UNDERWRITING AGREEMENT
This Agreement, dated May 2, 2001, is entered into between Xxxxxxxx.xxx
(the "Corporation") and Xxxxxx Corp. International (the "Underwriter") with
respect to the following facts:
The Corporation proposes to issue and sell a maximum of 4,800,000
shares of its Common Stock in a public offering, which shares shall be
registered under the Securities Act of 1933, as amended (the "Act") by
means of a registration statement on form SB-2, which has been issued
Registration Number 333-56632 by the Securities and Exchange Commission
(the "Registration Statement"). The Underwriter wishes to serve as the
Corporation's nonexclusive agent to assist in the sale of the Shares to
the public, and the Corporation wishes to retain the Underwriter's
services to conduct such an offering, subject to the terms and
conditions set forth below.
IN VIEW OF THE FOREGOING FACTS, the parties agree as follows:
SECTION ONE: INTRODUCTION AND DEFINITIONS
A. The Corporation hereby agrees to appoint the Underwriter as its nonexclusive
agent for the purposes of placing up to 4,800,000 shares of its Common Stock
(the "Shares") in a public offering, and the Underwriter hereby agrees to use
its best efforts to locate prospective purchasers of the Shares and to
facilitate their sale, subject to the terms and conditions set forth in this
agreement.
B. As used in this agreement, the term "Registration Statement" shall mean the
Registration Statement and all amendments thereto described in the recitals of
this Agreement. The term "Prospectus" shall mean the Prospectus included in the
Registration Statement when it becomes effective. The term "Offering" shall mean
the public offering of the Shares by the Corporation as described in the
Registration Statement. All other defined terms used in this agreement, unless
specifically defined herein, shall have the meanings set forth in such
Registration Statement and Prospectus.
SECTION TWO: REPRESENTATIONS BY THE CORPORATION
The Corporation represents and warrants to the Underwriter that:
A. The Corporation has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of California with
power and authority to own its properties and conduct its business as described
in the Prospectus.
B. This agreement has been duly authorized, executed and delivered on behalf of
the Corporation and is a valid agreement enforceable against the Corporation in
accordance with
its terms, subject to limitations on the enforceability of agreements under
bankruptcy laws, the limitation on the availability of certain remedies under
general principles of equity and the unavailability of certain remedies for the
breach of agreements under the implied covenant of good faith and fair dealing.
C. The Registration Statement has been prepared by the Corporation in conformity
with the requirements of the Securities Act of 1933, as amended, (the "Act") and
the rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "SEC"), thereunder and has been filed with the SEC. The
Corporation intends to file prior to the effective date of such Registration
Statement an amendment thereto by way of response to the comments of the
Securities and Exchange Commission. Copies of such Registration Statement have
been delivered to the Underwriter.
D. When the Registration Statement becomes effective and at all times thereafter
until the Offering is completed, the Registration Statement, the Prospectus, and
any amendments or additions thereto will contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations and will in all respects conform to the requirements of the Act and
the Rules and Regulations. Neither the Registration Statement nor the
Prospectus, nor any amendment or additions 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 not misleading.
E. The performance of the transactions herein proposed and the fulfillment of
the terms hereof will not result in a breach of any of the terms and provisions
of, or constitute a default under, any indenture, mortgage, deed of trust, or
other agreement or instrument to which the Corporation is a party, or the
charter or bylaws of the Corporation as presently in effect or, to the best of
the Corporation's knowledge, any order, rule, or regulation applicable to the
Corporation of any court or of any federal or state regulatory body or
administrative agency or other governmental body, domestic or foreign, having
jurisdiction over the Corporation or its properties.
F. No approval, authorization, consent, or other order of any public board or
body, other than in connection with or in compliance with the provisions of the
Act and the security or blue-sky laws of various states, is legally required for
the sale of the Shares.
G. Xxxxx Xxxxxxxx LLP, the auditors which have provided an opinion with respect
to the audited financial statements of the Corporation which are incorporated in
the Prospectus, are independent public accountants as required by the Act and
the Rules and Regulations.
