1
EXHIBIT 1
2,000,000 SHARES
OF COMMON STOCK
C3, INC.
UNDERWRITING AGREEMENT
________________, 1997
▇▇▇▇▇▇▇ Investment Company, Inc.
As Representative of the
Several Underwriters
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
C3, Inc., a North Carolina corporation (the "Company"), proposes to
sell to the several underwriters (the "Underwriters") named in Schedule I hereto
for whom you are acting as Representative (the "Representative") an aggregate of
2,000,000 shares (the "Firm Shares") of the Company's common stock, no par value
("Common Stock"). The respective amounts of the Firm Shares to be so purchased
by the several Underwriters are set forth opposite their names in Schedule I
hereto. The Company also proposes to grant to the Representative an option to
purchase an aggregate up to 300,000 additional Shares, identical to the Firm
Shares, (the "Option Shares") as set forth below. The offer and sale of the Firm
Shares and the Option Shares pursuant to this Agreement is referred to as the
"Offering."
As the Representative, you have advised the Company (a) that you are
authorized to enter into this Agreement for yourself as the Representative and
on behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the number of Firm Shares
set forth opposite their respective names in Schedule I. The Firm Shares and the
Option Shares (to the extent the aforementioned option is exercised) are herein
collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
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________________, 1997
Page 2
1. Representations and Warranties of the Company.
The Company represents and warrants to each of the
Underwriters as follows:
(a) A registration statement on Form S-1 (File No.333-_____)
with respect to the Shares has been carefully prepared by the Company
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
"Commission") thereunder and has been filed with the Commission. Copies
of such registration statement, including any amendments thereto, the
preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements
and schedules, as finally amended and revised, have heretofore been
delivered by the Company to you. Such registration statement, together
with any registration statement filed by the Company pursuant to Rule
462(b) of the Act, herein referred to as the "Registration Statement,"
which shall be deemed to include all information omitted therefrom in
reliance upon Rule 430A and contained in the Prospectus referred to
below, has become effective under the Act and no post-effective
amendment to the Registration Statement has been filed as of the date
of this Agreement. "Prospectus" means (a) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (b) the last
preliminary prospectus included in the Registration Statement filed
prior to the time it becomes effective or filed pursuant to Rule 424(a)
under the Act that is delivered by the Company to the Underwriters for
delivery to purchasers of the Shares, together with the term sheet or
abbreviated term sheet filed with the Commission pursuant to Rule
424(b)(7) under the Act. Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus."
(b) (i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of North Carolina, with corporate power and authority to own or lease
its properties and conduct its business as described in the
Registration Statement. The Company is duly qualified to transact
business in all jurisdictions in which the conduct of its business
requires such qualification.
(ii) Each corporation all of the equity securities of
which are directly or indirectly beneficially owned by the
Company and the business of which is material to the Company's
business (a "Subsidiary") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with corporate power and authority to
own or lease its properties and conduct its business as described in
the Registration Statement. Each Subsidiary is duly qualified to
transact business as a foreign corporation in good standing in all
other jurisdictions in which the conduct of its business requires such
qualification. Except with respect to Subsidiaries described in the
Prospectus, the Company does
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________________, 1997
Page 3
not own and never has owned a controlling interest in any
corporation or other business entity that has or ever has had
any material assets, liabilities or operations.
(c) The outstanding shares of Common Stock of the Company and
each Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable and have been issued and sold by the
Company in compliance in all material respects with applicable
securities laws; the Shares have been duly authorized and when issued
and paid for as contemplated herein will be validly issued, fully paid
and nonassessable; and no preemptive rights of stockholders exist with
respect to any security of the Company or any Subsidiary or the issue
and sale thereof. Neither the filing of the Registration Statement nor
the offering or sale of the Shares as contemplated by this Agreement
gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Common
Stock or other securities of the Company or any Subsidiary.
(d) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. The Common
Stock conforms to the description thereof contained in the Registration
Statement. The form of certificate for the Common Stock conforms to the
corporate law of the jurisdiction of the Company's incorporation.
(e) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering
of the Shares nor instituted proceedings for that purpose. The
Registration Statement contains, and the Prospectus and any amendments
or supplements thereto will contain, all statements which are required
to be stated therein by, and will conform, to the requirements of the
Act and the Rules and Regulations. The Registration Statement and any
amendment thereto do not contain, and will not contain, any untrue
statement of a material fact and do not omit, and will not omit, to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any
amendments and supplements thereto do not contain, and will not
contain, any untrue statement of material fact; and do not omit, and
will not omit, to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or
the Prospectus, or any such amendment or supplement, in reliance upon,
and in conformity with, written information furnished to the Company by
or on behalf of any Underwriter through the Representative,
specifically for use in the preparation thereof.
(f) The financial statements of the Company, together with
related notes thereto as set forth in the Registration Statement,
present fairly the financial position and the results of operations and
cash flows of the Company and Subsidiaries, if any, at the indicated
dates
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________________, 1997
Page 4
and for the indicated periods. Such financial statements have been
prepared in accordance with generally accepted principles of
accounting, consistently applied throughout the periods involved,
except as disclosed herein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary
financial and statistical data of the Company included in the
Registration Statement present fairly the information shown therein and
such data have been compiled on a basis consistent with the financial
statements presented therein and the books and records of the Company.
(g) Deloitte & Touch LLP, who have certified certain of the
financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required
by the Act and the Rules and Regulations.
(h) There is no action, suit, claim or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any
Subsidiary, if any, before any court or administrative agency or
otherwise which if determined adversely to the Company might result in
any material adverse change in the earnings, business, management,
properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company or any Subsidiary, if any, or to
prevent the consummation of the transactions contemplated hereby,
except as set forth in the Registration Statement.
