Company's incorporators, directors and
shareholders, all financial statements, correct copies of any material
contracts, licenses, leases or agreements to which the Company is a party
or by which it or its property is bound, including contracts for the sale
of products or services in the normal course of business, excluding
purchase orders made in the normal course of business, and including any
employee (including officers and/or directors) incentive plans and any
other type of fringe benefit plan, of whatever nature, and copies of all
patents, patent applications, trademarks and trademark applications in
which the Company may have an interest.
(ee) A certificate signed by any officer of the Company and delivered
to the Representative or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to the Underwriters as to the
matters covered thereby. A certificate delivered by the Company to its
counsel for purposes of enabling such counsel to render the opinion
referred to in Section 8(d) will also be furnished to the Representative
and counsel for the Underwriters and shall be deemed to be additional
representations and warranties to the Underwriters by the Company as to the
matters covered thereby.
SECTION 3. REPRESENTATION OF UNDERWRITERS. The Representative will act as
------------------------------
the Representative for the several Underwriters in connection with the public
offering of the
-12-
Shares, and any action under or in respect of this Agreement
taken by the Representative will be binding upon all of the Underwriters.
SECTION 4. INFORMATION FURNISHED BY THE UNDERWRITERS. The information set
-----------------------------------------
forth on the outside front cover page of the Prospectus concerning the terms of
the offering by the Underwriters, and the information appearing under the
caption "Underwriting" in the Prospectus constitute all of the information
furnished to the Company by and on behalf of the Underwriters for use in
connection with the preparation of the Registration Statement and the
Prospectus, as such information is referred to in this Agreement.
SECTION 5. PURCHASE, SALE AND DELIVERY OF SHARES.
-------------------------------------
(a) Subject to Section 5(b), on the basis of the representations,
warranties and agreements herein contained, and subject to the terms and
conditions herein set forth, the Company agrees to sell to the Underwriters
identified in Schedule I annexed hereto 2,000,000 Firm Shares, and each of
the Underwriters agrees, severally and not jointly, to purchase from the
Company the number of Firm Shares as hereinafter set forth at the price per
share of $4.50 per Share. The obligation of each Underwriter to the Company
shall be to purchase from the Company that number of full Firm Shares which
(as nearly as practicable in full shares as determined by the
Representative) bears the same proportion to the number of Firm Shares to
be sold by the Company as the number of shares set forth opposite the name
of such Underwriter in Schedule I annexed hereto bears to the total number
of Firm Shares to be purchased by all of the Underwriters under this
Agreement.
(b) Notwithstanding anything herein to the contrary, the Underwriters
agree to sell Shares to each of the holders of the Company's 8% Debentures
(the "Debentures") at a price of $5.00 per Share (the "Debenture
Exchange"), provided that the holders of the Debentures shall pay such
price by delivery of the Debentures and not in cash, with the Debentures to
be valued for such purpose at their principal amount, without regard to any
accrued and unpaid interest thereon. In consideration for the Debenture
Exchange, the Company hereby irrevocably agrees to purchase from the
Underwriters any and all Debentures delivered to the Underwriters in
connection with the Debenture Exchange for a purchase price equal to the
principal amount of the Debentures, without regard to any accrued and
unpaid interest thereon, which purchase price will be paid to the
Underwriters in immediately available funds on the First Closing Date
against delivery of the Debentures on the First Closing Date.
(c) On the First Closing Date (as hereinafter defined), the Company
will deliver to the Representative, at the offices of the Representative,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or through the facilities
of The Depository Trust Company, for the accounts of the several
Underwriters, a master certificate representing all the Firm Shares to be
sold
-13-
by them to "customers of the Company" (as determined by the Company)
buying Firm Shares, and shall make appropriate book entries to evidence
ownership of Shares by all other purchasers, against payment of the
aggregate purchase price therefor by wire transfer of immediately available
funds to the account specified by the Company. As referred to in this
Agreement, the "First Closing Date" shall be on the third or fourth
business day (as permitted under Rule 15c6-1 under the Exchange Act),
following the date of the effectiveness of the Registration Statement , at
9:00 a.m., Denver, Colorado time. The master certificate for the Firm
Shares to be so delivered, and the evidence of book entry ownership, will
be in denominations and registered in such names as the Representative
reasonably requests by notice to the Company prior to the First Closing
Date.
(d) In addition, on the basis of the representations, warranties and
agreements herein contained, and subject to the terms and conditions herein
set forth, the Company hereby agrees to sell to the Underwriters, and the
Underwriters, severally and not jointly, shall have the right at any time
within thirty (30) days after the First Closing Date to purchase up to
300,000 Optional Shares from the Company at the price of $4.50 per share,
for use solely in covering any over-allotments made by the Underwriters in
the sale and distribution of the Firm Shares. The option granted hereunder
may be exercised in full or in part upon notice by the Representative to
the Company within thirty (30) days after the First Closing Date setting
forth the aggregate number of Optional Shares to be purchased by the
Underwriters and sold by the Company, and the names and denominations in
which the certificates for such Optional Shares are to be registered (or
similar information for purchasers whose ownership of Optional Shares is to
be evidenced by book entry only). Such date of delivery (the "Second
Closing Date") shall be determined by the Representative, provided that the
Second Closing Date, which may be the same as the First Closing Date, shall
not be earlier than the First Closing Date and, if after the First Closing
Date, shall not be earlier than three (3) nor later than ten (10) full
business days after delivery of such notice to exercise. Any certificates
for Optional Shares will be made available for checking and packaging at
9:00 a.m., Denver, Colorado time, on the first full business day preceding
the Second Closing Date at a location to be designated by the
Representative. The manner of payment for and delivery of (including the
denominations of and the names in which certificates are to be registered
or book entries are to be made) the Optional Shares shall be the same as
for the Firm Shares.
