NAVIDEC, INC.
00 XXXXXXXXX XXXXX, XXXXXXXX X, XXXXX 000
XXXXXXXXX, XXXXXXXX 00000
UNDERWRITING AGREEMENT
_______________, 1997
Xxxxxx Xxxxxxx & Associates, Inc.
As Representative of the Several Underwriters
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Ladies and Gentlemen:
NAVIDEC, INC., a Colorado corporation (the "Company"), and certain
security holders of the Company listed on Schedule A hereto (such security
holders being referred to in this Agreement as the "Selling Stockholders"),
propose to issue and sell pursuant to this Underwriting Agreement (the
"Agreement"), an aggregate of 1,000,000 shares of Common Stock, $.001 par
value per share (the "Shares"), and 1,000,000 Warrants, each of which may be
exercised to purchase one share of Common Stock (the "Warrants") commencing
on the effective date of the Registration Statement (the "Effective Date").
The Shares consist of 755,000 shares to be sold by the Company (the "Company
Shares") and 245,000 shares to be sold by the Selling Stockholders (the
"Stockholder Shares"). All of the Warrants are to be sold by the Company. In
addition, the Company proposes to grant the option referred to in Section
2(b) to purchase all or any part of an aggregate of 150,000 additional Shares
and 150,000 additional Warrants. You are acting as Representative (the
"Representative") of the Underwriters listed on Schedule I hereto (the
"Underwriters").
The aggregate of 1,000,000 Shares and 1,000,000 Warrants, together with
all or any part of the 150,000 Shares and 150,000 Warrants which the
Underwriters have the option to purchase, are herein called the "Securities."
The Common Stock of the Company to be outstanding after giving effect to the
sale of the Shares (including the 150,000 Shares that the Underwriters have
the option to purchase) is herein called the "Common Stock."
The Underwriters have advised the Company that they desire to purchase
the Securities. The Company and the Selling Stockholders confirm the
agreements made by them, respectively, with respect to the purchase of the
Shares by the Underwriters, as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
A. The Company represents and warrants to, and agrees with, each
Underwriter that:
(a) A registration statement (File No. 333-14497) on Form SB-2
relating to the public offering of the Securities, including a preliminary
form of prospectus, copies of which have heretofore been delivered to you,
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 with the
Commission under the Act. "Preliminary Prospectus" shall mean each prospectus
filed pursuant to Rule 430 of the Rules and Regulations. The registration
statement (including all financial schedules and exhibits) as amended at the
time it becomes effective and the final prospectus included therein are
respectively referred to as the "Registration Statement" and the
"Prospectus", except that (i) if the prospectus first filed by the Company
pursuant to Rule 424(b) or Rule 430A of the Rules and Regulations or
otherwise utilized and not required to be so filed shall differ from said
prospectus as then amended, the term "Prospectus" shall mean the prospectus
first filed pursuant to Rule 424(b) or Rule 430A or so utilized from and
after the date on which it shall have been filed or utilized, and (ii) if
such registration statement or prospectus is amended or such prospectus is
supplemented, after the effective date of such registration statement and
prior to the Option Closing Date (as defined in Section 2(b)), the term
"Registration Statement" shall include such registration statement as so
amended, and the term "Prospectus" shall include the prospectus as so amended
or supplemented, or both, as the case may be.
(b) At the time the Registration Statement becomes effective and
at all times subsequent thereto up to the Option Closing Date (hereinafter
defined), (i) the Registration Statement and Prospectus will in all material
respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus
will include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made; provided, however, that the Company makes no representations,
warranties or agreements as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity
with, written information furnished to the Company by or on behalf of you or
any Selling Stockholder specifically for use in the preparation thereof. It
is understood that the statements set forth in the Prospectus with respect to
stabilization, the material set forth under the heading "Underwriting" and
the identity of counsel to the Underwriter under the heading "Legal Matters"
constitute the only information furnished in writing by the Underwriters for
inclusion in the Registration Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus and is
duly qualified to do business as a foreign corporation and is in good
standing in all other jurisdictions in which the nature of its business or
the character or location of its properties requires such qualification,
except where failure to so qualify is not reasonably likely to materially
adversely affect the Company's business, properties or financial condition.
(d) The authorized capital stock of the Company as of the
Effective Date was as set forth under "Capitalization" in the Prospectus. The
shares of issued and outstanding capital stock of the Company set forth
thereunder have been duly authorized, validly issued and are fully paid and
non-assessable; except as set forth in the Prospectus, no options, warrants
or other rights to purchase, agreements or other obligations to issue, or
agreements or other rights to convert any obligation into, any shares of
capital stock of the Company have been granted or entered into by the
Company. The
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Securities and Representative's Warrants conform in all material respects to
all statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Securities are duly authorized and, when issued, delivered
and paid for pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights of any
security holder of the Company. The certificates evidencing the Securities
are and will be in valid and proper legal form. The Representative's Warrants
(as defined in Section 12) will be exercisable for Securities in accordance
with the terms of the Representative's Warrants and at the prices therein
provided for. The shares of Common Stock and Warrants have been duly
authorized and reserved for issuance upon such exercise, and such Securities,
when issued upon such exercise in accordance with the terms of the
Representative's Warrants and when the price is paid, shall be fully paid and
non-assessable. Neither the filing of the Registration Statement nor the
offering or sale of the Securities as contemplated in this Agreement gives
rise to any rights, other than those which have been waived or satisfied, for
or relating to the registration of any securities of the Company, except as
described in the Registration Statement.
(f) This Agreement and the Representative's Warrants have been
duly and validly authorized, executed and delivered by the Company, and
assuming due execution by the other party or parties hereto and thereto,
constitute valid and binding obligations of the Company enforceable against
the Company in accordance with their respective terms, except as rights to
indemnity and contribution hereunder may be limited by applicable law and
except as enforceability may be limited by bankruptcy, insolvency or other
laws affecting the rights of creditors generally or by general equitable
principles. The Company has full power and lawful authority to authorize,
issue and sell the Shares to be sold by it hereunder on the terms and
conditions set forth herein, and no consent, approval, authorization or other
order of any governmental authority is required in connection with such
authorization, execution and delivery or with the authorization, issue and
sale of the Securities or the Representative's Warrants, except such as may
be required under the Act or state securities laws.
(g) Except as described in the Prospectus, the Company is not in
material violation, breach or default of or under, and consummation by the
Company of the transactions herein contemplated and the fulfillment by the
Company of the terms of this Agreement and the Representative's Warrants will
not conflict with, or result in a breach of, any of the terms or provisions
of, or constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance pursuant to the terms of, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company is a party or by which the Company may be bound or to which
any of the property or assets of the Company are subject, which would have a
material adverse effect on the business, properties or financial condition of
the Company, nor will such action result in any violation of the provisions
of the certificate of incorporation or the by-laws of the Company, as
amended, or any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental
body having jurisdiction over the Company, which would have a material
adverse effect on the business, properties or financial condition of the
Company.
(h) The Company owns no real property and, subject to the
qualifications stated in the Prospectus, the Company has good and marketable
title to all properties and assets described in the Prospectus as owned by
it, free and clear of all liens, charges, encumbrances or restrictions,
except such
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as are not materially significant or important in relation to its business;
all of the leases and subleases under which the Company is the lessor or
sublessor of properties or assets or under which the Company holds properties
or assets as lessee or sublessee as described in the Prospectus are in full
force and effect, and, except as described in the Prospectus, the Company is
not in default in any respect with respect to any of the terms or provisions
of any of such leases or subleases which would have a material adverse effect
on the business, properties or financial condition of the Company, and no
claim has been asserted by anyone adverse to rights of the Company as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company to continued
possession of the leased or subleased premises or assets under any such lease
or sublease except as described or referred to in the Prospectus, which would
have a material adverse effect on the business properties or financial
condition of the Company; and the Company owns or leases all such properties
described in the Prospectus as are necessary to its operations as now
conducted and, except as otherwise stated in the Prospectus, as proposed to
be conducted as set forth in the Prospectus.
