UP TO 4,800,000 SHARES
XXXXXXXX.XXX
SERIES B PREFERRED STOCK
UNDERWRITING AGREEMENT
New York, New York
May 23, 2001
Alexander, Wescott & Co., Inc.
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Xxxxxx Corp. International
0000 X. XxxXxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxx, XX 00000-0000
Dear Sirs:
SECTION 1. Introduction. XxxXxxxx.xxx (the "Company"), a California
corporation, has authorized capital consisting of 20,000,000 shares of common
stock (the "Common Stock") and 10,000,000 shares of preferred stock (the
"Preferred Stock"). As of the date hereof, a maximum of 6,324,149 shares of
Common Stock, 1,833 shares of Series A-1 Preferred Stock, and 1,702 shares of
Series A-2 Preferred Stock have been issued and are outstanding, not including
________ shares of Common Stock issuable upon conversion of the 1,833 shares of
Series A-1 Preferred Stock and the 1,702 shares of series A-2 Preferred Stock.
The Company proposes to issue and sell up to 4,800,000 shares of Series B
Preferred Stock (the "Shares") at a price of $2.50 per share (the "Offering"),
which Shares shall be convertible into an aggregate of up to 8,000,000 shares of
Common Stock in accordance with the terms set forth in the Registration
Statement.
The Company wishes to confirm your engagement as non-exclusive agents of
the Company in connection with the issuance and sale of the Shares on a
best-efforts basis. The terms "Underwriter" or "Underwriters" are used
interchangeably to refer to one or both of you as the context may require.
The Company agrees with the Underwriters as follows:
SECTION 2. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to, and agrees with, the Underwriters that:
(a) A registration statement on Form SB-2 (File No. 333-55478), with
respect to the Shares and the Underwriter's Warrant Securities (as hereinafter
defined), including a prospectus subject to completion, has been filed by the
Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act "), and one or more amendments to that registration statement may have been
so filed. Copies of such registration statement and of each amendment heretofore
filed by the Company with the Commission have been delivered to the
Underwriters. After the execution of this Agreement, the Company will file with
the Commission either (i) if the registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act, a
prospectus in the form most recently included in that registration statement
(or, if an amendment thereto shall have been filed, in such amendment), with
such changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been provided to and approved
by the Underwriters prior to the execution of this Agreement, or (ii) if that
registration statement, as it may have been amended, has not been declared by
the Commission to be effective under the Act, an amendment to that registration
statement, including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Underwriter prior to the execution of this
Agreement.
(b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus. When each Preliminary Prospectus and each
amendment and each supplement thereto was filed with the Commission it (i)
contained all statements required to be stated therein, in accordance with, and
complied with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (ii) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. When the Registration Statement was or is declared
effective ("Effective Date"), it (i) contained or will contain all statements
required to be stated therein in accordance with, and complied or will comply
with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (ii) did not or will not include any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus and each amendment or
supplement thereto is filed with the Commission pursuant to Rule 424(b) (or, if
the Prospectus or such amendment or supplement is not required so to be filed,
when the Registration Statement containing such Prospectus or amendment or
supplement thereto was or is declared effective) and on each Closing Date (as
such term is hereinafter defined), the Prospectus, as amended or supplemented at
any such time, (i) contained or will contain all statements required to be
stated therein in accordance with, and complied or will comply with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The foregoing provisions of this paragraph (b) do not apply to
statements or omissions made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company by the
Underwriters specifically for use therein.
(c) Since the respective dates as of which information is given in the
Registration Statement and in the Prospectus, except as otherwise stated
therein, (i) there has been no material adverse change in the condition,
financial or otherwise, earnings, business or prospects of the Company
considered as a whole, whether or not arising in the ordinary course of
business, and
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(ii) there have been no material transactions entered into by the Company other
than those in the ordinary course of business.
(d) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of California with
power and authority to own, lease and operate its properties and conduct its
business as described in the Registration Statement and Prospectus and is duly
qualified to do business as a foreign corporation and is in good standing in all
other jurisdictions in which the nature of its business or the character or
location of its properties requires such qualification, except where failure to
so qualify will not materially affect the business, properties or financial
condition of the Company. The Company has no directly or indirectly held
subsidiary except as disclosed in the Registration Statement. The Company has
all power, authority, authorizations, approvals, consents, orders, licenses,
certificates and permits needed to enter into, deliver and perform this
Agreement and to issue and sell the Shares.
