EXHIBIT 1.1
IMAGENETIX, INC.
UNDERWRITING AGREEMENT
September ___, 1999
Xxxxxxx Xxxxxxx, Inc.
As Representative of the Several
Underwriters Named in Schedule I Hereto
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Gentlemen:
Imagenetix, Inc., a Colorado corporation (the "Company"), hereby confirms
its agreement with you (the "Representative") and with the other Members of the
Underwriting Group, including the Representative, named in Schedule I hereto
(hereinafter "the Underwriting Group") as follows:
SECTION 1
DESCRIPTION OF SECURITIES
The Company's authorized and outstanding capitalization when the offering
of the securities contemplated hereby is permitted to commence and at the
Closing Date (hereinafter defined), will be as set forth in the Registration
Statement and Prospectus (hereinafter defined) included therein. The Company
proposes to issue and sell to the Underwriting Group an aggregate of 333,334
shares ("Shares") at a price of $3.00 per Share.
The Representative shall also have an over-allotment option to purchase all
or part of 35,000 additional Shares (the "Over-Allotment") for a period of
thirty (30) days from the Closing Date, as provided in Section 3.1 hereof. The
Over-Allotment shall be exercisable by the Underwriter, in whole or in part,
from time to time during the aforementioned thirty (30) day period.
The Company proposes to issue and sell to the Representative on the Closing
Date, for a total purchase price of $100, warrants to purchase 33,333 shares of
common stock (the "Underwriter's Warrant") at $3.60 per Share, as provided in
Section 3.3 hereof.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Underwriting Group to enter into this Agreement, the
Company hereby represents and warrants to and agrees with each member of the
Underwriting Group that:
2.1 Registration Statement and Prospectus. A Registration Statement on
Form SB-1
(File No. ____________) with respect to the Shares, including the related
Prospectus, copies of which have heretofore been delivered by the Company to
the Representative, 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 ("Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and said Registration
Statement has been filed with the Commission under the Act; one or more
amendments to said Registration Statement, copies of which have heretofore
been delivered to the Representative, has or have heretofore been filed; and
the Company may file on or prior to the Effective Date of the Registration
Statement additional amendments to said Registration Statement, including the
final Prospectus. Included in such Registration Statement are a sufficient
number of additional shares of the Company's Common Stock which are reserved
against exercise of the over-allotment option.
As of the Effective Date, the capitalization of the Company shall
consist of no more than 1,800,000 shares of capital stock outstanding and
700,000 subject to issuance upon the exercise of outstanding A Warrants
(300,000) and B Warrants (300,000) and note conversions (100,000). Any
changes in the number of shares of Common Stock issued and outstanding at or
prior to the Effective Date of the Registration Statement must be approved by
the Representative. Without the Representative's prior consent, there shall
be no other warrants, options or rights outstanding as of the Effective Date
of the Registration Statement to purchase Common Stock other than as stated
above.
As used in this Agreement, the term "Registration Statement" refers to
and means said Registration Statement on Form SB-1 and all amendments
thereto, including the Prospectus, the information incorporated therein by
reference, all exhibits and financial statements, as it becomes effective;
the term "Prospectus" refers to and means the Prospectus included in the
Registration Statement when it becomes effective or as filed in final form in
accordance with the requirements of Rule 424(b) of the Rules and Regulations;
and the term "Preliminary Prospectus" refers to and means any prospectus
included in said Registration Statement before it becomes effective. The
term "Effective Date" throughout this Agreement refers to the date the
Commission declares the Registration Statement effective pursuant to Section
8 of the Act.
2.2 Accuracy of Registration Statement and Prospectus. The Commission
has not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Shares, and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Act and the
applicable Rules and Regulations of the Commission thereunder and to the best
of the Company's knowledge has not included at the time of filing any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein not misleading, except with respect to matters
subsequently amended prior to the Effective Date. On the Effective Date and
on the Closing Date, the Registration Statement and Prospectus will contain
all statements which are required to be stated therein in accordance with the
Act and the Rules and Regulations for the purposes of the public offering of
the Shares, and all statements of material fact contained in the Registration
Statement and Prospectus will be true and correct, and 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; provided, however, the Company does
not make any representations or warranties as to information contained in or
omitted from the Registration Statement or the Prospectus in reliance upon
written information furnished on behalf of the Underwriting Group
specifically for use therein. The Company will not at any time hereafter
file any amendments to the Registration Statement or in accordance with Rule
424(b) of the Rules and Regulations of which the Representative shall not
have been previously advised in advance of filing or to which the
Representative shall reasonably object in writing.
2.3 Financial Statements. The financial statements of the Company
together with related schedules and notes as set forth in the Registration
Statement and Prospectus will present fairly the financial position of the
Company and the results of its operations and the changes in its financial
position at the respective dates and for the respective periods for which
they apply; such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods concerned except as otherwise stated therein.
2.4 Independent Public Accountant. Xxxxxxxxx, Xxxxx and Xxxxx, P.C.
have certified or shall certify certain of the fiscal year end financial
statements filed or to be filed with the Commission as part of the
Registration Statement and Prospectus and are independent certified public
accountants within the meaning of the Act and the Rules and Regulations.
2.5 No Material Adverse Change. Except as may be reflected in or
contemplated by the Registration Statement or the Prospectus, subsequent to
the dates as of which information is given in the Registration Statement and
Prospectus, and prior to the Closing Date, (i) there shall not be any
material adverse change in the condition, financial or otherwise, of the
Company or in its business taken as a whole; (ii) there shall not have been
any material transaction entered into by the Company other than transactions
in the ordinary course of business; (iii) the Company shall not have incurred
any material liabilities, obligations or claims, contingent or otherwise,
which are not disclosed in the Prospectus; (iv) except in the ordinary course
of business and with the consent of the Representative, there shall not have
been nor will there be any change in the capital stock or long-term debt
(except current payments) of the Company; and (v) the Company has not and
will not have paid or declared any dividends or other distributions on its
capital stock.
2.6 No Defaults. Other than as disclosed in the Registration Statement
or Prospectus, the Company is not in any material default which has not been
waived in the performance of any obligation, agreement or condition contained
in any debenture, note or other evidence of indebtedness or any indenture or
loan agreement of the Company. The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated, and compliance
with the terms of this Agreement will not conflict with or result in a breach
of any of the terms, conditions or provisions of, or constitute a default
under, the articles of incorporation, as amended, or by-laws of the Company,
any note, indenture, mortgage, deed of trust, or other agreement or
instrument to which the Company is a party or by which it or any of its
property is bound, or any existing law, order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality, agency
or body, arbitration tribunal or court, domestic or foreign, having
jurisdiction over the Company or its property. The consent, approval,
authorization, or
order of any court or governmental instrumentality, agency or body is not
required for the consummation of the transactions herein contemplated except
such as may be required under the Act or under the securities laws of any
state or jurisdiction.
2.7 Incorporation and Standing. The Company is and at the Closing Date
and the Over-Allotment Closing Date will be duly incorporated and validly
existing in good standing as a corporation under the laws of the State of
Colorado with authorized and outstanding capital stock as set forth in the
Registration Statement and the Prospectus, and with full power and authority
(corporate and other) to own its property and conduct its business, present
and proposed, as described in the Registration Statement and Prospectus; the
Company has full power and authority to enter into this Agreement; and the
Company is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which the character or location of its properties (owned
or leased) or the nature of its business makes such qualification necessary.
2.8 Legality of Outstanding Stock. The outstanding capital stock of
the Company has been duly and validly authorized, issued and is fully paid
and nonassessable and will conform to all statements with regard thereto
contained in the Registration Statement and Prospectus. No sales of
securities have been made by the Company in violation of the registration or
anti-fraud provisions of the Act or in violation of any other federal law or
laws of any state or jurisdiction.
2.9 Legality of Securities. The Common Stock, Underwriter's Warrants,
and the Common Stock issuable upon the exercise of the Underwriter's Warrants
have been duly and validly authorized and, when issued and delivered against
payment therefor as provided in this Agreement, will be validly issued, fully
paid and nonassessable. The Common Stock and the Common Stock underlying the
Underwriter's Warrants, upon issuance, will not be subject to the preemptive
rights of any shareholders of the Company. The Underwriter's Warrants, when
sold and delivered, will constitute valid and binding obligations of the
Company enforceable in accordance with the terms thereof. A sufficient
number of shares of Common Stock of the Company has been reserved for
issuance upon exercise of the Underwriter's Warrants. The Common Stock, the
Underwriter's Warrants and the Common Stock issuable upon the exercise of the
Underwriter's Warrants will conform to all statements with regard thereto in
the Registration Statement and Prospectus.