(i) Xxxx + Associates, who have given their report on
certain financial statements filed and to be filed with the Commission
as a part of the Registration Statement, which are included in the
Prospectus, are with respect to the Company independent public
accountants as required by the Act and the Rules and Regulations.
(j) The financial statements and schedules, together with
related notes, set forth in the Prospectus or the Registration
Statement present fairly the financial position and results of
operations and changes in financial position of the Company on the
basis stated in the Registration Statement, at the respective dates and
for the respective periods to which they apply. Said statements and
schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a basis which is
consistent during the periods involved.
(k) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, the Company has not
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business, or entered into any transaction not in the
ordinary course of business, which is material to the business of the
Company, and there has not been any change in the capital stock of, or any
incurrence of long-term debt by, the Company or any issuance of options,
warrants or other rights to purchase the capital stock of the Company or any
adverse change or any development involving, so far as the Company can now
reasonably foresee, a prospective adverse change in the condition (financial
or other), net worth, results of operations, business, key personnel or
properties of it which would be material to the business or financial
condition of the Company, and the Company has not become party to, and
neither the business nor the property of the Company has become the subject
of, any material litigation whether or not in the ordinary course of business.
(l) Except as set forth in the Prospectus, there is not now
pending nor, to the knowledge of the Company, threatened, any action, suit or
proceeding (including those related to environmental matters or
discrimination on the basis of age, sex, religion or race) to which the
Company is a party before or by any court or governmental agency or body,
which, if adversely determined, would result in any material adverse change
in the condition (financial or other), business
4
prospects, net worth or properties of the Company; and, except as set forth
in the Prospectus, no labor disputes involving the employees of the Company
exist which, if adversely determined, would result in any material adverse
change in the condition (financial or otherwise), business prospects, net
worth or property of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid all taxes shown as due thereon; and there is no tax deficiency which
has been or to the knowledge of the Company might be asserted against the
Company which has not been adequately reserved for on the Company's balance
sheet.
(n) The Company has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its
business or the ownership of its property as described in the Prospectus and
is in all material respects complying therewith and owns or possesses
adequate rights to use all material patents, patent applications, trademarks,
xxxx registrations, copyrights and licenses necessary for the conduct of such
business and has not received any notice of conflict with the asserted rights
of others in respect thereof. To the best knowledge of the Company, none of
the activities or business of the Company is in violation of, or causes the
Company to violate, any law, rule, regulation or order of the United States,
any state, county or locality, or of any agency or locality, the violation of
which would have a material adverse effect upon the condition (financial or
otherwise), business prospects, net worth or properties of the Company.
(o) The Company has not, directly or indirectly, at any time (i)
made any contributions to any candidate for foreign political office, or if
made, failed to disclose fully any such contribution made in violation of
law, or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi
public duties, other than payments or contributions required or allowed by
applicable law. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(p) On the Closing Dates (as defined in Section 2(c)), all
transfer or other taxes (including franchise, capital stock or other tax,
other than income taxes imposed by any jurisdiction), if any, which are
required to be paid in connection with the sale and transfer of the
Securities to the Underwriters hereunder will have been fully paid or
provided for by the Company and all laws imposing such taxes will have been
fully complied with.
(q) All contracts and other documents of the Company which are,
under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Securities or to facilitate
the sale or resale of the Securities.
(s) Except as disclosed in the Registration Statement, the Company
has no subsidiaries.
5
(t) Except for this Agreement and other agreements with you, and
except as disclosed in the Registration Statement, the Company has not
entered into any agreement pursuant to which any person is entitled either
directly or indirectly to compensation from the Company for services as a
finder in connection with the proposed public offering.
B. Each Selling Stockholder severally represents and warrants to, and
agrees with, each Underwriter that:
(a) When the Registration Statement shall become effective, and at
all times subsequent thereto up to the First Closing Date (defined below)
and, if any Optional Shares are purchased, up to the Option Closing Date
(defined below) (i) such parts of the Registration Statement and any
amendments and supplements thereto as specifically refer to such Selling
Stockholder will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading and (ii) such parts of the Prospectus
as specifically refer to such Selling Stockholder will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The execution and delivery by such Selling Stockholder of, and
the performance by such Selling Stockholder of its obligations under, this
Agreement, the Custody Agreement signed by such Selling Stockholder and
American Securities Transfer, Inc., as custodians (the "Custodians"),
relating to the deposit of the Stockholder Shares to be sold by such Selling
Stockholder (the "Custody Agreement") and the Power of Attorney appointing
certain individuals as such Selling Stockholder's attorneys-in-fact to the
extent set forth therein, relating to the transactions contemplated hereby
and the Registration Statement (the "Power of Attorney") will not contravene
any provision, or the certificate or articles of incorporation or by-laws of
such Selling Stockholder (if such Selling Stockholder is a corporation), or
any agreement or other instrument binding upon such Selling Stockholder or
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over such Selling Stockholder, and no consent, approval,
authorization or order of or qualification with any governmental body or
agency, financial institution, or other person or entity is required for the
performance by such Selling Stockholder of its obligations under this
Agreement or the Custody Agreement or Power of Attorney of such Selling
Stockholder, except as required by the Securities Act or the securities or
Blue Sky laws of the various states in connection with the offer and sale of
the Shares.
(c) This Agreement, the Custody Agreement and the Power of
Attorney have been duly authorized, executed and delivered by, and are
binding and valid agreements of, such Selling Stockholder.
(d) Such Selling Stockholder on the First Closing Date will have
good and marketable title to the Stockholder Shares to be sold by such
Selling Stockholder, free and clear of any pledge, lien, security interest,
charge, claim, equity or encumbrance of any kind, and full right, power and
authority to enter into this Agreement and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder. Upon the
delivery of and payment for the Stockholder Shares hereunder, good and
marketable title to the Stockholder Shares to be sold by such Selling
Stockholder
6
will pass to the several Underwriters, free and clear of any pledge, lien,
security interest, charge, claim, equity or encumbrance of any kind.
(e) Certificates for all of the Stockholder Shares to be sold by
such Selling Stockholder pursuant to this Agreement in suitable form for
transfer by delivery or accompanied by duly executed instruments of transfer
or assignment in blank (with signatures guaranteed), have been placed in
custody with the Custodians for the purpose of effecting delivery pursuant to
this Agreement.
(f) Such Selling Stockholder shall not sell, transfer or otherwise
dispose of, or offer or contract to sell transfer or otherwise dispose of,
directly or indirectly (except for transfers during such Selling
Stockholder's lifetime or on death by will or intestacy to his or her
immediate family or a family trust; provided that such transferee shall agree
in writing to the restrictions on transfer set forth therein), any Common
Stock, any securities convertible into or exchangeable for Common Stock or
any rights to purchase or acquire Common Stock for a period of ten months
after the date of the public offering of the Shares contemplated hereby,
without your prior written consent, except for the Stockholder Shares offered
hereunder.
(g) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to cause or result in, or that
has constituted, or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company and
such Selling Stockholder has not distributed and will not distribute any
prospectus or other offering material in connection with the offering and
sale of the Stock other than any Preliminary Prospectus filed with the
Commission or the Prospectus Or other material permitted by the Securities
Act.
