EXHIBIT 1.1
1,300,000 Units
ADVANTAGE MARKETING SYSTEMS, INC.
UNDERWRITING AGREEMENT
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_______, 1997
Xxxxxxx Investment Company, Inc.
Xxxxxx Xxxxxxx & Assoc., Inc.
As Representatives of the
Several Underwriters
c/x Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Gentlemen:
Advantage Marketing Systems, Inc., an Oklahoma corporation (the
"Company"), proposes to sell to the several underwriters (the "Underwriters")
named in Schedule I hereto for whom you are acting as Representatives (the
"Representatives") an aggregate of 1,300,000 Units (the "Firm Units"). Each Unit
will consist of one share of the Company's Common Stock, $0.0001 par value (the
"Common Stock"), and one Redeemable Common Stock Purchase Warrant to purchase
one share of Common Stock substantially on the terms and in the form filed as an
exhibit to the Registration Statement (hereinafter defined) (the "Warrants").
The respective amounts of the Firm Units to be so purchased by the several
Underwriters are set forth opposite their names in Schedule I hereto. The
Company also proposes to grant to the Representatives an option to purchase in
the aggregate up to 195,000 additional Units, identical to the Firm Units (the
"Option Units"), as set forth below. The offer and sale of the Firm Units and
the Option Units pursuant to this Underwriting Agreement (the "Agreement") is
referred to herein as the "Offering."
As the Representatives, you have advised the Company that (a) you are
authorized to enter into this Agreement for yourselves as Representatives and on
behalf of the several Underwriters, and (b) the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm Units
set forth opposite their respective names in Schedule I. The Firm Units and the
Option Units (to the extent the aforementioned option is exercised) are herein
collectively called the "Units."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company.
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The Company represents and warrants to each of the Underwriters as
follows:
(a) A registration statement on Form SB-2 (File No. 333-34885) with
respect to the Units has been carefully prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (a) the form of prospectus first
filed with the Commission pursuant to Rule 424(b), or (b) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Units, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus."
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Oklahoma, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Prospectus. Except as described in the Prospectus,
the Company does not own and never has owned any interest in any corporation or
other business entity. The Company is duly qualified to transact business in
all jurisdictions in which the conduct of its business requires such
qualification.
(c) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable and
have been issued and sold by
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the Company in compliance in all material respects with applicable Federal and
state securities laws; the Common Stock and Warrants to be included in the Units
have been duly authorized and when issued and paid for as contemplated herein
will be validly issued, fully paid and non-assessable; and no preemptive rights
of shareholders exist with respect to any security of the Company or the issue
and sale thereof. Neither the filing of the Registration Statement nor the
offering or sale of the Units as contemplated by this Agreement gives rise to
any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock or other securities
of the Company.
(d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. The Common Stock and the Warrants conform
to the description thereof contained in the Registration Statement. The form of
certificates for the Common Stock and Warrants conform to the corporate law of
the State of Oklahoma. Except as disclosed in the Prospectus, there are no
outstanding rights, options or warrants for the purchase of any securities of
the Company, and the Company is not a party to any agreement pursuant to which
any person has the right to purchase any securities of the Company. Effective
immediately following the Closing Date (hereinafter defined), there will be no
person holding any anti-dilution rights with respect to the securities of the
Company.
(e) Except as described in the Registration Statement, the Company has
not (i) issued any capital stock or any options, warrants, convertible
securities or other rights to purchase its capital stock, (ii) increased its
long-term or short-term debt, or (iii) declared or paid any dividends on its
capital stock.
(f) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Units nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform to, the
requirements of the Act and the Rules and Regulations. The Registration
Statement and any amendments thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any Underwriter
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through either of the Representatives, specifically for use in the preparation
thereof.
(g) The financial statements of the Company, together with related
notes and schedules as set forth in the Registration Statement (the "Financial
Statements"), present fairly the financial position and the results of
operations and cash flows of the Company as of the indicated dates and for the
indicated periods. Such Financial Statements and related schedules have been
prepared in accordance with generally accepted accounting principles,
consistently applied through the periods involved, except as disclosed therein,
and all adjustments necessary for a fair presentation of results for such
periods have been made. The summary financial and statistical data of the
Company included in the Registration Statement present fairly the information
shown therein and such data have been compiled on a basis consistent with the
financial statements presented therein and the books and records of the Company.
(h) Deloitte & Touche LLP, who have certified certain of the
Financial Statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(i) Except as described in the Prospectus, there is no action, suit,
claim or proceeding pending or, to the best knowledge of the Company, threatened
against the Company before any court or administrative agency or otherwise which
if determined adversely to the Company might result in any material adverse
change in the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company or
prevent the consummation of the transactions contemplated hereby.
(j) The Company has good and marketable title to all of the properties
and assets reflected in the Financial Statements (or as described in the
Registration Statement), subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those reflected in such Financial Statements (or
as described in the Registration Statement) or which are not material in amount.
