FIRSTLINK COMMUNICATIONS, INC.
1,400,000 UNITS
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE COMMON STOCK PURCHASE WARRANT
UNDERWRITING AGREEMENT
, 1998
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Securities Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs:
Firstlink Communications, Inc., an Oregon corporation (the "Company"),
hereby confirms its agreement with ▇▇▇▇▇▇▇ Davidson Securities Corporation and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates, Inc. (the "Underwriters"), as follows:
I. DESCRIPTION OF THE SECURITIES.
The Company proposes to issue and sell to the Underwriters 1,400,000
units (the "Units"), each unit consisting of one share the Company's common
stock, no par value per share (the "Common Stock"), and one Common Stock
purchase warrant (each, a "Warrant," and collectively, the "Warrants"). Two
Warrants shall entitle to the holder to purchase one share of Common Stock for
$___. The Units, and the Common Stock and Warrants underlying the Units,
collectively, are referred to herein as the "Securities." The Company proposes
to grant to the Underwriters an option to purchase up to 210,000 additional
Units (the "Additional Securities"). offering of Securities and Additional
Securities contemplated hereby may sometimes be referred to as the "Offering."
(a) THE WARRANTS.
The Warrants are exercisable for a period of three years
commencing on the effective date of the Registration Statement, as defined in
Paragraph 2(a) (the "Effective Date"), subject to prior redemption by the
Company. The Warrants will be exercisable at $____ per share
of Common Stock. The shares of Common Stock issuable upon the exercise of the
Warrants are hereinafter referred to as the "Warrant Shares."
The Warrants will be redeemable by the Company at any time after the
Effective Date at a price of $.05 per Warrant and prior to their expiration upon
written notice given within 30 days after 20 consecutive business days ending on
the third day prior to the date the notice of redemption is given during which
the Common Stock maintains a per share closing bid price (or closing sales price
if listed on an exchange or on a reporting system that provides last sales
prices) at least equal to 150% of the then current Warrant exercise price
(initially $___ per share, subject to adjustment), subject to the right of the
holder to exercise his purchase rights thereunder until redemption.
(b) UNDERWRITERS' SECURITIES.
The Company will sell to the Underwriters, for nominal
consideration, a warrant to purchase 140,000 Units at a price of 140% the public
offering price of the Units, exercisable over a period of four years commencing
one year from the Effective Date (the "Underwriters' Warrants," and collectively
with the Securities underlying the Underwriters' Warrants, the "Underwriters'
Securities"). The Underwriters' Securities shall be non-exercisable and
non-transferable (other than to officers and directors of the Underwriters and
to members of the selling group) for a period of 12 months following the
Effective Date. If the Underwriters' Securities are not exercised during their
term, they shall, by their terms, automatically expire. The Underwriters'
Securities shall be registered for sale to the public and shall be included in
the Registration Statement filed in connection with the Offering.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission"), a registration statement on Form SB-2 (File No.
33- _________), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities under the Securities Act of
1933 (the "Act"). The Company will file further amendments to said registration
statement in the form to be delivered to you and will not, before the
registration statement becomes effective, file any other amendment thereto to
which you shall have objected in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
exhibits and all other documents filed as a part thereof or incorporated
therein), is hereinafter called the "Registration Statement," and the
prospectus, in the form filed with the Commission pursuant to Rule 424(b) of the
General Rules and Regulations of the Commission under the Act (the
"Regulations") or, if no such filing is made, the definitive prospectus used in
the Offering, is hereinafter called the "Prospectus." The Company has delivered
to you copies of each Preliminary
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Prospectus as filed with the Commission and has consented to the use of such
copies for purposes permitted by the Act.
(b) The Commission has not issued any orders preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
Act and has not included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, subject to the provisions set forth below and to except as such
omission has been cured in the a subsequent preliminary prospectus or in the
final prospectus.
(c) When the Registration Statement becomes effective under the
Act and at all times subsequent thereto including the Closing Date (hereinafter
defined) and the Option Closing Date (hereinafter defined) and for such longer
periods as in the opinion of counsel for the Underwriters, a Prospectus is
required to be delivered in connection with the sale of the Securities by the
Underwriters, the Registration Statement and Prospectus, and any amendment
thereof or supplement thereto, will contain all material statements which are
required to be stated therein in accordance with the Act and the Regulations,
and will in all material respects conform to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements or omissions made in
reliance upon and in conformity with written information furnished to the
Company by you, for use in connection with the preparation of the Registration
Statement or Prospectus, or in any amendment thereof or supplement thereto. It
is understood that the statements set forth under the heading "Underwriting" in
the Prospectus with respect to (i) the amounts of the selling concession and
reallowance; (ii) the identity of counsel to the Underwriters under the heading
"Legal Matters"; and (iii) the information concerning the NASD affiliation of
the Underwriters.
(d) The Company is, and at the Closing Date and the Option
Closing Date will be, a corporation duly organized, validly existing and in good
standing under the laws of the State of Oregon. The Company is duly qualified or
licensed and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of any properties or the character of its
operations requires such qualification or licensing, except those jurisdictions
in which the failure to so qualify would not have a material adverse effect.
The Company has all requisite corporate powers and authority, and except as set
forth in the Registration Statement the Company and its employees have all
material and necessary authorizations, approvals, orders, licenses, certificates
and permits of and from all governmental regulatory officials and bodies to own
or lease the Company's properties and conduct its business as described in the
Prospectus and the Company is doing business and has been doing business during
the period described in the Registration Statement in compliance with all such
material authorizations, approvals, orders, licenses, certificates and permits
and all material federal, state and local laws, rules and regulations
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concerning the business in which the Company is engaged. The disclosures in the
Registration Statement concerning the effects of federal, state and local
regulation on the Company's business as currently conducted and as contemplated
are correct in all material respects and do not omit to state a material fact.
The Company has all corporate power and authority to enter into this Agreement
and carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained or will have been obtained prior to the Closing Date.
(e) This Agreement has been duly and validly authorized and
executed by the Company. The Securities (including the Units, Common Stock and
the Warrants), the Warrant Shares, the Underwriters' Warrants to be issued and
sold by the Company pursuant to this Agreement, the securities issuable upon
exercise of the Underwriters' Warrants and payment therefor, and the Common
Stock and Warrant Shares underlying such Underwriters' Warrants, have been duly
authorized (and, in the case of the Common Stock and the Warrant Shares, have
been duly reserved for issuance) and, when issued and paid for in accordance
with this Agreement (and, in the case of the Warrant Shares, upon exercise of
the Warrants and payment to the Company of the exercise price therefor), the
Common Stock and Warrant Shares will be validly issued, fully paid and
non-assessable; the Common Stock, Warrants, Warrant Shares, Underwriters'
Warrants, Additional Securities and Underwriters' Warrants Shares are not and
will not be subject to the preemptive rights of any stockholder of the Company
and conform and at all times up to and including their issuance will conform in
all material respects to all statements with regard thereto contained in the
Registration Statement and Prospectus; and all corporate action required to be
taken for the authorization, issuance and sale of the Units and the Common Stock
and Warrants underlying the Units, Warrant Shares and Underwriters' Warrants has
been taken, and this Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, to issue and sell, upon
exercise in accordance with the terms thereof, the number and kind of securities
called for thereby.
(f) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
the Articles of Incorporation, as amended, or bylaws of the Company or of any
evidence of indebtedness, lease, contract or other agreement or instrument to
which the Company is a party or by which the Company or any of its properties is
bound, or under any applicable law, rule, regulation, judgment, order or decree
of any government, professional advisory body, administrative agency or court,
domestic or foreign, having jurisdiction over the Company or its properties, or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the properties or assets of the Company; and no consent, approval,
authorization or order of any court or governmental or other regulatory agency
or body is required for the consummation by the Company of the transactions on
its part herein contemplated, except as such as may be required under the Act or
under state securities or blue sky laws, except where a breach, violation or
failure to obtain such consent would not have a material adverse effect upon the
business or operation of the Company.