2. PURCHASE, DELIVERY AND SALE OF THE SHARES.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties and agreements herein
contained, (i) the Company agrees to issue and sell to the Underwriters and
the Underwriters agree to buy from the Company at $_____________ per
Share and $_________ per Warrant at the place and time hereinafter specified,
the number of Shares and Warrants set forth opposite each Underwriter's name
in Schedule I hereto (the "Company Firm Securities") (ii) each Selling
Stockholder agrees, severally but not jointly, to sell to the Underwriters
and the Underwriters agree to buy the number of Shares indicated by such
Selling Stockholder's name on Schedule II to this Agreement (the "Selling
Stockholders Firm Shares"). Together, the Company Firm Securities and the
Selling Stockholder's Firm Shares are the "Firm Securities." Each of the
Underwriters agrees, severally and not jointly, to purchase from the Company
and the Selling Stockholders, at a combined purchase price of
$____________ per Share and Warrant, the number of Firm Securities set
forth opposite such Underwriter's name on Schedules I and II hereto.
Delivery of the Firm Securities against payment therefor shall take
place at the offices of Xxxxxx Xxxxxxx & Associates, Inc., 0000 Xxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 (or at such other
place as may be designated by agreement between the Representative and the
Company) at 10:00 a.m. New York time on ______,1997, or at such other time
and date, not later than seven calendar days thereafter, as you may
designate, such time and date of payment and delivery for the Firm Securities
being herein called the "First Closing Date." Time shall be of the essence
and
7
delivery at the time and place specified in this subsection (a) is a further
condition to the Underwriters' obligations hereunder.
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and
agreements herein contained, the Company hereby grants the Underwriters an
option to purchase all or any part of an aggregate of 150,000 additional
Shares and 150,000 additional Warrants at $___________ per Share and
$_____ per Warrant (such additional Shares and Warrants being referred to
herein as the "Option Securities"). This option may be exercised on one
occasion within 60 days after the Effective Date upon notice by the
Representative to the Company advising it as to the amount of Option
Securities as to which the option is being exercised, the names and
denominations in which the certificates for such Option Securities are to be
registered and the time and date when such certificates are to be delivered.
Such time and date shall be determined by the Representative but shall not be
earlier than four and not later than seven calendar days after the exercise
of said option, nor in any event prior to the First Closing Date, and such
time and date is referred to herein as the "Option Closing Date." Delivery of
the Option Securities against payment therefor shall take place at the
offices of Xxxxxx Xxxxxxx & Associates, Inc., 0000 Xxxxxxxx Xxxxxxxxx, Xxxxx
Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000. Time shall be of the essence and
delivery at the time and place specified in this subsection (b) is a further
condition to the Underwriters' obligations hereunder.
The Option granted hereunder may be exercised only to cover
over-allotments in the sale by the Underwriters of Firm Securities referred
to in subsection (a) above.
(c) The Company will make the certificates for the Securities to
be purchased by the Underwriters hereunder available to the Representative
for checking at least two full business days prior to the First Closing Date
or the Option Closing Date (which are collectively referred to herein as the
"Closing Dates" and individually as a "Closing Date"), as the case may be.
The certificates shall be in such names and denominations as the
Representative may request, at least two full business days prior to the
relevant Closing Dates.
Definitive engraved certificates in negotiable form for the
Securities to be purchased by the Underwriters hereunder will be delivered by
the Company to the Underwriters for the Underwriters' account against payment
of the purchase price by the Underwriters, at the option of the
Representative, by certified or bank cashier's checks in New York Clearing
House funds or by wire transfer, payable to the order of the Company and the
Selling Stockholders, as the case may be.
In addition, in the event the Underwriters exercise the option to
purchase from the Company all or any portion of the Option Securities
pursuant to the provisions of subsection (b) above, payment for such Option
Securities shall be made to or upon the order of the Company by the
Underwriters, at the option of the Representative, by certified or bank
cashier's checks payable in New York Clearing House funds or by wire
transfer, at the offices of Xxxxxx Xxxxxxx & Associates, Inc. at the time and
date of delivery of such Option Securities as required by the provisions of
subsection (b) above, against receipt of the certificates for such Option
Securities by the Underwriters, registered in such names and in such
denominations as the Underwriters may request.
8
It is understood that you propose to offer the Securities to be
purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
3. COVENANTS OF THE COMPANY.
The Company covenants and agrees with each Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and, upon notification from the
Commission that the Registration Statement has become effective, will so
advise the Representative and will not at any time, whether before or after
the Effective Date, file any amendment to the Registration Statement or
supplement to the Prospectus of which the Representative shall not previously
have been advised and furnished with a copy or to which the Representative or
counsel to the Underwriters shall have reasonably objected in writing or
which is not in compliance with the Act and the Rules and Regulations. At any
time prior to the later of (A) the completion by you of the distribution of
the Securities contemplated hereby (but in no event more than nine months
after the Effective Date) and (B) 25 days after the Effective Date, the
Company will prepare and file with the Commission, promptly upon your
request, any amendments or supplements to the Registration Statement or
Prospectus which, in the Representative's reasonable opinion, may be
necessary or advisable in connection with the distribution of the Securities.
Promptly after the Representative or the Company is advised
thereof, the Representative will advise the Company or the Company will
advise the Representative, as the case may be, and confirm the advice in
writing, of the receipt of any comments of the Commission, of the
effectiveness of any post effective amendment to the Registration Statement,
of the filing of any supplement to the Prospectus or any amended Prospectus,
of any request made by the Commission for amendment of the Registration
Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any
state or regulatory body of any stop orders or other order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus or the Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or the institution of any proceedings for any of such purposes,
and will use its best efforts to prevent the issuance of any such order and,
if issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to the Underwriters copies
of each Preliminary Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriters and selected dealers to use the
Prospectus in connection with the sale of the Securities for such period not
to exceed nine months from the Effective Date as in the reasonable opinion of
counsel for the Underwriters the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations. In case of
the happening, at any time within such period as a Prospectus is required
under the Act to be delivered in connection with sales by an underwriter or
dealer, of any event of which the Company has knowledge and which materially
affects the Company or the Securities, or which in the opinion of counsel for
the Company or counsel for the Underwriters should be set forth in an
amendment to the Registration Statement or a supplement to the Prospectus in
order to make the statements therein not then misleading, in light of the
circumstances existing at the time the Prospectus is required to be
9
delivered to a purchaser of the Securities, or in case it shall be necessary
to amend or supplement the Prospectus to comply with the Act or with the
Rules and Regulations, the Company will notify the Representative promptly
and forthwith prepare and furnish to the Underwriters copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as the Underwriters may reasonably request, in order that the
Prospectus, as so amended or supplemented, will not contain any untrue
statement of a material fact or omit to state any material facts necessary in
order to make the statements in the Prospectus, in the light of the
circumstances under which they are made, not misleading. The preparation and
furnishing of any such amendment or supplement to the Registration Statement
or amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriters, except that in case the Underwriters are
required, in connection with the sale of the Shares, to deliver a Prospectus
nine months or more after the Effective Date, the Company will upon request
of and at the Underwriters' expense, amend or supplement the Registration
Statement and Prospectus and furnish you with reasonable quantities of
prospectuses complying with Section 10(a)(3) of the Act.
(b) The Company will comply with the Act, the Rules and
Regulations and the Shares Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations thereunder in connection with the
offering and issuance of the Securities.