(i) The Company and each Subsidiary, if any, has good and
marketable title to all of the properties and assets reflected in the
financial statements (or as described in the Registration Statement)
hereinabove described, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those reflected in such financial
statements (or as described in the Registration Statement) or which are
not material in amount. The Company and each Subsidiary, if any, occupy
its leased properties under valid and binding leases conforming in all
material respects to the description thereof set forth in the
Registration Statement.
(j) The Company and each Subsidiary, if any, has filed all
Federal, State, local and foreign income tax returns which have been
required to be filed and have paid all taxes indicated by said returns
and all assessments received by it to the extent that such taxes have
become due and are not being contested in good faith. All tax
liabilities have been adequately provided for in the financial
statements of the Company.
(k) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or
supplemented, there has not been any material adverse change or any
development involving a prospective material adverse change in or
affecting the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise), or prospects of
the Company or any Subsidiary, if any, whether or not occurring in the
ordinary course of business, and there has not been any material
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________________, 1997
Page 5
transaction entered into or any material transaction that is probable
of being entered into by the Company or any Subsidiary, if any, other
than transactions in the ordinary course of business and changes and
transactions described in the Registration Statement, as it may be
amended or supplemented. The Company and each Subsidiary, if any, has
no material contingent obligations which are not disclosed in the
Company's financial statements included in the Registration Statement
or elsewhere in the Prospectus.
(l) The Company and each Subsidiary, if any, are not, nor,
with the giving of notice or lapse of time or both, will it be, in
violation of or in default under its respective articles of
incorporation or by-laws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or
by which it, or any of its properties, is bound and which default is of
material significance in respect of the condition, financial or
otherwise of the Company or Subsidiary, if any, as the case may be, or
the business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company or
Subsidiary, if any, as the case may be. The execution and delivery of
this Agreement and the consummation of the transactions herein
contemplated and the fulfillment of the terms hereof will not conflict
with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or its Subsidiary,
if any, is a party, or of the articles of incorporation or bylaws of
the Company or any Subsidiary, if any, or any order, rule or regulation
applicable to the Company or any Subsidiary, if any, of any court or of
any regulatory body or administrative agency or other governmental body
having jurisdiction.
(m) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company of this Agreement and the consummation of the
transactions herein contemplated (except such additional steps as may
be required by the Commission, the National Association of Securities
Dealers, Inc. (the "NASD") or such additional steps as may be necessary
to qualify the Shares for public offering by the Underwriters under
state securities or Blue Sky laws) has been obtained or made and is in
full force and effect.
(n) The Company or its Subsidiaries, if any, holds all
material patents, patent rights trademarks, trade names, copyrights,
trade secrets and licenses of any of the foregoing (collectively,
"Intellectual Property Rights") that are necessary to the conduct of
its businesses; there is no claim pending or, to the best knowledge of
the Company or any Subsidiary, if any, threatened against the Company
or any Subsidiary, if any, alleging any infringement of Intellectual
Property Rights, or any violation of the terms of any license relating
to Intellectual Property Rights, nor does the Company or any
Subsidiary, if any, know of any basis for any such claim. The Company
and each Subsidiary, if any, knows of
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________________, 1997
Page 6
no material infringement by others of Intellectual Property Rights
owned by or licensed to the Company or any Subsidiary. The Company or
its Subsidiaries, if any, has obtained, is in compliance in all
material respects with and maintains in full force and effect all
material licenses, certificates, permits, orders or other, similar
authorizations granted or issued by any governmental agency
(collectively "Government Permits") required to conduct its business as
it is presently conducted. All applications for additional Government
Permits described in the Prospectus as having been made by the Company
or its Subsidiaries, if any, have been properly and effectively made in
accordance with the applicable laws and regulations with respect
thereto and such applications constitute, in the best judgment of the
Company's management, those reasonably required to have been made in
order to carry out the Company's business plan as described in the
Prospectus. No proceeding to revoke, limit or otherwise materially
change any Government Permit has been commenced or, to the Company's
best knowledge or that of its Subsidiaries, if any, is threatened
against the Company or any Subsidiary, if any, with respect to
materials supplied to the Company or its Subsidiaries, if any, and the
Company has no reason to anticipate that any such proceeding will be
commenced against the Company or any Subsidiary, if any. Except as
disclosed or contemplated in the Prospectus, the Company and each
Subsidiary, if any, has no reason to believe that any pending
application for a Government Permit will be denied or limited in a
manner inconsistent with the Company's business plan as described in
the Prospectus.
(o) The Company and each Subsidiary, if any, is in all
material respects in compliance with all applicable Environmental Laws.
The Company and each Subsidiary, if any, has no knowledge of any past,
present or, as anticipated by the Company or its Subsidiaries, if any,
future events, conditions, activities, investigation, studies, plans or
proposals that (i) would interfere with or prevent compliance with any
Environmental Law by the Company or any Subsidiary, if any or (ii)
could reasonably be expected to give rise to any common law or other
liability, or otherwise form the basis of a claim, action, suit,
proceeding, hearing or investigation, involving the Company or any
Subsidiary, if any, and related in any way to Hazardous Substances or
Environmental Laws. Except for the prudent and safe use and management
of Hazardous Substances in the ordinary course of the Company's
business, (i) no Hazardous Substance is or has been used, treated,
stored, generated, manufactured or otherwise handled on or at any
Facility and (ii) to the Company's best knowledge or that of its
Subsidiaries, if any, no Hazardous Substance has otherwise come to be
located in, on or under any Facility. No Hazardous Substances are
stored at any Facility except in quantities necessary to satisfy the
reasonably anticipated use or consumption by the Company and its
Subsidiaries, if any. No litigation, claim, proceeding or governmental
investigation is pending regarding any environmental matter for which
the Company or any Subsidiary, if any, has been served or otherwise
notified or, to the knowledge of the Company or any Subsidiary, if any,
threatened or asserted against the Company or any Subsidiary, if any,
or the officers or directors of the Company or of any Subsidiary, if
any, in their capacities as such, or any Facility or the Company's
business.
