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EXHIBIT 1.1
DRAFT 05/14/99
______________ SHARES
DURASWITCH INDUSTRIES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
__________________, 1999
CRUTTENDEN XXXX INCORPORATED
As Representative of the several Underwriters
00 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
DuraSwitch Industries, Inc., a Nevada corporation (the "Company"),
addresses you as the Representative of each of the persons, firms and
corporations listed in Schedule A hereto (herein collectively called the
"Underwriters") and hereby confirms its agreement with the several Underwriters
as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
____________ shares of its authorized and unissued Common Stock, $.01 par value
per share (the "Firm Shares"), to the several Underwriters. The Company and
Blackwater Capital Partners, L.P. (the "Selling Securityholder") also propose to
grant to the Underwriters an option to purchase up to __________ additional
shares of the Company's Common Stock, $.01 par value per share (the "Option
Shares"), as provided in Section 8 hereof. In addition, the Company proposes to
sell to you, individually and not in your capacity as Representative, five-year
warrants (the "Representative's Warrants") to purchase up to ______ shares of
Common Stock, $.001 par value per share, of the Company (the "Representative's
Warrant Stock"), which sale will be consummated in accordance with the terms and
conditions of the Representative's Warrant Agreement (the "Representative's
Warrant Agreement"), the form of which is filed as an exhibit to the
Registration Statement described below. As used in this Agreement, the term
"Shares" shall include the Firm Shares and the Option Shares. All shares of
Common Stock, $.01 par value per share, of the Company to be outstanding after
giving effect to the sales contemplated hereby, including the Firm Shares and
the Option Shares, are hereinafter referred to as "Common Stock."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents and warrants to, and agrees with, each Underwriter that:
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(a) A registration statement on Form SB-2 (File No. 333-_____) with
respect to the Shares, the Representative's Warrants and the Representative's
Warrant Stock, including a prospectus, has been prepared and filed by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the applicable rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Act and has been filed with the Commission; such amendments to such
registration statement, such prospectuses and abbreviated registration
statements pursuant to Rule 462(b) of the Rules and Regulations (a "462
Registration Statement") as may have been required prior to the date hereof have
been similarly prepared and filed with the Commission; and the Company will file
such additional amendments to such registration statement, such amended
prospectuses and such 462 Registration Statements as may hereafter be required.
Copies of such registration statement and amendments together with each exhibit
filed therewith, of each related prospectus contained or filed as part of any
pre-effective amendment to such registration statement or filed pursuant to Rule
424(a) (the "Preliminary Prospectuses") and of any 462 Registration Statement
have been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and promptly
file with the Commission the information omitted from the registration statement
pursuant to Rule 430A(a) or, if the Representative, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the information required to be included in any term sheet filed
pursuant to Rule 434(b) or (c), as applicable, of the Rules and Regulations
pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared effective under the Act by the
Commission, the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if the
Representative, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information required
to be included in any term sheet filed pursuant to Rule 434(b) or (c), as
applicable, of the Rules and Regulations. The term "Registration Statement" as
used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits (including exhibits incorporated by
reference), in the form in which it became or becomes, as the case may be,
effective (including, if the Company omitted information from the registration
statement pursuant to Rule 430A(a) or files a term sheet pursuant to Rule 434 of
the Rules and Regulations, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule 430A(b)
or Rule 434(d) of the Rules and Regulations) and, in the event of any amendment
thereto or the filing of any 462 Registration Statement after the effective date
of such registration statement, shall also mean (from and after the
effectiveness of such amendment or the filing of any 462 Registration Statement)
such registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Shares as included in such Registration
Statement at the time it becomes effective (including, if the Company omitted
information from the Registration Statement pursuant to Rule 430A(a) of the
Rules and Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the Rules
and Regulations); provided, however, that if in
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reliance on Rule 434 of the Rules and Regulations and with the consent of the
Representative, on behalf of the several Underwriters, the Company shall have
provided to the Underwriters a term sheet pursuant to Rule 434(b) or (c), as
applicable, prior to the time that a confirmation is sent or given for purposes
of Section 2(10)(a) of the Act, the term "Prospectus" shall mean the "prospectus
subject to completion" (as defined in Rule 434(g) of the Rules and Regulations)
last provided to the Underwriters by the Company and circulated by the
Underwriters to all prospective purchasers of the Shares (including the
information deemed to be a part of the Registration Statement at the time it
became effective pursuant to Rule 434(d) of the Rules and Regulations).
Notwithstanding the foregoing, if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the offering of the
Shares that differs from the prospectus referred to in the immediately preceding
sentence (whether or not such revised prospectus is required to be filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations), the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriters for such use. If in reliance on Rule 434
of the Rules and Regulations and with the consent of the Representative, on
behalf of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable, prior
to the time that a confirmation is sent or given for purposes of Section
2(10)(a) of the Act, the Prospectus and the term sheet, together, will not be
materially different from the prospectus in the Registration Statement.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which Option Shares are to be purchased, (i)
the Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (ii) the Registration Statement, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that none of the representations and
warranties contained in this subparagraph (b) shall apply to information
contained in or omitted from the Registration Statement or Prospectus, or any
amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof. The information set
forth on the inside front cover page of the Prospectus (insofar as such
information relates to the Underwriters) concerning stabilization,
over-allotment and passive market making by the Underwriters, and under the
[first and second paragraphs] under the
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caption "Underwriting" in any Preliminary Prospectus and in the Prospectus
constitutes the only information furnished by the Underwriters to the Company
for inclusion in any Preliminary Prospectus, the Prospectus or the Registration
Statement.
(c) If the Company has elected to rely on Rule 462(b) and the
462 Registration Statement has not been declared effective, (i) the Company has
filed a 462 Registration Statement in compliance with, and that is effective
upon filing pursuant to, Rule 462(b) and has received confirmation of its
receipt and (ii) (a) the Company has given irrevocable instructions for
transmission of the applicable filing fee in connection with the filing of the
462 Registration Statement, in compliance with Rule 111 promulgated under the
Act or (b) the Commission has received payment of such filing fee.
(d) Each of the Company and its direct and indirect
subsidiaries (hereinafter, the "Subsidiaries") is duly incorporated and validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation with full power and authority (corporate and other) to own,
lease and operate its properties and conduct its business as described in the
Prospectus; each of the Company and its Subsidiaries is duly qualified to do
business as a foreign corporation and in good standing in each jurisdiction in
which the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or to
be in good standing would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its Subsidiaries, taken as a whole (hereinafter, a "Material
Adverse Effect"); no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification; each of the Company and the Subsidiaries
is in possession of and operating in compliance with all authorizations,
licenses, certificates, consents, orders and permits from state, federal and
other regulatory authorities that are material to the conduct of its business,
all of which are valid and in full force and effect. Neither the Company nor any
of its Subsidiaries is in violation of their respective charter or bylaws and no
event has occurred which, with notice or lapse of time or both, would constitute
a breach or violation of any of the terms and provisions of, or constitute a
default under, any obligation, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness, or in any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which either the Company or any of its
Subsidiaries is a party or by which their properties may be bound. Neither the
Company nor any of its Subsidiaries is in violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, administrative
agency, regulatory body, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any Subsidiary or their
respective properties except where such violation would not have a Material
Adverse Effect.
(e) Each of the Company and its Subsidiaries has full legal
right, power and authority to enter into this Agreement and the Representative's
Warrant Agreement and perform the transactions contemplated hereby and thereby.
Each of this Agreement and the Representative's Warrant Agreement has been duly
authorized, executed and delivered by the Company and is a valid and binding
agreement on the part of the Company, enforceable in accordance with its terms,
except
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as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles and rules of law
governing specific performance, estoppel, waiver, injunctive relief, and other
equitable remedies (regardless of whether enforcement is sought in a proceeding
at law or in equity). The making, execution and performance of this Agreement
and the Representative's Warrant Agreement by the Company and the consummation
of the transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, (i) any bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument to which the
Company or any Subsidiary is a party or by which their respective properties may
be bound, (ii) the charter or bylaws of the Company or any Subsidiary or (iii)
any law, order, rule, regulation, writ, injunction, judgment or decree of any
court, administrative agency, regulatory body, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or any
Subsidiary or their respective properties. No consent, approval, authorization
or order of or qualification with any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or any
Subsidiary or their respective properties is required for the execution and
delivery of this Agreement and the Representative's Warrant Agreement and the
consummation by the Company of the transactions herein and therein contemplated,
except such as may be required under the Act, by the National Association of
Securities Dealers, Inc. (the "NASD"), or under state or other securities or
Blue Sky laws, all of which requirements have been satisfied in all material
respects.
(f) There is not pending or, to the Company's knowledge,
threatened, any action, suit, claim or proceeding against either the Company or
any of its Subsidiaries, any of the Company's or any of its Subsidiaries'
officers, any of their respective properties, assets or rights before any court,
administrative agency, regulatory body, government or governmental agency or
body, domestic or foreign, having jurisdiction over the Company or any of its
Subsidiaries or their respective officers or properties, or otherwise which (i)
might, individually or in the aggregate, result in any material adverse change
in the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its Subsidiaries, taken as a whole (a
"Material Adverse Change"), or (ii) might prevent consummation of the
transactions contemplated hereby, or (iii) is required to be disclosed in the
Registration Statement or Prospectus and is not so disclosed. For purposes of
this Agreement, the phrases "to the Company's knowledge or "to the knowledge of
the Company" shall mean the knowledge of the senior management personnel of each
of the Company and its Subsidiaries. There are no agreements, contracts, leases
or documents of the Company or any Subsidiary of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement by the Act or the Rules and
Regulations which have not been accurately described in all material respects in
the Registration Statement or Prospectus or filed as exhibits to the
Registration Statement. Neither the Company nor any Subsidiary is a party or
subject to the provisions of any injunction, judgment, decree or order of any
court, administrative agency, regulatory body, government or governmental agency
or body domestic or foreign, that could be expected to result in a Material
Adverse Change. Each of the Company and its Subsidiaries has conducted and is
conducting its business in
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compliance with all applicable federal, state, local and foreign statutes, laws,
rules, regulations, ordinances, codes, decisions, decrees, directives and
orders, except where the failure to do so would not, singly or in the aggregate,
have a Material Adverse Effect.
(g) All outstanding shares of capital stock of each of the
Company and its Subsidiaries have been duly authorized and validly issued and
are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities. The Company has an authorized, issued and outstanding capitalization
as set forth in the Prospectus under the caption "Capitalization." The capital
stock of the Company conforms to the description thereof contained in the
Registration Statement and the Prospectus (and such statements correctly state
the substance of the instruments defining the capitalization of the Company).