(e) The Company is not (i) in violation of its Articles of Incorporation or
bylaws, as the case may be, or other organizational documents, or (ii) in
default in the performance or observance of any obligation, agreement, covenant
or condition contained in any material contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which it is a party
or by which it or its properties may be bound, except in the case of (ii) above,
where such default would not, individually or in the aggregate, result in a
material adverse change in (A) the condition, financial or otherwise, earnings,
business or prospects of the Company taken as a whole, or (B) the ability of the
Company to enter into, perform and effect the transactions contemplated hereby;
no consent, approval, authorization, order, registration, filing or
qualification of or with any court or governmental authority or agency is
required for the issue and sale of the Shares as contemplated herein or the
consummation by the Company of the transactions contemplated by this Agreement,
except such as may be required under the Act and the Rules and Regulations or
state securities or Blue Sky laws in connection with the distribution of the
Shares by the Underwriters; and the issue and sale of the Shares as contemplated
herein, the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with or constitute a breach
of, or default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to,
any contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company is a party or by which it may be
bound or to which any of the property or assets of the Company is subject, nor
will any such action result in any violation of the provisions of the charter or
code of regulation of the Company or any law, administrative regulation or
administrative or court decree or order applicable to the Company.
(f) The Company possesses all certificates, authorities or permits issued
by the appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct the business now operated by it, and the Company has not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the condition, financial or otherwise, earnings,
business or prospects of the Company considered as a whole.
(g) Except as set forth in the Prospectus, as amended or supplemented,
there is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or
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foreign, now pending, or, to the knowledge of the Company, contemplated or
threatened against the Company, which might result in any material adverse
change in the condition, financial or otherwise, earnings, business or prospects
of the Company considered as a whole, or might materially and adversely affect
the properties or assets thereof or might adversely affect the lawful issuance
and offering of the Shares in the manner contemplated by the Prospectus; and
there are no material contracts or other documents which are required to be
described in the Registration Statement or the Prospectus or filed as exhibits
to the Registration Statement by the Act or by the Rules and Regulations which
have not been so described or have not been so filed.
(h) The Company has good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by it, in
each case free and clear of all liens, encumbrances and defects except (i) such
as are referred to in the Prospectus, or (ii) such as do not materially and
adversely affect the value of such property to the Company, and do not
materially interfere with the use made and proposed to be made of such property
by the Company; and any real property and buildings held under lease by the
Company are held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made by the Company.
(i) The Company has an authorized capitalization as set forth in the
Prospectus and the Shares and the Warrant Securities have been duly authorized
and, when issued and delivered in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable and will conform to the
description of them contained in the Prospectus. The issuance and sale of the
Shares is not subject to pre-emptive or other similar rights or to restrictions
on transfer (other than those imposed by the Act, the Rules and Regulations or
state securities or Blue Sky laws). There are no outstanding options, warrants
or other rights calling for the issuance of, and no binding commitment to issue,
any share of stock of the Company or any security convertible into or
exchangeable for stock of the Company, except for stock options, warrants and
Underwriter Warrants (as defined below) described in the Registration Statement
(the "Stock Options") and Series A-1 and Series A-2 Preferred Stock described in
the Registration Statement. The Common Stock, the Preferred Stock, the Shares
and the Stock Options conform to all statements in relation thereto contained in
the Registration Statement and the Prospectus.
(j) This Agreement has been duly authorized, executed and delivered by the
Company and is the legal, valid and binding agreement and obligation of the
Company, except (i) as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
enforcement of creditors rights or by general equity principles, including
requirements of reasonableness and good faith in the exercise of rights and
remedies, whether applied by a court of equity or a court of law in an action at
law or in equity, or by the discretionary nature of specific performance,
injunctive relief, and other equitable remedies, including the appointment of a
receiver and (ii) with respect to provisions relating to indemnification and
contribution, to the extent they are held by a court of competent jurisdiction
to be void or unenforceable as against public policy or limited by applicable
laws or the policies embodied in them.
(k) Neither the Company nor any of its officers, directors or holders of
five percent or more of any class of its capital stock or any of their
respective affiliates is a member of, or is
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associated or affiliated with a member of, the National Association of
Securities Dealers, Inc. ("NASD").
(l) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the Company to
include such securities under the Registration Statement, except as described in
the Registration Statement.
