EXHIBIT 1.1
700,000 Shares
ELDORADO ARTESIAN SPRINGS, INC.
Common Stock
UNDERWRITING AGREEMENT
_______________, 1999
XXXXX FINANCIAL SERVICES, INC.
00 X. Xxxxx Xxxxxx, Xxx. 0000
Xxxxxxx, Xxxxxxxx 00000
Dear Sirs:
Section 1. Introductory.
------------
ELDORADO ARTESIAN SPRINGS, INC., a Colorado corporation (the "Company"),
proposes to issue and sell 700,000 shares of its authorized but unissued common
stock, $.001 par value (the "Firm Common Shares") to you, or if there be any so
named, to the several underwriters named in Schedule A annexed hereto (the
"Underwriters"), for whom you are acting as Representative. In addition, the
Company proposes to grant to you or to the Underwriters, as the case may be, an
option to purchase up to an aggregate of 105,000 additional shares of common
stock (the "Optional Common Shares"), as provided in Section 5 hereof. The Firm
Common Shares and, to the extent such option is exercised, the Optional Common
Shares are hereinafter collectively referred to as the "Common Shares."
In addition, the Company proposes to sell to Xxxxx Financial Services, Inc.
warrants ("Representative's Warrants") to purchase 70,000 shares of common stock
in accordance with the terms and conditions provided for herein.
You have advised the Company that you or the Underwriters, as the case may be,
propose to make a public offering of their respective portions of the Common
Shares on the effective date of the registration statement hereinafter referred
to, or as soon thereafter as in your judgment is advisable.
The Company hereby confirms its agreements with respect to the purchase of the
Common Shares by you or the Underwriters, as the case may be, as follows.
Section 2. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the several Underwriters that:
(a) A registration statement on Form SB-2 (File No. ________) with respect to
the Common Shares 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. If the Company prepares and files prior to the effective date of
such registration statement an amendment or amendments to such registration
statement, such amendment or amendments will have been similarly prepared. There
have been delivered to you two signed copies of such registration statement and
all amendments, if any, together with two copies of each exhibit filed
therewith. Conformed copies of such registration statement and amendments, if
any, (but without exhibits) and of any related preliminary prospectus have been
delivered to you in such reasonable quantities as you have requested for you and
for each of the Underwriters, as the case may be. The Company will next file
with the Commission one of the following: (i) prior to effectiveness of such
registration statement, a further amendment thereto, including the form of final
prospectus, or (ii) a final prospectus in accordance with Rules 430A and 424(b)
of the Rules and Regulations. As filed, such amendment and form of final
prospectus, or such final prospectus, shall include all Rule 430A Information
and, except to the extent that you shall agree in writing to a modification,
shall be in all substantive respects in the form furnished to you prior to the
date and time that this Agreement was executed and delivered by the parties
hereto, or, to the extent not completed at such date and time, shall contain
only such specific substantive changes (beyond that contained in the latest
Preliminary Prospectus) as the Company shall have previously advised you in
writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall mean such
registration statement at the time such registration statement becomes effective
and, in the event any post-effective amendment thereto becomes effective prior
to the First Closing Date (as hereinafter defined), shall also mean such
registration statement as so amended; provided, however, that such term shall
also include all Rule 430A Information deemed to be included in such
registration statement at the time such registration statement becomes effective
as provided by Rule 430A of the Rules and Regulations. The term "Preliminary
Prospectus" shall mean any preliminary prospectus referred to in the preceding
paragraph and any preliminary prospectus included in the Registration Statement
at the time it becomes effective that omits Rule 430A Information. The term
"Prospectus" as used in this Agreement shall mean the prospectus relating to the
Common Shares in the form in which it is first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations or, if no filing pursuant
to Rule 424(b) of the Rules and Regulations is required, shall mean the form of
final prospectus included in the Registration Statement at the time such
registration statement becomes effective. The term "Rule 430(A) Information"
means information with respect to the Common Shares and the offering thereof
permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430(A) of the Rules and Regulations. Any reference
herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Form
SB-2 under the Act, as of the date of such Preliminary Prospectus or Prospectus,
as the case may be.
2
(b) The Commission has not issued any order preventing or suspending the use
of any Preliminary Prospectus, and at the time the Registration Statement
becomes effective, and at all times subsequent thereto up to and including each
Closing Date hereinafter mentioned, the Registration Statement and the
Prospectus, and any amendments or supplements thereto, will contain all material
statements and information required to be included therein by the Act and the
Rules and Regulations and will in all material respects conform to the
requirements of the Act and the Rules and Regulations, and neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, no representation or warranty
contained in this subsection 2(b) shall be applicable to information contained
in or omitted from the Registration Statement, the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by you or by or on behalf of any
Underwriter, directly or through the Representative, specifically for use in the
preparation thereof.
(c) The Company does not own or control, directly or indirectly, any
corporation, association or other entity. The Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with full power and authority (corporate and
other) to own and lease its properties and conduct its business as described in
the Prospectus; the Company is in possession of and operating in compliance with
all authorizations, licenses, permits, consents, certificates and orders
material to the conduct of its business, all of which are valid and in full
force and effect; the Company is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which the ownership or
leasing of properties or the conduct of its business requires such qualification
except for jurisdictions in which the Company has no place of business and in
which the failure to so qualify would not have a material adverse effect upon
the Company; and no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
(d) The Company has an authorized and outstanding capital stock as set forth
under the heading "Capitalization" in the Prospectus and has outstanding
____________ shares of common stock; the issued and outstanding shares of common
stock have been duly authorized and validly issued, are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and conform to
the description thereof contained in the Prospectus. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the Company, and
the related notes thereto, included in the Prospectus, the Company does not have
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock purchase and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth under the heading "Stock
3
Option Plan" in Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(e) The Common Shares to be sold by the Company have been duly authorized and,
when issued, delivered and paid for in the manner set forth in this Agreement,
will be duly authorized, validly issued, fully paid and nonassessable, and will
conform to the description thereof contained in the Prospectus. No preemptive
rights or other rights to subscribe for or purchase exist with respect to the
issuance and sale of the Common Shares by the Company pursuant to this
Agreement. No stockholder of the Company has any right which has not been waived
to require the Company to register the sale of any shares owned by such
stockholder under the Act in the public offering contemplated by this Agreement.
No further approval or authority of the stockholders or the Board of Directors
of the Company will be required for the transfer and sale of the Common Shares
to be sold by the Company as contemplated herein.
(f) The Company has full legal right, power and authority to enter into this
Agreement and perform the transactions contemplated hereby. This Agreement has
been duly authorized, executed and delivered by the Company and constitutes a
valid and binding obligation of the Company in accordance with its terms. The
making and performance of this Agreement by the Company and the consummation of
the transactions herein contemplated will not violate any provisions of the
Company's Articles of Incorporation or Bylaws and will not conflict with, result
in the breach or violation of, or constitute, either by itself or upon notice or
the passage of time or both, a default under any agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument to which
the Company is a party or by which the Company or any of its properties may be
bound or affected, any statute or any authorization, judgment, decree, order,
rule or regulation of any court or any regulatory body, administrative agency or
other governmental body applicable to the Company or any of its properties. No
consent, approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, except for compliance with the Act, the Blue Sky
laws applicable to the public offering of the Common Shares by you or the
several Underwriters, as the case may be, the inclusion of the Common Shares in
the NASDAQ SmallCap Market and the clearance of such offering with the National
Association of Securities Dealers, Inc. (the "NASD").
