EXHIBIT 1.1
1,250,000 UNITS
DATA CONVERSION LABORATORY, INC.
UNDERWRITING AGREEMENT
_________________, 2002
Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Gentlemen:
Data Conversion Laboratory, Inc., a New York corporation (the
"Company"), proposes to sell to the several underwriters (the "Underwriters")
named in Schedule I hereto for whom you are acting as the Representative (the
"Representative"), an aggregate of 1,250,000 units (the "Firm Units"). Each unit
will consist of one share of the Company's Common Stock ("Common Stock") and one
Warrant, each such warrant substantially in the form filed as an exhibit to the
Registration Statement (as hereinafter defined) (the "Warrants"). The respective
number of the Firm Units 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 Xxxxxxx Investment Company, Inc. an option to purchase in the aggregate
up to 187,500 additional units, identical to the Firm Units (the "Option
Units"), as set forth below. The Firm Units and the Option Units (to the extent
the aforementioned option is exercised) are herein collectively called the
"Units."
As the Representative, you have advised the Company (a) that you are
authorized to enter into this Agreement for yourself as Representative and on
behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm Units
set forth opposite their respective names in Schedule I.
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:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Underwriters as follows:
(a) A registration statement on Form SB-2 (File No. ____-_______) with
respect to the Units has been 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 (i) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (ii) 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
Units, 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."
Page 1 - Underwriting Agreement
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of New York, with
corporate power and corporate authority to own or lease its properties and
conduct its business as described in the Registration Statement. The Company
does not own and never has owned a controlling interest in any other material
corporation or other business entity, except as disclosed in the Registration
Statement. The Company is duly qualified to transact business and is in good
standing in all jurisdictions in which the conduct of its business requires such
qualification.
(c) The outstanding shares of each class or series of capital stock of
the Company have been duly authorized and validly issued and are fully paid and
non-assessable and, except as disclosed in the Registration Statement, have been
issued and sold by the Company in compliance in all material respects with
applicable securities laws; the issuance and sale of the Units, and the Common
Stock and Warrants included within the Units, have been duly authorized by all
necessary corporate action and, when issued and paid for as contemplated herein,
the Common Stock and Warrants included in the Units will be validly issued,
fully paid and non-assessable; and no preemptive rights of shareholders exist
with respect to any security of the Company or the issue and sale thereof. The
Company does not own or have the right to acquire capital stock or other equity
securities of any other person representing more than five percent of the equity
of that person, or otherwise control any other person.
(d) The information set forth under the caption "Capitalization" in the
Prospectus is true and correct in all material respects. The Common Stock
conforms and the Warrants and the Representative's Warrants (as defined in
Paragraph (d) of Section 2 hereof) will conform to the description thereof
contained in the Registration Statement. The forms of certificates for the
securities comprising the Units conform to the requirements of the corporate law
of New York. Except as described in the Registration Statement, there are no
outstanding securities of the Company convertible or exchangeable into or
evidencing the right to purchase or subscribe for 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 into or exchangeable for or
evidencing the right to purchase or subscribe for any shares of such stock.
Page 2 - Underwriting Agreement
(e) The Commission has not issued an order preventing or suspending the
use of any Prospectus relating to the proposed offering of the Units 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
the Underwriters, specifically for use in the preparation thereof; and further
provided that, with respect to information included in the Registration
Statement and the Prospectus in reliance on the opinion of experts identified as
such in the Prospectus, such representation is given to the Company's best
knowledge.
(f) The financial statements of the Company, together with related
notes and schedules as set forth in the Registration Statement, present fairly
the financial position, results of operations, cash flows and shareholders
equity of the Company at the indicated dates and for the indicated periods. Such
financial statements and related schedules have been prepared in accordance with
generally accepted accounting principles, consistently applied throughout the
periods involved, except as disclosed therein, 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 has been
compiled on a basis consistent with the financial statements presented therein
and the books and records of the Company.
(g) Xxxxxxxxx Xxxxx Xxxxxxx 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
applicable published Rules and Regulations.