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(g) Subsequent to the date hereof, and prior to the Closing Date
and the Option Closing Date, the Company will not issue or acquire any equity
securities except that the Company may make short-term investments as
contemplated in the "Use of Proceeds" section of the Prospectus. Except as
described in the Registration Statement, the Company does not have, and at the
Closing Date and at the Option Closing Date will not have, outstanding any
options to purchase or rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue or sell
shares of its Preferred Stock, Common Stock or any such options, warrants,
convertible securities or obligations.
(h) The financial statements and notes thereto included in the
Registration Statement and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved.
(i) Except as set forth in the Registration Statement, the
Company is not, and at the Closing Date and at the Option Closing Date will not
be, in violation or breach of, or default in, the due performance and observance
of any term, covenant or condition of any indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or instrument evidencing
an obligation for borrowed money, or any other agreement or instrument to which
the Company is a party or by which the Company may be bound or to which any of
the property or assets of the Company is subject, which violations, breaches,
default or defaults, singularly or in the aggregate, would have a material
adverse effect on the Company. The Company has not and will not have taken any
action in material violation of the provisions of the Articles of Incorporation,
as amended, or the Bylaws of the Company or any statute or any order, rule or
regulation of any court or regulatory authority or governmental body having
jurisdiction over or application to the Company, its business or properties.
(j) The Company has, and at the Closing Date and at the Option
Closing Date will have, good and marketable title to all properties and assets
described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances, claims, security interests, restrictions and defects of
any material nature whatsoever, except such as are described or referred to in
the Prospectus and liens for taxes not yet due and payable. All of the material
leases and subleases under which the Company is the lessor or sublessor of
properties or assets or under which the Company holds properties or assets as
lessee as described in the Prospectus are, and will on the Closing Date and the
Option Closing Date be, in full force and effect, and except as described in the
Prospectus, the Company is not and will not be in default in respect to any of
the terms or provisions of any of such leases or subleases (which would have a
material adverse effect on the business, business prospects or operations of the
Company taken as a whole), and no claim has been asserted by anyone adverse to
rights of the Company as lessor, sublessor, lessee or sublessee under any of the
leases or subleases mentioned above, or affecting or questioning the right of
the Company to continue possession of the leased or subleased premises or assets
under any such lease or sublease except as described or referred to in the
Prospectus, and the Company owns or leases all such
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properties as are necessary to its operations as now conducted and, except as
otherwise stated in the Prospectus, as proposed to be conducted set forth in the
Prospectus (which would have a material adverse effect on the business, business
prospects or operations of the Company taken as a whole).
(k) The authorized, issued and outstanding capital stock of the
Company as of ___________, 1998 and as of the date of the Prospectus is as set
forth in the Prospectus under "Capitalization;" the shares of issued and
outstanding capital stock of the Company set forth thereunder have been duly
authorized, validly issued and are fully paid and non-assessable; except as set
forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company have
been granted or entered into by the Company; and the Units and the Common Stock
and the Warrants underlying the Units, and all such options and warrants
conform in all material respects, to all statements relating thereto contained
in the Registration Statement and Prospectus.
(l) Except as described in the Prospectus, the Company does not
own or control any capital stock or securities of, or have any proprietary
interest in, or otherwise participate in any other corporation, partnership,
joint venture, firm, association or business organization; provided, however,
that this provision shall not be applicable to the investment, if any, of the
net proceeds from the sale of the Securities sold by the Company in certificates
of deposits, savings deposits, short-term obligations of the United States
Government, money market instruments or other short-term investments.
(m) KPMG Peat Marwick, LLP, who have reported on the financial
statements of the Company for the years ended December 31, 1997 and 1996, and
who have reviewed the financial statements of the Company for the periods ended
March 31, 1998 and 1997 all of which are filed with the Commission as a part of
the Registration Statement, are independent accountants as required by the Act
and the Regulations.
(n) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money; or (ii) entered into any transaction other than
in the ordinary course of business; or (iii) declared or paid any dividend or
made any other distribution on or in respect to its capital stock.
(o) There is no litigation or governmental proceeding pending or
to the knowledge of the Company threatened against, or involving the properties
or business of the Company which might materially adversely affect the value,
assets or the operation of the properties or the business of the Company, except
as referred to in the Prospectus. Further, except as referred to in the
Prospectus, there are no pending actions, suits or proceedings related to
environmental matters or related to discrimination on the basis of age, sex,
religion or race, nor is the Company charged with or, to its knowledge, under
investigation with respect to any violation of any statutes
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or regulations of any regulatory authority having jurisdiction over its business
or operations, and no labor disturbances by the employees of the Company exist
or, to the knowledge of the Company, have been threatened.
(p) The Company has, and at the Closing Date and at the Option
Closing Date will have, filed all necessary federal, state and foreign income
and franchise tax returns or has requested extensions thereof (except in any
case where the failure to so file would not have a material adverse effect on
the Company), and has paid all taxes which it believes in good faith were
required to be paid by it except for any such tax that currently is being
contested in good faith or as described in the Prospectus.
(q) The Company has not at any time (i) made any contribution to
any candidate for political office, or failed to disclose fully any such
contribution, in violation of law, or (ii) made any payment to any state,
federal, foreign governmental or professional regulatory agency, officer or
official or other person charged with similar public, quasi-public or
professional regulatory duties, other than payments or contributions required or
allowed by applicable law.
(r) Except as set forth in the Registration Statement, to the
knowledge of the Company, neither the Company nor any officer, director,
employee or agent of the Company has made any payment or transfer of any funds
or assets of the Company or conferred any personal benefit by use of the
Company's assets or received any funds, assets or personal benefit in violation
of any law, rule or regulation, which is required to be stated in the
Registration Statement or necessary to make the statements therein not
misleading.
(s) On the Closing Date and on the Option Closing Date, all
transfer or other taxes, if any (other than income tax) which are required to be
paid, and are due and payable, in connection with the sale and transfer of the
Securities by the Company to the Underwriters will have been fully paid or
provided for by the Company as the case may be, and all laws imposing such taxes
will have been fully complied with in all material respects.
(t) There are no contracts or other documents of the Company
which are of a character required to be described in the Registration Statement
or Prospectus or filed as exhibits to the Registration Statement which have not
been so described or filed.
(u) The Company will apply the net proceeds from the sale of the
Securities sold by it for the purposes and in the manner set forth in the
Registration Statement and Prospectus under the heading "Use of Proceeds."
(v) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (1) transactions are
executed in accordance with management's general or specified authorizations;
(2) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (3) access to assets is permitted only in
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accordance with management's general or specific authorizations; and (4) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(w) Except as set forth in the Prospectus, no holder of any
securities of the Company has the right to require registration of any
securities because of the filing or effectiveness of the Registration Statement.
(x) The Company has not taken and at the Closing Date will not
have taken, directly or indirectly, any action designed to cause or result in,
or which has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of the Units, or the Common Stock
or the Warrants underlying the Units, to facilitate the sale or resale of such
securities.
(y) To the Company's knowledge, there are no claims for services
in the nature of a finder's origination fee with respect to the sale of the
Securities hereunder, except as set forth in the Prospectus.
(z) No right of first refusal exists with respect to any sale of
securities by the Company.
(aa) No statement, representation, warranty or covenant made by
the Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to Underwriters was, when made, or as of the
Closing Date or as of the Option Closing Date will be materially inaccurate,
untrue or incorrect.
3. COVENANTS OF THE COMPANY.
The Company covenants and agrees that:
(a) It will deliver to the Underwriters, without charge, two
conformed copies of each Registration Statement and of each amendment or
supplement thereto, including all financial statements and exhibits.