(g) The financial statements and schedules of the Company, and the related
notes thereto, included in the Registration Statement and the Prospectus present
fairly the financial position of the Company as of the respective dates of such
financial statements and schedules, and the results of operations and changes in
financial position of the Company for the respective periods covered thereby.
Such statements, schedules and related notes have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis as
certified by Xxxxxxxx Xxxxx Xxxxxxx & Xxxxxxx.
(h) There are no legal or governmental actions, suits or proceedings pending
or, to the best of the Company's knowledge, threatened to which the Company is
or may be a party
4
or of which property owned or leased by the Company is or may be the subject, or
related to environmental or discrimination matters, which actions, suits or
proceedings might, individually or in the aggregate, prevent or adversely affect
the transactions contemplated by this Agreement or result in a material adverse
change in the condition (financial or otherwise), properties, business, results
of operations or prospects of the Company; and no labor disturbance by the
employees of the Company exists or is imminent which might be expected to affect
adversely such condition, properties, business, results of operations or
prospects. The Company is not a party or subject to the provisions of any
material injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.
(i) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (1) the Company has not incurred
any material liabilities or obligations, indirect, direct or contingent, or
entered into any material agreement or other transaction which is not in the
ordinary course of business; (2) the Company has not sustained any material loss
or interference with its business or properties from fire, flood, windstorm,
accident or other calamity, whether or not covered by insurance; (3) the Company
has not paid or declared any dividends or other distributions with respect to
its capital stock and the Company is not in default in the payment of principal
or interest on any outstanding debt obligations; (4) there has not been any
change in the capital stock (other than upon the sale of the Common Shares
hereunder and upon the exercise of options or pursuant to other employee benefit
plans described in the Registration Statement) or indebtedness material to the
Company (other than in the ordinary course of business); and (5) there has not
been any material adverse change in the condition (financial or otherwise),
business, properties, results of operations or prospects of the Company.
(j) The Company has timely filed all necessary federal, state and foreign
income and franchise tax returns and has paid all taxes shown as due thereon;
and the Company has no knowledge of any tax deficiency which has been or might
be asserted or threatened against the Company which could materially and
adversely affect the business, operations or properties of the Company.
(k) The Company maintains insurance with insurers of recognized financial
responsibility of the types and in the amounts generally deemed adequate for its
businesses and consistent with insurance coverage maintained by similar
companies in similar businesses, including, but not limited to, insurance
covering product liability and insurance covering real and personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect; the Company has not been refused any
insurance coverage sought or applied for; and the Company does not have any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company.
5
(l) To the best of the Company's knowledge, after reasonable investigation,
no labor disturbance by the employees of the Company exists or is imminent; and
the Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers or customers, that might be expected
to result in a material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company.
No collective bargaining agreement exists with any of the Company's employees
and, to the best of the Company's knowledge, after reasonable investigation, no
such agreement is imminent.
(m) The Company owns or possesses adequate rights to use all patents, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names and copyrights which are necessary to conduct its businesses as described
in the Registration Statement and the Prospectus, the expiration of any patents,
patent rights, trade secrets, trademarks, licenses, service marks, trade names
or copyrights would not have a material adverse affect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company; the Company has not received notice of, and has no knowledge of,
any infringement of or conflict with asserted rights of the Company by others
with respect to any patent, patent right, invention, trade secret, know-how,
trademark, license, service xxxx or trade name.
(n) The Company has not distributed and will not distribute prior to the
later of (i) the Closing Date, or any date on which Optional Common Shares are
to be purchased, as the case may be, and (ii) completion of the distribution of
the Common Shares, any offering material in connection with the offering and
sale of the Common Shares other than any Preliminary Prospectus, the Prospectus,
the Registration Statement and other materials, if any, permitted by the
Securities Act of 1933.
(o) The Company has not at any time during the last five (5) years (i) made
any unlawful contribution to any candidate for foreign or domestic office or
failed to disclose fully any contribution in violation of law, or (ii) made any
payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
(p) The Company had not taken and will not take, directly or indirectly, any
action designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the common stock of the Company in
order to facilitate the sale or resale of the Common Shares.
(q) Each owner of more than ten percent (10%) of the issued and outstanding
common stock of the Company has agreed in writing that such person will not,
without the prior written consent of Xxxxx Financial Services, Inc. as
Representative on behalf of the Underwriters (which consent may be withheld in
its sole discretion) and subject to certain limited exception, offer, pledge,
sell, contract to sell, sell any option or contract to purchase,
6
sell short, purchase any option or contract to sell, grant any option, right or
warrant to a purchaser, lend or otherwise transfer or dispose of, directly or
indirectly, any shares of common stock of the Company or any securities
convertible into or exercisable or exchangeable for shares of common stock of
the Company, or enter into any swap or similar agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the common
stock , for a period of 180 days commencing on the effective date of the
Registration Statement (the "Lock-up Period"); provided that such restriction s
do not apply to the Common Shares sold or purchased pursuant to this Agreement
or to shares of the common stock of the Company purchased in the open market
following the offering. Xxxxx Financial Services, Inc., on behalf of the
Underwriters, may, in its sole discretion and at any time without notice,
release all or any portion of the securities subject to these lock-up
agreements. In addition, the Company agrees hereby that, for a period of 180
days after the effective date of the Registration Statement, it will not,
without the consent of Xxxxx Financial Services, Inc. as Representative of the
Underwriters, make any offering, sale or other disposition of any shares of
common stock or other securities convertible into or exchangeable or exercisable
for shares of common stock (or agreement for such) except for the grant of
options to purchase common stock pursuant to the Stock Option Plan described in
the Prospectus and shares of common stock issued pursuant to the exercise of
options granted under such plan provided that such options shall not vest, or
the Company shall obtain the written consent of the holder of shares issued
pursuant to exercise not to transfer such shares, until the end of such 180 day
period. Furthermore, such person will also agree and consent to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of such shares except in compliance with this restriction. The Company
has provided to counsel for the Underwriters, true, accurate and complete copies
of all of the agreements pursuant to which each covered stockholder has agreed
to such or similar restrictions (the "Lock-up Agreements") presently in effect
or effected hereby. The Company hereby represents and warrants that it will not
release any person from a Lock-up Agreement without the prior written consent of
Xxxxx Financial Services, Inc.
(r) Except as set forth in the Registration Statement and Prospectus, (i) the
Company is in compliance with all rules, laws and regulations relating to the
use, treatment, storage and disposal of toxic substances and protection of
health or the environment ("Environmental Laws") which are applicable to its
businesses, (ii) the Company has received no notice from any governmental
authority or third party of an asserted claim under Environmental Laws, which
claim is required to be disclosed in the Registration Statement and the
Prospectus, (iii) the Company will not be required to make future material
capital expenditures to comply with Environmental Laws and (iv) no property
which is owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local law.
