___________ SHARES/1/
CPS SYSTEMS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
December__, 1997
CRUTTENDEN XXXX INCORPORATED
As Representative of the several Underwriters
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
CPS Systems, Inc., a Texas corporation (the "Company"), addresses you as the
Representative of each of the persons, firms and corporations listed in Schedule
A hereto (herein collectively called the "Underwriters") and hereby confirms its
agreement with the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
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__________ shares of its authorized and unissued Common Stock, [$.001] par value
per share (the "Firm Shares"), to the several Underwriters. In addition, [the
Company and] certain stockholders of the Company listed on Schedule B hereto
(the "Selling Stockholders") propose to grant to the Underwriters an option to
purchase up to[ _________ and] ________ additional shares [, respectfully, ] of
the Company's Common Stock (the "Option Shares"), as provided in Section 5
hereof. The Company also proposes to sell to you, individually and not in your
capacity as Representative, warrants (the "Representative's Warrants") to
purchase up to _________ shares of Common Stock of the Company (the
"Representative's Warrant Stock"), which sale will be consummated in accordance
with the terms and conditions of the Representative's Warrant Agreement (the
"Representative's Warrant Agreement"), the form of which is filed as an exhibit
to the Registration Statement described below. As used in this Agreement, the
term "Shares" shall include the Firm Shares and the Option Shares. All shares
of Common Stock of the Company to be outstanding after giving effect to the
sales contemplated hereby, including the sale of the Shares, are hereinafter
referred to as "Common Stock." Unless the context otherwise requires,
references herein to the "Company" include CPS Systems, Inc. together with its
subsidiaries described in the Prospectus (hereinafter defined).
________________
/1/ Plus an option to purchase up to _____________ additional shares from the
[Company] certain selling stockholders to cover over-allotments, if any.
1
2. Representations, Warranties and Agreements of the Company.
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The Company represents and warrants to and agrees with each
Underwriter and each Selling Stockholder that:
(a) A registration statement on Form SB-2 (File No. 333-
____) with respect to the Shares, the Representative's Warrants and the
Representative's Warrant Stock, including a prospectus subject to completion,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act and has been filed with the
Commission; such amendments to such registration statement and such amended
prospectuses subject to completion as may have been required prior to the date
hereof have been similarly prepared and filed with the Commission; and the
Company will file such additional amendments to such registration statement and
such amended prospectuses subject to completion as may hereafter be required.
Copies of such registration statement and amendments and of each related
prospectus subject to completion (the "Preliminary Prospectuses") have been
delivered to you.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare and
promptly file with the Commission the information previously omitted from the
registration statement pursuant to Rule 430A(a) of the Rules and Regulations
pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and Regulations
or as part of a post-effective amendment to the registration statement
(including a final form of prospectus). If the registration statement relating
to the Shares has not been declared effective under the Act by the Commission,
the Company will prepare and promptly file an amendment to the registration
statement, including a final form of prospectus. The term "Registration
Statement" as used in this Agreement shall mean such registration statement,
including financial statements, schedules and exhibits, in the form in which it
became or becomes, as the case may be, effective (including, if the Company
omitted information from the registration statement pursuant to Rule 430A(a) of
the Rules and Regulations, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule 430A(b)
of the Rules and Regulations) and, in the event of any amendment thereto after
the effective date of such registration statement, shall also mean (from and
after the effectiveness of such amendment) such registration statement as so
amended. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares as included in such Registration Statement at
the time it becomes effective (including, if the Company omitted information
from the Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations, the information deemed to be a part of the Registration Statement
at the time it became effective pursuant to Rule 430A(b) of the Rules and
Regulations), except that if any revised prospectus shall be provided to the
Underwriters by the Company for use in connection with the offering of the
Shares that differs from the prospectus on file with the Commission at the time
the Registration Statement became or becomes, as the case may be, effective
(whether or not such revised prospectus is required to be filed with the
Commission pursuant to Rule 424(b)(3) of the Rules and Regulations), the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriters for such use.
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(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus, at the time of filing
thereof, has conformed in all material respects to the requirements of the Act
and the Rules and Regulations and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up to
and on the Closing Date (hereinafter defined) and on any later date on which
Option Shares are to be purchased, (i) the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act and
the Rules and Regulations and will in all material respects conform to the
requirements of the Act and the Rules and Regulations, (ii) the Registration
Statement, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (iii) the Prospectus, and any amendments or supplements thereto,
did not and will not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
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that none of the representations and warranties contained in this subparagraph
(b) shall apply to information contained in or omitted from the Registration
Statement or Prospectus, or any amendment or supplement thereto, in reliance
upon, and in conformity with, written information relating to any Underwriter
furnished to the Company by such Underwriter specifically for use in the
preparation thereof.
(c) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
subsidiaries listed in Exhibit 21 of the Registration Statement. The Company and
each of its subsidiaries has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation with full power and authority (corporate and other) to own, lease
and operate its properties and conduct its business as described in the
Prospectus; the Company and each of its subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to be so
qualified or be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company taken as a whole; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; the Company is in possession
of and operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities that are material to the conduct of its business, all of which are
valid and in full force and effect; the Company is not in material violation of
its charter or bylaws or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any material
bond, debenture, note
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or other evidence of indebtedness, or in any material lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which it or its
properties or assets may be bound; and the Company is not in violation of any
law, order, rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its properties or assets.
(d) The Company has full legal right, power and authority
to enter into this Agreement and the Representative's Warrant Agreement and to
perform the transactions contemplated hereby and thereby. Each of this Agreement
and the Representative's Warrant Agreement has been duly authorized, executed
and delivered by the Company and is a valid and binding agreement on the part of
the Company, enforceable in accordance with its terms, except as rights to
indemnification under this Agreement or the Representative's Warrant Agreement
may be limited by applicable law and except as the enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the performance of this Agreement and the Representative's
Warrant Agreement and the consummation of the transactions herein or therein
contemplated will not violate any provisions of the charter, bylaws or other
organizational document of the Company and will not result in a breach or
violation of any of the terms and provisions of, or constitute, either by itself
or upon notice or the passage of time or both, a default under any bond,
debenture, note or other evidence of indebtedness, or under any lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which its
properties or assets may be bound, or any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or over its
properties or assets. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or over its properties
or assets is required for the execution and delivery of this Agreement or the
Representative's Warrant Agreement and the consummation by the Company of the
transactions herein and therein contemplated, except such as may be required
under the Act or under state or other securities or Blue Sky laws, all of which
requirements have been satisfied in all material respects.
(e) There is not any pending or, to the best of the
Company's knowledge, threatened action, suit, claim or proceeding against the
Company, or any of its officers or any of its properties, assets or rights
before any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its officers or properties
or otherwise that (i) is reasonably likely to result in any material adverse
change in the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company or might materially and adversely affect
its properties, assets or rights, (ii) might prevent consummation of the
transactions contemplated hereby or (iii) is required to be disclosed
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in the Registration Statement or Prospectus and is not so disclosed; and there
are no agreements, contracts, leases or documents of the Company of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement by the Act
or the Rules and Regulations or by the Securities Exchange Act of 1934 (the
"Exchange Act") or the rules and regulations of the Commission thereunder that
have not been accurately described in all material respects in the Registration
Statement or Prospectus or filed as exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and the
authorized and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" and conforms to the statements
relating thereto contained in the Registration Statement and the Prospectus (and
such statements correctly state the substance of the instruments defining the
capitalization of the Company); the Firm Shares and the Option Shares have been
duly authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company against payment therefor
in accordance with the terms of this Agreement, will be duly and validly issued
and fully paid and nonassessable, and will be sold free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest; and no
preemptive right, co-sale right, registration right, right of first refusal or
other similar right of stockholders exists with respect to any of the Firm
Shares or Option Shares or the issuance and sale thereof other than those that
will automatically expire upon the consummation of the transactions contemplated
on the Closing Date. No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the issuance and
sale or transfer of the Shares except as may be required under the Act, the
Rules and Regulations or under state or other securities or Blue Sky laws.
