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EXHIBIT 1.1
1,200,000 SHARES OF COMMON STOCK
1,200,000 WARRANTS
FACTUAL DATA CORP.
UNDERWRITING AGREEMENT
, 1998
Xxxxxxxxx Securities, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Dear Sirs:
Factual Data Corp., a Colorado corporation (the "Company") hereby
confirms its agreement with you (who are sometimes hereinafter referred to as
the "Representative") and with the other members of the underwriting group (the
"Underwriters") named on Schedule 1 hereto as follows:
1. Introductory. Subject to the terms and conditions contained
herein, the Company proposes to issue and sell to the Underwriters 1,200,000
shares of common stock (the "Common Stock") and 1,200,000 redeemable warrants
(the "Warrants"). In addition, solely for the purpose of covering
over-allotments, the Company grants to the Representative the option to purchase
up to an additional 180,000 shares of Common Stock and/or 180,000 Warrants (the
"Additional Securities"), which option to purchase shall be exercisable, in
whole or in part, from time to time during the forty-five (45) day period
commencing on the date on which the Registration Statement (as hereinafter
defined) is initially declared effective (the "Effective Date") by the
Securities and Exchange Commission (the "Commission"). Unless otherwise noted,
the Common Stock, together with the additional 180,000 shares of Common Stock
issuable on exercise of the over-allotment option, is referred to hereinafter as
the "Common Stock" and the Warrants and the 180,000 Warrants issuable on
exercise of the over-allotment option are referred to hereinafter as the
"Warrants".
Each Warrant will entitle the holder to purchase one share of Common
Stock (a "Warrant Share") at a price equal to $ during the
thirty-six (36) month exercise period of the Warrants, subject to the Company's
right of redemption. The Warrants may be redeemed by the Company commencing
one year from the Effective Date of the Registration Statement upon at least 30
days prior written notice, in whole but not in part, at a price of $.05 per
Warrant provided the
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closing bid price for the Company's Common Stock is at least 150% of the
exercise price of the Warrant during each day of the twenty (20) trading day
period ending five days preceding the date of the written notice. The terms and
provisions of the Warrants shall be governed by a warrant agreement between the
Company and its transfer agent (the "Warrant Agreement"), which Warrant
Agreement will contain, among other provisions, anti-dilution protection for
warrantholders on terms acceptable to the Representative. The Common Stock,
Warrants and Additional Securities are more fully described in the Prospectus
referred to below. All references to the Company below shall be deemed to
include, where appropriate, the Company's subsidiaries, if any.
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters that:
a. The Company has filed with the Commission a
registration statement, and may have filed one or more amendments
thereto, on Form SB-2 (Registration No. 333- ), including in
such registration statement and each such amendment a facing sheet,
the information called for by Part I, audited consolidated financial
statements for the past two fiscal years or such other period as may
be appropriate, the information called for by Part II, the
undertakings to deliver certificates, file reports and file
post-effective amendments, the required signatures, consents of
experts, exhibits, a related preliminary prospectus (a "Preliminary
Prospectus") and any other information or documents which are required
for the registration of the Common Stock and Warrants, the Warrant
Shares, the purchase options referred to in Section 2(n) (the
"Representative's Options"), and the securities referred to in Section
2(n) underlying the Representative's Options (the "Representative's
Option Securities"), under the Securities Act of 1933, as amended (the
"Act"). As used in this Agreement, the term "Registration Statement"
means such registration statement, including incorporated documents,
all exhibits and consolidated financial statements and schedules
thereto, as amended, when it becomes effective, and shall include
information with respect to the Common Stock, the Warrants, the
Warrant Shares, the Representative's Options, and the Representative's
Option Securities and the offering thereof permitted to be omitted
from the Registration Statement when it becomes effective pursuant to
Rule 430A of the General Rules and Regulations promulgated under the
Act (the "Regulations"), which information is deemed to be included
therein when it becomes effective as provided by Rule 430A; the term
"Preliminary Prospectus" means each prospectus included in the
Registration Statement, or any amendments thereto, before it becomes
effective under the Act and any prospectus
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filed by the Company with the consent of the Representative pursuant
to Rule 424(a) of the Regulations; and the term "Prospectus" means the
final prospectus included as part of the Registration Statement,
except that if the prospectus relating to the securities covered by
the Registration Statement in the form first filed on behalf of the
Company with the Commission pursuant to Rule 424(b) of the Regulations
shall differ from such final prospectus, the term "Prospectus" shall
mean the prospectus as filed pursuant to Rule 424(b) from and after
the date on which it shall have first been used.