The Company occupies its leased properties under valid and binding leases
conforming in all material respects to the description thereof set forth in the
Registration Statement.
(k) The Company has filed all Federal, state and foreign income tax
returns which have been required to be filed and has paid all taxes indicated by
said returns and all assessments received by it to the extent that such taxes
have become due and are not being contested in good faith. All tax liabilities
have been adequately provided for in the financial statements of the Company.
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(l) Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, there has not been
any material adverse change or any development involving a prospective material
adverse change in or affecting the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise), or prospects of
the Company, whether or not occurring in the ordinary course of business, and
there has not been any material transaction entered into or any material
transaction that is probable of being entered into by the Company, other than
transactions in the ordinary course of business and changes and transactions
described in the Registration Statement, as it may be amended or supplemented.
The Company has no material contingent obligations which are not disclosed in
the Company's Financial Statements.
(m) The Company is not, nor, with the giving of notice or lapse of
time or both, will it be, in violation of or in default under its certificate of
incorporation or bylaws or under any agreement, lease, contract, indenture or
other instrument or obligation to which it is a party or by which it, or any of
its properties, is bound and which default is material in respect of the
condition, financial or otherwise, of the Company or the business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company. The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein and the fulfillment of the
terms hereof will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust or other agreement or instrument to which the Company is a party, or of
the certificate of incorporation or bylaws of the Company or any order, rule or
regulation applicable to the Company of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction over the
Company or its assets.
(n) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Units for public offering by
the Underwriters under state securities or Blue Sky laws) has been obtained or
made and is in full force and effect.
(o) Except as described in the Prospectus, the Company holds all
material patents, patent rights, trademarks, trade names, copyrights, trade
secrets and
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licenses of any of the foregoing (collectively, "Intellectual Property Rights")
that are necessary for the conduct of its business as conducted and as proposed
to be conducted in accordance with the description contained in the Prospectus;
there is no claim pending or, to the best knowledge of the Company, threatened
against the Company alleging any infringement of Intellectual Property Rights,
or any violation of the terms of any license relating to Intellectual Property
Rights, nor does the Company know of any basis for any such claim. The Company
knows of no material infringement by others of Intellectual Property Rights
owned by or licensed to the Company.
(p) The Company has obtained, is in compliance in all material
respects with and maintains in full force and effect, all material licenses,
certificates, permits, orders or other similar authorizations granted or issued
by any governmental agency (collectively "Government Permits") required to
conduct its business as it is presently conducted. No proceeding to revoke,
limit or otherwise materially change any Government Permit has been commenced
or, to the Company's best knowledge, is threatened against the Company, or any
supplier to the Company with respect to materials supplied to the Company, and
the Company has no reason to anticipate that any such proceeding will be
commenced against the Company or any such supplier. Except as disclosed or
contemplated in the Prospectus, the Company has no reason to believe that any
pending application for a Government Permit will be denied or limited in a
manner inconsistent with the Company's business plan as described in the
Prospectus.
(q) The Company is in compliance with all laws, rules, regulations,
orders of any court or administrative agency, operating licenses or other
requirements imposed by any governmental body applicable to it, including,
without limitation, all applicable laws, rules, regulations, licenses or other
governmental standards relating to the industry in which the Company operates,
including, without limitation, (i) the actions of a multilevel marketing
enterprise including, without limitation, the recruitment of distributors and
the marketing of the Company's programs and products; and (ii) the sale of
nutritional supplements, cosmetics and all other products sold by the Company;
and the conduct of the business of the Company, as described in the Prospectus,
will not cause the Company to be in violation of any such requirements.
(r) Neither the Company nor, to the Company's best knowledge, any of
its affiliates has taken or intends to take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Units.
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(s) The Company is not an "investment company" within the meaning of
such term under the Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations of the Commission thereunder.
(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (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 accounting of assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(u) Except as otherwise described in the Prospectus, the Company
carries, or is covered by, insurance in such amounts and covering such risks as
is adequate for the conduct of its business and the value of its properties and
as is customary for companies engaged in similar industries.
(v) The Company is not a party to, and the Company (including any
predecessor) has not, within five years of the effective date of the
Registration Statement, been a party to any pension plan governed by the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(w) The Company is in compliance with all provisions of Section 1 of
Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of Doing Business
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with Cuba, and the Company covenants that if it commences to engage in any
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business with the government of Cuba or with any person or affiliate located in
Cuba after the date the Registration Statement becomes or has become effective
with the Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference into the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba changes in
any material way, the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.
(x) The Warrants have been authorized for issuance to the various
purchasers of the Units and will, when issued, possess rights, privileges and
characteristics as represented in the most recent form of Warrants filed as an
exhibit to the Registration Statement; the securities to be issued upon exercise
of the Warrants, when issued and delivered against payment
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therefor in accordance with the terms of the Warrants, will be duly and validly
issued, fully paid, non-assessable and free of preemptive rights, and all
corporate action required to be taken for the authorization and issuance of the
Warrants, and the securities to be issued upon their exercise, has been validly
and sufficiently taken.