Except as disclosed in or contemplated by the Prospectus and the financial
statements of the Company, and the related notes thereto, included in the
Prospectus, the Company has no outstanding options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted and exercised thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights under the Act and the Rules and
Regulations.
(g) Xxxxx Xxxxxxxx LLP, which has expressed its opinion
with respect to the financial statements of the Company filed with the
Commission as a part of the Registration Statement, which are included in the
Prospectus, are independent accountants within the meaning of the Act and the
Rules and Regulations. The audited financial statements of the Company, together
with the related schedules and notes, and the unaudited financial information,
5
included in the Registration Statement and Prospectus, fairly present the
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they apply. Such
financial statements of the Company, together with the related schedules and
notes, filed with the Commission as part of the Registration Statement, have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods as certified by Xxxxx Xxxxxxxx LLP.
The selected and summary financial and statistical data included in the
Registration Statement present fairly the information shown therein and have
been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to be
included in the Registration Statement.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, except as
specifically disclosed or contemplated therein, there has not been (i) any
material adverse change in the condition (financial or otherwise), earnings,
operations or business of the Company, (ii) incurred by the Company any
transaction that is material to the Company, (iii) any obligation, direct or
contingent incurred by the Company that is material to the Company, (iv) any
change in the capital stock or outstanding indebtedness of the Company that is
material to the Company, (v) any dividend or distribution of any kind declared,
paid or made on the capital stock of the Company, or (vi) any loss or damage
(whether or not insured) to the property of the Company which has a material
adverse effect on the condition (financial or otherwise), earnings, operations
or business of the Company.
(i) Except as set forth in the Registration Statement and
Prospectus, (i) the Company has good and marketable title to all properties and
assets described in the Registration Statement and Prospectus as owned by it,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest, other than such as would not have a material adverse effect
on the condition (financial or otherwise), earnings, operations or business of
the Company, (ii) the agreements to which the Company is a party described in
the Registration Statement are valid agreements, enforceable by the Company,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles and, to
the best of the Company's knowledge, the other contracting party or parties
thereto are not in material breach or material default under any of such
agreements, and (iii) the Company has valid and enforceable leases for all
properties described in the Registration Statement and Prospectus as leased by
it, except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles. Except
as set forth in the Registration Statement and Prospectus, the Company owns or
leases all such properties as are necessary to its operations as now conducted
and as described in the Registration Statement and the Prospectus.
6
(j) The Company has timely filed all federal, state, local
and foreign tax returns required to be filed by it and has paid all taxes shown
thereon as due, and there is no tax deficiency that has been or, to the best of
the Company's knowledge, is reasonably likely to be asserted against the
Company, which might have a material adverse effect on the condition (financial
or otherwise), earnings, operations or business of the Company, and all tax
liabilities are adequately provided for on the books of the Company.
(k) The Company maintains insurance with insurers of
recognized financial responsibility of the types and in the amounts generally
deemed adequate for its business including, but not limited to, insurance
covering real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect; the Company
has not been refused any insurance coverage sought or applied for; and the
Company does have any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition
(financial or otherwise), earnings, operations or business of the Company.
(l) To the best of Company's knowledge, no labor
disturbance by the employees of the Company exists or is imminent. No collective
bargaining agreement exists with any of the Company's employees and, to the best
of the Company's knowledge, no such agreement is imminent.
(m) Except as disclosed in or specifically contemplated by
the Prospectus, the Company owns or possesses adequate rights to use all patent
rights, trade secrets, mask works, know-how, trademarks, copyrights, licenses,
service marks and trade names that are necessary to conduct its businesses as
described in the Registration Statement and Prospectus; the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of the Company by others with respect to any patent rights,
trade secrets, mask works, know-how, trademarks, copyrights, licenses, service
marks or trade names; and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of others
with respect to any patent rights, trade secrets, mask works, know-how,
trademarks, copyrights, licenses, service marks or trade names which, singly or
in the aggregate, in the event of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company.
(n) The Common Stock is registered pursuant to Section
12(g) of the Exchange Act and is approved for quotation on the Nasdaq SmallCap
Market, and the Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or delisting the Common Stock from the Nasdaq SmallCap Market, nor has the
Company received any notification that the
7
Commission or the National Association of Securities Dealers, Inc. ("NASD") is
contemplating terminating such registration or listing.
(o) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it will not become an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the 1940 Act and such rules and regulations.
(p) The Company has not distributed and will not distribute
prior to the later of (i) the Closing Date, or any date on which Option Shares
are to be purchased, as the case may be, and (ii) completion of the distribution
of the Shares, any offering material in connection with the offering and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
(q) The Company has not at any time during the last five
(5) years (i) made any unlawful contribution to any candidate for foreign office
or failed to disclose fully any contribution in violation of law, or (ii) made
any payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
(r) The Company has not taken and will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization in violation of law or manipulation of the
price of the Common Stock to facilitate the sale or resale of the Shares.
(s) Each officer, director and director-nominee of the
Company and each beneficial owner of [five (5)] percent or more of the Company's
Common Stock has agreed in writing that such person will not without the prior
written consent of Cruttenden Xxxx Incorporated, for a period of 365 days from
the date that the Registration Statement is declared effective by the Commission
(the "Lock-up Period"), (which consent may be withheld in its sole discretion),
directly or indirectly, sell, offer, contract or grant any option to sell
(including without limitation, any short sale), pledge, transfer, establish an
open "put equivalent position" within the meaning of Rule 16a-1(h) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise
dispose of any shares of Common Stock, options or warrants to acquire shares of
Common Stock, or securities exchangeable or exercisable for or convertible into
shares of Common Stock currently or hereafter owned either of record or
beneficially (as defined in Rule 13d-3 under the Exchange Act) by such person
(collectively, "Securities") or publicly announce the undersigned's intention to
do any of the foregoing. Furthermore, such person will also agree and consent to
the entry of stop transfer instructions with the Company's
8
transfer agent against the transfer of the Securities held by such person except
in compliance with this restriction. The Company has provided to counsel for the
Underwriters a complete and accurate list of all securityholders of the Company
and the number and type of securities held by each securityholder. The Company
has provided to counsel for the Underwriters true, accurate and complete copies
of all of the agreements pursuant to which its officers, directors, director-
nominees and stockholders have agreed to such restrictions (the "Lock-up
Agreements"). The Company hereby represents and warrants that it will not
release any of its officers, directors or director-nominees or other
stockholders from any Lock-up Agreements currently existing or hereafter
effected without the prior written consent of Cruttenden Xxxx Incorporated.
(t) Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in material compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
that are applicable to its business, (ii) the Company has received no notice
from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) to its best knowledge, the Company is not
likely to be required to make future material capital expenditures to comply
with Environmental Laws and (iv) no property which is owned, leased or occupied
by the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. (S) 9601, et seq.), or otherwise designated as a contaminated site under
-- ----
applicable state or local law.