The Shares to be issued and sold by the Company hereunder have been duly
authorized for issuance and sale to the Underwriters pursuant to this Agreement,
and, when issued and delivered by the Company against payment therefor in
accordance with the terms of this Agreement, will be duly and validly issued and
fully paid and nonassessable, and will be sold free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest. No preemptive
right, co-sale right, registration right, right of first refusal or other
similar right of stockholders exists with respect to any of the Shares or the
issuance and sale thereof other than those that have been satisfied or expressly
waived prior to the date hereof and those that will automatically expire upon
and will not apply to the consummation of the transactions contemplated on or
before the Closing Date. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale or transfer of the Shares except as may be required under the
Act or under state or other securities or Blue Sky laws. Except as disclosed in
the Registration Statement, the Prospectus and the financial statements of the
Company, and the related notes thereto included in the Prospectus, the Company
has no outstanding options to purchase, or any preemptive rights or other rights
to subscribe for or to purchase, any securities or obligations convertible into,
or any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus under the caption "Management - Executive
Compensation" fairly and accurately presents the information required to be
shown with respect to such plans, arrangements, options and rights. All
outstanding options of the Company have been duly authorized and issued in
compliance with the option plan pursuant to which such options were granted and
with all federal and state securities laws and the Nevada General Corporation
Law.
(h) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been (i)
any Material Adverse Change, (ii) any transaction that is material to either the
Company or any of its Subsidiaries, (iii) any obligation, direct or contingent,
incurred by either the Company or any of its Subsidiaries, except obligations
incurred in the ordinary course of business, (iv) any change in the capital
stock or outstanding indebtedness of either the Company or any of its
Subsidiaries, (v) any dividend or distribution of any kind declared, paid or
made on the capital stock of either the Company or any of its Subsidiaries, (vi)
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any default in the payment of principal of or interest on any outstanding debt
obligations, or (vii) any loss or damage (whether or not insured) to the
property of either the Company or any of its Subsidiaries which has been
sustained or will have been sustained which has a Material Adverse Effect.
(i) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its Subsidiaries has good and marketable
title to all properties and assets described in the Registration Statement and
Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would not
have a Material Adverse Effect, (ii) the agreements to which either the Company
or any of its Subsidiaries is a party described in, or filed as exhibits to, the
Registration Statement and Prospectus are valid agreements, enforceable by the
Company or its Subsidiaries, as the case may be, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles and rules of law governing specific
performance, estoppel, waiver, injunctive relief and other equitable remedies
(regardless of whether enforcement is sought in a proceeding at law or in
equity) and, to the Company's knowledge, the other contracting party or parties
thereto are not in breach or default under any of such agreements, and (iii)
either the Company or its Subsidiaries has valid and enforceable leases for all
properties described in the Registration Statement and Prospectus, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles and rules of law
governing specific performance, estoppel, waiver, injunctive relief and other
equitable remedies (regardless of whether enforcement is sought in a proceeding
at law or in equity). Except as set forth in the Registration Statement and
Prospectus, the Company and its Subsidiaries own or lease all such properties as
are necessary to its operations as now conducted or as proposed to be conducted.
(j) Deloitte & Touche, L.L.P. ("D&T"), the Company's current
auditors, which have examined the consolidated financial statements of the
Company, together with the related schedules and notes, as of December 31, 1998,
and for the year then ended, filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are independent
accountants within the meaning of the Act and the Rules and Regulations.
McGladrey & Xxxxxx LLP ("M&P"), the Company's former auditors, which have
examined the consolidated financial statements of the Company, together with the
related schedules and notes, as of December 31, 1997, and for the year then
ended, filed with the Commission as a part of the Registration Statement, which
are included in the Prospectus, are independent accountants within the meaning
of the Act and the Rules and Regulations. The audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, forming part of the
Registration Statement and Prospectus, fairly present the financial position and
the results of operations of the Company and its Subsidiaries at the respective
dates and for the respective periods to which they apply; and all audited
consolidated financial statements of the Company, together with the related
schedules and notes, and the unaudited consolidated financial information, filed
with the Commission as part of the Registration Statement, have been prepared
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in accordance with generally accepted accounting principles consistently applied
throughout the periods involved except as may be otherwise stated therein. The
selected and summary consolidated financial and statistical data included in the
Registration Statement fairly present the information shown therein and have
been compiled on a basis consistent with the audited consolidated financial
statements presented therein. No other financial statements or schedules are
required to be included in the Registration Statement.
(k) Each of the Company and its Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets, (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.
(l) There are no issues related to the Company's, or any of
its Subsidiaries', preparedness for the Year 2000 that (i) are of a character
required to be described or referred to in the Registration Statement or
Prospectus or by the Act or the Rules and Regulations or by the Exchange Act or
the rules and regulations of the Commission thereunder which have not been
accurately described in the Registration Statement or Prospectus or (ii) might
reasonably be expected to result in any Material Adverse Change or have a
Material Adverse Effect. All internal computer systems and each Constituent
Component (as defined below) of those systems and all computer-related products
and each Constituent Component (as defined below) of those products of the
Company and each of its Subsidiaries fully comply with the Year 2000
Qualification Requirements. "Year 2000 Qualification Requirements" means that
the internal computer systems and each Constituent Component (as defined below)
of those systems and all computer-related products and each Constituent
Component (as defined below) of those products of the Company and each of its
Subsidiaries (i) have been reviewed to confirm that they store, process
(including sorting and performing mathematical operations, calculations and
computations), input and output data containing date and information correctly
regardless of whether the date contains dates and times before, on or after
January 1, 2000, (ii) have been designated to ensure date and time entry
recognition, calculations that accommodate same-century and multi-century
formulas and date values, leap year recognition and calculations, and date-data
interface values that reflect the century, (iii) accurately manage and
manipulate data involving dates and times, including single-century formulas and
multi-century formulas, and will not cause an abnormal ending scenario within
the application or generate incorrect values or invalid results involving such
dates, (iv) accurately process any date rollover, and (v) accept and respond to
two-digit year date input in a manner that resolves any ambiguities as to the
century. "Constituent Component" means all software (including operating
systems, programs, packages and utilities), firmware, hardware, networking
components, and peripherals provided as part of the configuration.
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(m) Each of the Company and its Subsidiaries has timely filed
all necessary federal, state, local and foreign income and franchise tax returns
and has paid all taxes shown thereon as due, and there is no tax deficiency that
has been or, might be asserted against the Company or any of its Subsidiaries
that might have a Material Adverse Effect. All tax liabilities are adequately
provided for on the books of each of the Company and its Subsidiaries.
(n) Each of the Company and its Subsidiaries maintains
insurance with insurers of recognized financial responsibility of the types and
in the amounts generally deemed prudent for its business and consistent with
insurance coverage maintained by similar companies in similar businesses or as
otherwise required by any agreement to which either the Company or a Subsidiary
is a party, including, but not limited to, insurance covering real and personal
property owned or leased by the Company or its Subsidiaries against theft,
damage, destruction, acts of vandalism, products liability, errors and
omissions, and all other risks customarily insured against, all of which
insurance is in full force and effect. Neither the Company nor any Subsidiary
has been refused any insurance coverage sought or applied for; and the Company
does not have any reason to believe that it will not be able to renew its or any
Subsidiary's existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.
(o) The conditions for use of Form SB-2, as set forth in the
General Instructions thereto, have been satisfied.
(p) No labor disturbance by the employees of the Company or
any of its Subsidiaries exists or, to the Company's knowledge, is imminent. The
Company is not aware of any existing or imminent work stoppage or labor strike
by the employees of any of the Company's or any of its Subsidiaries' principal
suppliers, subcontractors, distributors (domestic or foreign) that might be
expected to result in a Material Adverse Change or to have a Material Adverse
Effect. No collective bargaining agreement exists with any of the Company's or
any of its Subsidiaries' employees and, to the Company's Knowledge, no such
agreement is imminent.
(q) If any full-time employee identified in the Prospectus has
entered into any non-competition, non-disclosure, confidentiality or other
similar agreement with any party other than the Company or its Subsidiaries,
such employee is neither in violation thereof nor is expected to be in violation
thereof as a result of the business conducted or expected to be conducted by the
Company or its Subsidiaries as described in the Prospectus or such person's
performance of his or her obligations to the Company or any Subsidiary. To the
Company's knowledge, no consultant or scientific advisor of the Company or any
Subsidiary (individually, a "Consultant" and collectively "Consultants") is in
violation of any non-competition, non-disclosure, confidentiality or similar
agreement between such Consultant and any party other than the Company or a
Subsidiary. Each Consultant engaged by or on behalf of the Company or any of its
Subsidiaries to render services for the Company or any of its Subsidiaries has
entered into an agreement with the Company or such Subsidiary, as the case may
be, providing for terms and conditions of non-competition, non-disclosure and
confidentiality in connection with such services ("Consulting Agreements").
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Assuming due authorization, execution and delivery of the Consulting Agreements
by each Consultant, the Consulting Agreements are the legal, valid, binding and
enforceable instruments of the Consultants, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting rights generally or by general
equitable principles and rules of law governing specific performance estoppel,
waiver, injunctive relief, and other equitable remedies (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(r) The Common Stock is registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is
approved for quotation on the American Stock Exchange, Inc. ("AMEX"). The
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from AMEX, nor has the Company received any
notification that the Commission, AMEX or the NASD is contemplating terminating
such registration or quotation.
(s) Each of the Company and its Subsidiaries owns or possesses
exclusive rights to use all patents, patent rights, patent licenses, inventions,
trade secrets, trademarks, service marks, trade names, copyrights, service
names, mask works, technology, know-how and other proprietary intellectual
rights which are necessary to conduct its business as now conducted and as
described in the Registration Statement and Prospectus. The expiration of any
patents, patent rights, trade secrets, trademarks, service marks, trade names or
copyrights would not have a Material Adverse Effect. The Company or its assignor
has duly and properly filed with the U.S. Patent and Trademark Office and/or
respective patent offices in foreign countries all pending patent applications
(the "Patent Applications"). All issued United States patents and Patent
Applications have been properly assigned to the Company, and all documents
reflecting such assignment to the Company have been properly recorded in the
U.S. Patent and Trademark Office. The information contained in the Registration
Statement and Prospectus concerning patents owned by or licensed to the Company
or its Subsidiaries is accurate in all material respects. Neither the Company
nor any of its Subsidiaries has received any notice of, nor has it any knowledge
of, any infringement of or conflict with asserted rights of either the Company
or any of its Subsidiaries by others with respect to any patents, patent rights,
inventions, trade secrets, trademarks, service marks, trade names, copyrights,
mask works, technology or know-how. Neither the Company nor any of it
Subsidiaries has received any notice of, nor has it any knowledge of, any
infringement of or conflict with asserted rights of others with respect to any
patent, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, might have a Material
Adverse Effect.
(t) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it is not and will not become an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the 1940 Act and such rules and regulations.