(b) The Company has delivered to the Underwriters, and each of
the Selected Dealers (as hereinafter defined) without charge, as many copies as
have been requested of each Preliminary Prospectus heretofore filed with the
Commission in accordance with and pursuant to the Commission's Rule 430 under
the Act and will deliver to the Underwriters and to others whose names and
addresses are furnished by the Underwriters or a Selected Dealer, without
charge, on the Effective Date of the Registration Statement, and thereafter from
time to time during such reasonable period as you may request if, in the opinion
of counsel for the Underwriters, the Prospectus is required by law to be
delivered in connection with sales by the Underwriters or a dealer, as many
copies of the Prospectus (and, in the event of any amendment of or supplement to
the Prospectus,
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of such amended or supplemented Prospectus) as the Underwriters may request for
the purposes contemplated by the Act. The Company will take all necessary
actions to furnish to whomever directed by the Underwriters, when and as
requested by the Underwriters, all necessary documents, exhibits, information,
applications, instruments and papers as may be reasonably required or, in the
opinion of counsel to the Underwriters desirable, in order to permit or
facilitate the sale of the Securities.
(c) The Company has authorized the Underwriters to use, and make
available for use by prospective dealers, the Preliminary Prospectus, and
authorizes the Underwriters, all dealers selected by you in connection with the
distribution of the Securities (the "Selected Dealers") to be purchased by the
Underwriters and all dealers to whom any of such Securities may be sold by the
Underwriters or by any Selected Dealer, to use the Prospectus, as from time to
time amended or supplemented, in connection with the sale of the Securities in
accordance with the applicable provisions of the Act, the applicable Regulations
and applicable state law, until completion of the distribution of the Securities
and for such longer period as you may request if the Prospectus is required
under the Act, the applicable Regulations or applicable state law to be
delivered in connection with sales of the Securities by the Underwriters or the
Selected Dealers.
(d) The Company will use its best efforts to cause the
Registration Statement to become effective and will notify the Representative
immediately, and confirm the notice in writing: (i) when the Registration
Statement or any post-effective amendment thereto becomes effective; (ii) of
the issuance by the Commission of any stop order or of the initiation, or to
the best of the Company's knowledge, the threatening, of any proceedings for
that purpose; (iii) the suspension of the qualification of the Securities and
the Underwriters' Warrants, or underlying securities, for offering or sale in
any jurisdiction or of the initiating, or to the best of the Company's
knowledge the threatening, of any proceeding for that purpose; and (iv) of
the receipt of any comments from the Commission. If the Commission shall
enter a stop order at any time, the Company will make every reasonable effort
to obtain the lifting of such order at the earliest possible moment.
(e) During the time when a prospectus is required to be
delivered under the Act, the Company will comply with all requirements
imposed upon it by the Act and the Securities Exchange Act of 1934 (the
"Exchange Act"), as now and hereafter amended and by the Regulations, as from
time to time in force, as necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriters, the Prospectus as then amended or supplemented includes an
untrue statement of a material fact or omits 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 amend the Prospectus to comply with the
Act, the Company will notify you promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section
10 of the Act and will furnish to you copies thereof.
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(f) The Company will endeavor in good faith, in cooperation with
you, at or prior to the time the Registration Statement becomes effective, to
qualify the Securities for offering and sale under the securities laws or blue
sky laws of such jurisdictions as you may reasonably designate. In each
jurisdiction where such qualification shall be effected, the Company will,
unless you agree that such action is not at the time necessary or advisable,
file and make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction.
(g) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than the first day of the
fifteenth full calendar month following the Effective Date of the Registration
Statement, an earnings statement of the Company, which will be in reasonable
detail but which need not be audited, covering a period of at least twelve
months beginning after the Effective Date of the Registration Statement, which
earnings statements shall satisfy the requirements of Section 11(a) of the Act
and the Regulations as then in effect. The Company may discharge this
obligation in accordance with Rule 158 of the Regulations.
(h) During the period of five years commencing on the Effective
Date of the Registration Statement, the Company will furnish to its stockholders
an annual report (including financial statements audited by its independent
public accountants), in reasonable detail, and, at its expense, furnish each of
the Underwriters (i) within 90 days after the end of each fiscal year of the
Company, a consolidated balance sheet of the Company and its consolidated
subsidiaries and a separate balance sheet of each subsidiary of the Company the
accounts of which are not included in such consolidated balance sheet as of the
end of such fiscal year, and consolidated statements of operations,
stockholder's equity and cash flows of the Company and its consolidated
subsidiaries and separate statements of operations, stockholder's equity and
cash flows of each of the subsidiaries of the Company the accounts of which are
not included in such consolidated statements, for the fiscal year then ended all
in reasonable detail and all certified by independent accountants (within the
meaning of the Act and the Regulations), (ii) within 45 days after the end of
each of the first three fiscal quarters of each fiscal year, similar balance
sheets as of the end of such fiscal quarter and similar statements of
operations, stockholder's equity and cash flows for the fiscal quarter then
ended, all in reasonable detail, and subject to year end adjustment, all
certified by the Company's principal financial officer or the Company's
principal accounting officer as having been prepared in accordance with
generally accepted accounting principles applied on a consistent basis, (iii) as
soon as available, each report furnished to or filed with the Commission or any
securities exchange and each report and financial statement furnished to the
Company's shareholders generally and (iv) as soon as available, such other
material as the Underwriters may from time to time reasonably request regarding
the financial condition and operations of the Company.
(i) For a period of eighteen months from the Closing Date, the
Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit), the Company's financial statements
for each of the first three quarters prior to the announcement of quarterly
financial information, the filing of the Company's 10-Q quarterly report and the
mailing of quarterly financial information to stockholders.
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(j) Prior to the Closing Date or the Option Closing Date, the
Company will not issue, directly or indirectly, without your prior written
consent and that of counsel for the Underwriters, any press release or other
public announcement or hold any press conference with respect to the Company or
its activities with respect to this Offering.
(k) The Company will deliver to you prior to filing, any
amendment or supplement to the Registration Statement or Prospectus proposed to
be filed after the Effective Date of the Registration Statement and will not
file any such amendment or supplement to which you shall reasonably object after
being furnished such copy.
(l) During the period of 120 days commencing on the date hereof,
the Company will not at any time take, directly or indirectly, any action
designed to, or which will constitute or which might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Securities
to facilitate the sale or resale of any of the Securities.
(m) The Company will apply the net proceeds from the Offering
received by it in the manner set forth under "Use of Proceeds" in the
Prospectus. For a period of three years from the Closing, the Company will not
make any loans or engage in any transactions with any officer, director or
shareholder of the Company, or any person, corporation or other entity
affiliated with such persons, without the approval of the independent Audit
Committee.
(n) Counsel for the Company, the Company's accountants, and the
officers and directors of the Company will, respectively, furnish the opinions,
the letters and the certificates referred to in subsections of Paragraph 9
hereof, and, in the event that the Company shall file any amendment to the
Registration Statement relating to the offering of the Securities or any
amendment or supplement to the Prospectus relating to the offering of the
Securities subsequent to the Effective Date of the Registration Statement, such
counsel, such accountants, such officers and directors, respectively, will, at
the time of such filing or at such subsequent time as you shall specify, so long
as securities being registered by such amendment or supplement are being
underwritten by the Underwriters, furnish to you such opinions, letters and
certificates, each dated the date of its delivery, of the same nature as the
opinions, the letters and the certificates referred to in said Paragraphs 9, as
you may reasonably request, or, if any such opinion or letter or certificate
cannot be furnished by reason of the fact that such counsel or such accountants
or any such officer or director believes that the same would be inaccurate, such
counsel or such accountants or such officer or director will furnish an accurate
opinion or letter or certificate with respect to the same subject matter.
(o) The Company will comply with all of the provisions of any
undertakings contained in the Registration Statement in all material respects.