(u) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, including without limitation cash receipts,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(v) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers,
directors or director-nominees of the Company or any of the members of the
families of any of them, except as disclosed in the Registration Statement and
the Prospectus.
(w) The Representative's Warrants have been duly and
validly authorized by the Company and upon delivery to you in accordance with
the Representative's Warrant Agreement will be duly issued and legal, valid and
binding obligations of the Company.
9
(x) The Representative's Warrant Stock has been duly
authorized and reserved for issuance upon the exercise of the Representative's
Warrants and when issued upon payment of the exercise price therefor will be
validly issued, fully paid and nonassessable shares of Common Stock of the
Company.
3. Representations, Warranties and Covenants of the Selling Stockholders.
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Each of the Selling Stockholders severally, and not jointly,
represents and warrants to, and agrees with, the several Underwriters that:
(a) Such Selling Stockholder has, and on the Closing Date
and on any later date on which the Option Shares are to be purchased
will have, good and marketable title to the Shares proposed to be sold
by such Selling Stockholder hereunder on such closing date and full
right, power and authority to enter into this Agreement and to sell,
assign, transfer and deliver such Option Shares hereunder, free and
clear of all voting trust arrangements, liens, encumbrances, equities,
security interests, restrictions and claims whatsoever, other than
pursuant to this Agreement and the Stockholders' Agreement (as defined
below); and upon delivery of and payment for such Shares hereunder,
the Underwriters will acquire good and marketable title thereto, free
and clear of all liens, encumbrances, equities, claims, restrictions,
security interests, voting trusts or other defects of title
whatsoever.
(b) Such Selling Stockholder has executed and delivered a
Power of Attorney and caused to be executed and delivered on his
behalf a Custody Agreement (hereinafter collectively referred to as
the "Stockholders' Agreement") and in connection herewith such Selling
Stockholder further represents, warrants and agrees that such Selling
Stockholder has deposited in custody, under the Stockholders'
Agreement, with the agent named therein (the "Agent") as custodian,
certificates in negotiable form for the Shares or warrants to purchase
the Shares to be sold hereunder by such Selling Stockholder, for the
purpose of further delivery pursuant to this Agreement. Such Selling
Stockholder agrees that the Shares or warrants to purchase the Shares
to be sold by such Selling Stockholder on deposit with the Agent are
subject to the interests of the Company and the Underwriters, that the
arrangements made for such custody are to that extent irrevocable, and
that the obligations of such Selling Stockholder hereunder shall not
be terminated, except as provided in this Agreement or in the
Stockholders' Agreement, by any act of such Selling Stockholder, by
operation of law, by the death or incapacity of such Selling
Stockholder or by the occurrence of any other event. If the Selling
Stockholder should die or become incapacitated, or if any other event
should occur, before the delivery of the Shares hereunder, the
documents evidencing Shares or warrants to purchase the
10
Shares then on deposit with the Agent shall be delivered by the Agent
in accordance with the terms and conditions of this Agreement and the
Stockholders' Agreement as if such death, incapacity or other event
had not occurred, regardless of whether or not the Agent shall have
received notice thereof. This Agreement and the Stockholders'
Agreement have been duly executed and delivered by or on behalf of
such Selling Stockholder and the form of such Stockholders' Agreement
has been delivered to you.
(c) The performance of this Agreement and the Stockholders'
Agreement and the consummation of the transactions contemplated hereby
and thereby will not result in a breach or violation by such Selling
Stockholder of any of the terms or provisions of, or constitute a
default by such Selling Stockholder under, any indenture, mortgage,
deed of trust, trust (constructive or other), loan agreement, lease,
franchise, license or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder or
any of its properties is bound, any statute, or any judgment, decree,
order, rule or regulation of any court or governmental agency or body
applicable to such Selling Stockholder or any of its properties, other
than breaches or violations which do not adversely affect such Selling
Stockholder's ability to perform under this Agreement or the
Stockholders' Agreement.
(d) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares, except usual
and customary market maker and brokerage transactions up to two
business days prior to the offering contemplated hereby in each case
in accordance with applicable Commission regulations.
(e) To the extent that any statements or omissions made in
the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto, are made in reliance upon and
in conformity with written information furnished to the Company by
such Selling Stockholder specifically for use therein, such
Preliminary Prospectus and the Registration Statement did, and the
Prospectus and any further amendments or supplements to the
Registration Statement and the Prospectus will, when they become
effective or are filed with the Commission, as the case may be, not
contain any untrue statement of material fact or omit any material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they
were made.
(f) To the best of its knowledge, such Selling Stockholder
is
11
not aware that any of the representations and warranties set forth in
Section 2 above is untrue or inaccurate in any material respect.
4. Representation, Warranties and Agreements of the Underwriters.
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The information set forth in the last paragraph on the front cover page (insofar
as such information relates to the Underwriters), in the first paragraph on page
__, concerning stabilization and over-allotment by the Underwriters, and in
third and eighth paragraphs under the caption "Underwriting" in any Preliminary
Prospectus and in the final form of Prospectus filed pursuant to Rule 424(b)
constitutes the only information furnished by the Underwriters to the Company
for inclusion in any Preliminary Prospectus, the Prospectus or the Registration
Statement, and you, on behalf of the respective Underwriters, represent and
warrant to the Company that the statements made therein do not include any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
5. Purchase, Sale and Delivery of Shares. On the basis of the
-------------------------------------
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
respective number of Firm Shares as hereinafter set forth. The obligation of
each Underwriter to the Company shall be to purchase from the Company that
number of Firm Shares which is set forth opposite the name of such Underwriter
in Schedule A hereto (subject to adjustment as provided in Section 11).
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 5 shall be made against
payment of the purchase price therefor by the several Underwriters by certified
or official bank check or checks drawn in next-day funds, payable to the order
of the Company (and the Company agrees not to deposit any such check in the bank
on which it is drawn until the day following the date of its delivery to the
Company) at the offices of the Representative or such other place as may be
agreed upon among the Representative and the Company, at 7:00 A.M., California
time, on the third (3rd) full business day following the first day that Shares
are traded (or at such time and date to which payment and delivery shall have
been postponed pursuant to Section 11 hereof), such time and date of payment and
delivery being herein called the "Closing Date." The certificates for the Firm
Shares to be so delivered will be made available to you at such office or such
other location as you may reasonably request for checking at least one (1) full
business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two (2) full
business days prior to the Closing Date. If the Representative so elects,
delivery of the Firm Shares may be made by credit through full fast transfer to
the accounts at The Depository Trust Company designated by the Representative.
12
It is understood that you, individually, and not as the
Representative of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
[Company and the] Selling Stockholders hereby grant to the several Underwriters,
for the purpose of covering over-allotments in connection with the distribution
and sale of the Firm Shares only, a nontransferable option to purchase, in the
respective amounts set forth on the Schedule B, up to an aggregate of _________
Option Shares at the purchase price per share for the Firm Shares set forth in
this Section 5. Such option may be exercised by the Representative on behalf of
the several Underwriters on one or more occasions in whole or in part during the
forty-five (45) day period after the date on which the Firm Shares are initially
offered to the public, by giving written notice to the Company and the Agent.