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(u) Each of the Company and its Subsidiaries is conducting
business in compliance with all applicable statutes, rules, regulations and
orders administered or issued by any domestic or foreign administrative agency,
regulatory body, government or governmental agency in the jurisdictions in which
each is conducting business except where such noncompliance would not result in
a Material Adverse Effect.
(v) Each of the Company and its Subsidiaries to which ISO 9001
certification standards apply is in compliance with such ISO 9001 certification
standards and all CE xxxx certification requirements. Each of the Company and
its Subsidiaries has submitted all reports and other documentation necessary to
be submitted in accordance with all foreign regulatory orders, laws and
regulations in jurisdictions in which the Company or such Subsidiary is
conducting business except where such failure would not have a Material Adverse
Effect. Neither the Company nor any such Subsidiaries has received notification
of violation of any applicable statute, rule, regulation or order administered
or issued by any foreign administrative agency, regulatory body, government or
governmental agency in foreign jurisdictions in which it is conducting business.
(w) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its Subsidiaries is in compliance with
all laws, orders, rules and regulations relating to the use, treatment, storage
and disposal of toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to their respective businesses
except where failure to do so would not have a Material Adverse Effect, (ii)
neither the Company nor any of its Subsidiaries has received notice from any
administrative agency, regulatory body, government, governmental authority or
third party of an asserted claim under Environmental Laws, (iii) neither the
Company nor any of its Subsidiaries will be required to make material capital
expenditures to comply or cause its Subsidiaries to comply with Environmental
Laws in the foreseeable future and (iv) no property which is, or has been,
owned, leased or occupied by the Company or any of its Subsidiaries has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended, or otherwise designated as
a contaminated site under applicable state or local law.
(x) Each employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that is maintained, administered or contributed to by the Company or
any of its Subsidiaries for employees or former employees of the Company or any
of its Subsidiaries has been maintained in compliance with its respective terms
and the requirements of any applicable statutes, orders, rules and regulations,
including but not limited to ERISA and the Internal Revenue Code of 1986, as
amended (the "Code"). Each employee benefit plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal Revenue Service
("IRS") a favorable determination letter as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has applied to the IRS for such a
determination letter prior to the requisite period under applicable Treasury
Regulations or IRS pronouncements in which to apply for a determination letter
and to make any amendments necessary to obtain a favorable determination. No
prohibited transaction, within the meaning of Section 406 of ERISA or Section
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4975 of the Code, has occurred with respect to any such plan, excluding
transactions effected pursuant to a statutory or administrative exemption. For
each such plan which is subject to the funding rules of Section 412 of the Code
or Section 302 of ERISA, no "accumulated funding deficiency", as defined in
Section 412 of the Code, has been incurred, whether or not waived, and the fair
market value of the assets of each such plan (excluding for these purposes
accrued but unpaid contributions) exceeded the present value of all benefits
accrued under such plan determined using reasonable actuarial assumptions.
Neither the Company nor any of its Subsidiaries has been a party to or made
contributions to or otherwise incurred any obligation under any employee benefit
plan that was subject to Title IV of ERISA or Section 412 of the Code, and any
"multi-employer plan" as defined in Section 3(37) of ERISA.
With respect to each employee benefit plan, the Company and
each Subsidiary has complied with (i) the applicable health care continuation
and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") and the proposed regulations thereunder, (ii) the applicable
requirements of the Family and Medical Leave Act of 1993 and the regulations
thereunder, and (iii) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996 and the temporary regulations
thereunder. Neither the Company nor any Subsidiary has any material obligations
under COBRA with respect to any former employees or qualifying beneficiaries
thereunder. Neither the Company nor any of its Subsidiaries are parties to a
retiree medical plan.
(y) The Company has not distributed, and will not distribute
prior to the later of (i) the Closing Date or any date on which Option Shares
are to be purchased, as the case may be, and (ii) completion of the distribution
of the Shares, any offering material in connection with the offering and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
(z) Neither the Company nor any of its Subsidiaries has at any
time during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(aa) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(bb) Except as otherwise set forth in the Registration
Statement and the Prospectus, each officer and director of the Company, and each
person listed on Schedule 1 attached hereto has agreed in writing that such
person will not, except as described below, for a period of 180 days from the
date of the final Prospectus (the "Lock-Up Period"), sell, offer to sell,
solicit an offer to buy, contract to sell, loan, pledge, grant any option to
purchase, or otherwise transfer or dispose of
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(collectively, a "Disposition"), any shares of Common Stock, or any securities
convertible into or exercisable or exchangeable for Common Stock (collectively,
"Securities"), now owned or hereafter acquired by such person or with respect to
which such person has or hereafter acquires the power of disposition otherwise
than (i) on the transfer of shares of Common Stock or Securities during such
person's lifetime by bona fide gift or upon death by will or intestacy, provided
that any transferee agrees to be bound by the Lock-Up Agreement, and (ii) on the
transfer or other disposition of shares of Common Stock or Securities as a
distribution to limited partners or stockholders of such person, provided that
the distributees thereof agree to be bound by the terms of the Lock-Up
Agreement. The foregoing restriction has been expressly agreed to preclude the
holder of the Securities from engaging in any hedging, pledge or other
transaction which is designed to or may reasonably be expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than such stockholder. Such
prohibited hedging, pledge or other transactions would include, without
limitation, any short sale (whether or not against the box), any pledge of
shares covering an obligation that matures, or could reasonably mature during
the Lock-Up Period, or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any Securities or
with respect to any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its value from any
Securities. Furthermore, such person has also agreed and consented to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with the
restrictions described in this subsection (bb). The Company has provided to
counsel for the Underwriters ("Underwriters' Counsel") a complete and accurate
list of all securityholders of the Company as of [May __, 1999] and the number
and type of securities held by each securityholder. In addition, each officer
and director of the Company, and each person listed on Schedule 1 attached
hereto (excluding Blackwater Capital Group, L.L.C., Blackwater Capital Partners,
L.P. or their assigns) also has agreed pursuant to the Lock-Up Agreement that
the Representative shall have an irrevocable preferential right for a period of
two years from the termination of the Lock-Up Period to purchase for its account
or to sell for the account of each such officer, director or securityholder any
Securities of the Company that any of such officers, directors, or stockholders
may seek to sell under Rule 144 promulgated under the Act. Each such officer,
director, or securityholder will consult the Representative with regard to any
such offering and will offer the Representative the opportunity to purchase or
sell any such Securities on terms not more favorable to such officer, director
or securityholder than they can secure elsewhere. The Company has provided to
Underwriters' Counsel true, accurate and complete copies of all of the
agreements pursuant to which its officers, directors and stockholders have
agreed to such or similar restrictions (the "Lock-up Agreements") presently in
effect or effected hereby. The Company hereby represents and warrants that it
will not release any of its officers, directors or other stockholders from any
Lock-up Agreements currently existing or hereafter effected without the prior
written consent of Cruttenden Xxxx Incorporated.
(cc) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any stockholder who owns
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beneficially more than five percent (5%) of the Common Stock or any of the
members of the families of any of them, except as disclosed in the Registration
Statement and the Prospectus.
(dd) Other than the Representative, on behalf of the several
Underwriters, no person is or will be owed any finder's fee or commission or
similar payment in connection with the transactions contemplated by this
Agreement.
(ee) All offers and sales of capital stock of the Company
prior to the date hereof were at all relevant times duly registered or exempt
from the registration requirements of the Act and were duly registered or
subject to an available exemption from the registration requirements of the
applicable state securities or Blue Sky laws. There are no persons with
registration or other similar rights to have any securities registered pursuant
to the Registration Statement or otherwise registered by the Company under the
Act, other than those which have been waived or complied with.
(ff) No relationship, direct or indirect, exists between or
among the Company on the one hand and the directors, officers, stockholders,
customers or suppliers of the Company on the other hand, that is required by the
Act or the 1934 Act or the Rules and Regulations to be described in the
Registration Statement and the Prospectus that is not described as so required.
(gg) The Preliminary Prospectuses and Prospectus delivered to
the Underwriters for use in connection with this offering were identical to the
versions of the Preliminary Prospectuses and Prospectuses created to be
transmitted to the Commission for filing via the Electronic Data Gathering
Analysis and Retrieval System ("XXXXX"), except to the extent permitted by
Regulation S-T.
(hh) The Representative's Warrants have been duly and validly
authorized by the Company and upon delivery to you in accordance with the
Representative's Warrant Agreement will be duly issued and legal, valid and
binding obligations of the Company.
(ii) The Representative's Warrant Stock has been duly
authorized and reserved for issuance upon the exercise of the Representative's
Warrants and when issued upon payment of the exercise price therefore will be
validly issued, fully paid and non-assessable shares of Common Stock of the
Company.
3. REPRESENTATIONS AND WARRANTIES OF SELLING SECURITYHOLDER. The
Selling Securityholder represents and warrants to, and agrees with, each of the
several Underwriters that:
(a) The Selling Securityholder has full power to enter into
this Agreement and to sell, assign, transfer and deliver to the Underwriters the
Shares to be sold by the Selling Securityholder hereunder in accordance with the
terms of this Agreement. This Agreement has been duly executed and delivered by
the Selling Securityholder.
(b) The Selling Securityholder has duly executed and delivered
a power of attorney and custody agreement (the "Power-of-Attorney" and the
"Custody Agreement",
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respectively) in the form heretofore delivered to the Representative, appointing
______________ as the Selling Securityholder's attorney-in-fact (the
"Attorney-in-Fact") with authority to execute, deliver and perform this
Agreement on behalf of the Selling Securityholder and appointing ____________ as
custodian thereunder (the "Custodian"). Certificates in negotiable form,
endorsed in blank or accompanied by blank stock powers duly executed, with
signatures appropriately guaranteed, representing the Shares to be sold by the
Selling Securityholder hereunder have been deposited with the Custodian pursuant
to the Custody Agreement for the purpose of delivery pursuant to this Agreement.
The Selling Securityholder has full power (corporate and other) to enter into
the Custody Agreement and the Power-of-Attorney and to perform its obligations
under the Custody Agreement. The delivery of the Custody Agreement and the
Power-of-Attorney have been duly executed and delivered by the Selling
Securityholder and, assuming due authorization, execution and delivery by the
Custodian, are the legal, valid, binding and enforceable instruments of the
Selling Securityholder. The Selling Securityholder agrees that each of the
Shares represented by the certificates on deposit with the Custodian is subject
to the interests of the Underwriters hereunder, that the arrangements made for
such custody, the appointment of the Attorney-in-Fact and the right, power and
authority of the Attorney-in-Fact to execute and deliver this Agreement, to
agree on the price at which the Shares (including the Selling Securityholder's
Shares) are to be sold to the Underwriters, and to carry out the terms of this
Agreement, are to that extent irrevocable and that the obligations of the
Selling Securityholder hereunder shall not be terminated, except as provided in
this Agreement or the Custody Agreement, by any act of the Selling
Securityholder, by operation of law or otherwise, or by its liquidation or
dissolution or by the occurrence of any other event. If the Selling
Securityholder shall liquidate or dissolve, or if any other event should occur,
before the delivery of such Shares hereunder, the certificates for such Shares
deposited with the Custodian shall be delivered by the Custodian in accordance
with the respective terms and conditions of this Agreement as if such
liquidation or dissolution or other event had not occurred, regardless of
whether the Custodian or the Attorney-in-Fact shall have received notice
thereof.