(y) The Representatives' Warrants (as defined in paragraph (d) of
Section 2 hereof) have been duly authorized for issuance to the Representatives
and will, when issued, possess rights, privileges, and characteristics as
represented in the most recent form of Representatives' Warrants filed as an
exhibit to the Registration Statement; the securities to be issued upon exercise
of the Representatives' Warrants, when issued and delivered against payment
therefor in accordance with the terms of the Representatives' Warrants, will be
duly and validly issued, fully paid, non-assessable and free of preemptive
rights, and all corporate action required to be taken for the authorization and
issuance of the Representatives' Warrants, and the securities to be issued upon
their exercise, has been validly and sufficiently taken.
(z) The Company has not at any time during the last five 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) Except as disclosed in the Prospectus, neither the Company nor
any of its officers, directors or affiliates have caused any person, other than
the Underwriters, to be entitled to reimbursement or compensation of any kind,
including, without limitation, any compensation that would be includable as
underwriter compensation under the NASD's Corporate Financing Rule with respect
to the offering of the Units, as a result of the consummation of such offering
based on any activity of such person as a finder, agent, broker, investment
adviser or other financial service provider.
(ab) The Common Stock and the Warrants have been approved for
inclusion, subject to official notice of issuance, in the Nasdaq Small Cap
Market.
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2. Purchase, Sale and Delivery of the Units.
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(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_________ per Unit, the number of Firm
Units set forth opposite the name of each underwriter in Schedule I hereof,
subject to adjustment in accordance with Section 9 hereof.
(b) Payment for the Firm Units to be sold hereunder is to be made in
New York Clearing House funds and, at the option of the Representatives, by
certified or bank cashier's checks drawn to the order of the Company or bank
wire to an account specified by the Company against either uncertificated or
certificated delivery of the Firm Units (which delivery, if certificated, shall
take place in such location in New York, New York as may be specified by the
Representatives) to the Representatives for the several accounts of the
Underwriters. Such payment is to be made at the offices of Tonkon, Xxxx, Xxxxx,
Marmaduke & Booth, 000 X.X. Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000-0000, at 7:00
a.m., Pacific time, on the third business day after the date on which the
Commission under the Rules and Regulations declares effective the Registration
Statement (the "Effective Date") or at such other time and date not later than
five business days thereafter as the Representatives and the Company shall
agree, such time and date being herein referred to as the "Closing Date." (As
used herein, "business day" means a day on which the New York Stock Exchange is
open for trading and on which banks in New York are open for business and not
permitted by law or executive order to be closed.) Except to the extent
uncertificated Firm Units are delivered at closing, the certificates for the
securities comprising the Firm Units will be delivered in such denominations and
in such registrations as the Representatives shall request in writing not later
than the second full business day prior to the Closing Date, and will be made
available for inspection by the Representatives at least one business day prior
to the Closing Date.
(c) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the Representatives to purchase the Option Units at
the price per Unit as set forth in paragraph (a) of this Section 2. The option
granted hereby may be exercised in whole or in part by giving written notice (i)
at any time before the Closing Date and (ii) only once thereafter within 45 days
after the Effective Date, by the Representatives to the Company setting forth
the number of Option Units as to which the Representatives are exercising the
option, the names and denominations in which the Option Units are to be
registered and the time and date at which certificates representing such Units
are to be delivered. The
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time and date at which certificates for Option Units are to be delivered shall
be determined by the Representatives but shall not be earlier than three nor
later than ten full business days after the exercise of such option, nor in any
event prior to the Closing Date (such time and date being herein referred to as
the "Option Closing Date"). If the date of exercise of the option is three or
more days before the Closing Date, the notice of exercise shall set the Closing
Date as the Option Closing Date. The option with respect to the Option Units
granted hereunder may be exercised only to cover over-allotments in the sale of
the Firm Units by the Underwriters. The Representatives may cancel such option
at any time prior to its expiration by giving written notice of such
cancellation to the Company. To the extent, if any, that the option is
exercised, payment for the Option Units shall be made on the Option Closing Date
in New York Clearing House funds and, at the option of the Representatives, by
certified or bank cashier's check drawn to the order of the Company or by bank
wire to an account specified by the Company against delivery of certificates
therefor at the offices of Xxxxxxx Investment Company, Inc. ("Xxxxxxx"), as set
forth on the first page of this Agreement.
(d) In addition to the sums payable to the Representatives as provided
elsewhere herein, the Representatives shall be entitled to receive at the
Closing, for themselves alone and not as representatives of the Underwriters, as
additional compensation for their services, purchase warrants (the
"Representatives' Warrants") for the purchase of up to 130,000 Units at a
price of $_________ per Unit, upon the terms and subject to adjustment as
described in the form of Representatives' Warrants filed as an exhibit to the
Registration Statement.