The number of Option Shares to be purchased by each Underwriter upon the
exercise of such option shall be the same proportion of the total number of
Option Shares to be purchased as the number of Firm Shares purchased by such
Underwriter (set forth in Schedule A hereto) bears to the total number of Firm
Shares purchased by the several Underwriters (set forth in Schedule A hereto),
adjusted by the Representative in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 5 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in next-day funds, payable to the order of the Agent [and the
Company, respectively,] (and the Agent [and the Company] agree[s] not to deposit
any such check in the bank on which it is drawn until the day following the date
of its delivery). Such delivery and payment shall take place at the offices of
the Representative, or at such other place as may be agreed upon by the
Representative and the Agent (i) on the Closing Date, if written notice of the
exercise of such option is received by the Agent at least three (3) full
business days prior to the Closing Date, or (ii) on a date which shall not be
later than the fifth (5th) full business day following the date the Agent
receives written notice of the exercise of such option, if such notice is
received by the Agent less than three (3) full business days prior to the
Closing Date.
[To the extent that the Company is also selling in the over-
allotment, describe whether Shares to come first from the Company or
Stockholders if not all exercised.] To the extent that the option is not
exercised for the entire __________ Option Shares, the number of Option Shares
to be sold by each Selling Stockholder shall be that number which bears the same
relationship to the aggregate number of Option Shares being purchased as the
13
maximum number of Option Shares being sold by each Selling Stockholder bears to
_________ .
The certificates for the Option Shares to be so delivered will be
made available to you at such office or such other location as you may
reasonably request for inspection at least two (2) full business days prior to
the date of payment and delivery and will be in such names and denominations as
you may request, such request to be made at least three (3) full business days
prior to such date of payment and delivery. If the Representative so elects,
delivery of the Option Shares may be made by credit through full fast transfer
to the accounts at The Depository Trust Company designated by the
Representative.
It is understood that you, individually, and not as the
Representative of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
Upon exercise of any option provided for in this Section 5, the
obligations of the several Underwriters to purchase such Option Shares will be
subject (as of the date hereof and as of the date of payment and delivery for
such Option Shares) to the accuracy of and compliance with the representations,
warranties and agreements of the Company herein, to the accuracy of the
statements of the Company and officers of the Company made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the condition that all proceedings taken at or prior to the
payment date in connection with the sale and transfer of such Option Shares
shall be reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, and you shall have been furnished with all such
documents, certificates and opinions as you may reasonably request in order to
evidence the accuracy and completeness of any of the representations, warranties
or statements, the performance of any of the covenants or agreements of the
Company or the compliance with any of the conditions herein contained in each
case in all material respects.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 13 hereof) of the Firm Shares at an initial public offering
price of $_____ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
6. Further Agreements of the Company. The Company agrees with the
---------------------------------
several Underwriters that:
(a) The Company will use best efforts to cause the
Registration
14
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; it will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement or any
subsequent amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed; if the Company omitted information
from the Registration Statement at the time it was originally declared effective
in reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to you that the Prospectus contains such information and
has been filed with the Commission within the time period prescribed; it will
notify you promptly of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for additional
information; promptly upon your request, it will prepare and file with the
Commission any amendments or supplements to the Registration Statement or
Prospectus which, in the opinion of counsel for the several Underwriters
("Underwriters' Counsel"), may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters; it will promptly prepare and
file with the Commission, and promptly notify you of the filing of, any
amendments or supplements to the Registration Statement or Prospectus which may
be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act, any
event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, it will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Act; and it will file no amendment or supplement to the Registration
Statement or Prospectus which shall not previously have been submitted to you a
reasonable time prior to the proposed filing thereof or to which you shall
reasonably object in writing, subject, however, to compliance with the Act and
the Rules and Regulations and the rules and regulations of the Commission
thereunder and the provisions of this Agreement.
(b) The Company will advise you promptly after it shall
received notice or obtained knowledge of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of
15
any stop order or to obtain its withdrawal at the earliest possible moment if
such stop order should be issued.
(c) The Company will use reasonable efforts to qualify the
Shares for offering and sale under the securities laws of such jurisdictions as
you may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, except that the
Company shall not be required in connection therewith or as a condition thereof
to qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be reasonably required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available,
copies of the Registration Statement (three of which will be signed and which
will include all exhibits), each Preliminary Prospectus, the Prospectus and any
amendments or supplements to such documents, including any prospectus prepared
to permit compliance with Section 10(a)(3) of the Act (three of which will
include all exhibits) all in such quantities as you may from time to time
reasonably request.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration Statement,
an earnings statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the Act and covering
a twelve (12) month period beginning after the effective date of the
Registration Statement.
(f) During a period of five (5) years after the date hereof
and for so long as the Company is subject to Section 13 or 15 of the Exchange
Act, the Company will furnish to its stockholders as soon as practicable after
the end of each respective period, annual reports (including financial
statements audited by independent certified public accountants) and unaudited
quarterly reports of operations for each of the first three quarters of the
fiscal year, and will furnish to you and the other several Underwriters
hereunder, upon request (i) concurrently with furnishing such reports to its
stockholders, statements of operations of the Company for each of the first
three (3) quarters in the form furnished to the Company's stockholders, (ii)
concurrently with furnishing to its stockholders, a balance sheet of the Company
as of the end of such fiscal year, together with statements of operations, of
stockholders' equity, and of cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate or report thereon of independent
certified public accountants, (iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders, (iv) as soon as they are
available, copies of all reports and financial statements furnished to or filed
with the Commission, any securities exchange or the NASD, (v) every material
press
16
release and every material news item or article in respect of the Company or its
affairs which was generally released to stockholders or prepared by the Company,
and (vi) any additional information of a public nature concerning the Company or
its business which you may reasonably request. During such five (5) year period,
if the Company shall have active subsidiaries, the foregoing financial
statements shall be on a consolidated basis to the extent that the accounts of
the Company and its subsidiaries are consolidated, and shall be accompanied by
similar financial statements for any significant subsidiary that is not so
consolidated.
(g) The Company will apply the net proceeds from the sale
of the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and a
registrar (which may be the same entity) for its Common Stock.
(i) The Company will file Form SR in conformity with the
requirements of the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations hereunder, or if the
Company shall terminate this Agreement pursuant to Section 12(a) hereof, or if
the Underwriters shall terminate this Agreement pursuant to Section 12(b)(i),
and, in the judgment of the Representative, a public offering price of $5.00 or
more per share is available, then the Company shall pay the Representative an
amount equal to one and one half percent (1.5%) of the gross amount of the
proposed offering (assuming a $5.00 per share price) less any amounts previously
paid to the Representative.
(k) If at any time during the ninety (90) day period after
the Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
if reasonably requested by you, forthwith prepare, and, if permitted by law,
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(l) During the Lock-up Period, the Company will not,
without the prior written consent of the Representative, effect the Disposition
of, directly or indirectly, any Securities other than (i) the sale of the Firm
Shares and the Option Shares hereunder and, (ii) the Company's issuance of
options or Common Stock under the Company's presently authorized stock option
plans or restricted stock plans (collectively, the "Option Plans").