(c) The Selling Securityholder is the lawful owner of the
Shares to be sold by the Selling Securityholder hereunder and upon sale and
delivery of, and payment for, such Shares, as provided herein, the Selling
Securityholder will convey good and marketable title to such Shares, free and
clear of any security interests, liens, encumbrances, equities, claims or other
defects.
(d) The Selling Securityholder has not, directly or
indirectly, (i) taken any action designed to cause or result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (ii) since the filing of the
Registration Statement (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Shares (B) paid or agreed to pay
to any person any compensation for soliciting another to purchase any other
securities of the Company (except for the sale of Shares by the Selling
Securityholder under this Agreement).
(e) To the extent that any statements or omissions are made in
the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
information furnished to the Company by the Selling
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Securityholder, such Preliminary Prospectus did, and the Registration Statement
and the Prospectus and any amendments or supplements thereto, when they become
effective or are filed with the Commission, as the case may be, will, conform in
all material respects to the requirements of the Act and the Rules and
Regulations thereunder and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading. The Selling Securityholder has
reviewed the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) and the Registration Statement, and the
information regarding the Selling Securityholder set forth therein under the
caption "Selling Stockholder" is complete and accurate.
(f) The sale of the Shares by the Selling Securityholder
pursuant to this Agreement is not prompted by any adverse information concerning
the Company that is not set forth in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(g) The sale of the Shares to the Underwriters by the Selling
Securityholder pursuant to this Agreement, the compliance by the Selling
Securityholder with the other provisions of this Agreement, the Custody
Agreement and the consummation of the other transactions herein contemplated do
not (i) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have been
obtained, such as may be required under state securities or Blue Sky laws and,
if the registration statement filed with respect to the Shares (as amended) is
not effective under the Act as of the time of execution hereof, such as may be
required (and shall be obtained as provided in this Agreement) under the Act or
(ii) conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Selling
Securityholder is a party or by which the Selling Securityholder or any of the
Selling Securityholder's properties are bound, or any statute or any judgment,
decree, order, rule or regulation of any court or other governmental authority
or any arbitrator applicable to the Selling Securityholder.
4. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
respective number of Firm Shares which is set forth opposite the name of such
Underwriter in Schedule A hereto (subject to adjustment as provided in Section
11).
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 4 shall be made against
payment of the purchase price therefor by the several Underwriters by certified
or official bank check or checks drawn in same-day funds, payable to the order
of the Company or by wire transfer in same day funds, at the offices of Xxxxx &
Xxxxxx L.L.P., Phoenix, Arizona (or at such other place as may be agreed upon
between the Representative and the Company), at 7:00 A.M. Pacific daylight
savings time, (a) on the third (3rd)
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full business day following the first day that Shares are traded or (b) if this
Agreement is executed and delivered after 1:30 P.M. Pacific daylight savings
time, the fourth (4th) full business day following the day that this Agreement
is executed and delivered or (c) at such other time and date not later than
seven (7) full business days following the first day that Shares are traded as
the Representative and the Company may determine (or at such time and date to
which payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"Closing Date;" provided, however, that if the Company has not made available to
the Representative copies of the Prospectus within the time provided in Section
5(a)(4) hereof, the Representative may, in its sole discretion, postpone the
Closing Date until no later than two (2) full business days following delivery
of copies of the Prospectus to the Representative. The certificates for the Firm
Shares to be so delivered will be made available to you at such office or such
other location as you may reasonably request for checking at least one (1) full
business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two (2) full
business days prior to the Closing Date. If the Representative so elects,
delivery of the Firm Shares may be made by credit through full fast transfer to
the accounts at The Depository Trust Company designated by the Representative.
It is understood that you, individually, and not as the
Representative of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the
several Underwriters intend to make a public offering (as such term is described
in Section 12 hereof) of the Firm Shares at a public offering price of $_____
per share. After the public offering, the several Underwriters may, in their
discretion, vary the public offering price.
5. FURTHER AGREEMENTS OF THE COMPANY AND SELLING SECURITYHOLDER.
(a) The Company covenants and agrees with each of Underwriters
that:
(1) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible. The Company will use its best efforts
to cause any 462 Registration Statement as may be required subsequent to the
date the Registration Statement is declared effective to become effective as
promptly as possible. The Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any 462 Registration
Statement has become effective or any supplement to the Prospectus has been
filed. If the Company omitted information from the Registration Statement at the
time it was originally declared effective in reliance upon Rule 430A(a) of the
Rules and
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Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of Rule
424(b) of the Rules and Regulations or as part of a post-effective amendment to
such Registration Statement as originally declared effective which is declared
effective by the Commission. If the Company files a term sheet pursuant to Rule
434 of the Rules and Regulations, the Company will provide evidence satisfactory
to you that the Prospectus and term sheet meeting the requirements of Rule
434(b) or (c), as applicable, of the Rules and Regulations have been filed,
within the time period prescribed, with the Commission pursuant to subparagraph
(7) of Rule 424(b) of the Rules and Regulations. If for any reason the filing of
the final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the time
period prescribed. The Company will notify you promptly of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Prospectus or for additional information. Promptly upon your request, the
Company will prepare and file with the Commission any amendments or supplements
to the Registration Statement or Prospectus which, in the opinion of
Underwriters' Counsel, may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters. The Company will promptly
prepare and file with the Commission, and promptly notify you of the filing of,
any amendments or supplements to the Registration Statement or Prospectus which
may be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act, any
event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. In case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, it will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Act. The Company will file no amendment or supplement to the Registration
Statement or Prospectus which shall not previously have been submitted to you a
reasonable time prior to the proposed filing thereof or to which you shall
reasonably object in writing, subject, however, to compliance with the Act and
the Rules and Regulations and the provisions of this Agreement.
(2) The Company will advise you, promptly after it shall receive notice
or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(3) The Company will arrange for qualification (including by providing
full cooperation with Underwriter's Counsel, whose services in this matter are
required and which you and the Company will seek to expedite) of the Shares for
offering and sale under the securities
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laws of such jurisdictions as you may designate and to continue such
qualifications in effect for so long as may be required for purposes of the
distribution of the Shares, provided, however, that the Company shall not be
required in connection therewith or as a condition thereof to qualify as a
foreign corporation or to execute a general consent to service of process in any
jurisdiction in which it is not otherwise required to be so qualified or to so
execute a general consent to service of process. In each jurisdiction in which
the Shares shall have been qualified as above provided, the Company will make
and file such statements and reports in each year as are or may be required by
the laws of such jurisdiction for such purpose.
(4) The Company will furnish to you, as soon as
available, and, in the case of the Prospectus and any term sheet or abbreviated
term sheet under Rule 434, in no event later than the first full business day
following the first day that Shares are traded, copies of each Registration
Statement (two of which will be signed and which will include all exhibits),
each Preliminary Prospectus, the Prospectus and any amendments or supplements to
such documents, including any prospectus prepared to permit compliance with
Section 10(a)(3) of the Act, all in such quantities as you may from time to time
reasonably request. Notwithstanding the foregoing, if the Representative, on
behalf of the several Underwriters, shall agree to the utilization of Rule 434
of the Rules and Regulations, the Company shall provide to you copies of a
Preliminary Prospectus updated in all respects through the date specified by you
in such quantities as you may from time to time reasonably request.
(5) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration Statement,
an earnings statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the Act and covering
a twelve (12) month period beginning after the effective date of the
Registration Statements.
(6) During a period of five (5) years after the date
hereof, the Company will furnish to its stockholders as soon as practicable
after the end of each respective period, annual reports (including financial
statements audited by independent certified public accountants) and, upon
request by a stockholder, unaudited quarterly reports of operations for each of
the first three quarters of the fiscal year, and will furnish to you and the
other several Underwriters hereunder, upon request (i) concurrently with
furnishing such reports to its stockholders, statements of operations of the
Company for each of the first three (3) quarters in the form furnished to the
Company's stockholders, (ii) concurrently with furnishing to its stockholders, a
balance sheet of the Company as of the end of such fiscal year, together with
statements of operations, of stockholders' equity, and of cash flows of the
Company for such fiscal year, accompanied by a copy of the certificate or report
thereon of independent certified public accountants, (iii) as soon as they are
available, copies of all reports (financial or other) mailed to stockholders,
(iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, any securities exchange or
AMEX, (v) every material press release and every material news item or article
in respect of the Company or its affairs which was generally released to
stockholders or prepared by the Company,
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and (vi) any additional information of a public nature concerning the Company,
or its business which you may reasonably request. During such five (5) year
period, if the Company shall have active subsidiaries, the foregoing financial
statements shall be on a consolidated basis to the extent that the accounts of
the Company and such subsidiaries are consolidated, and shall be accompanied by
similar financial statements for any significant subsidiary which is not so
consolidated.
(7) The Company will apply the net proceeds from the
sale of the Shares being sold by it in the manner set forth under the caption
"Use of Proceeds" in the Prospectus.
(8) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(9) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations hereunder, or if the
Company shall terminate this Agreement pursuant to Section 12(a) hereof, or if
the Underwriters shall terminate this Agreement pursuant to Section 12(b)(i),
the Company will pay the several Underwriters for all out-of-pocket expenses
(including fees and disbursements of Underwriters' counsel) incurred by the
Underwriters in investigating or preparing to market or marketing the Shares and
to the extent any advances to the Underwriters exceeds such expenses, the
Underwriters shall return such excess to the Company.
(10) If at any time during the ninety (90) day period
after the Registration Statement becomes effective, any rumor, publication or
event relating to or affecting the Company shall occur as a result of which in
your opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(11) During the Lock-up Period, the Company will not,
without the prior written consent of the Representative, effect the Disposition
of, directly or indirectly, any Securities other than the sale of the Firm
Shares and the Option Shares hereunder and the Company's issuance of options or
Common Stock under the Company's presently authorized stock option and stock
purchase plans described in the Registration Statement and the Prospectus
following Stockholder Approval.
(12) The Company will not grant any Common Stock
options (whether or not pursuant to an option plan) or Common Stock Warrants at
any time prior to the Stockholder Approval.
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(13) The Company will cause the Securities to be
included for quotation on AMEX following the Closing Date.
