CYANOTECH CORPORATION
(a Nevada Corporation)
1,500,000 Shares of Common Stock
UNDERWRITING AGREEMENT
, 1996
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XXX XXXXXX & COMPANY
As Representative of the several
Underwriters named in Schedule I,
00000 Xxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Cyanotech Corporation, a Nevada corporation (the "Company"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters") 1,500,000 shares (the "Firm Stock") of the Company's Common
Stock, $0.005 par value (the "Common Stock"). In addition, the Company also
proposes to grant to the Underwriters an option to purchase up to an additional
225,000 shares of the Common Stock on the terms and for the purposes set forth
in Section 2(b) (the "Option Stock"). The Firm Stock and any Option Stock
purchased pursuant to this Agreement are referred to below as the "Stock." Xxx
Xxxxxx & Company is acting as representative of the several Underwriters and in
that capacity is referred to in this Agreement as the "Representative."
The Company hereby confirms its agreement with the several Underwriters as
set forth below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to and agrees with each Underwriter as follows:
(a) A Registration Statement (Registration No. 333-00951) on Form
SB-2 under the Securities Act of 1933, as amended (the "Securities Act"),
including such amendments to such registration statement as may have been
required to the date of this Agreement, relating to the Stock has been
prepared by the Company under and in conformity with the provisions of the
Securities Act, the rules and regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder and has
been filed with the Commission. After the execution of this Agreement, the
Company will file with the Commission either (i) if such registration
statement, as it may have been amended, has been declared by the Commission
to be effective under the Securities Act, either (A) if the Company relies on
Rule 434 under the Securities Act, a Term Sheet (defined below) relating to
the Stock, that identifies the Preliminary Prospectus (defined below) that it
supplements and contains such information as is required or permitted by Rules
434, 430A and 424(b) of the Rules and Regulations or (B) if the Company does not
rely on Rule 434 under the Securities Act, a prospectus in the form most
recently included in an amendment to such registration Statement (or, if no such
amendment has been filed, in such registration statement), with such changes or
insertions as are required by Rule 430A of the Rules and Regulations or
permitted by Rule 424(b) of the Rules and Regulations, and in the case of either
(i)(A) or (i)(B) of this sentence, as has been provided to and approved by the
Representative, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the
Securities Act, an amendment to such registration statement, including a form
of prospectus, a copy of which amendment has been furnished to and approved
by the Representative prior to the execution of this Agreement. As used in
this Agreement, the term "Registration Statement" means such registration
statement, as amended at the time when it was or is declared effective,
including all financial schedules and exhibits thereto and including any
information omitted therefrom pursuant to Rule 430A of the Rules and
Regulations and included in the Prospectus (defined below); the term
"Preliminary Prospectus" means each prospectus subject to completion filed
with such registration statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration
Statement or any amendment thereto at the time it was or is declared
effective); the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the Securities Act,
the Term Sheet relating to the Securities that is first filed pursuant to Rule
424(b)(7) under the Securities Act, together with the Preliminary Prospectus
identified therein that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434 under the
Securities Act, the prospectus first filed with the Commission pursuant to Rule
424(b) under the Securities Act; or
(C) if the Company does not rely on Rule 434 under the
Securities Act and if no prospectus is required to be filed pursuant to Rule
424(b) under the Securities Act, the prospectus included in the Registration
Statement;
provided that if any revised prospectus that is provided to the Underwriters by
the Company for "use in connection with the offering of the Stock" 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 the
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 mean such
revised prospectus from and after the time it is first provided to the
Underwriters for such use.
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The term "Term Sheet" as used in this Agreement means any term sheet that
satisfies the requirements of Rule 434 under the Securities Act. Any reference
in this Agreement to the "date" of a prospectus that includes a Term Sheet means
the date of such Term Sheet.
(b) No order suspending the effectiveness of the Registration
Statement or preventing or suspending the issue of any Preliminary Prospectus or
the Prospectus has been issued and no proceedings for that purpose are pending
or, to the best knowledge of the Company, threatened or contemplated by the
Commission; no order suspending the sale of the Stock in any jurisdiction has
been issued and no proceedings for that purpose are pending or, to the best
knowledge of the Company, threatened or contemplated, and any request of the
Commission for additional information (to be included in the Registration
Statement, any Preliminary Prospectus or the Prospectus or otherwise) has been
complied with.
(c) When any Preliminary Prospectus was filed with the Commission it
(i) contained all statements required to be contained therein and complied in
all material respects with the requirements of the Securities Act and the Rules
and Regulations, 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 or any amendment thereto
was or is declared effective, it (i) contained or will contain all statements
required to be contained therein and complied or will comply in all material
respects with the requirements of the Securities Act, 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 or any amendment or supplement to the Prospectus is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment or
supplement is not required to be so filed, when the Registration Statement or
the amendment thereto containing such amendment or supplement to the Prospectus
was or is declared effective) and at all times subsequent thereto up to and
including the Closing Date (defined below) and any date on which Option Stock is
to be purchased, the Prospectus, as amended or supplemented at any such time,
(i) contained or will contain all statements required to be contained therein
and complied or will comply in all material respects with the requirements of
the Securities Act, the Rules and Regulations, and (ii) did not or will 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. The foregoing
provisions of this paragraph (c) do not apply to statements or omissions made in
any Preliminary Prospectus, the Registration Statement or any
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amendment thereto or the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representative specifically for use
therein.
(d) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has full power (corporate and
other) and authority to own or lease its properties and conduct its business as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) and as
currently being conducted and proposed to be conducted by it and is duly
qualified as a foreign corporation and in good standing in all jurisdictions in
which the character of the property owned or leased or the nature of the
business transacted by it makes qualification necessary (except where the
failure to be so qualified would not have a material adverse effect on the
business, properties, condition (financial or otherwise), results of operations
or, to the best of the Company's knowledge, prospects of the Company and its
subsidiaries taken as a whole). Each of the Company and each of its
subsidiaries are in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from
federal, state, local, foreign and other governmental or regulatory authorities
that are material to the conduct of its business, all of which are valid and in
full force and effect. Except as may be disclosed in the Registration
Statement, the Company owns all of the outstanding capital stock of each of its
subsidiaries, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest of any type, kind or nature. None of
the subsidiaries of the Company (excluding the subsidiaries listed on Exhibit
21.1 to the Registration Statement) is a "significant subsidiary" as such
term is defined in Rule 405 under the Securities Act. As used in this
Agreement, the word "subsidiary" means any corporation, partnership, limited
liability company or other entity of which the Company directly or indirectly
owns 50% or more of the equity or that the Company directly or indirectly
controls. The Company does not have any subsidiaries that are not
corporations.
(e) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there has not been any
material loss or interference with the business of the Company or any of its
subsidiaries from fire, explosion, flood, volcano, tidal wave, earthquake or
other calamity, whether or not covered by insurance, or from any court or
governmental action, order or decree, or any changes in the capital stock or
long-term debt of the Company or any of its subsidiaries, or any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company, or any material adverse change, or a development known
to the
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Company that might cause or result in a material adverse change, in or affecting
the business, properties, condition (financial or otherwise), results of
operation or, to the best of the Company's knowledge, the prospects of the
Company and its subsidiaries taken as a whole, whether or not arising from
transactions in the ordinary course of business, in each case other than as may
be set forth in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), and
since such dates, except in the ordinary course of business, neither the Company
nor any of its subsidiaries has entered into any material transaction not
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(f) There is no agreement, contract, license, lease or other document
required to be described in the Registration Statement or the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) or
to be filed as an exhibit to the Registration Statement which is not described
or filed as required. All contracts described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), if any,
are in full force and effect on the date hereof, and neither the Company nor any
of its subsidiaries nor, to the best knowledge of the Company, any other party
thereto is in material breach of or default under any such contract.
(g) The authorized and outstanding capital stock of the Company is
set forth in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus), and the description of the Common Stock therein
conforms with and accurately describes the rights set forth in the instruments
defining the same. The shares of the Stock have been duly and validly
authorized and, when issued and delivered against payment therefore as provided
herein, will be duly and validly issued, fully paid and non-assessable, and the
issuance of the Stock is not subject to any preemptive or similar rights.