17
7. Expenses.
--------
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and
expenses in connection with the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments or supplements
thereto; the printing of this Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreement, the Preliminary Blue Sky Survey and any supplemental
Blue Sky Survey, the Underwriters' Questionnaire and Power of Attorney, and any
instruments related to any of the foregoing; the issuance and delivery of the
Shares hereunder to the several Underwriters, including transfer taxes, if any,
the cost of all certificates representing the Shares and transfer agents' and
registrars' fees; the fees and disbursements of counsel and accountants for the
Company; the fees and disbursements of counsel for the several Underwriters, all
fees and other charges of the Company's independent certified public
accountants; the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary Prospectus
and the Prospectus, and any amendments or supplements to any of the foregoing;
NASD filing fees and the cost of qualifying the Shares under the laws of such
jurisdictions as you may designate (including filing fees and fees and
disbursements of counsel for the Underwriters related to such qualification);
the Company's road show costs and expenses, the cost of preparing bound volumes
of the documents relating to the public offering of Common Stock contemplated
hereby; and all other expenses directly incurred by the Company in connection
with the performance of its obligations hereunder.
(ii) To the extent that the Representative's accountable
expenses (including without limitation, travel expenses) exceed $20,000 (which
amount has preveiously been advanced to the Representative by the Company), the
Company shall reimburse the Representative on the Closing Date up to an
additional $30,000 (exclusive of the Representative's legal expenses) for such
accountable expenses.
(iii) In addition to its other obligations under Section
7(a)(i) hereof, if the Shares are sold pursuant to this Agreement, the Company
will pay to the Representative a nonaccountable expense allowance equal to 3.0%
of the aggregate sales price of the Shares to the public. This nonaccountable
expense allowance with respect to the Firm Shares shall be paid to you on the
Closing Date and the nonaccountable expense allowance with respect to the Option
Shares shall be paid to you on the closing of the sale to you of such Option
Shares. The $20,000 previously paid to the Representative by the Company and
any amount owed to the Representative pursuant to Section 7(a)(ii) hereof shall
be credited against this nonaccountable expense allowance.
18
(iv) In addition to its other obligations under Section 9
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding described in
Section 9(a) hereof, it will reimburse the Underwriters and Selling
Stockholders, as the case may be, on a monthly basis for all reasonable legal or
other expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Company's obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriters shall
promptly return such payment to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) listed from time to time in
The Wall Street Journal which represents the base rate on corporate loans posted
by a substantial majority of the nation's five (5) largest banks (the "Prime
Rate"). Any such interim reimbursement payments which are not made to the
Underwriters within thirty (30) days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request.
(b) In addition to their other obligations under Section
9(b) hereof, the Underwriters severally and not jointly agree that, as an
interim measure during the pendency of any claim, action, investigation, inquiry
or other proceeding described in Section 9(b) hereof, they will reimburse the
Company and Selling Stockholders, as the case may be, on a monthly basis for all
reasonable legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Company
shall promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
7(a)(iv) and 7(b) hereof, including the amounts of any requested reimbursement
payments, the method of determining such amounts and the basis on which such
amounts shall be apportioned among the reimbursing parties, shall be settled by
arbitration conducted pursuant to the Code of Arbitration Procedure of the NASD
in Orange County, California (or as close geographically to Orange County,
California as is reasonably practical). Any such arbitration must be commenced
by service of a written demand for arbitration or a written notice of intention
to arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation
19
of an arbitration tribunal in such demand or notice, then the party responding
to said demand or notice is authorized to do so. Any such arbitration will be
limited to the operation of the interim reimbursement provisions contained in
Sections 7(a)(iv) and 7(b) hereof and will not resolve the ultimate propriety or
enforceability of the obligation to indemnify for expenses which is created by
the provisions of Sections 9(a) and 9(b) hereof or the obligation to contribute
to expenses which is created by the provisions of Section 9(d) hereof.
8. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective
not later than 2:00 P.M., California time, on the date of this Agreement, or
such later date as shall be consented to in writing by you; and no stop order
suspending the effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been initiated or, to the knowledge of the Company
or any Underwriter, threatened by the Commission, and any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issuance, sale and delivery of
the Shares, shall have been reasonably satisfactory to Underwriters' Counsel,
and such counsel shall have been furnished with such documents and information
as they may reasonably have requested to enable them to pass upon the matters
referred to in this Section.
(c) You shall be satisfied that since the respective dates as of
which information is given in the Registration Statement and Prospectus, (i)
there shall not have been any change in the capital stock of the Company other
than pursuant to the exercise of outstanding options and warrants disclosed in
the Prospectus or any material change in the indebtedness of the Company, (ii)
except as set forth or contemplated by the Registration Statement or the
Prospectus, no material verbal or written agreement or other transaction shall
have been entered into by the Company, which is not in the ordinary course of
business, (iii) no loss or damage (whether or not insured) to the property of
the Company shall have been sustained which materially and adversely affects the
condition (financial or otherwise), business, results of operations or prospects
of the Company, (iv) no legal or governmental action, suit or proceeding
affecting the Company which is material to the Company or which affects or may
affect the transactions contemplated by this Agreement shall have been
instituted or threatened
20
and (v) there shall not have been any material change in the condition
(financial or otherwise), business, management, results of operations or
prospects of the Company which makes it impractical or inadvisable in the
judgment of the Representative to proceed with public offering or purchase the
Common Shares as contemplated hereby.
(d) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased, as the case may be, an opinion
of Schreeder, Wheeler, Flint, counsel for the Company, dated the Closing Date or
such later date on which Option Shares are purchased, addressed to the
Underwriters (and stating that it may be relied upon by Underwriters' Counsel in
rendering its opinion pursuant to Section 8 (d) of this Agreement) and with
reproduced copies or signed counterparts thereof for each of the Underwriters,
to the effect that:
(i) The Company and each of its subsidiaries has been
duly incorporated and is validly existing and in good standing under
the laws of the jurisdiction of its incorporation;
(ii) The Company and each of its subsidiaries has full
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration
Statement;
(iii) The Company and each of its subsidiaries is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction, if any, in which the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in
good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business
of the Company taken as a whole. To such counsel's knowledge, Company
has no subsidiaries or other than as listed in Exhibit 21 to the
Registration Statement;
(iv) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under the
caption "Capitalization"; all outstanding shares of capital stock of
the Company have been duly and validly issued and are fully paid and
nonassessable, and, to such counsel's knowledge, have not been issued
in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right;
without limiting the foregoing, to such counsel's knowledge, there are
no preemptive or other rights to subscribe for or purchase any of the
Shares;
(v) The certificates evidencing the Shares to be
delivered hereunder are in due and proper form under Texas law and
when duly countersigned by the Company's transfer agent and registrar
and delivered to you
21
against payment of the agreed compensation in accordance with this
Agreement, the Firm Shares and the Option Shares, represented thereby
will be duly and validly issued and fully paid and nonassessable, and
will not have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or
other similar right of stockholders and will conform in all respects
to the description thereof in the Registration Statement;
(vi) the Company has the corporate power and authority
to enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares to be issued and sold by it hereunder;
(vii) The Company has the corporate power and authority
to enter into the Representative's Warrant Agreement and to issue,
sell and deliver to the Representative the Representative's Warrants
to be issued and sold by it thereunder;
(viii) Each of this Agreement, the Representative's
Warrant Agreement and the Representative's Warrants has been duly
authorized by all necessary corporate action on the part of the
Company and has been duly executed and delivered by the Company and,
assuming due authorization, execution and delivery by you, is a valid