(b) If the Underwriters purchase the Option Shares from the
Selling Securityholder, then the Selling Securityholder covenants and agrees
with each of the Underwriters that:
(1) The Selling Securityholder will not, directly or
indirectly, without the prior written consent of the Representative, on behalf
of the Underwriters, offer, sell, offer to sell, contract to sell, pledge, grant
any option to purchase or otherwise sell or dispose (or announce any offer,
sale, offer of sale, pledge, grant of any option to purchase or other sale or
disposition) of any Securities legally or beneficially owned by the Selling
Securityholder or any securities convertible into, or exchangeable or
exercisable for, Securities for a period of 180 days after the date hereof
except as provided in this Agreement.
(2) The Selling Securityholder will not, directly or
indirectly, (i) take any action designed to cause or result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (ii) (A) sell, bid for, purchase,
or pay anyone any compensation for soliciting purchases of, the Shares or (B)
pay or agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Company (except for the sale of Shares by
the Selling Securityholder under this Agreement).
(3) The Selling Securityholder acknowledges the receipt
of valuable consideration under this Agreement in connection with the sale of
the Shares hereunder and agrees to be bound by all terms of this Agreement
applicable to the Selling Securityholder.
6. EXPENSES.
(a) The Company agrees with each Underwriter that:
(1) The Company will pay and bear all costs and
expenses in connection with the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments or supplements
thereto; the printing of this Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreement, all Blue Sky filing fees and related expenses, the
Underwriters' Questionnaire and Power of Attorney, and any instruments related
to any of the foregoing; the issuance and delivery of the Shares hereunder to
the several Underwriters, including transfer taxes, if any, the cost of all
certificates representing the Shares and transfer agents' and registrars' fees;
the fees and disbursements of counsel for the Company; all fees and other
charges of the Company's independent certified public accountants; the cost of
furnishing to the several Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus and the Prospectus, and
any amendments or supplements to any of the foregoing; NASD
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filing fees and the cost of qualifying the Shares under the laws of such
jurisdictions as you may designate (including filing fees and fees and
disbursements of Underwriters' Counsel in connection with such NASD filings and
Blue Sky qualifications); and all other expenses directly incurred by the
Company in connection with the performance of its obligations hereunder. The
provisions of this Section 6(a)(i) are intended to relieve the Underwriters from
the payment of the expenses and costs which the Company hereby agrees to pay.
(2) In addition to its other obligations under Section
6(a)(i) hereof, the Company will pay to you a nonaccountable expense allowance
equal to _____% of the gross sales price of the Shares to the public. This
nonaccountable expense allowance with respect to the Firm Shares shall be paid
to you on the Closing Date and the nonaccountable expense allowance with respect
to the Option Shares shall be paid to you on the closing of the sale to you of
such Option Shares. The Company has previously paid to you a fee of $25,000,
which shall be credited to this nonaccountable expense allowance.
(3) In addition to its other obligations under Section
9(a) hereof, the Company agrees that, as an interim measure during the pendency
of any claim, action, investigation, inquiry or other proceeding described in
Section 9(a) hereof, it will reimburse the Underwriters on a monthly basis for
all reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) listed from time to
time in The Wall Street Journal which represents the base rate on corporate
loans posted by a substantial majority of the nation's thirty (30) largest banks
(the "Prime Rate"). Any such interim reimbursement payments which are not made
to the Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(b) In addition to their other obligations under Section 9(b)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 9(b) hereof, they will reimburse the
Company on a monthly basis for all reasonable legal or other expenses incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company shall
promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
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reimbursement payments which are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
6(a)(3) and 6(b) hereof, including the amounts of any requested reimbursement
payments, the method of determining such amounts and the basis on which such
amounts shall be apportioned among the reimbursing parties, shall be settled by
arbitration conducted under the provisions of the Constitution and Rules of the
Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 6(a)(3) and 6(b)
hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses which is created by the provisions of
Sections 9(a) and 9(b) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 9(d) hereof.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company herein, to the performance by
the Company of its obligations hereunder, and to the following additional
conditions:
(a) The Registration Statement shall have become effective not
later than 2:00 P.M., Pacific Standard time, on the date following the date of
this Agreement, or such later date and time as shall be consented to in writing
by you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, the registration, authorization, issue, sale and delivery of the
Shares, and the one-for-four reverse stock split contemplated by the Prospectus,
shall have been satisfactory to Underwriters' Counsel, and such counsel shall
have been furnished with such papers and information as they may have requested
to enable them to pass upon the matters referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, or any later date on which Option Shares are to
be purchased, as the case may be, there
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shall not have been any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
Subsidiaries, taken as a whole, from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and adverse
and that makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus.
(d) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, the
following opinion of Xxxxxxx & Xxxxx, LLP, counsel for the Company, dated the
Closing Date or such later date on which Option Shares are to be purchased, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by Xxxxx & Xxxxxx, L.L.P., Underwriters' counsel, in rendering its
opinion pursuant to Section 7(g) of this Agreement) and with reproduced copies
or signed counterparts thereof for each of the Underwriters, to the effect that:
(1) Each of the Company and its Subsidiaries has been
duly incorporated and are validly existing as corporations in good standing
under the laws of the jurisdiction of their incorporation;
(2) Each of the Company and its Subsidiaries has the
corporate power and authority to own, lease and operate its properties and to
conduct their respective businesses as described in the Registration Statement
and the Prospectus;
(3) Each of the Company and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction, if any, in which the ownership or leasing of their respective
properties or the conduct of their respective businesses requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its Subsidiaries, taken as a whole;
(4) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein; the issued and outstanding
shares of capital stock of the Company have been duly and validly issued and are
fully paid and nonassessable, and will not have been issued in violation of the
Company's charter or bylaws or in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or other
similar right, and all offers and sales of the Company's capital stock were at
all relevant times exempt from the registration or qualification requirements of
the Act and state securities laws. The Company's outstanding options as
described in the Prospectus have been duly authorized and shares of Common Stock
have been reserved for issuance pursuant to the terms of the Company's stock
option plans;
(5) The Firm Shares or the Option Shares, as the case
may be, to be issued by the Company pursuant to the terms of this Agreement have
been duly authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be duly and
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validly issued and fully paid and nonassessable and will not have been issued in
violation of or subject to any preemptive right, co-sale right, registration
right, right of first refusal or, to the best of such counsel's knowledge, other
similar right contained in the Company's charter or bylaws or in any other
agreement or contract to which the Company is a party; and the forms of
certificates evidencing the Shares comply with Nevada law;
(6) The Company has the corporate power and authority
to enter into this Agreement and to issue, sell and deliver to the Underwriters
the Shares to be issued and sold by it hereunder;
(7) The Company has the corporate power and authority
to enter into Representative's Warrant Agreement and to issue, sell and deliver
to the Representative the Representative's Warrants to be issued and sold by it
thereunder;
(8) Each of this Agreement and the Representative's
Warrant Agreement has been duly authorized by all necessary corporate action on
the part of the Company and has been duly executed and delivered by the Company
and, assuming due authorization, execution and delivery by you, is a valid and
binding agreement of the Company, enforceable in accordance with its terms,
except insofar as indemnification and contribution provisions may be limited by
applicable law and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles;
(9) The Registration Statement has become effective
under the Act and no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or, to the best of such counsel's knowledge,
threatened under the Act;
(10) The Registration Statement and the Prospectus, and
each amendment or supplement thereto (other than the financial statements
(including supporting schedules), financial data derived therefrom and other
financial and statistical information included therein, as to which such counsel
need express no opinion), as of the effective date of the Registration
Statement, and with respect to the Prospectus as of __________, 1999, complied
as to form in all material respects with the requirements of the Act and the
applicable Rules and Regulations;
(11) The information in the Prospectus under the
caption (a) ["Description of Capital Stock," "Shares Eligible For Future Sale"
and "Business-Legal Proceedings,"] to the extent that it constitutes matters of
law or legal conclusions, has been reviewed by such counsel and is a fair
summary of such matters and conclusions and (b) ["Business-Government
Regulation"] to the extent that it reflects matters of law or summaries of law
or regulations, is correct in all material respects;
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(12) The description in the Registration Statement and
the Prospectus of the charter and bylaws of the Company and of statutes are
accurate and fairly present the information required to be presented by the Act
and the applicable Rules and Regulations;
(13) There are no agreements, contracts, leases or
documents to which the Company is a party of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement that are not described or
referred to therein or filed as required;
(14) The performance of this Agreement and the
Representative's Warrant Agreement and the consummation of the transactions
herein and therein contemplated (other than performance of the Company's
indemnification obligations hereunder or under the Representative's Warrant
Agreement, concerning which no opinion need be expressed) will not (a) result in
any violation of the charter or bylaws of the Company or any of its Subsidiaries
or (b) conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which its properties are
bound, or any applicable statute, rule or regulation generally applicable to
transactions of the type contemplated hereunder or any order, writ or decree of
any court, government or governmental agency or body having jurisdiction over
the Company or any of its Subsidiaries or any of their respective properties or
operations which such breach, conflict, violation or default is reasonably
likely to have a Material Adverse effect.;
(15) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body having
jurisdiction over the Company or any of its Subsidiaries or any of the Company's
or its Subsidiaries' properties or operations is necessary in connection with
the consummation by the Company of the transactions herein contemplated, except
such as have been obtained under the Act or such as may be required under state
or other securities or Blue Sky laws in connection with the purchase and the
distribution of the Shares by the Underwriters;
(16) There are no legal or governmental proceedings
pending or, to such counsel's best knowledge, threatened against the Company or
any of its Subsidiaries of a character required to be disclosed in the
Registration Statement or the Prospectus by the Act or the Rules and
Regulations, other than those described therein;
(17) To the best of such counsel's knowledge, each of
the Company and its Subsidiaries is not in violation of its respective charter
or bylaws and no breach or default exists, and to such counsel's knowledge, no
event has occurred which, with notice or lapse of time or both, would constitute
a breach or violation of any of the terms and provisions of, or constitute a
default under, any bond, debenture, note or other evidence of indebtedness, or
any lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which either the Company or any of
its Subsidiaries is a party or by which their respective properties are
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bound, and which is known to such counsel, or any applicable statute, rule or
regulation or any order, writ or decree of any court, government or governmental
agency or body having jurisdiction over the Company or any of its Subsidiaries
or any of the Company's or any of its Subsidiaries properties or operations,
except such breaches, violations or defaults which would not have a Material
Adverse Effect.
(18) Each of the Company and its Subsidiaries is not,
and upon the sale of the Shares as herein contemplated will not be, an
"investment company,' as defined under the Investment Company Act of 1940, as
amended.