SECTION THREE: REPRESENTATIONS BY UNDERWRITER
A. The Underwriter represents and warrants to the Corporation that the
information furnished to the Corporation in writing by the Underwriter expressly
for use in the Registration Statement or the Prospectus does not, and any
amendments or additions thereto thus furnished will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
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B. The Underwriter represents and warrants to the Corporation that it is
registered as a broker-dealer with the SEC and is registered as a broker-dealer
in all states in which it conducts business as a broker-dealer and is a member
in good standing of the National Association of Securities Dealers, Inc.
("NASD").
C. The Underwriter represents and warrants to the Corporation that, except as
set forth in Exhibit A, there is not now pending or threatened against the
Underwriter any action or proceeding of which it has been advised, either in an
court of competent jurisdiction, before the SEC or any state securities
commission concerning its activities as a broker-dealer, nor has the Underwriter
been named as a "cause" in any such action or proceeding.
SECTION FOUR: COSTS AND EXPENSES
The Corporation will pay:
A. All of its costs and expenses in connection with the transactions herein
contemplated, including, but not limited to, the fees and disbursements of
counsel for the Corporation;
B. The fees, costs, and expenses of preparing, printing, and delivering the
certificates for the Shares;
C. The fees, costs, and expenses of the transfer agent and registrar of the
Corporation's Common Stock and their counsel and accounting fees and
disbursements;
D. Original issue tax on the issue of the Shares being issued by the
Corporation;
E. Expenses in connection with the qualification or exemption of the Shares
under state security or blue sky laws, including filing fees, counsel fees, and
disbursements in connection therewith; and
F. The costs and expenses in connection with the preparation, printing, and
filing of the Registration Statement and Prospectus, the preparation and
printing of this agreement, and the furnishing to the Underwriter of copies of
each preliminary and final Prospectus.
SECTION FIVE: PURCHASE, SALE, AND DELIVERY OF the SHARES
On the basis of the covenants, representations and warranties herein contained
and subject to the terms and conditions herein set forth:
A. The Corporation hereby engages the Underwriter as its nonexclusive agent to
solicit subscriptions for the Shares in accordance with the terms of the
Registration Statement, the Prospectus and this agreement, and the Underwriter
agrees to use its best efforts to procure such subscriptions. The foregoing
notwithstanding, the Underwriter shall not be required to sell any specific
number of the Shares and the Underwriter does not guaranty that it will be able
to sell all or any of the Shares.
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B. The Corporation may engage other persons to sell the Shares in the Offering,
including but not limited to its own employees, as well as to retain the
services of other broker-dealers. The Corporation agrees to provide the
Underwriter with the names of other persons whom it has engaged to sell the
Shares, the identity of other subscribers for the Shares and information
regarding the amount of the subscriptions obtained from such persons.
C. The Underwriter may form a group of securities dealers ("Selected Placement
Agents"), including the Underwriter, to procure subscribers for the Shares. Any
agreement between the Underwriter and a securities broker-dealer pursuant to
which such broker-dealer becomes a Selected Placement Agent shall require such
broker-dealer to represent and warrant that it will conduct the solicitation of
subscriptions in the manner set forth herein. The allocation of Shares among the
Underwriter and the Selected Placement Agents shall be made by the Underwriter.
D. In consideration of the Underwriter's performance of its obligations
hereunder, the Corporation agrees that the Underwriter shall receive selling
commissions in an amount equal to 10% of the aggregate purchase price for the
Shares received from subscribers introduced to the Corporation by the
Underwriter (or any Selected Placement Agent). A subscriber will be deemed
introduced by the Underwriter if the Underwriter (or any Selected Placement
Agent) was the first person to contact that subscriber to solicit that
subscriber to purchase the Shares. Commissions payable in connection with the
sale of the Shares will be disbursed to the Underwriter upon the acceptance by
the Corporation of subscriptions for those sales. The Underwriter shall pay to
each of the other Selected Placement Agents, if any, such amount at such times
and upon such terms and conditions as shall have been agreed upon between the
Underwriter and such Selected Placement Agent, that portion of the aggregate
commissions to which such Selected Placement Agent is entitled. The Corporation
also agrees to pay to the Underwriter a non-accountable expense allowance equal
to 1.5% of the aggregate purchase price for the Shares received from subscribers
introduced to the Corporation by the Underwriter (or any Selected Placement
Agent). The Underwriter may reallow all or any part of such expense allowance to
any other Selected Placement Agent.