and binding agreement of the Company, enforceable in accordance with
its terms, except insofar as indemnification provisions may be limited
by applicable law and to which counsel need not express any opinion
and except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles;
(ix) The Registration Statement has become effective
under the Act and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Act;
(x) The Registration Statement and the Prospectus, and
each amendment or supplement thereto (other than the financial
statements and schedules included in the Registration Statement as to
which such counsel need express no opinion), as of the effective date
of the Registration Statement, complied as to form in all material
respects with the requirements of the Act and the applicable Rules and
Regulations;
(xi) The statements in the Registration Statement and
Prospectus under the captions "Management," "Certain Transactions,"
"Description of Capital Stock" and "Shares Eligible For Future Sale,"
and in the
22
Registration Statement in Items 24 and 26 insofar as they constitute
matters of law or legal conclusions or are descriptions of contracts,
agreements or other documents are accurate and complete in all
material respects and fairly present the information contained herein;
(xii) The description in the Registration Statement and
the Prospectus of the charter and bylaws of the Company and of
statutes are accurate and fairly present the information required to
be presented by the Act and the applicable Rules and Regulations and
the Company is not in violation of its charter or bylaws, or other
organizational documents;
(xiii) To such counsel's knowledge, there are no
agreements, contracts, leases or documents to which the Company is a
party of a character required to be described or referred to in the
Registration Statement or Prospectus or to be filed as an exhibit to
the Registration Statement that are not described or referred to
therein or filed as required;
(xiv) The execution and delivery of this Agreement and
the Representative's Warrant Agreement and the performance by the
Company of its obligations hereunder and thereunder will not (a)
result in any violation of the Company's charter, bylaws or other
organizational documents, or (b) result in a material breach or
violation of any of the terms and provisions of, or constitute a
material default under, any material bond, debenture, note or other
evidence of indebtedness, or under any material lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company is a party or by
which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any court, government or governmental agency
or body having jurisdiction over the Company or over any of its
properties or operations;
(xv) To counsel's best knowledge, no consent, approval,
authorization or order of or qualification with any court, government
or governmental agency or body having jurisdiction over the Company or
over any of its properties or operations is necessary in connection
with the consummation by the Company of the transactions contemplated
in this Agreement and the Representative's Warrant Agreement, except
such as have been obtained under the Act or such as may be required
under state or other securities or Blue Sky laws in connection with
the purchase and the distribution of the Shares by the Underwriters;
(xvi) To such counsel's knowledge, there are no legal or
23
governmental proceedings pending or threatened against the Company of
a character required to be disclosed in the Registration Statement or
the Prospectus by the Act or the Rules and Regulations or by the
Exchange Act or the applicable rules and regulations of the Commission
thereunder, other than those described therein;
(xvii) The Representative's Warrants have been duly and
validly authorized by the Company and upon delivery to you in
accordance with the Representative's Warrant Agreement will be duly
issued and legal, valid and binding obligations of the Company;
(xviii) The Representative's Warrant Stock to be issued by
the Company pursuant to the terms of the Representative's Warrant has
been duly authorized and, upon issuance and delivery against payment
therefor in accordance with the terms of the Representative's Warrant
Agreement, will be duly and validly issued and fully paid and
nonassessable, and to such counsel's knowledge, will not have been
issued in violation of or subject to any preemptive right, co-sale
right, registration right, right of first refusal or other similar
right of stockholders;
(xix) To such counsel's knowledge, no holders of Common
Stock or other securities of the Company have registration rights with
respect to securities of the Company that have not been waived; and
(xx) The offer and sale of all securities of the
Company made within the last three years as set forth in Item 15 of
the Registration Statement were exempt from the registration
requirements of the Securities Act, pursuant to the provisions set
forth in such Item, and from the registration or qualification
requirements of all relevant state securities laws.
(xxi) The Company has satisfied the conditions for use
of Form SB-2 as set forth in the General Instructions thereto.
(xxii) No transfer taxes are required to be paid in
connection with the sale and delivery of the Shares to the
Underwriters.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representative, Underwriters' Counsel and the independent certified
public accountants of the Company, at which the contents of the Registration
Statement and Prospectus and related matters were discussed, and although they
have not verified the accuracy or completeness of the statements contained in
the Registration Statement or the Prospectus, nothing has come to the attention
of
24
such counsel that leads them to believe that, at the time the Registration
Statement became effective and at all times subsequent thereto up to and on the
Closing Date and on any later date on which Option Shares are purchased, the
Registration Statement and any amendment or supplement thereto, when such
documents became effective or were filed with the Commission (other than the
financial statements and supporting schedules included in the Registration
Statement as to which such counsel need express no comment) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or at
the Closing Date or any later date on which the Option Shares are purchased, as
the case may be, the Registration Statement, the Prospectus and any amendment or
supplement thereto contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions
of law not involving the laws of the United States upon opinions of local
counsel, and as to questions of fact upon representations or certificates of
officers of the Company, and of government officials, in which case its opinion
is to state that they are so relying and that they have no knowledge of any
material misstatement or inaccuracy in any such opinion, representation or
certificate. Copies of any opinion, representation or certificate so relied upon
shall be delivered to you, as Representatives of the Underwriters, and to
Underwriters' Counsel.
(e) You shall have received on the date on which any Option
Shares are purchased an opinion or opinions of counsel for the Selling
Stockholders, addressed to the Underwriters and stating that it may be relied
upon by Underwriters' Counsel in rendering its opinion pursuant to Section 8(f)
and dated the date on which any Option Shares are purchased, to the effect that:
(1) To the best of such counsel's knowledge, this
Agreement and the Stockholders' Agreement have been duly
authorized, executed and delivered by or on behalf of each of the
Selling Stockholders; the Agent has been duly and validly
authorized to act as the custodian of the Shares and, where
applicable, warrants to purchase the Shares, to be sold by each
such Selling Stockholder; and the performance of this Agreement
and the Stockholders' Agreement and the consummation of the
transactions herein contemplated by the Selling Stockholders will
not result in a breach of, or constitute a default under, any
indenture, mortgage, deed of trust, trust (constructive or
other), loan agreement, lease, franchise, license or other
agreement or instrument to which any of the Selling Stockholders
is a party or by which any of the Selling Stockholders or any of
their properties may be bound, or violate any statute, judgment,
decree, order, rule or regulation known to such counsel of any
court or governmental body having jurisdiction over any of the
25
Selling Stockholders or any of their properties; and to the best
of such counsel's knowledge, no approval, authorization, order or
consent of any court, regulatory body, administrative agency or
other governmental body is required for the execution and
delivery of this Agreement or the Stockholders' Agreement or the
consummation by the Selling Stockholders of the transactions
contemplated by this Agreement, except such as have been obtained
and are in full force and effect under the Act and such as may be
required under the rules of the NASD and applicable Blue Sky
laws;
(2) To the best of such counsel's knowledge, the
Selling Stockholders have full right, power and authority to
enter into this Agreement and the Stockholders' Agreement and to
sell, transfer and deliver the Shares to be sold on such closing
date by such Selling Stockholders and good and marketable title
to such Shares so sold, free and clear of all liens,
encumbrances, equities, claims, restrictions, security interests,
voting trusts, or other defects of title whatsoever, has been
transferred to the Underwriters (whom counsel may assume to be
bona fide purchasers) who have purchased such Shares hereunder;
(3) To the best of such counsel's knowledge, this
Agreement and the Stockholders' Agreement are valid and binding
agreements of each of the Selling Stockholders in accordance with
their terms except as enforceability may be limited by general
equitable principles, bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally
and except with respect to those provisions relating to
indemnities or contributions for liabilities under the Act, as to
which no opinion need be expressed; and
(4) No transfer taxes are required to be paid in
connection with the sale and delivery of the Shares to the
Underwriters hereunder.