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________________, 1997
Page 7
There are no orders, judgments or decrees of any court or of any
governmental agency or instrumentality under any Environmental Law
which specifically apply to the Company or any Subsidiary, if any, any
Facility or any of the Company's operations. Neither the Company nor
any Subsidiary, if any, has received from a governmental authority or
other person (i) any notice that it is a potentially responsible person
for any Contaminated site or (ii) any request for information about a
site alleged to be Contaminated or regarding the disposal of Hazardous
Substances. There is no litigation or proceeding against any other
person by the Company or any Subsidiary, if any, regarding any
environmental matter. The Company has disclosed in the Prospectus or
made available to the Underwriters and their counsel true, complete and
correct copies of any reports, studies, investigations, audits,
analysis, tests or monitoring in the possession of or initiated by the
Company or any Subsidiary, if any, pertaining to any environmental
matter relating to the Company, any Subsidiary, if any, its past or
present operations or any Facility.
For the purposes of the foregoing paragraph, "Environmental
Laws" means any applicable federal, state or local statute, regulation, code,
rule, ordinance, order, judgment, decree, injunction or common law pertaining in
any way to the protection of human health or the environment, including without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Toxic Substances
Control Act, the Clean Air Act, the Federal Water Pollution Control Act and any
similar or comparable state or local law; "Hazardous Substance" means any
hazardous, toxic, radioactive or infectious substance, material or waste as
defined, listed or regulated under any Environmental Law; "Contaminated" means
the actual existence on or under any real property of Hazardous Substances, if
the existence of such Hazardous Substances triggers a requirement to perform any
investigatory, remedial, removal or other response action under any
Environmental Laws or if such response action legally could be required by any
governmental authority; "Facility" means any property currently owned, leased or
occupied by the Company.
(p) Neither the Company or any Subsidiary, if any, nor to the
Company's best knowledge or that of any Subsidiary, if any, any of its
affiliates, has taken or intends to take, 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 shares of Common Stock to facilitate
the sale or resale of the Shares.
(q) The Company is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940 and the
rules and regulations of the Commission thereunder.
(r) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary
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________________, 1997
Page 8
to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(s) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of their
respective businesses and the value of their respective properties and
as is customary for companies engaged in similar industries.
(t) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Section 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such
qualification.
(u) The Company and each Subsidiary, if any, is in material
compliance with all laws, rules, regulations, orders of any court or
administrative agency, operating licenses or other requirements imposed
by any governmental body applicable to it, including, without
limitation, all applicable laws, rules, regulations, licenses or other
governmental standards applicable to the industries in which the
Company and its Subsidiaries, if any, operates; and the conduct of the
business of the Company and each Subsidiary, if any, as described in
the Prospectus, will not cause the Company or any Subsidiary, if any,
to be in violation of any such requirements.
(v) The Representative's Warrants (as defined in Paragraph (d)
of Section 2 hereof) have been authorized for issuance to the
Representative and will, when issued, possess rights, privileges, and
characteristics as represented in the most recent form of
Representative's Warrants filed as an exhibit to the Registration
Statement; the securities to be issued upon exercise of the
Representative's Warrants, when issued and delivered against payment
therefor in accordance with the terms of the Representative's Warrants,
will be duly and validly issued, fully paid, nonassessable and free of
preemptive rights, and all corporate action required to be taken for
the authorization and issuance of the Representative's
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Page 9
Warrants, and the securities to be issued upon their exercise, have
been validly and sufficiently taken.
(w) Except as disclosed in the Prospectus, neither the Company
or any Subsidiary, if any, nor any of its officers, directors or
affiliates have caused any person, other than the Underwriters, to be
entitled to reimbursement of any kind, including, without limitation,
any compensation that would be includable as underwriter compensation
under the NASD's Corporate Financing Rule with respect to the offering
of the Shares, as a result of the consummation of such offering based
on any activity of such person as a finder, agent, broker, investment
adviser or other financial service provider.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties and
covenants herein contained, and subject to the conditions herein set
forth, the Company agrees to sell to the Underwriters and each
Underwriter agrees, severally and not jointly, to purchase, at a price
of $__________ per Share (representing a 6.2% discount from the initial
public offering price of the Shares), the number of Firm Shares set
forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be
made in New York Clearing House funds and, at the option of the
Representative, by certified or bank cashier's checks drawn to the
order of the Company or bank wire to an account specified by the
Company against either uncertificated delivery of the securities
comprising the Firm Shares or of certificates therefor (which delivery,
if certificated, shall take place in such location in New York, New
York as may be specified by the Representative) to the Representative
for the several accounts of the Underwriters. Such payment is to be
made at the offices of the Representative, at the address set forth on
the first page of this agreement, at 7:00 a.m., Pacific time, on the
third business day after the date of this Agreement or at such other
time and date not later than five business days thereafter as you and
the Company shall agree upon, such time and date being herein referred
to as the "Closing Date." (As used herein, "business day" means a day
on which the New York Stock Exchange is open for trading and on which
banks in New York are open for business and not permitted by law or
executive order to be closed.) Except to the extent uncertificated
securities comprising the Firm Shares are delivered at closing, the
certificates for the securities comprising the Firm Shares will be
delivered in such denominations and in such registrations as the
Representative requests in writing not later than the second full
business day prior to the Closing Date, and will be made available for
inspection by the Representative at least one business day prior to the
Closing Date.
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Page 10
(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions
herein set forth, the Company hereby grants an option to the
Representative to purchase the Option Shares at the price per Share as
set forth in the first paragraph of this Section 2. The option granted
hereby may be exercised in whole or in part by giving written notice
(i) at any time before the Closing Date and (ii) thereafter (on one or
more occasions) within 45 days after the date of this Agreement, by the
Representative to the Company setting forth the number of Option Shares
as to which the Representative is exercising the option, the names and
denominations in which the securities comprising the Option Shares are
to be registered and the time and date at which certificates
representing the securities comprising such Shares are to be delivered.
