2,000,000 SHARES
ZOMAX OPTICAL MEDIA, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
May ____, 1998
Xxxx X. Xxxxxxx and Company, Incorporated
Cruttenden Xxxx, Incorporated
Pacific Crest Securities Inc.
AS REPRESENTATIVES OF THE SEVERAL UNDERWRITERS
c/o Xxxx X. Xxxxxxx and Company, Incorporated
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Ladies and Gentlemen:
Zomax Optical Media, Inc., a Minnesota corporation (the "Company"), and
the shareholders of the Company named in Schedule II hereto (the "Selling
Shareholders") propose to sell to the several underwriters named in Schedule
I hereto (the "Underwriters"), for whom you are acting as the representatives
(the "Representatives"), an aggregate of Two Million (2,000,000) shares (the
"Firm Shares") of Common Stock, without par value, of the Company (the
"Common Stock"), of which 1,600,000 shares will be sold by the Company and
400,000 shares will be sold by the Selling Shareholders. The respective
amounts of Firm Shares to be so purchased by the several Underwriters are set
forth opposite their names in Schedule I hereto, and the respective amounts
to be sold by the Selling Shareholders are set forth opposite their names in
Schedule II hereto. The Company and the Selling Shareholders are sometimes
referred to herein collectively as the "Sellers." In addition, the Company
proposes, subject to the terms and conditions stated herein, to grant to the
Underwriters an option to purchase an aggregate of up to 300,000 additional
shares of Common Stock upon the request of the Representative solely for the
purpose of covering over allotments (the "Option Shares"). The Firm Shares
and the Option Shares are referred to herein collectively as the "Shares."
As Representatives, you have advised the Company and the Selling
Shareholders (i) that you are authorized to enter into this Agreement on
behalf of the Underwriters and (ii) that the Underwriters are willing, acting
severally and not jointly, to purchase the number of Firm Shares, aggregating
in total Two Million (2,000,000) shares, set forth opposite their respective
names in Schedule I hereto, plus their pro rata portion of the Option Shares
purchased if you elect to exercise the over allotment option in whole or in
part for the accounts of the Underwriters.
The Company hereby confirms the arrangements with respect to the
purchase of the Shares severally by each of the Underwriters. The Company
has been advised and
hereby acknowledges that Xxxx X. Xxxxxxx and Company, Incorporated has been
duly authorized to act as the representative of the Underwriters. As used in
this Agreement, the term "Underwriter" refers to any individual member of the
underwriting syndicate and includes any party substituted for an Underwriter
under Section 9 hereof.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDERS
A. The Company represents and warrants to, and agrees with, each of
the several Underwriters as follows:
i. A registration statement on Form S-1 (Registration No.
333-______) with respect to the Shares has been prepared by
the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules
and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission")
promulgated thereunder and has been filed with the Commission
under the Act. If the Company has elected to rely upon Rule
462(b) under the Act to increase the size of the offering
registered under the Act, the Company will prepare and file
with the Commission a registration statement with respect to
such increase pursuant to Rule 462(b). Copies of the
registration statement as amended to date have been delivered
by the Company to the Representatives. Such registration
statement, including a registration statement (if any) filed
pursuant to Rule 462(b) under the Act and the information (if
any) deemed to be part thereof pursuant to Rules 430A and
434(d) under the Act, and all prospectuses included as a part
thereof, all financial statements included in such
registration statement, and all schedules and exhibits
thereto, as amended at the time when the registration
statement shall become effective, are herein referred to as
the "Registration Statement," and the term "Prospectus" as
used herein shall mean the final prospectus included as a part
of the Registration Statement on file with the Commission when
it becomes effective (except that if a prospectus is filed by
the Company pursuant to Rules 424(b) and 430A under the Act,
the term "Prospectus" as used herein shall mean the prospectus
so filed pursuant to Rules 424(b) and 430A (including any term
sheet meeting the requirements of Rule 434 under the Act
provided by the Company for use with a prospectus subject to
completion within the meaning of Rule 434 in order to meet the
requirements of Section 10(a) of the Act)). The term
"Preliminary Prospectus" as used herein means any prospectus
used prior to the Effective Date (as defined in Section 5(A)
hereof) and included as a part of the Registration Statement,
prior to the time it becomes or became
effective under the Act and any prospectus subject to
completion as described in Rules 430A or 434 under the Act.
Copies of the Registration Statement, including all exhibits
and schedules thereto, any amendments thereto and all
Preliminary Prospectuses have been delivered to you.
ii. The Registration Statement has been declared effective,
and at all times subsequent thereto up to each closing date,
the Registration Statement and Prospectus and all amendments
thereof and supplements thereto, will comply in all material
respects with the provisions of the Act and the Rules and
Regulations. Neither the Commission nor any state securities
division has issued any order (i) preventing or suspending the
use of any Preliminary Prospectus, (ii) issuing a stop order
with respect to the offering of the Shares or (iii) requiring
the recirculation of a Preliminary Prospectus. The
Registration Statement (as amended, if the Company shall have
filed with the Commission any post effective amendments
thereto) does not and will not contain any untrue statement of
a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading. Each Preliminary Prospectus, at the time of
filing thereof, the Registration Statement as of the date
declared effective and at all times subsequent thereto up to
each closing date, and the Prospectus (as amended or
supplemented, if the Company shall have filed with the
Commission any amendment thereof or supplement thereto)
conformed and conforms in all material respects to the
requirements of the Act and the Rules and Regulations and did
not, does not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading; provided, however, that none of the
representations and warranties in this Subsection 1(A)(ii)
shall apply to statements in, or omissions from, the
Registration Statement or the Prospectus (or any amendment
thereof or supplement thereto) which are based upon and
conform to information furnished to the Company by the
Underwriters, or by any Selling Shareholder, in writing
specifically for use in the preparation of the Registration
Statement or the Prospectus or any such amendment or
supplement. There is no contract or other document of the
Company of a character required by the Act or the Rules and
Regulations to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration
Statement that has not been described
or filed as required.
iii. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the State of Minnesota, with full corporate power and
authority, to own, lease and operate its properties and
conduct its business as described in the Registration
Statement and Prospectus. The Company is duly qualified to do
business as a foreign corporation in good standing in each
jurisdiction in which the ownership or lease of its
properties, or the conduct of its business, requires such
qualification and in which the failure to be qualified or in
good standing would have a material adverse effect on the
condition (financial or otherwise), results of operations,
shareholders' equity, business, property or prospects of the
Company. Except as set forth in Exhibit 21.1 to the
Registration Statement, the Company has no subsidiaries, is
not affiliated with, nor owns any stock or other equity
interest of, any other company or business entity.
iv. The Company has all necessary material authorizations,
licenses, approvals, consents, permits, certificates and
orders of and from all state, federal, foreign and other
governmental or regulatory authorities to own its properties
and to conduct its business as described in the Registration
Statement and Prospectus, is conducting its business in
substantial compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting
business, and has received no notice of nor has it knowledge
of any basis for any proceeding or action for the revocation
or suspension of any such authorizations, licenses, approvals,
consents, permits, certificates or orders.
v. The Company is not in violation of or in default under
(i) its Articles of Incorporation or Bylaws, (ii) or in
default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness or in
any contract, license, indenture, bond mortgage, loan
agreement, joint venture or partnership agreement, lease,
agreement or instrument to which the Company is a party or by
which the Company or any of its properties are bound, (iii)
any law, order, rule, regulation, writ, injunction or decree
of any government, governmental instrumentality or court,
domestic or foreign, which violation or default would have a
material adverse effect on the condition (financial or
otherwise), results of operations, shareholders' equity,
business, property or prospects of the Company or the ability
of the
Company to consummate the transactions contemplated hereby.
vi. The Company has full requisite power and authority to
enter into this Agreement. This Agreement has been duly
authorized, executed and delivered by the Company and will be
a valid and binding agreement on the part of the Company,
enforceable in accordance with its terms, if and when this
Agreement shall have become effective in accordance with
Section 8, except as enforceability may be limited by the
application of bankruptcy, insolvency, moratorium or similar
laws affecting the rights of creditors generally and by
judicial limitations on the right of specific performance and
other equitable remedies, and except as the enforceability of
the indemnification or contribution provisions hereof may be
affected by applicable federal or state securities laws. The
performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a material
breach or violation of any of the terms and provisions of or
constitute a material default under (i) any bond, debenture,
note or other evidence of indebtedness, or any contract,
license, indenture, mortgage, loan agreement, joint venture or
partnership agreement, lease, agreement or other instrument to
which the Company is a party or by which the property of the
Company is bound, (ii) the Company's Articles of Incorporation
or Bylaws, or (iii) any statute or any order, rule or
regulation of any court, governmental agency or body having
jurisdiction over the Company. No consent, approval,
authorization or order of any court, governmental agency or
body is required for the consummation by the Company of the
transactions on its part herein contemplated, except such as
may be required under the Act or under state or other
securities laws.
vii. There are no actions, suits or proceedings pending
before any court or governmental agency, authority or body to
which the Company is a party or of which the business or
property of the Company is the subject which (i) might result
in any material adverse change in the condition (financial or
otherwise), shareholders' equity, results of operations,
business or prospects of the Company, (ii) materially and
adversely affect its properties or assets, or (iii) prevent
consummation of the transactions contemplated by this
Agreement. To the best of the Company's knowledge, no such
actions, suits or proceedings are threatened.
viii. The Company has the duly authorized and outstanding
capitalization set forth under the caption "Capitalization" in
the Prospectus. The outstanding shares of capital stock of
the
Company have been duly authorized and validly issued, fully
paid and nonassessable. The Shares conform in substance to all
documents relating thereto contained in the Registration
Statement and Prospectus. The Shares to be sold by the
Company hereunder have been duly authorized and, when issued
and delivered pursuant to this Agreement, will be validly
issued, fully paid and nonassessable and will conform to the
description thereof contained in the Prospectus. No statutory
preemptive rights or similar rights to subscribe for or
purchase shares of capital stock of any security holders of
the Company exist with respect to the issuance and sale of the
Shares by the Company. Except as described in the Prospectus,
the Company has no agreement with any security holder which
gives such security holder the right to require the Company to
register under the Act any securities of any nature owned or
held by such person in connection with the transactions
contemplated by this Agreement. Except as described in the
Prospectus, there are no outstanding options, warrants,
agreements, contracts or other rights to purchase or acquire
from the Company any shares of its capital stock. Except as
described in the Prospectus, there are no agreements among the
Company's executive officers and directors and any other
persons with respect to the voting or transfer of the
Company's capital stock or with respect to other aspects of
the Company's affairs. Upon payment for and delivery of the
Shares to be sold by the Company pursuant to this Agreement,
the Underwriters will acquire good and marketable title to
such Shares, free and clear of all liens, encumbrances or
claims created by actions of the Company. The certificates
evidencing the Shares will comply as to form with all
applicable provisions of the laws of the State of Minnesota.