(e) The Representative has advised the Company that each Underwriter
has authorized the Representative to accept delivery of the Shares and to
make payment therefor. It is understood that the Representative,
individually and not as representative of the Underwriters, may (but shall
not be obligated to) make payment for any Shares to be purchased by any
Underwriter whose funds shall not have been received by the Representative
by the First Closing Date or the Second Closing Date, as the case may be,
for the account of such Underwriter, but any such payment shall not relieve
such Underwriter from any obligation under this Agreement. As referred to
in this Agreement, "Closing Date" shall mean either the First Closing Date
or the Second Closing Date.
-14-
(f) The parties represent and warrant that as of the date hereof and
as of the Closing Date, the representations and warranties herein contained
and the statements contained in all certificates delivered by any party to
another pursuant to this Agreement shall in all material respects be true
and correct.
SECTION 6. COVENANTS OF THE COMPANY. The Company covenants and agrees
------------------------
with the several Underwriters that:
(a) If the effective time of the Registration Statement is not prior
to the execution and delivery of this Agreement, the Company will use its
best efforts to cause the Registration Statement to become effective at the
earliest possible time and, upon notification from the Commission that the
Registration Statement has become effective, will so advise the
Representative and counsel to the Underwriters promptly. The Company will
advise the Representative and counsel to the Underwriters promptly of the
issuance by the Commission or any state securities commission of any stop
order suspending the effectiveness of the Registration Statement or of the
institution of any proceedings for purposes, or of any notification of the
suspension of qualification of the Shares for sale in any jurisdiction, or
any issue regarding denial or suspension of Nasdaq listing or the
initiation or threatening of any proceedings for any of those purposes, and
will also advise the Representative and counsel to the Underwriters
promptly of any request of the Commission for amendment or supplement of
the Registration Statement or of the Prospectus, or for additional
information, and the Company will not file any amendment or supplement to
the Registration Statement (either before or after it becomes effective) or
to the Prospectus (including a prospectus filed pursuant to Rule 424(b)),
or file any document under the Exchange Act in the time period from the
execution of this Agreement through the First Closing Date with respect to
the Firm Shares, or from the time of notice by the Representative
exercising the option to purchase the Optional Shares through the Second
Closing Date with respect to the Optional Shares, without first providing
the Underwriters with a copy prior to such filing (with a reasonable
opportunity to review such amendment or supplement) or if the
Representative objects to such filing.
(b) If, at any time when a prospectus relating to the Shares is
required by law to be delivered in connection with sales by an Underwriter
or dealer, any event occurs as a result of which the Prospectus would
include an untrue statement of a material fact, or would 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 were
made, not misleading, or if it is necessary at any time to supplement the
Prospectus to comply with the Act, the Company promptly will advise the
Representative and counsel to the Underwriters thereof and will promptly
prepare and file with the Commission, at its expense, an amendment to the
Registration Statement which will correct such statement or omission or an
amendment which will effect such compliance; and, if any Underwriter is
required to deliver a prospectus after the effective date of the
Registration Statement, the Company, upon request of the Representative,
will prepare promptly such prospectus or prospectuses as may be necessary
-15-
to permit compliance with the requirements of Section 10(a)(3) of the Act.
The Company consents to the use, in accordance with the provisions of the
Act and with the Blue Sky Laws of the jurisdictions in which the Shares are
offered by the several Underwriters and by dealers, of each Preliminary
Prospectus.
(c) Neither the Company nor any Subsidiary will, prior to the Second
Closing Date, if any, incur any liability or obligation, direct or
contingent, or enter into any material transaction, other than in the
ordinary course of business, or enter into any transaction with an
"affiliate," as defined in Rule 405 under the Act, which is required to be
described in the Prospectus pursuant to Item 404 of Regulation S-K under
the Act, except as described in the Prospectus.
(d) Neither the Company nor any Subsidiary will, prior to the Second
Closing Date, if any, acquire any of the Common Stock nor will the Company
declare or pay any dividend or make any other distribution upon its Common
Stock payable to shareholders of record on a date prior to such earlier
date, except as described in the Prospectus.
(e) The Company will make generally available to its security holders
and the Representative an earnings statement as soon as practicable, but in
no event later than sixty (60) days after the end of its fiscal quarter in
which the first anniversary of the effective date of the Registration
Statement occurs, covering a period of twelve (12) consecutive calendar
months beginning after the effective date of the Registration Statement,
which will satisfy the provisions of the last paragraph of Section 11(a) of
the Act and Rule 158 promulgated thereunder.
(f) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the Company
will furnish to the Representative, at the expense of the Company, copies
of the Registration Statement, the Prospectus, and all amendments and
supplements to any such documents, including any document filed under the
Exchange Act and deemed to be incorporated by reference in the Registration
Statement, in each case as soon as available and in such quantities as the
Representative may reasonably request.
(g) The Company will apply the net proceeds from the sale of the
Shares to be sold by it hereunder for the purposes set forth in the
Prospectus.
(h) The Company will cooperate with the Representative and counsel to
the Underwriters in qualifying or registering the Shares for sale under the
Blue Sky Laws of such jurisdictions as the Representative designates, and
will continue such qualifications or registrations in effect so long as
reasonably requested by the Representative to effect the distribution of
the Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified. In each jurisdiction
where any of the Shares shall have been
-16-
qualified as provided above, the Company will file such reports and
statements as may be required to continue such qualification for a period
of not less than one year from the date of the Prospectus. The Company
shall promptly prepare and file with the Commission, from time to time,
such reports as may be required to be filed by the Act and the Exchange
Act, and the Company shall comply in all respects with the undertakings
given by the Company in connection with the qualification or registration
of the Shares for offering and sale under the Blue Sky Laws.
(i) During the period of three (3) years from the date of the
Prospectus, the Company will furnish to each of the Representative and to
each of the other Underwriters who may so request, as soon as available,
each report, statement or other document of the Company or its Board of
Directors mailed to its shareholders or filed with the Commission, and such
other information concerning the Company as the Representative may
reasonably request.
(j) The Company shall deliver the requisite notice of issuance to
Nasdaq and shall take all necessary or appropriate action within its power
to maintain the authorization for trading of the Class A Common Stock as a
Nasdaq National Market security, or take such action to authorize the Class
A Common Stock for listing on the New York Stock Exchange or the American
Stock Exchange, for a period of at least thirty-six (36) months after the
date of the Prospectus.