The time and date at which certificates for the securities comprising
the Option Shares are to be delivered shall be determined by the
Representative but shall not be earlier than three nor later than 10
full business days after the exercise of such option, nor in any event
prior to the Closing Date (such time and date being herein referred to
as the "Option Closing Date"). If the date of exercise of the option is
three or more days before the Closing Date, the notice of exercise
shall set the Closing Date as the Option Closing Date. The option with
respect to the Option Shares granted hereunder may be exercised only to
cover over-allotments in the sale of the Firm Shares by the
Underwriters. The Representative may cancel such option at any time
prior to its expiration by giving written notice of such cancellation
to the Company. To the extent, if any, that the option is exercised,
payment for the Option Shares shall be made on the Option Closing Date
in New York Clearing House funds and, at the option of the
Representative, by certified or bank cashier's check drawn to the order
of the Company for the Option Shares to be sold by the Company or bank
wire to an account specified by the Company against delivery of
certificates therefor at the offices of the Representative set forth on
the first page of this Agreement.
(d) In addition to the sums payable to the Representative as
provided elsewhere herein, the Representative shall be entitled to
receive at the Closing, for itself alone and not as the Representative
of the Underwriters, as additional compensation for its services,
purchase warrants (the "Representative's Warrants") for the purchase of
up to 200,000 Shares at a price of $__________ per Unit (120% of the
initial public offering price of the Shares), upon the terms and
subject to adjustment and conversion as described in the form of
Representative's Warrants filed as an exhibit to the Registration
Statement.
3. Offering by the Underwriters.
It is understood that the several Underwriters are to make a
public offering of the Firm Shares as soon as the Representative deems it
advisable to do so. The Firm Shares are to be initially offered to the public at
the initial public offering price set forth in the Prospectus. The
Representative may from time to time thereafter change the public offering price
and other selling
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Page 11
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Representative will offer them to the public on the
foregoing terms.
It is also understood that the Underwriters have reserved an
aggregate of Firm Shares for sale at the initial public offering price to
directors, director nominees, officers, employees and certain individuals
associated with the Company, its directors, director nominees, officers and
employees. Any reserved Shares that are not so purchased will be offered by the
Underwriters to the general public on the same basis as the balance of the Firm
Shares.
It is further understood that you will act as the
Representative for the Underwriters in the offering and sale of the Shares in
accordance with an Agreement Among Underwriters entered into by you and the
several other Underwriters.
4. Covenants of the Company.
The Company covenants and agrees with the several Underwriters
that:
(a) The Company will (i) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely
file with the Commission under Rule 424(b) of the Rules and Regulations
a Prospectus in a form approved by the Representative containing
information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and
Regulations, and (ii) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representative
shall not previously have been advised and furnished with a copy or to
which the Representative shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations.
(b) The Company will advise the Representative promptly (i)
when the Registration Statement or any post-effective amendment thereto
shall have become effective, (ii) of receipt of any comments from the
Commission, (iii) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, and (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending
the use of the Prospectus and to obtain as soon as possible the lifting
thereof, if issued.
(c) The Company will cooperate with the Representative in
endeavoring to qualify the Shares for sale under the securities laws of
such jurisdictions as the Representative may reasonably have designated
in writing and will make such applications, file such documents, and
furnish such information as may be reasonably required for that
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Page 12
purpose, provided the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process
in any jurisdiction where it is not now so qualified or required to
file such a consent. The Company will, from time to time, prepare and
file such statements, reports, and other documents, as are or may be
required to continue such qualifications in effect for so long a period
as the Representative may reasonably request for distribution of the
Shares.
(d) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary
Prospectus as the Representative may reasonably request. The Company
will deliver to, or upon the order of, the Representative during the
period when delivery of a Prospectus is required under the Act, as many
copies of the Prospectus in final form, or as thereafter amended or
supplemented, as the Representative may reasonably request. The Company
will deliver to the Representative at or before the Closing Date, two
signed copies of the Registration Statement and all amendments thereto
including all exhibits filed therewith, and will deliver to the
Representative such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that
may reasonably be requested), and of all amendments thereto, as the
Representative may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission
thereunder, so as to permit the completion of the distribution of the
Shares as contemplated in this Agreement and the Prospectus. If during
the period in which a prospectus is required by law to be delivered by
an Underwriter or dealer, any event shall occur as a result of which,
in the judgment of the Company or in the reasonable opinion of the
Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend
or supplement the Prospectus to comply with any law, the Company
promptly will prepare and file with the Commission an appropriate
amendment to the Registration Statement or supplement to the Prospectus
so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or
so that the Prospectus will comply with the law.
(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration
Statement, an earnings statement (which need not be audited) in
reasonable detail, covering a period of at least 12 consecutive months
beginning after the effective date of the Registration Statement, which
earnings statement shall satisfy the requirements of Section 11(a) of
the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
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(g) The Company will, for a period of five years from the
Closing Date, deliver to the Representative copies of annual reports
and copies of all other documents, reports and information furnished by
the Company to its stockholders or filed with any securities exchange
pursuant to the requirements of such exchange or with the Commission
pursuant to the Act or the Exchange Act. The Company will deliver to
the Representative similar reports with respect to significant
subsidiaries, as that term is defined in the Rules and Regulations,
which are not consolidated in the Company's financial statements.
(h) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other securities convertible
into or exchangeable or exercisable for shares of Common Stock or
derivative of Common Stock (or agreement for such) will be made for a
period of one year after the date of this Agreement, directly or
indirectly, by the Company otherwise than hereunder or with the prior
written consent of the Representative, other than pursuant to
outstanding convertible securities, stock option and warrants or
pursuant to employee benefit plans in effect as of the date hereof, in
each case as disclosed in the Prospectus.