2.10 Prior Sales. No unregistered securities of the Company, or an
affiliate or of a predecessor of the Company have been sold within one year
prior to the date hereof, except as set forth in the Registration or
otherwise disclosed to the Representative in writing.
2.11 Litigation. Except as set forth in the Registration Statement and
Prospectus, there is and at the Closing Date there will be no action, suit or
proceeding before any court, arbitration tribunal or governmental agency,
authority or body pending or to the knowledge of the Company threatened which
might result in judgments against the Company not adequately covered by
insurance or which collectively might result in any material adverse change
in the condition (financial or otherwise), the business or the prospects of
the Company, or would materially affect the properties or assets of the
Company.
2.12 Underwriter's Warrants. Upon delivery of and payment for the
Underwriter's Warrants to be sold by the Company as set forth in Section 3.3
of this Agreement, the Representative and designees of the Representative
will receive good and marketable title thereto, free and clear of all liens,
encumbrances, charges and claims whatsoever; and the Company will have on the
Effective Date and at the time of delivery of such Underwriter's Warrants
full legal right and power and all authorization and approval required by law
to sell, transfer and deliver such Underwriter's Warrants in the manner
provided hereunder.
2.13 Finder. The Company knows of no outstanding claims against it for
compensation for services in the nature of a finder's fee, origination fee or
financial consulting fee with respect to the offer and sale of the Shares
hereunder except as previously disclosed in writing to the Representative.
2.14 Exhibits. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act or
by the Rules and Regulations which have not been so filed and each contract
to which the Company is a party and to which reference is made in the
Prospectus has been duly and validly executed, is in full force and effect in
all material respects in accordance with their respective terms, and none of
such contracts have been assigned by the Company; and the Company knows of no
present situation or condition or fact which would prevent compliance with
the terms of such contracts, as amended to date. Except for amendments or
modifications of such contracts in the ordinary course of business, the
Company has no intention of exercising any right which it may have to cancel
any of its obligations under any of such contracts, and has no knowledge that
any other party to any of such contracts has any intention not to render full
performance under such contracts.
2.15 Tax Returns. The Company has filed all federal and state tax
returns which are required to be filed by it and has paid all taxes shown on
such returns and on all assessments received by it to the extent such taxes
have become due. All taxes with respect to which the Company is obligated
have been paid or adequate accruals have been set up to cover any such unpaid
taxes.
2.16 Property. Except as otherwise set forth in or contemplated by the
Registration Statement and Prospectus, the Company has good title, free and
clear of all liens, encumbrances and defects, except liens for current taxes
not due and payable, to all property and assets which are described in the
Registration Statement and the Prospectus as being owned by the Company,
subject only to such exceptions as are not material and do not adversely
affect the present or prospective business of the Company.
2.17 Authority. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company.
2.18 Use of Form SB-1. The Company is eligible to use Form SB-1 for
the offer and sale of the Common Stock, the Underwriter's Warrants and the
Common Stock underlying such Underwriter's Warrants.
2.19 Transfer Agent, Daily Transfer Sheets and DTC Position Listing
Report. The Company shall designate Interwest Transfer Company, Inc., Salt
Lake City, Utah, as transfer agent for the Company's securities.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
SECTION 3
PURCHASE AND SALE OF THE SHARES
3.1 Purchase of Shares and Over-Allotment Option. The Company hereby
agrees to sell to members of the Underwriting Group named in Schedule I hereto
(individually referred to as "Member" and collectively referred to as "Members")
(for all of whom the Representative is acting), severally and not jointly, and
each Member of the Underwriting Group, upon the basis of the representations and
warranties herein obtained, but subject to the conditions hereinafter stated,
agrees to purchase from the Company, severally and not jointly, the number of
Shares set forth opposite their respective names in Schedule I hereto at a
purchase price of $2.70 per Share.
The Company hereby grants to the Representative an over-allotment option
for a period of thirty (30) days after the Closing Date to purchase at a
purchase price of $2.70 per Share up to 35,000 additional Shares, each such
Share to be identical in all respects to the Shares as described in Section 1
hereof, solely to cover over-allotments, if any.
3.1.1 Default by a Member. If for any reason one or more Members of
the Underwriting Group shall fail or refuse (otherwise than for a reason
sufficient to justify the termination of this Agreement under the
provisions of Section 9 hereof) to purchase and pay for the number of
Shares agreed to be purchased by such Member, the Company shall immediately
give notice thereof to the Representative, and the non-defaulting Members
shall have the right within 24 hours after the receipt by the
Representative of such notice, to purchase or procure one or more other
Members to purchase, in such proportions as may be agreed upon among the
Representative and such purchasing Member or Members and upon the terms
herein set forth, the Shares which such defaulting Member or Members agreed
to purchase. If the non-defaulting Members fail so to make such
arrangements with respect to all such Shares, the number of Shares which
each non-defaulting Member is otherwise obligated to purchase under the
Agreement shall be automatically increased pro rata to absorb the remaining
Shares which the defaulting Member or Members agreed to purchase; provided,
however, that the non-defaulting Members shall not be obligated to purchase
the Shares which the defaulting Member or Members agreed to purchase in
excess of 10% of the total number of Shares which such non-defaulting
Member agreed to purchase hereunder, and provided further that the
non-defaulting Members shall not be obligated to purchase any Shares which
the defaulting Member or Members agreed to purchase if such additional
purchase would cause the Member to be in violation of the net capital rule
of the Commission or other applicable law. If the total number of Shares
which the defaulting Member or Members agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding
sentences, the Company shall have the right, within 24 hours next
succeeding the 24-hour period above referred to, to make arrangements
with other underwriters or purchasers satisfactory to the Representative
for the purchase of such Shares on the terms herein set forth. In any such
case, either the Representative or the Company shall have the right to
postpone the Closing determined as provided in Section 3.2.2 hereof for not
more than seven business days after the date originally fixed as the
Closing pursuant to said Subsection 3.2.2 in order that any necessary
changes in the Registration Statement, the Prospectus or any other
documents or arrangements may be made. If neither the non-defaulting
Members nor the Company shall make arrangements within the 24-hour periods
stated above for the purchase of all the Shares which the defaulting Member
or Members agreed to purchase hereunder, this Agreement shall be terminated
without further act or deed and without any liability on the part of the
Company to any non-defaulting Member.
3.1.2 Liability of Defaulting Member. Nothing contained in this
Section 3.1 shall relieve any defaulting Member of its liability, if any,
to the Company or to the remaining Members of the Underwriting Group for
damages occasioned by its default hereunder.
3.2 Public Offering Price. After the Commission notifies the Company that
the Registration Statement has become effective, the Members of the Underwriting
Group propose to offer the Shares to the public at an initial public offering
price of $3.00 per Share as set forth in the Prospectus. The Members of the
Underwriting Group may allow such discounts and concessions upon sales to
selected dealers as may be determined from time to time by the Representative.
3.2.1 Payment For Shares. Payment for the Shares (including Shares
included in the over-allotment option which the Representative agrees to
purchase) shall be made to the Company or its order by certified or
official bank check or checks, in the amount of the purchase price by or on
behalf of the Representative at the offices of the Representative in
Englewood, Colorado, upon delivery to the Representative or its designee of
certificates for the Common Stock in definitive form in such numbers and
registered in such names as the Representative requests in writing at least
three full business days prior to such delivery. At the request of the
Representative, the Company shall deliver the Shares to the Members of the
Underwriting Group through the facilities of The Depository Trust Company
or as otherwise directed.
3.2.2 Closing. The time and date of delivery and payment hereunder
is herein called the "Closing Date" and shall take place at the office of
the Representative in Englewood, Colorado, or at such other location as may
be specified by the Representative, at 10:00 a.m. on the fifth business day
following the date of the Prospectus; provided, however, that such date may
be extended for not more than an additional seven business days by the
Representative. Should the Representative elect to exercise any part of
the over-allotment option pursuant to Section 3.1 hereinabove, the time and
date of delivery and payment for said over-allotment Shares shall be as
mutually agreed, but not later than the thirtieth (30th) calendar day after
the Closing Date or the date of the Prospectus, whichever is later. Said
date is referred to as the "Over-Allotment Closing Date."