(p) The Company will reserve and keep available for issuance
that maximum number of its authorized but unissued shares of Common Stock which
are issuable upon
11
exercise of the Warrants and issuable upon exercise of the Underwriters'
Warrants (including the underlying securities) outstanding from time to time.
(q) Following the Effective Date, and from time to time
thereafter, so long as the Warrants are outstanding, the Company will timely
prepare and file at its sole cost and expense one or more post-effective
amendments to the Registration Statement or a new registration statement as
required by law as will permit Warrant holders to be furnished with a current
prospectus in the event Warrants are exercised, and to use its best efforts and
due diligence to have same be declared effective. The Company will deliver a
draft of each such post-effective amendment or new registration statement to the
Underwriters at least ten days prior to the filing of such post-effective
amendment or registration statement.
(r) Twelve months following the Effective Date and from time to
time thereafter so long as any of the Warrants remain outstanding, the Company
will timely deliver and supply to its warrant agent sufficient copies of the
Company's current Prospectus, as will enable such Warrant Agent to deliver a
copy of such Prospectus to any Warrant or other holder where such Prospectus
delivery is by law required to be made.
(s) So long as any of the Warrants remain outstanding, the
Company shall continue to employ the services of a firm of independent certified
public accountants reasonably acceptable to the Underwriters in connection with
the preparation of the financial statements to be included in any registration
statement to be filed by the Company hereunder, or any amendment or supplement
thereto (it being understood KPMG Peat Marwick, LLP is acceptable to the
Underwriters). During the same period, the Company shall employ the services of
a law firm(s) acceptable to the Underwriters in connection with all legal work
of the Company, including the preparation of a registration statement to be
filed by the Company hereunder, or any amendment or supplement thereto (it being
understood that ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLC is acceptable to the Underwriters).
(t) So long as any of the Warrants remain outstanding, the
Company shall continue to appoint a Warrant Agent for the Warrants, who shall be
reasonably acceptable to the Underwriters.
(u) The Company agrees that it will, upon the Effective Date,
for a period of no less than three (3) years, engage a designee of the
Underwriters as an advisor (the "Advisor") to its Board of Directors where such
Advisor shall attend meetings of the Board, receive all notices and other
correspondence and communications sent by the Company to members of its Board of
Directors and receive compensation equal to the entitlement of other non-officer
Directors. In addition, such Advisor shall be entitled to receive reimbursement
for all reasonable costs incurred in attending such meetings including, but not
limited to, food, lodging, and transportation. The Company further agrees that,
during said three (3) year period, it shall schedule no less than four (4)
formal and "in person" meetings of its Board of Directors in each such year and
thirty (30) days advance notice of such meetings shall be held quarterly each
year and thirty (30) days advance notice
12
of such meetings shall be given to the Advisor. Further, during such three (3)
year period, the Company shall give notice to the Underwriters with respect to
any proposed acquisitions, mergers, reorganizations or other similar
transactions. In lieu of the Underwriters right to designate an Advisor, the
Underwriters shall have the right during such three-year period, in its sole
discretion, to designate one person for election as a Director of the Company
and the Company will utilize its best efforts to obtain the election of such
person who shall be entitled to receive the same compensation, expense
reimbursements and other benefits set forth above.
The Company agrees to indemnify and hold the Underwriters and
such Advisor or Director harmless against any and all claims, actions, damages,
costs and expenses, and judgments arising solely out of the attendance and
participation of your designee at any such meeting described herein. In the
event the Company maintains a liability insurance policy affording coverage for
the acts of its officers and directors, it agrees, if possible, to include the
Underwriters' designee as an insured under such policy.
(v) The Company's Units, and the Common Stock and Warrants
underlying the Units, shall be listed on the NASDAQ National Market ("NNM") or
the Nasdaq SmallCap Market ("Nasdaq") and the Boston Stock Exchange ("BSE") not
later than the Closing Date. Promptly after the Closing Date, the Company will
make all filings required, including registration under the Exchange Act, to
obtain the listing of the Common Stock and Warrants on the NNM, Nasdaq and the
BSE, as the case may be, and will effect and use its best efforts to maintain
such listing (unless the Company is acquired) for at least five years from the
date of this Agreement.
(w) The Company will apply for listing in Standard and Poor's
Corporation Reports or ▇▇▇▇▇'▇ OTC Guide and shall use its best efforts to have
the Company included in such publications for at least five years from the
Closing Date.
(x) Except as contemplated in the Registration Statement, no
person who is currently an officer or director of the Company nor any
stockholder, warrant holder or option holder of the Company shall, without your
written consent, offer for sale, pledge, contract to sell, or sell or otherwise
dispose of directly or indirectly, any shares of the Common Stock of the Company
owned by such stockholder (including shares issuable upon exercise of existing
options and shares issued pursuant to Rule 144 under the Act), on the date of
this Agreement for a period of six months from the Closing Date. The Company
has caused each of its officers, directors, stockholders, warrant holders and
option holders to deliver to you, on or before the date of this Agreement, an
agreement to this effect, in form and substance reasonably satisfactory to the
Underwriters and to counsel for the Underwriters. For a period of twelve months
from the Effective Date, the Company shall not issue any shares of Common Stock
or preferred stock or any warrants, options or other rights to purchase Common
Stock or preferred stock or any other security of the Company without the
consent of the Underwriters, with the exception of shares issued pursuant to the
exercise of options, warrants or other convertible securities outstanding prior
to the Effective Date. The Company agrees not to file any registration
statement on Form S-8, during the 24 months following the Effective Date without
prior written approval of the Underwriters.
13
(y) The Company will use its best efforts to obtain, and so long
as any of the Warrants remain outstanding shall maintain, key person life
insurance payable to the Company on the life of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in the amount
of $1,000,000; provided, however, that such insurance need not be maintained on
such person if he ceases to be employed by the Company.
(aa) The Company will use its best efforts to obtain, as
soon after the Closing Date as is reasonably possible, liability insurance
covering its officers and directors.
(bb) The Company agrees that any conflict of interest
arising between a member of the Company's Board of Directors and the Company in
connection with such Director's dealing with, or obligations to, the Company,
shall be resolved by a vote of the majority of the independent members of the
Board of Directors.
(cc) The Company agrees that it will not amend the terms or
cancel any employment or consulting agreement without the approval of the
independent Audit Committee.
(dd) The Company agrees that it will employ the services of
financial public relations firm acceptable to the Underwriters for a period of
at least twelve months following the Effective Date.
4. SALE, PURCHASE AND DELIVERY OF SECURITIES; CLOSING DATE.
(a) The Company agrees to sell to the Underwriters, and the
Underwriters, on the basis of the warranties, representations and agreements of
the Company herein, and subject to the terms and conditions herein, agrees to
purchase the Securities from the Company at a price of ($___) per unit, less
an underwriting discount of ten percent (10%) of the offering price for each
security. The Underwriters may allow a concession not exceeding ($ ) per Unit
to Selected Dealers who are members of the National Association of Securities
Dealers, Inc. ("NASD"), and to certain foreign dealers, and such dealers may
reallow to NASD members and to certain foreign dealers a concession not
exceeding $.( ) per Unit.
(b) Delivery of the Securities and payment therefor shall
be made at 10:00 A.M., New York time on the Closing Date, as hereinafter
defined, at the offices of ▇▇▇▇▇▇▇ Davidson Securities Corp., ▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other location as may be agreed upon by you
and the Company. Delivery of certificates for the Common Stock and Warrants
underlying the Units (in definitive form and registered in such names and in
such denominations as you shall request by written notice to the Company
delivered at least four business days' prior to the Closing Date), shall be made
to you for the account of the Underwriters against payment of the purchase price
therefor by certified or bank check or wire transfer payable in New York
Clearing House funds to the order of the Company. The Company will make such
certificates available for inspection at least two business days prior to the
Closing Date at such place as you shall designate.
14
(c) The "Closing Date" shall be __________, 1998, or such
other date not later than the third business day following the Effective Date of
the Registration Statement as you shall determine and advise the Company by at
least three full business days' notice.