ix. The financial statements of the Company, together with
the related notes, included in the Registration Statement and
Prospectus (the "Financial Statements") fairly and accurately
present the financial position, the results of operations and
changes in shareholders' equity and cash flows of the Company
at the dates and for the respective periods to which such
Financial Statements apply. The Financial Statements have been
prepared in accordance with generally accepted accounting
principles, consistently applied throughout the periods
involved, and all adjustments necessary for a fair
presentation of results for such periods have been made,
except as otherwise stated therein; and the supporting
schedules included in the Registration Statement present
fairly the information required to be stated therein. No
other financial statements or schedules are required to be
included
in the Registration Statement. The summary and selected
consolidated financial data included in the Registration
Statement present fairly the information shown therein on the
basis stated in the Registration Statement and have been
compiled on a basis consistent with the financial statements
presented therein.
x. Arthur Xxxxxxxx, LLP, which has expressed its opinion
with respect to the financial statements filed with the
Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the
rules and regulations thereunder.
xi. Since the respective dates as of which information is
given in the Registration Statement and Prospectus, (i) there
has not been any material adverse change, or any development,
event or occurrence in the business of the Company that, taken
together with other developments, events and occurrences with
respect to such business, would have or would reasonably be
expected to have a material adverse effect on the condition
(financial or otherwise) of the Company or the management,
shareholders' equity, results of operations, business,
property or prospects of the Company, whether or not occurring
in the ordinary course of business, (ii) there has not been
any transaction not in the ordinary course of business entered
into by the Company which is material to the Company, other
than transactions described or contemplated in the
Registration Statement, (iii) the Company has not incurred any
material liabilities or obligations, which are not in the
ordinary course of business or which could result in a
material reduction in the future earnings of the Company, (iv)
the Company has not sustained any material loss or
interference with its business or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered
by insurance, (v) there has not been any change in the capital
stock of the Company (other than upon the exercise of options
described in the Registration Statement) or any material
increase in the short-term or long-term debt (including
capitalized lease obligations) of the Company, (vi) there has
not been any declaration or payment of any dividends or any
distributions of any kind with respect to the capital stock of
the Company, other than any dividends or distributions
described or contemplated in the Registration Statement, or
(vii) there has not been any issuance of warrants, options,
convertible securities or other rights to purchase or acquire
capital stock of the Company.
xii. The Company has filed all necessary federal, state, local
and foreign income and franchise tax returns and paid all
taxes shown as due thereon. The Company has no knowledge of
any tax deficiency which either has been or might be asserted
against it which would materially and adversely affect the
Company's business or properties.
xiii. The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's
general or specific authorizations and (ii) transactions are
recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken
with respect to any differences.
xiv. The Company has good and marketable title to all of the
property, real and personal, described in the Registration
Statement or Prospectus as being owned by the Company, free
and clear of all liens, encumbrances, equities, charges or
claims, except as do not materially interfere with the uses
made and to be made by the Company of such property or as
disclosed in the Financial Statements. The Company has valid
and binding leases to the real and personal property described
in the Registration Statement or Prospectus as being under
lease to the Company, except as to those leases which are not
material to the Company or the lack of enforceability of which
would not materially interfere with the use made and to be
made by the Company of such leased property.
xv. There has been no unlawful storage, treatment or
disposal of waste by the Company at any of the facilities
owned or leased thereby, except for such violations which
would not have a material adverse effect on the condition,
(financial or otherwise) or the shareholders' equity, results
of operation, business, properties or prospects of the
Company. There has been no material spill, discharge, leak,
emission, ejection, escape, dumping or release of any kind
onto the properties owned or leased by the Company, or into
the environment surrounding those properties, of any toxic or
hazardous substances, as defined under any federal, state or
local regulations, laws or statutes, except for those releases
either permissible under such regulations, laws or statutes or
otherwise
allowable under applicable permits or which would not have a
material adverse effect on the condition (financial or
otherwise) or the shareholders' equity, results of operation,
business, properties or prospects of the Company.
xvi. Each employee benefit plan (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) ("Employee Benefit Plan"), and each bonus,
retirement, pension, profit sharing, stock bonus, thrift,
stock option, stock purchase, incentive, severance, deferred
or other compensation or welfare benefit plan, program,
agreement or arrangement of, or applicable to employees or
former employees of, the Company or with respect to which the
Company could have any liability ("Benefit Plans"), was or has
been established, maintained and operated in all material
respects in compliance with all applicable federal, state, and
local statutes, orders, governmental rules and regulations,
including, but not limited to, ERISA and the Internal Revenue
Code of 1986, as amended (the "Code"). No Benefit Plan is or
was subject to Title IV of ERISA or Section 302 of ERISA or
Section 412 of the Code. The Company does not, either directly
or indirectly as a member of a controlled group within the
meaning of Sections 414(b), (c), (m) and (o) of the Code
("Controlled Group"), have any material liability that remains
unsatisfied or arising under Section 502 of ERISA, Subchapter
D of Chapter 1 of Subtitle A of the Code or under Chapter 43
of Subtitle D of the Code. No action, suit, grievance,
arbitration or other matter of litigation or claim with
respect to any Benefit Plan (other than routine claims for
benefits made in the ordinary course of plan administration
for which plan administrative procedures have not been
exhausted) is pending or, to the Company's knowledge,
threatened or imminent against or with respect to any Benefit
Plan, any member of a Controlled Group that includes the
Company, or any fiduciary within the meaning of Section 3(21)
of ERISA with respect to a Benefit Plan which, if determined
adversely to the Company, would have a material adverse effect
on the Company. Neither the Company nor any member of a
Controlled Group that includes the Company, has any knowledge
of any facts that could give rise to any action, suit,
grievance, arbitration or any other manner of litigation or
claim with respect to any Benefit Plan.
xvii. No labor disturbance or dispute by the employees or
consultants or contractors of the Company exists or, to the
Company's knowledge, is threatened which could reasonably be
expected to have a material adverse effect on the conduct of
the
business or the financial condition (financial or otherwise),
results of operations, properties or prospects of the Company.
xviii. Except as disclosed in the Prospectus:
a. The Company owns or possesses the full rights to
use or is licensed to use all patents, patent
applications, inventions, copyrights, trademarks,
service marks, applications for registration of
trademarks and service marks, trade secrets, know-how
and other intellectual property proprietary information
or know-how reasonably necessary for the conduct of its
present or intended business as described in the
Prospectus ("Proprietary Rights"); there are no pending
legal, governmental or administrative proceedings
relating to the Proprietary Rights to which the Company
is a party or of which any property of the Company is
subject; and no such proceedings are, to the best of
the Company's knowledge, threatened or contemplated
against the Company by any governmental agency or
authority or by others;
b. The Company has not received notice of any material
conflict or claim with asserted intellectual property
rights of any third parties;
c. To the best of the Company's knowledge, the Company
does not infringe upon the rights or claimed rights of
any person under or, with respect to, any of the
Proprietary Rights referred to in Section 1(A)
(xviii)(a) above; except as disclosed in the
Prospectus, the Company is not obligated nor is it
under any liability whatsoever to make any payments by
way of royalties, fees or otherwise to any owner of,
licensor of, or other claimant to, any Proprietary
Rights, with respect to the use thereof or in
connection with the conduct of its business or
otherwise; and to the best of the Company's knowledge,
the Company is not using any confidential information
or trade secrets of any other party in the conduct of
its business;
d. The Company has not entered into any consent,
indemnification, forbearance to xxx or settlement
agreement with respect to the Proprietary Rights other
than in the ordinary course of business;
e. To the best of the Company's knowledge, the
Proprietary Rights are valid and enforceable and no
registration relating thereto has lapsed, expired or
been abandoned or canceled or is the subject of
cancellation or other adversarial proceedings, and all
applications therefor are pending and are in good
standing;
f. The Company is in compliance in all material
respects with its contractual obligations relating to
the protection of any Proprietary Rights used pursuant
to licenses; and
g. The Company owns and/or has the unrestricted right
to use all trade secrets, including know-how, customer
lists, inventions, designs, processes, computer
programs and any other technical data or information
necessary to the development, manufacture, operation
and sale of all products sold or proposed to be sold by
it, free and clear of any rights, liens and claims of
others.
xix. The Company maintains insurance, which is in full force
and effect, of the types and in the amounts reasonably
adequate for its business and, to the best of its knowledge,
consistent with coverage comparable to the insurance
maintained by similar companies or businesses.
xx. The Company has not sold any securities in violation of
Section 5 of the Act.
xxi. The conditions for use of a registration statement on
Form S-1 for the distribution of the Shares have been
satisfied with respect to the Company.
xxii. The Company intends to apply the proceeds from the sale
of the Shares by it to the purposes and substantially in the
manner set forth in the Prospectus.
xxiii. No person is entitled, directly or indirectly, to
compensation from the Company or the Underwriters for services
as a finder in connection with the transactions contemplated
by this Agreement.
xxiv. All material transactions between the Company and its
shareholders who beneficially own more than 5% of any class of
the Company's voting securities have been accurately disclosed
in the Prospectus, and the terms of each such transaction are
fair to the Company and no less favorable to the Company than
the terms
that could have been obtained from unrelated parties.
xxv. The Company has not distributed and will not distribute
any prospectus or other offering material in connection with
the offering and sale of the Shares other than any Preliminary
Prospectus or the Prospectus or other materials permitted by
the Act to be distributed by the Company.