(h) All of the outstanding shares of Common Stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable,
have been issued in compliance with all applicable federal and state securities
laws and were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities. All of the issued shares
of each subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned by the Company, free and
clear of all liens or encumbrances. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted or exercised thereunder, set forth in the Prospectus (or,
if the Prospectus is not in
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existence, the most recent Preliminary Prospectus), accurately and fairly
present the information required to be shown with respect to such plans,
arrangements, options and rights. Other than this Agreement and the options to
purchase the Common Stock described in the Prospectus, there are no options,
warrants or other rights outstanding to subscribe for or purchase any shares of
the Company's capital stock. There are no preemptive rights applicable to any
shares of capital stock of the Company.
(i) This Agreement has been duly authorized, executed and delivered
by, and constitutes the valid and binding obligation of, the Company,
enforceable against it in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable federal or state
securities laws, public policy or general equitable principles. The filing of
the Registration Statement does not give rise to any rights, other than those
which have been waived, for or relating to the registration of any capital stock
of the Company.
(j) Neither the Company nor any of its subsidiaries is, or with the
giving of notice or lapse of time or both would be, in violation of or in
default under, nor will the execution or delivery of this Agreement or the
completion of the transactions contemplated by this Agreement result in a
material violation of or constitute a breach of or a default (including without
limitation with the giving of notice, the passage of time or otherwise) under,
the certificate or articles of incorporation, bylaws or other governing
documents of the Company or any of its subsidiaries or any obligation,
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage, deed of trust,
loan agreement, lease, license, joint venture or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which any of
its or their properties may be bound or affected. The Company has not incurred
any liability, direct or indirect, for any finders' or similar fees payable on
behalf of the Company or the Underwriters in connection with the transactions
contemplated by this Agreement. The performance by the Company of its
obligations under this Agreement will not violate any law, ordinance, rule or
regulation, or any order, writ, injunction, judgment or decree of any
governmental agency or body or of any court having jurisdiction over the
Company, its subsidiaries or any of their respective properties, or result in
the creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of the Company or any of its subsidiaries. Except for permits
and similar authorizations required under the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or under other securities
or Blue Sky laws of certain jurisdictions, the clearance of this offering with
the NASD and for such permits and authorizations that have been obtained, no
consent, approval, authorization or order of any court,
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governmental agency or body, financial institution or any other person is
required in connection with the completion of the transactions contemplated by
this Agreement.
(k) The Company and each of its subsidiaries owns, or has valid
rights to use, all items of real and personal property which are material to the
business of the Company and its subsidiaries taken as a whole and free and clear
of all liens, encumbrances and claims that might materially interfere with the
business, properties, condition (financial or otherwise), results of operations
or prospects of the Company and its subsidiaries taken as a whole.
(l) Each of the Company and each of its subsidiaries owns or
possesses adequate rights to use all material patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names and
copyrights described or referred to in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) as owned by or used by any of them, or which are
necessary for the conduct of their business as described in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus); and neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, tradenames or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would reasonably be expected to have a material
adverse effect on the business, properties, condition (financial or otherwise),
results of operations or prospects of the Company and its subsidiaries taken as
a whole.
(m) There is no litigation or governmental proceeding to which the
Company or any of its subsidiaries is a party or to which any property of the
Company or any of its subsidiaries is subject which is pending or, to the best
knowledge of the Company, is threatened or contemplated against the Company or
any of its subsidiaries which, if subject to an unfavorable decision, ruling or
finding, would reasonably be expected to have a material adverse effect on the
business, properties, condition (financial or otherwise), results of operations
or prospects of the Company and its subsidiaries taken as a whole, that might
prevent consummation of the transactions contemplated by this Agreement or that
are required to be disclosed in the Registration Statement or Prospectus (or, if
the Prospectus is not in existence, in the most recent Preliminary Prospectus)
and are not so disclosed.
(n) Neither the Company nor any of its subsidiaries is in violation
of, and neither the Company nor any of its
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subsidiaries has received any notice or claim from any governmental agency or
third party that any of them is in violation of, any law, order, ordinance, rule
or regulation, or any order, writ, injunction, judgment or decree of any agency
or body or of any court, to which it or its properties (whether owned or leased)
may be subject, which violation would reasonably be expected to have a material
effect on the business, properties, condition (financial or otherwise), results
of operations or prospects of the Company and its subsidiaries taken as a whole.
(o) The Company has not taken and shall not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to cause or result in, under the Exchange
Act, the Exchange Act Rules and Regulations or otherwise, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Stock. No bid or purchase by the Company and, to the best
knowledge of the Company, no bid or purchase that could be attributed to the
Company (as a result of bids or purchases by an "affiliated purchaser" within
the meaning of Rule 10b-6 under the Exchange Act) for or of the Stock, the
Common Stock, any securities of the same class or series as the Common Stock or
any securities convertible into or exchangeable for or that represent any right
to acquire the Common Stock is now pending or in progress or will have commenced
at any time prior to the completion of the distribution of the Stock.
(p) KPMG Peat Marwick LLP, whose reports appear in the Registration
Statement and the Prospectus, are, and during the periods covered by their
reports in the Registration Statement were, independent accountants as required
by the Securities Act and the Rules and Regulations. The financial statements
and schedules included in the Registration Statement, each Preliminary
Prospectus and the Prospectus present fairly (or, if the Prospectus has not been
filed with the Commission, as to the Prospectus, will present fairly) the
financial condition, results of operations, cash flow and changes in
stockholders' equity and the financial statements and schedules included in the
Registration Statement present fairly the information required to be stated
therein. Such financial statements and schedules have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods presented. The unaudited quarterly financial
data included in the Registration Statement and the Prospectus
present fairly (or, if the Prospectus has not been filed with the Commission, as
to the Prospectus, will present fairly) the information shown therein and have
been prepared 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.
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(q) The books, records and accounts of the Company and each of its
subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in and dispositions of the assets of the Company and each of its
subsidiaries. The systems of internal accounting controls maintained by the
Company and each of its subsidiaries are sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with management's
general or specific authorization; and (ii) transactions are recorded as
necessary (x) to permit preparation of financial statements in conformity with
generally accepted accounting principles and (y) to maintain accountability for
assets.
(r) The Company will not, and the Company has delivered to the
Representative the written agreement of each of its officers and directors and
all persons who own more than 1% of the outstanding shares of Common Stock
(collectively, "Material Holders") to the effect that each of the Material
Holders will not, in each case for a period of 120 days following the date of
this Agreement, in each case without the prior written consent of the
Representative, offer, sell or contract to sell, or otherwise dispose of, or
announce the offer of, any Common Stock or options or convertible securities
exercisable or exchangeable for, or convertible into, Common Stock; provided
however, that the Company may issue Common Stock upon the exercise of stock
options and may grant options to purchase Common Stock under its plans described
in the Registration Statement so long as none of such options become
exercisable during a period of 120 days following the date of this Agreement.
(s) No labor disturbance by the employees of the Company or any of
its subsidiaries exists, is imminent or, to the best knowledge of the Company,
is contemplated or threatened; and the Company is not aware of an existing,
imminent or threatened labor disturbance by the employees of any principal
suppliers, contract manufacturing organizations, manufacturers, authorized
dealers or distributors that would reasonably be expected to result in any
material adverse change in the business, properties, condition (financial or
otherwise), results of operations or prospects of the Company and its
subsidiaries taken as a whole. No collective bargaining agreement exists with
any of the Company's or any of the Company's subsidiaries' employees and, to the
best knowledge of the Company, no such agreement is imminent.
(t) Each of the Company and each of its subsidiaries has filed all
federal, state, local and foreign tax returns that are required to be filed or
has requested extension thereof and has paid all taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges to the extent
that the same have become due and payable, except for such as are being
contested in good faith. No tax assessment or deficiency has been made or
proposed against the Company or any of its
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subsidiaries nor has the Company or any of its subsidiaries received any notice
of any proposed tax assessment or deficiency in either case that has not been
paid in full or is not being by the Company in good faith.
(u) Except as set forth in the Prospectus (or if the Prospectus is
not in existence, the most recent Preliminary Prospectus) there are no
outstanding loans, advances or guaranties of indebtedness by the Company to or
for the benefit of any of (i) its "affiliates," as such term is deemed in the
Rules and Regulations, (ii) any of the officers or directors of any of its
subsidiaries or (iii) any of the members of the families of any of them.