(k) Except for (i) the issuance and sale by the Company of Common
Stock upon exercise of presently existing outstanding stock options, (ii)
the sale or exchange of Common Stock in settlement of any threatened
litigation by the holder of the minority interest in Healing Arts
Publishing, L.L.C. or the sale of Common Stock to purchase the minority
interest in Healing Arts Publishing, L.L.C., and (iii) the sale of the
Shares to be sold by the Company pursuant to this Agreement, the Company
shall not, for a period of one hundred eighty (180) days after the First
Closing Date without the prior written consent of the Representative,
directly or indirectly, offer, sell or otherwise dispose of, contract to
sell or otherwise dispose of, or cause or in any way permit to be sold or
otherwise disposed of, any: (i) shares of Common Stock; (ii) rights to
purchase shares of Common Stock exercisable within such 180-day period; or
(iii) securities that are convertible or exchangeable into shares of Common
Stock within such 180-day period.
(l) The Company will maintain a transfer agent and, if required by law
or the rules of The Nasdaq Stock Market or any national securities exchange
on which the Class A Common Stock is listed, a registrar (which, if
permitted by applicable laws and rules, may be the same entity as the
transfer agent) for its Class A Common Stock.
(m) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any rumor, publication or event
relating to of affecting the Company shall occur as a result of which, in
the opinion of the Representative, the market price of the
-17-
Class A Common Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to the Prospectus), the Company will, after written notice from
the Representative advising the Company of any of the matters set forth
above, promptly consult with the Representative concerning the advisability
and substance of, and, if the Company and the Representative jointly
determine that it is appropriate, disseminate, a press release or other
public statement responding to or commenting on, such rumor, publication or
event.
(n) The Company will use its reasonable best efforts to comply or
cause to be complied with the conditions to the obligations of the
Underwriters in Section 8 hereof and will take no action or omit to take
any action that would reasonably be expected to prevent the Underwriter's
compliance or satisfaction with the conditions to the obligations of the
Underwriter in Section 8 hereof.
(o) The Company shall issue at the Closing irrevocable instructions to
the transfer agent to provide the Representative for a period of 180 days
after the Closing Date, for its confidential use and at the Company's
expense, reasonable access to its daily transfer sheets (provided such
access does not result in expense to the Company) and, annually upon
request of the Representative to the transfer agent therefor (but more
frequently in the event of an investigation requiring the same or inquiry
therefor by the Commission or other government body or agency or by the
NASD), with lists of shareholders of the Company, all for a period of three
(3) years after the Closing Date. As a condition to providing any
information under this Section 6(o), the Company may require the
Representative to enter into a non-disclosure or confidentiality agreement
providing reasonable restrictions against disclosure of such information.
(p) The Company shall deliver to the Representative the documents
described in Section 2(dd). In addition, at Closing, the Company shall
deliver to the Representative or counsel to the Underwriters, certificates
of good standing in each state where the Company does business,
certificates as to tax status, incumbency or any other certificate or
document which the Representative may reasonably require prior to Closing.
(q) Prior to the Closing Date, the Company shall cooperate with the
Representative in such reasonable investigation as the Representative may
make or cause to be made of all the properties, business and operations of
the Company in connection with the sale of the Shares, and the Company
shall make its officers and directors available to the Representative for
interrogation, without cost or expense, in connection therewith, and the
Company shall make available such information in its possession as the
Representative may reasonably request.
(r) If applicable, the Company shall file with the Commission all
required reports in accordance with the provisions of Rule 463 of
Regulation C under the Act and shall provide a copy of each such report to
the Representative and counsel to the Underwriters.
-18-
(s) The Company shall supply to each of the Representative and
counsel to the Underwriters, at the Company's cost, two (2) sets of bound
transcripts each containing all of the Closing materials within a
reasonable time after the Closing Date.
SECTION 7. PAYMENT OF EXPENSES. Whether or not the transactions
-------------------
contemplated hereunder are consummated or this Agreement becomes effective, or
if this Agreement becomes effective and is thereafter terminated for any
reason, the Company will pay the costs, fees and expenses incurred in connection
with the proposed public offering of the Shares as hereinafter provided. Such
costs, fees and expenses to be paid by the Company will include, without
limitation:
(a) All costs, fees and expenses (excluding the expenses incurred by
the Underwriters except as otherwise set forth in subsections (b), (c) and
(d) below) incurred in connection with the performance of the Company's
obligations hereunder, including, without limiting the generality of the
foregoing: the registration fees related to the filing of the Registration
Statement with the Commission; the fees and expenses related to the
quotation of the Shares on Nasdaq or other national securities exchange;
the fees and expenses of the Company's counsel, accountants, transfer agent
and registrar; the costs and expenses incurred in connection with the
preparation, printing, shipping, and delivery of the Registration Statement
and the Prospectus (including all exhibits and financial statements) and
all agreements and supplements provided for herein, this Agreement,
including, without limitation, shipping expenses via overnight delivery
and/or courier service to comply with applicable prospectus delivery
requirements; and the costs and expenses associated with the production of
materials related to, and travel expenses incurred by the management of the
Company in connection with, the various meetings to be held between the
Company's management and prospective investors.
(b) All registration fees and expenses, including filings under the
Blue Sky Laws and the clearing of the public offering and the underwriting
arrangements evidenced hereby with the NASD and legal fees and
disbursements of counsel to the Underwriters incurred in connection with
qualifying or registering all or any part of the Shares for offer and sale
under the Blue Sky Laws.
(c) All accountable costs, fees and expenses of the Underwriters
incurred in connection with the proposed sale of the Shares, as described
in the last sentence of this subsection (c), excluding (i) the costs, fees
and expenses of counsel to the Underwriters (except as set forth in
subsection (d) below) (ii) the costs, fees and expenses incurred by the
Underwriters in connection with the marketing and advertising of the
transactions contemplated hereunder, and (iii) the Underwriters' travel and
promotional expenses incurred in connection with the offering. At the First
Closing and, if applicable, on the Second Closing Date, the Company shall
pay to each Underwriter a sum equal to the accountable expenses incurred by
such Underwriter in connection with the preferential allocation of shares
to customers of the Company, including, but not limited to, travel
expenses, postage
-19-
expenses, duplication expenses, long distance telephone expenses,
additional staffing and other administrative or "back office" expenses.