(i) The Company will use its best efforts to list, subject to
notice of issuance, the Common Stock on The Nasdaq National Market.
(j) The Company has caused each officer and director and each
person who owns, beneficially or of record, 5% or more of the
outstanding shares of the Company's Common Stock (or securities
convertible into or exercisable for Common Stock) outstanding
immediately prior to this offering to furnish to you, on or prior to
the date of this Agreement, a letter or letters, in form and substance
satisfactory to the Underwriters ("Lockup Agreements"), pursuant to
which each such person shall agree (A) not to offer to sell, sell,
contract to sell, sell short or otherwise dispose of any shares of
Common Stock or other capital stock of the Company, or any other
securities convertible, exchangeable or exercisable for Common Stock or
derivatives of Common Stock owned by such person, or request the
registration for the offer or sale of any of the foregoing (or as to
which such person has the right to direct the disposition of) for a
period of one year after the date of this Agreement, directly or
indirectly, except with the prior written consent of the
Representative. The Lockup Agreements shall also provide that, after
the expiration of the lockup period, each person shall give you prior
notice with respect to any offers to sell, sales, contracts to sell,
short sales or other dispositions of Common Stock pursuant to Rule 144
under the Act or any similar provisions enacted subsequent to the date
of this Agreement for a period of two years from the date of this
Agreement.
(k) The Company shall apply the net proceeds of its sale of
the Shares as set forth in the Prospectus and shall file such reports
with the Commission with respect to the sale of
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Page 14
the Shares and the application of the proceeds therefrom as may be
required in accordance with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a
manner as would require the Company or any of its Subsidiaries, if any,
to register as an investment company under the Investment Company Act
of 1940, as amended (the "1940 Act").
(m) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a
registrar for the Common Stock.
(n) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
5. Costs and Expenses.
(a) The Representative shall be entitled to receive from the
Company, for itself alone and not as the Representative of the
Underwriters, a nonaccountable expense allowance collectively equal to
1% of the aggregate public offering price of Shares sold to the
Underwriters in connection with the Offering. The Representative shall
be entitled to withhold this allowance on the Closing Date (less the
$35,000 advance against such amount that has been previously paid by
the Company) with respect to Shares delivered on the Closing Date and
to require the Company to make payment of this allowance on the Option
Closing Date with respect to Shares delivered on the Option Closing
Date.
(b) In addition to the payment described in Paragraph (a) of
this Section 5, the Company will pay all costs, expenses and fees
incident to the performance of the obligations of the Company under
this Agreement, including, without limiting the generality of the
foregoing, the following: accounting fees of the Company; the fees and
disbursements of counsel for the Company; the cost of electronic
filing, printing and delivering to, or as requested by, the
Underwriters copies of the Registration Statement, Preliminary
Prospectuses, the Prospectus, this Agreement, the Underwriters' Selling
Memorandum, the Underwriters' Invitation Letter, the Listing
Application, the Blue Sky Survey and any supplements or amendments
thereto; the filing fees of the Commission; the filing fees incident to
securing any required review by the National Association of Securities
Dealers, Inc. (the "NASD") of the terms of the sale of the Shares; the
Listing Fee of The Nasdaq National Market; the reasonable costs of
conducting a due diligence investigation of the principals of the
Company by a firm acceptable to the Representative, and the expenses,
including the fees and disbursements of counsel for the Underwriters,
incurred in connection with the qualification of the Shares under state
securities or Blue Sky laws. Any transfer
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Page 15
taxes imposed on the sale of the Shares to the several Underwriters
will be paid by the Company. The Company agrees to pay all costs and
expenses of the Underwriters, including the fees and disbursements of
counsel for the Underwriters, incident to the offer and sale of
directed shares of the Common Stock by the Underwriters to employees
and persons having business relationships with the Company. The Company
shall not, however, be required to pay for any of the Underwriters'
expenses (other than those related to qualification under NASD
regulation and state securities or Blue Sky laws) except that, if this
Agreement shall not be consummated, then the Company shall reimburse
the several Underwriters for reasonable accountable out-of-pocket
expenses, including fees and disbursements of counsel, reasonably
incurred in connection with investigating, marketing and proposing to
market the Shares or in contemplation of performing their obligations
hereunder (less the $35,000 advance that has been paid by the Company);
but the Company shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from
the sale by them of the Shares. In the event this Agreement is not
consummated, any nonaccountable portion of the $35,000 advance shall be
promptly returned to the Company.
6. Conditions of Obligations of the Underwriters.
The several obligations of the Underwriters to purchase the
Firm Shares on the Closing Date and the Option Shares, if any, on the Option
Closing Date are subject to the accuracy, as of the Closing Date or the Option
Closing Date, as the case may be, of the representations and warranties of the
Company contained herein, and to the performance by the Company of their
covenants and obligations hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and any and all filings
required by Rule 424 and Rule 430A of the Rules and Regulations shall
have been made, and any request of the Commission for additional
information (to be included in the Registration Statement or otherwise)
shall have been disclosed to the Representative and complied with to
their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to
time, shall have been issued and no proceedings for that purpose shall
have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission and no injunction, restraining order, or
order of any nature by a Federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance of the Shares.
(b) The Representative shall have received on the Closing Date
or the Option Closing Date, as the case may be, the opinion of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC, counsel for the Company, dated the
Closing Date or the Option Closing Date, as the case may be, addressed
to the Underwriters (and stating that it may be relied upon by counsel
to the Underwriters), substantially as follows:
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Page 16
(i) The Company and the Subsidiaries, if any, each
has been duly organized and is validly existing as a
corporation in good standing under the laws of its respective
jurisdictions of incorporation, with corporate power and
authority to own or lease its properties and conduct its
business as described in the Registration Statement; each of
the Company and the Subsidiaries, if any, is duly qualified to
transact business in all jurisdictions in which the conduct of
its business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon
the business of the Company and its Subsidiaries, if any.