(d) The cost of original issue tax stamps, if any, in
connection with the issuance and delivery of the Securities by the Company to
the Underwriters shall be borne by the Company. The Company will pay and hold
the Underwriters, and any subsequent holder of the Securities, harmless from any
and all liabilities with respect to or resulting from any failure or delay in
paying federal and state stamp taxes, if any, which may be payable or determined
to be payable in connection with the original issuance or sale to the
Underwriters of the Securities or any portions thereof.
5. SALE, PURCHASE AND DELIVERY OF ADDITIONAL SECURITIES; OPTION
CLOSING DATE.
(a) The Company agrees to sell to the Underwriters, and
upon the basis of the representations, warranties and agreements of the Company
herein contained, subject to the satisfaction of all the terms and conditions of
this Agreement, the Underwriters shall have the option (the "Option") to
purchase the Additional Securities from the Company, at the same price per
Security as set forth in Paragraph 4(a) above. Additional Securities may be
purchased solely for the purpose of covering over-allotments made in connection
with the distribution and sale of the Securities.
(b) The Option to purchase all or part of the Additional
Securities covered thereby is exercisable by you at any time and from time to
time before the expiration of a period of 45 calendar days from the date of the
Effective Date of the Registration Statement (the "Option Period") by written
notice to the Company setting forth the number of Additional Securities for
which the Option is being exercised, the name or names in which the certificates
for such Additional Securities are to be registered and the denominations of
such certificates. Upon each exercise of the Option, the Company shall sell to
the Underwriters the aggregate number of Additional Securities specified in the
notice exercising such Option.
(c) Delivery of the Additional Securities with respect to
which Options shall have been exercised and payment therefor shall be made at
10:00 A.M., New York time on the Option Closing Date, as hereinafter defined, at
the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Securities Corp. or at such other locations as
may be agreed upon by you and the Company. Delivery of certificates for
Additional Securities shall be made to you for the account of the Underwriters
against payment of the purchase price therefor by certified or bank check or
wire transfer in New York Clearing House Funds to the order of the Company. The
Company will make certificates for Additional Securities to be purchased at the
Option Closing Date available for inspection at least two business days prior to
such Option Closing Date at such place as you shall designate.
(d) The "Option Closing Date" shall be the date not later
than three business days after the end of the Option Period as you shall
determine and advise the Company by
15
at lease three full business days' notice, unless some other time is agreed upon
between you and the Company.
(e) The obligations of the Underwriters to purchase and pay for
Additional Securities at such Option Closing Date shall be subject to compliance
as of such date with all the conditions specified in Paragraph 2 herein and the
delivery to you of opinions, certificates and letters, each dated such Option
Closing Date, substantially similar in scope to those specified in Paragraph 9
herein.
(f) The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Additional Securities by the Company to
the Underwriters shall be borne by the Company. The Company will pay and hold
the Underwriters, and any subsequent holder of Additional Securities, harmless
from any and all liabilities with respect to or resulting from any failure or
delay in paying federal and state stamp taxes, if any, which may be payable or
determined to be payable in connection with the original issuance or sale to the
Underwriters of the Additional Securities or any portion thereof.
6. WARRANT SOLICITATION FEE.
The Company agrees to pay the Underwriters a fee of five percent (5%)
of the aggregate exercise price of the Warrants if: (i) the market price of the
Common Stock is greater than the exercise price of the Warrants on the date of
exercise; (ii) the exercise of the Warrants are solicited by a member of the
NASD; (iii) the Warrants are not held in a discretionary account; (iv) the
disclosure of compensation arrangements was made both at the tie of the Offering
and at the time of the exercise of the Warrant; and (v) the solicitation of the
Warrant is not in violation of Rule 10b-6 promulgated under the Exchange Act.
The Company agrees not to solicit the exercise of any Warrants other than
through the Underwriters and will not authorize any other dealer to engage in
such solicitation without the prior written consent of the Underwriters which
will not be unreasonably withheld. The Warrant solicitation fee will not be
paid in a non-solicited transaction. Any request for exercise will be presumed
to be unsolicited unless the customer states in writing that the transaction was
solicited and designates in writing the broker/dealer to receive compensation
for the exercise. No Warrant solicitation by the Underwriters will occur for a
period of 12 months from the Effective Date.
7. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS.
The Underwriters represent and warrant to the Company that:
(a) The Underwriters are members in good standing of the
National Association of Securities Dealers, Inc., and has complied with all NASD
requirements concerning net capital and compensation to be received in
connection with the Offering.
16
(b) To the Underwriters' knowledge, there are no claims for
services in the nature of a finder's origination fee with respect to the sale of
the Securities hereunder to which the Company is, or may become, obligated to
pay.
8. PAYMENT OF EXPENSES.
(a) The Company will pay and bear all costs, fees, taxes and
expenses incident to and in connection with: (i) the issuance, offer, sale and
delivery of the Securities, including all expenses and fees incident to the
preparation, printing, filing and mailing (including the payment of postage with
respect to such mailing) of the Registration Statement (including all exhibits
thereto), each Preliminary Prospectus, the Prospectus, and amendments and
post-effective amendments thereof and supplements thereto, and this Agreement
and related documents, Preliminary and Final Blue Sky Memoranda, including the
cost of preparing and copying all copies thereof in quantities deemed necessary
by the Underwriters; (ii) the costs of preparing and printing all "Tombstone"
and other appropriate advertisements; (iii) the printing, engraving, issuance
and delivery of the Common Stock, Warrants, Warrant Shares, Additional
Securities, Underwriters' Warrants and the securities underlying the
Underwriters' Warrant, including any transfer or other taxes payable thereon in
connection with the original issuance thereof; (iv) the qualification of the
Common Stock and Warrants under the state or foreign securities or "Blue Sky"
laws selected by the Underwriters and the Company, and disbursements and
reasonable fees of counsel for the Underwriters in connection therewith plus the
filing fees for such states; (v) fees and disbursements of counsel and
accountants for the Company; (vi) other expenses and disbursements incurred on
behalf of the Company (vii) the filing fees payable to the Commission and the
National Association of Securities Dealers, Inc. ("NASD"); (viii) fees
associated with the preparation of transaction "bibles" and lucite cube momentos
in such quantities as the Underwriters may request; and (ix) any listing of the
Common Stock and Warrants on a securities exchange or on NASDAQ.
(b) In addition to the expenses to be paid and borne by the
Company referred to in Paragraph 8(a) above, the Company shall reimburse you at
closing for expenses incurred by you in connection with the Offering (for which
you need not make any accounting), in the amount of 3% of the price to the
public of the Securities and Additional Securities sold in the Offering. This
3% non-accountable expense allowance shall cover the fees of your legal counsel,
but shall not include any expenses for which the Company is responsible under
Paragraph 8(a) above, including the reasonable fees and disbursements of your
legal counsel with respect to Blue Sky matters. As of the date hereof, $25,000
has been advanced by the Company to the Underwriters with respect to such
non-accountable expense allowance.
(c) In the event that the Company does not or cannot, for any
reason whatsoever other than a default by the Underwriters, expeditiously
proceed with the Offering, or if any of the representations, warranties or
covenants contained in this Agreement are not materially correct or cannot be
complied with by the Company, or business prospects or obligations of the
Company are adversely affected and the Company does not commence or continue
with the Offering at any time or terminate the proposed transaction prior to the
first closing date of this Agreement the
17
Company shall reimburse the Underwriters on an accountable basis for all
out-of-pocket expenses actually incurred in connection with the underwriting,
this Agreement and all of the transactions hereby contemplated, including,
without limitation, your legal fees and expenses, less such sums which have
already been paid.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
The obligations of the Underwriters to consummate the transactions
contemplated by this Agreement shall be subject to the continuing accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of the Closing Date, the accuracy of the statements of the
Company and its officers and directors made pursuant to the provisions hereof,
and to the performance by the Company of its covenants and agreements hereunder
and under each certificate, opinion and document contemplated hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date following the date of this
Agreement, or such later date and time as shall be consented to in writing by
you and, on or prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Securities under the securities laws of any jurisdiction shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission or any such authorities of any jurisdiction and
any request on the part of the Commission or any such authorities for additional
information shall have been complied with to the reasonable satisfaction of the
Commission or such authorities and counsel to the Underwriters and after the
date hereof no amendment or supplement shall have been filed to the Registration
Statement or Prospectus without your prior consent.