(d) In the event that the transactions contemplated hereunder are not
consummated by December 31, 1999, due to the action or inaction of the
Company, or if this Agreement is terminated by the Company at any time
prior to that date for any reason, the Company will promptly pay, upon the
request of the Underwriters, the out-of-pocket expenses incurred in
connection with this Agreement, including costs, fees and expenses of
counsel to the Underwriters.
(e) All fees and expenses related to printing of the certificates for
the Shares, and all transfer taxes, if any, with respect to the sale and
delivery of the Shares to the Underwriters.
(f) The Company shall also pay all expenses incurred in connection
with the placement of a "tombstone" advertisement after the closing in such
publications and containing such information as the Company and the
Representative may agree, after Closing of the offering.
SECTION 8. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
-------------------------------------------------
obligations of the several Underwriters under this Agreement shall be subject to
the accuracy of the representations and warranties on the part of the Company
herein set forth as of the date hereof and as of each Closing Date, to the
accuracy of the statements of the Company's officers made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions, unless waived in writing
by the Representative:
(a) The Registration Statement shall have been declared effective by
the Commission; all filings required by Rules 424(b) and 430A under the Act
shall have been timely made; no stop order suspending the effectiveness of
the Registration Statement shall have been issued by the Commission or any
state securities commission nor, to the knowledge of the Company, shall any
proceedings for that purpose have been initiated or threatened; and any
request of the Commission or any state securities commission for inclusion
of additional information in the Registration Statement, or otherwise,
shall have been complied with to the reasonable satisfaction of the
Representative.
(b) Since the dates as of which information is given in the
Registration Statement: (i) there shall not have occurred any change or
development involving, or which would be reasonably expected to involve, a
Material Adverse Effect, whether or not arising from transactions in the
ordinary course of business; and (ii) the Company shall not have sustained
any material loss or interference from any labor dispute, strike, fire,
flood, windstorm, accident or other calamity (whether or not insured) or
from any court or governmental action, order or decree, the effect of which
on the Company, in any such case described in clause (i) or (ii) above, is,
in the sole discretion of the Representative, so material and adverse as to
-20-
make it impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares on the terms and in the manner contemplated in
the Registration Statement and the Prospectus.
(c) The Representative shall not have been advised that the
Registration Statement or the Prospectus contains an untrue statement of
fact that, in the opinion of the Representative or counsel to the
Underwriters, is material, or omits to state a fact that, in the opinion of
the Representative or such counsel, is material and is required to be
stated therein or necessary to make the statements therein not
misleading.
(d) The Representative shall have received an opinion of Bartlit ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel for the Company, addressed to the
Representative, in its capacity as the Representative of the Underwriters,
and dated the First Closing Date or the Second Closing Date, as the case
may be, to the effect that, subject to customary qualifications and
assumptions:
(i) The Company is validly existing as a corporation and in
good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to own,
lease and operate its properties and conduct its business as
presently conducted and as described in the Prospectus and the
Registration Statement;
(ii) the Company is duly registered and qualified to do business
as a foreign corporation under the laws of, and is in good
standing as such in the States of Ohio and California;
(iii) the authorized capital stock of the Company consists of
150,000,000 shares of Class A Common Stock, par value $0.0001 per
share, and 50,000,000 shares of Class B Common Stock, par value
$0.0001 per share, and 50,000,000 shares of preferred stock, par
value $0.0001 per Share, and all such stock conforms in all
material respects to the descriptions thereof in the Prospectus
and the Registration Statement;
(iv) the issued and outstanding shares of capital stock of the
Company immediately prior to the issuance and sale of the Shares
to be sold by the Company hereunder have been duly authorized and
validly issued, are fully paid and nonassessable, and there are
no preemptive rights to subscribe for or purchase any shares of
capital stock of the Company, and no shares of capital stock of
the Company have been issued in violation of such rights;
(v) to such counsel's knowledge, except for the Subsidiaries,
the Company has no significant subsidiaries, and the Company does
not own any equity interest in or control, directly or
indirectly, any other corporation, limited liability
-21-
company, partnership, joint venture, association, trust or other
business organization except as described in the Prospectus and
the Registration Statement; each Subsidiary is validly existing
in good standing under the laws of its jurisdiction of
incorporation or formation, with full power and authority to own,
lease and operate its properties and to conduct its business as
presently conducted and as described in the Prospectus and the
Registration Statement; Gaiam Catalog, Inc. is duly registered or
qualified to do business as a foreign entity under the laws of,
and is in good standing as such in the State of Ohio; the issued
and outstanding shares of the capital stock or other equity of
each Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable and there are no preemptive rights
to subscribe for or purchase any shares of capital stock of or
other equity interest in any Subsidiary, and no shares of capital
stock or other equity interest of any Subsidiary have been issued
in violation of such rights; the Company owns directly and
beneficially all of the issued and outstanding capital stock or
other equity of each Subsidiary except as otherwise described in
the Registration Statement, free and clear of any and all liens,
claims, encumbrances and security interests except as described
in the Registration Statement;
(vi) the certificates for the Shares to be delivered hereunder
are in due and proper form and conform to the requirements of
applicable law, and, when duly countersigned by the Company's
transfer agent, and delivered to the Representative or upon the
order of the Representative against payment of the agreed
consideration therefor in accordance with the provisions of this
Agreement, the Shares to be sold by the Company represented
thereby will be duly authorized and validly issued, fully paid
and nonassessable, and free of any preemptive rights to subscribe
for or purchase shares of Common Stock;
(vii) the Registration Statement has become effective under the
Act, and, to such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been initiated or are
threatened under the Act or any Blue Sky Laws; the Registration