E. Each subscriber for the Shares must tender payment in full for the Shares
subscribed for ("Subscription Payment"). The Underwriter shall deliver
Subscription Payments (less the amount of the commission payable to the
Underwriter) received by the Underwriter to the Corporation by 12:00 noon on the
business day following such receipt by the Underwriter, together with a schedule
setting forth the amount of each such Subscription Payment and the name, mailing
address and state of residence of the subscriber. Concurrently with the
Underwriter's delivery of each Subscription Payment to the Corporation, the
Underwriter shall forward to the Corporation executed originals of all related
subscription documents, retaining copies of all such subscription documents for
the Underwriter's records.
F. Within five business days following receipt by it of each Subscription
Payment, the Corporation shall determine whether to accept or reject that
subscription. If the Corporation elects to reject a subscription, the related
Subscription Payment shall promptly be returned without interest to the
Underwriter, who shall in turn return the full amount of the rejected
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subscription to the subscriber. If the Corporation does not elect to reject a
subscription within that period, that subscription shall be deemed accepted.
SECTION SIX: COVENANTS OF THE CORPORATION
A. The Corporation will advise the Underwriter when the Registration Statement
is effective and will give the Underwriter advance notice of all amendments to
the Registration Statement.
B. The Corporation will advise the Underwriter promptly of any request of the
SEC for amendment of the Registration Statement or Prospectus or for additional
information and of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or of the institution of any
proceedings for that purpose. The Corporation will use its best efforts to
prevent the issuance of any such stop order and to obtain the lifting thereof as
soon as possible if such a stop order is issued.
C. Within the time during which the Prospectus relating to this financing is
required to be delivered under the Act, if any event occurs which would cause
the Prospectus as then amended or supplemented to include an untrue statement of
a material fact, or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, the Corporation will promptly prepare and file with the
SEC an amendment or supplement which will correct such statement or omission or
an amendment which will effect such compliance.
D. Within the sixteenth full calendar months after the effective date of the
Registration Statement, the Corporation will make generally available to its
security holders an earnings statement, covering a period of at least twelve
months beginning not earlier than the effective date of the Registration
Statement, which shall satisfy the provisions of Section 11(a) of the Act.
E. The Corporation will furnish to the Underwriter copies of the Registration
Statement, which will be signed and will include all exhibits thereto, each
preliminary Prospectus, the Prospectus, and all amendments and additions to such
documents, in each case as soon as available.
F. The Corporation will furnish such information and execute such instruments as
may be required to qualify the Shares for sale under the security or blue sky
laws of such jurisdictions as the Underwriter designates and the Corporation
concurs, and will continue such qualifications in effect so long as required for
distribution.
G. The Corporation will apply the net proceeds from the sale of the Shares sold
and delivered by it in the manner set forth in the Prospectus.
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SECTION SEVEN: COVENANTS OF THE UNDERWRITER
A. The Underwriter will solicit and obtain sales of the Shares in the Offering
in compliance with the provisions of the Act, the Rules and Regulations,
applicable state security or blue sky laws and the rules and regulations of the
NASD.
B. Prior to any sale of any of the Shares, the Underwriter will reasonably
conclude that an investment in the Shares was suitable for each subscriber that
the Underwriter obtains.
C. The Underwriter will promptly distribute any amendment or supplement to the
Prospectus to persons who had previously received a Prospectus from the
Underwriter and who the Underwriter believed continued to be interested in the
Shares. The Underwriter shall include such amendment or supplement in all
deliveries of the Prospectus made after receipt of any such amendment or
supplement.
D. The Underwriter shall only use sales materials other than the Prospectus
which have been approved for use by the Corporation, and shall refrain from
providing any such materials to any persons unless accompanied or preceded by
the Prospectus.
E. The Underwriter shall refrain from making any untrue statements of material
fact or omitting to state any fact which is necessary to make any statement of
fact not misleading in connection with the sale of the Shares; provided that the
Underwriter may rely on the accuracy of all statements contained in the
Prospectus other than those provided by the Underwriter.