b. When the Registration Statement becomes effective,
and at all times subsequent thereto, to and including the Closing Date
(as defined in Section 3) and each Additional Closing Date (as defined
in Section 3), and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the
Representative or any dealer, and during such longer period until any
post-effective amendment thereto shall become effective, the
Registration Statement (and any post-effective amendment thereto) and
the Prospectus (as amended or as supplemented if the Company shall
have filed with the Commission any amendment or supplement to the
Registration Statement or the Prospectus) will contain all statements
which are required to be stated therein in accordance with the Act and
the Regulations, will comply with the Act and the Regulations, 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 not misleading, and no event will have
occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus which has
not then been set forth in such an amendment or supplement; and no
Preliminary Prospectus, as of the date filed with the Commission,
included any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading; except that no representation
or warranty is made in this Section 2(b) with respect to statements or
omissions made in reliance upon and in conformity with written
information furnished to the Company as stated in Section 8(b) with
respect to the Underwriters by or on behalf of the Underwriters
expressly for inclusion in any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or
supplement thereto.
c. Neither the Commission nor the "blue sky" or
securities authority of any jurisdiction have issued an order (a "Stop
Order") suspending the effectiveness of the Registration Statement,
preventing or suspending the use of any Preliminary Prospectus, the
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Prospectus, the Registration Statement, or any amendment or supplement
thereto, refusing to permit the effectiveness of the Registration
Statement, or suspending the registration or qualification of the
Common Stock, the Warrants, the Warrant Shares, the Representative's
Options, or the Representative's Option Securities, nor has any of
such authorities instituted or threatened to institute any proceedings
with respect to a Stop Order.
d. Any contract, agreement, instrument, lease, or
license required to be described in the Registration Statement or the
Prospectus has been properly described therein. Any contract,
agreement, instrument, lease, or license required to be filed as an
exhibit to the Registration Statement has been filed with the
Commission as an exhibit to or has been incorporated as an exhibit by
reference into the Registration Statement.
e. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Colorado, with full power and authority, and all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits
of and from, and declarations and filings with, all federal, state,
local, and other governmental authorities and all courts and other
tribunals, to own, lease, license, and use its properties and assets
and to carry on the business in the manner described in the
Prospectus. The Company is duly qualified to do business and is in
good standing in every jurisdiction in which its ownership, leasing,
licensing, or use of property and assets or the conduct of its
business makes such qualifications necessary. The Company has no
subsidiaries except as disclosed in the Prospectus.
f. The authorized capital stock of the Company consists
of 10,000,000 shares of Common Stock, of which 1,800,000 shares of
Common Stock are issued and outstanding, 27,000 shares of Common Stock
are reserved for issuance upon the exercise of currently outstanding
options and 173,000 shares of Common Stock are reserved for issuance
upon the exercise of the remaining options authorized under the
Company's option plans; and 1,000,000 shares of Preferred Stock, none
of which are issued or outstanding. Of the outstanding shares of
Common Stock, 500,000 shares are subject to a custody agreement,
release under which will occur upon the earlier of (i) the Company
achieving designated certain financial performance criteria as set
forth in the custody agreement or (ii) , 2005 (seven
years from the date of the Prospectus), all or more fully set forth in
a custody agreement (the "Custody Agreement") by and among Xxxxxx X.
Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx,
American Securities Transfer & Trust, Inc., the
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Company and the Representative. Each outstanding share of Common
Stock is validly authorized, validly issued, fully paid, and
nonassessable, without any personal liability attaching to the
ownership thereof, and has not been issued and is not owned or held in
violation of any preemptive rights of stockholders. There is no
commitment, plan, or arrangement to issue, and no outstanding option,
warrant, or other right calling for the issuance of, any share of
capital stock of the Company or any security or other instrument which
by its terms is convertible into, exercisable for, or exchangeable for
capital stock of the Company, except as set forth above, and as may be
properly described in the Prospectus.
g. The consolidated financial statements of the Company
included in the Registration Statement and the Prospectus fairly
present with respect to the Company the consolidated financial
position, the results of operations, and the other information
purported to be shown therein at the respective dates and for the
respective periods to which they apply. Such consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles, except to the extent that certain footnote
disclosures regarding any stub period may have been omitted in
accordance with the applicable rules of the Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
consistently applied throughout the periods involved, are correct and
complete, and are in accordance with the books and records of the
Company. The accountants whose report on the audited consolidated
financial statements is filed with the Commission as a part of the
Registration Statement are, and during the periods covered by their
report(s) included in the Registration Statement and the Prospectus
were, independent certified public accountants with respect to the
Company within the meaning of the Act and the Regulations. No other
financial statements are required by Form SB-2 or otherwise to be
included in the Registration Statement or the Prospectus. There has
at no time been a material adverse change in the consolidated
financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of the Company from the
latest information set forth in the Registration Statement or the
Prospectus, except as may be properly described in the Prospectus.