(19) Each of the Company and its Subsidiaries is in
compliance with, and conducts its respective businesses in conformity with, all
applicable laws and regulations under the laws of the states of its
incorporation and foreign qualifications and the federal laws of the United
States, relating to the operation of its business as described in the
Registration Statement, except to the extent that any failure so to comply or
conform would not have a Material Adverse Effect;
(20) Except as set forth in the Registration Statement
and Prospectus, no holders of Common Stock or other securities of the Company
have registration rights with respect to securities of the Company and, except
as set forth in the Registration Statement and Prospectus, all holders of
securities of the Company having rights to registration of such shares of Common
Stock or other securities, because of the filing of the Registration Statement
by the Company, have, with respect to the offering contemplated thereby, waived
such rights or such rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration Statement;
(21) The Representative's Warrants have been duly and
validly authorized by the Company and upon delivery to the Representative in
accordance with the Representative's Warrant Agreement will be duly issued and
legal, valid and binding obligations of the Company;
(22) The Representative's Warrant Stock to be issued by
the Company pursuant to the terms of the Representative's Warrant has been duly
authorized and, upon issuance and delivery against payment therefore in
accordance with the terms of the Representative's Warrant Agreement, will be
duly and validly issued and fully paid and nonassessable, and to such counsel's
knowledge, will not have been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first refusal or
other similar right of stockholders;
(23) To such counsel's knowledge, no holders of Common
Stock or other securities of the Company have registration rights with respect
to securities of the Company;
(24) If the Company elects to rely on Rule 434, the
Prospectus is not "materially different," as such term is used in Rule 434, from
the prospectus included in the Registration Statement at the time of its
effectiveness or an effective post-effective amendment thereto (including such
information that is permitted to be omitted pursuant to Rule 430A); and
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(25) The conditions for use of Form SB-2, as set forth
in the General Instructions thereto, have been satisfied.
In addition, such counsel shall state that such counsel has
acted as outside corporate legal counsel to the Company and participated in
conferences with officials and other representatives of the Company, the
Representative, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads such counsel to believe that, at the
time the Registration Statement became effective and at all times subsequent
thereto up to and on the Closing Date and on any later date on which Option
Shares are to be purchased, the Registration Statement and any amendment or
supplement thereto (other than the financial statements including supporting
schedules, other financial information derived therefrom and other financial and
statistical information included therein, as to which such counsel need express
no opinion) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the Closing Date or any later date on
which the Option Shares are to be purchased, as the case may be, the
Registration Statement, the Prospectus and any amendment or supplement thereto
(except as aforesaid) contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or the State of
Arizona upon opinions of local counsel, and as to matters of fact, to the extent
such counsel deems proper, upon certificates of responsible officers of the
Company, and of government officials, in which case their opinion is to state
that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or certificate.
References to the Registration Statement and the Prospectus in this subsection
(d) shall include any amendment or supplement thereto at the date of such
opinion. Copies of any opinion, representation or certificate so relied upon
shall be delivered to you, as Representative of the Underwriters, and to
Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of Dorn, McEachran, Xxxxxx & Xxxxxxx, intellectual property counsel for
the Company, dated the Closing Date or such later date on which Option Shares,
as the case may be, are to be purchased, addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the Underwriters:
(1) "Intellectual Property" means: (a) currently
existing domestic and foreign patents, patent applications, and patent
disclosures; (b) currently existing domestic (including federal and state) and
foreign trademarks, servicemarks, trade names, trade dress, domain names, and
all applications, registrations, renewals related thereto; and (c) currently
existing domestic and foreign copyright applications and copyright
registrations, including renewals related thereto.
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(2) Exhibit A attached hereto is a complete and
accurate listing of all Intellectual Property owned by, registered to, or
assigned to the Company. All right, title, and interest to the Intellectual
Property listed in Exhibit A is valid and subsisting.
(3) The Intellectual Property has been properly
assigned to the Company, and, except as otherwise stated in counsel's opinion,
the Company is currently listed as the sole assignee of record in the respective
patent office, trademark office, copyright office, or other appropriate
government or administrative office.
(4) The Company is unaware of any irregularities in the
chain of title to any of the Intellectual Property.
(5) The Company has taken all necessary and desirable
action to maintain and protect each item of Intellectual Property. In this
respect, all currently pending domestic and foreign applications related to the
procurement, establishment, or registration of the Intellectual Property are
being diligently prosecuted, and none of the pending domestic and foreign
applications has been fully rejected or abandoned.
(6) The Company has not licensed, assigned, sold, or
otherwise transferred any of the rights (or any portion of the rights) to the
Intellectual Property to any third party.
(7) All domestic and foreign applications related to
the procurement, establishment, or registration of the Intellectual Property
have been properly executed by the respective inventor(s), an authorized
representative of a corporate applicant, an authorized attorney or legal
representative, or an appropriate person or entity in accordance with the
respective governing laws, rules, regulations, and procedures.
(8) All domestic and foreign applications related to
the procurement, establishment, or registration of the Intellectual Property
have been properly filed and prosecuted by the respective inventor(s), an
authorized representative of a corporate applicant, an authorized attorney or
legal representative, or an appropriate person or entity in accordance with the
respective governing laws, rules, regulations, and procedures.
(9) In the opinion of counsel, all pertinent prior art
references known to the Company or the Company's representative during the
prosecution of the U.S. patents and the U.S. applications were disclosed to the
PTO or cited by the PTO. To the best of counsel's knowledge, no
misrepresentations or mischaracterizations of the prior art were made during the
prosecution of any foreign or domestic patent application related to the
Intellectual Property. To the best of counsel's knowledge, the provisions of 37
C.F.R. Section1.56 were fully complied with during the prosecution of the U.S.
patents and the U.S. applications related to the Intellectual Property.
(10) Counsel is unaware of any irregularities in the
prosecution of any foreign or domestic applications relating to the procurement,
establishment, or registration of the
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Intellectual Property, where such irregularities may impact the validity or
enforceability of the Intellectual Property or otherwise impact the Company's
rights in the Intellectual Property.
(11) Regarding any pending patent applications listed
in Exhibit A, counsel is unaware of any circumstances that would adversely
affect the ability of the Company to obtain validly issued patents having
reasonable claim scope.
(12) Except as set forth in the Registration Statement,
counsel is unaware of any actual or threatened legal, governmental, or other
third party action, suit, claim, or proceeding (including those relating to
infringement) relating to Intellectual Property rights owned by or affecting the
business operations of the Company which are pending or threatened against the
Company and which action, suit, claim, or proceeding would, with respect to any
of the foregoing, have a material adverse effect on the condition (financial or
other), earnings, operations, business, or business prospects of the Company.
(13) Except as set forth in the Registration Statement,
to the best of counsel's knowledge, the Company is not infringing or otherwise
violating any Intellectual Property rights of any third party, and, to the best
of counsel's knowledge, no third party is infringing or otherwise violating any
of the Company's Intellectual Property in a way that would have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business, or business prospects of the Company.
(14) The information in the Registration Statement and
the Prospectus under the captions "_____________________" have been reviewed by
such counsel and are a fair and accurate summary of such matters.
(15) To such counsel's knowledge, there are no facts or
circumstances which would require the Company to obtain licenses under third
party Intellectual Property rights which are necessary to allow the Company to
conduct the business now being conducted or proposed to be conducted by the
Company as described in the Prospectus.
(16) Counsel is unaware of any asserted, unasserted, or
threatened claims relating to the scope, validity, or ownership of any of the
Intellectual Property.
References to the Registration Statement and the
Prospectus in this subsection (e) shall include any amendment or supplement
thereto at the date of such opinion.
(f) You shall have received on the Closing Date and on any later date on
which Option Shares are to be purchased, as the case may be, the following
opinion of ________________, counsel for the Selling Securityholder, dated the
Closing Date, to the effect that:
(1) The Selling Securityholder has full corporate power
to enter into this Agreement, the Custody Agreement and the Power-of-Attorney
and to sell, transfer and deliver the Shares being sold by the Selling
Securityholder hereunder in the manner provided in this Agreement
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and to perform its obligations under the Custody Agreement. The execution and
delivery of this Agreement, the Custody Agreement and the Power-of-Attorney have
been duly authorized by all necessary action (corporate or other) of the Selling
Securityholder. This Agreement, the Custody Agreement and the Power-of-Attorney
have been duly executed and delivered by the Selling Securityholder. Assuming
due authorization, execution and delivery by the Custodian, the Custody
Agreement and the Power-of-Attorney are the legal, valid, binding and
enforceable instruments of the Selling Securityholder, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law);
(2) The delivery by the Selling Securityholder to the
several Underwriters of certificates for the Shares being sold hereunder by the
Selling Securityholder against payment therefor as provided herein, will convey
good and marketable title to such Shares to the several Underwriters, free and
clear of all security interests, liens, encumbrances, equities, claims or other
defects; and
(3) The sale of the Shares to the several Underwriters
by the Selling Securityholder pursuant to this Agreement, the compliance by the
Selling Securityholder with the other provisions of this Agreement, the Custody
Agreement and the consummation of the other transactions herein contemplated do
not (i) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have been
obtained and such as may be required under state securities or blue sky laws, or
(ii) conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Selling
Securityholder is a party or by which such Selling Securityholder or any of the
Selling Securityholder's respective properties are bound, or the charter
documents or by-laws of the Selling Securityholder, if applicable, or any
statute or any judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to the Selling
Securityholder.
In rendering such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials. Copies of such opinion shall be
delivered to the Representative and Underwriters' Counsel.
References to the Registration Statement and the Prospectus in this
subsection (f) shall include any amendment or supplement thereto at the date of
such opinion.
(g) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, an opinion of
Xxxxx & Xxxxxx, L.L.P. in form and substance satisfactory to you, with respect
to the sufficiency of all such corporate proceedings and other legal matters
relating to this Agreement and the transactions contemplated hereby as you may
reasonably require, and the Company shall have furnished to such counsel such
documents as they may have requested for the purpose of enabling them to pass
upon such matters.
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(h) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a letter or
letters from D&T, addressed to the Underwriters, dated the Closing Date or such
later date on which Option Shares are to be purchased, as the case may be (in
each case, the "Bring Down Letter"), confirming that they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the applicable published Rules and Regulations and based upon the
procedures described in the letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), dated the
date hereof, or such later date on which Option Shares are to be purchased, as
the case may be, (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of the Closing Date
or such later date on which Option Shares are to be purchased, as the case may
be, and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter that are necessary to reflect any
changes in the facts described in the Original Letter since its date, or to
reflect the availability of more recent financial statements, data or
information. The Bring Down Letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. The Original
Letter from D&T shall be addressed to or for the use of the Underwriters in form
and substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations, (ii) set forth their opinion with respect to their examination
of the consolidated balance sheets of the Company as of December 31, 1998
(including the balance sheets of Aztec Industries, Inc. as of January 31, 1998),
and related consolidated statements of operations and common stockholders'
equity (deficit) and cash flows for the twelve (12) months ended December 31,
1998, (iii) state that D&T has performed the procedures set out in Statement on
Auditing Standards No. 71 ("SAS 71") for a review of interim financial
information and providing the report of D&T as described in SAS 71 on the
financial statements for the periods ended March 31, 1999 and 1998 (the
"Quarterly Financial Statements"), (iv) state that in the course of such review,
nothing came to their attention that leads them to believe that any material
modifications need to be made to any of the Quarterly Financial Statements in
order for them to be in compliance with generally accepted accounting principles
consistently applied across the periods presented, (v) state that nothing came
to their attention that caused them to believe that the financial statements
included in the Registration Statement and Prospectus do not comply as to form
in all material respects with the applicable accounting requirements of Rule
11-02 of Regulation S-X and that any adjustments thereto have not been properly
applied to the historical amounts in the compilation of such statements, and
(vi) address other matters agreed upon by D&T and you. In addition, you shall
have received from D&T a letter addressed to the Company and made available to
you for the use of the Underwriters stating that their review of the Company's
system of internal accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's financial
statements as of and for the twelve (12) months ended December 31, 1998, and as
of and for the three (3) months ended March 31, 1999 did not disclose any
weaknesses in internal controls that they considered to be material weaknesses.