3.2.3 Inspection of Certificates. For the purpose of expediting the
checking and packaging of the certificates for the securities comprising
the Shares and the Underwriter's Warrants, the Company agrees to make the
certificates available for inspection by the Representative at the main
office of the Representative in Englewood, Colorado, at least two full
business days prior to the proposed delivery date.
3.3 Sale of Underwriter's Warrants. On the Closing Date, the Company will
sell to the Underwriter for a total purchase price of $100, warrants to purchase
common stock substantially identical to the Common Stock at $3.60 per Share.
The Company shall not be obligated to sell and deliver the Underwriter's
Warrants, and the Representative will not be obligated to purchase and pay for
the Underwriter's Warrants, except upon payment for the Shares pursuant to
Subsection 3.2.1 hereof.
The total number of securities which may be purchased upon exercise of the
Unit Common Stock Warrant will be 10% of the number of shares of Common Stock
which are sold in the offering (33,333), excluding such Shares as may be sold
upon exercise of the Underwriter's over-allotment option. The Underwriter's
Warrants shall be non-transferable for a period of one (1) year following the
Effective Date except to the Underwriters and selected dealers and their
respective officers or partners. The Underwriter's Warrant shall contain
anti-dilution provisions, a cashless exercise provision, piggyback registration
rights and shall otherwise be in form and substance satisfactory to the
Underwriter.
3.4 Representative's Expense Allowance. It is understood that the
Company shall reimburse the Representative, for itself alone and not on
behalf of the other Members of the Underwriting Group, for its expenses on a
nonaccountable basis in the amount of 3% of the gross proceeds from the sale
of the Shares ($.09 per Share) excluding proceeds from the sale of the Shares
included in the over-allotment option. The Representative acknowledges
receipt of $10,000 of said non-accountable expense allowance. By the Closing
Date and, if applicable, on the Over-Allotment Closing Date, the
Representative shall be entitled to withhold the unpaid balance of such
nonaccountable expense allowance. The Representative shall be solely
responsible for all expenses incurred by it in connection with the offering
including, but not limited to, the expenses of its own counsel except as set
forth in Section 5.7 hereof. Notwithstanding the foregoing, if the
Registration Statement does not become effective, or the offering is never
commenced after it becomes effective, or if this Agreement is terminated as
provided herein, the Representative will retain so much of the
non-accountable expense allowance which has been or should have been received
by the Representative from the Company as is equal to its actual accountable
out-of-pocket expenses and reimburse the remainder, if any to the Company,
provided that the amount to be reimbursed will not exceed the amount of the
non-accountable expense allowance. The Representative's expenses shall
include, but are not to be limited to, a fee to compensate the Representative
for the services and time of Representative's counsel, plus any additional
expenses and fees, including but not limited to, travel expenses, postage
expenses, duplication expenses, confirmation and other record preparation
expenses, long-distance telephone expenses, consultant and investigator
expenses and other expenses incurred by the Representative in connection with
the proposed offering.
3.5 Additional Financing. The Company agrees that if the
Representative arranges for equity financing accepted by and closed with the
Company other than as contemplated herein during a period of five (5) years
from the date of this Agreement, the Company will pay a ten percent (10%)
commission to the Representative based on the amount of equity financing.
"Arranges," as used in this section, means locating the financing,
introducing the Company to the source of the financing, and assisting the
Company, in all reasonable ways as the Company may request, to negotiate and
complete the financing.
If the Underwriter arranges for debt financing accepted by and closed
with the Company during a period of five (5) years from the date hereof, the
Company will pay a five percent (5%) commission to the Underwriter based on
the amount of debt financing.
If the Underwriter obtains an increase in the Company's line of credit,
which is accepted by and closed with the Company, the Company will pay a fee
equal to 1% of the amount of increase.
If the Underwriter arranges for the purchase or sale of assets, for a
merger, acquisition or joint venture accepted by and closed with the Company,
during a period of five (5) years from the date hereof, the Company will pay
a fee to the Underwriter for its services calculated as follows:
5% of the value of the transaction to the Company up to and
including $1,000,000,
4% of the value of the transaction to the Company greater than
$1,000,000 and up to and including $2,000,000,
3% of the value of the transaction to the Company greater than
$2,000,000 and up to and including $3,000,000,
2% of the value of the transaction to the Company greater than
$3,000,000 and up to and including $4,000,000, and
1% of the value of the transaction to the Company in excess of
$4,000,000, all from such income as received.
In addition, the Company shall reimburse the Representative for any
reasonable expenses that it incurs in arranging and closing such funding or
transactions, including fees of its counsel after receiving written approval
from the Company.
The provisions of this Section 3.5 shall survive the performance or
termination of this Agreement in accordance with Section 12.2 of this Agreement.
3.6 Representations of the Parties. The parties hereto respectively
represent that as of the Closing Date the representations herein contained and
the statements contained in all the certificates theretofore or simultaneously
delivered by any party to another, pursuant to this
Agreement, shall in all material respects be true and correct.
3.7 Post-Closing Information. The Representative covenants that
reasonably promptly after the Closing Date, it will supply the Company with
all information required from the Representative which must be supplied to
the Commission, if any, and such additional information as the Company may
reasonably request to be supplied to the securities authorities for such
states in which the Shares have been qualified for sale.
3.8 Re-Offers By Selected Dealers. On each sale by the Representative
of any of the Shares to selected dealers, the Representative shall require
the selected dealer purchasing any such Shares to agree to re-offer the same
on the terms and conditions of the offering set forth in the Registration
Statement and Prospectus.
SECTION 4
REGISTRATION STATEMENT AND PROSPECTUS
4.1 Delivery of Registration Statements. The Company shall deliver to
the Representative without charge two (2) manually signed copies of the
Registration Statement, including all financial statements and exhibits filed
therewith and any amendments or supplements thereto. The signed copies of
the Registration Statement so furnished to the Representative will include
manually signed copies of any and all consents and certificates of the
independent public accountant certifying to the financial statements included
in the Registration Statement and Prospectus and signed copies of any and all
opinions, consents and certificates of any other persons whose profession
gives authority to statements made by them and who are named in the
Registration Statement or Prospectus as having prepared, certified, or
reviewed any part thereof.
4.2 Delivery of Preliminary Prospectus. The Company will cause to be
delivered to Members of the Underwriting Group and to other broker-dealers,
without charge, prior to the Effective Date as many copies of each
Preliminary Prospectus filed with the Commission bearing in red ink the
statement required by Item 501(c)(7) of Regulation S-B as may be required by
the Representative. The Company consents to the use of such documents by
Members of the Underwriting Group and by selected dealers prior to the
Effective Date of the Registration Statement.
4.3 Delivery of Prospectus. The Company will deliver, without charge,
copies of the Prospectus at such addresses and in such quantities as may be
required by the Representative for the purposes contemplated by this
Agreement and shall deliver said printed copies of the Prospectus to Members
of the Underwriting Group and to selected dealers within one business day
after the Effective Date.
4.4 Further Amendments and Supplements. If during such period of time
as in the opinion of the Representative or its counsel the Prospectus is
required to be delivered under the Act, any event occurs or any event known
to the Company relating to or affecting the Company shall occur as a result
of which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact, or omit to state any material fact
necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time after the Effective Date to
amend or supplement the Prospectus to comply with the Act, the Company will
forthwith notify the Representative thereof and prepare and file with the
Commission such further amendment to the Registration Statement or
supplemental or amended Prospectus as may be required and furnish and deliver
to the Representative and to others whose names and addresses are designated
by the Representative, all at the cost of the Company, a reasonable number of
copies of the amended or supplemented Prospectus which as so amended or
supplemented will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the Prospectus not
misleading in the light of the circumstances as of the date of such
Prospectus, amendment, or supplement, and which will comply in all respects
with the Act; and in the event the Representative is required to deliver a
Prospectus beyond completion of its participation in the public offering,
upon request will prepare promptly such Prospectus or Prospectuses as may be
necessary to permit continued compliance with the requirements of the Act.
4.5 Use of Prospectus. The Company authorizes the Members of the
Underwriting Group in connection with the distribution of the Shares and all
selected dealers to whom any of the Shares may be sold to use the Prospectus
as from time to time amended or supplemented, in connection with the offer
and sale of the Shares and in accordance with the applicable provisions of
the Act, the Rules and Regulations and state Blue Sky or securities laws.