(v) Neither the Company nor any of its subsidiaries has, directly or
indirectly, at any time: (i) made any contributions to any candidate for
political office in violation of law; (ii) made any payment to any local, state,
federal or foreign governmental officer or official, or other person charged
with similar public or quasi-public duties; or (iii) violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended.
(w) The Company has not distributed and will not distribute prior to
the Closing Date or on or prior to any date on which the Option Stock is to be
purchased, as the case may be, any prospectus or other offering material in
connection with the offering and sale of the Stock other than the Prospectus,
the Registration Statement and any other material which may be permitted by the
Securities Act and the Rules and Regulations.
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(x) The Stock has been approved for inclusion for listing on the
Nasdaq National Market, subject only to official notice of issuance.
(y) The Company is not now, and intends to conduct its affairs in the
future in such a manner so that it will not become, an investment company within
the meaning of the Investment Company Act of 1940, as amended.
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(z) The Company satisfies the requirements for filing a registration
statement on Form SB-2.
2. PURCHASE, SALE AND DELIVERY OF THE STOCK.
(a) On the basis of the representations, warranties, covenants and
agreements of the Company contained in this Agreement and subject to the terms
and conditions set forth in this Agreement, the Company agrees to sell to the
several Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at a purchase price of $______ per share
of Stock ("Purchase Price") the respective number of shares of Firm Stock set
forth opposite the name of such Underwriter on Schedule I to this Agreement
(subject to adjustment as provided in Section 8 of this Agreement).
(b) On the basis of the several (and not joint) representations,
warranties, covenants and agreements of the Underwriters contained in this
Agreement and subject to the terms and conditions set forth in this Agreement,
the Company grants an option to the several Underwriters to purchase from the
Company, severally and jointly, all or any portion of the Option Stock at the
Purchase Price. This option may be exercised only to cover over-allotments in
the sale of the Firm Stock by the Underwriters and may be exercised in whole or
in part at any time (but not more than once) on or before the 30th day after the
date of the Prospectus upon written, telecopied or telegraphic notice by the
Representative to the Company setting forth the aggregate principal amount of
Option Stock as to which the several Underwriters are exercising the option and
the settlement date. The Option Stock shall be purchased severally, and not
jointly,
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by each Underwriter, if purchased at all, in the same proportion that the number
of shares of Firm Stock set forth opposite the name of the Underwriter in
Schedule I to this Agreement bears to the total number of shares of Firm Stock
to be purchased by the Underwriters under Section 2(a) above, subject to such
adjustments as the Representative in its absolute discretion shall make to
eliminate any fractional Stock. Delivery of Option Stock, and payment therefor,
shall be made as provided in Section 2(c) and Section 2(d) below.
(c) Delivery of the Firm Stock and the Option Stock (if the option
granted by the Company in Section 2(b) above has been exercised not later than
7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date), and payment therefor, shall be made at the office of Xxx Xxxxxx &
Company, 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx at 7:00 a.m., San
Francisco time, on the third business day after the date of this Agreement, or
at such time on such other day, not later than seven full business days after
such third business day, as shall be agreed upon in writing by the Company and
the Representative, or as provided in Section 8 of this Agreement. The date and
hour of delivery and payment for the Firm Stock are referred to in this
Agreement as the "Closing Date." As used in this Agreement, "business day"
means a day on which the Nasdaq Stock Market is operating and on which banks in
New York and California are open for business and not permitted by law or
executive order to be closed. Certificates for the Stock shall be in such
denominations and registered in such names as the Representative may request in
writing at least two business days before the Closing Date.
(d) If the option granted by the Company in Section 2(b) above is
exercised after 7:00 a.m., San Francisco time, on the date two business days
preceding the Closing Date, delivery of the Option Stock and payment therefor
shall be made at the office of Xxx Xxxxxx & Company, 000 Xxxxxxxxxx Xxxxxx, Xxx
Xxxxxxxxx, Xxxxxxxxxx at 7:00 a.m., San Francisco time, on the date specified by
the Representative (which shall be three or four or fewer business days after
the exercise of the option, but not in excess of the period specified in the
Rules and Regulations).
(e) Payment of the purchase price for the Stock by the several
Underwriters shall be made by certified or official bank check or checks drawn
in next-day funds, payable to the order of the Company. Such payment shall be
made upon delivery of Stock to the Representative for the respective accounts of
the several Underwriters. The Stock to be delivered to the Representative shall
be registered in such name or names and shall be in such denominations as the
Representative may request at least two business days before the Closing Date,
in the case of Firm Stock, and at least one business prior to the purchase of
the Option
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Stock, in the case of the Option Stock. The Representative, individually and
not on behalf of the Underwriters, may (but shall not be obligated to) make
payment to the Company for Stock to be purchased by any Underwriter whose check
shall not have been received by the Representative on the Closing Date or any
later date on which Option Stock is purchased for the account of such
Underwriter. Any such payment shall not relieve such Underwriter from any of
its obligations hereunder.
(f) The several Underwriters propose to offer the Stock for sale to
the public as soon as the Representative deems it advisable to do so. The Firm
Stock is to be initially offered to the public at the public offering price set
forth (or to be set forth) in the Prospectus. The Representative may from time
to time thereafter change the public offering price and other selling terms.
(g) The information set forth in the last paragraph on the front
cover page (insofar as such information relates to the Underwriters), the legend
respecting stabilization set forth on the inside front cover page and the
statements set forth under the caption "Underwriting" in any Preliminary
Prospectus, in the Registration Statement and in the final form of Prospectus
filed pursuant to Rule 424(b) constitute the only information furnished by the
Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement.
3. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees
with the several Underwriters as follows:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the time of execution
of this Agreement, to become effective as promptly as possible. If the
Registration Statement has become or becomes effective pursuant to Rule 430A, or
filing of the Prospectus is otherwise required under Rule 424(b), the Company
will file the Prospectus, properly completed (and in form and substance
reasonably satisfactory to the Underwriters) pursuant to Rule 424(b) within the
time period prescribed and will provide evidence satisfactory to the
Representative of such timely filing. The Company will not file the Prospectus,
any amended Prospectus, any amendment (including post-effective amendments) of
the Registration Statement or any supplement to the Prospectus without (i)
advising the Representative of and, a reasonable time prior to the proposed
filing of such amendment or supplement, furnishing the Representative with
copies thereof and (ii) obtaining the prior consent of the Representative to
such filing. The Company will prepare and file with the Commission, promptly
upon the request of the Representative, any amendment to the Registration
Statement or supplement to the Prospectus that may be necessary or advisable in
the reasonable opinion of the
-14-
Representative in connection with the distribution of the Stock by the
Underwriters and use its best efforts to cause the same to become effective as
promptly as possible.
(b) The Company will promptly advise the Representative (i) when the
Registration Statement becomes effective, (ii) when any post-effective amendment
thereof becomes effective, (iii) of any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus or
for any additional information, (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (v) of the
receipt by the Company of any notification with respect to the suspension of the
registration, qualification or exemption from registration or qualification of
the Stock for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will make every reasonable effort to
prevent the issuance of any such stop order or suspension and, if issued, to
obtain as soon as possible the withdrawal thereof.
(c) The Company will (i) on or before the Closing Date, deliver to
the Representative and its counsel a signed copy of the Registration Statement
as originally filed and of each amendment thereto filed prior to the time the
Registration Statement becomes effective and, promptly upon the filing thereof,
a signed copy of each post-effective amendment, if any, to the Registration
Statement (together with, in each case, all exhibits thereto unless previously
furnished to the Representative) and will also deliver to the Representative,
for distribution to the several Underwriters, a sufficient number of additional
conformed copies of each of the foregoing (excluding exhibits) so that one copy
of each may be distributed to each Underwriter, (ii) as promptly as possible
deliver to the Representative and send to the several Underwriters, at such
office or offices as the Representative may designate, as many copies of the
Prospectus as the Representative may reasonably request and (iii) thereafter
from time to time during the period in which a prospectus is required by law to
be delivered by an Underwriter or a dealer, likewise to send to the Underwriters
as many additional copies of the Prospectus and as many copies of any supplement
to the Prospectus and of any amended Prospectus, filed by the Company with the
Commission, as the Representative may reasonably request for the purposes
contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or a dealer any event shall
occur as a result of which it is necessary to supplement or amend the Prospectus
in order to make the Prospectus not misleading in light of the circumstances
then existing or so that the Prospectus will
not omit to state a material fact necessary in light of the circumstances
then existing to be stated therein, in
-15-
each case at the time the Prospectus is delivered to a purchaser of the Stock,
or if it shall be necessary to amend or to supplement the Prospectus to comply
with the Securities Act or the Rules and Regulations, the Company will forthwith
prepare and file with the Commission a supplement to the Prospectus or an
amended Prospectus so that the Prospectus as so supplemented or amended will not
contain any untrue 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 then existing not misleading and so that it then will
otherwise comply with the Securities Act and the Rules and Regulations. If,
after the public offering of the Stock by the Underwriters and during such
period, the Underwriters propose to vary the terms of offering thereof by
reason of changes in general market conditions or otherwise, the
Representative will advise the Company in writing of the proposed variation
and if, in the opinion either of counsel for the Company or counsel for the
Underwriters, such proposed variation requires that the Prospectus be
supplemented or amended, the Company will forthwith prepare and file with the
Commission a supplement to the Prospectus setting forth such variation. The
Company authorizes the Underwriters and all dealers to whom any of the Stock
may be sold by the Underwriters to use the Prospectus, as from time to time
so amended or supplemented, in connection with the sale of the Stock in
accordance with the applicable provisions of the Securities Act and the Rules
and Regulations for such period.