(h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company 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 prevent the consummation of the
transactions contemplated hereby, except as set forth in the Registration
Statement.
(i) The Company has good and marketable title to all properties and
assets, tangible and intangible, 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 (i) those
reflected in such financial statements (or as described in the Registration
Statement), (ii) liens securing indebtedness for money borrowed under agreements
described in the Prospectus or (iii) which are not material. The Company's
ownership rights in its patents, patent licenses and other material technology
is consistent with (i) the description thereof in the Registration Statement,
and (ii) the business needs of the Company. All of the leases and subleases
under which the Company holds properties, tangible or intangible, are in full
force and effect conforming in all material respects to the description thereof
set forth in the Registration Statement. The Company has not received notice of
any claim that is materially adverse to the rights of the Company under any of
such leases or subleases.
Page 3 - Underwriting Agreement
(j) The Company has filed all federal, state, local and foreign income
tax returns which have been required to be filed and has paid all taxes shown as
due thereon 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,
and the Company does not know of any actual or proposed additional material tax
assessments relating to any of its historical periods.
(k) Since the respective dates as of which information is given in the
Registration Statement, as it may have been 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, whether or not occurring in the ordinary course of
business, and there has not been any material transaction entered into or any
material transaction that is probable of being entered into by the Company,
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 has no material contingent obligations which are not
disclosed in the Company's financial statements or elsewhere in the Prospectus
which is included in the Registration Statement.
(l) The Company is not, nor, with the giving of notice or lapse of time
or both, will it be, in violation of or in default that has not been waived
under its Articles of Incorporation or Bylaws 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 the business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company. 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, material contract or other agreement or
instrument to which the Company is a party or by which its assets may be bound,
or of the Articles of Incorporation or Bylaws of the Company or any order, rule
or regulation applicable to the Company 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 NASD Regulation, Inc. (the "NASDR") or such additional steps as may be
necessary to qualify the Units for public offering by the Underwriter under
state securities or Blue Sky laws) has been obtained or made and is in full
force and effect.
Page 4 - Underwriting Agreement
(n) The Company owns or possesses adequate rights to use or can acquire
on reasonable terms, all patents, patent rights, trademarks, service marks,
trade names, copyrights, trade secrets and licenses of any of the foregoing
(collectively, "Intellectual Property Rights") that are described in the
Prospectus or which are necessary to the conduct of its business; except as
disclosed in the Registration Statement, there is no claim pending or, to the
best knowledge of the Company, threatened against the Company, or any of its
officers, directors, employees or consultants, in their capacities as such,
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 know of any basis for any such claim. The Company knows of no
infringement by others of Intellectual Property Rights owned by or licensed to
the Company. Except as disclosed in the Registration Statement, and except in
the case of rights that the Company reasonably believes will be renewed prior to
their expiration, the expiration of any Intellectual Property Rights in
accordance with their terms would not have a material adverse effect on the
condition, or on the earnings, business or operations of the Company, taken as a
whole. The Company 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. No proceeding to revoke, limit or
otherwise materially change any Government Permit has been commenced or, to the
knowledge of the Company, is threatened against the Company, and the Company has
no reason to anticipate that any such proceeding will be commenced against the
Company. Except as disclosed or contemplated in the Prospectus, the Company has
no reason to believe that any pending application for a patent or 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 is in all material respects in compliance with all
applicable Environmental Laws (as defined below). The Company has no knowledge
of any past, present or, as anticipated by the Company, 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 (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 and related to
Hazardous Substances (as defined below) or Environmental Laws. No Hazardous
Substance is or has been used, treated, stored, generated, manufactured or
otherwise handled on or at any Facility (as defined below) in quantities that
violate applicable Environmental Laws or impose on the Company any reporting
obligation under such laws, and to the knowledge of the Company, 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. No
litigation, claim, proceeding or governmental investigation is pending regarding
any environmental matter for which the Company has been served or otherwise
notified or, to the knowledge of the Company, threatened or asserted against the
Company or the officers or directors of the Company, in their capacities as
such, or any Facility or the Company's business. 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, any Facility or
any of the Company's operations. The Company has not received from a
governmental authority or other person (i) any notice that it is a potentially
responsible person for any Contaminated site (as defined below) 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 regarding any environmental matter. The Company
has disclosed in the Prospectus or made available to the Underwriter and its
counsel true, complete and correct copies of any reports, studies,
investigations, audits, analyses, tests or monitoring, in the possession of or
initiated by the Company, pertaining to any environmental matter relating to the
Company and its past or present operations or any Facility.