(ii) The Company has authorized and outstanding
capital stock as set forth under the caption "Capitalization"
in the Prospectus; the outstanding shares of the Company's
Common Stock have been duly authorized and validly issued and
are fully paid and nonassessable; all issued and outstanding
shares of the capital stock of the Company and the
Subsidiaries, if any, and all other securities issued and sold
or exchanged by the Company and its Subsidiaries, if any, have
been issued and sold or exchanged in compliance in all
material respects with applicable securities laws and
regulations; all of the securities of the Company conform to
the description thereof contained in the Prospectus; the
certificate for the Common Stock, assuming it is in the form
filed with the Commission, is in due and proper form; the
shares of Common Stock to be sold by the Company pursuant to
this Agreement, including shares of Common Stock to be sold as
a part of the Option Shares, have been duly authorized and,
upon issuance and delivery thereof as contemplated in this
Agreement and the Registration Statement, will be validly
issued, fully paid and nonassessable; no preemptive rights of
stockholders exist with respect to any of the Common Stock of
the Company or the issuance or sale thereof pursuant to any
applicable statute or the provisions of the Company's charter
documents or, to such counsel's best knowledge, pursuant to
any contractual obligation. The Representative's Warrants have
been authorized for issuance to the holders of the
Representative's Warrants, and will, when issued, possess
rights, privileges, and characteristics as represented in the
most recent form of Representative's Warrants filed as an
exhibit to the Registration Statement; the securities to be
issued upon exercise of the Representative's Warrants, when
issued and delivered against payment therefor in accordance
with the terms of the Representative's Warrants, will be duly
and validly issued, fully paid, nonassessable and free of
preemptive rights, and all corporate action required to be
taken for the authorization and issuance of the
Representative's Warrants, and the securities to be issued
upon their exercise, has been validly and sufficiently taken.
(iii) Except as described in or contemplated by the
Prospectus, to the knowledge of such counsel, there are no
outstanding securities of the Company convertible or
exchangeable into or evidencing the right to purchase or
subscribe for
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________________, 1997
Page 17
any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its
capital stock or any securities convertible or exchangeable
into or evidencing the right to purchase or subscribe for any
shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any
securities of the Company or any other person has the right,
contractual or otherwise, which has not been satisfied or
effectively waived, to cause the Company to sell or otherwise
issue to them, or to permit them to underwrite the sale of,
any of the Shares or the right to have any Common Stock or
other securities of the Company included in the Registration
Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act
of any shares of Common Stock or other securities of the
Company.
(iv) The Registration Statement has become
effective under the Act and, to the best of the knowledge of
such counsel, no stop order proceedings with respect thereto
have been instituted or are pending or threatened under the
Act.
(v) The Registration Statement, the Prospectus and
each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Act and the
applicable rules and regulations thereunder (except that such
counsel need express no opinion as to the financial statements
therein).
(vi) The statements under the captions "Business -
Dependence on Cree and Cree Technology," "Business -
Intellectual Property of the Company," "Description of
Securities" and "Shares Eligible for Future Sale" in the
Prospectus and in Item 14 of the Registration Statement,
insofar as such statements constitute a summary of documents
referred to therein or matters of law, fairly summarize in all
material respects the information called for with respect to
such documents and matters.
(vii) Such counsel does not know of any contracts or
documents required to be filed as exhibits to the Registration
Statement or described in the Registration Statement or the
Prospectus which are not so filed or described as required,
and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized
in all material respects.
(viii) Such counsel knows of no material legal or
governmental proceedings pending or threatened against the
Company or any Subsidiary, if any, except as set forth in the
Registration Statement.
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Page 18
(ix) To the best knowledge of such counsel, except
as described in the Registration Statement or the Prospectus,
the Company is not party to any agreement giving rise to any
obligation by the Company to pay any third-party royalties or
fees of any kind whatsoever with respect to any technology
developed, employed, used or licensed by the Company.
(x) The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated
do not and will not conflict with or result in a breach of any
of the terms or provisions of, or constitute a default under,
the articles of incorporation or bylaws of the Company or any
Subsidiary, if any, or any agreement or instrument known to
such counsel to which the Company or any Subsidiary, if any,
is a party or by which the Company or any Subsidiary, if any,
may be bound.
(xi) This Agreement has been duly authorized,
executed and delivered by the Company; and the
Representative's Warrants have been duly authorized, executed
and delivered by the Company.
(xii) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory,
administrative or other governmental body is necessary in
connection with the execution and delivery of this Agreement
and the consummation of the transactions herein contemplated
(other than as may be required by the NASD or as required by
state securities and Blue Sky laws as to which such counsel
need express no opinion) except such as have been obtained or
made, specifying the same.
(xiii) The Company is not, and will not become, as a
result of the consummation of the transactions contemplated by
this Agreement, and application of the net proceeds therefrom
as described in the Prospectus, required to register as an
investment company under the 1940 Act.
In rendering such opinion, such counsel may rely as to matters
governed by the laws of any state other than North Carolina or Federal laws on
local counsel in such jurisdictions, provided that in each case such counsel
shall state that they believe that they and the Underwriters are justified in
relying on such other counsel. In addition to the matters set forth above, the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC, shall also include a statement
to the effect that nothing has come to the attention of such counsel that has
caused them to believe that (i) the Registration Statement, at the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
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________________, 1997
Page 19
misleading, and (ii) the Prospectus, or any supplement thereto, on the date it
was filed pursuant to the Rules and Regulations and as of the Closing Date or
the Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements and statistical information therein).