(s) 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 authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
7
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.
(t) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
(u) The Representative's Warrants have been duly and validly authorized by
the Company and upon delivery will be duly issued and legal, valid and binding
obligations of the Company.
(v) To the Company's knowledge, after reasonable investigation, there are no
affiliations or associations between any member of the NASD and any of the
Company's officers, directors or 5% or greater securityholders, except as set
forth in the Registration Statement.
Section 4. Representations and Warranties of the Underwriters.
--------------------------------------------------
Xxxxx Financial Services, Inc., for itself or as the Representative, on behalf
of the several Underwriters, as the case may be, represents and warrants to the
Company that the information set forth (i) on the cover page of the Prospectus
with respect to price, underwriting discounts and commissions and terms of
offering and (ii) under "Underwriting" in the Prospectus was the only
information furnished to the Company by it or on behalf of the Underwriters, as
the case may be, for use in connection with the preparation of the Registration
Statement and the Prospectus and is correct in all material respects. If
applicable, the Representative represents and warrants that it has been
authorized by each of the other Underwriters as the Representative to enter into
this Agreement on its behalf and to act for it in the manner herein provided.
Section 5. Purchase, Sale and Delivery of Underwritten Shares and
------------------------------------------------------
Representative's Warrants
-------------------------
(a) Firm Common Shares. On the basis of the representations, warranties and
------------------
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to you or to the Underwriters, as
the case may be, the Firm Common Shares which are in the amount of 700,000
shares. You or, if applicable, you on behalf of the Underwriters agree,
severally and not jointly, as the case may be, to purchase from the Company the
number of Firm Common Shares described below which are in the aggregate equal to
700,000 shares. The purchase price per share to be paid by you or the several
Underwriters, as the case may be, to the Company shall be $ ____ per share.
8
The obligation of you or, if applicable, each Underwriter to the Company shall
be to purchase from the Company that number of Firm Common Shares which is equal
to the number of shares set forth opposite the name of you or such Underwriter,
as the case may be, in Schedule A hereto.
Delivery of definitive certificates for the Firm Common Shares to be purchased
by the Underwriters pursuant to this Section 5 shall be made against payment of
the purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in next-day funds, payable to the order of the
Company (and the Company agrees not to deposit any such check in the bank on
which it is drawn until the day following the date of its delivery to the
Company) at the offices of Xxxxx Financial Services, Inc., 00 X. Xxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxx, or such other place as may be agreed upon between
the Company and Xxxxx Financial Services, Inc. as Representative of the
Underwriters, at 9:00 a.m., Chicago time, on the third (3rd) full business day
following the first day that Common Shares are traded or at such other time and
date not later than seven (7) full business days following the first day that
Common Shares are traded as the Representative and the Company may determine,
such time and date of payment and delivery being herein called the "First
Closing Date." The certificates for the Firm Common Shares to be so delivered
will be made available to the Representative at such office or such other
location as you may reasonably request for checking at least one (1) full
business day prior to the First Closing Date and will be in such names and
denominations as requested by the Representative, such request to be made at
least two (2) full business days prior to the First Closing Date. If the
Representative so elects, delivery of the Firm Common Shares may be made by
credit through full fast transfer to the account at the Depository Trust Company
designated by the Representative.
(b) Optional Common Shares. In addition, on the basis of the
----------------------
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company hereby grants an option to
you or to the several Underwriters, as the case may be, to purchase, in the
case of the several Underwriters severally and not jointly, up to 105,000
Optional Common Shares at the purchase price per share to be paid for the Firm
Common Shares, for use solely in covering any over-allotments made by you for
your account or for the account of the Underwriters, as the case may be, in the
sale and distribution of the Firm Common Shares. The option granted hereunder
may be exercised at any time (but not more than once) within 30 days after the
first date that any of the Common Shares are released by you for sale to the
public, upon notice by you to the Company setting forth the aggregate number of
Optional Common Shares as to which you or the Underwriters, as the case may be,
are exercising the option, the names and denominations in which the certificates
for such shares are to be registered and the time and place at which such
certificates are to be delivered. Such time of delivery (which may not be
earlier than the First Closing Date), being herein referred to as the "Second
Closing Date," shall be determined by you, but if at any time other than the
First Closing Date shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. If applicable, the
number of Optional Common Shares to be purchased by each Underwriter shall be
the same percentage of the total number of Optional Common Shares to be sold by
the Company as such Underwriter is purchasing of the Firm Common Shares (subject
to such adjustments to eliminate any fractional share
9
purchases as you in your discretion may make). Certificates for the Optional
Common Shares will be made available for checking and packaging on the business
day preceding the Second Closing Date at a location in Chicago, Illinois as may
be designated by you. The manner of payment for and delivery of the Optional
Common Shares shall be the same as for the Firm Common Shares purchased from the
Company. At any time before lapse of the option, you may cancel such option by
giving written notice of such cancellation to the Company. If the option is
canceled or expires unexercised in whole or in part, the Company will deregister
under the Act the number of Optional Common Shares as to which the option has
not been exercised.
(c) Acceptance of Delivery and Payment. If applicable, you have advised the
----------------------------------
Company that each Underwriter has authorized you to accept delivery of its
Common Shares, to make payment and to receipt therefor. If applicable, you,
individually and not as the Representative of the Underwriters, may (but shall
not be obligated to) make payment for any Common Shares to be purchased by any
Underwriter whose funds shall not have been received by you by the First Closing
Date or the Second Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from any of
its obligations under this Agreement.
(d) Public Offering. Subject to the terms and conditions hereof, you or the
---------------
Underwriters, as the case may be, propose to make a public offering of your or
their respective portions of the Common Shares as soon after the effective date
of the Registration Statement as in your judgment is advisable and at the public
offering price set forth on the cover page of and on the terms set forth in the
Prospectus.
(e) Representative's Warrants. On the basis of the representations,
-------------------------
warranties and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to Xxxxx Financial
Services, Inc., and Xxxxx Financial Services, Inc. agrees to purchase, the
Representative's Warrant at a purchase price of $.01 per share underlying the
Representative's Warrant. The Representative's Warrant shall be substantially in
the form filed as Exhibit ___ to the Registration Statement, with such changes
therein, if any, as may be agreed upon by the Company and Xxxxx Financial
Services, Inc., shall be dated the Closing Date, and shall evidence the right of
Xxxxx Financial Services, Inc. to purchase from the Company up to 70,000 shares
of common stock (subject to adjustment as provided in the Representative's
Warrants) at a price of 120% of the public offering price per share and upon the
terms and conditions provided in the Representative's Warrants.
Section 6. Covenants of the Company.