SECTION EIGHT: CANCELLATION
A. At any time prior to the Registration Statement becoming effective, either
party may cancel this agreement by notice to the other party.
B. The Underwriter may also, by notice to the Corporation, cancel this agreement
on or after the effective date of the Registration Statement if, during such
period there shall have been imposed any restrictions on the sale or
distribution of securities to such a degree as in their judgment would restrict
materially a free market for the Shares, or if there shall have been such a
material change in general economic or financial conditions, or if the effect of
international conditions on the financial markets of the United States shall be
such as, in any case, in their judgment, makes it impracticable for the
Underwriter to sell the Shares as provided herein.
C. Upon the cancellation of this agreement or the completion of the Offering,
the Underwriter shall no longer serve as a nonexclusive agent of the Corporation
with respect to the offer and sale of the Shares, nor shall the Underwriter have
any obligations to offer and sell the Shares under this Agreement. Unless a
provision by its terms shall remain in effect only prior to the completion of
the Offering or the cancellation of this agreement, all provisions of this
agreement shall survive the completion of the Offering or the cancellation of
this agreement.
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D. The Company may terminate the Offering at any time in its discretion
regardless of whether the maximum number of Shares is sold. The Company shall
provide the Underwriter with notice of any termination of the Offering by no
later than one business day prior to the date upon which the Offering is to
terminate. Upon the termination of the Offering, this agreement shall be
cancelled.
SECTION NINE: INDEMNITY
A. The Corporation will indemnify the Underwriter and each person, if any, who
controls the Underwriter within the meaning of the Act against any losses,
claims, damages, or liabilities, to which the Underwriter or such controlling
person may become subject, under the Act or otherwise, insofar as such losses,
claims, damages, liabilities, or actions relating thereto, arise out of or are
based on any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the preliminary Prospectus, the
Prospectus, or any amendment or addition thereto, or arise out of or are based
on the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Underwriter and each controlling person for any legal or
other expenses reasonably incurred by the Underwriter or such controlling person
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the Corporation will not be liable
if any such loss, claim, damage, or liability arises out of or is based on an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, the preliminary Prospectus, the Prospectus,
amendment or addition thereto, in reliance on and in conformity with written
information furnished to the Corporation by the Underwriter specifically for use
in the preparation thereof. This indemnity agreement will be in addition to any
liability which the Corporation may otherwise have.
B. The Underwriter will indemnify the Corporation and each of its directors and
officers who have signed the Registration Statement, against any losses, claims,
damages, or liabilities to which the Corporation, any such director, or officer
may be subjected, under the Act or otherwise, insofar as such losses, claims,
damages, liabilities, or actions relating thereto arise out of or are based on
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, the preliminary Prospectus, the Prospectus, or
any amendment or addition thereto, or arise out of or are based on the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, the preliminary Prospectus, the Prospectus, amendment or addition, in
reliance on and in conformity with written information furnished to the
Corporation by the Underwriter specifically for use in the preparation thereof.
The Underwriter will reimburse the Corporation for any legal or other expenses
reasonably incurred in connection with investigating or defending any such loss,
claim, damage, liability, or action. This indemnity agreement will be in
addition to any liability which the Underwriter may otherwise have.
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C. After receipt by an indemnified party under this section of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this section,
immediately notify the indemnifying party in writing thereof, but the omission
to so notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than under this section. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to the indemnifying parties. After notice from the
indemnifying party to such indemnified party of its election to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
SECTION TEN: SURVIVAL OF AGREEMENTS AND REPRESENTATIONS
The respective agreements, representations, warranties, covenants and other
statements of the Corporation and the Underwriter herein set forth or made
pursuant to this agreement shall remain in full force and effect regardless of
any investigations made by or on behalf of the Underwriter or the Corporation or
any of its directors or officers or any controlling person and shall survive
delivery of and payment for the Shares purchased hereunder.
SECTION ELEVEN: SUCCESSORS AND ASSIGNS
This agreement shall be binding on and inure solely to the benefit of the
Underwriter and the Corporation, their respective personal representatives,
successors, and assigns and, to the extent provided in Section 9 hereof,
officers, directors and control persons within the meaning of the Act, and no
other person shall acquire or have any right under or because of this agreement,
and no purchaser of any of the Shares shall be held to be a successor or assign
by reason of such purchase.