(m) The financial statements of the Company included in the Registration
Statement and the Prospectus (and, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) fairly present the financial position of the
Company as of the dates indicated and the results of operations of the Company
for the periods specified. Such financial statements have been prepared in
accordance with accounting principles generally accepted in effect in the United
States of America, consistently applied, except to the extent that certain
footnote disclosures regarding unaudited interim periods may have been omitted
in accordance with the applicable rules of the Commission under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The financial data set forth
under the caption "Summary Financial Information" in the Prospectus (and, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) fairly
present, on the basis stated in the Prospectus (or such Preliminary Prospectus),
the information included therein.
(n) Xxxxx Xxxxxxxx LLP has audited the financial statements of the Company
as of December 31, 2000, and they have delivered their report with respect to
the financial statements included in the Registration Statement and the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), and are independent public accountants with respect to
the Company as required by the Act and the applicable rules and regulations
thereunder.
(o) Neither the Company nor, to the Company's knowledge, any director,
officer, agent, employee or other person associated with the Company, acting on
behalf of the Company, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the Foreign Corrupt Practices Act of 1977; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(p) Neither the Company nor any of its affiliates has taken, nor will they
take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Shares in order to facilitate
the sale or resale of any of the Shares as contemplated by the Rules and
Regulations.
(q) No transaction has occurred between or among the Company and any of its
officers, directors, organizers or any affiliate or affiliates of any such
officer, director, organizer or shareholder, that is required to be described in
and is not described in the Prospectus.
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(r) The Company is not and will not, upon completion of the Offering, be an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(s) The Company has obtained from all of its officers and directors listed
in the Prospectus their written agreement ("Holdback Agreement") that for a
period of 180 days after the termination of the Offering ("Holdback Period")
they will not offer to sell, transfer, contract to sell or grant any option for
the sale of or otherwise dispose of, directly or indirectly, any shares of
Common Stock or Preferred Stock of the Company (or any securities convertible
into or exercisable for such shares of Common Stock or Preferred Stock), except
for (A) the exercise of Stock Options under the terms of the option plans and
agreements pursuant to which the Stock Options were issued (including, as
available, by means of "cashless exercise"); (B) gifts of Common Stock or
Preferred Stock (or other securities) to a donee or donees who agree in writing
to be bound by their donor's Holdback Agreement; (C) any stock transferred by
Ridgewood Capital by way of settlement of the Series A-1 and Series A-2
Preferred Stock conversion controversy; and (D) the Holdback Period for Common
Stock or Preferred Stock held by trusts or estates on the death of an executive
office or director of the Company, shall be the lesser of 90 days or the
expiration of the Holdback Period.
(t) Each Warrant to Purchase Preferred Stock of XxxXxxxx.xxx (each, an
"Underwriter Warrant") in the form of Exhibit A has been duly authorized,
executed, and when delivered by the Company will be the legal, valid, and
binding obligation of the Company. The Company has the full power and authority
to enter into and perform its obligations under the Underwriter Warrants.
SECTION 3. Engagement of the Underwriters and Closing. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the parties have agreed as follows:
(a) The Company hereby engages the Underwriters as non-exclusive agents to
sell for the Company's account up to 4,800,000 Shares. The Company may sell
shares and such sales will not be subject to the commission payments provided
for in subsection (e) below.
(b) Each Underwriter severally agrees to use its best efforts as agent,
promptly after the Effective Date, to offer and obtain purchase subscriptions
for all of the Shares subject to the terms, provisions and conditions set forth
below. The Underwriter is not under any obligation to purchase or take down any
of the Shares on its own behalf or on behalf of others.
(c) Subscriber checks received from investors in this Offering by the
Underwriters shall be deposited in an escrow account with American Stock
Transfer and Trust Company, New York, N.Y., such account having terms and
provisions complying with Rules 10b-9 and 15c2-4 under the Securities Act of
l934.
(d) The Underwriter may effect sales of Shares through dealers selected by
the Underwriter at such concessions from the compensation payable to the
Underwriters as they may determine.
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(e) At each Closing (as defined below), each Underwriter shall be entitled
to a commission equal to $.25 for each Share subscribed through such Underwriter
in the Offering during the preceding Offering Period. At each Closing (as
defined below), the Company shall also deliver to each Underwriter as additional
compensation for its services in selling the Shares an Underwriter Warrant
exercisable for the purchase of one (1) Share for each ten (10) Shares sold in
the Offering (in form as attached hereto as Exhibit A) and reimbursement of
certain of the Underwriter's expenses described below.
(f) Subject to the satisfaction of the conditions set forth in Section 6 of
this Agreement, partial and final closings will be held at the offices of Snow
Xxxxxx Xxxxxx P.C. on ten (10) days notice by the Company or either Underwriter.