(e) The Company will cooperate with the Representative and its
counsel in the qualification or registration of the Stock for offer and sale
under the securities or blue sky laws of such jurisdictions as the
Representative may designate and, if applicable, in connection with exemptions
from such qualification or registration and, during the period in which a
Prospectus is required by law to be delivered by an Underwriter or a dealer, in
keeping such qualifications, registrations and exemptions in effect; provided,
however, that the Company shall not be obligated to file any general consent to
service of process or to qualify to do business as a foreign corporation in any
jurisdiction in which it is not so qualified. The Company will, from time to
time, prepare and file such statements, reports and other documents as are or
may be required to continue such qualifications, registrations and exemptions in
effect for so long a period as the Representative may reasonably request for the
distribution of the Stock.
(f) During a period of five years commencing with the date of this
Agreement, the Company will promptly furnish to the Representative and to each
Underwriter who may so request in writing copies of (i) all periodic and special
reports furnished by it to shareholders of the Company, (ii) all information,
documents and reports filed by it with the Commission, any securities exchange
on which any securities of the Company are then listed, Nasdaq or its National
Market System or the National
-16-
Association of Securities Dealers, Inc., (iii) all press releases and material
news items or articles in respect of the Company or its affairs released or
prepared by the Company (other than promotional and marketing materials
disseminated solely to customers and potential customers of the Company in the
ordinary course of business) and (iv) any additional information concerning the
Company which the Representative may reasonably request.
(g) As soon as practicable, but not later than the 45th day following
the end of the fiscal quarter first ending after the first anniversary of the
Effective Date, the Company will make generally available to its securities
holders and furnish to the Representative an earnings statement or statements in
accordance with Section 11(a) of the Securities Act and Rule 158 of the Rules
and Regulations.
(h) The Company intends to apply the net proceeds from the offering
of the Stock in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(i) The Company will comply with all provisions of all undertakings
contained in the Registration Statement.
(j) The Company will, and at all times for a period of at least
five years after the date of this Agreement, make every reasonable effort to
cause the Common Stock (including the Stock) to be listed on the Nasdaq
National Market, and the Company will comply with all registration, filing,
reporting and other requirements of the Exchange Act and the Nasdaq National
Market which may from time to time be applicable to the Company.
(k) The Company will make every best effort to maintain insurance of
the types and in the amounts which it deems adequate for its business consistent
with insurance coverage maintained by companies of similar size and engaged in
similar businesses, including, but not limited to, product liability insurance
and general liability insurance covering all real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against.
(l) The Company will issue no press release prior to the Closing
Date with respect to the offering without providing the Representative a
reasonable opportunity to review it.
-17-
4. FEES AND 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, any drafts of each of them and any amendments
or supplements to any of them; the duplication or, if applicable, printing
(including all drafts thereof) of this Agreement, the Agreement Among
Underwriters, any Selected Dealer Agreements, the Preliminary Blue Sky Survey
and any Supplemental Blue Sky Survey, the Underwriters' Questionnaire and the
Power of Attorney and the duplication and printing (including of drafts thereof)
of any other underwriting documents and material (including but not limited to
marketing memoranda and other marketing material) in connection with the
offering, purchase, sale and deliver of the Stock; the issuance and delivery of
the Stock under this Agreement to the several Underwriters, including all
expenses, taxes and duties on the purchase and sale of the Stock and stock
exchange brokerage and transaction levies with respect to the purchase and, if
applicable, the sale of the Stock (x) incident to the sale and delivery of the
Stock by the Company to the Underwriters and (y) incident to the sale and
delivery of the Stock by the Underwriters to the initial purchasers thereof; the
cost of printing the certificates for the Stock; the Transfer Agents' and
Registrars' fees; the fees and disbursements of counsel for the Company; all
fees and other charges of the Company's independent public accountants and any
other experts named in the Prospectus; the cost of furnishing to the several
Underwriters copies of the Registration Statement (including appropriate
exhibits), Preliminary Prospectus and the Prospectus, the agreements and other
documents and instruments referred to above and any amendments or supplements to
any of the foregoing; the NASD filing fees; the cost of qualifying or
registering the Stock (or obtaining exemptions from qualification or
registration) under the laws of such jurisdictions as the Representative may
designate (including filing fees and fees and costs/disbursements of
Underwriters' counsel in connection with such NASD filings and state securities
or Blue Sky qualifications, registrations and exemptions and in preparing the
preliminary and any final Blue Sky Memorandum); all fees and expenses in
connection with listing of the Stock on the Nasdaq National Market; all
Company marketing expenses; and all other expenses incurred by the Company in
connection with the performance of its obligations hereunder. In addition,
the Company will pay the Representatives on the Closing Date and, if
applicable, on the date on which Option Stock is purchased a non-accountable
expense allowance of one percent (1%) of the gross proceeds (prior to
deducting underwriting discounts and commissions) of the offering of the
Stock. Except as provided in
-18-
this Section 4(a), Section 4(d) and Section 7, the Underwriters shall pay all of
their own expenses, including the fees of and disbursements to their counsel.
(ii) In addition to its obligations under Section 7(a) of this
Agreement, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any loss, claim, damage or liability described in Section 7(a) of
this Agreement, it will reimburse or advance to or for the benefit of the
Underwriters, and each of them, on a quarterly basis for all legal and 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 or advance for the benefit of the Underwriters
for such expenses or the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. To the extent that any
portion, or all, of any such interim reimbursement payments or advances are so
held to have been improper, the Underwriters receiving the same shall promptly
return such amounts to the Company together with interest, compounded daily, at
the prime rate (or other commercial lending rate for borrowers of the highest
credit standing) announced from time to time by Bank of America, NT&SA, San
Francisco, California (the "Prime Rate"), but not in excess of the maximum rate
permitted by applicable law. Any such interim reimbursement payments or
advances that are not made to or for the Underwriters within 30 days of a
request for reimbursement or for an advance shall bear interest at the Prime
Rate, compounded daily, but not in excess of the maximum rate permitted by
applicable law, from the date of such request until the date paid.
(b) In addition to their obligations under Section 7(b) of this
Agreement, the Underwriters severally and in proportion to their obligation to
purchase Firm Stock as set forth on Schedule I hereto, agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any loss, claim, damage or
liability described in Section 7(b) of this Agreement, they will reimburse or
advance to or for the benefit of the Company on a quarterly basis for all legal
and other expenses incurred by the Company 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 or
enforceability of the Underwriters' obligation to reimburse or advance for the
benefit of the Company for such expenses and the possibility that such payments
or advances might later be held to have been improper by a court of competent
jurisdiction. To the extent that any portion, or all, of any such interim
reimbursement payments or
-19-
advances are so held to have been improper, the Company shall promptly return
such amounts to the Underwriters together with interest, compounded daily, at
the Prime Rate, but not in excess of the maximum rate permitted by applicable
law. Any such interim reimbursement payments or advances that are not made to
the Company within 30 days of a request for reimbursement or for an advance
shall bear interest at the Prime Rate, compounded daily, but not in excess of
the maximum rate permitted by applicable law, from the date of such request
until the date paid.