(f) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased, as the case may be, an opinion
of Summit Law Group PLLC in form and substance satisfactory to you, with respect
to the sufficiency of all such corporate proceedings and other legal matters
relating to this Agreement and the transactions contemplated hereby as you may
reasonably require, and the Company shall have furnished to such counsel such
documents as they may have requested for the purpose of enabling them to pass
upon such matters.
(g) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
letter from Grant
26
Xxxxxxxx LLP, addressed to the Company and the Underwriters, dated the Closing
Date or such later date on which Option Shares are purchased, as the case may
be, confirming that they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in such
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
three (3) business days prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of such letter, or to reflect
the availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or otherwise),
earnings, operations or business of the Company from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. The Original Letter from Xxxxx Xxxxxxxx LLP shall be addressed
to or for the use of the Underwriters in form and substance satisfactory to the
Underwriters and shall (i) represent, to the extent true, that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations, (ii) set
forth its opinion with respect to its examination of the balance sheets of the
Company as of September 30, 1997, and December 31, 1996 and related statements
of operations, stockholders' equity, and cash flows for the years ended December
31, 1995 and 1996, and (iii) address other matters agreed upon by Xxxxx Xxxxxxxx
LLP and you. In addition, you shall have received from Xxxxx Xxxxxxxx LLP a
letter addressed to the Company and made available to you for the use of the
Underwriters stating that its review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of its examination of the Company's financial statements as of September
30, 1997, did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(h) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the President
and Chief Financial Officer of the Company, to the effect that, and you shall be
satisfied that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the
Closing Date or any later date on which Option Shares are to be
purchased, as the case may be, and the Company has complied, in all
material aspects, with all the agreements and satisfied all the
conditions on its part to be performed or satisfied, in all
27
material respects, at or prior to the Closing Date or any later date
on which Option Shares are to be purchased, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to their knowledge, are pending or
threatened under the Act;
(iii) When the Registration Statement became effective
and at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and the Prospectus, and any
amendments or supplements thereto, contained all material information
required to be included therein by the Act and the Rules and
Regulations or the Exchange Act and the applicable rules and
regulations of the Commission thereunder, as the case may be, and in
all material respects conformed to the requirements of the Act and the
Rules and Regulations or the Exchange Act and the applicable rules and
regulations of the Commission thereunder, as the case may be, the
Registration Statement, and any amendment or supplement thereto, did
not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the
Prospectus, and any amendment or supplement thereto, did not and does
not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and,
since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or
supplemented Prospectus that has not been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
there has not been (a) any material adverse change in the condition
(financial or otherwise), earnings, operations or business of the
Company, (b) any transaction that is material to the Company, (c) any
obligation, direct or contingent incurred by the Company, that is
material to the Company, (d) any change in the capital stock or
outstanding indebtedness of the Company, (e) any dividend or
distribution of any kind declared, paid or made on the capital stock
of the Company, or (f) any loss or damage (whether or not insured) to
the property of the Company which has a material adverse effect on the
condition (financial or otherwise), earnings, operations or business
of the Company.
(i) The Company shall have obtained and delivered to you an
agreement from each officer, director and director-nominee of the Company, and
each beneficial owner of five percent or more of the Common Stock immediately
after the offering contemplated hereby, in writing prior to the date hereof that
such person will not, during the Lock-up Period,
28
effect the Disposition of any Securities now owned or hereafter acquired
directly by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) as a bona fide gift or
gifts, provided the donee or donees thereof agree in writing to be bound by this
restriction, (ii) as a distribution to limited partners or stockholders of such
person, provided that the distributees thereof agree in writing to be bound by
the terms of this restriction, or (iii) with the prior written consent of
Cruttenden Xxxx Incorporated. The foregoing restriction is expressly agreed to
preclude the holder of the Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a Disposition of Securities during the Lock-up Period, even if such Securities
would be disposed of by someone other than the such holder. Such prohibited
hedging or other transactions would include, without limitation, any short sale
(whether or not against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any
Securities or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from Securities. Furthermore, such person will have also agreed and
consented to the entry of stop transfer instructions with the Company's transfer
agent against the transfer of the Securities held by such person except in
compliance with this restriction.
(j) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request, including
certificates of officers of the Company as to the accuracy of the
representations and warranties of the Company, as to the performance by the
Company of its obligations hereunder and as to the other conditions concurrent
and precedent to the obligations of the Underwriters hereunder.
(k) The Representative's Warrant Agreement shall have been
entered into by the Company and you, and the Representative's Warrants shall
have been issued and sold to you pursuant thereto.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
9. Indemnification and Contribution.
--------------------------------
(a) The Company and each of the Selling Stockholders
severally agrees to indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject (including, without limitation, in its capacity
as an Underwriter or as a "qualified independent underwriter" within the meaning
of Schedule E of the Bylaws of the NASD), under the Act, the Exchange Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are
29
based upon (i) with respect to the Company, any breach of any representation,
warranty, agreement or covenant of the Company herein contained, or any failure
of the Company to perform its obligations hereunder or under law, (ii) with
respect to each of the Selling Stockholders, arise out of or are based in whole
or in part on any inaccuracy in the representations and warranties of such
Selling Stockholder contained herein or any failure of such Selling Stockholder
to perform its obligations hereunder or under law, (iii) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (but, with respect to each of the Selling Stockholder only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished by such Selling Stockholder, in its capacity as such, to
the Company or the Underwriters, directly or through such Selling Stockholders'
representatives, specifically for inclusion therein) and agrees to reimburse
each Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that neither the Company nor any Selling
-------- -------
Stockholder shall be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, such Preliminary Prospectus or the Prospectus, or
any such amendment or supplement thereto, in reliance upon, and in conformity
with, written information relating to any Underwriter furnished to the Company
as described in Section 4 hereof, and, provided further, that the indemnity
-------- -------
agreement provided in this Section 9(a) with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any losses, claims, damages, liabilities or actions based upon
any untrue statement or alleged untrue statement of material fact or omission or
alleged omission to state therein a material fact purchased Shares, if a copy of
the Prospectus in which such untrue statement or alleged untrue statement or
omission or alleged omission was corrected had not been sent or given to such
person within the time required by the Act and the Rules and Regulations, unless
such failure is the result of noncompliance by the Company with Section 6(d)
hereof.
The indemnity agreement in this Section 9(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company and the Selling Stockholders against any
losses, claims, damages or liabilities, joint or several, to which the Company
may become subject under the Act or otherwise, specifically including, but not
limited to, losses, claims, damages or liabilities, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
30
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company as described in Section 4 hereof,
and agrees to reimburse the Company and the Selling Stockholders for any legal
or other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action.
The indemnity agreement in this Section 9(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company and each person, if any, who controls the Company or any of the Selling
Stockholders within the meaning of the Act or the Exchange Act. This indemnity
agreement shall be in addition to any liabilities which each Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under
this Section 9 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 9, notify the indemnifying party in
writing of the commencement thereof but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 9. In case any such
action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it shall elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
---------
however, that if the defendants in any such action include both the indemnified
-------
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party which pose a conflict of interest for such counsel, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of the indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel
31
(together with appropriate local counsel) approved by the indemnifying party
representing all the indemnified parties under Section 9(a) or 9(b) hereof who
are parties to such action), (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be liable in respect of any amounts paid in settlement of any
action unless the indemnifying party shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably withheld. No
--------
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnification
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such indemnification.