Statement and the Prospectus and any amendment or supplement
thereto (except for the financial statements and other
statistical or financial data included therein, as to which such
counsel need express no opinion), comply as to form in all
material respects with the requirements of the Act, including
Form S-1 promulgated under the Act;
(viii) the Company has the corporate power and authority to enter
into and perform this Agreement; the performance of the Company's
obligations hereunder and the consummation of the transactions
described herein have been duly authorized by the Company by all
necessary corporate action, and this Agreement has been duly
executed and delivered by and on behalf of the
-22-
Company, and is a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its
terms; no consent, approval, authorization or other order or
decree of any court, regulatory or governmental body, arbitrator,
administrative agency or other instrumentality of the United
States or of the State of Colorado is required for the execution
and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement (except for
compliance with the Act, the Exchange Act, applicable Blue Sky
Laws and the clearance of the underwriting arrangements by the
NASD);
(ix) the execution, delivery and performance of this Agreement
by the Company will not: (A) violate any provisions of the
Articles of Incorporation or By-laws (or equivalents thereto) of
the Company or any Subsidiary; (B) or result in the breach,
modification or termination of, or constitute a default under,
any agreement, lease, franchise, license, indenture, permit,
mortgage, deed of trust, other evidence of indebtedness or other
instrument to which the Company or any Subsidiary is a party or
by which the Company or such Subsidiary, or any of their
respective owned or leased property is bound, and which is filed
as an exhibit to the Registration Statement; or (C) violate any
statute, ordinance, rule, or regulation of any regulatory or
governmental body, or to such counsel's knowledge, any order or
decree of any court, arbitrator, administrative agency or other
instrumentality of the United States or of the State of Colorado
(assuming compliance with all applicable federal and state
securities laws);
(x) to such counsel's knowledge, except as described in the
Prospectus, there are no holders of Common Stock or other
securities of the Company, or securities that are convertible or
exchangeable into Common Stock or other securities of the
Company, that have rights to the registration of such securities;
(xi) the Class A Common Stock (including the Shares) has been
designated for inclusion as a National Market security on The
Nasdaq Stock Market and is registered under the Exchange Act;
(xii) neither the Company nor any Subsidiary is, nor with the
giving of notice or passage of time or both would be, in
violation of its respective Articles of Incorporation or By-laws
(or their equivalents) or, to such counsel's knowledge, in
default in any material respect in the performance of any
agreement, lease, franchise, license, permit, mortgage, deed of
trust, evidence of indebtedness or other instrument, or any other
document in each case that is filed as an exhibit to or
incorporated by reference in the Registration Statement, to which
the Company or any Subsidiary is subject or bound;
-23-
(xii) neither the Company nor any Subsidiary is an "investment
company", an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended
(without regard to the second sentence of Section 3(c)(1) of such
Act insofar as such sentence applies to the status of Synergom,
Inc. as an "affiliated person" with respect to the Company,
and, upon its receipt of any proceeds from the sale of the
Shares, the Company will not become or be deemed to be an
"investment company" thereunder;
(xiv) the description in the Registration Statement and the
Prospectus of legal matters, statutes, documents, regulations,
legal and governmental proceedings, and contracts and other legal
documents described therein fairly and correctly present, in all
material respects, the information required to be included
therein by the Act and fairly summarize the matters referred to
therein;
(xv) nothing has come to such counsel's attention to lead them
to believe that all offers and sales by the Company of its
capital stock before the date hereof were not at all relevant
times duly registered under or were exempt from the registration
requirements of the Act; and
Such opinion may incorporate exclusions and such qualifications reasonably
acceptable to the Representative and may, with respect to paragraphs (iv), (v)
and (xv), be based on written representations and certifications of the Company
and respective offerees and purchasers of Shares. Any written representations
and certifications on which such opinion may rely shall be provided to the
Representative and shall be reasonably acceptable to the Representative.
(e) The Representative shall also have received a letter from Bartlit
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, special counsel for the Company, addressed
to the Representative, in its capacity as the Representative of the
Underwriters, and dated the First Closing Date or the Second Closing Date,
as the case may be, to the effect that (i) no facts have come to the
attention of such counsel which lead it to believe that either the
Registration Statement or the Prospectus or any amendment or supplement
thereto contains any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus, as of
the First Closing Date or the Second Closing Date, as the case may be,
contained any untrue statement of a material fact or omitted or will omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under
which they were made (except for the financial statements and other
financial data included therein, as to which such counsel need express no
opinion), and (ii) without limiting the generality of the foregoing, no
facts have come to the attention of counsel which lead it to believe that
there are legal or governmental proceedings pending or threatened against
the Company, including, without limitation, any such proceedings that are
related to environmental, employee benefit or employment discrimination
matters, required to be described in the Registration Statement or the
Prospectus which are not so described or
-24-
which question the validity of this Agreement or any action taken or to be
taken pursuant to this Agreement, nor is there any transaction,
relationship, agreement, contract or other document of a character required
to be described in the Registration Statement or the Prospectus or to be
filed as an exhibit to or incorporated by reference in the Registration
Statement by the Act, which is not described, filed or incorporated by
reference as required. Such letter may incorporate exclusions and such
qualifications reasonably acceptable to the Representatives.
(f) The Representative shall have received an opinion of ▇▇▇▇▇▇ &
Whitney LLP, counsel to the Underwriters, dated the First Closing Date or
the Second Closing Date, as the case may be, with respect to the issuance
and sale of the Shares by the Company, the Registration Statement and other
related matters as the Representative may require, and the Company shall
have furnished to such counsel such documents and shall have exhibited to
them such papers and records as they request for the purpose of enabling
them to pass upon such matters.