Page 5 - Underwriting Agreement
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 owned, leased or occupied
by the Company.
(p) Neither the Company, nor to the knowledge of the Company, any of
its affiliates, has taken or intends to take, directly or indirectly, any action
which is designed to cause or result in, or which constitutes or 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
Units.
(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 and will not become an Investment Company as a
result of its receipt and investment of the proceeds from the sale of the Units.
(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 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 its business and the
value of its properties and as is customary for companies engaged in similar
industries.
Page 6 - Underwriting Agreement
(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) Sections 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 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 or to its
business; and the conduct of the business of the Company, as described in the
Prospectus, will not cause the Company to be in violation of any such
requirements.
(v) Each of the Warrants and the Representative's Warrants (as defined
in Paragraph (d) of Section 2 hereof) have been authorized for issuance to the
purchasers thereof or to the Representative or its designees, as the case may
be, and will, when issued, entitle the holders thereof to the rights,
privileges, and characteristics as represented in the most recent form of
Warrants or Representative's Warrants, as the case may be, filed as an exhibit
to the Registration Statement; the securities to be issued upon exercise of the
Warrants and the Representative's Warrants, when issued and delivered against
payment therefor in accordance with the terms thereof, 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
Warrants and the Representative's 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 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 NASDR's Corporate Financing Rule with respect to the
offering of the Units, based on any activity of such person as a finder, agent,
broker, investment adviser or other financial service provider, and there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or the Underwriters for a
brokerage commission, finder's fee or other like payment in connection with this
offering.
(x) No labor dispute with the employees of the Company exists or, to
the knowledge of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its principal
suppliers, customers or vendors, which, in any case, may reasonably be expected
to result in a material adverse effect on the Company.
(y) There are no contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits thereto that have not been so described and filed as required.
Page 7 - Underwriting Agreement
(z) To the Company's best knowledge, there are no affiliations or
associations, direct or indirect, between any member of the National Association
of Securities Dealers, Inc. ("NASD") and any of the Company's officers,
directors or 5% or greater shareholders and no beneficial owner (as that term is
defined under Rule 2720(b)(2) of the NASD Conduct Rules) of the Company's
unregistered securities, regardless of time acquired or the source from which
derived, has any direct or indirect affiliation or association with any NASD
member.
(aa) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right (other than rights which have been waived or satisfied) to
require the Company to file a registration statement under the Act with respect
to any securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company under the Act.
(bb) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of the Laws of Florida, Chapter
92-198, An Act Relating to Disclosure of Doing Business with Cuba, and the
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after the
date of the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Financing (the
"Department"), whichever date is later, of if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba changed in
any material way, the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.
(dd) The Units and the Common Stock and Warrants comprising the Units
have been approved for listing on the Nasdaq SmallCap Market ("Nasdaq SmallCap")
upon the effectiveness of the Registration Statement and the Company has
satisfied all of the requirements of Nasdaq SmallCap for such listing and for
the trading of its Units and the Common Stock and Warrants comprising the Units
on Nasdaq SmallCap.
2. PURCHASE, SALE AND DELIVERY OF THE UNITS.
(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 the Underwriters agree to purchase, at a
price of $_____ per Unit (which price reflects an underwriting discount of __%),
1,250,000 Firm Units.