xxvi. The Company has not taken and will not take, directly
or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to cause or
result in, stabilization or manipulation of the price of the
Common Stock.
xxvii. The Company's application for listing the Shares on the
Nasdaq National Market ("Nasdaq") has been approved.
xxviii. To the Company's knowledge, none of the Company's
officers, directors or security holders has any affiliations
with the National Association of Securities Dealers, Inc.,
except as set forth in the Registration Statement or as
otherwise disclosed in writing to the Representatives.
xxix. The Company has obtained a written agreement,
enforceable by the Representatives, from each officer and
director of the Company and shareholder who holds 5% or more
of the outstanding Common Stock of the Company that for 120
days following the Effective Date, such person will not,
without the Representative's prior written consent, sell,
transfer or otherwise dispose of, or agree to sell, transfer
or otherwise dispose of, other than by gift to donees who
agree to be bound by the same restriction or by will or the
laws of descent, any of his or her Common Stock, or any
options, warrants or rights to purchase Common Stock or any
shares of Common Stock received upon exercise of any options,
warrants or rights to purchase Common Stock, which are
beneficially held by such persons during such 120-day period.
xxx. The Company is not, and upon completion of the sale of
the Shares contemplated hereby will not be, required to
register as an "investment company" under the Investment
Company Act of 1940, as amended.
xxxi. The Company has complied and will comply with all
provisions of Florida Statutes Section 517.075 (Chapter
92-198,
Laws of Florida). Neither the Company, nor any affiliate
thereof, does business with the government of Cuba or with any
person of affiliate located in Cuba.
xxxii. Other than as contemplated by this Agreement, the
Company has not incurred any liability for any finder's fee,
broker's fee or other agent's commission in connection with
the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
B. Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel to the Underwriters
shall be deemed to be a representation and warranty of the Company
to each Underwriter as to the matters covered thereby.
C. Each of the Selling Shareholders severally, but not jointly,
represents and warrants to and agrees with each of the Underwriters
as follows:
i. The Selling Shareholder has duly executed a Custody
Agreement ("Custody Agreement") between the Selling
Shareholder and Norwest Bank Minnesota, National Association,
as Custodian (the "Custodian"), and a Power of Attorney
("Power of Attorney") appointing Xxxxxxx Xxxxxxxx as
attorney-in-fact ("Attorney-In-Fact") with authority to
execute and deliver this Agreement on behalf of the Selling
Shareholder and to take certain other actions with respect
thereto.
ii. The Selling Shareholder now has, and at the First
Closing Date (as defined in Section 2(D) hereof) or Second
Closing Date (as defined in Section 2(E) hereof) (as the case
may be) will have, good and valid title to the Shares to be
sold by such Selling Shareholder, free and clear of any liens,
encumbrances, equities and claims, and full right, power and
authority to effect the sale and delivery of such Shares. The
certificates representing such Shares, which have been
deposited by the Selling Shareholder with the Custodian, were
duly and properly endorsed blank for transfer, or were
accompanied by all documents, duly and properly executed,
necessary to validate the transfer of title thereto to the
Underwriters, free of any legend, restriction on
transferability, proxy, lien, encumbrance, equity or claim
whatsoever; and, upon the delivery of, and against payment
for, such Shares pursuant to this Agreement, the Underwriters
will acquire good and valid title thereto free and clear of
any legends, liens, restrictions on transferability, proxies,
encumbrances, equities or claims.
iii. The Selling Shareholder is disposing of the Shares held by
him or her for his or her account and is not selling such Shares,
directly or indirectly, for the benefit of the Company or the
Underwriters, and no part of the proceeds of such sale received by
such Selling Shareholder will inure, either directly or indirectly, to
the benefit of the Company.
iv. The Selling Shareholder has full right, power and authority
to execute and deliver this Agreement, the Power of Attorney, and the
Custody Agreement and to perform the obligations of the Selling
Shareholder under this Agreement, the Power of Attorney and the
Custody Agreement. This Agreement, the Power of Attorney and the
Custody Agreement are each a valid and binding obligation of such
Selling Shareholder, except as the obligations of the Selling
Shareholder under the indemnification and contribution provisions
hereof may be limited under federal securities laws. The execution
and delivery of this Agreement and the consummation by such Selling
Shareholder of the transactions herein contemplated and the
fulfillment by such Selling Shareholder of the terms hereof will not
require any consent, approval, authorization, or other order of any
court regulatory body, administrative agency or other governmental
body (except as may be required under the Act, state securities laws
or Blue Sky laws) and will not result in a breach of any of the terms
and provisions of, or constitute a default under, governing documents
of such Selling Shareholder, if not an individual, any indenture,
mortgage, deed of trust or other agreement or instrument to which such
Selling Shareholder is a party, or, to the knowledge of such Selling
Shareholder, any order, rule or regulation applicable to such Selling
Shareholder of any court or of any regulatory body or administrative
agency or other governmental body having jurisdiction.
v. The Selling Shareholder has not taken and will not take
directly or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock of
the Company. Other than as permitted by the Act, the Selling
Shareholder will not distribute any prospectus or other offering
material in connection with the offering of the Shares.
vi. The information pertaining to such Selling Shareholder the
caption "Principal and Selling Shareholders" in the Prospectus is
complete and accurate in all material respects. All information
furnished to the Company in writing by the Selling Shareholder for use
in the preparation of the Registration Statement and Prospectus is
true in all material respects and does not omit any material fact
necessary to make such information not misleading. When the
Registration Statement becomes effective, and at all times subsequent
thereto up to and including any Closing Date, the Registration
Statement and the Prospectus, as may be amended or supplemented, will
not contain any untrue statement of a material fact with respect to
the Selling Shareholder or omit, with respect to such Selling
Shareholder, to state a material fact required to be stated therein or
necessary to make the statements therein with respect to the Selling
Shareholder misleading.
2. PURCHASE, SALE, DELIVERY AND PAYMENT.
A. On the basis of the representations, warranties, and
agreements herein contained, but subject to the terms and conditions
herein set forth, the Sellers agree to sell to each of the Underwriters,
and the Underwriters agree, severally and not jointly, to purchase, at a
purchase price equal to 93% of the per share price to public of
$________ (the "Offering Price"), the respective amount of Firm Shares
set forth opposite such Underwriter's name in Schedule I hereto, subject
to adjustments in accordance with Section 9 hereof. The number of Firm
Shares to be purchased by each Underwriter from each Seller shall be as
nearly as practicable in the same proportion to the total number of Firm
Shares being sold by each Seller as the number of Firm Shares being
purchased by each Underwriter bears to the total number of Firm Shares
to be sold hereunder. The Underwriters will collectively purchase all
of the Firm Shares if any are purchased.
B. Certificates in negotiable form for the total number of Shares
to be sold hereunder by the Selling Shareholders have been placed in
custody with the Custodian pursuant to the Custody Agreement executed by
each Selling Shareholder for delivery of all Shares to be sold hereunder
by the Selling Shareholders. Each of the Selling Shareholders
specifically agrees that the Shares represented by the certificates held
in custody for the Selling Shareholders under the Custody Agreement are
subject to the interests of the Underwriters hereunder, that the
arrangements made by the Selling Shareholders for such custody are to
that extent irrevocable, and that the obligations of the Selling
Shareholders hereunder shall not be terminable by any act or deed of the
Selling Shareholders (or by any other person, firm or corporation
including the Company, the Custodian or the Underwriters) or by
operation of law (including the death of an individual Selling
Shareholder or the dissolution or termination of a Selling
Shareholder which is not an individual person) or by the occurrence of
any other event or events, except as set forth in the Custody Agreement.
If any such event should occur prior to the delivery to the
Underwriters of the Shares hereunder, certificates for the Shares shall
be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such event has not occurred. The
Custodian is authorized to receive and acknowledge receipt of the
proceeds of sale of the Shares held by it against delivery of such
Shares.
C. On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the
Company hereby grants an option to the Underwriters to purchase an
aggregate of up to 300,000 Option Shares at the same purchase price as
the Firm Shares for use solely in covering any over allotments made by
the Underwriters in the sale and distribution of the Firm Shares. The
option granted hereunder may be exercised at any time (but not more than
once) within 30 days after the Effective Date (as defined in Section
5(A) hereof) upon notice (confirmed in writing) by the Representatives
to the Company setting forth the aggregate number of Option Shares as to
which the Underwriters are exercising the option and the date on which
certificates for such Option Shares are to be delivered. Option Shares
shall be purchased severally for the account of each Underwriter in
proportion to the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule I hereto. The option granted hereby may be
canceled by the Representatives upon notice to the Company as to the
Option Shares for which the option is unexercised at the time of
expiration of the 30-day period.
D. The Company and the Selling Shareholders will deliver the Firm
Shares to the Representatives at the offices of Xxxxxx and Xxxxxx,
Professional Association, 2400 IDS Center, 00 Xxxxx Xxxxxx Xxxxxx,
Xxxxxxxxxxx, XX 00000, unless some other place is agreed upon, at 10:00
a.m., Minneapolis time, against payment of the purchase price at the
same place, on the third full business day after trading of the Shares
has commenced, or, if the offering commences after 4:30 p.m., on the
fourth full business day after commencement of the offering, or such
earlier time as may be agreed upon between the Representatives and the
Company, such time and place being herein referred to as the "First
Closing Date."
E. The Company will deliver the Option Shares being purchased by
the Underwriters to the Representatives at the above-referenced offices
of Xxxxxx and Xxxxxx, Professional Association, set forth in Section
2(D) above, unless some other place is agreed, at 10:00 a.m.,
Minneapolis
time, against payment of the purchase price at such place, on the date
determined by the Representatives and of which the Company has received
notice as provided in Section 2(C), which shall not be earlier than two
nor later than five full business days after the exercise of the option
as set forth in Section 2(C), or at such other time not later than ten
full business days thereafter as may be agreed upon by the
Representatives and the Company, such time and date being herein
referred to as the "Second Closing Date."
F. Certificates for the Shares to be delivered will be registered
in such names and issued in such denominations as the Underwriters shall
request two business days prior to the First Closing Date or the Second
Closing Date, as the case may be. The certificates will be made
available to the Underwriters in definitive form for the purpose of
inspection and packaging at least twenty-four (24) hours prior to the
respective closing dates.