(g) The Representative shall have received on each Closing Date, a
certificate of ▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer, and ▇▇▇▇ ▇▇▇▇▇▇,
President of the Company, to the effect that:
(i) The representations and warranties of the Company set
forth in Section 2 hereof are true and correct as of the date of
this Agreement and as of the date of such certificate, and the
Company has complied in all material respects with all the
agreements and satisfied all the conditions to be performed or
satisfied in all material respects by it at or prior to the date
of such certificate;
(ii) the Commission has not issued an order preventing or
suspending the use of the Prospectus or any Preliminary
Prospectus or any amendment or supplement thereto; no stop order
suspending the effectiveness of the Registration Statement has
been issued; and to the knowledge of the respective signatories,
no proceedings for that purpose have been initiated or are
pending or contemplated under the Act or under the Blue Sky Laws
of any jurisdiction;
(iii) each of the respective signatories has examined the
Registration Statement and the Prospectus, and any amendment or
supplement thereto, including any documents filed under the
Exchange Act and deemed to be incorporated by reference in the
Registration Statement, and such documents contain all statements
required to be stated therein, and do not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and, since the date on which the
Registration Statement was initially filed, no event has occurred
that was required to be set forth in an amended or supplemented
prospectus or in an amendment to the Registration Statement that
has not been so set forth; and
-25-
(iv) since the date on which the Registration Statement was
initially filed with the Commission, there shall not have
occurred any change or development involving, or which could be
expected to involve, a Material Adverse Effect, whether or not
arising from transactions in the ordinary course of business,
except as disclosed in the Prospectus and the Registration
Statement as heretofore amended or as disclosed in an amendment
or supplement thereto filed with the Commission and delivered to
the Representative after the execution of this Agreement; since
such date and except as so disclosed or in the ordinary course of
business, the Company has not incurred any liability or
obligation, direct or indirect, or entered into any transaction
which is material to the Company other than in the ordinary
course of business; since such date and except as so disclosed,
there has not been any change in the outstanding capital stock of
the Company, or any change that is material to the Company in the
short-term debt or long-term debt of the Company; since such date
and except as so disclosed or as contemplated in this Agreement,
the Company has not acquired any of the Common Stock or other
capital stock of the Company nor has the Company declared or paid
any dividend, or made any other distribution, upon its
outstanding Common Stock payable to shareholders of record on a
date prior to such Closing Date; since such date and except as so
disclosed, the Company has not incurred any material contingent
obligations, and no material litigation is pending or threatened
against the Company; and, since such date and except as so
disclosed, the Company has not sustained any material loss or
interference from any strike, fire, flood, windstorm, accident or
other calamity (whether or not insured) or from any court or
governmental action, order or decree.
The delivery of the certificate provided for in this subsection (g)
shall be and constitute a representation and warranty of the Company as to
the facts required in the immediately foregoing clauses (i), (ii), (iii)
and (iv) to be set forth in said certificate.
(h) At the time this Agreement is executed and also on each Closing
Date, there shall be delivered to the Representative a letter addressed to
the Representative, in its capacity as the representative of the
Underwriters, from each of Ernst & Young LLP and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
Associates, P.C., the Company's independent accountants, the first letters
to be dated the date of this Agreement, the second letters to be dated the
First Closing Date and the third letters (if applicable) to be dated the
Second Closing Date, which shall be in form and substance satisfactory to
the Representative and shall contain information as of a date within five
(5) days of the date of such letter. There shall not have been any change
or decrease set forth in any of the letters referred to in this subsection
(g) which makes it impracticable or inadvisable, in the sole discretion of
the Representative, to proceed with the public offering or purchase of the
Shares as contemplated hereby.
(i) The Shares shall have been qualified or registered for sale under
the Blue Sky Laws of such jurisdictions as shall have been specified by the
Representative, the
-26-
underwriting terms and arrangements for the offering shall have been
cleared by the NASD, and the Class A Common Stock (including the Shares)
shall have been designated for inclusion as a Nasdaq National Market
security on the Nasdaq Stock Market and shall have been registered under
the Exchange Act.
(j) Such further certificates and documents as the Representative may
reasonably request (including certificates of officers of the Company).
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to the
Representative and to ▇▇▇▇▇▇ & Whitney LLP, counsel to the Underwriters.
The Company shall furnish the Representative with such manually signed or
conformed copies of such opinions, certificates, letters and documents as
the Representative may reasonably request.
(k) All the Shares being offered by the Company shall be tendered for
delivery in accordance with the terms and provisions of this Agreement.
If any condition to the Underwriters' obligations hereunder to be satisfied
prior to or at either Closing Date is not so satisfied, this Agreement at the
election of the Representative will terminate upon notification to the Company,
without liability on the part of any Underwriter, including the Representative
or the Company, except for the provisions of Section 6(n) hereof, the expenses
to be paid or reimbursed by the Company pursuant to Section 7 hereof and except
to the extent provided in Section 10 hereof.
SECTION 9. MAINTAIN EFFECTIVENESS OF REGISTRATION STATEMENT. The Company
------------------------------------------------
will use its best efforts to prevent the issuance of any stop order suspending
the effectiveness of the Registration Statement, and, if such stop order is
issued, to obtain as soon as possible the lifting and permanent suspension or
termination thereof.
SECTION 10. INDEMNIFICATION.