(c) Any controversy arising out of the operation of the interim
reimbursement and advance arrangements set forth in Sections 4(a)(ii) and 4(b)
above, including the amounts of any requested reimbursement payments or advance,
the method of determining such amounts and the basis on which such amounts shall
be apportioned among the indemnifying parties, shall be settled by arbitration
conducted under the provisions of the Code of Arbitration Procedure of the
National Association of Securities Dealers, Inc. 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. If the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to the demand or notice is
authorized to do so. Any such arbitration will be limited to the interpretation
and obligations of the parties under the interim reimbursement and advance
provisions contained in Sections 4(a)(ii) and 4(b) above and will not resolve
the ultimate propriety or enforceability of the obligation to indemnify for or
contribute to expenses that is created by the provisions of Section 7 of this
Agreement.
(d) If the sale of the Stock provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 5 of this Agreement is not satisfied, or because of any termination
pursuant to Section 9(b) of this Agreement, or because of any refusal, inability
or failure on the part of the Company to perform any covenant or agreement set
forth in this Agreement or to comply with any provision of this Agreement other
than by reason of a default by any of the Underwriters, the Company agrees to
reimburse the several Underwriters upon demand for all reasonable out-of-pocket
accountable expenses actually incurred (including fees and disbursements of
counsel) that shall have been incurred by any or all of them in connection with
investigating, preparing to market or marketing the Stock or otherwise in
connection with this Agreement.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase and pay for the Stock shall be subject, in the sole
discretion of the Representative,
-20-
to the accuracy as of the date of execution of this Agreement, the Closing Date
and the date and time at which the Option Stock is to be purchased, as the case
may be, of the representations and warranties of the Company set forth in this
Agreement, to the accuracy of the statements of the Company and its officers
made in any certificate delivered pursuant to this Agreement, to the performance
by the Company of all of its obligations to be performed under this Agreement at
or prior to the Closing Date or any later date on which Option Stock is to be
purchased, as the case may be, to the satisfaction of all conditions to be
satisfied or performed by the Company at or prior to that date and to the
following additional conditions:
(a) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A under the
Act, such post-effective amendment shall become effective and the Company shall
have provided evidence satisfactory to the Representative of such filing and
effectiveness) not later than 5:00 p.m., New York time, on the date of this
Agreement or at such later date and time as the Representative may approve in
writing and, at the Closing Date or, with respect to the Option Stock, the date
on which such Option Stock is to be purchased, no stop order suspending the
effectiveness of the Registration Statement or any qualification, registration
or exemption from qualification or registration for the sale of the Stock in any
jurisdiction shall have been issued and no proceedings for that purpose shall
have been instituted or threatened; and any request for additional information
on the part of the Commission shall have been complied with to the reasonable
satisfaction of the Representative and its counsel.
(b) The Representative shall have received from Xxxxxx Xxxxxx White &
XxXxxxxxx, counsel for the Underwriters, an opinion, on and dated as of the
Closing Date or, if applicable, the date on which Option Stock is to be
purchased, with respect to the issuance and sale of the Stock and such other
related matters as the Representative may reasonably require, and the Company
shall have furnished such counsel with all documents which they may request for
the purpose of enabling them to pass upon such matters.
(c) The Representative shall have received on the Closing Date or, if
applicable, the later date on which Option Stock is purchased the opinions of
Xxxxxxx, Xxxxxxx & Xxxxxxxx and of Woodbury & Wedge, counsel for the Company,
addressed to the Underwriters and dated the Closing Date or such later date,
with reproduced copies or signed counterparts thereof for each of the
Underwriters, covering the matters set forth in Annex A and Annex B,
respectively, to this Agreement and in form and substance satisfactory to the
Representative.
-21-
(d) The Representative shall be satisfied that there has not been any
material change in the market for securities in general or in political,
financial or economic conditions as to render it impracticable in the
Representative's judgment to make a public offering of the Stock.
(e) The Representative shall have received on the Closing Date and on
any later date on which Option Stock is purchased a certificate, dated the
Closing Date or such later date, as the case may be, and signed by the President
and the Chief Financial Officer of the Company stating that:
(i) the representations and warranties of the Company set forth
in Section 1 of this Agreement are true and correct with the same force and
effect as if expressly made at and as of the Closing Date or such later date,
and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date or such later date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and to the best of such officer's
knowledge no proceedings for that purpose have been instituted or are pending or
are threatened under the Securities Act;
(iii) the Stock has been approved for listing on the Nasdaq
National Market, subject only to notice of issuance, and the outstanding shares
of the Common Stock of the Company are listed on the Nasdaq National Market; and
(iv) all outstanding Series A Preferred Stock of the Company
shall automatically convert into Common Stock of the Company upon the Closing as
described in the Prospectus; and
(v) (A) each of the respective signers of such certificate have
carefully examined the Registration Statement in the form in which it originally
became effective and the Prospectus and any supplements or amendments to any of
them and, as of the Effective Date, in his opinion and to the best of his
knowledge after making necessary investigations the statements made in the
Registration Statement and the Prospectus were true and correct in all material
respects and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading, (B) since the effective
date of the Registration Statement, no event has occurred that should have been
set forth in an amendment to the Registration Statement or a supplement or
amendment to the Prospectus that has not been set forth in such an amendment or
supplement, (C) since the respective dates as of which information is given in
the Registration Statement in the form in
-22-
which it originally became effective and the Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the business, properties, condition (financial or
otherwise), results of operations or to the best of the Company's knowledge
prospects of the Company and its subsidiaries taken as a whole and, since such
dates, neither the Company nor any of its subsidiaries has entered into any
material transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein,
(D) there are not any pending or known threatened legal proceedings to which the
Company or any of its subsidiaries is a party or of which property of the
Company or any of its subsidiaries is the subject which are material and which
are not disclosed in the Registration Statement and the Prospectus and (E) there
are not any license agreements, contracts, leases or other documents that are
required to be filed as exhibits to the Registration Statement that have not
been filed as required.
(f) The Representative shall have received from KPMG Peat Marwick LLP
a letter or letters, addressed to the Underwriters and dated the Closing Date
and any later date on which Option Stock is purchased, confirming that they are
independent accountants with respect to the Company within the meaning of the
Securities Act and the applicable Rules and Regulations thereunder and, based
upon the procedures described in their letter delivered to the Representative
concurrently with the execution of this Agreement (the "Original Letter"), but
carried out to a date not more than five business days prior to the Closing Date
or such later date on which Option Stock is purchased, (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,, as the case may
be, and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter that are necessary to reflect any
changes in the facts described in the Original Letter since the date of the
Original Letter or to reflect the availability of more recent financial
statements, data or information. Such letters shall not disclose any change, or
any development involving a prospective change, in or affecting the business,
properties or condition (financial or otherwise), results of operations or
prospects of the Company or any of its subsidiaries which, in the
Representative's sole judgment, makes it impractical or inadvisable to proceed
with the public offering of the Stock or the purchase of the Option Stock as
contemplated by the Prospectus. In addition, the Representative shall have
received from KPMG Peat Marwick LLP, on or prior to the Closing Date, a letter
addressed to the Company and made available to the Representative for the use of
the Underwriters stating that their review of the Company's system of internal
controls, to the extent they deemed necessary in establishing the scope of their
examination of the Company's
-23-
consolidated financial statements as of March 31, 1995 or in delivering their
Original Letter, did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(g) Prior to the Closing Date, the Stock shall have been approved for
listing on the Nasdaq National Market, subject only to official notice of
issuance and the outstanding shares of the Common Stock of the Company shall be
listed on the Nasdaq National Market.
(h) On or prior to the Closing Date, the Representative shall have
received from all Material Holders executed agreements covering the matters
described in Section 1(r) of this Agreement.
(i) The Representative shall have received from the State of Hawaii
as of the Closing Date an estoppel certificate relating to the real property
leased by the Company in form and substance reasonably acceptable to the
Representative.
(j) On the Closing Date all outstanding shares of Series A Preferred
Stock of the Company shall have converted into Common Stock as described in the
Prospectus.
(k) The Company shall have furnished to the Representative such
further certificates and documents as the Representative shall reasonably
request (including certificates of officers of the Company) as to the accuracy
of the representations and warranties of the Company set forth in this
Agreement, the performance by the Company of its obligations under this
Agreement and such other matters as the Representative may have then requested.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement will be in compliance with the provisions of this
Agreement only if they are satisfactory to the Representative. The Company will
furnish the Representative with such number of conformed copies of such
opinions, certificates, letters and documents as the Representative shall
reasonably request.