(d) In order to provide for just and equitable contribution
in any action in which a claim for indemnification is made pursuant to this
Section 9 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the initial public
offering price, and the Company is responsible for the remaining portion,
provided, however, that (i) no Underwriter shall be required to contribute any
-------- -------
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter and (ii) no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The contribution agreement in this Section 9(d) shall extend
upon the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls the Underwriters or the Company within the meaning
of the Act or the Exchange Act and each officer of the Company who signed the
Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that
they are sophisticated business persons who were represented by counsel during
the negotiations regarding the provisions hereof including, without limitation,
the provisions of this Section 9, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 9
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement and Prospectus as required by the Act and the
Exchange Act. The parties are advised that federal or state public policy, as
interpreted by the courts in certain jurisdictions, may be
32
contrary to certain of the provisions of this Section 9, and the parties hereto
hereby expressly waive and relinquish any right or ability to assert such public
policy as a defense to a claim under this Section 9 and further agree not to
attempt to assert any such defense.
10. Representations, Warranties, Covenants and Agreements to Survive
----------------------------------------------------------------
Delivery. All representations, warranties, covenants and agreements of the
--------
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Sections 7
and 9 and hereof shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Underwriter or any controlling
person within the meaning of the Act or the Exchange Act, or by or on behalf of
the Company or any of its officers, directors or controlling persons within the
meaning of the Act or the Exchange Act, and shall survive the delivery of the
Shares to the several Underwriters hereunder or termination of this Agreement.
11. Substitution of Underwriters. If any Underwriter or Underwriters
----------------------------
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for twenty-
four (24) hours to allow the several Underwriters the privilege of substituting
within twenty-four (24) hours (including non-business hours) another underwriter
or underwriters (which may include any nondefaulting Underwriter) satisfactory
to the Company. If no such underwriter or underwriters shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for a further twenty-four (24) hours,
if necessary, to allow the Company the privilege of finding another underwriter
or underwriters, satisfactory to you, to purchase the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section 11, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven (7)
full business days, in order to effect whatever changes may thereby
33
be made necessary in the Registration Statement or the Prospectus, or in any
other documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary, and (ii) the respective number of Firm Shares to
be purchased by the remaining Underwriters and substituted underwriter or
underwriters shall be taken as the basis of their underwriting obligation. If
the remaining Underwriters shall not take up and pay for all such Firm Shares so
agreed to be purchased by the defaulting Underwriter or Underwriters or
substitute another underwriter or underwriters as aforesaid and the Company
shall not find or shall not elect to seek another underwriter or underwriters
for such Firm Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 11, the Company shall not be liable to any
Underwriter (except as provided in Sections 7 and 9 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 7 and 9 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 11.
12. Effective Date of this Agreement and Termination.
------------------------------------------------
(a) This Agreement shall become effective at the earlier of
(i) 6:30 A.M., California time, on the second full business day following the
effective date of the Registration Statement, or (ii) the time of the initial
public offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set forth
in Section 13 before the time this Agreement becomes effective, you, as
Representative of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 6(j), 7 and 9 hereof.
(b) You, as Representative of the several Underwriters,
shall have the right to terminate this Agreement by giving notice as hereinafter
specified at any time at or prior to the Closing Date or on or prior to any
later date on which Option Shares are purchased, as the case may be, (i) if the
Company shall have failed, refused or been unable to perform any agreement on
its part to be performed, or (ii) because any other condition of the
34
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
from that set forth in the Registration Statement or Prospectus, which, in your
sole judgment, is material and adverse, or (iii) if additional material
governmental restrictions, not in force and effect on the date hereof, shall
have been imposed upon trading in securities generally or minimum or maximum
prices shall have been generally established on the New York Stock Exchange or
on the American Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either such
exchange or in the over the counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (iv) if the Company shall have sustained a loss by strike, fire,
flood, earthquake, accident or other calamity of such character as to interfere
materially with the conduct of the business and operations of the Company
regardless of whether or not such loss shall have been insured, or (v) if there
shall have been a material adverse change in the general political or economic
conditions or financial markets as in your reasonable judgment makes it
inadvisable or impracticable to proceed with the offering, sale and delivery of
the Shares, or (vi) if there shall have been an outbreak or escalation of
hostilities or of any other insurrection or armed conflict or the declaration by
the United States of a national emergency which, in the reasonable opinion of
the Representatives, makes it impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. Any termination
pursuant to any of subparagraphs (ii) through (vi) above shall be without
liability of any party to any other party except as provided in Sections 7 and 9
hereof. In the event of termination pursuant to subparagraph (i) above, the
Company shall also remain obligated to pay costs and expenses pursuant to
Sections 6(j), 7 and 9 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 12, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
13. Notices. All notices or communications hereunder, except as
-------
herein otherwise specifically provided, shall be in writing and if sent to you
shall be mailed, delivered, telegraphed (and confirmed by letter) or telecopied
(and confirmed by letter) to you c/o Cruttenden Xxxx Incorporated, 00000 Xxx
Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, telecopier number (000) 000-0000,
Attention: Xxxxx Xxxxxxx; if sent to the Company, such notice shall be mailed,
delivered, telegraphed (and confirmed by letter) or telecopied (and confirmed by
letter) to 0000 Xxxxxxxx Xxxxx 000, Xxxxxx, XX, telecopier number (214) 855-
5277, Attention: Xxx Xxxxxxx.
14. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon the several Underwriters and the Company and their respective
executors, administrators,
35
successors and assigns. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person or corporation, other than the
parties hereto and their respective executors, administrators, successors and
assigns, and their controlling persons within the meaning of the Act or the
Exchange Act, officers and directors referred to in Section 9 hereof, any legal
or equitable right, remedy or claim in respect of this Agreement or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of the
parties hereto and their respective executors, administrators, successors and
assigns and said controlling persons and said officers and directors, and for
the benefit of no other person or corporation. No purchaser of any of the Shares
from any Underwriter shall be construed a successor or assign by reason merely
of such purchase. The Agreement constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof.
In all dealings with the Company under this Agreement, you shall act
on behalf of each of the several Underwriters, and the Company shall be entitled
to act and rely upon any statement, request, notice or agreement made or given
by you on behalf of each of the several Underwriters.
15. Applicable Law. This Agreement shall be governed by, and
--------------
construed in accordance with, the laws of the State of California.
16. Counterparts. This Agreement may be signed in several
------------
counterparts, each of which will constitute an original.
If the foregoing correctly sets forth the understanding among the
Company and the several Underwriters, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among the Company and the several Underwriters.
Very truly yours,
CPS SYSTEMS, INC.
By:_____________________________________
Name:________________________________
Title:_______________________________
SELLING STOCKHOLDERS
By:_____________________________________
36
Attorney-in-fact
Accepted as of the date first above written:
CRUTTENDEN XXXX INCORPORATED
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By: CRUTTENDEN XXXX INCORPORATED
By:_____________________
Name:________________
Title:_______________
37
SCHEDULE A
Underwriters Number of
Firm Shares
To Be
Purchased
-----------
Cruttenden Xxxx Incorporated............
-----------
Total.................................
===========
38