G. Payment to the Company and the Selling Shareholders for the
Shares sold shall be made by wire transfer to an account designated by
the Company or by certified or official bank check or checks in Clearing
House funds, payable to the order, respectively, of the Company and the
Selling Shareholders.
3. UNDERWRITERS' OFFERING TO THE PUBLIC.
A. The Underwriters will make a public offering of the Shares
directly to the public (which may include selected dealers who are
members in good standing of the National Association of Securities
Dealers, Inc. (the "NASD") or foreign dealers not eligible for
membership in the NASD but who have agreed to abide by the
interpretation of the NASD Board of Governor's with respect to
free-riding and withholding) as soon as the Underwriters deem
practicable after the Registration Statement becomes effective at the
Offering Price, subject to the terms and conditions of this Agreement
and in accordance with the Prospectus. Concessions from the Offering
Price may be allowed selected dealers who are members of the NASD as the
Underwriters determine and the Underwriters will furnish the Company
with such information about the distribution arrangements as may be
necessary for inclusion in the Registration Statement. It is understood
that the Offering Price and such concessions may vary after the public
offering. The Underwriters shall offer and sell the Shares only in
jurisdictions in which the offering of Shares has been duly registered
or qualified, or is exempt from registration or qualification, and shall
take reasonable measures to effect compliance with applicable state and
local securities laws.
B. It is understood that the Representatives, individually and
not as representatives, may (but shall not be obligated to) make payment
on behalf of any Underwriter or Underwriters for the Shares to be
purchased by such Underwriter or Underwriters. No such payment by the
Representatives shall relieve such Underwriter or Underwriters from any
of its or their other obligations hereunder.
4. COVENANTS OF THE COMPANY.
The Company hereby covenants and agrees with each of the several
Underwriters as follows:
A. If the Company has elected to rely on Rule 430A under the Act,
the Company will prepare and file a Prospectus (or term sheet within the
meaning of Rule 434 under the Act) containing the information omitted
therefrom pursuant to Rule 430A under the Act with the Commission within
the time period required by, and otherwise in accordance with the
provisions of, Rules 424(b), 430A and 434, if applicable, under the Act;
if the Company has elected to rely upon Rule 462(b) under the Act to
increase the size of the offering registered under the Act, the Company
will prepare and file a registration statement with respect to such
increase with the Commission within the time period required by, and
otherwise in accordance with the provisions of, Rule 462(b) under the
Act; the Company will prepare and file with the Commission, promptly
upon the request of the Representatives, any amendments or supplements
to the Registration Statement or Prospectus (including any term sheet
within the meaning of Rule 434 under the Act) that, in the opinion of
the Representatives, may be necessary or advisable in connection with
distribution of the Securities by Underwriters; and the Company will not
file any amendment or supplement to the Registration Statement or
Prospectus (including any term sheet within the meaning of Rule 434
under the Act) to which the Representatives shall reasonably object by
notice to the Company after having been furnished with a copy a
reasonable time prior to the filing.
B. The Company will advise the Representatives promptly of (i)
any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, (ii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of
the Prospectus, (iii) the suspension of the qualification of the Shares
for offering or sale in any jurisdiction, or (iv) the institution or
threatening of any proceedings for that purpose, and the Company will
use its best efforts to prevent the
issuance of any such stop order preventing or suspending the use of the
Prospectus or suspending such qualification and to obtain as soon as
possible the lifting thereof, if issued.
C. The Company will promptly prepare and file at its own expense
with the Commission any amendments of, or supplements to, the
Registration Statement and the Prospectus which may be necessary in
connection with the distribution of the Shares by the Underwriters.
During the period when a Prospectus relating to the Shares is required
to be delivered under the Act, the Company will promptly file any
amendments of, or supplements to, the Registration Statement and the
Prospectus which may be necessary to correct any untrue statement of a
material fact or any omission to state any material fact necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company will not file any amendment
of, or supplement to, the Registration Statement or Prospectus, after
the Effective Date, which shall not previously have been submitted to
the Representatives and its counsel a reasonable time prior to such
proposed filing or to which the Representatives shall have reasonably
objected. In case any Underwriter is required to deliver a prospectus
in connection with sales of any Shares at any time nine months or more
after the Effective Date, upon the request of the Representatives but at
the expense of such Underwriter, the Company will prepare and deliver to
such Underwriter as many copies as the Representatives may request of an
amended or supplemented Prospectus complying with Section 10(a)(3) of
the Act.
D. The Company will endeavor to qualify the Shares for sale under
the securities laws of such jurisdictions as the Representatives may
reasonably designate and the Company will file such consents to service
of process or other documents necessary or appropriate in order to
effect such qualification or registration. In each jurisdiction in
which the Shares shall have been qualified or registered as above
provided, the Company will continue such qualifications or registrations
in effect for so long as may be required for purposes of the
distribution of the Shares and make and file such statements and reports
in each year as are or may be reasonably required by the laws of such
jurisdiction to permit secondary trading of the same; provided, however,
that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take
any action which would subject it to the service of process in suits,
other than those arising out of the offering or sale of the Shares.
E. The Company will furnish to the Representatives, as soon as
available, copies of the Registration Statement and all amendments (two
of which will be signed and which shall include all exhibits), each
Preliminary Prospectus, if any, the Prospectus and any amendments or
supplements to such documents including any prospectus prepared to
permit compliance with Section 10(a)(3) of the Act, all in such
quantities as the Representatives may from time to time reasonably
request. The Company specifically authorizes the Underwriters and all
dealers to whom any of the Shares may be sold by the Underwriters to use
and distribute copies of such Preliminary Prospectuses and Prospectuses
in connection with the sale of the Shares as and to the extent permitted
by the federal and applicable state and local securities laws.
F. The Company will make generally available to its security
holders an earnings statement, in a form complying with requirements of
Section 11(a) of the Act and Rule 158 thereunder, as soon as practicable
and in any event not later than 45 days after the end of its fiscal
quarter in which occurs the first anniversary date of the Effective
Date, meeting the requirements of Section 11(a) of the Act covering a
period of at least 12 consecutive months beginning after the Effective
Date, and will advise you in writing when such statement has been so
made available.
G. The Company will, for such period up to two years from the
First Closing Date, deliver to the Representatives copies of its annual
report and copies of all other documents, and information furnished by
the Company to its security holders or filed with any securities
exchange pursuant to the requirements of such exchange or with the
Commission pursuant to the Act or the Exchange Act, or any state
securities commission by the Company. The Company will deliver to the
Representatives similar reports with respect to significant
subsidiaries, if any, as that term is defined in the rules and
regulations under the Act, which are not consolidated in the Company's
financial statements.
H. The Company shall be responsible for and pay all costs and
expenses incident to the performance of its obligations under this
Agreement including, without limiting the generality of the foregoing,
(i) all costs and expenses in connection with the preparation, printing
and filing of the Registration Statement (including financial statements
and exhibits),
Preliminary Prospectuses, if any, the Prospectus and any amendments
thereof or supplements to any of the foregoing; (ii) the issuance and
delivery of the Shares, including taxes, if any; (iii) the cost of all
certificates representing the Shares; (iv) the fees and expenses of the
Transfer Agent for the Shares; (v) the fees and disbursements of counsel
for the Company; (vi) all fees and other charges of the independent
public accountants of the Company; (vii) the cost of furnishing and
delivering to the Underwriters and dealers participating in the offering
copies of the Registration Statement (including appropriate exhibits),
Preliminary Prospectuses, the Prospectus and any amendments of, or
supplements to, any of the foregoing; (viii) the NASD filing fee; (ix)
all fees and expenses of counsel for the Representatives incurred in
qualifying the Shares for sale under the laws of such jurisdictions
designated by the Representatives (including filing fees). In the event
this Agreement is terminated pursuant to Section 8 below, the Company
shall remain obligated to pay the Representatives their actual
accountable out-of-pocket expenses, plus any fees and expenses described
in (ix) above, not to exceed $75,000. The provisions of this Section
4(H) are intended to allocate responsibility for the expenses as between
the Company and the Underwriters and shall not affect any agreement
between the Company and the Selling Shareholders for the sharing of such
costs and expenses.
I. The Company will not take, and will use its best efforts to
cause each of its officers and directors not to take, directly or
indirectly, any action designed to or which might reasonably be expected
to cause or result in the stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the
Shares and will not effect any sales of any security of the Company
which are required to be disclosed in response to Item 701 of Regulation
S-X of the Commission which have not been so disclosed in the
Registration Statement.
J. Upon completion of this offering, the Company will use its
best efforts to maintain the listing of its Common Stock on the National
Association of Securities Dealers Automated Quotation System (Nasdaq)
National Market or any other national securities exchange.
K. The Company will apply the net proceeds from the sale of the
Shares substantially in the manner set forth in the Prospectus.
L. During the period ending on the final closing date, the
Company agrees that it will issue press releases, make public statements
and respond to inquiries of the press and securities analysts only after
conferring with its counsel and with the Representatives.
M. Prior to or as of either closing date, the Company shall have
performed each condition to closing required to be performed by the
Company pursuant to Section 5 hereof.
5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS.
The respective obligations of the Underwriters to purchase and pay for
the Shares as provided herein shall be subject to the accuracy of the
representations and warranties of the Company and the Selling Shareholders,
in the case of the Firm Shares as of the date hereof and the First Closing
Date (as if made on and as of the First Closing Date), and in the case of
the Option Shares, as of the date hereof and the Second Closing Date (as if
made on and as of the Second Closing Date), to the performance by the
Company and the Selling Shareholders of their obligations hereunder, and to
the satisfaction of the following additional conditions on or before the
First Closing Date in the case of the Firm Shares and on or before the
Second Closing Date in the case of the Option Shares:
A. The Registration Statement has been declared effective as of
_________.m Minneapolis time on ____________, 1998 (the "Effective
Date"). All filings required by Rules 424, 430A and 434 under the Act
shall have been timely made. No stop order suspending the effectiveness
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or, to the knowledge of the Company or the
Representatives, threatened by the Commission or any state securities
commission or similar regulatory body. Any request of the Commission
for additional information (to be included in the Registration Statement
or the Prospectus or otherwise) shall have been complied with to the
satisfaction of the Underwriters and their legal counsel.