(c) The Representative shall have received from counsel for
the Company, an opinion dated the Closing Date or the Option Closing
Date, as the case may be, (and stating that it may be relied upon by
counsel to the Underwriters), regarding intellectual property matters
in the form to be mutually agreed by the Company and the
Representative.
(d) The Representative shall have received from ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, P.C., counsel for the Underwriters, an opinion dated the
Closing Date or the Option Closing Date, as the case may be,
substantially to the effect specified in subparagraphs (i), (iv) and
(v) of Paragraph (b) of this Section 6. In rendering such opinion,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P.C. may rely as to all matters governed other
than by the laws of the State of California or Federal laws on the
opinion of counsel referred to in Paragraph (b) of this Section 6. In
addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the
attention of such counsel that has caused them to believe that (i) the
Registration Statement, or any amendment thereto, as of the time it
became effective under the Act (but after giving effect to any
modifications incorporated therein pursuant to Rule 430A under the Act)
as of the Closing Date or the Option Closing Date, as the case may be,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as
the case may be,
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Page 20
contained an untrue statement of a material fact or omitted to state a
material fact, necessary in order to make the statements, in the light
of the circumstances under which they are made, not misleading (except
that such counsel need express no view as to financial statements,
schedules and statistical information therein). With respect to such
statement, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P.C. may state that their belief is
based upon the procedures set forth therein, but is without independent
check and verification.
(e) The Representative shall have received at or prior to the
Closing Date from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P.C. a memorandum or summary,
in form and substance satisfactory to the Representative, with respect
to the qualification for offering and sale by the Underwriters of the
Shares under the state securities or Blue Sky laws of such
jurisdictions as the Representative may reasonably have designated to
the Company.
(f) The Representative, on behalf of the several Underwriters,
shall have received, on each of the dates hereof, the Closing Date and
the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may
be, in form and substance satisfactory to the Representative, of
Deloitte & Touche LLP, confirming that they are independent public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and stating that in their opinion the
financial statements examined by them and included in the Registration
Statement comply in form in all material respects with the applicable
accounting requirements of the Act and the related published Rules and
Regulations and containing such other statements and information as are
ordinarily included in accountants' "comfort letters" to Underwriters
with respect to the financial statements and certain financial and
statistical information contained in the Registration Statement and
Prospectus.
(g) The Representative shall have received on the Closing Date
or the Option Closing Date, as the case may be, a certificate or
certificates of the President and the Chief Financial Officer of the
Company to the effect that, as of the Closing Date or the Option
Closing Date, as the case may be, each of them severally represents as
follows:
(i) The Registration Statement has become effective
under the Act and no stop order suspending the effectiveness
of the Registration Statement has been issued, and no
proceedings for such purpose have been taken or are, to his or
her knowledge, contemplated by the Commission;
(ii) The representations and warranties of the
Company contained in Section 1 hereof are true and correct as
of the Closing Date or the Option Closing Date, as the case
may be;
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Page 21
(iii) All filings required to have been made pursuant
to Rules 424 or 430A under the Act have been made;
(iv) He has carefully examined the Registration
Statement and the Prospectus and, in his opinion, as of the
effective date of the Registration Statement, the statements
contained in the Registration Statement were true and correct,
and such Registration Statement and Prospectus did not omit to
state a material fact required to be stated therein or
necessary in order to make the statements therein not
misleading, and since the effective date of the Registration
Statement, no event has occurred which should have been set
forth in a supplement to or an amendment of the Prospectus
which has not been so set forth in such supplement or
amendment; and
(v) Since the respective dates as of which
information is given in the Registration Statement and
Prospectus, there has not been any material adverse change or
any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise,
of the Company or the earnings, business, management,
properties, assets, rights, operations, condition (financial
or otherwise) or prospects of the Company, whether or not
arising in the ordinary course of business.
(h) The Company shall have furnished to the Representative
such further certificates and documents confirming the representations
and warranties, covenants and conditions contained herein and related
matters as the Representative may reasonably have requested.
(i) The Common Stock has been approved for quotation upon
notice of issuance on the Nasdaq National Market.
(j) The Lockup Agreements described in Section 4(j) are in
full force and effect.
The opinions and certificates mentioned in this Agreement
shall be deemed to be in compliance with the provisions hereof only if they are
in all material respects satisfactory to the Representative and to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, P.C., counsel for the Underwriters.
If any of the conditions hereinabove provided for in this
Section 6 shall not have been fulfilled when and as required by this Agreement
to be fulfilled, the obligations of the Underwriters hereunder may be terminated
by the Representative by notifying the Company of such termination in writing or
by telegram at or prior to the Closing Date or the Option Closing Date, as the
case may be.
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Page 22
In such event, the Company and the Underwriters shall not be
under any obligation to each other (except to the extent provided in Sections 5
and 8 hereof).
7. Conditions of the Obligations of the Company.
The obligations of the Company to sell and deliver the portion
of the Shares required to be delivered as and when specified in this Agreement
are subject to the conditions that at the Closing Date or the Option Closing
Date, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities to which such Underwriter or any such controlling person
may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or (ii) 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 each Underwriter and each such controlling person upon demand
for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating or
defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter
or controlling person is a party to any action or proceeding; provided,
however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement, or
omission or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by or through the Representative specifically
for use in the preparation thereof. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify
and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement and each person, if
any, who controls the Company within the meaning of the Act, against
any losses, claims, damages or liabilities to which the Company or any
such director, officer or controlling person may become subject under
the Act or otherwise, insofar as such
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Page 23
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto, or (ii) 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
the light of the circumstances under which they were made; and will
reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission has been made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or such amendment
or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof. This indemnity
agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to this Section 8, such person
(the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available
to any party who shall fail to give notice as provided in this Section
8(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially
prejudiced by the failure to give such notice, but the failure to give
such notice shall not relieve the indemnifying party or parties from
any liability which it or they may have to the indemnified party for
contribution or otherwise than on account of the provisions of Section
8(a) or (b). In case any such proceeding shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party and shall
pay as incurred the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the indemnifying party shall pay as
incurred (or within 30 days of presentation) the fees and expenses of
the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them or (iii) the indemnifying
party shall have failed to assume
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▇▇▇▇▇▇▇ Investment Company, Inc.