(g) Notwithstanding any other provisions, it is expressly agreed that the
Company may terminate this engagement at any time upon giving ten (10) working
days written notice of termination. Any sales of securities made by the
Underwriters prior to the termination notice shall be subject to the payment to
the Underwriters of commissions, expenses and warrants as agreed, even if the
closing of such sales occurs after the termination date.
SECTION 4. Offering by the Underwriters. After the Effective Date and until
the close of business on the day preceding the date of the Final Closing (the
"Termination Date"), the Underwriters will, as Company's agents, offer the
Shares for sale to the public on the terms and conditions as set forth in the
Prospectus.
SECTION 5. Covenants of the Company. The Company covenants and agrees with
the Underwriters that:
(a) The Company will advise the Underwriters promptly of any proposal to
amend or supplement the Registration Statement as filed, or the related
Prospectus, prior to each Closing Date, and will not effect such amendment or
supplement without the Underwriters' consent which will not be unreasonably
withheld; the Company will also advise the Underwriters promptly of the
effectiveness of the Registration Statement (if the Effective Time is subsequent
to the execution and delivery of this Agreement), of any amendment or supplement
to the Registration Statement or the Prospectus, and of receipt of notification
of the institution by the Commission of any stop order proceedings in respect of
the Registration Statement or of any order preventing or suspending the use of
any prospectus relating to the Shares, of the suspension of the qualification of
the Shares for offering or sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, or of any request by the
Commission to amend or supplement the Registration Statement or Prospectus or
for additional information and will use its best efforts to prevent the issuance
of any such stop order or of any order preventing or suspending the use of any
prospectus relating to the Shares or suspending any such qualification and to
obtain as soon as possible its lifting, if issued.
(b) If, at any time when a prospectus relating to the Shares is required to
be delivered under the Act, any event occurs as a result of which the Prospectus
as then amended or supplemented would, in the judgment of either Underwriter,
include an 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, or if it is necessary at any
7
time to amend or supplement the Prospectus to comply with the Act, or any other
law, the Company promptly will prepare and file with the Commission an amendment
or supplement which will correct such statement or omission or an amendment
which will effect such compliance and will notify the Underwriters and, upon
either Underwriter's request prepare and furnish without charge to the
Underwriters and to any dealer in securities as many copies as the Underwriters
may from time to time reasonably request, of an amended Prospectus or a
supplement to the Prospectus complying with Section 8(a) of the Act which will
correct such statement or omission or effect such compliance.
(c) The Company will deliver to each Underwriter as many signed and
conformed copies of the Registration Statement (as originally filed) and of each
amendment thereto (including exhibits filed therewith and documents incorporated
therein by reference) as such Underwriter may reasonably request and will also
deliver to the Underwriters a conformed copy of the Registration Statement and
each amendment thereto (including documents incorporated therein by reference).
(d) The Company will take such action as either Underwriter may reasonably
request to qualify the Shares for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United States as
either Underwriter may designate, and will maintain such qualifications in
effect for as long as may be required for the distribution of the Shares. The
Company will file such statements and reports as may be required by the laws of
each jurisdiction in which the Shares have been qualified as above provided.
(e) During the period of three years hereafter, the Company will furnish to
the Underwriters as soon as practicable after the end of each fiscal year, a
copy of its annual report to shareholders for such year, and the Company will
furnish to the Underwriters (i) as soon as available, a copy of each report or
definitive proxy statement of the Company filed with the Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or mailed to
shareholders, and (ii) from time to time, such other information concerning the
Company as either Underwriter may reasonably request.
(f) The Company, during the period when the Prospectus relating to the
Shares is required to be delivered under the Act, will file promptly all
documents required to be filed with the Commission pursuant to Sections 13, 14
or 15 of the Exchange Act.
(g) The Company currently has, and will continue to use its best efforts to
maintain, the listing of its Common Stock, which represent the stock underlying
the Shares if converted, on the Nasdaq Small Cap Market.
SECTION 6. Conditions to Transfer of Funds. The Underwriters' consent to
the transfer of funds to the Company upon each Underwriter's receipt of such
funds from investors, will be subject to the accuracy of the representations and
warranties on the part of the Company herein as of the date hereof and as of
such date of transfer with the same force and effect as if made as of that date,
to the performance by the Company of its obligations hereunder and to the
following additional conditions precedent:
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(a) If the Effective Date is not prior to the execution and delivery of
this Agreement, the Effective Date shall have occurred not later than 5:00 p.m.,
Eastern Time, on such later date as shall have been consented to by the
Underwriters. Prior to each Closing, no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened, or to the knowledge of the
Company or the Underwriters, shall be contemplated by the Commission; and the
Company shall have complied with all requests for additional information on the
part of the Commission to your reasonable satisfaction.