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[(i) At the time of the execution of this Agreement, the
Underwriters shall have received from M&P, former independent public accountants
for the Company, a letter dated such date and addressed to the Underwriters, in
form and substance satisfactory to the Underwriters, containing statements and
information of the type ordinarily included in accountants' "comfort letters" to
underwriters, delivered according to Statement of Auditing Standards No. 72 (or
any successor bulletin), with respect to the audited and unaudited financial
statements and certain financial and capital stock information contained in the
Registration Statement and the Prospectus.]
(j) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, to the effect
that, and you shall be satisfied that:
(1) The representations and warranties of the Company
in this Agreement are true and correct in all material respects, as if made on
and as of the Closing Date and such later date on which Option Shares are to be
purchased, as the case may be, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date or any later date on which Option
Shares are to be purchased, as the case may be;
(2) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(3) When the Registration Statement became effective
and at all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein by
the Act and the Rules and Regulations, and in all material respects conformed to
the requirements of the Act and the Rules and Regulations, the Registration
Statement, and any amendment or supplement thereto, did not and does not include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, the Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(4) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (a) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company or any of
its Subsidiaries, (b) any transaction that is material to the Company or any of
its
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Subsidiaries, except transactions entered into in the ordinary course of
business or that were contemplated by and disclosed in the Registration
Statement and the Prospectus, (c) any obligation, direct or contingent, that is
material to the Company or any of its Subsidiaries, incurred by the Company or
any of its Subsidiaries, except obligations incurred in the ordinary course of
business, (d) any change in the capital stock or outstanding indebtedness of the
Company or any of its Subsidiaries that is material to the Company or such
Subsidiary or is out of the ordinary course of business of the Company or such
Subsidiary , (e) any dividend or distribution of any kind declared, paid or made
on the capital stock of the Company, or (f) any loss or damage (whether or not
insured) to the property of the Company or any of its Subsidiaries which has
been sustained or will have been sustained which has a Material Adverse Effect.
(k) The Representative shall have received a certificate from
the Selling Securityholder, signed by the Selling Securityholder, dated the
Closing Date and such later date on which Option Shares are to be purchased, as
the case may be, to the effect that:
(1) The representations and warranties of the Selling
Securityholder in this Agreement are true and correct in all material respects
as if made on and as of the Closing Date, or the date on which Option Shares are
to be purchased, as the case may be;
(2) The Selling Securityholder has performed all
covenants and agreements on its part to be performed or satisfied at or prior to
the Closing Date, or the date on which Option Shares are to be purchased, as the
case may be;
(3) To the extent that any statements or omissions are
made in the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto in reliance upon and in conformity with
information furnished to the Company by the Selling Securityholder, as amended
as of the Closing Date, the Registration Statement does not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading, and the Prospectus, as amended or
supplemented as of the Closing Date, does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and
(l) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company, each person set forth
on Schedule B attached hereto and each entity that is a stockholder and is
affiliated with an officer or director of the Company in writing prior to the
date hereof that such person will not, except as described below, during the
Lock-up Period, effect the Disposition of any Securities now owned or hereafter
acquired by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) on the transfer of shares
of Common Stock or Securities during such person's lifetime by bona fide gift or
upon death by will or intestacy, provided that any transferee agrees in writing
to be bound by the Lock-Up Agreement, and (ii) on the transfer or other
disposition of shares of Common Stock or Securities as a distribution to limited
partners or stockholders of such person, provided that the
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distributees thereof agree in writing to be bound by the terms of the Lock-Up
Agreement. The foregoing restriction shall have been expressly agreed to
preclude the holder of the Securities from engaging in any hedging, pledge or
other transaction which is designed to or may reasonably be expected to lead to
or result in a Disposition of Securities during the Lock-Up Period, even if such
Securities would be disposed of by someone other than the such holder. Such
prohibited hedging, pledge or other transactions would include, without
limitation, any short sale (whether or not against the box), any pledge of
shares covering an obligation that matures or could reasonably mature during the
Lock-Up Period, or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person will have also agreed and consented to the
entry of stop transfer instructions with the Company's transfer agent against
the transfer of the Securities held by such person except in compliance with
this restriction. In addition, each officer and director of the Company, and
each person listed on Schedule 1 attached hereto (excluding Blackwater Capital
Group, L.L.C., Blackwater Capital Partners, L.P. or their assigns) also has
agreed pursuant to the Lock-Up Agreement that the Representative shall have an
irrevocable preferential right for a period of two years from the termination of
the Lock-Up Period to purchase for its account or to sell for the account of
each such officer, director or securityholder any Securities of the Company that
any of such officers, directors, or stockholders may seek to sell under Rule 144
promulgated under the Act. Each such officer, director, or securityholder will
consult the Representative with regard to any such offering and will offer the
Representative the opportunity to purchase or sell any such Securities on terms
not more favorable to such officer, director or securityholder than they can
secure elsewhere.
(m) The Representative's Warrant Agreement shall have been
entered into by the Company and you, and the Representative's Warrants shall
have been issued and sold to you pursuant thereto.
(n) The Company and the Selling Stockholder, if applicable,
shall have furnished to you such further certificates and documents as you shall
reasonably request (including certificates of officers of the Company) as to the
accuracy of the representations and warranties of the Company herein, as to the
performance by the Company of its obligations hereunder and as to the other
conditions concurrent and precedent to the obligations of the Underwriters
hereunder.
All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are satisfactory to
Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
8. OPTION SHARES.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the several Underwriters, for the purpose of
covering over-allotments in connection with the distribution
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and sale of the Firm Shares only, a nontransferable option to purchase up to an
aggregate of ________________ Option Shares at the purchase price per share for
the Firm Shares set forth in Section 4 hereof (the "Option"). The Option may be
exercised by the Representative on behalf of the several Underwriters on one (1)
or more occasions in whole or in part during the period of forty five (45) days
after the date on which the Firm Shares are initially offered to the public by
giving written notice (the "Option Notice") to the Company. The number of Option
Shares to be purchased by each Underwriter upon the exercise of the Option shall
be the same proportion of the total number of Option Shares to be purchased by
the several Underwriters pursuant to the exercise of the Option as the number of
Firm Shares purchased by such Underwriter (set forth in Schedule A hereto) bears
to the total number of Firm Shares purchased by the several Underwriters (set
forth in Schedule A hereto), adjusted by the Representative in such manner as to
avoid fractional shares.
Delivery of definitive certificates for the Option
Shares to be purchased by the several Underwriters pursuant to the exercise of
the Option granted by this Section 8 shall be made against payment of the
purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in same day funds, payable to the order of the
Company or by wire transfer in same day funds. In the event of any breach of the
foregoing, the Company shall reimburse the Underwriters for the interest lost
and any other expenses borne by them by reason of such breach. Such delivery and
payment shall take place at the offices of Xxxxx & Xxxxxx L.L.P., Phoenix,
Arizona, or at such other place as may be agreed upon between the Representative
and the Company (i) on the Closing Date, if written notice of the exercise of
the Option is received by the Company at least two (2) full business days prior
to the Closing Date, or (ii) on a date which shall not be later than the third
(3rd) full business day following the date the Company receives written Notice
of the Option, if such notice is received by the Company after the date two (2)
full business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location, as you may reasonably
request for checking at least one (1) full business day prior to the date of
payment and delivery and will be in such names and denominations as you may
request, such request to be made at least two (2) full business days prior to
such date of payment and delivery. If the Representative so elects, delivery of
the Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representative.
It is understood that you, individually, and not as the Representative
of the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the date of payment and
delivery for the Option Shares to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of the Option provided for in Section 8(a) hereof,
the obligations of the several Underwriters to purchase such Option Shares will
be subject (as of the date
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hereof and as of the date of payment and delivery for such Option Shares) to the
accuracy of and compliance with the representations, warranties and agreements
of the Company herein, to the accuracy of the statements of the Company and
officers of the Company made pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder, to the conditions set
forth in Section 7 hereof, and to the condition that all proceedings taken at or
prior to the payment date in connection with the sale and transfer of such
Option Shares shall be satisfactory in form and substance to you and to
Underwriters' Counsel, and you shall have been furnished with all such
documents, certificates and opinions as you may request in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements, the performance of any of the covenants or agreements of the
Company, or the satisfaction of any of the conditions herein contained.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, and each person, if any, who controls any Underwriter within the
meaning of the Act or the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such controlling
person may become subject (including, without limitation, in its capacity as an
Underwriter or as a "qualified independent underwriter" within the meaning of
Schedule E of the Bylaws of the NASD), under the Act, the Exchange Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities (or actions in respect thereof) arising out of or based upon (i)
any breach of any representation, warranty, agreement or covenant of the Company
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (iii) any untrue statement or alleged untrue statement
of any material fact contained in any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or (iv) any untrue statement or alleged untrue statement
of any material fact contained in any audio or visual materials used in
connection with the marketing of the Shares and furnished by the Company,
including without limitation, slides, videos, films and tape recordings, and
agrees to reimburse each Underwriter for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through the Representative, specifically for use in the
preparation thereof and, provided further, that the indemnity agreement provided
in this Section 9(a) with respect to any Preliminary Prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any losses,
claims, damages, liabilities or actions based upon any untrue
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statement or alleged untrue statement of material fact or omission or alleged
omission to state therein a material fact purchased Shares, if a copy of the
Prospectus in which such untrue statement or alleged untrue statement or
omission or alleged omission was corrected had not been sent or given to such
person within the time required by the Act and the Rules and Regulations, unless
such failure is the result of noncompliance by the Company with Section 5(a)(4)
hereof. This indemnity agreement shall be in addition to any liabilities which
the Company may otherwise have.