(b) The Registration Statement or the Prospectus or any
amendment thereof or supplement thereto shall not contain an untrue statement of
a fact which is material, or omit to state a fact which is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) Between the time of the execution and delivery of this
Agreement and the Closing Date, there shall be no litigation instituted against
the Company or any of its officers or directors and between such dates there
shall be no proceeding instituted or, to the Company's knowledge, threatened
against the Company or any of its officers or directors before or by any
federal, state or county commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, in which litigation or proceeding
an unfavorable ruling, decision or finding would have a material adverse effect
on the Company or its business, business prospects or properties, or have a
material adverse effect on the financial condition or results of operation of
the Company.
18
(d) Each of the representations and warranties of the Company
contained herein and each certificate and document contemplated under this
Agreement to be delivered to you shall be true and correct at the Closing Date
as if made at the Closing Date, and all covenants and agreements contained
herein and in each such certificate and document to be performed on the part of
the Company, and all conditions contained herein and in each such certificate
and document to be fulfilled or complied with by the Company at or prior to the
Closing Date shall be fulfilled or complied with.
(e) At the Closing Date, you shall have received the opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Stone, LLC, counsel to the Company, dated as of such Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
counsel to the Underwriters, to the effect that:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Oregon with full
corporate power and authority, and all licenses, permits, certifications,
registrations, approvals, consents and franchises to own or lease and operate
its properties and to conduct its business as described in the Registration
Statement. The Company is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company;
(ii) The Company has full corporate power and authority
to execute, deliver and perform the Underwriting Agreement, the Consulting
Agreement, the Warrant Agreement and the Underwriters' Warrants and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreement and the Underwriters' Warrants by the Company, the consummation by the
Company of the transactions therein contemplated and the compliance by the
Company with the terms of the Underwriting Agreement, the Consulting Agreement,
the Warrant Agreements and the Underwriters' Warrants have been duly authorized
by all necessary corporate action, and each of the Underwriting Agreement, the
Consulting Agreement, the Warrant Agreement and the Underwriters' Warrant has
been duly executed and delivered by the Company. Each of the Underwriting
Agreement, the Consulting Agreement, the Warrant Agreements and the
Underwriters' Warrants are a valid and binding obligation of the Company,
enforceable in accordance with their respective terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors generally and the
discretion of courts in granting equitable remedies and except that
enforceability of the indemnification provisions and the contribution provisions
set forth in the Underwriting Agreement may be limited by the federal securities
laws or public policy underlying such laws;
(iii) The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and the
Underwriters' Warrants by the Company, the consummation by the Company of the
transactions therein contemplated and the compliance by the Company with the
terms of the Underwriting Agreement, the Consulting
19
Agreement, the Warrant Agreement and the Underwriters' Warrants do not, and will
not, with or without the giving of notice or the lapse of time, or both, (A)
result in a violation of the Certificate of Incorporation, as the same may be
amended, or by-laws of the Company, (B) to the best of our knowledge, result in
a breach of, or conflict with, any terms or provisions of or constitute a
default under, or result in the modification or termination of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to, any indenture,
mortgage, note, contract, commitment or other material agreement or instrument
to which the Company is a party or by which the Company or any of its properties
or assets are or may be bound or affected, except where any of the foregoing
would not result in a material adverse effect upon the Company's business or
operations; (C) to the best of our knowledge, violate any existing applicable
law, rule or regulation or judgment, order or decree known to us of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or business; or (D) to the best of our
knowledge, have any effect on any permit, certification, registration, approval,
consent, license or franchise necessary for the Company to own or lease and
operate its properties and to conduct its business or the ability of the Company
to make use thereof;
(iv) To the best of our knowledge, no authorization,
approval, consent, order, registration, license or permit of any court or
governmental agency or body (other than under the Act, the Regulations and
applicable state securities or Blue Sky laws) is required for the valid
authorization, issuance, sale and delivery of the Securities, the Additional
Securities, the Common Stock, the Warrants, the Warrant Shares, or the
Underwriters' Warrants, and the consummation by the Company of the transactions
contemplated by the Underwriting Agreement, the Consulting Agreement, the
Warrant Agreement or the Underwriters' Warrants;
(v) The Registration Statement was declared effective
under the Act on [___________], 1998; to the best of our knowledge, no stop
order suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act or applicable state securities laws;
(vi) The Registration Statement and the Prospectus, as of
the Effective Date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which we express no opinion),
comply as to form in all material respects with the requirements of the Act and
Regulations and the conditions for use of a registration statement on Form SB-2
have been satisfied by the Company;
(vii) The description in the Registration Statement and
the Prospectus of statutes, regulations, contracts and other documents have been
reviewed by us, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed, and to the
best of our knowledge, there are no material statutes or regulations, or, to the
best of our knowledge, material contracts or documents, of a character required
20
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement, which are not so described or filed
as required.
To the best of our knowledge, none of the material provisions of
the contracts or instruments described above violates any existing applicable
law, rule or regulation or judgment, order or decree known to us of any United
States governmental agency or court having jurisdiction over the Company or any
of its assets or businesses;
(viii) The outstanding Common Stock and Warrants have been
duly authorized and validly issued. The outstanding Common stock is fully paid
an nonassessable. To the best of our knowledge, none of the outstanding Common
Stock has been issued in violation of the preemptive rights of any shareholder
of the Company. None of the holders of the outstanding Common Stock is subject
to personal liability solely by reason of being such a holder. The authorized
Common Stock conforms to the description thereof contained in the Registration
Statement and Prospectus. To the best of our knowledge, except as set forth in
the Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act;
(ix) The issuance and sale of the Securities, the
Additional Securities, the Common Stock, the Warrants, the Warrant Shares and
the Underwriters' Warrants have been duly authorized and when issued will be
validly issued, fully paid and nonassessable, and the holders thereof will not
be subject to personal liability solely by reason of being such holders.