(b) Neither Underwriter shall have advised the Company that the
Registration Statement or Prospectus, or any amendment or supplement thereto,
contains any untrue statement of fact or omits to state any fact which, you
concluded, is material and in the case of an omission is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) The Underwriters shall have received a favorable opinion of Xxxxx &
Lardner, counsel for the Company, dated as of each Closing Date , to the effect
that:
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of California
and is qualified to do business in California.
(ii) The Company has full corporate power and authority and all
material authorizations, approvals, orders, licenses, certificates and
permits necessary to own its properties and to conduct its business as
described in the Registration Statement and Prospectus, except for such
authorizations, approvals, orders, licenses, certificates and permits as
are not material to the ownership of its properties or conduct of its
businesses.
(iii) The Company has authorized capital stock as set forth in the
Prospectus and, on the Effective Date had a maximum of 6,324,149 shares of
Common Stock, 1,833 shares and only 1,833 shares of Series A-1 Preferred
Stock, 1,702 shares of Series A-2 Preferred Stock issued or outstanding not
including _________ shares of Common Stock issuable on conversion of the
1833 shares of Series A-1 Preferred Stock and 1,702 shares of Series A-2
Preferred Stock outstanding; the Shares have been duly and validly
authorized and issued and upon receipt by the Company of payment therefor
in accordance with the terms of this Agreement will be fully paid and
nonassessable and are not and will not be subject to preemptive rights or
other similar rights or to restrictions on transfer (other than those
imposed by the Act, the rules and regulations or state securities or Blue
Sky Laws); the Shares and the other capital stock and Stock Options of the
Company and the Underwriter Warrants conform in all material respects to
the descriptions thereof contained in the Registration Statement and the
Prospectus.
(iv) This Agreement has been duly authorized, executed and delivered
by the Company and is the legal, valid and binding agreement and obligation
of the Company, except (A) as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or affecting enforcement of creditors rights or by general equity
principles, including requirements of reasonableness and good faith in the
exercise of rights and remedies, whether applied by a court of equity or a
9
court of law in an action at law or in equity, or by the discretionary
nature of specific performance, injunctive relief, and other equitable
remedies, including the appointment of a receiver and (B) with respect to
provisions relating to indemnification and contribution, to the extent they
are held by a court of competent jurisdiction to be void or unenforceable
as against public policy or limited by applicable laws or the policies
embodied in them.
(v) The certificates evidencing the Shares are in the form approved by
the Board of Directors of the Company, comply with the bylaws and Articles
of Incorporation of the Company and comply as to form and in all other
material respects with applicable legal requirements.
(vi) The Registration Statement is effective under the Act and no stop
order suspending the effectiveness of the Registration Statement or any
part thereof has been issued under the Act or proceedings therefor
initiated or threatened or are pending or contemplated by the Commission.
(vii) Statements set forth in the Registration Statement and
Prospectus, insofar as they are descriptions of corporate documents, stock
option plans, contracts, agreements or descriptions of laws, regulations or
regulatory requirements, or refer to compliance with laws or to statements
of laws or legal conclusions, are correct in all material respects.
(viii) No consent, approval, authorization, order, filing,
registration or qualification of or with any court or governmental
authority or agency is required for the issue and sale of the Shares or the
consummation of the transactions contemplated by this Agreement, except
such as may be required and have been obtained under the Act and the Rules
and Regulations and such as may be required under state securities or Blue
Sky laws in connection with the sale of the Shares by the Underwriters;
and, the issue and sale of the Shares, the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein will
not conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to, any material contract filed
with the Registration Statement in response to paragraphs (4) and (10) of
Item 601(b) of Regulation S-B promulgated under the Act and the Exchange
Act ("Regulation S-B") or other instrument to which the Company is a party
or by which it or any of them may be bound or to which any of the property
or assets of the Company is subject, that is disclosed or referred to in
the Prospectus or which is actually known by such counsel, nor will such
action result in any violation of, the provisions of the Articles of
Incorporation or bylaws of the Company, or any California corporate law, or
administrative regulation or, to the actual knowledge of such counsel, any
administrative or court decree or order applicable to the Company.
(ix) To the actual knowledge of such counsel, (A) there is no
governmental action or proceeding and no litigation pending against the
Company which would adversely affect the lawful issuance and offering of
the Shares or that is required to be described in the Registration
Statement or Prospectus and is not so described, and (B)
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there are no material contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not so described or filed
as required.