If any of the conditions specified in this Section 5 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
time being of the essence, or if any of the opinions and certificates mentioned
above or elsewhere in this Agreement shall not be in all material respects
satisfactory in form and substance to the Representative and its counsel, this
Agreement and all obligations of the Underwriters hereunder may be canceled by
the Representative at or at any time prior to, the Closing Date or, with respect
to the Option Stock, prior to the date which the Option Stock is to be
purchased, as
-24-
the case may be. Notice of such cancellation shall be given to the Company
in writing or by telephone, telecopy or telegraph confirmed in writing. Any
such termination shall be without liability of the Company to the Underwriters
(except as provided in Section 4 or Section 7 of this Agreement) and without
liability of the Underwriters to the Company (except as provided in Section 4 or
7 of this Agreement).
6. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligations of the
Company to sell and deliver the Stock required to be delivered as and when
specified in this Agreement shall be subject to the condition that, at the
Closing Date or, with respect to the Option Stock, the date and time at which
the Option Stock is to be purchased, no stop order suspending the effectiveness
of the Registration Statement shall be in effect and no proceedings therefor
shall be pending or threatened by the Commission.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner or officer thereto) who
controls any Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act or other federal or state statute,
law or regulation, at common law or otherwise, specifically including but not
limited to losses, claims, damages or liabilities (or action in respect thereof)
related to negligence on the part of any Underwriter, and the Company agrees to
reimburse each such Underwriter and controlling person for any legal or other
expenses (including, except as otherwise provided below, settlement expenses and
reasonable fees and disbursements of counsel) incurred by the respective
indemnified parties in connection with defending against any such losses,
claims, damages or liabilities or in connection with any investigation or
inquiry of, or other proceeding that may be brought against, the respective
indemnified parties, in each case insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon, in
whole or in part, (i) any breach of any representation, warranty, covenant or
agreement of the Company in this Agreement, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof) or any post-effective amendment
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 not
misleading or (iii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if
-25-
the Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or (iv) any untrue statement or alleged untrue statement of
a material fact contained in any application or other document, or any amendment
or supplement thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify or register the Stock under the securities or Blue Sky laws thereof or
to obtain an exception from such qualification or registration or filed with the
Commission, any securities association or the Nasdaq National Market, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that (1) the indemnity agreements of the Company contained in
this Section 7(a) shall not apply to such losses, claims, damages, liabilities
or expenses if such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of any Underwriter through the Representative specifically for use in any
Preliminary Prospectus or the Registration Statement or the Prospectus or any
such amendment thereof or supplement thereto and (2) the indemnity agreement
contained in this Section 7(a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages, liabilities or expenses purchased the Stock that
is the subject thereof (or to the benefit of any person controlling such
Underwriter) if the Company can demonstrate that at or prior to the written
confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) or, for this purpose, if applicable, a
copy of the then most recent Preliminary Prospectus was not sent or delivered to
such person and the untrue statement or omission of a material fact contained in
such Preliminary Prospectus or, if applicable, prior Preliminary Prospectus was
corrected in the Prospectus (or the Prospectus as amended or supplemented) or,
if applicable, the then most recent Preliminary Prospectus, unless the failure
is the result of noncompliance by the Company with Section 3 of this Agreement.
The indemnity agreements of the Company contained in this Section 7(a) and the
representations and warranties of the Company contained in Section 1 of this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or behalf of any indemnified party and shall survive the
delivery of and payment for the Stock. 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, each of its
-26-
officers who signs the Registration Statement, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Exchange Act, or other federal
or state statute, law or regulation or at common law or otherwise and to
reimburse each of them for any legal or other expenses (including, except as
otherwise hereinafter provided, settlement expenses and reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding that may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any breach of any covenant or
agreement of the indemnifying Underwriter in this Agreement, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof) or any
post-effective amendment 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, not misleading or (iii) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus or
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, but in each case
under clauses (i), (ii) and (iii) above, as the case may be, only if such
statement or omission was made in reliance upon and in connection with
information furnished in writing to the Company by or on behalf of such
indemnifying Underwriter specifically for use in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto. The Company acknowledges and agrees that the matters
described in Section 2(g) of this Agreement constitute the only information
furnished in writing by or on behalf of any of the several Underwriters for
inclusion in the Registration Statement or the Prospectus or in any Preliminary
Prospectus. The several indemnity agreement of each Underwriter contained in
this Section 7(b) shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any indemnified party and shall
survive the delivery of and payment for the Stock. This indemnity agreement
shall be in addition to any liabilities which each Underwriter may otherwise
have.
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(c) Each person or entity indemnified under the provisions of
Sections 7(a) and 7(b) above agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
Sections, it will, if a claim in respect thereunder is to be made against the
indemnifying party or parties under this Section 7, promptly give written notice
(the "Notice") of such service or notification to the party or parties from whom
indemnification may be sought hereunder. No indemnification provided for in
Sections 7(a) or 7(b) above shall be available to any person who fails to so
give the Notice if the party to whom such Notice was not given was unaware of
the action, suit, investigation, inquiry or proceeding to which the Notice would
have related, but only to the extent such party was materially prejudiced by the
failure to receive the Notice, and the omission to so notify such indemnifying
party or parties shall not relieve such indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of Sections 7(a) and 7(b). Any indemnifying party
shall be entitled at its own expense to participate in the defense of any
action, suit or proceeding against, or investigation or inquiry of, an
indemnified party. Any indemnifying party shall be entitled, if it so elects
within a reasonable time after receipt of the Notice by giving written notice
(the "Notice of Defense") to the indemnified party, to assume (alone or in
conjunction with any other indemnifying party or parties) the entire defense of
such action, suit, investigation, inquiry or proceeding, in which event such
defense shall be conducted, at the expense of the indemnifying party or parties,
by counsel chosen by such indemnifying, party or parties and reasonably
satisfactory to the indemnified party or parties; provided, however, that (i) if
the indemnified party or parties reasonably determine that there may be a
conflict between the positions of the indemnifying party or parties and of the
indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses or
rights available to such indemnified party or parties different from or in
addition to those available to the indemnifying party or parties, then separate
counsel for and selected by the indemnified party or parties shall be entitled,
at the expense of the indemnifying parties, to conduct the defense of the
indemnified parties to the extent determined by counsel to the indemnified
parties to be necessary to protect the interests of the indemnified party or
parties and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel selected by such indemnified party or parties
participate in, but not conduct, the defense. If, within a reasonable time
after receipt of the Notice, an indemnifying party gives a Notice of
-28-
Defense and, unless separate counsel is to be chosen by the indemnified party or
parties as provided above, the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under Sections 7(a) through
7(c) for any legal or other expenses subsequently incurred by the indemnified
party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding, except that (A) the indemnifying party or
parties shall bear and pay the legal and other expenses incurred in connection
with the conduct of the defense as referred to in clause (i) of the "provided,
however" clause in the preceding sentence and (B) the indemnifying party or
parties shall bear and pay such other expenses as it or they have authorized to
be incurred by the indemnified party or parties. If, within a reasonable time
after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding. In no event
shall any indemnifying party be liable with respect to any amounts paid in
settlement of any claim or action unless the indemnifying party shall have
approved the terms of such settlement, such approval not to be unreasonably
withheld.
(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 7
but 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 to appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in Section 7(a) or 7(b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by each indemnifying party from the offering of the Stock or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each indemnifying
party in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, or actions in respect thereof, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Underwriters shall be deemed to be in the same respective
proportion as the total proceeds from the offering of the Stock, net of the
underwriting discounts, received by the Company and the total underwriting
discount retained by the Underwriters bear to the aggregate public offering
price of the Stock. Relative fault shall be
-29-
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 each indemnifying party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were to be determined by pro rata
allocation which does not take into account the equitable considerations
referred to in the first sentence of the first paragraph of this Section 7(d)
and to the considerations referred to in the third sentence of the first
paragraph of this Section 7(d). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities, or actions in respect
thereof, referred to in the first sentence of the first paragraph of this
Section 7(d) shall be deemed to include any legal or other expenses incurred by
such indemnified party in connection with investigating, preparing to defend or
defending against any action or claim which is the subject of this Section 7(d).