------------------------
The Company covenants and agrees that:
(a) The Company will use its reasonable best efforts to cause the
Registration Statement to become effective and will advise you immediately, and
confirm the advice in writing, (i) of the receipt of any comments of the
Commission, (ii) of any request of the Commission for amendment of or supplement
to the Registration Statement (either before or
10
after it becomes effective), any Preliminary Prospectus or the Prospectus or for
additional information, (iii) when the Registration Statement shall have become
effective and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose. If the Commission shall enter any such stop
order at any time, the Company will use its reasonable best efforts to obtain
the lifting of such order at the earliest possible moment. The Company will not
file any amendment or supplement to the Registration Statement (either before or
after it becomes effective), any Preliminary Prospectus or the Prospectus of
which you have not been furnished with a copy a reasonable time prior to such
filing or to which you reasonably object or which is not in compliance in all
material respects with the Act and the Rules and Regulations.
(b) If at any time within nine months of the effectiveness of the Registration
Statement when a prospectus relating to the Common Shares is required to be
delivered under the Act any event occurs, as a result of which the Prospectus,
including any amendments or supplements, would include an untrue statement of a
material fact, or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or if it is
necessary at any time to amend the Prospectus, including any amendments or
supplements, to comply with the Act or the Rules and Regulations, the Company
will promptly advise you thereof and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will correct
such statement or omission or an amendment or supplement which will effect such
compliance and will use its best efforts to cause the same to become effective
as soon as possible; and, in case you or any Underwriter, as the case may be, is
required to deliver a prospectus nine months or more after the effective date of
the Registration Statement, the Company upon request, but at your expense or the
expense of such Underwriter, will promptly prepare such amendment or amendments
to the Registration Statement and such Prospectus or Prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Act.
(c) The Company will furnish to you, as soon as available, copies of the
Registration Statement (four of which final Registration Statement will be
signed and which will include all exhibits), each Preliminary Prospectus, the
Prospectus and any amendments or supplements to such documents, including any
prospectus prepared to permit compliance with Section 10(a)(3) of the Securities
Act of 1933 (four of which will include all exhibits) all in such quantities as
you may from time to time reasonably request.
(d) Prior to the Second Closing Date, the Company will not repurchase or
otherwise acquire any of the Company's common stock or declare or pay any
dividend or make any other distribution upon its common stock.
(e) As soon as practicable, but not later than 45 days after the end of the
first quarter ending after one year following the effective date of the
Registration Statement, the Company will make generally available to its
security holders an earnings statement (which need not be audited) covering a
period of 12 consecutive months beginning after the effective date of the
Registration Statement which will satisfy the provisions of the last paragraph
of Section 11(a) of the Act.
11
(f) During such period as a prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, the Company, at its expense,
but only for the first nine months after the effective date of the Registration
Statement, will furnish to you or mail to your order copies of the Registration
Statement, the Prospectus, the Preliminary Prospectus and all amendments and
supplements to any such documents in each case as soon as available and in such
quantities as you may request, for the purposes contemplated by the Act.
(g) The Company will use its best efforts to qualify the Common Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Common Shares, except that the
Company shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any such jurisdiction where it is not
presently qualified or where it would be subject to taxation as a foreign
corporation. In each jurisdiction in which the Common Shares shall have been
qualified as above provided, the Company will make and file such statements and
reports in each year as are or may be reasonably required by the laws of such
jurisdictions.
(h) The Company will advise you promptly of the suspension of the
qualification or registration of (or any such exemption relating to) the Common
Shares for offering, sale or trading in any jurisdiction or any initiation or
threat of any proceeding for any such purpose, and in the event of the issuance
of any order suspending such qualification, registration or exemption, the
Company, with your cooperation, will use its reasonable best efforts to obtain
the withdrawal thereof.
(i) During the period of five years hereafter, the Company will furnish to its
stockholders as soon as practicable after the end of each respective period,
annual reports (including financial statements audited by independent certified
public accountants) and unaudited quarterly reports of operations for each of
the first three quarters of the fiscal year, and will furnish to you or upon
your request as Representative of the Underwriters, to each of the other
Underwriters, as the case may be: (i) as soon as practicable after the end of
each fiscal year, copies of the Annual Report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and statements
of income, stockholders' equity and changes in financial position for the year
then ended and the opinion thereon of the Company's independent public
accountants; (ii) as soon as practicable after the filing thereof, copies of
each proxy statement, Annual Report on Form 10-KSB, Quarterly Report on Form 10-
QSB, Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; (iii) as soon as available,
copies of any report or communication of the Company mailed generally to holders
of its common stock; (iv) every material press release and every material news
item or article in respect of the Company or its affairs which was generally
released to stockholders or prepared by or on behalf of the Company; and (v) any
additional information of a public nature concerning the Company, or its
business which you may reasonably request. During such five (5) year period, if
the Company shall have active subsidiaries, the foregoing financial statements
shall be on a consolidated basis to the extent that the accounts of the Company
and its subsidiaries are
12
consolidated, and shall be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(j) During the period of 180 days after the date hereof, without your prior
written consent, individually or as Representative of the Underwriters, the
Company will not other than pursuant to outstanding stock options and the terms
of other employee benefit plans disclosed in the Prospectus issue, offer, sell,
grant options to purchase or otherwise dispose of any of the Company's equity
securities or any other securities convertible into or exchangeable for its
common stock or other equity security under circumstances where such securities
may be sold into the public market during such period.
(k) The Company has caused each owner of 10% or more of the outstanding
common stock of the Company 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, pursuant to which each such person shall agree not to offer, sell,
sell short, or otherwise dispose of any shares of common stock of the Company or
other capital stock of the Company, or any other securities convertible,
exchangeable or exercisable for common stock or derivative of common stock owned
by such person (or as to which such person has the right to direct the
disposition of) for a period of 180 days after the date of this agreement,
directly or indirectly, except with the prior written consent of Xxxxx Financial
Services, Inc.
(l) Subject to notice of inclusion, the Company will cause the Common Shares
to be included in the NASDAQ SmallCap Market.
(m) The Company will apply the net proceeds from the sale of the Common
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(n) The Company will maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar (which may be the same
entity as the transfer agent) for its common stock.
(o) If the transactions contemplated hereby are not consummated for any
reason, the Company will pay the several Underwriters for all out-of-pocket
expenses (including fees and disbursement of counsel) incurred by the
Underwriters in investigating and preparing to market or marketing the Common
Shares, up to a maximum of $ ____________.
13
Section 7. Expenses.
--------
(a) Expenses of the Company. The Company agrees with each Underwriter that
-----------------------
the Company will pay and bear all costs in connection with the preparation,
printing and filing of the Registration Statement (including financial
statements, schedules and exhibits), Preliminary Prospectuses and the Prospectus
and any amendments or supplements thereto; the printing of this Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreement, the Preliminary
Blue Sky Survey and any supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to any of the
foregoing; the issuance and delivery of the Common Shares hereunder to the
several Underwriters, including transfer taxes, if any, the cost of all
certificates representing the Common Shares and transfer agents' and registrars'
fees; the fees and disbursements of counsel for the Company; all fees and other
charges of the Company's independent certified public accountants; the cost of
furnishing the several Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus and the Prospectus, and
any amendments or supplements to any of the foregoing; NASDAQ application fees
and the cost of qualifying the Common Shares under the laws of such
jurisdictions as you may designate; the costs and expenses of two Due Diligence
presentations (one in Chicago and one in Denver); and all other expenses
directly incurred by the Company in connection with the performance of its
obligations hereunder; provided, however, that the Company shall not be obligate
to pay the fees and disbursements of counsel for the Underwriters.