(x) The Registration Statement, as of its date or as of its effective
date, and the Prospectus, as of the Effective Date and as of its date
(other than the financial statements and related schedules and other
financial and statistical data included therein, as to which no opinion
need be expressed) complies as to form in all material respects with the
requirements of the Act and the Rules and Regulations.
In rendering the foregoing opinion, such counsel may rely upon certificates
of public officials (as to matters of fact and law) and officers of the Company
(as to matters of fact), and include qualifications in its opinion as are
reasonably acceptable to the Underwriters. Copies of all such certificates shall
be furnished to counsel to the Underwriters on such Closing Date.
In addition, such counsel shall state that they have participated in
conferences with officers of the Company and representatives of the Underwriters
at which the contents of the Registration Statement and Prospectus and related
matters were discussed and although such counsel did not independently verify
the accuracy or completeness of the statements made in the Registration
Statement and Prospectus and does not assume any responsibility for the accuracy
or completeness of the statements in the Registration Statement and Prospectus,
on the basis of the foregoing, nothing has come to the attention of such counsel
that would lead them to believe that the Registration Statement or Prospectus,
as amended or supplemented, if amended or supplemented, contains any untrue
statement of a material fact or omits a material fact required to be stated
therein or necessary to make the statements therein not misleading; except that
such statement may exclude financial statements, financial data, and statistical
information included in the Registration Statement and Prospectus.
(d) The Underwriters shall have received from the President or any Vice
President and a principal financial or accounting officer of the Company a
certificate, dated such Closing Date, in which such officers, to the best of
their knowledge and after reasonable investigation, shall state that there has
not been, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) any material adverse change in
the condition, financial or otherwise, earnings, business or prospects of the
Company considered as a whole, whether or not arising in the ordinary course of
business, or (ii) any material transactions entered into by the Company other
than those in the ordinary course of business, except in the case of clause (i)
and clause (ii) as set forth in or contemplated by the Prospectus; the
representations and warranties of the Company contained in Section 2 are true
and correct with the same force and effect as though made on and as of such
Closing Date and the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date; and no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been initiated or threatened or are contemplated by the Commission.
(e) The Underwriters shall have received from Xxxxx Xxxxxxxx, LLP,
independent public accountants, letters, one dated the date of this Agreement
and the others dated each such
11
Closing Date, addressed to the Underwriters, substantially in the form of Annex
I hereto with such variations as are reasonably acceptable to the Underwriters.
(f) At such Closing Date, counsel for the Underwriters shall have been
furnished with such other documents and opinions as they may reasonably require.
(g) The Company's Common Stock, which represent the stock underlying the
Shares if converted, is currently listed on the Nasdaq Small Cap Market.
(h) The Underwriters shall have received from each director and executive
officer of the Company a written agreement to the effect set forth in Section
2(s).
(i) At or prior to such Closing Date, the Underwriters shall have received
a "blue sky" memorandum of Xxxxx & Lardner, counsel for the Company, addressed
to the Underwriters and in form and scope reasonably satisfactory to the
Underwriters, concerning compliance with the blue sky or securities laws of the
states listed in Exhibit B attached to this Agreement.
(j) No order suspending the sale of the Shares prior to such Closing Date,
in any jurisdiction listed in Exhibit C, shall have been issued on such Closing
Date, and no proceedings for that purpose shall have been instituted or, to
either Underwriter's knowledge or that of the Company, shall be contemplated.
(k) The NASD, upon review of the terms of the public offering of the
Shares, shall have favorably passed upon the terms of the Offering as to
compensation and as to either Underwriter's participation in the same.
If any condition to be fulfilled prior to or at such Closing Date is not so
fulfilled, either Underwriter may terminate this Agreement or, if such
Underwriter so elects, waive any such condition which has not been fulfilled or
extend the time of its fulfillment.