(b) Payment for the Firm Units to be sold hereunder is to be made in
New York Clearing House funds and, at the option of the Representative by bank
wire to an account specified by the Company, or certified or bank cashier's
checks drawn to the order of the Company, against either uncertificated delivery
of Firm Units 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 Firm Units are delivered at closing, certificates
for the Firm Units and for the Common Stock and Warrants comprising such Firm
Units 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.
Page 8 - Underwriting Agreement
(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
Units at the price per Unit 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) only once
thereafter within 45 days after the date of this Agreement, by the
Representative to the Company setting forth the number of Option Units as to
which the Representative is exercising the option, the names and denominations
in which the Option Units are to be registered and the time and date at which
certificates representing such Units are to be delivered. The time and date at
which certificates for Option Units 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 Units granted hereunder may
be exercised only to cover over-allotments in the sale of the Firm Units 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 Units shall
be made on the Option Closing Date in New York Clearing House funds and, at the
option of the Representative, by bank wire to an account specified by the
Company, or certified or bank cashier's check drawn to the order of the Company
for the Option Units to be sold by the Company in consideration either of
uncertificated delivery of Option Units or delivery 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.
Except to the extent uncertificated Option Units are delivered at closing, the
certificates for the Option Units and for the common stock and warrants
comprising such Option Units 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 Option Closing Date, and will be made
available for inspection by the Representative at least one business day prior
to the Option Closing Date.
(d) In addition to the sums payable to the Representative as provided
elsewhere herein, the Representative shall be entitled to receive at the
closing, as compensation for its services, purchase warrants (the
"Representative's Warrants") for the purchase of up to 125,000 Units at a price
of $____ per Unit (120% of the Unit offering price), 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.
Page 9 - Underwriting Agreement
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a public
offering of the Firm Units as soon as the Representative deems it advisable to
do so. The Firm Units 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
terms. To the extent, if at all, that any Option Units are purchased pursuant to
Section 2 hereof, the Representative will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representative for
the Underwriters in the offering and sale of the Units 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 (A) 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, (B) 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, and (C) file on a timely basis all reports and any definitive
proxy or information statements required to be filed by the Company with the
Commission subsequent to the date of the Prospectus and prior to the termination
of the offering of the Units by the Representative.
(b) The Company will advise the Representative promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, (D) 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, and (E) of the issuance of any order suspending
trading of the Units, the Common Stock or the Warrants. The Company will use its
best efforts to prevent the issuance of any such stop order preventing or
suspending the use of the Prospectus or suspending trading 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 Units 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 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 Units.
Page 10 - Underwriting Agreement
(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, four 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 Units as contemplated in this Agreement
and the Prospectus, and make all required filings thereunder to maintain
compliance with such act with respect to the trading and issuance of the Common
Stock, the Warrants and the Common Stock underlying the Warrants. 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 Representative, 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 existing at the time the Prospectus 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 the
Representative in writing when such statement has been so made available.
(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 shareholders
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. The Company
will, for a period of five years from the Closing Date, deliver to the
Representative notice of all meetings of its Board of Directors and any
executive or similar committee thereof.
Page 11 - Underwriting Agreement
(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 derivatives of Common Stock (or
agreement therefor) 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
pursuant to contractual obligations existing on the date hereof or pursuant to
employee benefit plans in effect on the date hereof, or with the prior written
consent of the Representative, which consent will not be unreasonably withheld.
(i) The Company has been advised that the Units, the Common Stock and
the Warrants have been qualified for listing on the Nasdaq SmallCap, subject to
notice of issuance.
(j) The Company has caused all its officers and directors and all other
holders of shares of Common Stock to furnish to you, on or prior to the date of
this agreement, a letter or letters, in form and substance satisfactory to the
Representative ("Lock-up Agreements"), pursuant to which each such person shall
agree not to offer, sell, contract to sell or grant any option to purchase or
otherwise dispose of any shares of Common Stock or Preferred Stock or other
capital stock of the Company, or any options or 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) for a period of one year after the date of this Agreement, directly
or indirectly, except with the prior written consent of the Representative.