B. The Representatives shall not have advised the Company that
the Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, contains any untrue statement of a fact which is
material or omits to state a fact which is material and is required to
be stated therein or is necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that this Section 5(B) shall not apply to
statements in, or omissions from, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto, which are
based upon and conform to written information furnished to the Company
by any of the Underwriters specifically for use in the preparation of
the Registration Statement or the Prospectus, or any such amendment or
supplement.
C. Subsequent to the Effective Date, and except as contemplated
or referred to in the Prospectus, the Company shall not have incurred
any direct or contingent liabilities or obligations material to the
Company, or entered into any material transactions, except liabilities,
obligations or transactions in the ordinary course of business, or
declared or paid any dividends or made any distribution of any kind with
respect to its capital stock; and there shall not have been any change
in the capital stock (other than a change in the number of outstanding
shares of Common Stock due to the exercise of options or warrants
described in the Registration Statement and the Prospectus), or any
change in the short-term debt or long-term debt (including capitalized
lease obligations) of the Company, or any issuance of options, warrants,
convertible securities or other rights to purchase the capital stock of
the Company or any change or any development involving a prospective
change in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered.
D. The Representatives shall have received the opinion of
Xxxxxxxxxx & Xxxxx, P.A., counsel for the Company, dated the First
Closing Date or the Second Closing Date, as the case may be, addressed
to the Underwriters covering certain corporate matters to the effect
that:
i. The Company as been duly incorporated and is validly
existing in good standing under the laws of the State of Minnesota;
has the corporate power to own, lease and operate its properties and
conduct its businesses as described in the Prospectus; and is duly
qualified to do business as a foreign corporation in good standing in
all jurisdictions where the ownership or leasing of its properties or
the conduct of its business requires such qualification and in which
the failure to be so qualified or in good standing would have a
material adverse effect on condition (financial or otherwise),
shareholders' equity, results of operations, business, properties or
prospects of the Company.
ii. The Company has the number of authorized and outstanding
shares of capital stock of the Company as set forth under the caption
"Capitalization" of the Prospectus, and all issued and outstanding
capital stock of the Company has been duly authorized and is validly
issued, fully paid and nonassessable. There are no statutory
preemptive rights, or to the best knowledge
of such counsel, no similar subscription or purchase rights of
securities holders of the Company with respect to issuance or sale of
the Shares by the Company pursuant to this Agreement, and no rights
to require registration of shares of Common Stock or other securities
of the Company because of the filing of the Registration Statement
exist. The Shares conform as to matters of law in all material
respects to the description of such made in the Prospectus, and such
description accurately sets forth the material legal provisions
thereof required to be set forth in the Prospectus.
iii. The Shares have been duly authorized and, upon delivery to
the Underwriters against payment therefor, will be validly issued,
fully paid and nonassessable.
iv. The certificates evidencing the Shares comply as to form
with the applicable provisions of the laws of the State of Minnesota.
v. The Registration Statement has become effective under the
Act and, to the knowledge of such counsel, no stop orders suspending
the effectiveness of the Registration Statement have been issued and
no proceedings for that purpose have been instituted or are pending
or, to the knowledge of such counsel, contemplated under the Act.
vi. Upon payment for and delivery of the Shares to be sold by
the Company pursuant to this Agreement, the Underwriters will acquire
good and marketable title to such Shares, free and clear of all liens,
encumbrances or claims created by actions of the Company.
vii. To such counsel's knowledge, there are no material legal or
governmental proceedings, pending or threatened, before any court or
administrative body or regulatory agency, to which the Company or its
affiliates is a party or to which any of the properties of the Company
or its affiliates are subject that are required to be disclosed in the
Registration Statement or Prospectus that are not so described, or
statutes, regulations, or legal or governmental proceedings that are
required to be described in the Registration Statement or Prospectus
that are not so described.
viii. To such counsel's knowledge, there are no franchises,
leases, contracts, agreements or documents of a character required to
be disclosed in the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement or required to be
incorporated by reference into the Prospectus
which are not disclosed or filed or incorporated by reference, as
required.
ix. No authorization, approval or consent of any governmental
authority or agency is necessary in connection with the issuance and
sale of the Shares as contemplated under this Agreement, except such
as may be required under the Act or under state or other securities
laws in connection with the purchase and distribution of the Shares by
the Underwriters.
x. The Registration Statement and the Prospectus and any
amendments thereof or supplements thereto (other than the financial
statements and schedules and supporting financial and statistical data
and information included or incorporated therein, as to which such
counsel need express no opinion) conform in all material respects with
the requirements of the Act and the Rules and Regulations, and the
conditions for use of a registration statement on Form S-1 for the
distribution of the Shares have been satisfied with respect to the
Company.
xi. The statements (i) in the Prospectus under the caption "Risk
Factors -- Dependence on Technology Licenses," "-- Regulatory
Compliance," "--Anti-takeover Effects of Minnesota Law and
Undesignated Stock," "Business -- Proprietary Rights," "--
Facilities," "-- Legal Proceedings," "Management -- Director
Compensation," "-- Employment Agreements," ""-- Stock Options,"
"Description of Securities," "Shares Eligible for Future Sale" and
(ii) in the Registration Statement in Item 14 insofar as such
statements constitute a summary of statutes, legal and governmental
proceeding, contracts and other documents, are accurate summaries and
fairly present the information called for with respect to such
matters.
xii. Such counsel does not know of any contracts, agreements,
documents or instruments required to be filed as exhibits to the
Registration Statement or described in the Registration Statement or
the Prospectus which are not so filed or described as required, and
does not know of any amendment to the Registration Statement required
to be filed that has not been filed; and insofar as any statements in
the Registration Statement or the Prospectus constitute summaries of
any contract, agreement, document or instrument to which the Company
is a party, such statements are accurate summaries and fairly present
the information called for with respect to such matters.
xiii. To such counsel's knowledge, there are no defects in
title or leasehold interests, or any liens, encumbrances, equities,
charges or claims, not disclosed in the Registration Statement or
Prospectus which would materially affect the present occupancy or use
of any of the real or personal property owned or leased by the
Company.
xiv. The Company has the corporate power and authorization to
enter this Agreement and to authorize, issue and sell the Shares as
contemplated hereby. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except as
enforceability may be limited by the application of bankruptcy,
insolvency, moratorium or similar laws affecting the rights of
creditors generally and judicial limitations on the right of specific
performance and other equitable remedies and except as the
enforceability of indemnification or contribution provisions hereof
may be limited by action of a court interpreting or applying federal
or state securities laws or equitable principles.
xv. The performance of this Agreement and the consummation of
the transactions described herein will not result in a violation of or
default under, the Company's Articles of Incorporation, Bylaws or
other governing documents. To the best of such counsel's knowledge,
(a) the Company is not in violation of, or in default under, its
Articles of Incorporation, Bylaws or other governing documents; and
(b) the performance of this Agreement and the consummation of the
transactions described herein will not result in a material violation
of, or a material default under, the terms or provisions of (A) any
bond, debenture, note, or other evidence of indebtedness or any
contract, license, indenture, mortgage, loan agreement, joint venture
or partnership agreement, lease, agreement or instrument to which the
Company is a party or by which the Company or any of its properties is
bound, or (B) any law, order, rule, regulation, writ, injunction, or
decree known to such counsel of any government, governmental agency or
court having jurisdiction over the Company or any of its properties.
xvi. To such counsel's knowledge, sales of unregistered
securities by the Company prior to the Effective Date were exempt from
registration requirements of the Act and are not required to be
integrated, under Rule 502(a) of Regulation D of the Act, with the
public offering contemplated hereby.
xvii. The Company is not, and immediately upon completion of
the sale of the Shares contemplated hereby will not be required to
register as an "investment company" under the Investment Company Act
of 1940, as amended.
xviii. To the best of such counsel's knowledge, the Company is
not engaged in any negotiations regarding any form of business
combination with another entity.
xix. Xxxxxxxxxx & Xxxxx, P.A., counsel for the Company, has not
been retained to provide substantive legal advice on any pending or
threatened claim, action or proceeding by any person which challenges
the rights of the Company with respect to any material intellectual
property of the Company. To such counsel's knowledge, such counsel is
not aware of any pending or threatened claim, action or proceeding by
a person or governmental agency which challenges the rights of the
Company with respect to any material intellectual property of the
Company, except as provided in the Prospectus.
xx. Xxxxxxxxxx & Xxxxx, P.A., counsel for the Company, has
performed certain trademark searches relating to, but has conducted no
patent searches nor reviewed patentability issues on behalf of the
Company. To such counsel's knowledge, and based solely upon such
searching and review, the Company's current products, services and
processes do not infringe on any intellectual property rights of any
third parties, except as set forth in the Prospectus.
xxi. To the knowledge of Xxxxxxxxxx & Xxxxx, P.A., counsel for
the Company, and based solely on the searching and review identified
above, the Company's trademark registrations which have been issued by
the United States Patent and Trademark Office have been fully
maintained and are in full force and effect. Such counsel gives no
opinion, however, as to whether any third party could successfully
challenge the validity or enforceability of any of such trademark
registrations.
In expressing the foregoing opinion, as to matters of fact relevant to
conclusions of law, counsel may rely, to the extent that they deem proper, upon
certificates of public officials and of the officers of the Company, and
opinions of other legal counsel to the Company, provided that copies of all such
certificates and opinions are attached to the opinion.
In addition to the matters set forth above, such opinion shall also include
a statement to the effect that, although such counsel cannot guarantee the
accuracy, completeness or fairness of any of the statements contained in the
Registration Statement or Prospectus, in connection with such counsel's
representation, investigation and due inquiry of the Company in the preparation
of the Registration Statement and Prospectus, such counsel has no reason to
believe that, (i) as of its Effective Date, the Registration Statement or any
further amendment thereto (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion) made by the
Company prior to the First Closing Date or the Second Closing Date, as the case
may be, contained an 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 (ii), as of its date, the Prospectus or any further
amendment or supplement thereto (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion) made by the
Company prior to the First Closing Date or the Second Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading or (iii), as of the First
Closing Date or the Second Closing Date, as the case may be, either the
Registration Statement or the Prospectus or any further amendment or supplement
thereto (other than the financial statements and related schedules therein, as
to which such counsel need express no opinion) made by the Company prior to the
First Closing Date or the Second Closing Date, as the case may be, contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements therein, in light of the circumstances in which they were
made, not misleading.