Neither the Securities, the Additional Securities, nor the Common Stock are
subject to preemptive rights of any stockholder of the Company. The
certificates representing the Securities are in proper legal form;
(x) The issuance and sale of the Warrant Shares and the
Underwriters' Warrant have been duly authorized and, when paid for, issued and
delivered pursuant to the terms of the Underwriters Agreement or the
Underwriters' Warrants, as the case may be, the Warrants, the Warrant Shares and
the Underwriters' Warrants will constitute the valid and binding obligations of
the Company, enforceable in accordance with their terms, to issue and sell the
Warrants, the Warrant Shares and/or Underwriters' Warrants. All corporate
action required to be taken for the authorization, issuance and sale of the
securities has been duly, validly and sufficiently taken. The Common Stock and
the Warrants have been duly authorized by the Company to be offered in the form
of the Securities. The Warrants, the Warrant Shares and the Underwriters'
Warrants conform to the descriptions thereof contained in the Registration
Statement and Prospectus;
(xi) The Underwriters have acquired good title to the
Securities, free and clear of all liens, encumbrances, equities, security
interests and claims, provided that the Underwriters are bona fide purchasers as
defined in Section 8-302 of the Uniform Commercial Code;
(xii) Assuming that the Underwriters exercise the
over-allotment option to purchase the Additional Securities and make payments
therefor in accordance with the
21
terms of the Underwriting Agreement, upon delivery of the Additional Securities
to the Underwriters thereunder, the Underwriters will acquire good title to the
Additional Securities, free and clear of any liens, encumbrances, equities,
security interests and claims, provided that the Underwriters are bona fide
purchasers as defined in Section 8-302 of the Uniform Commercial Code;
(xiii) To the best of our knowledge, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any governmental agency, court or tribunal, foreign or domestic, or before any
private arbitration tribunal, pending or threatened against the Company or
involving its properties or business, other than as described in the Prospectus,
such description being accurate, and other than litigation incident to the kind
of business conducted by the Company which, individually and in the aggregate,
is not material, and, except as otherwise disclosed in the Prospectus and the
Registration Statement, the Company has complied with all federal and state
laws, statutes and regulations concerning its business;
(xiv) We have participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus. Although we are not passing upon and do not assume responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement, no facts came to our attention which lead us to believe
that (A) the Registration Statement (except as to the financial statements and
other financial data contained therein, as to which we express no opinion), on
the Effective Date, contained any untrue statement of a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which we express no opinion) contains any untrue
statement or a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and
(xv) The Company is not in violation of or in default
under its Articles of Incorporation or by-laws, or to the knowledge of such
counsel, in the performance or observance of any material obligation, agreement,
covenant or condition contained in any bond, debenture, note or other evidence
of indebtedness or in any contract, indenture, mortgage, loan agreement or
instrument to which the Company is a party or by which it or any of its
properties may be bound, or in violation of any material order, rule,
regulation, writ, injunction or decree of any government or governmental
instrumentality or court.
(f) On or prior to the Closing Date, counsel for the
Underwriters shall have been furnished such documents, certificates and opinions
as they may reasonably require for the purpose of enabling them to review the
matters referred to in subparagraph (e) of this Paragraph 9, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(g) Prior to the Closing Date:
22
(i) There shall have been no material adverse change in
the condition or prospects or the business activities, financial or otherwise,
of the Company from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus;
(ii) There shall have been no transaction, outside the
ordinary course of business, entered into by the Company from the latest date as
of which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is material to the Company, which is either (x)
required to be disclosed in the Prospectus or Registration Statement and is not
so disclosed, or (y) likely to have material adverse effect on the Company's
business or financial condition;
(iii) The Company shall not be in default under any
material provision of any instrument relating to any outstanding indebtedness,
except as described in the Prospectus;
(iv) No material amount of the assets of the Company
shall have been pledged, mortgaged or otherwise encumbered, except as set forth
in the Registration Statement and Prospectus;
(v) No action, suit or proceeding, at law or in equity,
shall have been pending or to its knowledge threatened against the Company or
affecting any of its properties or businesses before or by any court or federal
or state commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
operations, prospects or financial condition or income of the Company, taken as
a whole, except as set forth in the Registration Statement and Prospectus; and
(vi) No stop order shall have been issued under the Act
and no proceedings therefor shall have been initiated or, to the Company's
knowledge, threatened by the Commission.
(vii) Each of the representations and warranties of the
Company contained in this Agreement and in each certificate and document
contemplated under this Agreement to be delivered to you was, when originally
made and is at the time such certificate is dated, true and correct.
(h) Concurrently with the execution and delivery of this
Agreement and at the Closing Date, you shall have received a certificate of the
Company signed by the Chief Executive Officer of the Company and the principal
financial officer of the Company, dated as of the Closing Date, to the effect
that the conditions set forth in subparagraph (g) above have been satisfied and
that, as of the Closing Date, the representations and warranties of the Company
set forth in Paragraph 2 herein and the statements in the Registration Statement
and Prospectus were and are true and correct. Any certificate signed by any
officer of the Company and delivered to you or for
23
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to the Underwriters as to the statements made therein.
(i) At the time this Agreement is executed, and at the Closing
Date, you shall have received a letter, addressed to the Underwriters and in
form and substance satisfactory in all respects to you and counsel for the
Underwriters, and including estimates of the Company's revenues and results of
operations for the period ending at the end of the month immediately preceding
the Effective Date and results of the comparable period during the prior fiscal
year, from KPMG Peat Marwick, dated as of the date of this Agreement and as of
the Closing Date.
(j) All proceedings taken in connection with the authorization,
issuance or sale of the Common Stock, Warrants, Warrant Shares, Additional
Securities, the Underwriters' Warrants and the Underwriters' Warrants Shares as
herein contemplated shall be satisfactory in form and substance to you and to
counsel to the Underwriters, and the Underwriters shall have received from such
counsel an opinion, dated as the Closing Date with respect to such of these
proceedings as you may reasonably require.
(k) The Company shall have furnished to you such certificates,
additional to those specifically mentioned herein, as you may have reasonably
requested in a timely manner as to the accuracy and completeness, at the Closing
Date, of any statement in the Registration Statement or the Prospectus, as to
the accuracy, at the Closing Date, of the representations and warranties of the
Company herein and in each certificate and document contemplated under this
Agreement to be delivered to you, as to the performance by the Company of its
obligations hereunder and under each such certificate and document or as to the
fulfillment of the conditions concurrent and precedent to your obligations
hereunder.
(l) The obligation of the Underwriters to purchase Additional
Securities hereunder is subject to the accuracy of the representations and
warranties of the Company contained herein on and as of the Option Closing Date
and to the satisfaction on and as of the Option Closing Date of the conditions
set forth herein.
(m) On the Closing Date there shall have been duly tendered to
you for your account the appropriate number of shares of Common Stock and
Warrants.
10. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless the Underwriters and each person, if any,
who controls the Underwriters ("controlling person") within the meaning of
either Section 15 of the Act or Section 20 of the Exchange Act, against any and
all losses, liabilities, claims, damages, actions and expenses or liability,
joint or several, whatsoever (including but not limited to any and all expense
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), joint or
several, to which it or such controlling persons may
24
become subject under the Act, the Exchange Act or under any other statute or at
common law or otherwise or under the laws of foreign countries, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any Preliminary Prospectus or
the Prospectus (as from time to time amended and supplemented); in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included the Warrant Shares of the Company issued or
issuable upon exercise of the Warrants, or Underwriters' Warrant Shares upon
exercise of the Underwriters' Warrants; or in any application or other document
or written communication (in this Paragraph 10 collectively called
"application") executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the
Common Stock, Warrants, Warrant Shares, Additional Securities, Underwriters'
Warrants and Underwriters' Warrant Shares (including the Shares issuable upon
exercise of the Warrants underlying the Underwriters' Warrants) under the
securities laws thereof or filed with the Commission or any securities exchange;
or the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading (in
the case of the Prospectus, in the light of the circumstances under which they
were made), unless such statement or omission was made in reliance upon or in
conformity with written information furnished to the Company with respect to the
Underwriters by or on behalf of the Underwriters expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in application, as the case may be.
Notwithstanding the foregoing, the Company shall have no liability under this
Paragraph 10(a) if any such untrue statement or omission made in a Preliminary
Prospectus, is cured in the Prospectus and the Underwriters failed to deliver to
the person or persons alleging the liability upon which indemnification is being
sought, at or prior to the written confirmation of such sale, a copy of the
Prospectus. This indemnity will be in addition to any liability which the
Company may otherwise have.
(b) The Underwriters agree to indemnify and hold harmless the
Company and each of the officers and directors of the Company who have signed
the Registration Statement and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
the Underwriters in Paragraph 10(a), but only with respect to any untrue
statement or alleged untrue statement of any material fact contained in or any
omission or alleged omission to state a material fact required to be stated in
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or necessary to make the statements therein not
misleading or in any application made solely in reliance upon, and in conformity
with, written information furnished to the Company by you specifically expressly
for use in the preparation of such Preliminary Prospectus, the Registration
Statement or Prospectus directly relating to the transactions effected by the
Underwriters in connection with this Offering. This indemnity agreement will be
in addition to any liability which the Underwriters may otherwise have.