---------------
(a) The Company, subject to the last paragraph of this Section 10,
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, from and against any losses, claims, damages, expenses,
liabilities or actions in respect thereof ("Claims"), joint or several, to
which such Underwriter or each such controlling person may become subject
under the Act, the Exchange Act, Blue Sky Laws or other federal or state
statutory laws or regulations, at common law or otherwise (including
payments made in settlement of any litigation), insofar as such Claims
arise out of or are based upon any breach of any representation, warranty
or covenant made by the Company in this Agreement, or any untrue statement
or alleged untrue statement of any material fact contained in the
Registration Statement, the Prospectus or any amendment or supplement
thereto, or in any application filed with Nasdaq or under any Blue Sky Law
or other document executed by the Company for that purpose or based upon
written information furnished by the Company and filed in any state or
other jurisdiction to qualify any or all of the Shares under the securities
laws
-27-
thereof (any such document, application or information being hereinafter
called a "Blue Sky Application") or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arise out of establishment of the administrative or "back
office" practices, procedures and policies enacted by the Underwriters, or
the implementation thereof, in order to facilitate the preferential
allocation of shares to customers of the Company described in Section 1 of
this Agreement (other than the negligent establishment or implementation of
such practices, procedures or policies, for which the Underwriters shall
not be entitled to indemnification under this Section 9(a)). The Company,
subject to the last paragraph of this Section 10, agrees to reimburse each
Underwriter and each such controlling person for any legal fees or other
expenses incurred by such Underwriter or any such controlling person in
connection with investigating, defending or settling any such Claim;
provided, however, that the Company will not be liable in any such case to
the extent that any such Claim arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in the Registration Statement, any Preliminary Prospectus, the Prospectus
or supplement thereto or in any Blue Sky Application in reliance upon and
in conformity with the written information furnished to the Company by the
Underwriters pursuant to Section 4 of this Agreement. The indemnification
obligations of the Company as provided above are in addition to and in no
way limit any liabilities the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company, each of its directors and each of its officers
who signs the Registration Statement, and each person, if any, who controls
the Company within the meaning of the Act or the Exchange Act against any
Claim to which the Company, or any such director, officer, controlling
person may become subject under the Act, the Exchange Act, Blue Sky Laws or
other federal or state statutory laws or regulations, at common law or
otherwise (including payments made in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter and the
Representative), insofar as such Claim arises out of or is based upon any
untrue or alleged untrue statement of any material fact contained in the
Registration Statement, the Prospectus, or any amendment or supplement
thereto, or in any Blue Sky Application, or arises out of or is based upon
any untrue or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus, or any amendment or supplement
thereto, or in any Blue Sky Application, or arises out of or is based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application, in
reliance solely upon and in conformity with the information set forth in
the Registration Statement on the front cover of the Prospectus and under
the caption "Underwriting," which is the only written information furnished
by the Representative to the Company pursuant to Section 4 of this
Agreement. Each Underwriter will severally reimburse any legal fees or
other expenses incurred by the Company, or any such director, officer or
controlling person in connection
-28-
with investigating or defending any such Claim, and from any and all Claims
solely resulting from failure of an Underwriter to deliver a Prospectus, if
the person asserting such Claim purchased Shares from such Underwriter and
a copy of the Prospectus (as then amended if the Company shall have
furnished any amendments thereto) was not sent or given by or on behalf of
such Underwriter to such person, at or prior to the written confirmation of
the sale of the Shares to such person, and if the Prospectus (as so
amended) would have cured the defect giving rise to such Claim. The
indemnification obligations of each Underwriter as provided above are in
addition to any liabilities any such Underwriter may otherwise have.
Notwithstanding the provisions of this section, no Underwriter shall be
required to indemnify or reimburse the Company, or any officer, director or
controlling person in an aggregate 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 been
otherwise required to pay.
(c) Promptly after receipt by an indemnified party under this section
of notice of the commencement of any action in respect of a Claim, such
indemnified party will, if a Claim in respect thereof is to be made against
an indemnifying party under this section, notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve an indemnifying party from any
liability it may have to any indemnified party under this section or
otherwise, except to the extent that the failure to so notify the
indemnifying party causes such party prejudice. In case any such action is
brought against any indemnified party, and such indemnified party notifies
an indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate in and, to the extent that he, she or it
may wish, jointly with all other indemnifying parties, similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and any indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to the indemnified party and/or other indemnified
parties which are different from or additional to those available to any
indemnifying party, the indemnified party or parties shall have the right
to select one 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.
(d) Upon receipt of notice from the indemnifying party to such
indemnified party of the indemnifying party's election to assume the
defense of such action and upon approval by the indemnified party of
counsel selected by the indemnifying party, the indemnifying party will not
be liable to such indemnified party under this section for any legal fees
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 connection with the assumption of legal defenses in accordance
with the proviso to the last sentence of subsection (e) of this
section (it being understood, however, that the indemnifying
party shall not be liable for the legal fees and expenses of more
-29-
than one separate counsel, approved by the Representative, if one
or more of the Underwriters or their controlling persons are the
indemnified parties);
(ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the indemnified
party's notice to the indemnifying party of commencement of the
action; or
(iii) the indemnifying party has authorized the employment of
counsel at the expense of the indemnifying party.
(e) If the indemnification provided for in this section is
unavailable to an indemnified party under subsection (a) or (b) hereof in
respect of any Claim referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall, subject to the
limitations hereinafter set forth, contribute to the amount paid or payable
by such indemnified party as a result of such Claim:
(i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Underwriters
from the offering of the Shares; or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause
(i) above, but also the relative fault of the Company and the
Underwriters in connection with the statements or omissions which
resulted in such Claim, as well as any other relevant equitable
considerations.
The relative benefits received by each of the Company and the
Underwriters shall be deemed to be in such proportion so that the
Underwriters are responsible for that portion represented by the percentage
that the amount of the underwriting discounts and commissions per share
appearing on the cover page of the Prospectus bears to the public offering
price per share appearing thereon, and the Company is responsible for the
remaining portion. The relative fault of the Company and the Underwriters
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The amount paid or payable by a party as a result of the
Claims referred to above shall be deemed to include, subject to the
limitations set forth in subsections (c) and (d) of this section, any legal
or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim.
(f) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this section were determined by
pro rata or per capita allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method
-30-
or allocation which does not take into account the equitable considerations
referred to in subsection (e) of this section. Notwithstanding the other
provisions of this section, 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 been otherwise required to pay. No
person guilty of fraudulent misrepresentation (within the meaning of
section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this section are several in
proportion to their respective underwriting commitments and not joint.
SECTION 11. DEFAULT OF UNDERWRITERS. It shall be a condition to the
-----------------------
obligations of each Underwriter to purchase the Shares in the manner as
described herein, that, except as hereinafter provided in this section, each of
the Underwriters shall purchase and pay for all the Shares agreed to be
purchased by such Underwriter hereunder upon tender to the Representative of all
such Shares in accordance with the terms hereof. If any Underwriter or
Underwriters default in their obligations to purchase Shares hereunder on either
the First Closing Date or the Second Closing Date and the aggregate number of
Shares which such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed ten percent (10%) of the total number of Shares which
the Underwriters are obligated to purchase on such Closing Date, the
Representative may make arrangements for the purchase of such Shares by other
persons, including any of the Underwriters, but if no such arrangements are made
by such Closing Date the nondefaulting Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Shares which such defaulting Underwriters agreed but failed to purchase on
such Closing Date. If any Underwriter or Underwriters so default and the
aggregate number of Shares with respect to which such default or defaults occur
is greater than ten percent (10%) of the total number of Shares which the
Underwriters are obligated to purchase on such Closing Date, and arrangements
satisfactory to the Representative for the purchase of such Shares by other
persons are not made within thirty-six (36) hours after such default, this
Agreement will terminate without liability on the part of any nondefaulting
Underwriter and the Company except to the extent provided in section 10 hereof.