E. The Representatives shall have received the opinion of counsel
for each of the Selling Shareholders, which counsel shall be reasonably
acceptable to the Representatives, dated the First Closing Date or the
Second Closing Date, as the case may be, addressed to the Underwriters
and satisfactory in form and substance to the Representatives and their
counsel, substantially to the effect that:
(i) Such Selling Shareholder has the power and authority to
enter into this Agreement, the Custody Agreement and the Power of
Attorney and to perform and discharge such Selling Shareholder's
obligations thereunder and hereunder; and this Agreement, the
Custody Agreement and the Power of Attorney have been duly and
validly authorized, executed and delivered by (or by the
Attorney-in-Fact on behalf of) such Selling Shareholder and are
the valid and binding agreements of the Selling Shareholder,
enforceable in accordance with their respective terms (except as
rights to indemnity hereunder or thereunder may be
limited by federal or state securities laws and except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally and subject to general principles of equity).
(ii) The sale of the Shares to be sold by such Selling
Shareholder hereunder and the compliance by such Selling
Shareholder with all of the provisions of this Agreement, the
Power of Attorney and the Custody Agreement, and the consummation
of the transactions herein and therein contemplated, will not
conflict with or result in a breach or violation of any terms or
provisions of, or constitute a default under, any statute, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which such
Selling Shareholder is a party or by which such Selling
Shareholder is bound or to which any of the property or assets of
such Selling Shareholder is subject, nor will such action result
in any violation of any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over such Selling Shareholder or the property of
such Selling Shareholder.
(iii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement
in connection with the Shares to be sold by such Selling
Shareholder hereunder, except such consents, approvals,
authorizations or orders as have been validly obtained and are in
full force and effect, such as have been obtained under the Act
and such as may be required under the state securities or blue
sky laws in connection with the purchase and distribution of such
Shares by the Underwriters.
(iv) Such Selling Shareholder has full power and authority to
sell and deliver the Shares to be sold by such Selling
Shareholder hereunder.
(v) Delivery of the certificates for the Shares to be sold by
such Selling Shareholder pursuant to this Agreement, upon payment
therefor by the Underwriters, will pass good and valid title to
such Shares to the Underwriters, and the Underwriters will
acquire all the rights of such Selling Shareholder in the Shares
(assuming the Underwriters have no knowledge of an adverse
claim), free and clear of any claims, liens, encumbrances,
security interests or other adverse claims.
In rendering the opinions described above, counsel for each of the
Selling Shareholders may rely, as to matters of fact with respect to such
Selling Shareholder, upon the representations of such Selling Shareholder
contained in this Agreement, the Power of Attorney and Custody Agreement.
F. The Representatives shall have received from Xxxxxx and
Xxxxxx, Professional Association, its counsel, such opinion or
opinions as the Representatives may reasonably require, dated the
First Closing Date or the Second Closing Date, as the case may be,
with respect to the sufficiency of corporate proceedings and other
legal matters relating to this Agreement and the transactions
contemplated hereby, and other related matters as the
Representatives may reasonably request; and the Company and its
counsel shall have furnished to said counsel such documents as they
may have reasonably requested for the purpose of enabling them to
pass upon such matters. In connection with such opinion, as to
matters of fact relevant to conclusions of law, such counsel may
rely, to the extent that they deem proper, upon representations or
certificates of public officials and of responsible officers of the
Company.
G. The Representatives and the Company shall have received
letters, dated the date hereof and the First Closing Date and the
Second Closing Date, as the case may be, from Xxxxxx Xxxxxxxx LLP,
to the effect that they are independent public accountants with
respect to the Company within the meaning of the Act and the related
rules and regulations, stating that in their opinion the financial
statements and schedules examined by them an included in the
Registration Statement comply in form in all material respects with
the applicable accounting requirements of the Act and the related
rules and regulations, and containing such other statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements
and certain financial information contained in the Registration
Statement and the Prospectus.
H. The Representatives shall have received from the Company a
certificate, dated as of each Closing Date, of the Chief Executive
Officer and the Chief Financial Officer of the Company to the effect
that as of the First Closing Date and the Second Closing Date:
i. The representations and warranties of the Company in this
Agreement are true and correct as if made on and as of each
Closing Date. 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, each such Closing Date.
ii. No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for
that purpose has been instituted or is pending or to the best
knowledge of such officers contemplated under the Act.
iii. Neither the Registration Statement nor the Prospectus nor
any amendment thereof or supplement thereto includes any untrue
statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they
were made, not misleading, and, since the Effective Date, there
has occurred no event required to be set forth in an amended or
supplemented prospectus which has not been so set forth;
provided, however, that such certificate does not require any
representation concerning statements in, or omissions from, the
Registration Statement or Prospectus or any amendment thereof
or supplement thereto, which are based upon and conform to
written information furnished to the Company by any of the
Selling Shareholders or any of the Underwriters specifically
for use in the preparation of the Registration Statement or the
Prospectus or any such amendment or supplement.
iv. Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus and except as contemplated or referred to in the
Prospectus, the Company has not incurred any direct or
contingent liabilities or obligations material to the Company,
or entered into any material transactions, except liabilities,
obligations or transactions in the ordinary course of business,
or declared or paid any dividend or made any distribution of
any kin with respect to its capital stock, and there has not
been any change in the capital stock (other than a change in
the number of outstanding shares of Common Stock due to the
exercise of options or warrants described in the Registration
Statement and the Prospectus) and there has not been any
material adverse change in the capital stock, short-term debt,
or long-term debt (including capitalized lease obligations) of
the Company, or any material adverse change or any development
involving a prospective material adverse change (whether or not
arising in the ordinary course of business) in or affecting the
general affairs, condition (financial or otherwise), business,
key personnel, property, prospects, shareholders' equity or
results of operations of the Company.
v. Subsequent to the respective dates as of which
information
is given in the Registration Statement and the Prospectus, the
Company has not sustained any material loss of, or damage to,
its properties, whether or not insured.
vi. Except as is otherwise expressly stated in the
Registration Statement and Prospectus there are no material
actions, suits or proceedings pending before any court or
governmental agency, authority or body, or, to the best of such
officer's knowledge, threatened, to which the Company is a
party or of which the business or property of the Company is
the subject.
I. The Representatives shall have received, dated as of each
Closing Date, from the Secretary of the Company a certificate of
incumbency certifying the names, titles and signatures of the
officers authorized to execute the resolutions of the Board of
Directors of the Company authorizing and approving the execution,
delivery and performance of this Agreement, a copy of such
resolutions to be attached to such certificate, certifying such
resolutions and certifying that the Articles of Incorporation and
the Bylaws of the Company have been validly adopted and have not
been amended or modified, except as described in the Prospectus.
J. The Representatives shall have received a written agreement,
enforceable by the Representatives, from each of officer and
director of the Company and each shareholder who holds 5% or more of
the outstanding Common Stock of Company, that for 120 days following
the Effective Date, such person will not, without the
Representative's prior written consent, sell, transfer or otherwise
dispose of, or agree to sell, transfer or otherwise dispose of,
other than by gift to donees who agree to be bound by the same
restriction or by will or the laws of descent, any of his or her
Common Stock, or any options, warrants or rights to purchase Common
Stock or any shares of Common Stock received upon exercise of any
options, warrants or rights to purchase Common Stock, all of which
are beneficially held by such persons during the 120 day period.
K. The Shares shall have been approved for listing on the Nasdaq
National Market.
L. The Company and the Selling Shareholders shall have furnished
to the Underwriters, dated as of the date of each Closing Date, such
further certificates and documents as the Underwriters shall have
reasonably required.
M. All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory to the Representatives and their legal counsel. All
statements contained in any certificate, letter or other document
delivered pursuant hereto by, or on behalf of, the Company shall be
deemed to constitute representations and warranties of the Company.
N. The Representatives may waive in writing the performance of
any one or more of the conditions specified in this Section 5 or
extend the time for their performance.
O. If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement to be
fulfilled, this Agreement and all obligations of the Underwriters
hereunder may be canceled at, or at any time prior to, each closing
date by the Representatives. Any such cancellation shall be without
liability of the Underwriters to the Company or to any other party,
and shall not relieve the Company of its obligations under Section
4(H) hereof. Notice of such cancellation shall be given to the
Company at the address specified in Section 11 hereof in writing, or
by facsimile or telephone and confirmed in writing.
6. INDEMNIFICATION.
A. The Company hereby agrees to indemnify and hold harmless each
Underwriter, the Selling Shareholders and each person, if any, who
controls any Underwriter within the meaning of the Act, against any
losses, claims, damages or liabilities, joint or several, to which
such Underwriter, any of the Selling Shareholders or each such
controlling person may become subject, under the Act, the Exchange
Act, the common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof), arise out
of, or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus or the Prospectus including
any amendment thereof, or (ii) the omission or alleged omission to
state in the Registration Statement, any Preliminary Prospectus or
Prospectus including any amendment thereof 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; or (iii) any untrue statement or alleged untrue
statement of a material fact contained in any application or other
statement executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to
quality the Shares under, or exempt the Shares or the sale thereof
from qualification under, the securities laws of such jurisdiction,
or the omission or alleged omission to state in such application or
statement 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; and the
Company will reimburse each Underwriter, each such Selling
Shareholder and each such controlling person for any legal or other
expenses reasonably incurred by such Underwriter, Selling
Shareholder or controlling person (subject to the limitation set
forth in Section 6(D) hereof, in connection with investigating or
defending against any such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that the Company
will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of, or is based upon,
any untrue statement, or alleged untrue statement, omission or
alleged omission, made in reliance upon and in conformity with
information furnished to the Company by, or on behalf of, any
Underwriter or any Selling Shareholder in writing specifically for
use in the preparation of the Registration Statement or any such
post effective amendment thereof, any such Preliminary Prospectus or
the Prospectus or any such amendment thereof or supplement thereto;
and provided further, that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission
made in any Preliminary Prospectus but eliminated, remedied or
corrected in the Prospectus (or any amendment or supplement thereto)
such indemnity agreement shall not inure to the benefit of any
Underwriter (or to the benefit of any person who controls such
Underwriter), if the person asserting any loss, claim, damage or
liability as a result of such untrue statement or omission purchased
the Shares from such Underwriter and was not sent or given a copy of
the Prospectus with, or prior to, the written confirmation of the
sale of such Shares to such person by such Underwriter unless such
failure to deliver the Prospectus (as amended or supplemented) was
the result of noncompliance by the Company with Section 4(C). This
indemnity agreement is in addition to any liability which the
Company may otherwise have.