3. Offering by the Underwriters.
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It is understood that the several Underwriters are to make a public
offering of the Firm Units as soon as the Representatives deem it advisable to
do so. The Firm Units are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Units are purchased pursuant
to Section 2 hereof, the Representatives will offer them to the public on the
foregoing terms.
It is further understood that the Representatives will act as
representatives of the Underwriters in the offering and sale of the Units in
accordance with an Agreement Among Underwriters entered into by the
Representatives and the several other Underwriters.
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4. Covenants of the Company.
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The Company covenants and agrees with the several Underwriters that:
(a) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure set forth in
Rule 430A of the Rules and Regulations is followed, to prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a Prospectus
in a form approved by the Representatives containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance
on Rule 430A of the Rules and Regulations, and (B) not file any amendment to the
Registration Statement or supplement to the Prospectus of which the
Representatives shall not previously have been advised and furnished with a copy
or to which the Representatives shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations.
(b) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplementation of the Prospectus or for any additional information, and (D) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus or of the institution of
any proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if any is
issued.
(c) The Company will cooperate with the Representatives in endeavoring
to qualify the Units for sale under the securities laws of such jurisdictions as
the Representatives may reasonably have designated in writing and will make such
applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to file
such a consent. The Company will, from time to time, prepare and file such
statements, reports, and other documents as are or may be required to continue
such qualifications in effect for so long a period as the Representatives may
reasonably request for distribution of the Units.
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(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or
before the Closing Date, three signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will deliver
to the Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representatives
may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder, so as to
permit the completion of the distribution of the Units as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with the law.
(f) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15 months
after the Effective Date, an earnings statement (which need not be audited) in
reasonable detail, covering a period of at least 12 consecutive months beginning
after the effective date of the Registration Statement, which earnings statement
shall satisfy the requirements of the Act and Rule 158 of the Rules and
Regulations, and will advise the Representatives in writing when such statement
has been so made available.
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(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
shareholders or filed with any securities exchange or the NASD pursuant to the
requirements of such exchange or association or with the Commission pursuant to
the Act or the Exchange Act. The Company will deliver to the Representatives
similar reports with respect to significant subsidiaries, as that term is
defined in the Rules and Regulations, which are not consolidated in the
Company's financial statements.
(h) Other than (i) shares of Common Stock issued upon exercise of
options and warrants described in the Prospectus and outstanding as of the date
of this Agreement, (ii) options issued under the Company's 1995 Stock Option
Plan, as described in the Prospectus (and Common Stock issued upon exercise of
such options), and (iii) as otherwise provided in this Agreement, no offering,
sale, short sale or other disposition of any shares of Common Stock of the
Company or other securities convertible into or exchangeable or exercisable for
shares of Common Stock or derivative of Common Stock (or any agreement for
such), will be made for a period of one year after the date of this Agreement,
directly or indirectly, by the Company, except with the prior written consent of
the Representatives, which consent will not be unreasonably withheld.
(i) The Company will use its best efforts to list, subject to official
notice of issuance, the Common Stock and Warrants, and to maintain the listing
of the Common Stock, on the Nasdaq Small Cap Market.
(j) The Company has caused each of its officers and directors to
furnish to the Representatives, on or prior to the date of this Agreement, a
letter or letters, in the form of Exhibit A hereto ("Lockup Agreements"),
pursuant to which each such person shall agree (A) not to offer to sell, sell,
contract to sell, sell short or otherwise dispose of any shares of Common stock
or other capital stock of the Company, or any other securities convertible,
exchangeable or exercisable for Common Stock or derivatives of Common Stock
owned by such person, or request the registration for the offer or sale of any
of the foregoing for the period described in the Lockup Agreement, directly or
indirectly, except with the prior written consent of Xxxxxxx and (B) to provide
prior written notice to Xxxxxxx of any offers to sell, sales, contracts to sell,
short sales or other dispositions of Common Stock pursuant to Rule 144 under the
Act or any similar provisions enacted subsequent to the date of this Agreement,
for a period of three years from the date of this Agreement.
(k) The Company shall apply the net proceeds of its sale of the Units
as set forth in the Prospectus.
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(l) The Company shall not invest or otherwise use the proceeds
received by the Company from its sale of the Units in such a manner as would
require the Company or any of its subsidiaries to register as an investment
company under the 1940 Act.
(m) The Company shall maintain as current the prospectus forming a
part of the Registration Statement relating to the Common Stock issuable upon
exercise of the Warrants and the securities issuable upon exercise of the
Representatives' Warrants at all times during which any of the
Warrants or Representatives' Warrants remain outstanding.
(n) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar for the Common
Stock.