(b) Non-Accountable Allowance. Upon the consummation of the transactions
-------------------------
contemplated hereunder and, in any event, not later than the date of the First
Closing and, if applicable, again on the date of the Second Closing, the Company
shall reimburse Xxxxx Financial Services, Inc. for its expenses on a non-
accountable basis in the amount of three percent (3%) of the gross proceeds to
the Company from the transactions contemplated herein, of which amount a total
of $ ___________ has been advanced at the date of this Agreement.
Section 8. Conditions of the Obligations of the Underwriters.
-------------------------------------------------
The obligations of the several Underwriters to purchase and pay for the Firm
Common Shares on the First Closing Date and the Optional Common Shares on the
Second Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company herein set forth as of the date hereof and
as of the First Closing Date or the Second Closing Date, as the case may be, to
the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later than
4:00 P.M., Colorado time, on the date following the date of this Agreement, or
at such later time as shall have been consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or,
14
to the knowledge of the Company or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of Underwriters' counsel.
(b) All corporate proceedings by the Company and other legal matters in
connection with this Agreement, the form of the Registration Statement and the
Prospectus, and the registration, qualification, authorization, issue, sale and
delivery of the Common Shares shall have been reasonably satisfactory to
Underwriters' counsel, and such counsel shall have been furnished with such
papers and information as counsel may reasonably have requested to enable
counsel to pass upon the matters referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement and prior to
the First Closing Date and the Second Closing Date, if applicable, there shall
not have been any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Common Shares as
contemplated by the Prospectus.
(d) You shall have received on the First Closing Date and on any later date
on which Common Shares are purchased, as the case may be, the following opinion
of Xxxxxxxx, Xxxxx & Xxxxxxx, counsel for the Company, dated the First Closing
Date or such later date on which Optional Common Shares are purchased, addressed
to the Representative, on behalf of the Underwriters (and stating that it may be
relied upon by counsel for the Underwriters), to the effect that:
(i) The Company is a corporation in good standing under the laws of the
jurisdiction of its incorporation;
(ii) The Company has the corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus;
(iii) The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction, if any, in which the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where failure to be so qualified or be in good standing
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company;
(iv) To such counsel's knowledge, the Company does not own or control,
directly or indirectly, any corporation, association or other entity;
(v) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated
15
therein, the issued and outstanding shares of capital stock of the Company have
been duly and validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, will not have been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first refusal or
other similar right of stockholders;
(vi) The Firm Common Shares and the Optional Common Shares, as the case may
be, to be issued by the Company pursuant to the terms of this Agreement each
have been duly authorized and, upon issuance and delivery against payment
therefor in accordance with the terms hereof, will be duly and validly issued
and fully paid and nonassessable, and will not have been issued in violation of
or subject to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right of stockholders;
(vii) The Company has the corporate power and authority to enter into this
Agreement and to issue, sell and deliver to the Underwriters the Common Shares
to issued and sold by it hereunder;
(viii) The Company has the corporate power and authority to issue, sell and
deliver to the Representative the Representative's Warrants to be issued and
sold by it hereunder;
(ix) Each of this Agreement and the Representative's Warrant has been duly
authorized by all necessary corporate action on the part of the Company and has
been duly executed and delivered by the Company and, assuming due authorization,
execution and delivery by you, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except insofar as indemnification
provisions may be limited by applicable law and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by equitable principles;
(x) The Registration Statement has become effective under the Act and, to
such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose have
been instituted or are pending or threatened under the Act;
(xi) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements (including supporting
schedules) and financial data derived therefrom as to which such counsel need
express no opinion), as of the effective date of the Registration Statement,
complied as to form in all material respects with the requirements of the
Securities Act of 1933 and the applicable Rules and Regulations thereunder;
(xii) The information in the Prospectus under the captions "Management,"
"Certain Transactions," "Description of Capital Stock," and "Shares Eligible for
Future Sale,"
16
and in the Registration Statement in Items 24 and 26 and insofar as such
information constitutes matters of law or legal conclusions, has been reviewed
by such counsel and is a fair summary of such matters and conclusions;
(xiii) The form of certificate evidencing the Common Shares filed as an exhibit
to the Registration Statement complies with Colorado law;
(xiv) The description in the Registration Statement and the Prospectus of the
charter and bylaws of the Company and of statutes are accurate and fairly
present the information required to be presented by the Securities Act of 1933
and the applicable Rules and Regulations thereunder;
(xv) To such counsel's knowledge, there are no agreements, contracts, leases
or documents to which the Company is a party of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required;
(xvi) The execution and delivery of this Agreement and the Representative's
Warrant and the performance of and the consummation of the transactions herein
and therein contemplated (other than performance of the Company's
indemnification obligations concerning which no opinion need be expressed) will
not (a) result in any violation of the Company's charter or bylaws or (b) result
in any material breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument known to such
counsel to which the Company is a party or by which its properties are bound, or
any applicable statute, rule or regulation or any order, writ or decree of any
court, government or governmental agency of body having jurisdiction over the
Company or over any of its properties or operations;
(xvii) No consent, approval, authorization or order of or qualification with
any court, government or governmental agency or body having jurisdiction over
the Company or over any of its properties or operations is necessary in
connection with the consummation by the Company of the transactions contemplated
in this Agreement and the Representative's Warrant, except as such have been
obtained under the Securities Act or such as may be required under the state or
other securities or Blue Sky laws in connection with the purchase and the
distribution of the Common Shares by the Underwriters;
(xviii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company of a character required to
be disclosed in the Registration Statement or the Prospectus by the Securities
Act or the Rules and Regulations thereunder or by the Securities Exchange Act of
1934 or the applicable
17
Rules and Regulations thereunder, other than those, if any, described in the
Registration Statement or Prospectus;
(xix) The Company is not presently (a) in material violation of its charter
or bylaws, or (b) to such counsel's knowledge, in material breach of any
applicable statute, rule or regulation, order, writ or decree of any court or
governmental agency or body having jurisdiction over the Company or over any
of its properties or operations;
(xx) The Representative's Warrant Stock to be issued by the Company
pursuant to the terms of the Representative's Warrant has been duly authorized
and, upon issuance and delivery against payment therefor in accordance with
the terms of the Representative's Warrant will be duly and validly issued and
fully paid and nonassessable, and to such counsel's knowledge, will not have
been issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right of
stockholders;
(xxi) To such counsel's knowledge, except as set forth in the Registration
Statement and Prospectus, no holders of the common stock of the Company or
other securities of the Company have any registration rights with respect to
securities of the Company, and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company having
rights known to such counsel to require registration of common stock or other
securities, because of the filing of the Registration Statement by the Company
have, with respect to the offering contemplated thereby, waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement or have included
securities in the Registration Statement pursuant to the exercise of and in
full satisfaction of such rights;
(xxii) The offer and sale of all securities of the Company made within the
last three years as set forth in Item 26 of the Registration Statement were
exempt from the registration requirements of the Securities Act, pursuant to
the provisions set forth in such Item, and from the registration or
qualification requirements of all relevant state securities laws; and
(xxiii) The Common Shares have been duly authorized for inclusion in the
NASDAQ SmallCap Market upon official notice of issuance.