SECTION 5
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Representative and other
Members of the Underwriting Group that:
5.1 Objection of Representative to Amendments or Supplements. After
the date hereof, the Company will not at any time, whether before or after
the Effective Date, file any amendment or supplement to the Registration
Statement or Prospectus unless and until a copy of such amendment or
supplement has been previously furnished to the Representative a reasonable
period prior to the proposed filing thereof, or to which the Representative
or counsel for the Representative have reasonably objected, in writing, on
the ground that such amendment or supplement is not in compliance with the
Act or the Rules and Regulations.
5.2 Company's Best Efforts to Cause Registration Statement to Become
Effective. The Company will use its best efforts to cause the Registration
Statement and any post-effective amendment subsequently filed, to become
effective as promptly as reasonably practicable and will promptly advise the
Representative, and will confirm such advice in writing (i) when the
Registration Statement shall become effective and when any amendment thereto
shall have become effective and when any amendment of or supplement to the
Prospectus shall be filed with the Commission, (ii) when the Commission shall
make a request or suggestion for any amendment to the Registration Statement
or the Prospectus or for additional information and the nature and substance
thereof, (iii) of the issuance by the Commission of an order suspending the
effectiveness of the Registration Statement pursuant to Section 8 of the Act
or of the initiation of any
proceedings for that purpose, (iv) of the happening of any event which in the
judgment of the Company makes any material statement in the Registration
Statement or Prospectus untrue or which requires the making of any changes in
the Registration Statement or Prospectus in order to make the statements
therein not misleading, and (v) of the refusal to qualify or the suspension
of the qualification of the Shares for offer or sale in any jurisdiction, or
of the institution of any proceedings for any of such purposes. The Company
will use every reasonable effort to prevent the issuance of any such order or
of any order preventing or suspending such use, to prevent any such refusal
to qualify or any such suspension, and to obtain as soon as possible a
lifting of any such order, the reversal of any such refusal and the
termination of any such suspension.
5.3 Preparation and Filing of Amendments and Supplements. The Company
agrees to prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement
or Prospectus, in form satisfactory to counsel to the Company, as in the
opinion of counsel to the Representative and of counsel to the Company may be
necessary in connection with the offer and sale of the Shares and will use
its best efforts to cause the same to become effective as promptly as
possible.
5.4 Blue Sky Qualification. It is understood and agreed by the Company
and the Representative that it shall be a condition of the Offering that the
sale of the Shares be registered or otherwise qualified for offer and sale in
those states as may be reasonably requested by the Representative. The
Company specifically agrees to attempt to register or qualify the Offering in
Colorado, New York, __________, __________, __________ and such other states
as reasonably requested by Representative. Copies of all applications for
the registration or qualification of the Shares and other securities
referenced herein and related documents (except for the Registration
Statement and Prospectus) will be filed by the Representative's Counsel with
the various states and shall be supplied to the Company's legal counsel,
concurrently with their transmission to the various states. The expense of
such filings, including legal fees of the Company's Counsel, shall be
promptly paid by the Company. Copies of all comments and orders received
from the various states shall be immediately supplied to the Company's legal
counsel. Immediately prior to the distribution of the preliminary
Prospectuses to potential investors, and prior to the Effective Date,
Representative's Counsel shall provide a written memorandum of all states
wherein the preliminary Prospectus may be distributed and wherein the
Offering has been registered or qualified for sale, canceled, withdrawn,
denied or exempt, the date of such event(s) and the number of Shares
registered or qualified for sale in each such state. After settlement and
closing, the Representative may confirm the qualification of the Company's
securities in writing to the Company and the Company's counsel. Failure by
the Company or Company's counsel to refute such confirmation shall constitute
an affirmative statement by the same advising the Representative that such
qualification in fact has taken place.
5.5 Financial Statements. The Company at its own expense will prepare
and give and will continue to give such financial statements and other
information to and as may be required by the Commission, or the proper public
bodies of the states in which the Shares may be registered or qualified.
5.6 Reports and Financial Statements to the Representative. During the
period of three
years from the Closing Date, the Company will file with the Commission within
the prescribed period the annual report of the Company on Form 10-K, which
includes a financial report of the Company and its subsidiaries, if any, on a
consolidated basis, and a similar financial report of all unconsolidated
subsidiaries, if any, all such reports to include a balance sheet as of the
end of the preceding fiscal year, a statement of operations, a statement of
cash flows and an analysis of shareholders' equity covering such fiscal year,
and all to be in reasonable detail and certified by independent public
accountants for the Company.
If the Company shall fail to file with the Commission the financial
statements as herein provided, within the times specified herein, the
Representative, after giving reasonable notice of not less than 30 days,
shall have the right to have such financial statements prepared by
independent public accountants of its own choosing and the Company agrees to
furnish such independent public accountants such data and assistance and
access to such records as they may reasonably require to enable them to
prepare such statements and to pay their reasonable fees and expenses in
preparing the same.
5.7 Expenses Paid by the Company. The Company shall bear, whether or
not the transactions contemplated hereunder are consummated or the
Registration Statement is prevented from becoming effective or this Agreement
is terminated, all costs and expenses incident to the filing of the
Registration Statement with the NASD, the cost and legal counsel fees of
qualification under state securities laws, the fees and disbursements of
legal counsel and accountants for the Company, the cost of preparing and
printing the Registration Statement, the cost of printing as many preliminary
and final Prospectuses as the Representative may deem necessary, the cost of
providing the Representative's Counsel with two signed copies of each
Registration Statement and as amended, including all exhibits, correspondence
and other documentation relating thereto, and all expenses incurred in
connection with the holding of due diligence meetings, including the cost of
the meeting room, food and beverage, and expenses incurred by Company
representatives in attending a reasonable number of such due diligence
meetings with the Representatives' representatives, prospective dealers and
(which shall include all expenses of presentations as reasonably requested by
the Representative) their representatives and others, the expenses of
delivery of preliminary and final Prospectuses to the Representatives and
dealers (the final Prospectus shall be delivered no later than the day
following the Effective Date), and any other expenses customarily paid by an
issuer; provided, however, that any amounts paid to the Representative as an
expense allowance shall not exceed the amounts provided in Section 3.4.
Except as specified above, the Company shall not be required to pay any fees
or charges for attending, or any travel or lodging expenses incurred in
attending, due diligence meetings by representatives of the Representatives
or dealers.
5.8 Reports to Shareholders. The Company agrees that for so long as
the Company's Common Stock is registered under the 1934 Act, the Company will
hold an annual meeting of shareholders for the election of directors within
one hundred eighty (180) days after the end of each of the Company's fiscal
years. The Company shall provide the Company's shareholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto, such financial statements will be those required by
the 1934 Act and will be included in an annual report meeting the
requirements of Rule 14c-3 under the 1934 Act.
5.9 Section 11(a) Financials. The Company will make generally
available to its security holders and will deliver to the Representative, as
soon as practicable, an earnings statement (as to which no opinion need be
rendered but which will satisfy the provisions of Section 11(a) of the Act)
covering a period of at least 12 months beginning after the Effective Date.
Compliance by the Company with Rule 158 promulgated under the Act shall
satisfy the requirements of this Section 5.9.
5.10 Post-Effective Availability of Prospectus. Within the time during
which the Prospectus is required to be delivered under the Act, the Company
will comply, at its own expense, with all requirements imposed upon it by the
Act, as now or hereafter amended, by the Rules and Regulations, as from time
to time may be in force, and by any order of the Commission, so far as
necessary to permit the continuance of sales or dealings in the Shares and
the exercise of the Warrants.
5.11 Application of Proceeds. The Company will adopt procedures for
the stewardship of the net proceeds it receives from the sale of the Shares
and will apply the net proceeds from the sale of the Shares substantially in
the manner specifically set forth in the Registration Statement and
Prospectus unless any deviation from such application is in accordance with
the Registration Statement and occurs only after approval by the Board of
Directors of the Company and then only after the Board of Directors has
obtained the written opinion of recognized legal counsel well versed in the
federal and state securities laws as to the propriety of any such deviation.
5.12 Delivery of Documents. At the Closing, the Company will deliver
to the Representative true and correct copies of the articles of
incorporation of the Company and all amendments thereto, all such copies to
be certified by the Secretary of the Company; true and correct copies of the
by-laws of the Company and of the minutes of all meetings of the directors
and shareholders of the Company held prior to the Closing Date which in any
way relate to the subject matter of this Agreement.