h. There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation pending, or, to the knowledge of the Company,
threatened, or in prospect with respect to the Company or any of its
operations, businesses, properties, or assets, except as may be
properly described in the Prospectus or such as
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individually or in the aggregate do not now have and will not in the
future have a material adverse effect upon the operations, business,
properties, or assets of the Company. The Company is not in violation
of, or in default with respect to, any law, rule, regulation, order,
judgment, or decree except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in
the future have a material adverse effect upon the operations,
business, properties, or assets of the Company; nor is the Company
required to take any action in order to avoid any such violation or
default.
i. The Company has good and marketable title in fee
simple absolute to all real properties and good title to all other
properties and assets which the Prospectus indicates are owned by it,
free and clear of all liens, security interests, pledges, charges,
encumbrances, and mortgages except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in
the future have a material adverse effect upon the operations,
business, properties, or assets of the Company. No real property
owned, leased, licensed, or used by the Company lies in an area which
is, or to the knowledge of the Company will be, subject to zoning,
use, or building code restrictions which would prohibit, and no state
of facts relating to the actions or inaction of another person or
entity or his or its ownership, leasing, licensing, or use of any real
or personal property exists or will exist which would prevent, the
continued effective ownership, leasing, licensing, or use of such real
property in the business of the Company as presently conducted or as
the Prospectus indicates it contemplates conducting, except as may be
properly described in the Prospectus or such as in the aggregate do
not now have and will not in the future have a material adverse effect
upon the operations, business, properties, or assets of the Company.
j. Neither the Company nor any other party is now or is
expected by the Company to be in violation or breach of, or in default
with respect to complying with, any material provision of any
contract, agreement, instrument, lease, license, arrangement, or
understanding which is material to the Company, and each such
contract, agreement, instrument, lease, license, arrangement, and
understanding is in full force and is the legal, valid, and binding
obligation of the parties thereto and is enforceable as to them in
accordance with its terms. The Company enjoys peaceful and
undisturbed possession under all leases and licenses under which it is
operating. The Company is not a party to or bound by any contract,
agreement, instrument, lease, license, arrangement, or understanding,
or subject to any charter or other restriction, which has had or may
in the future have a material
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adverse effect on the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the
Company. The Company is not in violation or breach of, or in default
with respect to, any term of its Articles of Incorporation (or other
charter document) or by-laws.
k. All patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights,
franchises, technology, know-how and other intangible properties and
assets (all of the foregoing being herein called "Intangibles") that
the Company owns or has pending, or under which it is licensed, are in
good standing and uncontested. Except as otherwise disclosed in the
Registration Statement, the Intangibles are owned by the Company, free
and clear of all liens, security interests, pledges, and encumbrances.
"Factual Data" is a registered trademark used by the Company to
identify its services and such xxxx is protected by registration in
the name of the Company on the principal register of the United States
Patent Office. There is no right under any Intangible necessary to
the business of the Company as presently conducted or as the
Prospectus indicates it contemplates conducting (except as may be so
designated in the Prospectus). The Company has not infringed, is not
infringing, and has not received notice of infringement with respect
to asserted Intangibles of others. To the knowledge of the Company,
there is no infringement by others of Intangibles of the Company. To
the knowledge of the Company, there is no Intangible of others which
has had or may in the future have a materially adverse effect on the
financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of the Company.
l. Neither the Company nor any director, officer, agent,
employee, or other person associated with or acting on behalf of the
Company has, directly or indirectly: used any corporate funds for
unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; violated
any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment. The Company has not accepted any
material advertising allowances or marketing allowances from suppliers
to the Company and, to the extent any advertising allowance has been
accepted, the Company has provided proper documentation to the
supplier with respect to advertising as to which the advertising
allowance has been granted.