The Company will use its best efforts to qualify or register the
Securities for sale under the securities or "blue sky" laws of such
jurisdictions as the Representative may have designated in writing prior to
the execution hereof and will make such applications and furnish such
information to counsel for the Underwriters as may be required for that
purpose and to comply with such laws, provided that the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or to
execute a general consent to service process in any jurisdiction. The Company
will, from time to time, prepare and file such statements and reports as are
or may be required to continue such qualification in effect for so long a
period as you may reasonably request. Legal fees for such qualifications
shall be itemized based on the time expended and costs incurred, shall not in
any event exceed $30,000.00, exclusive of filing fees (unless otherwise
agreed).
(c) The Company will instruct its transfer agent to provide the
Representative with copies of the Depository Trust Company stock transfer
sheets on a weekly basis for a period of six months from the First Closing
Date and on a monthly basis thereafter for six additional months.
(d) The Company will use its best efforts to cause a Registration
Statement under the Exchange Act to be declared effective on the Effective Date.
(e) For so long as the Company is a reporting company under either
Section 12(g), 13 or 15(d) of the Exchange Act, the Company, at its expense,
will furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail
and at its expense, will furnish to the Representative during the period
ending five years from the date hereof, (i) as soon as practicable after the
end of each fiscal year, a balance sheet of the Company and any subsidiaries
as at the end of such fiscal year, together with statements of income,
stockholders, equity and cash flows of the Company and any subsidiaries as at
the end of such fiscal year, all in reasonable detail and accompanied by a
copy of the certificate or report thereon of independent accountants; (ii) as
soon as they are available, a copy of all reports (financial or other)
10
mailed to security holders; (iii) as soon as they are available, a copy of
all non-confidential reports and financial statements furnished to or filed
with the Commission; and (iv) such other information of a public nature as
you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in sub-section (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will deliver to the Representative at or before
the First Closing Date one signed copy of the Registration Statement
including all financial statements and exhibits filed therewith, and of all
amendments thereto. The Company will deliver to or upon the Representative's
order, from time to time until the Effective Date as many copies of any
Preliminary Prospectus filed with the Commission prior to the Effective Date
as the Underwriters may reasonably request. The Company will deliver to the
Representative on the Effective Date and thereafter for so long as a
Prospectus is required to be delivered under the Act, from time to time, as
many copies of the Prospectus, in final form, or as thereafter amended or
supplemented, as the Underwriters may from time to time reasonably request.
(h) The Company will make generally available to its security
holders and deliver to the Representative as soon as it is practicable to do
so, but in no event later than 90 days after the end of 12 months after its
current fiscal quarter, an earnings statement (which need not be audited)
covering a period of at least 12 consecutive months beginning after the
Effective Date which shall satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the
Securities substantially for the purposes set forth under "Use of Proceeds"
in the Prospectus, and will file such reports with the Commission with
respect to the sale of the Shares and the application of the proceeds
therefrom as may be required pursuant to Rule 463 of the Rules and
Regulations.
(j) The Company will, promptly upon the Representative's request,
prepare and file with the Commission any amendments or supplements to the
Registration Statement, Preliminary Prospectus or Prospectus and take any
other action, which in the opinion of Berliner Xxxxxx Xxxxxx & Xxxxxxxx,
P.C., counsel to the Underwriters, may be reasonably necessary or advisable
in connection with the distribution of the Securities and will use its best
efforts to cause the same to become effective as promptly as possible.
(k) Prior to the Effective Date, the Company will use its best
efforts to cause the cause the Selling Stockholders and all other
Stockholders of the Company to enter into a written agreement with the
Representative, which among other things shall provide that for a period of
10 and 12 months following the closing date of the offering, respectively,
such stockholders will not sell, assign, hypothecate or pledge any of the
securities of the Company owned by them on the Effective Date, or
subsequently acquired by the exercise of any options or warrants or
conversion of any convertible security of the Company held by them on the
Effective Date directly or indirectly, except with the Representative's prior
written consent (except for transfers during such stockholder's lifetime or
on death by will or intestacy to his or her immediate family or a family
trust; provided that such
11
transferee shall agree in writing to the restrictions on transfer set forth
therein). Such stockholders will permit all certificates evidencing those
shares to be stamped with an appropriate restrictive legend, and will cause
the transfer agent for the Company to note such restrictions on transfer
books and records of the Company.
(l) The Company shall, as soon as practicable after the initial
filing of the Registration Statement, make all filings required to obtain
approval for the quotation of the Securities on the Nasdaq SmallCap market
("NASDAQ") and will use its best efforts to effect and maintain the aforesaid
approval for at least five (5) years from the date of this Agreement. Within
ten (10) days after the Effective Date, the Company shall use its best
efforts to cause the Company to be listed in the Xxxxx'x OTC Industrial
Manual and cause such listing to be maintained for five years from the date
of this Agreement.
(m) The Company represents that it has not taken, and agrees that
it will not take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Securities or to facilitate
the sale or resale of the Securities.
(n) During the period of the offering, and for a period of twelve
(12) months from the Effective Date, the Company will not sell or otherwise
dispose of any securities of the Company (except for shares of Common Stock
issuable pursuant to acquisitions and upon exercise of options or warrants
outstanding on the Effective Date ) without your prior written consent.
(o) Prior to the Effective Date, the Company shall had retained a
public relations firm reasonably acceptable to the Representative, and shall
continue to retain such firm, or any alternate firm reasonably acceptable to
the Representative, for a minimum period of one (1) year from the First
Closing Date.
(p) The Company will reserve and keep available that maximum
number of its authorized but unissued securities which are issuable upon
exercise of the Representative's Warrants (including securities issuable upon
the exercise of the Warrants which are issuable upon the exercise of the
Representative's Warrants) outstanding from time to time.
(q) The Company shall deliver to the Representative, at the Company's
expense, a total of three (3) bound volumes in form and content acceptable to
you, containing the Registration Statement and all exhibits filed therewith,
and all amendments thereto, and all other material correspondence, filings,
certificates and other documents filed and/or delivered in connection with
this offering. The Company shall use its best efforts to deliver such volumes
within ninety (90) days of the First Closing Date.
(r) The Company shall have acquired a reasonable amount of
Director and Officer Liability Insurance (provided that such insurance can be
obtained at a reasonable cost as determined by the Company and the
Representative) from a responsible insurer, all satisfactory to the
Representative, prior to the effectiveness of the Registration Statement.
The Company shall have acquired keyman life insurance on Xxxxx Xxxxxx on the
terms described in the Prospectus.
12
(s) Xxxxxx Xxxxxxx & Associates, Inc. shall have the right for a
period of four (4) years from the First Closing Date to designate one nominee
for election to the Board of Directors of the Company, such nominee to be
reasonably acceptable to the Company. In the event that the Company is unable
to obtain the Directors and Officers insurance described in subparagraph (r)
above, Xxxxxx Xxxxxxx & Associates, Inc. shall have the right for such four
(4) year period to designate a consultant to the Board of Directors of the
Company, which consultant shall have the right to attend all Board and Board
committee meetings and shall be compensated with respect to meetings of the
Board on the same basis as outside members of the Board.
(t) The Company agrees to deliver to the Representative a
financial consulting agreement whereby the Company will retain Xxxxxx Xxxxxxx
& Associates, Inc. as a financial consultant for a period of two years
following the First Closing Date for a fee of $3,000 per month.
(u) Each Selling Shareholder agrees to deliver to the
Representative on or prior to the First Closing Date a properly completed and
executed United States Treasury Department Form W-9 (or other applicable form
or statement specified by Treasury Department regulations in lieu thereof).
4. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS
The Underwriters' obligations to purchase and pay for the Securities
which they have agreed to purchase hereunder are subject to the accuracy (as
of the date hereof, and as of the Closing Dates) of and compliance with the
representations and warranties of the Company herein, to the performance by
the Company and the Selling Stockholders of their obligations hereunder, and
to the following conditions:
(a) The Registration Statement shall have become effective and the
Representative shall have received notice thereof not later than 4:30 p.m.,
Los Angeles time, on the date of this Agreement, or at such later time or on
such later date as to which you may agree in writing; on the Closing Dates,
no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that or any similar purpose
shall have been instituted or shall be pending or, to the knowledge of any
Underwriter or to the knowledge of the Company, shall be contemplated by the
Commission; any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C., counsel to the Underwriters; and no
stop order shall be in effect denying or suspending effectiveness of the
Registration Statement nor shall any stop order proceedings with respect
thereto be instituted or pending or threatened under the Act.
(b) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of Xxxxx Xxxxx & Xxxxx
Professional Corporation, counsel for the Company, in form and substance
reasonably satisfactory to counsel for you, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Colorado and is duly qualified or licensed to do business as a foreign
corporation in good standing in each other jurisdiction in which the
ownership or leasing of its properties or the conduct of its business
requires such
13
qualification, except where failure to so qualify will not have a material
adverse effect in the business, properties or financial condition of the
Company;
(ii) the authorized capitalization of the Company as of the date
of the Prospectus was as set forth in the Prospectus; all of the shares of
the Company's outstanding stock requiring authorization for issuance by
the Company's Board of Directors have been duly authorized and validly
issued, are fully paid and non-assessable and conform to the description
thereof contained in the Prospectus; the outstanding shares of Common Stock
of the Company, to such counsel's knowledge, have not been issued in
violation of the preemptive rights of any stockholder and the stockholders
of the Company do not have any preemptive rights or other rights to
subscribe for or to purchase any of the Shares offered hereby; except for
the transfer restrictions regarding "affiliates" contained in Rule 144
promulgated under the Act and restrictions provided for in this Agreement,
to the knowledge of counsel, there are no restrictions upon the voting or
transfer of, any of the Shares; the Securities and the Representative's
Warrants conform in all material respects to the respective descriptions
thereof contained in the Prospectus; the Securities to be issued as
contemplated in the Registration Statement and this Agreement have been
duly authorized and, when paid, will be validly issued, fully paid and
non-assessable and free of preemptive rights, if any, contained in the
Company's certificate of incorporation or by-laws, or any other document,
instrument or agreement known to counsel; a sufficient number of shares of
Common Stock has been reserved for issuance upon exercise of the Warrants
and the Representative's Warrants (including shares issuable upon the
exercise of the Warrants which are issuable upon the exercise of the
Representative's Warrants); to such counsel's knowledge, neither the filing
of the Registration Statement nor the offering or sale of the Securities
as contemplated by this Agreement gives rise to any registration rights or
other rights, other than those contemplated by the Representative's
Warrants or which have been waived or satisfied, for or relating to the
registration of the Shares;
(iii) this Agreement and the Representative's Warrants
(sometimes hereinafter collectively referred to as the "Representative
Agreements") have been duly and validly authorized, executed and delivered
by the Company, and assuming due execution and delivery of the
Representative Agreements by you, such agreements are, or when duly
executed will be, the valid and legally binding obligations of the Company
except as enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws affecting the rights of creditors, or by general
equitable principles and except as rights to indemnity and contribution
hereunder may be limited by applicable securities laws or public policy;
(iv) the certificates evidencing the Stockholder Shares are, and
the certificates representing the Company Shares and Warrants will be,
when issued, in valid and proper legal form; the Representative's Warrants
will be exercisable for shares of Common Stock of the Company in accordance
with the terms of the Representative's Warrants and at the prices therein
provided for; the shares of Common Stock and Warrants of the Company
issuable upon exercise of the Representative's Warrants have been duly
authorized and reserved for issuance upon such exercise, and such shares
and Warrants, when issued upon such exercise in accordance with the terms
of the Representative's Warrants and when the price is paid shall be fully
paid and non-assessable;
14
(v) Such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which are
required to be described or referred to in the Registration Statement
which are not so described or referred to;
(vi) The execution and delivery of this Agreement by the
Company and the Representative's Warrants and the incurrence of the
obligations of the Company herein and therein set forth and the
consummation by the Company of the transactions herein or therein
contemplated will not result in a violation of, or constitute a default
under, the certificate or articles of incorporation or by-laws of the
Company, or in a material violation of or default under any obligation,
agreement, covenant or condition contained in any bond, debenture, note
or other evidence of indebtedness or in any of the contracts,
indentures, mortgages, loan agreements, leases, joint ventures or other
agreements or instruments to which the Company is a party that are filed
as Exhibits to the Registration Statement or otherwise known to counsel;
(vii) 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 is in effect, no
proceedings for that purpose have been instituted or are pending before,
or threatened by, the Commission and the Registration Statement and the
Prospectus (except, in the case of both the Registration Statement and
any Amendment thereto, and the Prospectus and any supplement thereto for
the financial statements and notes and schedules thereto, and other
financial information or statistical data contained therein, or omitted
therefrom, as to which such counsel need express no opinion) comply as
to form in all material respects with the applicable requirements of the
Act and the Rules and Regulations;
(viii) All descriptions in the Registration Statement and
the Prospectus, and any amendment or supplement thereto, of contracts
and other documents are accurate and fairly present the information
required to be shown, and such counsel is familiar with all contracts
and other documents referred to in the Registration Statement and the
Prospectus and any such amendment or supplement, or filed as exhibits to
the Registration Statement, and such counsel does not know of any
contracts or documents of a character required to be summarized or
described therein or to be filed as exhibits thereto which are not so
summarized, described or filed;
(ix) No authorization, approval, consent or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or delivery
of the Securities by the Company, in connection with the execution,
delivery and performance of this Agreement or the Representative's
Warrants by the Company or in connection with the taking of any action
contemplated herein or therein, or the issuance of the Representative's
Warrants or the Shares underlying the Representative's Warrants, other
than registration or qualification of the Shares under applicable state
or foreign securities or blue sky laws (as to which such counsel need
express no opinion) and registration under the Act; and
(x) To the extent that the statements contained in the
Prospectus under the headings "Business", "Management", "Description of
Capital Stock", "Shares Eligible For Future Sale" and "Legal Matters"
refer to opinions of such counsel or matters of law or purport
15
to summarize the status of litigation or purport to summarize the
provisions of statutes, regulations, contracts, agreements or other
documents, such statements have been reviewed by such counsel and
accurately reflect the status of any such litigation, such provisions
purported to be summarized and any such opinions of such counsel;
(xi) The Company is not an investment company under the
Investment Company Act of 1940; and
(xii) Based solely on a review of the Company's transfer
records, the Selling Stockholders are the holders of record of the
Stockholder Shares.
Such counsel has participated in conferences with officers and
representatives of the Company and representatives of the Underwriters in
connection with the preparation of the Registration Statement and the
Prospectus and, although such counsel has not reviewed the accuracy or
completeness of, the statements contained in the Registration Statement or
Prospectus, on the basis of the foregoing, nothing has come to the attention
of such counsel that caused such counsel to have reason to believe that the
Registration Statement or any amendment thereto at the time it became
effective contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus or any
supplement thereto contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make statements therein in
light of the circumstances under which they were made not misleading (except,
in the case of both the Registration Statement and any amendment thereto and
the Prospectus and any supplement thereto, for the financial statements,
notes and schedules thereto and other financial information and statistical
data contained therein, as to which such counsel need express no opinion);
In rendering such opinion, such counsel may (i) rely upon
certificates of any officer of the Company or public officials as to matters
of fact and (ii) rely as to all matters of law other than the law of the
United States or of the State of Colorado upon opinions of counsel reasonably
satisfactory to you.