5.13 Cooperation With Representative's Due Diligence. At all times
prior to the Closing Date, the Company will cooperate with the Representative
in such investigation as the Representative may make or cause to be made of
all the properties, management, business and operations of the Company in
connection with the purchase and public offering of the Shares, and the
Company will make available to the Representative in connection therewith
such information in its possession as the Representative may reasonably
request.
5.14 Appointment of Transfer Agent and Warrant Agent. The Company has
appointed Intra West Transfer Company, Inc., Salt Lake City, Utah, as
Transfer Agent for the Shares subject to the Closing. The Company will not
change or terminate such appointment for a period of three years from the
Effective Date without first obtaining the written consent of the
Representative, which consent shall not be unreasonably withheld.
5.15 Compliance With Conditions Precedent. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Members of the Underwriting Group
in Section 8 hereof.
5.16 Reporting of Use of Proceeds. The Company agrees to file with the
Commission all required information in accordance with the provisions of Item
701 of Regulation S-B promulgated under the Act.
5.17 Bound Volume. The Company shall supply to the Representative and
the Representative's counsel, at the Company's cost, two bound volumes each
of all of the public offering materials within a reasonable time after the
closing, not to exceed three months.
5.18 Listing in Xxxxx'x and Standard & Poor's. As soon as possible
following the Effective Date, the Company agrees to use its best efforts to
have the Company listed in Xxxxx'x Over-The-Counter Manual or Standard &
Poor's Standard Corporation Records, or if already listed, the Company agrees
to use its best efforts to maintain such listings.
5.19 Secondary Trading Qualification. The Company agrees to qualify
the Shares for secondary trading, as soon as legally possible, in such states
as are requested by the Representative from time to time.
5.20 Right of Inspection. The Company agrees that for a period of
three (3) years after the Effective Date, the Representative, at the
Representative's expense, will have the right to have a person or persons
selected by the Representative review the books and records of the Company
upon seven (7) days' written notice and at reasonable times. Such person or
persons will be required to execute a confidentiality agreement which will,
in part, prohibit disclosure of information to any party except the
Representative, which information shall be held in confidence unless
otherwise specifically agreed to by the Company in writing.
SECTION 6
INDEMNIFICATION AND CONTRIBUTION
6.1 Indemnification By Company. The Company agrees to indemnify and
hold harmless the Representative and the other Members of the Underwriting
Group (for the purposes of this Section 6 collectively the "Underwriters")
and each officer, director, employee, representative, agent, surety,
guarantor, and each person who controls each of the Underwriters within the
meaning of Section 15 of the Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, any other statute, at common law, NASD requirements or
otherwise and to reimburse the persons indemnified above for any legal or
other expenses (including the cost of any investigation and preparation)
incurred by them in connection with any litigation, arbitration or any other
proceeding (hereinafter referred to as "litigation" in this Section 6),
whether or not resulting in any liability, but only insofar as such losses,
claims, damages, liabilities and litigation arise out of or are based upon
this Agreement or any matter relating to the offer or sale of the Shares,
including, but not limited to, any violation of any registration
requirements, any improper use of sales literature or any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereto or any application or other document filed
in order to qualify the Shares under the securities laws of the states where
filings were made, or 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, all as of the date when the Registration
Statement or such amendment, as the case may be, becomes effective, or any
untrue statement or alleged untrue statement of a material fact contained in
the Prospectus (as amended or supplemented if the Company shall have filed
with the Commission any amendments thereof or supplements thereto), or the
omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading as of the date of the Prospectus or such
amendment or supplement; provided, however, that the indemnity agreement
contained in this Section 6.1 shall not apply to amounts paid in settlement
of any such litigation if such settlements are effected without the consent
of the Company, nor shall it apply to the Underwriters or any other person
indemnified as provided above in respect of any such losses, claims, damages,
liabilities or actions arising out of or based upon any such untrue
statements or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission was made in reliance upon information
peculiarly within the knowledge of the Underwriters and furnished in writing
to the Company by the Underwriters specifically for use in connection with
the preparation of the Registration Statement and Prospectus or any such
amendment or supplement thereto. This indemnity agreement is in addition to
any other liability which the Company may otherwise have to the Underwriters
or any other person indemnified as provided above. The Underwriters or any
other person indemnified as provided above agree within twenty days after the
receipt by them of written notice of the commencement of any action against
them in respect of which indemnity may be sought from the Company on account
of the indemnity agreement contained in this Section 6.1 to notify the
Company in writing of the commencement thereof. The failure of the
Underwriters or any other person indemnified as provided above so to notify
the Company of any such action shall relieve the Company from any liability
which it may have to such person on account of the indemnity agreement
contained in this Section 6.1, but shall not relieve the Company from any
other liability which it may have to the Underwriters or any person
identified above. In case any such action shall be brought against the
Underwriters or any other person indemnified as provided above and the
Underwriters shall notify the Company of the commencement thereof, the
Company shall be entitled to participate in (and, to the extent that it shall
wish, to direct) the defense thereof at its own expense, but such defense
shall be conducted by counsel of recognized standing and reasonably
satisfactory to the Underwriters or any other person indemnified as provided
above, defendant or defendants in such litigation. The Company agrees to
notify the Underwriters promptly of commencement of any litigation against it
or any of its officers or directors, of which it may be advised, in
connection with the issue and sale of any of the Shares or any securities
included therein and to furnish to the Underwriters, at their request, copies
of all pleadings therein and permit the Underwriters to be observers therein
and apprise the Underwriters of all developments therein, all at the
Company's expense.
6.2 Indemnification By Underwriters. The Underwriters agree to
indemnify and hold harmless the Company, and each director, officer, employee
and agent of the Company and each person who controls the Company within the
meaning of Section 15 of the Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act or any other statute or at common law and to reimburse
persons indemnified as above for any legal or other expenses (including the
cost of any investigation and preparation) incurred by them in connection
with any litigation, whether or not resulting in any
liability, but only insofar as such losses, claims, damages, liabilities and
litigation arise out of or are based upon any statement in or omission from
the Registration Statement or any amendment thereto, or the Prospectus (as
amended or as supplemented, if amended or supplemented as aforesaid) or any
application or other document filed in any state or jurisdiction in order to
qualify the Shares under the securities laws thereof, if such statement or
omission was made in reliance upon information peculiarly within its
knowledge and furnished in writing to the Company by the Underwriters on
their behalf specifically for use in connection with the preparation thereof
or supplement thereto. This indemnity agreement is in addition to any other
liability which the Underwriters may otherwise have to the Company and any
other person indemnified as provided above. The Underwriters shall not be
liable for amounts paid in settlement of any such litigation if such
settlement was effected without the consent of the Underwriters. In case of
commencement of any action in respect of which indemnity may be sought from
the Underwriters on account of the indemnity agreement contained in this
Section 6.2, each person agreed to be indemnified by the Underwriters shall
have the same obligation to notify the Underwriters as the Underwriters have
toward the Company in Section 6.1 above, subject to the same loss of
indemnity in the event such notice is not given, and the Underwriters shall
have the same right to participate in (and, to the extent that they shall
wish, to direct) the defense of such action at their own expense, but such
defense shall be conducted by counsel of recognized standing and satisfactory
to the Company or any other person indemnified as provided above. The
Underwriters agree to notify the Company promptly of the commencement of any
litigation against the Underwriters (and any other person indemnified as
provided above), of which it may be advised, in connection with the issue and
sale of any of the securities of the Company, and to furnish to the Company
at its request copies of all pleadings therein and apprise it of all the
developments therein, all at the Underwriters' expense, and permit the
Company to be an observer therein.