SECTION 7. Payment of Expenses. The Company will pay all costs, expenses,
fees, disbursements and taxes incident to (i) the preparation by the Company,
printing, filing and distribution of the Registration Statement (including
financial statements and exhibits), the Prospectus; and all amendments and
supplements to any of them prior to or during the period specified in Section
5(b), (ii) the preparation, printing (including word processing and duplication
costs) and delivery of this Agreement (other than the fees of Snow Xxxxxx Xxxxxx
P.C.), Preliminary and Supplemental Blue Sky Memoranda, and all other
agreements, memoranda, correspondence and other documents printed and delivered
in connection with the offering of the Shares, (iii) the registration with the
Commission, and the issuance by the Company, of the Shares, (iv) the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states (including the reasonable fees
and disbursements of the counsel relating to such registration or
qualification), (v) filings and clearance with the NASD in connection with the
offering, (vi) fees and expenses, if any, incurred in connection with the
inclusion of the Shares on the Nasdaq Small Cap Market, (vii) the fees and
expenses of the Registrar and Transfer Agent for the Shares, and (viii) the
performance by the Company of its other obligations under this Agreement, and
all other costs and expenses incident to the performance of its obligations
hereunder in this Section 7. The Company shall also reimburse either Underwriter
from time to time upon such Underwriter's request for all
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properly documented reasonable expenses incurred by such Underwriter in
connection with the performance of its services hereunder, not to exceed
three-quarters of one percent (.75%) of the amount of funds raised by both
underwriters or $90,000 each, whichever is the lesser amount. Generally, these
expenses will represent travel, document procurement and delivery and related
matters, but will also include the fees and expenses of the Underwriters'
attorneys and other professional advisors should their advice be required. Such
expenses are to be paid on a current basis within 10 days of receipt of the
statement from such Underwriter.
If this Agreement is terminated by the Underwriters in accordance with the
provisions of Section 10(a) hereof, the Company shall not then be under any
liability to the Underwriters except as provided in Sections 7 and 8 hereof,
but, if for any other reason the Shares are not delivered by or on behalf of the
Company as provided herein, the Company shall reimburse the Underwriters for all
of its out-of-pocket expenses reasonably incurred in connection with marketing
and preparing for the purchase, sale and delivery of the Shares, including the
reasonable fees and disbursements of counsel for the Underwriters but the
Company shall then be under no further liability to the Underwriters except as
provided in Sections 7 and 8 hereof.
SECTION 8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls each Underwriter within the meaning of the Act
or the Exchange Act, from and against any and all losses, claims, damages and
liabilities (or actions in respect thereof) (including, without limiting the
foregoing, the reasonable legal and other expenses incurred in connection with
investigating or defending any action, suit or proceeding or any claim asserted,
as such expenses are incurred) arising out of or based on any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon the information
furnished to the Company in writing by the Underwriter in the Prospectus
concerning the terms of the offering by the Underwriter; provided, however, that
the Company shall not be liable to the Underwriter under this subsection (a) for
any such loss, claim, damage or liability arising from the Prospectus to the
extent that such loss, claim, damage or liability results from the fact that
such Underwriter sold Shares to a person to whom there was not sent or given, at
or prior to the written confirmation of such sale, a copy of the Prospectus as
then amended or supplemented, in any case where (i) such delivery of the
Prospectus as then amended or supplemented to such person is required by the
Act, (ii) the Company has previously furnished sufficient copies thereof to the
Underwriter at such time as is sufficient to permit such delivery prior to such
confirmation, and (iii) the loss, claim, damage or liability of the Underwriter
results from an untrue statement or omission of a material fact contained in the
Prospectus which was corrected in the Prospectus as amended or supplemented.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, the directors of the Company, the officers of the Company who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Act or the
13
Exchange Act from and against any and all losses, claims, damages and
liabilities (or actions in respect thereof) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only with reference to the
information furnished to the Company by such Underwriter in writing. This
indemnity agreement will be in addition to any liability which the Underwriters
may otherwise have.
(c) In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be instituted involving any person
in respect of which indemnity may be sought pursuant to any of the two preceding
paragraphs, such person (hereinafter called the indemnified party) shall
promptly notify the person against whom such indemnity may be sought
(hereinafter called the indemnifying party) in writing; provided, however, the
omission to so notify the indemnifying party shall relieve the indemnifying
party from liability under the two preceding paragraphs only to the extent
prejudiced thereby. The indemnifying party, upon request of the indemnified
party, shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others that the indemnifying party may designate and shall pay the
fees and disbursements of such counsel related to such proceeding. In any such
action or proceeding any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (i) the reasonable fees and expenses of more than
one separate firm (in addition to any local counsel) for an Underwriter and all
persons, if any, who control an Underwriter within the meaning of the Act or the
Exchange Act, and (ii) the reasonable fees and expenses of more than one
separate firm (in addition to any local counsel) for the Company, its directors,
its officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of the Act or the Exchange Act, and that
all such fees and expenses shall be reimbursed as they are incurred. In the case
of any such separate firm for an Underwriter and such control persons of an
Underwriter, such firm shall be designated in writing by the Underwriter. In the
case of any such separate firm for the Company, and such directors, officers and
control persons of the Company, such firm shall be designated in writing by the
Company. The Company shall not, without the prior written consent of any
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any such indemnified party is or could have been a party and
indemnity 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 proceeding.