(c) All corporate proceedings and other legal matters relating to
this Agreement, the Registration Statement, the Prospectus, and other related
matters shall be reasonably satisfactory to or approved by Berliner Xxxxxx
Xxxxxx & Xxxxxxxx, P.C., counsel to the Underwriters, and you shall have
received from such counsel a signed opinion, dated as of the First Closing
Date, with respect to the validity of the issuance of the Securities, the
form of the Registration Statement and Prospectus (other than the financial
statements and other financial data contained therein), the execution of this
Agreement and other related matters as the Representative may reasonably
require. The Company shall have furnished to counsel for the Underwriters
such documents as they may reasonably request for the purpose of enabling
them to render such opinion.
(d) You shall have received a letter on and as of the Effective
Date and again on and as of the First Closing Date, in each instance
describing procedures carried out to a date within five (5) days of the date
of the letter, from Xxxx + Associates, independent public accountants for the
Company, substantially in the form approved by the Representative.
16
(e) At each of the Closing Dates, (i) the representations and
warranties of the Company and the Selling Stockholders contained in this
Agreement shall be true and correct with the same effect as if made on and as
of such Closing Date, and the Company and the Selling Stockholders shall have
performed all of its obligations hereunder and satisfied all the conditions
on its part to be satisfied at or prior to such Closing Date; (ii) the
Registration Statement and the Prospectus and any amendments or supplements
thereto shall contain all statements which are required to be stated therein
in accordance with the Act and the Rules and Regulations, and shall in all
material respects conform to the requirements thereof, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statements 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 in light of the circumstances under
which they were made; (iii) there shall have been, since the respective dates
as of which information is given, no material adverse change in the business,
properties, condition (financial or otherwise), results of operations,
capital stock, long-term or short-term debt or general affairs of the Company
from that set forth in the Registration Statement and the Prospectus, except
changes which the Registration Statement and Prospectus indicate might occur
after the Effective Date and the Company shall not have incurred any material
liabilities nor entered into any agreement not in the ordinary course of
business other than as referred to in the Registration Statement and
Prospectus; and (iv) except as set forth in the Prospectus, no action, suit
or proceeding at law shall be pending or threatened against the Company which
would be required to be disclosed in the Registration Statement, and no
proceedings shall be pending or threatened against the Company before or by
any commission, board or administrative agency in the United States or
elsewhere, wherein an unfavorable decision, ruling or finding would
materially and adversely affect the business, property, condition (financial
or otherwise), results of operations or general affairs of the Company. In
addition, the Representative shall have received, at the First Closing Date,
a certificate signed by the President and the principal financial or
accounting officer of the Company, dated as of the First Closing Date,
evidencing compliance with the provisions of this subsection (e). The power
of attorney for the Selling Stockholders shall have executed and delivered to
you a certificate dated the First Closing Date to the effect that the
representations and warranties of such Selling Stockholder contained in this
Agreement are true and correct on and as of the date of this Agreement and
such Closing Date and such Selling Stockholder has timely performed or
complied with all covenants and conditions therein contained required to be
performed or complied with on his, her or its part in all material respects
at or prior to such Closing Date.
(f) Upon exercise of the option provided for in Section 2(b)
hereof, the Underwriters' obligations to purchase and pay for the Option
Securities referred to therein will be subject (as of the date hereof and as
of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, no stop order suspending the effectiveness thereof
shall have been issued, and no proceedings for that purpose shall have
been instituted or shall be pending, or, to the knowledge of any
Underwriter or the knowledge of the Company, shall be contemplated by
the Commission, and any reasonable request on the part of the Commission
for additional information shall have been complied with to the
reasonable satisfaction of Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C.,
counsel to the Underwriters.
17
(ii) At the Option Closing Date there shall have been
delivered to the Representative the signed opinion of Xxxxx Xxxxx &
Xxxxx Professional Corporation, counsel for the Company, dated as of the
Option Closing Date, in form and substance reasonably satisfactory to
Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C., counsel to the Underwriters,
which opinion shall be substantially the same in scope and substance as
the opinion furnished to the Representative at the First Closing Date
pursuant to Section 4(b) hereof, except that such opinion, where
appropriate, shall cover the Option Securities rather than the Firm
Securities. If the First Closing Date is the same as the Option Closing
Date, such opinions may be combined.
(iii) At the Option Closing Date, there shall have been
delivered to the Representative a certificate of the President and
financial officer of the Company dated the Option Closing Date, in form
and substance reasonably satisfactory to Berliner Xxxxxx Xxxxxx &
Xxxxxxxx, P.C., counsel to the Underwriters, substantially the same in
scope and substance as the certificate furnished to the Representative
at the First Closing Date pursuant to Section 4(e) hereof.
(iv) Each Selling Stockholder or his designated
attorney-in-fact shall have executed and delivered to the Representative
a certificate dated the Option Closing Date to the effect that the
representations and warranties of such Selling Stockholder contained in
this Agreement are true and correct on and as of the date of this
Agreement are such Closing Date and such Selling Stockholder has timely
performed or complied with all covenants and conditions therein
contained required to be performed or complied with on his/her or its
part in all material respects at or prior to such Option Closing Date.
(v) At the Option Closing Date, there shall have been
delivered to the Representative a letter in form and substance
satisfactory to you from Xxxx + Associates, dated the Option Closing
Date and addressed to the Representative, confirming the information in
their letter referred to in Section 4(d) hereof as of the date thereof
and stating that, without any additional investigation required, nothing
has come to their attention during the period from the ending date of
their review referred to in said letter to a date not more than five (5)
days prior to the Option Closing Date which would require any change in
said letter if it were required to be dated the Option Closing Date.
(vi) All proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Securities
shall be reasonably satisfactory in form and substance to the
Representative, and you and Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C.,
counsel to the Underwriters, shall have been furnished with all such
documents and certificates as you may request in connection with this
transaction in order to evidence the accuracy and completeness of any of
the representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained therein.
(g) If any of the conditions herein provided for in this Section
shall not have been completely fulfilled as of the date indicated, this
Agreement and all obligations of the Underwriters under this Agreement may be
cancelled at, or at any time prior to, each Closing Date by your notifying
the Company and the Selling Stockholders of such cancellation in writing or
by telegram at or prior
18
to the applicable Closing Date. Any such cancellation shall be without
liability of any Underwriter to the Company and the Selling Stockholders,
except as otherwise provided herein.
5. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY AND THE SELLING
STOCKHOLDERS.
The obligation of the Company and the Selling Stockholders to sell and
deliver the Securities is subject to the following conditions:
(a) The Registration Statement shall have become effective not
later than 4:30 p.m. Los Angeles time, on the date of this Agreement, or on
such later date or time as the Representative and the Company may agree in
writing.