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m. The Company has all requisite power and authority to
execute and deliver, and to perform thereunder each of this Agreement,
the Warrants, the Representative's Options, the Warrant Exercise Fee
Agreement described in Section 5(ff) (the "Warrant Exercise Fee
Agreement") and the Custody Agreement. All necessary corporate
proceedings of the Company have been duly taken to authorize the
execution and delivery, and performance thereunder by the Company of
this Agreement, the Warrants, the Representative's Options, the
Warrant Exercise Fee Agreement and the Custody Agreement. This
Agreement has been duly authorized, executed, and delivered by the
Company, is a legal, valid, and binding obligation of the Company, and
is enforceable as to the Company in accordance with its terms. Each
of the Warrants, the Representative's Options, the Warrant Exercise
Fee Agreement and the Custody Agreement has been duly authorized by
the Company and, when executed and delivered by the Company, will each
be a legal, valid, and binding obligation of the Company, and will be
enforceable against the Company in accordance with its respective
terms. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any
federal, state, local, or other governmental authority or any court or
other tribunal is required by the Company for the execution and
delivery, or performance thereunder by the Company of this Agreement,
the Warrants or the Representative's Options except filings under the
Act which have been or will be made before the Closing Date and such
consents consisting only of consents under "blue sky" or securities
laws which are required in connection with the transactions
contemplated by this Agreement and which have been obtained at or
prior to the date of this Agreement. No consent of any party to any
contract, agreement, instrument, lease, license, arrangement, or
understanding to which the Company is a party, or to which any of its
properties or assets are subject, is required for the execution or
delivery, or performance thereunder of this Agreement, the Warrants,
the Representative's Options, the Warrant Exercise Fee Agreement or
the Custody Agreement; and the execution and delivery, and performance
thereunder of this Agreement, the Warrants, the Representative's
Options, the Warrant Exercise Fee Agreement and the Custody Agreement
will not violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under any such contract,
agreement, instrument, lease, license, arrangement, or understanding,
or violate or result in a breach of any term of the Articles of
Incorporation or by-laws of the Company, or violate, result in a
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breach of, or conflict with any law, rule, regulation, order,
judgment, or decree binding on the Company or to which any of its
operations, businesses, properties, or assets are subject.
n. The Common Stock, the Warrants, the Warrant Shares,
purchase options (the "Representative's Options") entitling the
Representative or its assigns to purchase the Representative's Option
Securities, and the Representative's Option Securities are validly
authorized and reserved for issuance. The Common Stock, when issued
and delivered in accordance with this Agreement, the Warrant Shares,
when issued and delivered upon exercise of the Warrants, the
Representative's Option Securities, when issued and delivered upon
exercise of the Representative's Options and the Representative's
Option Shares issuable on exercise of warrants included in the
Representative's Option Securities, upon payment of the exercise price
therefor, will be validly issued, fully paid, and nonassessable,
without any personal liability attaching to the ownership thereof, and
will not be issued in violation of any preemptive rights of
stockholders, and the Underwriters will receive good title to the
Common Stock and the Warrants purchased, the Representative will
receive good title to the Representative's Options purchased and any
purchaser of the Warrant Shares or Representative's Option Securities
will receive good title thereto, all such title free and clear of all
liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts.
o. The Common Stock, the Warrants, the Warrant Shares,
the Representative's Options and the Representative's Option
Securities conform to all statements relating thereto contained in the
Registration Statement and the Prospectus.
p. Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
and except as may otherwise be properly described in the Prospectus,
the Company has not (i) issued any securities or incurred any
liability or obligation, primary or contingent, for borrowed money,
(ii) entered into any transaction not in the ordinary course of
business, or (iii) declared or paid any dividend on its capital stock.
q. Neither the Company nor any of its officers,
directors, or affiliates (as defined in the Regulations), has taken or
will take, directly or indirectly, prior to the termination of the
distribution of securities contemplated by this Agreement, any action
designed to stabilize or manipulate the price of any security of the
Company, or which has caused or resulted in, or which might in the
future reasonably be expected to cause or result in, stabilization or
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manipulation of the price of any security of the Company, to
facilitate the sale or resale of the Common Stock and Warrants.
r. The Company has not incurred any liability for a fee,
commission, or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by
this Agreement.