In addition, such counsel shall state that such counsel has participated in
conferences with the officials and other representatives of the Company, the
Representative, counsel to the Underwriters and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although (except as specifically set forth in paragraphs (xiii) and (xiv) above)
they have not verified the accuracy or completeness of the statements contained
in the
18
Registration Statement or the Prospectus, nothing has come to the attention of
such counsel which leads them to believe that, at the time the Registration
Statement became effective and at all times subsequent thereto up to and on the
First Closing Date and on any later date on which Optional Common Shares are to
be purchased, the Registration Statement and any amendment or supplement, when
such documents became effective or were filed with the Commission (other than
the financial statements including supporting schedules and other financial and
statistical information derived therefrom, as to which such counsel need express
no comment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statement therein not misleading, or at the First Closing Date or any later date
on which the Optional Common Shares are to purchased, as the case may be, the
Registration Statement, the Prospectus and any amendment or supplement thereto,
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statement therein, in the light of the circumstances
under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or the State of Colorado upon opinions
of local counsel, and as to questions of fact upon representations or
certificates of officers of the Company, and of government officials, in which
case the opinion of counsel is to state that they are so relying and that they
have no knowledge of any material misstatement or inaccuracy in any such
opinion, representation or certificate. Copies of any opinion, representation
or certificate so relied upon shall be delivered to you, as Representative of
the Underwriters and to counsel for the Underwriters.
(e) You shall have received on the First Closing Date and on any later date
on which Optional Common Shares are to be purchased, as the case may be, an
opinion of Xxxxxxxx, Xxxxx & Xxxxxxx, in form and substance satisfactory to you,
with respect to the sufficiency of all such corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(f) You shall have received on the First Closing Date and on any later date
on which Optional Common Shares are to be purchased, as the case may be, a
letter from Xxxxxxxx Xxxxx Xxxxxxx & Xxxxxxx, addressed to the Company and the
Representative, on behalf of the several Underwriters, dated the First Closing
Date or such later date on which Optional Common Shares are to be purchased, as
the case may be, confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Securities Act
of 1933 and the applicable published Rules and Regulations thereunder and based
upon procedures described in such letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), but carried
out to a date no more than five (5) business days prior to the First Closing
Date or such later date on which Optional Common Shares are to be purchased, as
the case may be, (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of the First
Closing Date or such late date on which Optional Common Shares are to be
purchased, as the
19
case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Common Shares as contemplated by the Prospectus. The
Original Letter from Xxxxxxxx Xxxxx Xxxxxxx & Xxxxxxx shall be addressed to or
for the use of the Underwriters in form and substance satisfactory to the
Underwriters and shall (i) represent, to the extent true, that they are
independent certified public accountants with respect to the Company within the
meaning of the Securities Act of 1933 and the applicable published Rules and
Regulations, (ii) set forth its opinion with respect to its examination of the
financial statements of the Company as of and for the periods ending March 31,
1998 and 1997 and (iii) address other matters agreed by Xxxxxxxx Xxxxx Xxxxxxx &
Xxxxxxx and you. In addition, you shall have received from Xxxxxxxx Xxxxx
Xxxxxxx & Xxxxxxx a letter addressed to the Company and ;made available to you
for the use of the Underwriters stating that its review of the Company's system
of internal accounting controls, to the extent they deemed necessary in
establishing the scope of its examination of the Company's financial statements
as of March 31, 1998, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(g) You shall have received on the First Closing Date and on any later date
on which Optional Common Shares are to be purchased, as the case may be, a
certificate of the Company, dated the First Closing Date or such later date on
which Optional Common Shares are to be purchased, as the case may be, signed by
the President and Chief Financial Officer of the Company, to the effect that,
and you shall be satisfied that:
(i) The representations and warranties of the Company in this Agreement are
true and correct, as if made on and as of the First Closing Date or any later
date on which Optional Common Shares are to be purchased, as the case may be,
and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the First
Closing Date or any later date on which Optional Common Shares are to be
purchased, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted or
are pending or threatened under the Securities Act of 1933 or otherwise;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of each certificate, (a) the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein by
the Securities Act of 1933 and the Rules and Regulations thereunder or the
Securities Exchange Act of 1934 and the applicable Rules and Regulations
thereunder, as the case may be, and in all material
20
respects conformed to the requirements of such statutes and rules and
regulations, (b) the Registration Statement, and any amendment or supplement
thereto, did not and does not include any untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (c) the Prospectus, and any
amendments or supplements thereto, did not and does not include any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (c)
the Prospectus, and any amendments or supplements thereto did not and does not
include any untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and since the effective date of the Registration Statement, there
has occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been (a) any material
adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company, (b) any transaction
that is material to the Company, except transactions entered into in the
ordinary course of business, (c) any obligation, direct or contingent, that is
material to the Company, incurred by the Company, except obligations incurred
in the ordinary course of business, (d) change in the capital stock or
outstanding indebtedness of the Company that is material to the Company, (e)
any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company, or (f) any loss or damage (whether or not insured) to
the property of the Company which has been sustained or will have been
sustained which has a material adverse affect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company.
(h) The Company shall have obtained and delivered to you an agreement from
each person owning ten percent (10%) of the common stock of the Company in
writing prior to the date hereof that such person will not, during the Lock-up
Period, effect the disposition of any securities now owned or hereafter acquired
directly by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) as a bona fide gift or
gifts, provided the donee or donees thereof agree in writing to be bound by this
restriction, or (ii) with the prior written consent of Xxxxx Financial Services,
Inc. The foregoing restriction is expressly agreed to preclude the holder of the
securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a disposition of securities
during the Lock-up Period, even if such securities would be disposed of by
someone other than such holder. Such prohibited hedging or other transactions
would include, without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including without limitation,
any put or call option) with respect to any securities of the Company.
Furthermore, such person will have also agreed and consented to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of the securities held by such person except in compliance with this
restriction.
21
(i) The Company shall have furnished to you such further certificates and
documents as you shall reasonably request, including certificates of officers of
the Company as to the accuracy of the representations and warranties of the
Company, as to the performance by the Company of its obligations hereunder and
as to the other conditions concurrent and precedent to the obligations of the
Underwriters hereunder.
(j) The Representative's Warrant shall have been issued and sold to you.
(k) Prior to the First Closing Date, the Common Shares shall have been
authorized for inclusion in the NASDAQ SmallCap Market upon official notice of
issuance.