6.3 Contribution. If the indemnification provided for in Sections 6.1
and 6.2 of this Agreement are, for any reason other than as specified in such
Sections, held by a court to be unavailable and the Company or any Member of
the Underwriting Group has been required to pay damages as a result of a
determination by a court, arbitration tribunal or any other person having
jurisdiction over any Member of the Underwriting Group that the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto contains an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, then the Company shall contribute to
the damage paid by the Member of the Underwriting Group and the Member of the
Underwriting Group shall contribute to the damages paid by the Company, but
in each case only to the extent that such damages arise out of or are based
upon such untrue statement or omission, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and the Member of the Underwriting Group on the other from the
offering of the Shares or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the Member of the Underwriting Group in
connection with the statements or omissions which resulted in such damages,
as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Member of the Underwriting Group
shall be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting expenses) received by the Company bear to the
total underwriting
discounts and unitemized expenses received by the Member of the Underwriting
Group. The relative fault shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company or the
Member of the Underwriting Group and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such untrue
statement or omission. For purposes of this Section 6.3, the term "damages"
shall include any counsel fees or other expenses reasonably incurred by the
Company or the Member of the Underwriting Group in connection with
investigating or defending any action or claim which is the subject of the
contribution provisions of this Section 6.3. Notwithstanding the provisions
of this Section 6.3, no Member of the Underwriting Group shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Member of
the Underwriting Group has otherwise been required to pay by reason of any
such untrue statements or omissions. No person adjudged guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Under this Section 6.3, each Member of the
Underwriting Group's obligations to contribute are several in proportion to
their respective underwriting obligations and not joint.
The agreements contained in this Section 6 and the representations and
warranties of the Company set forth in this Underwriting Agreement shall
remain operative and in full force and effect, regardless of (a) any
investigation made by or on behalf of any Member of the Underwriting Group or
any person controlling any Member of the Underwriting Group or by or on
behalf of the Company, or any person controlling the Company, (b) acceptance
of any Shares and payment therefor hereunder, and (c) any termination of any
other provision of this Underwriting Agreement. A successor of any Member of
the Underwriting Group or of the Company, or any director or officer thereof
or any person controlling any Member of the Underwriting Group or the
Company, as the case may be, shall be entitled to the benefits of the
agreements contained in this Section 6.
SECTION 7
EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective (i) at 10:00 a.m., Denver time, on
the first full business day after the Effective Date, or (ii) upon release by
the Representative of the Shares for sale after the Effective Date, whichever
shall first occur. The Representative agrees to notify the Company
immediately after the Representative shall have taken any action, by release
or otherwise, whereby this Agreement shall have become effective. This
Agreement shall, nevertheless, become effective at such time earlier than the
time specified above, after the Effective Date, as the Representative may
determine by notice to the Company.
SECTION 8
CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS
The obligations of the Underwriting Group hereunder to purchase the
Shares and to make
payment to the Company hereunder on the Closing Date and on the
Over-Allotment Closing Date, if any, shall be subject to the accuracy, as of
the Closing Date and the Over-Allotment Closing Date, of each of the
representations and warranties on the part of the Company herein contained,
to the performance by the Company of all its agreements herein contained, to
the fulfillment of or compliance by the Company with all covenants and
conditions hereof, and to the following additional conditions:
8.1 Effectiveness of Registration Statement. The Registration
Statement shall have become effective and no order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission or be pending; any request for additional information on the part
of the Commission (to be included in the Registration Statement or Prospectus
or otherwise) shall have been complied with to the satisfaction of the
Commission; and neither the Registration Statement or the Prospectus nor any
amendment thereto shall have been filed to which counsel to the
Representative shall have reasonably objected in writing or have not given
their consent.
8.2 Accuracy of Registration Statement. The Representative shall not
have disclosed in writing to the Company that the Registration Statement or
the Prospectus or any amendment thereof or supplement thereto contains an
untrue statement of a fact which, in the opinion of counsel to the
Representative, is material or omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein, or is
necessary to make the statements therein not misleading.
8.3 Casualty and Other Calamity. The Company shall not have sustained
any loss on account of fire, explosion, flood, accident, calamity or any
other cause, of such character as materially adversely affects its business
or property considered as an entire entity, whether or not such loss is
covered by insurance, and no officer or director of the Company shall have
suffered any injury, sickness or disability of a nature which would
materially adversely affect his or her ability to properly function as an
officer or director of the Company.
8.4 Litigation and Other Proceedings. Other than as disclosed in the
Registration Statement or Prospectus, there shall be no litigation instituted
or threatened against the Company and there shall be no proceeding instituted
or threatened against the Company before or by any federal or state
commission, regulatory body or administrative agency or other governmental
body, domestic or foreign, wherein an unfavorable ruling, decision or finding
would materially adversely affect the business, management, licenses,
operations or financial condition or income of the Company considered as an
entity.
8.5 Lack of Material Change. Except as contemplated herein or as set
forth in the Registration Statement and Prospectus, during the period
subsequent to the date of the last audited balance sheet included in the
Registration Statement, the Company (a) shall have conducted its business in
the usual and ordinary manner as the same was being conducted on the date of
the last audited balance sheet included in the Registration Statement, and
(b) except in the ordinary course of its business, the Company shall not have
incurred any liabilities, claims or obligations (direct or contingent) or
disposed of any of its assets, or entered into any material
transaction or suffered or experienced any substantially adverse change in
its condition, financial or otherwise. The capital stock and surplus
accounts of the Company shall be substantially the same as at the date of the
last audited balance sheet included in the Registration Statement, without
considering the proceeds from the sale of the Shares, other than as may be
set forth in the Prospectus, and except as the surplus reflects the result of
continued losses from operations consistent with the trend established by
prior periods.
8.6 Review By and Opinion of Representative's Counsel. The
authorization of the Shares, the Underwriter's Purchase Warrants and the
Common Stock and Warrants issuable upon the exercise of the Underwriter's
Purchase Warrants, the Registration Statement, the Prospectus and all
corporate proceedings and other legal matters incident thereto and to this
Agreement shall be reasonably satisfactory in all respects to counsel to the
Representative.
8.7 Opinion of Counsel. The Company shall have furnished to the
Representative an opinion, dated the Effective Date, the Closing Date and, if
applicable, the Over-Allotment Closing Date, addressed to the Representative,
from Xxxxxx X. Xxxxx, P.C., 00 Xxxx 000 Xxxxx, Xxxx Xxxx Xxxx, Xxxx 00000,
counsel to the Company, to the effect that based upon a review by them of the
Registration Statement, Prospectus, the Company's certificate of
incorporation, by-laws, and relevant corporate proceedings and contracts, and
examination of such laws they deem necessary and such other investigation by
such counsel as they deem necessary to express such opinion:
(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
has the corporate power and authority to own its properties and to carry on
its business as described in the Registration Statement and Prospectus.
(ii) The Company is duly qualified and in good standing as a foreign
corporation authorized to do business in all jurisdictions in which the
character of the properties owned or held under lease or the nature of the
business conducted requires such qualification and in which the failure to
qualify would have a materially adverse effect on the business of the
Company.
(iii) The authorized and outstanding capital stock of the Company is
as set forth in the Registration Statement and Prospectus; the outstanding
common stock of the Company, the Shares and the Underwriter's Purchase
Warrants conform to the statements concerning them in the Registration
Statement and Prospectus; the outstanding common stock of the Company
contains no preemptive rights; the Shares and Underwriter's Purchase
Warrants have been, and the securities issuable upon exercise of the
Underwriter's Purchase Warrants will be, duly and validly authorized and,
upon issuance thereof and payment therefor in accordance with this
Agreement, validly issued, fully paid and nonassessable, and will not be
subject to the preemptive rights of any shareholder of the Company.
(iv) The Underwriter's Purchase Warrants have been duly and validly
authorized
and are valid and binding obligations of the Company enforceable in
accordance with their respective terms.
(v) A sufficient number of shares of common stock has been duly
reserved for issuance upon the exercise of the Underwriter's Purchase
Warrants.
(vi) To such counsel's knowledge, no consents, approvals,
authorizations or orders of agencies, officers or other regulatory
authorities are required for the valid authorization, issuance or sale of
the Shares and the Underwriter's Purchase Warrants contemplated by this
Agreement, except as such have been obtained and are in full force and
effect under the Act and such as may be required under applicable state
securities laws in connection with the purchase and distribution of such
securities by the Representative and the Underwriting Group and the
approval of the underwriting terms and compensation by the NASD.
(vii) The issuance and sale of the Shares, the Underwriter's Purchase
Warrants, and the consummation of the transactions herein contemplated and
compliance with the terms of this Agreement will not conflict with or
result in a breach of any of the terms, conditions, or provisions of or
constitute a default under the certificate of incorporation, or by-laws of
the Company, or, to their knowledge, any note, indenture, mortgage, deed of
trust, or other agreement or instrument known to such counsel without any
specific investigation to which the Company is a party or by which the
Company or any of its property is bound or any existing law (provided this
paragraph shall not relate to federal or state securities laws), order,
rule, regulation, writ, injunction, or decree known to such counsel of any
government, governmental instrumentality, agency, body, arbitration
tribunal, or court, domestic or foreign, having jurisdiction over the
Company or its property.