s. The Company has obtained from each officer, director
and person who beneficially owns shares of the Company's capital stock
or derivative securities convertible into shares of the Company's
capital stock his or her enforceable written agreement that for a
period of 18 months from the Effective Date, he or she will not,
without the Representative's prior written consent, offer, pledge,
sell, contract to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any shares of capital stock or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for shares of Common Stock (except
that, subject to compliance with applicable securities laws, any such
officer, director or stockholder may transfer his or her stock in a
private transaction, provided that any such transferee shall agree, as
a condition to such transfer, to be bound by the restrictions set
forth in this Agreement and further provided that the transferor,
except in the case of the transferor's death, shall continue to be
deemed the beneficial owner of such shares in accordance with
Regulation 13d-(3) of the Exchange Act). For a period of three (3)
years, commencing 18 months from the Effective Date, all public sales
by officers, directors and stockholders of the Company prior to the
Effective Date shall be effected through or with the Representative on
an exclusive basis, provided that the Representative offers the best
price reasonably available to the selling stockholders. In addition,
for a period of three years commencing 18 months from the Effective
Date in the case of private transactions in the Company's Common
Stock, each such selling security holder specified above shall offer
the Representative the exclusive opportunity to purchase or sell the
securities on terms at least as favorable as the selling security
holder can obtain elsewhere. If the Representative fails to accept in
writing any such proposal for sale by the selling security holders
within three (3) business days after receipt of a notice containing
such proposal, then the Representative shall have no claim or right
with respect to any such sales contained in such notice. If,
thereafter, such proposal is modified in any material respect, the
selling security holders shall adopt the same procedure as with
respect to the original proposal. An appropriate legend shall be
marked on the face of stock
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certificates representing all of such securities. Public or private
sales of Common Stock by such persons shall not include gifts,
intra-family transfers or transfers for estate planning purposes,
which shall be exempt from the foregoing provisions. The Company, on
behalf of itself, and all officers, directors and holders of five
percent or more of the Common Stock of the Company, have provided the
Representative their enforceable written agreements not to sell,
transfer, or hypothecate capital stock or derivative securities of the
Company (i) through a "Regulation S" transaction for a minimum period
of five years from the Effective Date without the prior written
consent of the Representative, or (ii) through a "Regulation D"
transaction for a minimum period of 24 months from the Effective Date.
t. Except as otherwise provided in the Registration
Statement, no person or entity has the right to require registration
of shares of Common Stock or other securities of the Company because
of the filing or effectiveness of the Registration Statement.
u. The Company is eligible to use Form SB-2 for
registration of the Common Stock, the Warrants, the Warrant Shares,
the Representative's Options and the Representative's Option
Securities.
v. No unregistered securities of the Company, of an
affiliate of the Company or of a predecessor of the Company have been
sold within three years prior to the date hereof, except as described
in the Registration Statement.
w. Except as set forth in the Registration Statement,
there is and at the Closing Date there will be no action, suit or
proceeding before any court, arbitration tribunal or governmental
agency, authority or body pending or, to the knowledge of the Company,
threatened which might result in judgments against the Company not
adequately covered by insurance or which collectively might result in
any material adverse change in the condition (financial or otherwise),
the business or the prospects of the Company or would materially
affect the properties or assets of the Company.
x. The Company has filed all federal and state tax
returns which are required to be filed by it and has paid all taxes
shown on such returns and all assessments received by it to the extent
such taxes have become due. All taxes with respect to which the
Company is obligated have been paid or adequate accruals have been set
up to cover any such unpaid taxes.
y. Except as set forth in the Registration Statement:
i. The Company has obtained all permits,
licenses and other authorizations which are required under the
Environmental Laws for the ownership,
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use and operation of each location operated or leased by the
Company (the "Property"), all such permits, licenses and
authorizations are in effect, no appeal nor any other action
is pending to revoke any such permit, license or
authorization, and the Company is in full compliance with all
terms and conditions of all such permits, licenses and
authorizations.
ii. The Company and the Property are in
compliance with all Environmental Laws including, without
limitation, all restrictions, conditions, standards,
limitations, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws
or contained in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
iii. The Company has not, and to the best
knowledge of the Company's executive officers, no other person
has, released, placed, stored, buried or dumped any Hazardous
Substances, Oils, Pollutants or Contaminants or any other
wastes produced by, or resulting from, any business,
commercial, or industrial activities, operations, or
processes, on, beneath, or adjacent to the Property or any
property formerly owned, operated or leased by the Company
except for inventories of such substances to be used, and
wastes generated therefrom, in the ordinary course of business
of the Company (which inventories and wastes, if any, were and
are stored or disposed of in accordance with applicable laws
and regulations and in a manner such that there has been no
release of any such substances into the environment).
iv. Except as provided to the Representative,
there exists no written or tangible report, synopsis or
summary of any asbestos, toxic waste or Hazardous Substances,
Oils, Pollutants or Contaminants investigation made with
respect to all or any portion of the assets of the Company
(whether or not prepared by experts and whether or not in the
possession of the executive officers of the Company).
v. Definitions: As used herein:
(1) Environmental Laws means all
federal, state and local laws, regulations, rules and
ordinances relating to pollution or protection of the
environment, including, without limitation, laws
relating to Releases or threatened Releases of
Hazardous Substances, Oils, Pollutants or
Contaminants into the indoor or outdoor environment
(including, without
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limitation, ambient air, surface water, groundwater,
land, surface and subsurface strata) or otherwise
relating to the manufacture, processing,
distribution, use, treatment, storage, Release,
transport or handling of Hazardous Substances, Oils,
Pollutants or Contaminants.