(b) The Selling Securityholder agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act or the Exchange Act against any losses, claims,
damages, damages or liabilities, joint or several, to which such Underwriter or
such controlling person may become subject under the Act, the Exchange Act or
otherwise, arising out of or are based upon: (i) any breach of any
representation, warranty, agreement or covenant of the Selling Securityholder
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any amendment
thereto or any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto based upon information furnished by or on behalf of the
Selling Securityholder, or (iii) the omission or alleged omission to state in
the Registration Statement or any amendment thereto, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, a material fact
required to be stated therein or necessary to make the statements therein
relating to the Selling Securityholder not misleading, and agrees to reimburse
each Underwriter and each such controlling person for any legal or other
expenses reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action;
provided, however, that the Selling Securityholder 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 or
omission or alleged omissions made in the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto, or any such Application in reliance upon and in
conformity with written information furnished to the Company or to the Selling
Securityholder by any Underwriter through the Representative specifically for
use therein and (ii) the Selling Securityholder will not be liable to any
Underwriter or any person controlling such Underwriter with respect to any such
untrue statement or omission made in any Preliminary Prospectus that is
corrected in the Prospectus (or any amendment or supplement thereto) if the
person asserting to such loss, claim, damage or liability purchased Shares from
such Underwriter but was not sent or given a copy of the Prospectus (as amended
or supplemented) at or prior to the written confirmation or the sale of such
Shares to such person in any case where such delivery of the Prospectus (as
amended and supplemented) is required by the Act, unless such failure to deliver
to the Prospectus (as amended and supplemented) was a result of noncompliance by
the Company with Section 5(a)(4) of this Agreement. This indemnity agreement
shall be in addition to any liability which the Selling Securityholder may
otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company and the Selling Stockholder against any
losses, claims, damages or liabilities, joint or several, to which the Company
and the Selling Stockholder may become subject under the
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Act or otherwise, specifically including, but not limited to, losses, claims,
damages or liabilities (or actions in respect thereof) arising out of or based
upon (i) any breach of any representation, warranty, agreement or covenant of
such Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 9(c) to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company or to
the Selling Securityholder by such Underwriter, directly or through the
Representative, specifically for use in the preparation thereof, and agrees to
reimburse the Company and the Selling Securityholder for any legal or other
expenses reasonably incurred by the Company or by the Selling Securityholder in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 9(c) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer of the Company who signed the Registration Statement and each director
of the Company, and each person, if any, who controls the Company within the
meaning of the Act or the Exchange Act. This indemnity agreement shall be in
addition to any liabilities which such Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 9, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 9 except to the extent that it has been
prejudiced by such omission. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it shall elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of the indemnifying party's election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or
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other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with appropriate
local counsel) approved by the indemnifying party representing all the
indemnified parties under Section 9(a), 9(b), or 9(c) hereof who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be liable in respect of any amounts paid in settlement of any
action unless the indemnifying party shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably withheld. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnification
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on all claims that are the subject matter of such proceeding.
(e) In order to provide for just and equitable contribution in
any action in which a claim for indemnification is made pursuant to this Section
9 but it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the public offering
price, and the Company and the Selling Securityholder are responsible for the
remaining portion, provided, however, that (i) no Underwriter shall be required
to contribute any amount in excess of the amount by which the underwriting
discount applicable to the Shares purchased by such Underwriter exceeds the
amount of damages which such Underwriter has otherwise been required to pay and
(ii) no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. The contribution agreement
in this Section 9(e) shall extend upon the same terms and conditions to, and
shall inure to the benefit of, each person, if any, who controls any
Underwriter, or the Company, or the Selling Securityholder within the meaning of
the Act or the Exchange Act and each officer of the Company who signed the
Registration Statement and each director of the Company.
(f) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 9, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 9 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in
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order to assure that adequate disclosure is made in the Registration Statement
and Prospectus as required by the Act and the Exchange Act.
(g) The liability of the Selling Securityholder under this
Section 9 shall not exceed an amount equal to the total proceeds received by the
Selling Securityholder from the sale of the Option Shares.
10. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company, the Selling Securityholder and the Underwriters herein or in
certificates delivered pursuant hereto, and the indemnity and contribution
agreements contained in Section 9 hereof shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter within the meaning of the
Act or the Exchange Act, or by or on behalf of the Company, or any of its
officers, directors or controlling persons within the meaning of the Act or the
Exchange Act, and shall survive the delivery of the Shares to the several
Underwriters hereunder or termination of this Agreement.
11. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any nondefaulting
Underwriter) satisfactory to the Company. If no such underwriter or underwriters
shall have been substituted as aforesaid by such postponed Closing Date, the
Closing Date may, at the option of the Company, be postponed for a further
twenty-four (24) hours, if necessary, to allow the Company the privilege of
finding another underwriter or underwriters, satisfactory to you, to purchase
the Firm Shares which the defaulting Underwriter or Underwriters so agreed but
failed to purchase. If it shall be arranged for the remaining Underwriters or
substituted underwriter or underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section 11, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven (7) full business days, in order to effect whatever
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changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement, supplements to
the Prospectus or other such documents which may thereby be made necessary, and
(ii) the respective number of Firm Shares to be purchased by the remaining
Underwriters and substituted underwriter or underwriters shall be taken as the
basis of their underwriting obligation. If the remaining Underwriters shall not
take up and pay for all such Firm Shares so agreed to be purchased by the
defaulting Underwriter or Underwriters or substitute another underwriter or
underwriters as aforesaid and the Company shall not find or shall not elect to
seek another underwriter or underwriters for such Firm Shares as aforesaid, then
this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 11, then the Company shall not be liable to
any Underwriter (except as provided in Sections 6 and 9 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 6 and 9 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 11.
12. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of (i)
6:30 A.M., Pacific Standard time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the public offering shall mean the time
of the release by you, for publication, of the first newspaper advertisement
relating to the Shares, or the time at which the Shares are first generally
offered by the Underwriters to the public by letter, telephone, telegram or
telecopy, whichever shall first occur. By giving notice as set forth in Section
13 before the time this Agreement becomes effective, you, as Representative of
the several Underwriters, or the Company, may prevent this Agreement from
becoming effective without liability of any party to any other party, except as
provided in Sections 5(a)(9), 6 and 9 hereof.
(b) You, as Representative of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
shall have failed, refused or been unable to perform any agreement on its part
to be performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled is not fulfilled, including, without
limitation, any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material
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and adverse, or (ii) if additional governmental restrictions, not in force and
effect on the date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally established on
the New York Stock Exchange or on the American Stock Exchange or in the over the
counter market by the NASD, or trading in securities generally shall have been
suspended on either such exchange or in the over the counter market by the NASD,
or if a banking moratorium shall have been declared by federal, New York or
California authorities, or (iii) if the Company shall have sustained a loss by
strike, fire, flood, earthquake, accident or other calamity of such character as
to interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or (iv)
if there shall have been a material adverse change in the general political or
economic conditions or financial markets as in your judgment makes it
inadvisable or impracticable to proceed with the offering, sale and delivery of
the Shares, or (v) if there shall have been an outbreak or escalation of
hostilities or of any other insurrection or armed conflict or the declaration by
the United States of a national emergency which, in the opinion of the
Representative, makes it impracticable or inadvisable to proceed with the public
offering of the Shares as contemplated by the Prospectus. In the event of
termination pursuant to subparagraph (i) above, the Company shall remain
obligated to pay costs and expenses pursuant to Sections 5(a)9, 6 and 9 hereof.
Any termination pursuant to any of subparagraphs (ii) through (v) above shall be
without liability of any party to any other party except as provided in Sections
5, 6 and 9 hereof.
If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 12, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
13. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, or telecopied (and confirmed by letter) to you c/o Cruttenden
Xxxx Incorporated, 00 Xxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000 telecopier
number (000) 000-0000, Attention: General Counsel, with a copy to Xxxxx &
Xxxxxx, LLP, Xxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000, telecopier number (602)
382- 6070, Attention: Xxxxxx X. Xxxxxxx, Esq.; if sent to the Company, such
notice shall be mailed, delivered, telegraphed or telecopied (and confirmed by
letter) to DuraSwitch Industries, Inc., 000 X. Xxxxxxxxx Xxxx, Xxxxx 000, Xxxx,
Xxxxxxx 00000, Attention: President, with a copy to Xxxxxxx & Xxxxx, Xxx X.
Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, telecopier number (602)
230-5598, Attention: P. Xxxxxx Xxxx, Esq; if sent to the Selling Securityholder,
such notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to Blackwater Capital Partners, L.P.,
____________________________.
14. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and their respective
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any person
or entity, other than the parties hereto and their respective executors,
administrators,
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successors and assigns, and the controlling persons within the meaning of the
Act or the Exchange Act, officers and directors referred to in Section 9 hereof,
any legal or equitable right, remedy or claim in respect of this Agreement or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective executors, administrators,
successors and assigns and said controlling persons and said officers and
directors, and for the benefit of no other person or entity. No purchaser of any
of the Shares from any Underwriter shall be construed a successor or assign by
reason merely of such purchase.
In all dealings with the Company under this Agreement, you shall
act on behalf of each of the several Underwriters, and the Company shall be
entitled to act and rely upon any statement, request, notice or agreement made
or given by you jointly or by Cruttenden Xxxx Incorporated on behalf of you.
15. APPLICABLE LAW. The validity and interpretation of this Agreement,
and the terms and conditions set forth herein, shall be governed by, and
construed in accordance with, the laws of the State of California.
16. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial
proceedings arising out of or relating to this Agreement shall be initiated and
tried exclusively in the state and federal courts located in the State of
California. The aforementioned choice of venue is intended by the parties to be
mandatory and not permissive in nature, thereby precluding the possibility of
litigation between the parties with respect to or arising out of this Agreement
in any jurisdiction other than that specified in this Section 16. The Company
and the Selling Securityholder accepts for itself and in connection with its
properties, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts and waives any defense of forum non conveniens and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. Each party hereby authorizes and accepts service of process
sufficient for personal jurisdiction in any action against it as contemplated by
this Section 16 by registered or certified mail, return receipt requested,
postage prepaid, to its address for the giving of notices as set forth in this
Agreement.
17. COUNTERPARTS. This Agreement may be signed in several counterparts,
each of which will constitute an original.
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If the foregoing correctly sets forth the understanding among
the Company and the several Underwriters, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement between the Company and the several Underwriters.
Very truly yours,
DURASWITCH INDUSTRIES, INC.
By: ______________________________
R. Xxxxxx Xxxxxx
Chief Executive Officer
BLACKWATER CAPITAL PARTNERS, L.P.
By: ______________________________
Its:____________________________
Accepted as of the date first above written:
CRUTTENDEN XXXX INCORPORATED
On its behalf and on behalf of each of the several Underwriters named in
Schedule A hereto.
By: CRUTTENDEN XXXX INCORPORATED
By: ______________________________
Authorized Signatory
For and on behalf of the Representative
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SCHEDULE A
Number of Firm Shares
Underwriters To Be Purchased
------------------------------------------ ---------------------------------
Cruttenden Xxxx Incorporated..............
TOTAL.........................
1