In the event that Shares to which a default relates are to be purchased by
the nondefaulting Underwriters or by another party or parties, the
Representative shall have the right to postpone the First Closing Date or the
Second Closing Date, as the case may be, for not more than seven (7) business
days in order that the necessary changes in the Registration Statement,
Prospectus and any other documents, as well as any other arrangements, may be
effected. As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this section. Nothing herein will relieve a
defaulting Underwriter from liability for its default.
SECTION 12. EFFECTIVE DATE. This Agreement shall become effective the
--------------
date and time that this Agreement is executed and delivered by the parties
hereto.
SECTION 13. TERMINATION
-----------
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(a) This Agreement may be terminated by the Representative by notice
to the Company in the event the Company shall have failed or been unable to
comply with any of the terms, conditions, representations, warranties,
covenants or other provisions of this Agreement on the part of the Company
to be performed, complied with or fulfilled within the respective times
herein provided for, unless compliance therewith or performance or
satisfaction thereof shall have been expressly waived by the Representative
in writing.
(b) This Agreement may be terminated by the Representative by notice
to the Company at any time if payment for and delivery of the Shares is
rendered impracticable or inadvisable because of: (a) material adverse
changes in the Company's business, business prospects, management,
earnings, properties or financial condition; (b) any action, suit or
proceedings, threatened or pending, at law or equity against the Company,
or by any federal, state or other commissions, board or agency wherein any
unfavorable result or decision could materially adversely affect the
business, business prospects, properties, financial condition, income or
earnings of the Company; (c) additional material governmental restrictions
not in force and effect on the date hereof shall have been imposed upon the
trading in securities generally, or minimum or maximum prices shall have
been generally established on a registered securities exchange, or trading
in securities generally on any such exchange shall have been suspended, or
a general moratorium shall have been established by federal or state
authorities; (d) substantial and material changes in the condition of the
market beyond normal fluctuations are such that it would be undesirable,
impracticable or inadvisable to proceed with this Agreement or with the
offering; (e) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the
judgment of the Representative, the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the
Shares; (f) The Nasdaq Stock Market notifies the Company that the Shares
will not be listed for trading on The Nasdaq National Market as required
under this Agreement; or (g) any suspension of trading in the Class A
Common Stock of the Company in the over-the-counter market or the
interruption or termination of quotations of the Shares on the NASDAQ
System.
(c) Any termination of this Agreement under Section 13(a) or (b)
shall be without liability of any nature whatsoever (including, but not
limited to, loss of anticipated profits or consequential damages) on the
part of either party hereto, except that the Company shall remain obligated
to pay the costs and expenses provided to be paid or reimbursed by the
Company pursuant to Section 7 hereof; and the Company and the
Representative shall be obligated to pay, respectively, all losses, claims,
demands, liabilities and expenses under Section 10.
(d) It is understood that the Company and the Representative will
each advise the other party immediately and confirm in writing the receipt
of any threat of or the initiation of any steps or procedures which would
impair or prevent the right to offer any of the
-32-
Company's Shares or the issuance of any "suspension orders" or other
prohibitions preventing or impairing the proposed offering by the
Commission or other regulatory authority.
SECTION 14. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
---------------------------------------------------
respective indemnities, agreements, representations, warranties, covenants and
other statements of the Company, of its officers or directors and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or the Company or any of its or their partners, officers, directors
or any controlling person, as the case may be, and will survive delivery of and
payment for the Shares sold hereunder.
SECTION 15. NOTICES. All notices, demands or requests required or
-------
authorized hereunder shall only be deemed given sufficiently if in writing and
hand delivered by messenger or courier service or sent by registered mail or
certified mail, return receipt requested and postage prepaid, in the case of the
Representative:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Gull
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Managing Director
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
and, in the case of the Company:
Gaiam, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, President
with a copy to:
Bartlit ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
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Any such notice shall be deemed effectively given on the earlier of the
date of actual receipt or the second business day after delivered, telecopied,
or deposit of the notice with the United States Postal Service.
SECTION 16. SUCCESSORS. This Agreement will inure to the benefit of and
----------
be binding upon the parties hereto and their respective successors, personal
representative and assigns, and to the benefit of the officers and directors and
controlling persons referred to in Section 12 hereof and no other person will
have any right or obligation hereunder. The term "successors" shall not include
any purchaser of the Shares as such from any of the Underwriters merely by
reason of such purchase.
SECTION 17. PARTIAL UNENFORCEABILITY. If any section, paragraph, clause
------------------------
or provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph clause or provision hereof.
SECTION 18. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be
----------------------------
governed by and construed in accordance with the internal laws of the State of
New York without reference to conflict of law principles thereunder. This
Agreement may be signed in various counterparts which together shall constitute
one and the same instrument, and shall be effective when at least one
counterpart hereof shall have been executed by or on behalf of each party
hereto.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters, including the Representative, all in accordance with its terms.
Very truly yours,
GAIAM, INC.
By:
-----------------------------------
Its:
-----------------------------------
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ GULL
Acting as Representative of the several Underwriters (including themselves)
identified in Schedule I annexed hereto.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ GULL
By:
--------------------------------
Authorized Representative
Date:
--------------------------------
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GAIAM, INC.
Schedule I
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Name of Underwriter Number of Firm Shares to be Purchased
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Gull
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Incorporated
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc.
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Total
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GAIAM, INC.
Schedule II
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Name of Shareholder Number of Shares Owned
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