(viii) On the basis of a reasonable inquiry by such counsel,
including his participation in conferences with representatives of the
Company and its accountants at which the contents of the Registration
Statement and the Prospectus and related matters were discussed, and
without expressing any opinion as to the financial statements or other
financial data contained therein: (A) nothing has come to such counsel's
attention which leads them to believe that the Registration Statement and
the Prospectus, as amended or supplemented by any amendments or supplements
thereto made by the Company prior to the Closing Date, do not comply as to
form in all material respects with the requirements of the Act; (B) nothing
has come to their attention which leads them to believe that the
Registration Statement or the Prospectus, as amended or supplemented by any
such amendments or supplements thereto, contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; (C)
they do not know of any contract or other document required to be described
in or filed as an exhibit to the Registration Statement which is not so
described or filed; and (D) the Registration Statement has become effective
under the Act, and, to the best of their knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that
purpose have been instituted or are pending or contemplated by the
Commission.
(ix) This Agreement has been duly authorized and executed by the
Company and is a valid and binding agreement of the Company.
(x) Based upon representations of management, the Company is not in
default of any of the contracts, licenses, leases or agreements to which it
is a party, and the offering of the Shares and the Underwriter's Purchase
Warrants will not cause the Company to become in default of any of its
contracts, licenses, leases or agreements.
(xi) The Company is not currently offering any securities for sale
except as described in the Registration Statement.
(xii) Counsel has no knowledge of any promoter, affiliate, parent or
subsidiaries of the Company except as are described in the Registration
Statement and Prospectus.
(xiii) To the knowledge of counsel, and without making any statement
as to title, the Company owns all properties described in the Registration
Statement as being owned by it; the properties are free and clear of all
liens, charges, encumbrances or restrictions except as described in the
Registration Statement; all of the leases, subleases and other agreements
under which the Company holds its properties are in full force and effect;
the Company is not in default under any of the material terms or provisions
of any of the leases, subleases or other agreements; and there are no
claims against the Company concerning its rights under the leases,
subleases and other agreements and concerning its right to continued
possession of its properties.
(xiv) To the knowledge of counsel, the Company possesses the required
licenses, certificates, authorizations or permits issued by the appropriate
federal, state and local regulatory authorities necessary to conduct its
business as described in the Registration Statement and to retain
possession of its properties. Counsel is unaware of any notice of any
proceeding relating to the revocation or modification of any of these
licenses, certificates, authorizations or permits having been received by
the Company.
(xv) To the knowledge of counsel, the Company has paid all taxes
which are shown as due and owing on the financial statements included in
the Registration Statement and Prospectus.
As to all factual matters including without limitation the issuance of
stock and warrant certificates and receipt of payment therefor, the states in
which the Company transacts business, the adoption of resolutions reflected
by the Company's minute book and the like, such counsel may rely on the
certificate of an appropriate officer of the Company. Counsel's opinion as
to the validity and enforceability of any and all contracts and agreements
referenced herein may exclude any opinion as to the validity or
enforceability of any indemnification or contribution provisions thereof, or
as the validity or enforceability of any such contract or agreement may be
limited by bankruptcy or other laws relating to or affecting creditors'
rights generally and by equitable
principles.
8.8.1 Accountant's Letter. The Representative shall have received
letters addressed to it dated the Effective Date, the Closing Date and, if
applicable, the Over-Allotment Closing Date, respectively, and a draft of
such letter at least five days prior to the Effective Date, the Closing
Date and, if applicable, the Over-Allotment Closing Date, from Pritchett,
Siler, Hardy, P.C., independent public accountants for the Company, stating
that (i) with respect to the Company they are independent public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and the response to Item 509 of Regulation
S-B as reflected by the Registration Statement is correct insofar as it
relates to them; (ii) in their opinion, the financial statements examined
by them of the Company at all dates and for all periods referred to in
their opinion and included in the Registration Statement and Prospectus,
comply in all material respects with the applicable accounting requirements
of the Act and the published Rules and Regulations thereunder with respect
to registration statements on Form SB-1; (iii) on the basis of certain
indicated procedures (but not an examination in accordance with generally
accepted accounting principles), including a reading of the latest
available interim unaudited financial statements of the Company, whether or
not appearing in the Prospectus, inquiries of the officers of the Company
or other persons responsible for its financial and accounting matters
regarding the specific items for which representations are requested below
and a reading of the minute books of the Company, nothing has come to their
attention which would cause them to believe that during the period from the
last audited balance sheet included in the Registration Statement to a
specified date not more than five days prior to the date of such letter (a)
there has been any change in the capital stock or other securities of the
Company or any payment or declaration of any dividend or other distribution
in respect thereof or exchange therefor other than as set forth in or
contemplated by the Registration Statement or Prospectus; (b) there have
been any material decreases in net current assets or net assets as compared
with amounts shown in the last audited balance sheet included in the
Prospectus so as to make said financial statements misleading other than as
set forth in or contemplated by the Registration Statement or Prospectus;
and (c) on the basis of the indicated procedures and discussions referred
to in clause (iii) above, nothing has come to their attention which, in
their judgment, would cause them to believe or indicate that (1) the
unaudited financial statements and schedules set forth in the Registration
Statement and Prospectus do not present fairly the financial position and
results of the Company, for the periods indicated, in conformity with the
generally accepted accounting principles applied on a consistent basis with
the audited financial statements, and (2) the dollar amounts, percentages
and other financial information set forth in the Registration Statement and
Prospectus under the captions "Summary", "Risk Factors", and "Dilution",
are not in agreement with the Company's general ledger, financial records
or computations made by the Company therefrom.
8.8.2 Conformed Copies of Accountant's Letter. The Representative
shall be furnished without charge, in addition to the original signed
copies, such number of signed or photostatic or conformed copies of such
letters as the Representative shall reasonably
request.
8.9 Officer's Certificate. The Company shall have furnished to the
Representative certificates, each signed by the President and Chief Financial
Officer of the Company, one dated as of the Effective Date, one dated as of
the Closing Date, and, if applicable, one dated as of the Over-Allotment
Closing Date, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct at and as of the date of the certificate,
and the Company has complied with all the agreements and has satisfied all
the conditions on its part to be performed or satisfied at or prior to the
date of the certificate.
(ii) The Registration Statement has become effective and no order
suspending the effectiveness of the Registration Statement has been issued
and to the best of the knowledge of the respective signers, no proceeding
for that purpose has been initiated or is threatened by the Commission.
(iii) The respective signers have each carefully examined the
Registration Statement and Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and
the Prospectus and any amendments and supplements thereto contain all
statements required to be stated therein, and all statements contained
therein are true and correct, and neither the Registration Statement nor
Prospectus nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading and, since the Effective Date of the Registration Statement,
there has occurred no event required to be set forth in an amended or a
supplemented Prospectus which has not been so set forth.
(iv) Except as set forth in the Registration Statement and Prospectus
since the respective dates of the periods for which information is given in
the Registration Statement and Prospectus and prior to the date of the
certificate, (a) there has not been any substantially adverse change,
financial or otherwise, in the affairs or condition of the Company, and (b)
the Company has not incurred any material liabilities, direct or
contingent, or entered into any material transactions, otherwise than in
the ordinary course of business.
(v) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, no dividends or
distribution whatever have been declared and/or paid on or with respect to
the common stock of the Company.
8.10 Tender of Delivery of Securities. All of the Shares being offered
by the Company and the Underwriter's Purchase Warrants being purchased from
the Company shall be tendered for delivery in accordance with the terms and
provisions of this Agreement.
8.11 Blue-Sky Registration or Qualification. The Shares shall be
registered or qualified in
such states as the Representative and the Company may agree pursuant to
Section 5.4, and each such registration or qualification shall be in effect
and not subject to any stop order or other proceeding on the Closing Date or
the Over-Allotment Closing Date. On the Effective Date of the Registration
Statement, on the Closing Date and, if applicable, the Over-Allotment Closing
Date, the Representative shall receive from counsel for the Company, written
information which contains the following:
(i) the names of the states in which applications to register or
qualify the Shares and the Underwriter's Warrants and the Warrant Shares
have been filed;
(ii) the status of such registrations or qualifications in such
states as of the date of such letter;
(iii) a list containing the name of each such state in which the
Shares and the Underwriter's Warrants and the Warrant Shares may be legally
offered and sold by a dealer licensed in such state and the number of each
which may be legally offered and sold in each such state as of the date of
such letter.