(b) on the Closing Dates, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
Act or any proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company and the Selling
Stockholders provided for in this Section have been fulfilled on the First
Closing Date but are not fulfilled after the First Closing Date and prior to
the Option Closing Date, then only the obligation of the Company to sell and
deliver the Option Securities on exercise of the option provided for in
Section 2(b) hereof shall be affected.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Representative and each Underwriter and, each person, if any, who controls
each Representative and each Underwriter, within the meaning of the Act, from
and against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys, fees), to
which you or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (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 (A) the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment thereof or supplement thereto, (B) any blue sky application or
other document executed by the Company specifically for that purpose or based
upon written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Shares under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based
upon the omission or alleged omission to state in the Registration Statement,
or any supplement thereto, or in any Blue Sky Application, a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company will not be liable in any
such case to the extent, but only to the extent, that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company by
or through the Representative or by or on behalf of any Selling Stockholder
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such Preliminary Prospectus or the Prospectus or any such amendment or
supplement thereto and provided further, that the indemnity agreement
provided in this Section 6(a) with respect to any Preliminary
19
Prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any losses, claims, charges, liabilities or litigation based
upon any untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state therein a material fact purchased
Shares, if a copy of the Prospectus in which such untrue statement or alleged
untrue statement or omission or alleged omission was corrected has not been
sent or given to such person within the time required by the Act and the
Rules and Regulations thereunder. It is understood that the statements set
forth in the Prospectus with respect to stabilization, the material set forth
under the heading "Underwriting" and the identity of counsel to the
Underwriter under the heading "Legal Matters" constitute the only information
furnished in writing by the Underwriter for inclusion in the Registration
Statement and Prospectus, as the case may be. This indemnity will be in
addition to any liability which the Company may otherwise have.
(b) Each Selling Stockholder will, severally but not jointly,
indemnify and hold harmless each Representative, each Underwriter, and the
Company, and each person, if any who controls the Representative and each
Underwriter and the Company against any losses, claims, damages or
liabilities, joint or several, to which such entity or person may become
subject, under the Securities Act, the Exchange Act or otherwise, (including,
without limitation all costs of investigating, disputing or defending any
such claim or action or any amount paid in settlement thereof) insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related
Preliminary Prospectus, 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, or (ii)
any untrue statement or alleged untrue statement of a material fact contained
in any application or other document or communication executed by or on
behalf of the Company and based upon written information furnished by or on
behalf of the Selling Stockholders filed in any jurisdiction in order to
qualify the Shares under the securities or Blue Sky laws thereof or filed
with the Commission or any securities exchange, or any 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 based on information concerning
such Selling Stockholder included therein in reliance upon and in conformity
with written information furnished to the Company by such Selling Stockholder
expressly for use therein, and will reimburse each Representative and each
Underwriter and the Company for any legal or other expenses reasonably
incurred by each such Underwriter and the Company in connection with
investigating or defending any such loss, claim, damage, liability or action
as such expenses are incurred. Notwithstanding the foregoing, (i) in no event
shall the liability of any Selling Stockholder under this Section 6 (b)
exceed the proceeds received by such Selling Stockholder in connection with
the sale of the Shares as contemplated hereunder and, (ii) the Selling
Stockholders shall not be liable in any such case to the extent that any
losses, claims, damages or liabilities arise out of or are based upon an
untrue statement or alleged untrue statement in or omission or alleged
omission from the information included under the headings "Underwriting" and
"Legal Matters" in the Prospectus in reliance upon and in conformity with
written information furnished to the Company by you or by or on behalf of any
Underwriter through you specifically for inclusion therein;
(c) The Representative and each of the Underwriters agree to
indemnify and hold harmless the Company, each of its directors, each nominee
(if any) for director named in the
20
Prospectus, each of its officers who have signed the Registration Statement,
and each person, if any, who controls the Company and each Selling
Stockholder, within the meaning of the Act, from and against any losses,
claims, damages or liabilities (which shall, for all purposes of this
Agreement, shall include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys, fees) to which the
Company or any such director, nominee, officer or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (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, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged untrue statement or 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 any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or omission or alleged untrue statement
or omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, in reliance upon and
in conformity with written information furnished to the Company by or through
the Representative specifically for use in preparation thereof. It is
understood that the statements set forth in the Prospectus with respect to
stabilization, the material set forth under the heading "Underwriting" and
the identity of counsel to the Underwriter under the heading "Legal Matters"
constitute the only information furnished in writing by the Underwriter for
inclusion in the Registration Statement and Prospectus, as the case may be.
This indemnity agreement will be in addition to any liability which the
Representative and each of the Underwriters may otherwise have.
(d) 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 the indemnifying
party under this Section, notify in writing the indemnifying party 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 otherwise than under this Section. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
in and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnified party shall have the right
to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at
the expense of the indemnifying party if the indemnifying party has assumed
the defense of the action with counsel reasonably satisfactory to the
indemnified party; provided that if the indemnified party is any underwriter
or a person who controls any Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized
in writing by the indemnifying party or (ii) the named parties to any such
action (including any impleaded parties) include both such Underwriter or
such controlling person and the indemnifying party, and in your reasonable
judgment (based upon the written opinion of your counsel), it is advisable
for such Underwriter or controlling persons to be represented by separate
counsel (in which case the indemnifying party shall not have the right to
assume the defense of such action on behalf of such
21
Underwriter or such controlling person, it being understood, however, that
the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys). No settlement of any action against an indemnified party for
other than payment of money shall be made without the consent of the
indemnified party, which shall not be unreasonably withheld.
7. CONTRIBUTION.
In order to provide for just and equitable contribution in circumstances
in which the indemnification provided for in Section 6(a), (b) or (c) above
is due in accordance with its terms but for any reason is held to be
unavailable from the Company or each person who controls the Company or the
Selling Stockholders or any Underwriter, the Company, the Selling
Stockholders and the Underwriters shall contribute to the aggregate losses,
claims, damages, liabilities and expenses (including, without limitation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit, proceeding or litigation, or any claim, but
after deducting any contribution received from persons other than the parties
hereto, such as persons who control the Company within the meaning of the
Securities Act, officers of the Company who signed the Registration Statement
and directors of the Company, who may also be liable for the contribution) to
which the Company, the Selling Stockholders and one or more of the
Underwriters may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Company, the Selling Stockholders, and
the Underwriters, from the offering of the Shares or, if such allocation is
not permitted by applicable law or indemnification is not available as a
result of the indemnifying party not having received notice as provided in
Section 13 hereof, then each such indemnifying party shall contribute to such
amount paid or payable to such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company, the Selling Stockholders and the Underwriters, 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 Company, the Selling Stockholders and the
Underwriters, shall be deemed to be in the same proportion as (a) the total
proceeds from the offering (net of underwriting discounts but before
deducting expenses) received by the Company, the Selling Stockholders, as set
forth in the table on the cover page of the Prospectus, bear to (b) the
underwriting discounts received by the Underwriters, as set forth in the
table on the cover page of the Prospectus. The relative fault of the Company,
the Selling Stockholders, or the Underwriters, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact related to information supplied by the Company,
the Selling Stockholders, or the Underwriters, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Stockholders and
the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the
provisions of this Section 7, (i) in no case shall any Underwriter (except as
otherwise agreed among the Underwriters) be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder and (ii) the Company and the Selling
Stockholders shall be liable and responsible for any amount in excess of such
underwriting discount; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section
22
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Any party
entitled to contribution will promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect
of which a claim for contribution may be made against another party or
parties under this Section 7, notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties from whom contribution may be sought shall not relieve the party or
parties from whom contribution may be sought from any other obligation such
party or parties may have hereunder or otherwise than under this Section 7.
No party shall be liable for contribution with respect to any action, suit
proceeding or claim settled without its written consent. The Underwriters'
obligations to make contributions pursuant to this Section 7 are several in
proportion to their respective underwriting commitments and not joint.