(2) Hazardous Substances, Oils, Pollutants
or Contaminants means all substances defined as such
in the National Oil and Hazardous Substances Pollutant
Contingency Plan, 40 C.F.R. Section 300.6, or defined
as such under any Environmental Law.
(3) Release means any release, spill,
emission, discharge, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environmental
(including, without limitation, ambient air, surface
water, groundwater, and surface or subsurface strata)
or into or out of any property, including the movement
of Hazardous Substances, Oils, Pollutants or
Contaminants through or in the air, soil, surface
water, groundwater or any property.
z. Any pro forma financial or other information and
related notes included in the Registration Statement, each Preliminary
Prospectus and the Prospectus comply (or, if the Prospectus has not
been filed with the Commission, as to the Prospectus, will comply) in
all material respects with the requirements of the Act and the rules
and regulations of the Commission thereunder and present fairly the
pro forma information shown, as of the dates and for the periods
covered by such pro forma information. Such pro forma information,
including any related notes and schedules, has been prepared on a
basis consistent with the historical financial statements and other
historical information, as applicable, included in the Registration
Statement, the Preliminary Prospectus and the Prospectus, except for
the pro forma adjustments specified therein, and give effect to
assumptions made on a reasonable basis to give effect to historical
and, if applicable, proposed transactions described in the
Registration Statement, each Preliminary Prospectus and the
Prospectus. All of the above representations and warranties shall
survive the performance or termination of this Agreement.
3. Purchase, Sale, and Delivery of the Common Stock and the
Warrants. On the basis of the representations, warranties, covenants, and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the Underwriters,
severally and not jointly, and the Underwriters,
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severally and not jointly, agree to purchase from the Company the number of
shares of Common Stock and Warrants set forth opposite the Underwriters' names
in Schedule 1 hereto.
The purchase price per share of Common Stock to be paid by the
Underwriters shall be $ and the purchase price per Warrant
to be paid by the Underwriters shall be $.09. The initial public offering
price of the Common Stock shall be $ and the initial public
offering price of the Warrants shall be $.10.
Payment for the Common Stock and Warrants by the Underwriters shall be
made by certified or official bank check in clearing house funds, payable
to the order of the Company at the offices of Xxxxxxxxx Securities, Inc., 0000
Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000, or at such other place in
Denver, Colorado as the Representative shall determine and advise the Company
by at least two full days' notice in writing, upon delivery of the Common Stock
and Warrants to the Representative. Such delivery and payment shall be made at
10:00 a.m., Mountain Time, on the third business day following the time of the
initial public offering, as defined in Section 10(a). The time and date of
such delivery and payment are herein called the "Closing Date."
In addition, the Company hereby grants to the Representative the
option to purchase all or a portion of the Additional Securities as may be
necessary to cover over-allotments, at the same purchase price per Additional
Security as the price per share of Common Stock or Warrant provided for in this
Section 3. The Representative may purchase Common Stock and/or Warrants when
exercising such option, in its sole discretion. This option may be exercised
by the Representative on the basis of the representations, warranties,
covenants, and agreements of the Company herein contained, but subject to the
terms and conditions herein set forth, at any time and from time to time on or
before the 45th day following the Effective Date of the Registration Statement,
by written notice by the Representative to the Company. Such notice shall set
forth the aggregate number of Additional Securities as to which the option is
being exercised, and the time and date, as determined by the Representative,
when such Additional Securities are to be delivered (such time and date are
herein called an "Additional Closing Date"); provided, however, that no
Additional Closing Date shall be earlier than the Closing Date nor earlier than
the third business day after the date on which the notice of the exercise of
the option shall have been given nor later than the eighth business day after
the date on which such notice shall have been given; and further provided, that
not more than two Additional Closings shall be noticed and held following
purchase of Additional Securities by the Representative.
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Payment for the Additional Securities shall be made by certified or
official bank check in clearing house funds payable to the order of the Company
at the offices of Xxxxxxxxx Securities, Inc., 0000 Xxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxx, Xxxxxxxx, or at such other place in Denver, Colorado as you shall
determine and advise the Company by at least two full days' notice in writing,
upon delivery of certificates representing the Additional Securities to you.
Certificates for the Common Stock and Warrants and any Additional
Securities purchased shall be registered in such name or names and in such
authorized denominations as you may request in writing at least two full
business days prior to the Closing Date or Additional Closing Date, as
applicable. The Company shall permit you to examine and package such
certificates for delivery at least one full business day prior to any such
closing with respect thereto.