Notwithstanding the foregoing, the Underwriters shall have no liability under
this Paragraph 10(b) if any such untrue statement or omission made in a
Preliminary Prospectus is cured in the Prospectus, and the Prospectus is
delivered to the person or persons alleging the liability upon which
indemnification is being sought.
25
(c) If any action is brought against any indemnified party (the
"Indemnitee") in respect of which indemnity may be sought against another party
pursuant to the foregoing (the "Indemnitor"), the Indemnitor shall assume the
defense of the action, including the employment and fees of counsel (reasonably
satisfactory to the Indemnitee) and payment of expenses. Any Indemnitee shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee unless
the employment of such counsel shall have been authorized in writing by the
Indemnitor in connection with the defense of such action. If the Indemnitor
shall have employed counsel to have charge of the defense or shall previously
have assumed the defense of any such action or claim, the Indemnitor shall not
thereafter be liable to any Indemnitee in investigating, preparing or defending
any such action or claim. Each Indemnitee shall promptly notify the Indemnitor
of the commencement of any litigation or proceedings against the Indemnitee in
connection with the issue and sale of the Common Stock, Warrants, Warrants
Shares, Additional Securities, Underwriters' Securities or in connection with
the Registration Statement or Prospectus.
(d) In order to provide for just and equitable contribution
under the Act in any case in which: (i) the Underwriters make a claim for
indemnification pursuant to Paragraph 10 hereof, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the time to appeal has expired or the last right of appeal has been denied)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Paragraph 10 provides for indemnification of such case; or (ii)
contribution under the Act may be required on the part of the Underwriters in
circumstances for which indemnification is provided under this Paragraph 10,
then, and in each such case, the Company and the Underwriters shall contribute
to the aggregate losses, claims, damages or liabilities to which they may be
subject (after any contribution from others) in such proportion so that the
Underwriters are responsible for the portion represented by dividing the total
compensation received by the Underwriters herein by the total purchase price of
all Securities sold in the public offering and the Company is responsible for
the remaining portion; provided, that in any such case, no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The foregoing contribution agreement shall in no way affect the
contribution liabilities of any persons having liability under Section 11 of the
Act other than the Company and the Underwriters. As used in this Paragraph 10,
the term "Underwriters" includes any officer, director, or other person who
controls the Underwriters within the meaning of Section 15 of the Act, and the
word "Company" includes any officer, director or person who controls the Company
within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then the
Underwriters and each person who controls the Underwriters shall be entitled to
contribution from the Company to the full extent permitted by law. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement.
26
(e) Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission so to notify
the contributing party will not relieve it from any liability it may have to any
other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against any
party, and such party notifies a contributing party or his or its representative
of the commencement thereof within the aforesaid fifteen (15) days, the
contributing party will be entitled to participate therein with the notifying
party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The indemnification provisions contained in this Paragraph 10 are in
addition to any other rights or remedies which either party hereto may have with
respect to the other or hereunder.
11. REPRESENTATIONS, WARRANTIES, AGREEMENTS TO SURVIVE DELIVERY.
The respective indemnity and contribution agreements by the
Underwriters and the Company contained in Paragraph 10 hereof, and the
covenants, representations and warranties of the Company and the Underwriters
set forth in this Agreement, shall remain operative and in full force and effect
regardless of (i) any investigation made by the Underwriters or on their behalf
or by or on behalf of any person who controls the Underwriters, or by the
Company or any controlling person of the Company or any director or any officer
of the Company, (ii) acceptance of any of the Securities and payment therefor,
or (iii) any termination of this Agreement, and shall survive the delivery of
the Securities and any successor of the Underwriters or the Company, or of any
person who controls you or the Company or any other indemnified party, as the
case may be, shall be entitled to the benefit of such respective indemnity and
contribution agreements. The respective indemnity and contribution agreements
by the Underwriters and the Company contained in this Paragraph 11 shall be in
addition to any liability which the Underwriters and the Company may otherwise
have.
12. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) This Agreement shall become effective at 10:00 A.M., New
York time, on the first full business day following the day on which you and the
Company receive notification that the Registration Statement became effective.
(b) This Agreement may be terminated by the Underwriters by
notifying the Company at any time on or before the Closing Date, if any domestic
or international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, securities markets; or
if trading on the New York Stock Exchange, the American Stock
27
Exchange, or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required on the over-the-counter
market by the NASD or NASDAQ or by order of the Commission or any other
governmental authority having jurisdiction; or if a moratorium in foreign
exchange trading by major international banks or persons has been declared; or
if the Company shall have sustained a loss material or substantial to the
Company taken as a whole by fire, flood, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act which, whether or not such loss
shall have been insured, will, in your opinion, make it inadvisable to proceed
with the delivery of the Securities; or if there shall have been a material
adverse change in the conditions of the securities market in general, as in your
reasonable judgment would make it inadvisable to proceed with the offering, sale
and delivery of the Securities; or if there shall have been a material adverse
change in the financial or securities markets, particularly in the
over-the-counter market, in the United States having occurred since the date of
this Agreement.
(c) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Paragraph 12, the
Company shall be notified promptly by you by telephone or facsimile, confirmed
by letter.
(d) If this Agreement shall not become effective by reason of an
election of the Underwriters pursuant to this Paragraph 12 or if this Agreement
shall not be carried out within the time specified herein by reason of any
failure on the part of the Company to perform any undertaking, or to satisfy any
condition of this Agreement by it to be performed or satisfied, the sole
liability of the Company to the Underwriters, in addition to the obligations
assumed by the Company pursuant to Paragraph 8 herein, will be to reimburse the
Underwriters for the following: (i) Blue Sky counsel fees and expenses to the
extent set forth in Paragraph 8(a)(iv); (ii) Blue Sky filing fees; and (iii)
such reasonable out-of-pocket expenses of the Underwriters (including the fees
and disbursements of their counsel), to the extent set forth in Paragraph 8(c),
in connection with this Agreement and the proposed offering of the Securities,
but in no event to exceed the sum of $100,000 less such amounts already paid.
Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement, and whether or not
this Agreement is otherwise carried out, the provisions of Paragraph 8 and 10
hereof shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
13. NOTICES.
All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Underwriters, shall be mailed,
delivered or telegraphed and confirmed to the Underwriters at ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Securities Corp., ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, attention: ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates, Inc., Mellon Financial Center, ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, with a
copy thereof to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq., Sichenzia, Ross & ▇▇▇▇▇▇▇▇, LLP, 135
West 50th
▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, and, if sent to the Company, shall be
mailed, delivered or telegraphed and confirmed to the Company at ▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, attention: A. ▇▇▇▇▇ ▇▇▇▇▇, President, with a copy
thereof to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLC., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
14. PARTIES.
This Agreement shall inure solely to the benefit of and shall be
binding upon, the Underwriters, the Company and the controlling persons,
directors and officers referred to in Paragraph 10 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
15. CONSTRUCTION.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York and shall supersede any
agreement or understanding, oral or in writing, express or implied, between the
Company and you relating to the sale of any of the Securities.
16. JURISDICTION AND VENUE.
The Company agrees that the courts of the State of New York shall have
jurisdiction over any litigation arising from this Agreement, and venue shall be
proper in the Southern District of New York.
17. COUNTERPARTS.
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the understanding between you
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
FIRSTLINK COMMUNICATIONS, INC.
By:
----------------------------
A. ▇▇▇▇▇ ▇▇▇▇▇, President
Accepted as of the date first above
29
written:
▇▇▇▇▇▇▇ DAVIDSON SECURITIES CORP
By:
--------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ASSOCIATES, INC.
By:
--------------------------------
30
SCHEDULE A
NUMBER OF
UNITS TO BE
UNDERWRITER PURCHASED
----------- ---------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Securities Corp (____)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates, Inc. (____)
TOTAL: 1,400,000
---------
---------
31