8. COSTS AND EXPENSES.
(a) Whether or not this Agreement becomes effective or the sale of
the Securities to you is consummated, the Company will pay all costs and
expenses incident to the performance of this Agreement by the Company,
including but not limited to the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the
Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), each Preliminary Prospectus and the
Prospectus, as amended or supplemented, the fee of the National Association
of Securities Dealers, Inc. ("NASD") in connection with the filing required
by the NASD relating to the offering of the Securities contemplated hereby;
all expenses, including reasonable fees (but not in excess of the amount set
forth in Section 3(b)) and disbursements of counsel to you, in connection
with the qualification of the Shares under the State Securities or Blue Sky
Laws which you shall designate; the cost of printing and furnishing to you
copies of the Registration Statement, each Preliminary Prospectus, the
Prospectus, this Agreement, the Warrant Agreement and the Blue Sky
Memorandum; the cost of printing the certificates representing the Shares,
the expenses of Company due diligence meetings and presentations (including
your expenses in an amount not to exceed $30,000) and the expense (which
shall not exceed $7,500) of placing one or more "tombstone" advertisements as
directed by you. The Company shall pay any and all taxes (including any
transfer, franchise, capital stock or other tax imposed by any jurisdiction)
on sales to you hereunder. The Company will also pay all costs and expenses
incident to the furnishing of any amended Prospectus or of any supplement to
be attached to the Prospectus as called for in Section 3(a) of this Agreement
except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses, the Company shall at
the First Closing Date pay to you the balance of a non-accountable expense
allowance equal to 3% of the gross proceeds of the offering of the Firm
Securities, of which $40,000 has been paid. In the event the over allotment
option is exercised in part or in full, the Company shall pay to you at the
Option Closing Date an additional amount equal to 3% of the gross proceeds
received upon exercise of the over allotment option. In the event the
transactions contemplated hereby are not consummated for any reason, the
Company shall be liable for your actual accountable out-of-pocket expenses
(with credit given to the $40,000 paid), including legal fees, provided
however, that any portion of the $40,000 paid by the Company that has not
been utilized by you in connection with the offering on an accountable basis
shall be refunded by you to the Company; and further provided that if the
contemplated transactions are not consummated by reason of breach by the
Company of this Agreement or of any representation,
23
warranty, covenant or condition contained herein, the Company shall be liable
for your accountable out-of-pocket expenses up to a maximum of $85,000.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from any Selling Stockholder, from any
Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company and each Selling Stockholder
agrees to indemnify and hold harmless the Representative and each
Underwriter, and the Representative and each Underwriter agrees to indemnify
and hold harmless, severally and not jointly, the Company and each Selling
Stockholder, from and against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include,
but not be limited to, all reasonable costs of defense and investigation and
all reasonable attorneys' fees), to which the indemnified party may become
subject insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the claim of any person
(other than an employee of the party claiming indemnity) or entity that he or
it is entitled to a finder's fee in connection with the proposed offering by
reason of such person's or entity's influence or prior contact with the
indemnifying party.
9. EFFECTIVE DATE.
The Agreement shall become effective upon its execution, except that the
Representative may, at your option, delay its effectiveness until the earlier
to occur of 10:00 A.M., New York time on the first full business day
following the Effective Date as the Representative in its discretion shall
first commence the initial public offering by the Representative of any of
the Shares. The time of the initial public offering shall mean the time of
release by Representative of the first newspaper advertisement with respect
to the Shares, or the time when the Shares are first generally offered by the
Representative to dealers by letter or telecopier, whichever shall first
occur. This Agreement may be terminated by you at any time before it becomes
effective as provided above, except that Sections 6, 7, 8, 12, 13, 14 and 15
shall remain in effect notwithstanding such termination.
10. TERMINATION.
(a) This Agreement, except for Sections 6, 7, 8, 12, 13, 14 and
15, may be terminated at any time prior to the First Closing Date, and the
option referred to in Section 2(b), if exercised, may be cancelled, at any
time prior to the Option Closing Date, by the Representative if in its
judgment it is impracticable to offer for sale or to enforce contracts made
by the Representative for the resale of the Securities agreed to be purchased
hereunder, by reason of (i) the Company having sustained a material loss,
whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action,
order or decree, (ii) trading in securities on the New York Stock Exchange or
the American Stock Exchange having been suspended or limited, (iii) material
governmental restrictions having been imposed on trading in securities
generally which are not in force and effect on the date hereof, (iv) a
banking moratorium having been declared by federal of New York State
authorities, or (v) an outbreak of major international hostilities or other
national or international calamity having occurred.
24
(b) If the Representative elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
10 or in Section 9, the Company shall be promptly notified by the
Representative, by telephone or facsimile transmission, confirmed by letter.
11. REPRESENTATIVE'S WARRANTS.
On the First Closing Date, the Company will issue to the Representative,
for consideration of $100.00 and upon the terms and conditions set forth in
the form of Representative's Warrants annexed as an exhibit to the
Registration Statement, Representative's Warrants to purchase an aggregate of
100,000 Shares. In the event of conflict in the terms of this Agreement and
the Representative's Warrants, the language of the Representative's Warrants
shall control.
12. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties and
other statements of the Company, and the Selling Stockholders, where
appropriate, and you, set forth in or made pursuant to this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the Representative or any Underwriter, the Company or any of its
officers or directors or any controlling persons and the Selling Shareholders
and will survive delivery of and payment for the Shares and the termination
of this Agreement.
13. NOTICE.
All communications hereunder will be in writing and, except as otherwise
expressly provided herein, if sent to you, will be mailed, delivered or
telecopied and confirmed to it at Xxxxxx Xxxxxxx & Associates, 0000 Xxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, with a copy sent to
Xxxxx X. Xxxx, Esq., Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C., 0000 Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, XX 00000-0000, or if sent to the Company or the
Selling Stockholders, will be mailed, delivered, or facsimile and confirmed
to Xxxxx Xxxxxx of NAVIDEC, Inc., with copy sent to Xxxxx X. Xxxxxxxx, Esq.,
Xxxxx Xxxxx & Xxxxx, 0000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000.
14. PARTIES IN INTEREST.
The Agreement herein set forth shall inure solely to the benefit of, and
shall be binding upon, the Representative and the Underwriters, the Company,
the Selling Stockholders and, to the extent expressed, any person controlling
the Company, or you, and directors of the Company, nominees for directors of
the Company (if any) named in the Prospectus, the officers of the Company who
have signed the Registration Statement, and their respective executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term
25
"successors and assigns" shall not include any purchaser of Securities from
any Underwriter merely because of such purchase.
15. APPLICABLE LAW.
This Agreement will be governed by, and construed in accordance with,
the laws of the State of California applicable to agreements made and to be
entirely performed within California.
If the foregoing is, in accordance with your understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters in accordance with its terms.
Very truly yours,
NAVIDEC, INC.
By:
-----------------------------------
Xxxxx Xxxxxx, President
SELLING STOCKHOLDERS:
The foregoing Underwriting
Agreement is hereby By:
confirmed and accepted -----------------------------------
as of the date first , Attorney-in-fact
above written. ---------------
XXXXXX XXXXXXX & ASSOCIATES, INC.
For itself and for the other
several Underwriters listed in
Schedule I to the foregoing
Agreement.
By:
--------------------------------
26
SCHEDULE I
Underwriting Agreement dated _____________, _1996
Number of Firm
Units
Underwriter to be Purchased
----------- ---------------
Xxxxxx Xxxxxxx & Associates, Inc.
---------------
1,000,000
27
SCHEDULE II
Stock to be sold by Selling Stockholders
Number of
Shares
Name and Address of Selling Stockholder of Stock
---------
Total. . . . . . . . . . . . . . . . . . . . .
28