(o) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
(p) The Company will at all times have in place policies to ensure
compliance with, and take all other steps necessary to operate its business in
accordance with, all applicable federal and state laws governing the sale of
goods and services by a multilevel marketing enterprise. The Company will
retain and consult with experienced counsel with respect to such matters and,
for so long as such counsel so advises, the Company will comply with the
guidelines set forth by the Federal Trade Commission in In Re Amway Corp., 93
-----------------
FTC 618 (1979), with respect to the operation of a multilevel marketing
enterprise.
5. Costs and Expenses.
------------------
(a) Xxxxxxx Investment Company, Inc. ("Xxxxxxx") shall be entitled to
receive from the Company, for itself alone and not as a representative of the
Underwriters, a nonaccountable expense allowance equal to 2.0% of the aggregate
public offering price of the Units sold to the Underwriters in connection with
the Offering. Xxxxxxx shall be entitled to withhold this allowance on the
Closing Date (less the $35,000 advance against such amount that has been paid by
the Company) with respect to Units delivered on the Closing Date and to require
the Company to make payment of this allowance on the Option Closing Date with
respect to Units delivered on the Option Closing Date.
14
(b) In addition to the payment described in paragraph (a) of this
Section 5, the Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limitation, the following: accounting fees of the Company; the fees and
disbursements of counsel for the Company; the cost of printing and delivering
to, or as requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement, the Underwriters'
Selling Memorandum, the Underwriters' Invitation Letter, the Blue Sky Survey and
any supplements or amendments thereto; the filing fees of the Commission; the
filing fees and expenses (including legal fees and disbursements) incident to
securing any required review by the NASD of the terms of the sale of the Units;
the listing fee of the Nasdaq Small Cap Market; the reasonable costs of a due
diligence investigation of the principals of the Company by a firm acceptable to
the Representatives; the Company's expenses related to "road show" meetings; and
the expenses, including the fees and disbursements of counsel for the
Underwriters, incurred in connection with the qualification of the Units under
state securities or Blue Sky laws. Any transfer taxes imposed on the sale of
the Units to the several Underwriters will be paid by the Company. The Company
agrees to pay all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, incident to the offer and sale of
directed Units by the Underwriters, if any, to employees and persons having
business relationships with the Company. The Company shall not, however, be
required to pay for any other of the Underwriters' expenses (other than those
related to qualification under NASD regulations and state securities or Blue Sky
laws), except that if this Agreement shall not be consummated, then the Company
shall reimburse the several Underwriters for reasonable accountable out-of-
pocket expenses, including fees and disbursements of counsel, incurred in
connection with investigating, marketing and preparing to market the Units or in
contemplation of performing their obligations hereunder (less the $35,000
advance that has been paid by the Company); but the Company shall not in any
event be liable to any of the several Underwriters for damages on account of
loss of anticipated profits from the sale by them of the Units.
6. Conditions of the Obligations of the Underwriters.
-------------------------------------------------
The several obligations of the Underwriters to purchase the Firm Units
on the Closing Date and the Option Units, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company contained
herein, and to the performance by the Company of its covenants
15
and obligations hereunder and to the following additional conditions:
(a) The Registration Statement, all post-effective amendments thereto
and any subsequent registration statement filed pursuant to Rule 462(b) of the
Rules and Regulations shall have become effective and any and all filings
required by Rule 424 and Rule 430A of the Rules and Regulations shall have been
made, and any request of the Commission for additional information (to be
included in the Registration Statement or otherwise) shall have been disclosed
to the Representatives and complied with to their reasonable satisfaction. No
stop order suspending the effectiveness of the Registration Statement, as
amended from time to time, shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission and no injunction, restraining order, or order of
any nature by a Federal or state court of competent jurisdiction shall have been
issued as of the Closing Date which would prevent the issuance of the Units.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Xxxx, Swan & Xxxxxxxxxx,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Oklahoma, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; the Company is duly
qualified to transact business in all jurisdictions in which failure to qualify
would have a materially adverse effect upon the business of the Company.
(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the authorized
shares of the Common Stock have been duly authorized; the outstanding shares of
the Common Stock have been duly authorized and validly issued and are fully paid
and non-assessable; all of the securities of the Company conform to the
description thereof in the Prospectus; the certificates for the Common Stock and
Warrants are in due and proper form; the shares of Common Stock included in the
Units to be sold by the Company pursuant to this Agreement, including shares of
Common Stock to be sold as a part of the Option Units, have been duly authorized
and, upon issuance and delivery thereof and payment therefor as contemplated in
this Agreement and the Registration
16
Statement, will be validly issued, fully paid and non-assessable; no preemptive
rights of shareholders exist with respect to any of the Common Stock of the
Company or the issuance or sale thereof pursuant to any applicable statute or
the provisions of the Company's charter documents or, to such counsel's best
knowledge, pursuant to any contractual obligation.