If for any reason one or more Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 10 hereof) to purchase and pay for
the number of shares of Common Stock and Warrants agreed to be purchased by
such Underwriter, the Company shall immediately give notice thereof to the
Representative, and the non-defaulting Underwriters shall have the right within
24 hours after the receipt by the Representative of such notice, to purchase or
procure one or more other Underwriters to purchase, in such proportions as may
be agreed upon among the Representative and such purchasing Underwriter or
Underwriters and upon the terms herein set forth, the Common Stock and Warrants
which such defaulting Underwriter or Underwriters agreed to purchase. If the
non-defaulting Underwriters fail so to make such arrangements with respect to
all such Common Stock and Warrants, the number of shares of Common Stock and
Warrants which each non-defaulting Underwriter is otherwise obligated to
purchase under the Agreement shall be automatically increased pro rata to
absorb the remaining Common Stock and Warrants which the defaulting Underwriter
or Underwriters agreed to purchase; provided, however, that the non- defaulting
Underwriters shall not be obligated to purchase the Common Stock and Warrants
which the defaulting Underwriter or Underwriters agreed to purchase in excess
of 10% of the total number of shares of Common Stock and Warrants which such
non-defaulting Underwriter agreed to purchase hereunder, and provided further
that the non- defaulting Underwriters shall not be obligated to purchase any
Common Stock and Warrants which the defaulting Underwriter or Underwriters
agreed to purchase if such additional purchase would cause the Underwriter to
be in violation of the net capital rule of the Commission or other applicable
law. If the total number of Common Stock and Warrants which the defaulting
Underwriter or Underwriters agreed to purchase shall not be purchased or
absorbed in accordance
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with the two preceding sentences, the Company shall have the right, within 24
hours next succeeding the 24-hour period above referred to, to make
arrangements with other underwriters or purchasers satisfactory to the
Representative for the purchase of such Common Stock and Warrants on the terms
herein set forth. In any such case, either the Representative or the Company
shall have the right to postpone the Closing for not more than seven business
days after the date originally fixed as the Closing in order that any necessary
changes in the Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Underwriters nor the
Company shall make arrangements within the 24-hour periods stated above for the
purchase of all the Common Stock and Warrants which the defaulting Underwriter
or Underwriters agreed to purchase hereunder, this Agreement shall be
terminated without further act or deed and without any liability on the part of
the Company any non-defaulting Underwriter, except the Company shall be liable
for actual expenses incurred by the Representative as provided in Section 10
hereof, and without any liability on the part of any non-defaulting Underwriter
to the Company.
Nothing contained herein shall relieve any defaulting Underwriter of
its liability, if any, to the Company or to the remaining Underwriters for
damages occasioned by its default hereunder.
4. Offering. The Underwriters are to make a public offering of
the Common Stock and Warrants as soon, on or after the effective date of the
Registration Statement, as the Representative deems it advisable so to do. The
Common Stock and Warrants are to be initially offered to the public at the
initial public offering prices as provided for in Section 3 (such prices being
herein called the "public offering prices"). After the initial public
offering, you may from time to time increase or decrease the prices of the
Common Stock and/or Warrants, in your sole discretion, by reason of changes in
general market conditions or otherwise.
5. Covenants of the Company. The Company covenants that it will:
a. Use its best efforts to cause the Registration
Statement to become effective as promptly as possible. If the
Registration Statement has become or becomes effective with a form of
Prospectus omitting certain information pursuant to Rule 430A of the
Regulations, or filing of the Prospectus is otherwise required under
Rule 424(b), the Company will file the Prospectus, properly completed,
pursuant to Rule 424(b) within the time period prescribed and will
provide evidence satisfactory to you of such timely filing.
b. Notify you immediately, and confirm such notice in
writing, (i) when the Registration Statement and any post-effective
amendment thereto become effective, (ii) of the receipt of any
comments from the Commission or the "blue sky" or securities authority
of any
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jurisdiction regarding the Registration Statement, any post-effective
amendment thereto, the Prospectus, or any amendment or supplement
thereto, and (iii) of the receipt of any notification with respect to
a Stop Order or the initiation or threatening of any proceeding with
respect to a Stop Order. The Company will use its best efforts to
prevent the issuance of any Stop Order and, if any Stop Order is
issued, to obtain the lifting thereof as promptly as possible.