SECTION TWELVE: NOTICES
All communications hereunder shall be in writing, addressed to the Underwriter
at:
Xxxxxx Corp. International
0000 Xxxx XxxXxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxx Xxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxx X Xxxxxx
Fax # (000) 000-0000
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and to the Corporation at:
Xxxxxxxx.xxx
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxx
Fax # (000) 000-0000
with a copy to:
Xxxxx & Lardner
Xxx Xxxxxxxx Xxxxx
Xxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Fax # (000) 000-0000
SECTION THIRTEEN: GOVERNING LAW
This agreement and all matters relating thereto shall be construed in accordance
with the laws of the State of California, exclusive of any conflict of laws
provisions that may require the application of the laws of any other
jurisdiction.
SECTION fOURTEEN: COUNTERPARTS
This agreement may be executed in any number of counterparts, all of which shall
constitute one and the same agreement.
SECTION FIFTEEN: ENTIRE AGREEMENT AND AMENDMENT
This agreement contains the entire agreement and understanding of the parties
with respect to the subject matter hereof, and supersedes in its entirety all
prior and contemporaneous agreements, whether oral or written, with respect to
that subject matter. This agreement may not be amended unless that amendment is
in the form of a writing that is signed by both parties to this agreement. No
right of either party under this agreement will be deemed waived unless that
waiver is in a written instrument which is signed by the party who has allegedly
waived that right, and no waiver of any right shall be deemed to be a waiver of
any other right.
SECTION SIXTEEN: ATTORNEYS' FEES
If any action should be commenced to interpret or enforce this agreement, the
party who substantially prevails shall be entitled to recover all costs which
that party incurred in prosecuting or defending that action and any appeal
thereof (including but not limited to reasonable attorneys' fees) in addition to
any other relief to which that party may be entitled.
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IN WITNESS WHEREOF, the Corporation and the Underwriter have duly executed this
agreement on May 2, 2001.
XXXXXX CORP. INTERNATIONAL XXXXXXXX.XXX
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxx Xxxxx
------------------------------- ----------------------------------
Title: President Title: Chief Executive Officer
----------------------------- ----------------------------------
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EXHIBIT A
In March 2000, Thorem Corporation filed an arbitration claim against Xxxxxx
Corp. International (Case No. NASD-DR 0002008), seeking approximately $30,000.
Thorem Corporation asserts that Xxxxxxx X. Xxxxx, a Principal/Broker of Xxxxxx
Corp. International at the time of the alleged claim, purchased certain shares
of stock without authorization from Thorem Corporation. At the initial NASD
arbitration hearing in March 2001, Thorem Corporation was awarded approximately
$30,000. Since then, Xxxxxx Corp. International has filed a motion to vacate
stated judgment. The hearing to vacate has been set for June 22, 2001.
On March 29, 2001, Xxx Xxxxxxxx filed an arbitration claim against Xxxxxx Corp.
International (Case No. NASD-DR 01-01247), seeking approximately $100,000. Xx.
Xxxxxxxx asserts that Xxxxxxx X. Xxxxx, a Principal/Broker of Xxxxxx Corp.
International at the time of the alleged claim, purchased certain shares of
stock without authorization from Xx. Xxxxxxxx.
On April 11, 0000, Xxxxx Xxxxxxxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxxxxxx, Xxxxx
Xxxxxxxxx, Xxx Hermansem, Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxxxx, Xxxxx Xxxx, Xxxx
Xxxx, Xxxx Xxxx, Xxxx Xxx, and Xxxxxx Xxxxxxxx filed an arbitration claim
against Xxxxxxx X. Xxxxx, Xxxxx Xxxx, Xxxx Xxxxxx, Xxxxxx Corp. International,
Equity Trust Advisors, Inc., Western Securities Clearing Corporation, Xxxxx
Xxxxx, and Bear Xxxxxxx (Case No. NASD-DR 01-01934), seeking approximately $1
million in compensatory damages and approximately $3 million in punitive
damages. The claimants assert that Xxxxxxx X. Xxxxx purchased certain shares of
stock without authorization from the claimants.