Notwithstanding the provisions of this Section 7(d), no Underwriter shall be
required to contribute any amount in excess of the underwriting discount
applicable to the Stock purchased by that Underwriter. For purposes of this
Section 7(d), each person who controls an Underwriter within the meaning of the
Securities Act shall have the same rights to contribution as such Underwriter,
and each person who controls the Company within the meaning of the Securities
Act, each officer of the Company who signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company; provided, however, in each case that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute in
this Section 7(d) are several in proportion to their respective underwriting
obligations and not joint.
Each party or other entity entitled to contribution agrees that upon
the service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it will
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in Section 7(c) above).
(e) No indemnifying party will, without the prior written consent of
the indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened
-30-
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not such indemnified party or
any person who controls such indemnified party within the meaning of Section 15
of the Securities Act is a party to such claim, action, suit or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of each such indemnified party and each such controlling person from all
liability arising out of such claim, action, suit or proceeding.
(f) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of Sections 4(a)(ii), 4(b) and 4(c) and this Section
7 of this Agreement and that they are fully informed regarding all such
provisions. They further acknowledge that the provisions of Sections 4(a)(ii),
4(b) and 4(c) and this Section 7 of this Agreement 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 Securities Act and the Rules and
Regulations. The parties are advised that federal or state policy, as
interpreted by the courts in certain jurisdictions, may be contrary to certain
provisions of Sections 4(a)(ii), 4(b) and 4(c) and this Section 7 of this
Agreement and, to the extent permitted by law, the parties hereto hereby
expressly waive and relinquish any right or ability to assert such public policy
as a defense to a claim under Sections 4(a)(ii), 4(b) or 4(c) or this Section 7
of this Agreement and further agree not to attempt to assert any such defense.
8. SUBSTITUTION OF UNDERWRITERS. If for any reason one or more of the
Underwriters fails or refuses (otherwise than for a reason sufficient to justify
the termination of this Agreement under the provisions of Section 5 or Section 9
of this Agreement) to purchase and pay for the number of shares of Firm Stock
agreed to be purchased by such Underwriter or Underwriters, the Representative
shall immediately give notice thereof to the Company and the non-defaulting
Underwriters shall have the right within 24 hours after the receipt by the
Company of such notice to purchase, or procure one or more other Underwriters to
purchase, in such proportions as may be agreed upon among the Representative and
such purchasing Underwriter or Underwriters and upon the terms set forth herein,
all or any part of the Firm Stock that such defaulting Underwriter or
Underwriters agreed to purchase. If the non-defaulting Underwriters fail to
make such arrangements with respect to all such Stock, the number of shares of
Firm Stock that each non- defaulting Underwriter is otherwise obligated to
purchase under this Agreement shall be automatically increased on a pro rata
basis to absorb the remaining shares of Stock that the defaulting Underwriter or
Underwriters agreed to
-31-
purchase; provided, however, that the non-defaulting Underwriters shall not be
obligated to purchase the Stock that the defaulting Underwriter or Underwriters
agreed to purchase if the aggregate amount of such Stock exceeds 10% of the
aggregate amount of Firm Stock that all Underwriters agreed to purchase under
this Agreement. If the total number of shares of Firm Stock that the defaulting
Underwriter or Underwriters agreed to purchase shall not be purchased or
absorbed in accordance with the two preceding sentences, the Company shall have
the right, within 24 hours next succeeding the first 24-hour period above
referred to, to make arrangements with other underwriters or purchasers
reasonably satisfactory to the Representative for purchase of such Stock on the
terms set forth in this Agreement. In any such case, either the Representative
or the Company shall have the right to postpone the Closing Date determined as
provided in Section 2(c) of this Agreement for not more than seven business days
after the date originally fixed as the Closing Date pursuant to Section 2(c) in
order that any necessary changes in the Registration Statement, the Prospectus
or any other documents or arrangements may be made.
If neither the non-defaulting Underwriters nor the Company shall make
arrangements within the time periods set forth above for the purchase of all the
Firm Stock that the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement shall be terminated without further act or deed and
without any liability on the part of the Company to any non-defaulting
Underwriter (except as provided in Section 4 or Section 7 of this Agreement) and
without any liability on the part of any nondefaulting Underwriters to the
Company (except to the extent provided in Section 4 or 7 of this Agreement).
Nothing in this Section 8, and no action taken hereunder, shall relieve any
defaulting Underwriter from liability, if any, to the Company or any
nondefaulting Underwriter for damages occasioned by its default under this
Agreement. The term "Underwriter" in this Agreement shall include any persons
substituted for an Underwriter under this Section 8.
9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION.
(a) If the Registration Statement has not been declared effective
prior to the date of this Agreement, this Agreement shall become effective at
such time, after notification of the effectiveness of the Registration Statement
has been released by the Commission, as the Representative and the Company shall
agree upon the public offering price and the purchase price of the Stock. If
the public offering price and other terms and the purchase price of the Stock
shall not have been determined prior to 5:00 p.m., New York time, on the fifth
full business day after the Registration Statement has become effective, this
Agreement shall thereupon terminate without liability on the part of the Company
or the Underwriters (except as provided in Section
-32-
4 or Section 7 of this Agreement). By giving notice as set forth in Section 12
of this Agreement before the time this Agreement becomes effective, the
Representative, as Representative of the several Underwriters, may prevent this
Agreement from becoming effective without liability of any party to the other
party, except that the Company shall remain obligated to pay costs and expenses
to the extent provided in Section 4 and Section 7 of this Agreement. If the
Registration Statement has been declared effective prior to the date of this
Agreement, this Agreement shall become effective upon execution and delivery by
the Representative and the Company.
(b) This Agreement may be terminated by the Representative by giving
written notice to the Company at any time on or prior to the Closing Date or,
with respect to the purchase of the Option Stock, on or prior to any later date
on which the Option Stock is to be purchased, as the case may be, if prior to
such time any of the following has occurred: (i) after the respective dates as
of which information is given in the Registration Statement and the Prospectus,
any material adverse change or development involving a prospective material
adverse change in or affecting materially the business, properties, condition
(financial or otherwise), results of operations or prospects of the Company and
its subsidiaries taken as a whole, which would, in the Representative's sole
judgment, make the offering or the delivery of the Stock impracticable or
inadvisable; or (ii) if trading in securities of the Company has been suspended
by the Commission or if trading generally on the New York Stock Exchange,
American Stock Exchange or over-the-counter market 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 such exchanges, by the NASD or by
the Commission; or (iii) if there shall have been the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of, or commencement of any proceeding or investigation by, court,
legislative body, agency or other governmental authority which in the
Representative's sole judgment materially affects or may materially affect the
business, properties, condition (financial or otherwise), results of operations
or prospects of the Company and its subsidiaries taken as a whole; (iv) if there
shall have been the declaration of a banking moratorium by federal, New York or
California authorities; (v) existing international monetary conditions shall
have undergone a material change which, in the Representative's sole judgment,
makes the offering or delivery of the Stock impracticable or inadvisable; or
(vi) if there has occurred any material change in the financial markets in the
United States or internationally or any outbreak of hostilities or escalation of
existing hostilities or other crisis, the effect of which in the
Representative's sole judgment make the offering or delivery of the Stock
impracticable or inadvisable. If this Agreement shall be terminated pursuant to
this Section 9, there
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shall be no liability of the Company to the Underwriters (except pursuant to
Section 4 and Section 7 of this Agreement) and no liability of the Underwriters
to the Company (except pursuant to Sections 4a and 7 of this Agreement).
10. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by either telecopier or telegraph and, if to
the Underwriters, shall be mailed, telecopied or telegraphed or delivered to Xxx
Xxxxxx & Company, 00000 Xxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxxxxx (telecopier: (000) 000-0000); and
if to the Company, shall be mailed, telecopied, telegraphed or delivered to it
at its office at 73-4460 Queen Kaahumanu Hwy., Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxx
- Xxxx, Xxxxxx 00000 (telecopier: (000) 000-0000) Attention: Xxxxxx X. Xxxxxxxx.
All notices given by telecopy or telegraph shall be promptly confirmed by
letter.
11. PERSONS ENTITLED TO THE BENEFIT OF THIS AGREEMENT. This Agreement
shall inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 4 and Section 7 of this Agreement, the
several parties (in addition to the Company and the several Underwriters)
indemnified under the provisions of Section 4 and Section 7. Nothing in this
Agreement is intended or shall be construed to give to any other person, firm or
corporation any legal or equitable remedy or claim under or in respect of this
Agreement or any provision contained herein. The term "successors and assigns"
as herein used shall not include any purchaser, as such, of any of the Stock
from the several Underwriters.