(iv) with respect to the written information dated on the Effective
Date, a representation that such counsel will continuously update such
written opinion if any material changes occur, of which counsel received
actual notice, in the information provided therein between the Effective
Date and the Closing Date and, if applicable, Over-Allotment Closing Date;
(v) the names of the states in which the offer and sale of the Shares
is exempt from registration or qualification; and
(vi) a statement that the Members of the Underwriting Group and
selected dealers in the offering may rely upon the information contained
therein.
8.12 Approval of Representative's Counsel. All opinions, letters,
certificates and evidence mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative, whose approval
shall not be unreasonably withheld. The suggested form of such documents shall
be provided to the counsel for the Representative at least three business days
before the Closing Date. The Representative's counsel will provide a written
memorandum stating such closing documents which it deems necessary for its
review.
8.13 Officers' Certificate as a Company Representative. Any certificate
signed by an officer of the Company and delivered to the Representative or
counsel for the Representative shall be deemed a representation and warranty by
the Company to the Representative as to the statements made therein.
SECTION 9
TERMINATION
9.1 Termination Because of Noncompliance. This Agreement may be
terminated in its entirety by the Representative by notice to the Company prior
to its effectiveness or in the event that the Company shall have failed or been
unable to comply with any of the terms, conditions or provisions of this
Agreement on the part of the Company to be performed, complied with or fulfilled
(including but not limited to those specified in Sections 2, 3, 4, 5, and 8
hereof) within the respective times herein provided for, unless compliance
therewith or performance or satisfaction thereof shall have been expressly
waived by the Representative in writing.
9.2 Other Grounds for Termination by Representative. This Agreement may
be terminated by the Representative by notice to the Company at any time if, in
the sole judgment of the Representative, payment for and delivery of the Shares
is rendered impracticable or inadvisable because of:
(a) Material adverse changes in the Company's business, business
prospects, licenses, management, earnings, properties or conditions,
financial or otherwise;
(b) Any action, suit or proceedings, threatened or pending, at law or
equity against the Company, or by any federal, state or other commissions,
board or agency wherein any unfavorable result or decision could materially
adversely affect the business, business prospects, licenses, properties,
financial condition or income or earnings of the Company;
(c) Additional material governmental restrictions not in force and
effect on the date hereof shall have been imposed upon the trading in
securities generally, or new offering or trading restrictions shall have
been generally established by a registered securities exchange, Commission,
NASD or other applicable regulatory authority, or trading in securities
generally on any such exchange, NASDAQ or otherwise, shall have been
suspended, or a general moratorium shall have been established by federal
or state authorities;
(d) Substantial and material changes in the condition of the market
beyond normal fluctuations such that it would be undesirable, impracticable
or inadvisable in the judgment of the Representative to proceed with this
Agreement or with the public offering of the Shares;
(e) Any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the
judgment of the Representative, the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the
Shares; or
(f) Any suspension of trading in the securities of the Company in the
over-the-counter market or the interruption or termination of quotations of
any security of the Company on the NASDAQ System.
9.3 Effect of Termination Hereunder. Any termination of this Agreement
pursuant to this Section 9 shall be without liability of any character
(including, but not limited to, loss of anticipated profits or consequential
damages) on the part of any party hereto, except that the Company shall remain
obligated to pay the costs and expenses provided to be paid by it specified in
Sections 3.4 and 5.7; and the Company and the Underwriting Group shall be
obligated to pay, respectively, all losses, claims, damages or liabilities,
joint or several, under Section 6.1 in the case of the Company and Section 6.2
in the case of the Underwriting Group.
SECTION 10
REPRESENTATIVE'S REPRESENTATIONS AND WARRANTIES
The Representative represents and warrants to and agrees with the Company
that:
10.1 Registration as Broker-Dealer and Member of NASD. The Representative
is registered as a broker-dealer with the Securities and Exchange Commission and
is registered as a securities broker-dealer in all states in which it will sell
Shares and is a member in good standing of the National Association of
Securities Dealers, Inc.
10.2 Representative's Covenants. The Representative covenants and agrees
with the Company that (i) it will not offer or sell the Shares in any state or
other jurisdiction where it has not been advised in writing that the Shares are
qualified for the offer and sale therein or exempt from such requirements; (ii)
it will not make any representation to any person in connection with the offer
and sale of the Shares covered hereby except as set forth in the Registration
Statement or as authorized in writing by the Company; and (iii) it will comply
in good faith with all laws, rules and regulations applicable to the
distribution of the securities, including the Rules of Fair Practice of the
National Association of Securities Dealers, Inc.
SECTION 11
NOTICE
Except as otherwise expressly provided in this Agreement:
11.1 Notice to the Company. Whenever notice is required by the provisions
of this Underwriting Agreement to be given to the Company, such notice shall be
in writing addressed to the Company as follows:
Imagenetix, Inc.
00000 Xxxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxxxx X. Xxxxx, P.C.
00 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
11.2 Notice to the Representative. Whenever notice is required by the
provisions of this Agreement to be given to the Representative, such notice
shall be given in writing addressed to the Representative as follows:
Xxxxxxx Xxxxxxx, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxx Xxxxx Xxxxxxxx & Xxxxxx, P.C.
Attn: Xxx X. Xxxxxx, Esq.
000 00xx Xxxxxx, Xxxxx 0000-X
Xxxxxx, Xxxxxxxx 00000-0000
11.3 Effective Date of Notices. Such notices shall be effective the date
actually received, three days from the day of mailing, or on the date of
delivery set forth on the receipt if the notice is sent by registered mail or
any expedited delivery service.
SECTION 12
MISCELLANEOUS
12.1 Benefit. This Agreement is made solely for the benefit of the
Representative, the other Members of the Underwriting Group, the Company, their
respective officers, directors and controlling persons referred to in Section 15
of the Act and such other persons as are identified in this Agreement, and their
respective successors and assigns, and no other person shall acquire or have any
right under or by virtue of this Agreement. The term "successor" or the term
"successors and assigns" as used in this Agreement shall not include any
purchasers, as such, of any of the Shares.
12.2 Survival. The respective indemnities, agreements, representations,
warranties, covenants and other statements of the Company or its officers and
the Representative or the Members of the Underwriting Group as set forth in or
made pursuant to this Agreement and the indemnity agreements contained in
Section 6 hereof of the Company and the Underwriters (as defined in Section 6)
shall survive and remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or the Underwriters or any
such officer or director thereof or any controlling person of the Company or of
the Underwriters, (ii) delivery of or payment for the Shares, and (iii) the
Closing Date and Over-Allotment Closing Date, and any successor of the Company
and the Underwriters or any controlling person, officer or director thereof, as
the case may be, shall be entitled to the benefits hereof.
12.3 Governing Law. The validity, interpretation and construction of this
Agreement and of each part hereof will be governed by the laws of the State of
Colorado.
12.4 Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto, and supersedes all agreements and
understandings including, but not limited to, the Letter of Intent dated June
17, 1999 which was understood and accepted by the
Company on June 17, 1999.
12.5 Representative's Information. The statements with respect to the
public offering of the Shares on the inside and outside of both the front and
back cover pages of the Prospectus and under the caption "Underwriting" in the
Prospectus constitute the written information furnished by or on behalf of the
Representative referred to in Section 2.2 hereof, in Section 6.1 hereof and
Section 6.2 hereof.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the Agreement
between you and the Company.
Very truly yours,
IMAGENETIX, INC.
ATTEST:
By:
--------------------------------------- --------------------------------
Xxxxx X. Xxxxxxx, Secretary Xxxxxxx X. Xxxxxxx, President
WE HEREBY CONFIRM AS OF THE DATE HEREOF THAT THE ABOVE SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND US.
XXXXXXX XXXXXXX, INC.
(for itself and as Representative of
the several Underwriters names in
Schedule I hereto)
By:
---------------------------------
, President
IMAGENETIX, INC.
(A Colorado Corporation)
SCHEDULE I
This Schedule sets forth the name of each Underwriter referred to in the
Underwriting Agreement and the number of Shares to be purchased by each
Underwriter.
Number
Name of Shares
---- ---------
Total