(iii) The Warrants and the Representatives' Warrants have been
authorized for issuance to the purchasers of Units or the Representatives, as
the case may be, and will, when issued, possess rights, privileges, and
characteristics as represented in the most recent form of Warrants or
Representatives' Warrants, as the case may be, filed as an exhibit to the
Registration Statement; the securities to be issued upon exercise of the
Warrants or Representatives' Warrants, as the case may be, when issued and
delivered against payment therefor in accordance with the terms of the Warrants
or Representatives' Warrants, will be duly and validly issued, fully paid, non-
assessable and free of preemptive rights, and all corporate action required to
be taken for the authorization and issuance of the Warrants, the
Representatives' Warrants, and the securities to be issued upon their exercise,
has been validly and sufficiently taken.
(iv) Except as described in the Prospectus, to the best knowledge of
such counsel, there are no outstanding securities of the Company convertible or
exchangeable into or evidencing the right to purchase or subscribe for any
shares of capital stock of the Company and there are no outstanding or
authorized options, warrants or rights of any character obligating the Company
to issue any shares of its capital stock or any securities convertible or
exchangeable into or evidencing the right to purchase or subscribe for any
shares of such stock; and except as described in the Prospectus, to the
knowledge of such counsel, no holder of any securities of the Company or any
other person has the right, contractual or otherwise, which has not been
satisfied or effectively waived, to cause the Company to sell or otherwise issue
to them, or to permit them to underwrite the sale of, any Common Stock, or the
right to have any Common Stock or other securities of the Company included in
the Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any shares of
Common Stock or other securities of the Company.
(v) The Registration Statement has become effective under the Act
and, to the best knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
(vi) The Registration Statement, the Prospectus and each amendment or
supplement thereto comply as to form in all
17
material respects with the requirements of the Act and the Rules and Regulations
(except that such counsel need not express an opinion as to the financial
statements and related schedules therein).
(vii) The statements under the captions "Management's Discussion and
Analysis of Financial Condition and Results of Operation -- General," "Business
-- Regulations," "Management -- Stock Option Plan," "Description of Securities,"
and "Shares Eligible for Future Sale" in the Prospectus and in Item 24 and in
Item 26 of the Registration Statement, insofar as such statements constitute a
summary of documents referred to therein or matters of law, accurately summarize
in all material respects the information called for with respect to such
documents and matters.
(viii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are accurately summarized in all
material respects.
(ix) Except as described in the Prospectus, under the caption
"Business -- Litigation," such counsel knows of no legal or governmental
proceedings pending or threatened against the Company.
(x) The execution and delivery of this Agreement and the consummation
of the transactions herein contemplated do not and will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, the certificate of incorporation or bylaws of the Company, or any
agreement or instrument known to such counsel to which the Company is a party or
by which the Company may be bound.
(xi) This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company enforceable
in accordance with its terms, except as rights to indemnity and contribution may
be limited by applicable securities laws and except as enforceability may be
limited by application of bankruptcy, insolvency, moratorium, or similar laws
affecting the rights of creditors generally or judicial limits upon the rights
of specific performance.
(xii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein
(other than as may be required by the NASD or as required by state securities
and Blue Sky laws as to which such counsel need not express an opinion) except
such as have been obtained or made, specifying the same.
18
(xiii) The Company is not, and will not become for at least a
period of one year following the Effective Date, as a result of the transactions
contemplated by this Agreement and application of the net proceeds therefrom as
described in the Prospectus, required to register as an investment company under
the 1940 Act.
In rendering such opinion, counsel may rely as to matters of fact, to
the extent appropriate, upon certificates and representations of responsible
officers of the Company, of public officials, and of other third parties,
reasonably satisfactory to Tonkon, Xxxx, Xxxxx, Marmaduke & Booth, counsel to
the Representatives. Furthermore, in rendering such opinion, such counsel may
rely, as to matters governed by laws of states other than Oklahoma or Federal
laws, on local counsel in such jurisdictions, provided that in each case such
counsel shall state that they believe that they and the Underwriters are
justified in relying on such other counsel. In addition to the matters set forth
above, the opinion of Xxxx, Swan & Xxxxxxxxxx shall also include a statement to
the effect that nothing has come to the attention of such counsel that has
caused them to believe that (i) the Registration Statement, at the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading (except that such counsel need not express any view as to the
financial statements and related schedules therein).
(c) The Representatives shall have received from Tonkon, Torp. Xxxxx,
Marmaduke & Booth, counsel for the Underwriters, an opinion dated the Closing
Date or the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (i), (v) and (vi) of paragraph (b) of this Section 6.
In rendering such opinion, Tonkon, Xxxx, Xxxxx, Marmaduke & Booth may rely as to
all matters governed other than by the laws of the State of Oregon or Federal
laws on the opinion of counsel referred to in paragraph (b) of this Section 6.
In addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
that has caused them to believe that (i) the Registration Statement, at the time
it became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or
19
necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in
light of circumstances under which they were made, not misleading (except that
such counsel need not express any view as to financial statements and related
schedules therein). With respect to such statement, Tonkon, Xxxx, Xxxxx,
Marmaduke & Booth may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(d) The Representatives shall have received at or prior to the Closing
Date from Tonkon, Xxxx, Xxxxx, Marmaduke & Booth a memorandum or summary, in
form and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Units under the
state securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.
(e) The Representatives, on behalf of the several Underwriters, shall
have received, on each of the date hereof, the Closing Date and the Option
Closing Date, as the case may be, a letter dated the date hereof, the Closing
Date or the Option Closing Date, as the case may be, in form and substance
satisfactory to the Representatives, from Deloitte & Touche LLP confirming that
they are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in their
opinion the financial statements and schedules examined by them and included in
the Registration Statement comply in form and in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations, and containing such other statements and information as are
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(f) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and Chief Financial Officer of the Company to the effect
that, as of the Closing Date or the Option Closing Date, as the case may be,
each of them severally represents as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registration Statement has
been issued, and
20
no proceedings for such purpose have been taken or are, to the best of his
knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules 424
or 430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and the
Prospectus and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement were true and
correct, and such Registration Statement and Prospectus did not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date of the
Registration Statement no event has occurred which should have been set forth in
a supplement to or an amendment of the Prospectus which has not been set forth
in such supplement or amendment; and
(v) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the
Company, whether or not arising in the ordinary course of business.
(g) The Company shall have furnished to the Representatives such
further documents confirming the representations and warranties, covenants and
conditions contained herein and related matters as the Representatives may
reasonably have requested.
(h) The Lockup Agreements described in Section 4(j) shall have been
executed, delivered and shall be in full force and effect.
(i) The Common Stock and Warrants shall have been approved for
inclusion, subject to official notice of issuance, in the Nasdaq Small Cap
Market.
(j) The Company shall have obtained and prepaid for a three-year
non-cancelable insurance policy, naming the Underwriters as additional insureds
covering, for a period of three years after the Effective Date, any claim for
which indemnification may be sought by the Underwriters under Section 8 of this
Agreement, which insurance policy shall be in form and substance satisfactory to
the Representatives.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Tonkon, Xxxx,
Xxxxx, Marmaduke & Booth, counsel for the Underwriters.
21
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company of such termination in writing
(including by facsimile transmission) at or prior to the Closing Date or the
Option Closing Date, as the case may be. In such event, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Company.
--------------------------------------------
The obligations of the Company to sell and deliver the portion of the
Units required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
---------------
(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, against any losses, claims, damages or liabilities to which such
Underwriter or any such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) 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 in light of the circumstances under which
they were made; and will reimburse each Underwriter and each such controlling
person upon demand for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in investigating or defending any such
loss, claim, damage or liability, action or proceeding or in responding to a
subpoena or governmental inquiry related to the offering of the Units, whether
or not such Underwriter or controlling person is a party to any action or
proceeding; provided, however, that the Company will not be liable in any such
-------- -------
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement, or omission or
alleged omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or such amendment or supplement, in reliance upon and in
conformity with written
22
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made; and will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that each Underwriter will be liable in each case to the
-------- -------
extent, and only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission has been made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by or through the Representatives specifically for use
in the preparation thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such
23
proceeding shall be brought against any indemnified party and such indemnified
party shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or
within 30 days of presentation) the fees and expenses of the counsel retained by
the indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel,
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them or (iii) the indemnifying party shall
have failed to assume the defense and employ counsel acceptable to the
indemnified party within a reasonable period of time after notice of
commencement of the action. It is understood that the indemnifying party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
for all such indemnified parties. Such firm shall be designated in writing by
Xxxxxxx in the case of parties indemnified pursuant to Section 8(a) and by the
Company in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. In addition, the indemnifying party will not,
without the prior written consent of the indemnified party, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action or proceeding in which indemnification may be sought hereunder (whether
or not any indemnified party is an actual or potential party to such claim,
action or proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable
24
by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Units. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
Offering (before deducting expenses) received by the Company bears to the total
underwriting discounts, commissions and, if applicable, nonaccountable expense
allowance received by the Underwriters, in each case as set forth and footnoted
in the table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Units
purchased by such Underwriter, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of fraudulent
misrepresentation. The Underwriters' obligations in this Section 8(d) to
contribute are
25
several in proportion to their respective underwriting obligations and not
joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, or expenses are incurred. The indemnity and
contribution agreements contained in this Section 8 and the representations and
warranties of the Company set forth in this Agreement shall remain operative and
in full force and effect, regardless of (i) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter, the
Company, its directors or officers or any persons controlling the Company, (ii)
acceptance of any Units and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter, or to the
Company, its directors or officers, or any person controlling the Company, shall
be bound by and entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.