(k) The Company shall apply the net proceeds of its sale of the Units
as set forth in the Prospectus and shall properly disclose such information with
respect to the sale of the Units 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 Units, in such a manner as would
require the Company 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 Units and
Common Stock and a Warrant Agent for the Warrants.
(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.
(o) The Company will furnish to the Representative, as soon as they
have been prepared by or are available to the Company, a copy of any unaudited
interim financial statements of the Company for any period subsequent to the
period covered by the most recent financial statements appearing in the
Registration Statement and the Prospectus.
Page 12 - Underwriting Agreement
(p) The Company agrees to use its best efforts, upon receipt from the
Representative of a request to do so, to assist the Representative in enforcing
the terms of agreements executed by the Company's shareholders and holders of
certain rights to purchase Common Stock that restrict such persons from selling,
making any short sale of, grant any option for the purchase of, or otherwise
transfer or dispose of, any of such Common Stock, or any such rights, for a
period of one year after the date of the Prospectus without the prior written
consent of the Representative. Such assistance, if requested, shall include,
without limitation, the imposition of a stop-transfer instruction with the
Company's transfer agent.
(q) The Company will, between the date hereof and the date twenty-five
days after the Closing Date, provide the Representative and its legal counsel,
prior to their release, copies of all press releases, proposed communications
with shareholders or other interested parties and other public announcements and
will permit the Representative and its legal counsel to comment thereon prior to
release.
(r) If the Company's audited pre-tax income for the year ending
December 31, 2002 is less than $1.3 million, it will declare and pay a 10% stock
dividend to its shareholders on all shares of its Common Stock outstanding as of
the date of record for the dividend, as declared by its board of directors. The
issuance of the stock dividend, if payable, will occur no later than 30 days
after the date of the issuance by the Company's independent auditors of the
audited financial statements of the Company as of the year ending December 31,
2002.
5. COSTS AND EXPENSES.
(a) The Representative shall be entitled to reimbursement from the
Company, for itself alone and not as Representative of the Underwriters, to a
non-accountable expense allowance equal to ___% of the aggregate initial public
offering price of the Firm Units and any Option Units purchased by the
Underwriters. The Representative shall be entitled to withhold this allowance on
the Closing Date related to the purchase of the Firm Units or the Option Units,
as the case may be. If the offering is not consummated, any portion of the
$20,000 advanced to the Representative that is unaccounted for will be returned
to the Company.
(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 printing and delivering to, or as requested by, the Underwriters copies of
the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Nasdaq SmallCap listing application, the costs of the due
diligence investigation of the principals of the Company, the Blue Sky Survey
and any supplements or amendments thereto; the filing fees of the Commission;
the filing fees and expenses (including any fees and disbursements) incident to
securing the required review by the NASDR of the terms and conditions of the
underwriting arrangements; the listing fee of the Nasdaq SmallCap; and the
expenses, including the fees and disbursements of counsel for the Underwriters,
incurred in connection with the qualification of the Units under state
securities or Blue Sky laws. Any transfer taxes imposed on the sale of the Units
to the Underwriters will be paid by the Company. The Company shall not, however,
be required to pay for any of the Underwriters' expenses (other than those
related to qualification under NASDR regulations 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 actual out-of-pocket
expenses, including fees and disbursements of counsel, reasonably incurred in
connection with investigating, marketing and proposing to market the Units or in
contemplation of performing their obligations hereunder, up to a maximum of
$100,000; 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 Units.
Page 13 - Underwriting Agreement
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The obligations of the several Underwriters to purchase the Firm Units
on the Closing Date and the Option Units, 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, to the performance by the Company of its 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 its 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 Units.
(b) The Representative shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Morse, Zelnick, Rose &
Lander, LLP, 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) to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation under the laws of the state of New York, with
corporate power and corporate authority to own or lease its properties and to
conduct its business as described in the Registration Statement; the Company is
duly qualified to transact business and is in good standing in all jurisdictions
in which the conduct of its business requires such qualification.