B. Each Underwriter severally, but not jointly, agrees to
indemnify and hold harmless the Company, each of the Company's
directors, each of the Company's officers who has signed the
Registration Statement, the Selling Shareholders and each person who
controls the Company within the meaning of the Act against any
losses, claims, damages or liabilities to which the Company or any
such Selling Shareholder, director, officer, or controlling person
may become subject, under the Act, the Exchange Act, the common law,
or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of, or are
based upon, (i) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement, any
Preliminary
Prospectus or Prospectus, including any amendment thereof, (ii) the
omission or alleged omission to state in the Registration Statement,
any Preliminary Prospectus or Prospectus including any amendment
thereof 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; or (iii) any untrue statement
or alleged untrue statement of a material fact contained in any
application or other statement executed by the Company or by any
Underwriter and filed in any jurisdiction in order to qualify the
Shares under, or exempt the Shares or the sale thereof from
qualification under, the securities laws of such jurisdiction, or
the omission or alleged omission to state in such application or
statement 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; in each of the above cases to
the extent, but only the extent, that such untrue statement, alleged
untrue statement, omission or alleged omission, was made in reliance
upon and in conformity with information furnished to the Company by,
or on behalf of, any Underwriter in writing specifically for use in
the preparation of the Registration Statement or any such post
effective amendment thereof, any such Preliminary Prospectus or the
Prospectus or any such amendment thereof or supplement thereto, or
in any application or other statement executed by the Company or by
any Underwriter and filed in any jurisdiction; and each Underwriter
will reimburse any legal or other expenses reasonably incurred by
the Company or any such Selling Shareholder, director, officer or
controlling person in connection with investigating or defending
against any such loss, claim, damage, liability or action as such
expenses are incurred. This indemnity agreement is in addition to
any liability which the Underwriters may otherwise have.
C. Each Selling Shareholder severally, but not jointly, agrees to
indemnify and hold harmless the Company, each of the Company's
directors, each of the Company's officers who has signed the
Registration Statement, each person who controls the Company within
the meaning of Section 15 of the Act, each Underwriter and each
person who controls an Underwriter against any losses, claims,
damages or liabilities to which the Company, any Underwriter, or any
such director, officer, or controlling person may become subject,
under the Act, the Exchange Act, the common law, or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of, or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, or the
omission or alleged omission to state in the Registration Statement
or any amendment thereof a material fact required to be stated
therein or
necessary to make the statements therein not misleading; (ii) any
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; in each of
the above cases to the extent, but only the extent, that such untrue
statement, alleged untrue statement, omission or alleged omission
was made in reliance upon and in conformity with information
furnished to the Company by, or on behalf of, the Selling
Shareholder in writing specifically for use in the preparation of
the Registration Statement, any such Preliminary Prospectus or the
Prospectus or any such amendment or supplement thereto, and the
Selling Shareholder will reimburse any legal or other expenses
reasonably incurred by the Company, any Underwriter or any such
director, officer or controlling person in connection with
investigating or defending against any such loss, claim, damage,
liability or action. In no event, however, shall the liability of
the Selling Shareholder for indemnification under this Section 6(C)
exceed the lesser of (i) that proportion of the total of such
losses, claims, damages or liabilities indemnified against equal to
the proportion of the total Shares sold hereunder that are being
sold by such Selling Shareholder, or (ii) the proceeds received by
such Selling Shareholder for the Shares sold by it to the
Underwriters. This indemnity agreement is in addition to any
liability which the Selling Shareholder may otherwise have. Each
Selling Shareholder's liability for indemnification under this
Section 6(C), insofar as it arises (i) from any untrue statement or
alleged untrue statement of a material fact pertaining to the
Selling Shareholder contained in a post-effective amendment to the
Registration Statement but not in the Registration Statement, or
(ii) the omission or alleged omission to state a material fact
pertaining to the Selling Shareholder in a post-effective amendment
which fact was stated in the Registration Statement, shall require
the indemnified party or parties to demonstrate that prior to the
filing of such post-effective amendment the indemnifying Selling
Shareholder shall have been furnished a copy of such post-effective
amendment and given an opportunity to comment thereon.
D. Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action or proceeding
(including any governmental investigation), such indemnified party
will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 6, notify in writing the
indemnifying party of the commencement thereof. The failure to so
notify the indemnifying party will not relieve such party from any
liability under this Section 6 as to the particular item for which
indemnification is then being sought, unless such failure so to
notify
prejudices the indemnifying party's ability to defend such action.
In case any such action is brought against any indemnified party and
the indemnified party notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel who shall be reasonably satisfactory
to such indemnified party; and after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if, in the reasonable
judgment of the indemnified party, it is advisable for such parties
and controlling persons to be represented by separate counsel, any
indemnified party shall have the right to employ separate counsel to
represent it and all other parties and their controlling persons who
may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Underwriters against the
Company or by the Company against the Underwriters hereunder, in
which event the fees and expenses of such separate counsel shall be
borne by the indemnifying party; provided, however, if the
indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the
indemnifying party, or the indemnified and indemnifying parties may
have conflicting interests which would make it inappropriate for the
same counsel to represent both of them, the indemnified party shall
have the right to select separate counsel to assume such defense and
to otherwise participate in the defense of such action on behalf of
such indemnified party and all other parties and their controlling
persons. Any such indemnifying party shall not be liable to any
such indemnified party on account of any settlement of any claim or
action effected without the consent of such indemnifying party.
7. CONTRIBUTION.
A. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless any indemnified party
in respect of any losses, claims, damages or liabilities referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative benefits received by the
Company, the Selling Shareholders and the Underwriters from the
offering of the Shares. In the event that the allocation provided
by the
immediately preceding sentence is not permitted by applicable law,
then each indemnifying party shall contribute in such proportion as
is appropriate to reflect not only the relative benefits referred to
above but also the relative fault of the Company, the Selling
Shareholders and the Underwriters in connection with the statements
or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
The Company, the Selling Shareholders and the Underwriters agree
that contribution determined by per capita allocation (even if the
Underwriters were considered a single person) would not be
equitable. The respective relative benefits received by the Company
and the Selling Shareholders on the one hand, and the Underwriters,
on the other, shall be deemed to be in the same proportion (a) in
the case of the Company and the Selling Shareholders, as the total
price paid to the Company and the Selling Shareholders for the
Shares by the Underwriters (net of underwriting discount received
but before deducting expenses) bears to the aggregate Offering Price
of the Shares, and (b) in the case of the Underwriters, as the
aggregate underwriting discount received by them bears to the
aggregate Offering Price of the Shares, in each case as reflected in
the Prospectus. The relative fault of the Company, the Selling
Shareholders and the Underwriters shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the
Company, the Selling Shareholders or by the Underwriters and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
amount paid or payable by a party as a result of the losses, claims,
damages and liabilities referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or
claim. Notwithstanding the provisions of this Section 7, (i) no
Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten
by it were offered to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason
of any untrue or alleged untrue statement or omission or alleged
omission in the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto; and (ii) no
Selling Shareholder shall be required to contribute any amount in
excess of the proceeds such Selling Shareholder has received for the
Shares sold by such Selling Shareholder to the Underwriters. The
Underwriters' obligation to contribute pursuant to this Section 7 is
several and not joint. No person guilty of fraudulent
misrepresentation (within the meaning of the Act) shall be entitled
to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this
Section 7, each person who controls an Underwriter within the meaning
of the Act or the Exchange Act shall have the same rights to
contribution as such Underwriter, each person who controls the Company
within the meaning of the Act or the Exchange Act shall have the same
rights to contribution as the Company and each officer of the Company
who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company.
B. Promptly after receipt by a party to this Agreement of notice
of the commencement of any action, suit, or proceeding, such person
will, if a claim for contribution in respect thereof is to be made
against another party (the "Contributing Party"), notify the
Contributing Party of the commencement thereof, but the failure to
so notify the Contributing Party will not relieve the Contributing
Party from any liability which it may have to any party other than
under this Section 7, unless such failure to so notify prejudices
the Contributing Party's ability to defend such action. Any notice
given pursuant to Section 6 hereof shall be deemed to be like
notice hereunder. In case any such action, suit or proceeding is
brought against any party, and such person notifies a Contributing
Party of the commencement thereof, the Contributing Party will be
entitled to participate therein with the notifying party and any
other Contributing Party similarly notified.
C. The obligations of the Company under this Section 7 shall be
in addition to any liability which the Company may otherwise have,
and the obligations of the Underwriter under this Section 7 shall
be in addition to any liability which the Underwriters may
otherwise have.
8. EFFECTIVE DATE AND TERMINATION.
A. This Agreement shall become effective at the later of (i) the
day upon which this Agreement shall have been executed and
delivered by the parties hereto, or (ii) (ii) at 10:00 a.m.
Minneapolis time, on the first full business day following the
Effective Date, or at such earlier time after the Effective Date as
the Representatives in its discretion shall first release the
Shares for offering to the public. For purposes of this Section 8,
the Shares shall be deemed to have been released to the public upon
release by the Representatives of the publication of a newspaper
advertisement relating to the Shares or upon release of a telegram
or a letter offering the Shares for sale to securities dealers,
whichever shall first occur.