(d) If the indemnification provided for in this Section 8 is insufficient
or unavailable to an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
14
result of such losses, claims, damages, liabilities and expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and an Underwriter on the other from the offering of the
Shares, or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law or if the indemnified party shall have failed to the prejudice
of the indemnifying party to give the notice required by Section 8(c), in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and an Underwriter on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and an Underwriter on the other
shall be deemed to be in the same proportions as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
commissions received by an Underwriter. The relative fault of the Company on the
one hand and an Underwriter on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
the immediately preceding paragraph shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of Section 8(d), in no event shall any Underwriter be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 12(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 9. Representations Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in the Agreement, or
contained in certificates of officers of the Company submitted pursuant hereto,
including indemnity and contribution agreements, shall remain operative and in
full force and effect, regardless of any termination of this Agreement, or any
investigation, or any statement as to the results thereof, made by or on behalf
of any Underwriter or any person controlling any Underwriter or by or on behalf
of the Company, its officers or directors or controlling persons and shall
survive acceptance of and payment for Shares hereunder.
If this Agreement is terminated pursuant to Section 10 or if for any reason
the sale of Shares by the Underwriters is not consummated, the Company shall
remain responsible for the
15
reasonable expenses to be paid or reimbursed by it pursuant to Section 7 and the
respective obligations of the Company and the Underwriters pursuant to Section 8
shall remain in effect.
SECTION 10. Termination.
(a) By the Underwriters. This Agreement may be terminated for any reason at
any time prior to the delivery and payment of the Shares on any Closing Date, by
the Underwriters upon the giving of written notice of such termination to the
Company. The Underwriters shall be relieved of any obligation to close if prior
to such time (i) there has been, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, (A) any
material adverse change in the condition, financial or otherwise, earnings,
business or prospects of the Company considered as a whole, whether or not
arising in the ordinary course of business or as described in the Prospectus, or
(B) any material transaction entered into by the Company other than in the
ordinary course of business, (ii) there has occurred any outbreak or escalation
of hostilities or other calamity or crisis or material change in existing
national or international financial, political, economic or securities market
conditions, the effect of which is such as to make it, in the judgment of either
Underwriter, impracticable or inadvisable to market the Shares in the manner
contemplated in the Prospectus or Subscriptions for purchase of the Shares, or
(iii) trading generally on the Nasdaq National Market or the New York Stock
Exchange has been suspended, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices for securities have been required, by either
of said exchanges or by order of the Commission or any other governmental
authority. This Agreement may also be terminated as provided in Section 6. In
the event of any such termination, the provisions of Sections 7 through 14 shall
remain in effect.
(b) By the Company. Notwithstanding any other provisions in this Agreement,
it is expressly agreed that the Company may terminate this engagement at any
time upon giving ten (10) working days written notice of termination. Any sales
of securities made by the underwriters prior to the termination notice shall be
subject to the commissions and warrants as agreed, even if the closing of such
sales occurs after the termination date.
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Underwriters c/o Alexander, Wescott & Co.,
Inc., 00 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile
transmission no. 000-000-0000, and c/x Xxxxxx Corp. International, 0000 X.
XxxXxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx Xxx, Xxxxxxxxxx 00000-0000, facsimile
transmission no. ______________, and notices to the Company shall be directed to
it at 000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000, facsimile transmission
no. (000) 000-0000, attention of the Secretary with a copy to the Treasurer.
SECTION 12. Parties. This Agreement shall inure to the benefit of and be
binding upon the Company, its directors and officers who signed the Registration
Statement, each Underwriter, any controlling persons referred to herein and
their respective successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person, firm or
corporation any legal or equitable right, remedy or claim under or in respect of
16
this Agreement or any provision herein contained. No purchaser of Shares from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without
application to its principles of conflicts of laws.
SECTION 14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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If the foregoing is in accordance with your understanding of our agreement,
please sign this Agreement and return to us ten counterparts hereof.
Very truly yours,
XXXXXXXX.XXX
By:
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Name:
-----------------------------------
Title:
----------------------------------
Confirmed and Accepted, as of the
date first above written:
ALEXANDER, WESCOTT & CO., INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
XXXXXX CORP. INTERNATIONAL
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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