________________, 1997
Page 24
the defense and employ counsel acceptable to the indemnified party
within a reasonable period of time after notice of commencement of the
action. It is understood that the indemnifying party shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more
than one separate firm for all such indemnified parties. Such firm
shall be designated in writing by you in the case of parties
indemnified pursuant to Section 8(a) and by the Company in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding of
which indemnification may be sought hereunder (whether or not any
indemnified party is an actual or potential party to such claim, action
or proceeding) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability
arising out of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities, (or actions or proceedings in respect thereof), as well as
any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Company bears to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company on the one hand or the Underwriters on the other
25
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________________, 1997
Page 25
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
8(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 8(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement,
any Preliminary Prospectus, the Prospectus or any supplement or
amendment thereto, each party against whom contribution may be sought
under this Section 8 hereby consents to the jurisdiction of any court
having jurisdiction over any other contributing party, agrees that
process issuing from such court may be served upon him or it by any
other contributing party and consents to the service of such process
and agrees that any other contributing party may join him or it as an
additional defendant in any such proceeding in which such other
contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or
contribution under this Section 8 shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred. The indemnity and contribution
agreements contained in this Section 8 and the representations and
warranties of the Company set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or
any persons controlling the Company, (ii) acceptance of any Shares and
payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.
26
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________________, 1997
Page 26
9. Default by Underwriters.
If on the Closing Date or the Option Closing Date, as the case
may be, any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), you, as
the Representative of the Underwriters, shall use your reasonable efforts to
procure within 36 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and upon
the terms set forth herein, the Firm Shares or Option Shares, as the case may
be, which the defaulting Underwriter or Underwriters failed to purchase. If
during such 36 hours you, as such Representative, shall not have procured such
other Underwriters, or any others, to purchase the Firm Shares or Option Shares,
as the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of Shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of Firm Shares or Option Shares, as the case may be, with
respect to which such default shall occur equals or exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company or you
as the Representative of the Underwriters will have the right, by written notice
given within the next 36-hour period to the parties to this Agreement, to
terminate this Agreement without liability on the part of the non-defaulting
Underwriters or of the Company except to the extent provided in Section 8
hereof. In the event of a default by any Underwriter or Underwriters, as set
forth in this Section 9, the Closing Date or Option Closing Date, as the case
may be, may be postponed for such period, not exceeding seven days, as you, as
the Representative, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. Notices.
All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: if to the Underwriters, to ▇▇▇▇▇▇▇
Investment Company, Inc., ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇; with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P.C., ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇; if to the Company, to C3, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇; with a copy to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
27
▇▇▇▇▇▇▇ Investment Company, Inc.
________________, 1997
Page 27
11. Termination.
This Agreement may be terminated by you by notice to the
Company as follows:
(a) at any time prior to the earlier of (i) the time the
Shares are released by you for sale by notice to the Underwriters, or
(ii) 11:30 a.m. on the first business day following the date of this
Agreement;
(b) at any time prior to the Closing Date if any of the
following has occurred: (i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
any material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Company and its subsidiaries taken as a whole or the
earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and its
subsidiaries taken as a whole, whether or not arising in the ordinary
course of business, (ii) any outbreak or escalation of hostilities or
declaration of war or national emergency or other national or
international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, escalation, declaration,
emergency, calamity, crisis or change on the financial markets of the
United States would, in your reasonable judgment, make it impracticable
to market the Shares or to enforce contracts for the sale of the
Shares, (iii) the Dow ▇▇▇▇▇ Industrial Average shall have fallen by 15
percent or more from its closing price on the day immediately preceding
the date that the Registration Statement is declared effective by the
Commission, (iv) suspension of trading in securities generally on the
New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading)
for securities on either such Exchange, (v) the enactment, publication,
decree or other promulgation of any statute, regulation, rule or order
of any court or other governmental authority which in your opinion
materially and adversely affects or may materially and adversely affect
the business or operations of the Company, (vi) declaration of a
banking moratorium by United States or New York State authorities,
(vii) any downgrading in the rating of the Company's debt securities by
any "nationally recognized statistical rating organization" (as defined
for purposes of Rule 436(g) under the Exchange Act); (viii) the
suspension of trading of the Common Stock by the Commission on the
Nasdaq National Market or (ix) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal
affairs which in your reasonable opinion has a material adverse effect
on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
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________________, 1997
Page 28
12. Successors.
This Agreement has been and is made solely for the benefit of
the Underwriters, the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. Information Provided by Underwriters.
The Company and the Underwriters acknowledge and agree that
the only information furnished or to be furnished by any Underwriter to the
Company for inclusion in any Prospectus or the Registration Statement consists
of the information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), legends required by
Item 502(d) of Regulation S-K under the Act and the information under the
caption "Underwriting" in the Prospectus.
14. Miscellaneous.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Shares under
this Agreement.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Oregon. All disputes relating to this
Underwriting Agreement shall be adjudicated before a court located in Multnomah
County, Oregon to the exclusion of all other courts that might have
jurisdiction.
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▇▇▇▇▇▇▇ Investment Company, Inc.
________________, 1997
Page 29
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
C3, INC.
By:
-------------------------
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
▇▇▇▇▇▇▇ INVESTMENT COMPANY, INC.,
as Representative of the Several Underwriters
listed on Schedule I
By:
------------------------------------
30
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
▇▇▇▇▇▇▇ Investment Company, Inc.
---------------------
Total 2,000,000
=====================