All such opinions, certifications, letters and documents provided for in this
Section 8 will be compliance with the provisions hereof only if they are
reasonably satisfactory to counsel for the Underwriters. The Company will
furnish you with such number of conformed copies of such opinions, certificates,
letters and documents as you shall reasonably request.
Section 9. Substitution of Underwriters
----------------------------
If any Underwriter or Underwriters shall fail to take up and pay for the
number of Firm Common Shares agreed by such Underwriter or Underwriters to be
purchased hereunder upon tender of such Firm Common Shares in accordance with
the terms hereof, and if the aggregate number of Firm Common Shares which such
defaulting Underwriter or Underwriters so agreed but failed to purchase does not
exceed 10% of the Firm Common Shares, the remaining Underwriters shall be
obligated, severally in proportion to their respective commitments hereunder, to
take up and pay for the Firm Common Shares of such defaulting Underwriter or
Underwriters.
22
Section 10. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless you or each Underwriter
and each person, if any, who controls you or any such Underwriter, as the case
may be, within the meaning of the Act against any losses, claims, damages,
liabilities or expenses, joint or several, to which you or such Underwriter, as
the case may be, or such controlling person may become subject, under the Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Company), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading; and will
reimburse you or each Underwriter, as the case may be, and each such controlling
person for any legal and other expenses reasonably incurred by you or such
Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the Company will not be
23
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by you or by or on behalf of any Underwriter through the Representative,
as the case may be, specifically for use therein; and provided further, that
with respect to any untrue statement or omission or alleged untrue statement or
omission made in any Preliminary Prospectus, the indemnity agreement contained
in this paragraph shall not inure to the benefit of you or any Underwriter, as
the case may be, from whom the person asserting any such losses, claims,
damages, liabilities or expenses purchased the Common Shares concerned (or to
the benefit of any person controlling you or such Underwriter, as the case may
be) to the extent that any such loss, claim, damage, liability or expense of you
or such Underwriter, as the case may be, or controlling person results from the
fact that a copy of the Prospectus was not sent or given to such person at or
prior to the written confirmation of sale of such Common Shares to such person
as required by the Act, and if the untrue statement or omission has been
corrected in the Prospectus unless such failure to deliver the Prospectus was a
result of noncompliance by the Company with its obligations under Section 6(e)
hereof; and provided further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in the Registration
Statement, the Prospectus, or any amendment or supplement thereto.
(b) You or each Underwriter severally, as the case may be, will indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages,
liabilities or expenses to which the Company, or any such director, officer or
controlling person may become subject, under the Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of such Underwriter), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) arise out of or
are based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with Section 4 of this Agreement or any other written
information furnished to the Company by you or such Underwriter through the
Representative, as the case may be, specifically for use in the preparation
thereof; and will reimburse the Company, or any such director, officer or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. This indemnity agreement will be in
addition to any liability which you or such Underwriter, as the case may be, may
otherwise have.
24
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section or to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and counsel for the indemnified
party shall have reasonably concluded that there may be a conflict between the
positions of the indemnifying party and the indemnified party in conducting the
defense of any such action or that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
such counsel in connection with the assumption of legal defenses in accordance
with the proviso to the next preceding sentence or (ii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 10 is required by its
terms but is for any reason held to be unavailable to or otherwise insufficient
to hold harmless an indemnified party under paragraphs (a), (b) or (c) in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then such applicable indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of any losses, claims,
damages, liabilities or expenses referred to herein (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and you or
the Underwriters, as the case may be, from the offering of the Common Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and you or the Underwriters, as the case may be, in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The respective relative benefits received by the Company and you or the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material
25
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or you or the Underwriters, as the case may
be, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in subparagraph (c) of this Section 10, any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
subparagraph (c) of this Section 10 with respect to notice of commencement of
any action shall apply if a claim for contribution is to be made under this
subparagraph (d); provided, however, that no additional notice shall be required
with respect to any action for which notice has been given under subparagraph
(c) for purposes of indemnification. The Company and you or the Underwriters, as
the case may be, agree that it would not be just and equitable if contribution
pursuant to this Section 10 were determined solely by pro rata allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 10, neither you nor any
Underwriter, as the case may be, shall be required to contribute any amount in
excess of the amount by which the total underwriting discount received by you or
such Underwriter, as the case may be, in connection with the Common Shares
underwritten by it and distributed to the public exceeds the amount of any
damages which you or such Underwriter has otherwise been required to pay by
reason of such untrue alleged untrue statement or omission or alleged omission.
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. If applicable, the Underwriters'
obligations to contribute pursuant to this Section 10 are several in proportion
to their respective underwriting commitments and not joint.
(e) In addition to and without in any way limiting the other obligations of
the parties under this Section 10, the Company hereby further agrees to
reimburse you or each Underwriter, as the case may be, and each person who
controls you or any such Underwriter within the meaning of Section 15 of the Act
on a quarterly basis for one-half of all reasonable legal and other expenses
incurred in connection with investigating or defending any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in
paragraph (a) of this Section 10, notwithstanding the possibility that such
payments might later be held to be improper, but only under circumstances where
you or such Underwriter has selected separate counsel or elected to participate
in the defense of the action as permitted by the proviso of the second sentence
of Section 10(c) hereof. To the extent that any payment is ultimately held to be
improper, you or each Underwriter, as the case may be, shall promptly refund
such payment.
Section 11. Effectiveness of Registration Statement.
----------------------------------------
The Company will use its best efforts to cause the Registration Statement to
become effective, to prevent the issuance of any stop order suspending the
effectiveness of the
26
Registration Statement and, if such stop order be issued, to obtain as soon as
possible the lifting thereof.
Section 12. Effective Date of this Agreement and Termination.
------------------------------------------------
(a) After execution of the parties, this Agreement shall become effective at
the earlier of (i) 7:30 a.m., Colorado time, on the second full business day
following the effective date of the Registration Statement, or (ii) the time of
the first public offering of any of the Common Shares by the Underwriters after
the Registration Statement becomes effective. The time of the first public
offering shall mean the time of the release by you, for publication, of the
first newspaper advertisement relating to the Common Shares, or the time at
which the Common Shares are first generally offered by the Underwriters to the
public by letter, telephone, telegram or telecopy, which shall first occur. By
giving notice as set forth in this Section 12 before the time this Agreement
becomes effective, you, as Representative of the several Underwriters, or the
Company, may prevent this Agreement from becoming effective without liability to
any other party, except as provided in Section 10 hereof.