B. The Representatives shall have the right to terminate this
Agreement by giving notice to the Company as hereinafter specified
at any time prior to the First Closing Date, and the option
referred to in Section 2(C), if exercised, may be canceled at any
time by the Representatives by giving such notice to the Company at
any time prior to the Second Closing Date, if (i) the Company shall
have failed, refused or been unable, at or prior to the First
Closing Date, to perform any material agreement on its part to be
performed hereunder; (ii) any other condition of the Underwriters'
obligations hereunder is not fulfilled; (iii) trading in securities
generally on the New York Stock Exchange, American Stock Exchange
or the Nasdaq Stock Market shall have been suspended, or minimum or
maximum prices for trading shall have been required or established
by the Commission or by any such exchange or the Nasdaq
Stock Market; (iv) a banking moratorium shall have been declared by
federal, New York or Minnesota authorities; (v) there shall have
been such a material adverse change in general economic, monetary,
political or financial conditions, or the effect of international
conditions on the financial markets in the United States shall be
such as, in the judgment of the Representatives, makes it
impracticable or inadvisable to proceed with the completion of the
sale of and payment for the Shares; (vi) there shall have been the
enactment, publication, decree or other promulgation of any federal
or state statute, regulation, rule or order of any court or other
governmental authority, which in the judgment of the
Representatives materially and adversely affects or will materially
and adversely affect the business or operations of the Company; or
(vii) there shall be an outbreak of major hostilities (or an
escalation thereof) in which the United States is involved or a
formal declaration of war by the United States of America shall
have occurred or any other substantial national or international
calamity or any other event or occurrence of a similar character
shall have occurred since the execution of this Agreement that, in
the judgment of the Representatives, makes it impracticable or
inadvisable to proceed with the completion of the sale of and
payment for the Shares. Any such termination shall be without
liability of any party to any other party, except as provided in
Sections 6 and 7 hereof; provided, however, that the Company shall
remain obligated to pay costs and expenses to the extent provided
in Section 4(H) hereof.
C. If the Representatives elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in
this Section 8, it shall notify the Company and the Selling
Shareholders promptly by telecopy or telephone, confirmed by letter
sent to the address specified in Section 11 hereof. If the Company
shall elect to prevent this Agreement from becoming effective, it
shall notify the Representatives promptly by telecopy or telephone,
confirmed by letter sent to the address specified in Section 11
hereof.
D. If the Company shall fail at the First Closing Date to sell
and deliver the number of Shares which it is obligated to sell
hereunder, then this Agreement shall terminate without any
liability on the part of any Underwriter. No action taken pursuant
to this Section 8(D) shall relieve the Company from liability, if
any, in respect of such default.
9. DEFAULT OF UNDERWRITER.
If on the First Closing Date or the Second Closing Date, as the case may
be, any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by
reason of any default on the part of the Company), you, as Representatives of
the Underwriters, shall use your best efforts to procure within 36 hours
thereafter one or more of the other Underwriters, or any others, to purchase
from the Company such amounts as may be agreed upon, and upon the terms set
fort herein, of the Firm Shares or Option Shares, as the case may be, which
the defaulting Underwriter or Underwriters failed to purchase. If during
such 36 hours you, as Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (i) if the aggregate number of Shares with respect to
which such default shall occur does not exceed 10% of the Firm Shares or
Option Shares, as the case may be, covered hereby the other Underwriters
shall be obligated, severally, in proportion to the respective numbers of
Firm Shares or Option Shares, as the case may be, which they are obligated to
purchase hereunder, to purchase the Firm Shares or Option Shares, as the case
may be, which such defaulting Underwriter or Underwriters failed to purchase
or (ii) if the aggregate number of shares of Firm Shares or Option Shares, as
the case may be, with respect to which such default shall occur exceeds 10%
of the Firm Shares or Option Shares, as the case may be, covered hereby, the
Company or you as the Representatives of the Underwriters will have the
right, by written notice given within the next 36-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part
of the non-defaulting Underwriters or of the Company or the Selling
Shareholders except for expenses to be borne by the Company and the
Underwriters as provided in Section 4(H) hereof and the indemnity and
contribution agreements in Sections 6 and 7 hereof. In the event of a default
by any Underwriter or Underwriters, as set forth in this Section 9, the First
Closing Date or Second Closing Date, as the case may be, may be postponed for
such period, not exceeding seven days, as you, as Representatives, may
determine in order that the required changes, not including a reduction in
the number of Firm Shares, in the Registration Statement or in the Prospectus
or in any other documents or arrangements may be effected. The term
"Underwriter" includes any person substituted for a defaulting Underwriter.
Any action taken under this Section 9 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter
under this Agreement.
10. SURVIVAL.
The respective indemnity and contribution agreements of the Company and
the Underwriters contained in Sections 6 and 7, respectively, the
representations and warranties of the Company and the Selling Shareholders
set forth in Section 1 hereof and the covenants of the Company set forth in
Section 4 hereof shall remain operative and in full force and effect,
regardless of any investigation made by, or on behalf of, the Underwriters,
the Selling Shareholders, the Company, any of its officers and directors or
any controlling person referred to in Sections 6 and 7 and shall survive the
delivery of and payment for the Shares. The aforesaid indemnity and
contribution agreements shall also survive any termination or cancellation of
this Agreement. Any successor of
any party or of any such controlling person, or any legal representative of
such controlling person, as the case may be, shall be entitled to the benefit
of the respective indemnity and contribution agreements.
11. NOTICES.
All notices or communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to the
Representatives or any of the Underwriters, shall be mailed, delivered, or
telecopied and confirmed, to Xxxx X. Xxxxxxx and Company, Incorporated, 000
Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxxx X. Xxxxx,
with a copy to Xxxxx X. Xxxxxx, Esq., Xxxxxx and Xxxxxx, Professional
Association, 2400 IDS Center, 00 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx
00000; or, if sent to the Company, shall be mailed, delivered, or
telegraphed, and confirmed, to Zomax Optical Media, Inc., 0000 Xxxxxx Xxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxxx X. Xxxxxxxx, with a copy to
Xxxxxxx X. Xxxx, Esq., Xxxxxxxxxx & Xxxxx, P.A., 000 Xxxxxx Xxxxxx Xxxxx,
Xxxxx 0000, Xxxxxxxxxxx, Xxxxxxxxx 00000.
12. INFORMATION FURNISHED BY THE UNDERWRITERS AND THE SELLING
SHAREHOLDERS.
The statements relating to the stabilization activities of the
Underwriters set forth in the last paragraph on the front cover page and the
statements in paragraphs 7 and 8 under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus constitute the only information
furnished by, or on behalf of, the Underwriters in writing specifically for
use with reference to the Underwriters referred to in Section 1(A)(ii) and
Section 6 hereof. The statements set forth with respect to the Selling
Shareholders in "Principal and Selling Shareholders" constitute the only
information furnished by, or on behalf of, the Selling Shareholders in
writing specifically for use with reference to the Selling Shareholders in
any Preliminary Prospectus and in the Prospectus.
13. PARTIES.
This Agreement shall inure to the benefit of and be binding upon each of
the Underwriters, the Selling Shareholders and the Company, their respective
successors and assigns and the officers, directors and controlling persons
referred to in Sections 6 and 7. Nothing expressed in this Agreement is
intended or shall be construed to give any person or corporation, other than
the parties hereto, their respective successors and assigns and the
controlling persons, officers and directors referred to in Sections 6 and 7
any legal or equitable right, remedy or claim under, or in respect of, this
Agreement or any provision herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole
and exclusive benefit of the parties hereto and their respective executors,
administrators, successors, assigns and such controlling persons, officers
and directors, and for the benefit of no other
person or corporation. No purchaser of any Shares from the Underwriters
shall be construed to be a successor or assign merely by reason of such
purchase.
14. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with the
laws of the State of Minnesota, without regard to conflict of law provisions.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed counterpart of this
Agreement, whereupon it will become a binding agreement between the Company,
the Selling Shareholders and each of the several Underwriters in accordance
with its terms.
Very truly yours,
Zomax Optical Media, Inc.
By:
__________________________________
Xxxxx X. Xxxxxxxx
Its: President and Chief Executive
Officer
Selling Shareholders:
Xxxxxxx Xxxxxxxx
Xxxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxx Xxxx
Xxxxx Xxxxx
By:____________________________________
Xxxxxxx Xxxxxxxx
Attorney-In-Fact
The foregoing Underwriting Agreement is
hereby confirmed and accepted by us for
ourselves and as Representatives of the
Underwriters referred to in the foregoing
Agreement as of the date first above written.
XXXX X. XXXXXXX AND COMPANY,
INCORPORATED
CRUTTENDEN XXXX INCORPORATED
PACIFIC CREST SECURITIES INC.
By: XXXX X. XXXXXXX AND COMPANY,
INCORPORATED
By: ___________________________________
Xxxxx X. Xxxxx
Its: Vice President
SCHEDULE I
Name of Underwriter Number of Firm Shares
Xxxx X. Xxxxxxx and Company, Incorporated
Cruttenden Xxxx Incorporated
Pacific Crest Securities Inc.
Total 2,000,000
---------
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
Name of Selling Shareholder Number of Firm Shares
Xxxxxxx Xxxxxxxx 85,513
Xxxxxx Xxxxxx 152,691
Xxxxx Xxxxxx 95,051
Xxxxxx Xxxx 33,745
Xxxxx Xxxxx 33,000
Total 400,000
-------
SCHEDULE III
SCHEDULE OF SHAREHOLDERS REQUIRED TO EXECUTE
LOCK-UP AGREEMENTS
Name of Selling Shareholder Number of Shares(1)
Xxxxxxx X. Xxxxx 1,220,823
Xxxxx X. Xxxxxxxx(2) 312,661
Xxxxxx Xxxxxxx 3,000
Xxxxxx X. Xxxxx 4,000
Xxxxxx Xxxxxxx Xxxxxx 1,000
Xxxxxxxx X. Xxxxxx(2) 312,661
Xxxxx X. Xxxxxxxx 0
Xxxxxx X. Xxxxxxxx 0
Xxxxxxx Xxxxxxxx 130,000
Xxxxxx Xxxxxx 62,822
Xxxxx Xxxxxx 120,462
Xxxxxx Xxxx 42,704
Xxxxx Xxxxx 43,449
Total 1,940,921
---------
__________
(1)Does not include the 400,000 shares to be sold in the offering by the
Selling Shareholders or shares issuable upon the exercise of outstanding
options and warrants.
(2)Represents shares held jointly.