9. Default by Underwriters.
-----------------------
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Units
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), the
Representatives shall use their reasonable efforts to procure within 36 hours
thereafter one or more of the other Underwriters, or any others, to purchase
from the Company upon the terms set forth herein, the Firm Units or Option
Units, as the case may be, which the defaulting Underwriter or Underwriters
failed to purchase. If during such 36 hours the Representatives shall not have
procured such other Underwriters, or any others, to purchase the Firm Units or
Option Units, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of Units with
respect to which such default shall occur does not exceed 10% of the Firm Units
or Option
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Units, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Units or
Option Units, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Units or Option Units, as the case may be, which
such defaulting Underwriter or Underwriters failed to purchase, or (b) if the
aggregate number of Firm Units or Option Units, as the case may be, with respect
to which such default shall occur equals or exceeds 10% of the Firm Units or
Option Units, as the case may be, covered hereby, the Company or the
Representatives shall have the right, by written notice given within the next
36-hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company, except for expenses to be paid by the Company under Section 5 hereof
and except to the extent provided in Section 8 hereof. In the event of a default
by any Underwriter or Underwriters, as set forth in this Section 9, the Closing
Date or Option Closing Date, as the case may be, may be postponed for such
period, not exceeding seven days, as the Representatives may determine in order
that the required changes in the Registration Statement or in the Prospectus or
in any other documents or arrangements may be effected. The term "Underwriter"
includes any person substituted for a defaulting Underwriter. Any action taken
under this Section 9 shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
10. Notices.
-------
All communications hereunder shall be in writing and, except as
otherwise provided herein, shall be mailed, delivered, telecopied or telegraphed
and confirmed as follows:
if to the Representatives or the Underwriters:
Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxxx X.X. Xxxxxxx
with a copy to:
Tonkon, Xxxx, Xxxxx,
Marmaduke & Booth
1600 Pioneer Tower
000 XX Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
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if to the Company:
Advantage Marketing Systems, Inc.
0000 Xxxxxxxxx Xxxxxxxxxx
Xxxxx 0000X
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxx
with a copy to:
Xxxx, Swan & Xxxxxxxxxx
2800 Oklahoma Tower
000 Xxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx
11. Termination.
-----------
This Agreement may be terminated by the Representatives by notice to
the Company as follows:
(a) at any time prior to the earlier of (i) the time the Units are
released by the Representatives for sale by notice to the Underwriters, or (ii)
11:30 a.m. Pacific Time on the first business day following the Effective Date;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and its
subsidiaries taken as a whole, whether or not arising in the ordinary course of
business, (ii) any outbreak or escalation of hostilities or declaration of war
or national emergency or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in the Representatives' reasonable judgment,
make it impracticable to market the Units or to enforce contracts for the sale
of the Units, (iii) the Dow Xxxxx Industrial Average shall have fallen by 15
percent or more from its closing price on the day immediately preceding the
Effective Date, (iv) suspension of trading in securities generally on the New
York Stock Exchange or the American Stock Exchange or limitation on prices
(other than limitations on hours or numbers of days of trading) for securities
on either such Exchange, (v) the enactment, publication, decree or other
promulgation of any
28
statute, regulation, rule or order of any court or other governmental authority
which in the Representatives' opinion materially and adversely or may materially
and adversely affect the business or operations of the Company, (vi) declaration
of a banking moratorium by United States or New York State authorities; (vii)
the suspension of trading of the Common Stock or the Warrants by the Commission
or the NASD on the Nasdaq Small Cap Market or (viii) the taking of any action by
any governmental body or agency in respect of its monetary or fiscal affairs
which in the Representatives' reasonable opinion has a material adverse effect
on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors.
----------
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Units from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. Information Provided by Underwriters.
------------------------------------
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), the legends required by Item
502(d) of Regulation S-B under the Act and the information under the caption
"Underwriting" in the Prospectus.
14. Miscellaneous.
-------------
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Units under
this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Oregon. All disputes relating to this Agreement shall
be adjudicated before a court located in Multnomah County, Oregon to the
exclusion of all other courts that might have jurisdiction.
If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate copies
hereof, whereupon it will become a binding agreement among the Company and the
several Underwriters in accordance with its terms.
Very truly yours,
ADVANTAGE MARKETING SYSTEMS, INC.
By
---------------------------
Chief Executive Officer
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
XXXXXXX INVESTMENT COMPANY, INC.
As Representative of the several
Underwriters listed on Schedule I
By
-------------------------------
Authorized Officer
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SCHEDULE I
Schedule of Underwriters
Number of Firm Units
Underwriter to be Purchased
----------- --------------------
Xxxxxxx Investment Company, Inc.
Xxxxxx Xxxxxxx & Assoc., Inc.
Total: 1,300,000
=========
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