(b) You, as Representative of the several Underwriters, shall have the right
to terminate this Agreement by giving notice as hereinafter specified at any
time at or prior to the First Closing Date or on or prior to any later date on
which Optional Common Shares are to be purchased, as the case may be, (i) if the
Company shall have failed, refused or been unable to perform any agreement on
its part to be performed, or because any other condition of the Underwriters'
obligations hereunder required to be fulfilled is not fulfilled, including,
without limitation, any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company from that
set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse, or (ii) if additional material governmental
restrictions not in force and effect on the date hereof, shall have been imposed
upon trading in securities generally or minimum or maximum prices shall have
been generally established on the New York Stock Exchange or the American Stock
Exchange or in the over-the-counter market by the NASD, or trading in securities
generally shall have been suspended on either such exchange or in the over-the-
counter market by the NASD, or if a banking moratorium shall have been declared
by federal, New York, Illinois or Colorado authorities, or (iii) if the Company
shall have sustained a loss by strike, fire, flood, earthquake, accident or
other calamity of such character as to interfere materially with the conduct of
the business and operations of the Company regardless of whether or not such
loss or interference shall have been insured, or (iv) if there shall have been a
material adverse change in the general political or economic conditions or
financial markets as in your reasonable judgment makes it inadvisable or
impracticable to proceed with the offering, sale and delivery of the Common
Shares, or (v) if there shall have been an outbreak or escalation of hostilities
or of any other insurrection or armed conflict or the declaration of the United
States of a national emergency which, in the reasonable opinion of the
Representative, makes it impracticable or inadvisable to proceed with the public
offering of the Common Shares as contemplated by this Prospectus. Any
termination pursuant to this paragraph 12(b) shall be without liability of any
party to any other party except as provided in Section 10 hereof.
27
If you elect to prevent this Agreement from becoming effective or to terminate
this Agreement as provided in this Section 12, you shall promptly notify the
Company by telephone, telecopy or telegram, in each case, confirmed by letter.
If the Company shall elect to prevent this Agreement from becoming effective,
the Company shall promptly notify you by telephone, telecopy or telegram, in
each case, confirmed by letter.
Section 13. Right of First Refusal
----------------------
For a period of three (3) years from the date of this Agreement, the Company
will not enter into an agreement for a public or private offering for cash
(other than to employees) of any securities of the Company or any affiliate of
the Company or any securities offered by the Company or any affiliate for cash
to or through any person, firm or corporation other than Xxxxx Financial
Services, Inc. unless and until the Company shall have first negotiated for the
sale of such securities with or through or offered to sell such securities to
Xxxxx Financial Securities, Inc. The Company shall notify Xxxxx Financial
Services, Inc. in writing of the Company's intention to offer such securities in
an offering covered by this right of first refusal and the terms (including the
price or other method of determining the underwriting or placement discount or
fee) and the conditions of the proposed offering. Xxxxx Financial Services,
Inc. shall then have 10 days from the date of receipt of such written notice to
decide whether to participate in such proposed offering. If Xxxxx Financial
Services, Inc. determines that it does not wish to participate in the proposed
offering, then it shall so notify the Company of its intention in writing not
later than 30 days from the receipt of notice from the Company of such proposed
offering. If Xxxxx Financial Services, Inc. determines not to participate in
such offering, then the Company may, within a period of 90 days from the date of
receipt of notice from Xxxxx Financial Services, Inc. of its intention not to
participate, enter into a letter of intent for the public sale or, as
appropriate, a contract for the private sale, of any of such securities through
any other person, firm or corporation on the same general terms and conditions
as those which were tendered by the Company to Xxxxx Financial Services, Inc.
Provided, however, as to a public offering, it a definitive underwriting
agreement with a firm commitment is not executed by the Company with such third
party within 180 days thereafter, all the rights of Xxxxx Financial Services,
Inc. hereunder with respect to such offering shall be reinstated. Nothing in
this Agreement shall be construed as granting the continuation of such
preferential right on the part of Xxxxx Financial Services, Inc. beyond such
three-year period.
Section 14. Representations and Indemnities to Survive Delivery.
---------------------------------------------------
The respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers or key employees and of you or the
Underwriters, as the case may be, set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by you individually or on behalf of any Underwriter, as the case may be, or
the Company or any of its or their partners, officers or directors or any
controlling person, and will survive delivery of and payment for the Common
Shares sold hereunder and any termination of this Agreement.
28
Section 15. Notices.
-------
All communications hereunder shall be in writing and, if sent to you
individually or on behalf of the several Underwriters, shall be mailed,
delivered, telefaxed or telegraphed and confirmed to you at 00 X. Xxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxx Xxxxxxxxxx; and if sent
to the Company shall be mailed, delivered, telefaxed or telegraphed and
confirmed to the Company at X.X. Xxx 000, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxxx X. Xxxxxx. The Company, or you may change the address for
receipt of communications hereunder by giving notice to the other.
Section 16. Successors.
----------
This Agreement shall inure to the benefit of and be binding upon the parties
hereto, including any substitute Underwriters pursuant to Section 9 hereof, and
to the benefit of the officers and directors and controlling persons referred to
in Section 10, and in each case their respective successors, personal
representatives and assigns, and no other person will have any right or
obligation hereunder. No such assignment shall relieve any party of its
obligations hereunder. The term "successors" shall not include any purchaser of
the Common Shares as such from you or any of the Underwriters merely by reason
of such purchase.
Section 17. Representative of Underwriters.
------------------------------
If applicable, you will act as Representative for the several Underwriters in
connection with all dealings hereunder, and any action under or in respect of
this Agreement taken by the Underwriters jointly or by Xxxxx Financial Services,
Inc., as Representative, will be binding upon all the Underwriters.
Section 18. Partial Unenforceability.
------------------------
The invalidity or unenforceability of any Section, paragraph or provision of
this Agreement shall not affect the validity or enforceability of any other
Section, paragraph or provision hereof. If any Section, paragraph or provision
of this Agreement is for any reason determined to be invalid or unenforceable,
there shall be deemed to be made such minor changes (and only such minor
changes) as are necessary to make it valid and enforceable.
Section 19. Applicable Law.
--------------
This Agreement shall be governed by and construed in accordance with the
internal laws (and not the laws pertaining to conflicts of laws) of the State of
Illinois.
Section 20. General.
-------
This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may be executed
29
in several counterparts, each one of which shall be an original, and all of
which shall constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the singular
and the plural include one another. The section headings in this Agreement are
for the convenience of the parties only and will not affect the construction or
interpretation of this Agreement. This Agreement may be amended or modified, and
the observance of any term of this Agreement may be waived, only by a writing
signed by the Company and you, individually or on behalf of the several
Underwriters, as the case may be.
(Balance of Page Left Blank, Intentionally)
30
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed copies hereof, whereupon it will
become a binding agreement among the Company and Xxxxx Financial Services, Inc.
or the several Underwriters including you, as the case may be, all in accordance
with its terms.
Very truly yours,
ELDORADO ARTESIAN SPRINGS, INC.
By:____________________________
Xxxxxxx X. Xxxxxx, President
The foregoing Underwriting Agreement is hereby confirmed and accepted by us in
Chicago, Illinois as of the date first above written.
XXXXX FINANCIAL SERVICES, INC.
If applicable, acting as Representative of the several Underwriters named in the
attached Schedule A.
By XXXXX FINANCIAL SERVICES, INC.
By: ____________________________
Xxxxxx Xxxxxxxxxx, President
31
SCHEDULE A
Number of Firm Common
Name of Underwriter Shares to be Purchased
------------------- ----------------------
Xxxx Xxxxxxxxx Services, Inc.
32