12. GENERAL. Notwithstanding any provision of this Agreement to the
contrary, the reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties, covenants and
agreements in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof or by or on behalf of
the Company or their respective directors or officers and (c) delivery and
payment for the Stock under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of Sections
2(r), 3(f), 3(g), 3(h), 3(i) and 3(j) of this Agreement shall be of no further
force or effect.
This Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which together shall constitute one and
the same instrument.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS, AND NOT THE LAWS PERTAINING TO CHOICE OR CONFLICT OF LAWS, OF THE
STATE OF CALIFORNIA.
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13. AUTHORITY OF THE REPRESENTATIVE. In connection with this Agreement,
the Representative will act for and on behalf of the several Underwriters, and
any action taken under this Agreement by the Representative, as representative
of the several Underwriters, will be binding on all of the Underwriters.
If the foregoing correctly sets forth your understanding, please so
indicate by signing 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,
CYANOTECH CORPORATION
By: Xxxxxx X. Xxxxxxxx, Ph.D.
Its: President and Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
XXX XXXXXX & COMPANY
By:
--------------------------
Xxxxx X. Xxxxxxxx
Managing Director
On its behalf and on behalf of
each of the several Underwriters
named in Schedule I hereto
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SCHEDULE I
UNDERWRITERS
Shares of Firm Stock
Underwriters to be Purchased
----------------------------------- -----------------------------------
Xxx Xxxxxx & Company
---------
Total
---------
---------
-36-
ANNEX A
Matters to be Covered in the Opinion of
Xxxxxxx, Xxxxxxx & Xxxxxxxx
(i) The shares of capital stock of the Company and its subsidiaries
that have been issued in the previous three years have not been issued in
violation of any applicable federal securities laws, provided that in
rendering their opinion as to applicable federal securities laws, such
counsel may assume, unless counsel has knowledge of facts that may render
such assumption unreasonable, that any purchasers had, to the extent relevant
and represented by such purchasers in writing, any required investment intent,
(ii) The execution, delivery and performance of this Agreement and the
issuance and sale of the Stock do not (A) conflict with, violate, result in a
breach of or constitute a default (or an event that with notice or lapse of
time, or both, would constitute a default) under any agreement (including,
without limitation, an agreement with respect to registration rights) to which
the Company is a party or by which it or any of its properties or assets is
bound and which is filed as an exhibit to, or incorporated by reference in,
the Registration Statement or (B) result in violation of any material federal
or California law, rule or regulation or, to the best knowledge of such
counsel, any writ, judgment, order, injunction or decree of any government,
governmental body, agency or court or any arbitration tribunal having
jurisdiction over the Company or any of its properties,
(iii) The Underwriting Agreement 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,
(iv) Except for the order of the Commission making the Registration
Statement effective and similar authorizations required under the securities or
"Blue Sky" laws of certain jurisdictions (as to which such counsel need express
no opinion), no consent, approval, authorization or other order of any federal
or California governmental body or, to the knowledge of such counsel, other
person is required in connection with the authorization, issuance, sale and
delivery of the Stock and the execution, delivery and performance by the Company
of the Underwriting Agreement;
(v) The Registration Statement has become effective under the Securities
Act and, to the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or threatened under the
Securities Act;
(vi) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements, financial data and
supporting schedules included therein, as to which such counsel need express no
opinion), as of the effective date of the Registration Statement, complied as to
form in all material respects with the requirements of the Securities Act and
the applicable Rules and Regulations. The Company satisfies the requirements
for filing a registration statement on Form SB-2;
(vii) The description in the Registration Statement and the Prospectus of
the Company's contracts is accurate in all material respects and fairly presents
in all material respects the information required to be presented by the
Securities Act and the Rules and Regulations;
(viii) To the best knowledge of such counsel, there are no agreements,
contracts, licenses, leases or documents of a character required to be described
or referred to in the Registration Statement or Prospectus or to be filed as an
exhibit
-38-
to the Registration Statement that are not described or referred to therein and
filed as required;
(ix) To the best knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company or any of its
subsidiaries of a character which are required to be disclosed in the
Registration Statement or the Prospectus by the Securities Act or the applicable
Rules and Regulations, other than those described therein;
(x) To the best knowledge of such counsel, neither the Company nor any of
its subsidiaries are presently in breach of, or in default under, any bond,
debenture, note or other evidence of indebtedness or any contract, indenture,
mortgage, deed of trust, loan agreement, lease, license or, without limitation,
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which any of their properties are bound and that is filed
as an exhibit to, or incorporated by reference in, the Registration Statement
and that, individually or in the aggregate, is material to the business,
properties, condition (financial or otherwise), results of operations or
prospects of the Company and its subsidiaries taken as a whole; and
(xi) To the best knowledge of such counsel, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to any
securities of the Company.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, the independent public accountants of the Company, the Representative
and counsel to the Underwriters, at which conferences the contents of the
Registration Statement and the Prospectus and related matters were discussed
and, although they have not independently verified the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus, nothing has come to the attention of such counsel that caused them
to believe that, at the time the Registration Statement became effective, the
Registration Statement (except as to financial statement, financial data and
supporting schedules contained therein, as to which such counsel need express no
opinion) 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 Stock is to be purchased, as the case may be, the Prospectus 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, in
light of the circumstances under which they were made, not misleading.
-39-
ANNEX B
Matters to be Covered in the Opinion of
Nevada Counsel
(i) Each of 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 its jurisdiction of incorporation;
(ii) Each of the Company and each of its subsidiaries has the corporate
power to own, lease and operate its properties and to conduct its business as
described in the Prospectus;
(iii) Each of the Company and each of its subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions in which the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where the failure so to
qualify would not have a material adverse effect on the business, properties,
condition (financial or otherwise), results of operations or prospects of the
Company and its subsidiaries taken as a whole;
(iv) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated therein; all outstanding shares of Series A Preferred Stock of the
Company shall automatically convert into shares of Common Stock as of the
Closing as described in the Prospectus; the issued and outstanding shares of
capital stock of the Company and its subsidiaries have been duly and validly
authorized and issued, are fully paid and nonassessable and have not been issued
in violation of any preemptive right or other rights to subscribe for or
purchase securities; and the Company directly or indirectly owns all of the
issued and outstanding equity securities of each of its subsidiaries and there
are no outstanding options, warrants or other rights to acquire any equity
securities of any such subsidiary;
(v) The Company has corporate power and authority to enter into the
Agreement and to issue, sell and deliver the Stock to the Underwriters;
(vi) The execution, delivery and performance of the Agreement and the
issuance and sale of the Stock do not (A) conflict with, violate, result in a
breach of or constitute a default (or an event that with notice or lapse of
time, or both, would constitute a default) under the Articles of Incorporation
or By-laws of the Company or (B) result in violation of any material federal or
Nevada law, rule or regulation or, to the
-40-
best knowledge of such counsel, any writ, judgment, order, injunction or decree
of any government, governmental body, agency or court or any arbitration
tribunal having jurisdiction over the Company or any of its properties,
(vii) The Stock is duly authorized and, when issued and delivered against
payment in full therefor, will be validly issued, fully paid, non-assessable,
and free of preemptive rights;
(viii) The Underwriting Agreement 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;
(ix) Except for the order of the Commission making the Registration
Statement effective and similar authorizations required under the securities or
"Blue Sky" laws of certain jurisdictions (as to which such counsel need express
no opinion), no consent, approval, authorization or other order of any federal
or Nevada governmental body or, to the knowledge of such counsel, other person
is required in connection with the authorization, issuance, sale and delivery of
the Stock and the execution, delivery and performance by the Company of the
Underwriting Agreement;
(x) The terms and provisions of the capital stock of the Company conform
in all material respects to the description thereof contained in the
Registration Statement and Prospectus, and the information in the Prospectus
under the caption "Description of Capital Stock," to the extent it constitutes
matters of law or legal conclusions, has been reviewed by such counsel and is
correct and the form of certificate for the Stock complies with Nevada law; and
(xi) The description in the Registration Statement and the Prospectus of
the charter and bylaws of the Company is accurate in all material respects.
-41-