(ii) The Company has authorized any outstanding capital
stock as set forth under the caption "Capitalization" in the Prospectus; the
outstanding shares of Common Stock have been duly authorized and validly issued,
are non-assessable and, to such counsel's knowledge, fully paid, and, to such
counsel's best knowledge, have been issued and sold by the Company in compliance
in all material respects with applicable securities laws; all of the securities
of the Company conform to the description thereof contained in the Prospectus;
the certificates for the Common Stock, Units and Warrants are in due and proper
form under New York law; 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 Units, 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 non-assessable; no preemptive rights of
shareholders exist with respect to any of the Common Stock or the issuance or
sale thereof pursuant to any applicable statute or the provisions of the
Company's Articles of Incorporation or Bylaws or, to the knowledge of such
counsel, pursuant to any contractual obligation. The Warrants and the
Representative's Warrants have been authorized for issuance to the purchasers of
Units or the Representative, as the case may be, and will, when issued as
contemplated in the Prospectus, possess rights, privileges, and characteristics
as represented in the most recent form of Warrants or Representative's Warrants,
as the case may be, filed as an exhibit to the Registration Statement; the
securities to be issued upon exercise of the Warrants and the Representative's
Warrants, as the case may be, when issued and delivered against payment therefor
in accordance with the terms of the Warrants or the Representative's Warrants,
as the case may be, 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 Warrants, the Representative's Warrants,
and the securities to be issued upon their exercise, has been validly and
sufficiently taken.
Page 14 - Underwriting Agreement
(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 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
Units 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 knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
(v) The conditions for the use of Form SB-2 set forth in
the general instructions thereto have been satisfied, and 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 and related schedules
therein).
(vi) The statements under the captions "Risk Factors,"
"Business-Intellectual Property," "Business-Facilities," "Management-Stock
Option Plans," Management-Limitation of Directors' Liability and
Indemnification," "Certain Transactions," "Description of Securities," and
"Shares Eligible for Future Sale" in the Prospectus, and Item 24 of Part II 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.
Page 15 - Underwriting Agreement
(viii) Except as described in or contemplated by the
Prospectus, such counsel knows of no material legal or governmental proceedings
pending or threatened against the Company.
(ix) 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 Certificate of Incorporation or Bylaws of the
Company, or any agreement or instrument known to such counsel to which the
Company is a party or by which the Company may be bound.
(x) Each of this Agreement and the Warrant Agreement by
and among the Company, the Warrantholders (defined therein) and Continental
Stock Transfer Trust Company, as Warrant Agent, has been duly authorized,
executed and delivered by the Company and, assuming due and valid execution,
authorization and delivery by the other parties thereto, is a valid and binding
agreement of the Company enforceable in accordance with its terms.
(xi) 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 NASDR 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.
(xii) 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 states other than New York 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 Morse,
Zelnick, Rose & Lander, LLP 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 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, schedules and
statistical information therein). With respect to such statement, Morse,
Zelnick, Rose & Lander, LLP may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
Page 16 - Underwriting Agreement
(c) The Representative shall have received from Holland & Knight, LLP,
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 Holland & Knight, LLP may rely as to all matters governed other
than by the laws of the state of Oregon 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) 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 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, schedules and statistical information therein). With respect to such
statement, Holland & Knight, LLP may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
(d) 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 Xxxxxxxxx Xxxxx & Xxxxxxx 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 and schedules 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 is
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.
(e) 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 Operating 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 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;
Page 17 - Underwriting Agreement
(iii) All filings required to have been made pursuant to
Rule 424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the Registration
Statement were true and correct in all material respects, 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.
(f) 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 Units, Common Stock and Warrants have been
approved for quotation upon notice of issuance on the Nasdaq SmallCap.
(ii) The Lock-Up 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 Holland & Knight,
LLP, 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 several 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.
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
Units 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.
Page 18 - Underwriting Agreement
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the 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 against 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 Units, 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 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, in
the light of the circumstances under which they were made, not misleading; 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 against 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.
Page 19 - Underwriting Agreement
(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,
the indemnifying party 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 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
additional separate firm for all such indemnified parties. Such firm shall be
designated in writing by the Underwriter 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 in respect 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.
Page 20 - Underwriting Agreement
(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 Units. 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 Underwriter 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 discount 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 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 Units
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.
(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 Units 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.
Page 21 - Underwriting Agreement
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 Unit that
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 Representative of
the Underwriters, shall use 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 Units or Option Units, as the case may be, that the defaulting
Underwriter or Underwriters failed to purchase. If during such 36 hours you, as
the Representative, shall not have procured such other Underwriters, or any
others, to purchase the Firm Units or Option Units, as the case may be, agreed
to be purchased by the defaulting Underwriter or Underwriters, then (a) if the
aggregate number of Units with respect to which such default shall occur does
not exceed 10% of the Firm Units or Option Units, as the case may be, covered
hereby, the other Underwriters shall be obligated, severally, in proportion to
the respective numbers of Firm Units or Option Units, as the case may be, which
they are obligated to purchase hereunder, to purchase the Firm Units or Option
Units, as the case may be, which such defaulting Underwriter or Underwriters
failed to purchase, or (b) if the aggregate number of Firm Units or Option
Units, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Units or Option Units, 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 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 or telecopied and confirmed
as follows: if to the Underwriter, , Xxxxxxx Investment Company, Inc., 000 XX
Xxxxx Xxxxxxx, Xxxxxxxx, Xxxxxx 00000, Attention: Xxxxxxx X.X. Xxxxxxx; with a
copy to Holland & Knight, LLP, U.S. Bancorp Tower, Suite 2300, 000 X.X. Xxxxx
Xxxxxx, Xxxxxxxx, Xxxxxx 00000, Attention: Xxxx X. xxx Xxxxxx, Esq.; if to the
Company, to Data Conversion Laboratory, Inc., 184-13 Xxxxxx Xxxxxxx Expressway,
Xxxxx Xxxxxxx, Xxx Xxxx 00000, Attention: Xxxx Xxxxx; with a copy to Morse,
Zelnick, Rose & Lander, LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000,
Attention: Xxxx X. Xxxxxxxxxxx, Esq.
Page 22 - Underwriting Agreement
11. TERMINATION.
This Agreement may be terminated by the Representative by notice to the
Company as follows:
(a) at any time prior to the earlier of (i) the time the Firm Units are
released by the Representative for sale by notice to the Underwriters, or (ii)
11:30 a.m., Pacific Time, 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, 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, (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
on the financial markets of the United States of such outbreak, escalation,
declaration, emergency, calamity, crisis or change would, in the Underwriter's
reasonable judgment, make it impracticable to market the Units or to enforce
contracts for the sale of the Units, (iii) the Dow Xxxxx 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 the opinion of the Underwriter 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 or halt of trading of the Units, the Common Stock or the
Warrants on the Nasdaq Stock Market or (ix) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs which
in the Representative's 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.
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 Units from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
Page 23 - Underwriting Agreement
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by the Underwriters to the Company for
inclusion in the Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page of the
Prospectus (insofar as such information relates to the Underwriters), the
legends required by Item 502(d) of Regulation S-B 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 Units 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.
Page 24 - Underwriting Agreement
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
Underwriter in accordance with its terms.
Very truly yours,
DATA CONVERSION LABORATORY, INC.
By:
-------------------------------------
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
XXXXXXX INVESTMENT COMPANY, INC.
As Representative of the several Underwriters
listed in Schedule I
By:
-------------------------------------
Page 25 - Underwriting Agreement
SCHEDULE I
Schedule of Underwriters
Number of
Firm Units
Underwriter to be Purchased
---------------------------------------------------------- ---------------
Xxxxxxx Investment Company, Inc.
Total: 1,250,000
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Page 26 - Underwriting Agreement