c. During the time when a prospectus relating to the
Common Stock and Warrants or the Additional Securities is required to
be delivered hereunder or under the Act or the Regulations, comply so
far as it is able with all requirements imposed upon it by the Act, as
now existing and as hereafter amended, and by the Regulations, as from
time to time in force, so far as necessary to permit the continuance
of sales of or dealings in the Common Stock and Warrants and
Additional Securities in accordance with the provisions hereof and the
Prospectus. If, at any time when a prospectus relating to the Common
Stock and Warrants or Additional Securities is required to be
delivered hereunder or under the Act or the Regulations, any event
shall have occurred as a result of which, in the reasonable opinion of
counsel for the Company or counsel for the Representative, the
Registration Statement or the Prospectus, as then amended or
supplemented, contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or if, in the
opinion of either of such counsel, it is necessary at any time to
amend or supplement the Registration Statement or the Prospectus to
comply with the Act or the Regulations, the Company will immediately
notify you and promptly prepare and file with the Commission an
appropriate amendment or supplement (in form and substance
satisfactory to you) which will correct such statement or omission or
which will effect such compliance and will use its best efforts to
have any such amendment declared effective as soon as possible.
d. Deliver without charge to you such number of copies
of each Preliminary Prospectus as you may reasonably request and, as
soon as the Registration Statement or any amendment thereto becomes
effective or a supplement is filed, deliver without charge to you two
signed copies of the Registration Statement or such amendment thereto,
as the case may be, including exhibits, and two copies of any
supplement thereto, and deliver without charge to you such number of
copies of the Prospectus, the Registration Statement, and amendments
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and supplements thereto, if any, without exhibits, as you may
reasonably request for the purposes contemplated by the Act.
e. Endeavor in good faith, in cooperation with you, at
or prior to the time the Registration Statement becomes effective, to
qualify the Common Stock and Warrants and Additional Securities for
offering and sale under the "blue sky" or securities laws of such
jurisdictions as you may designate; provided, however, that no such
qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to service of general process or
to taxation as a foreign corporation doing business in such
jurisdiction to which it is not then subject. In each jurisdiction
where such qualification shall be effected, the Company will, unless
you agree in writing that such action is not at the time necessary or
advisable, file and make such statements or reports at such times as
are or may be required by the laws of such jurisdiction.
f. Make generally available (within the meaning of
Section 11(a) of the Act and the Regulations) to its security holders
as soon as practicable, but not later than fifteen (15) months after
the date of the Prospectus, an earnings statement (which need not be
certified by independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions
of Section 11(a) of the Act and the Regulations) covering a period of
at least 12 months beginning after the effective date of the
Registration Statement.
g. For a period of 12 months after the date of the
Prospectus, not, without your prior written consent, offer, issue,
sell, contract to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any shares of Common Stock (or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for shares of Common Stock) except as
provided in Section 3 and except for (i) the issuance of Warrant
Shares issuable upon the exercise of Warrants or issuance of Common
Stock underlying options outstanding on the date hereof which are
properly described in the Prospectus, (ii) the issuance of
Representative's Option Securities, or (iii) the grant of options
pursuant to the Company's existing stock option plans, or (iv) the
issuance of capital stock in connection with any acquisitions
undertaken by the Company.
h. For a period of five years after the Effective Date
of the Registration Statement, furnish you, without charge, the
following:
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i. Within 90 days after the end of each fiscal
year, three copies of consolidated financial statements
certified by independent certified public accountants,
including a balance sheet, statement of operations, and
statement of cash flows of the Company and its then existing
subsidiaries, with supporting schedules, prepared in
accordance with generally accepted accounting principles, at
the end of such fiscal year and for the 12 months then ended;
ii. As soon as practicable after they have been
sent to stockholders of the Company or filed with the
Commission, three copies of each annual and interim financial
and other report or communication sent by the Company to its
stockholders or filed with the Commission;
iii. As soon as practicable, two copies of every
press release and every material news item and article in
respect of the Company or its affairs which was released by
the Company;
iv. Notice of any regular quarterly or special
meeting of the Company's Board of Directors concurrently with
the sending of such notice to the Company's directors; and
v. Such additional documents and information
with respect to the Company and its affairs and the affairs of
any of its subsidiaries as you may from time to time
reasonably request.
i. Designate an Audit Committee and a Compensation
Committee, the members of which shall be subject to your reasonable
approval, which will generally supervise the financial affairs of the
Company and review executive compensation, respectively.
j. Furnish to you as early as practicable prior to the
Closing Date and any Additional Closing Date, as the case may be, but
not less than two full business days prior thereto, a copy of the
latest available unaudited interim consolidated financial statements
of the Company which have been read by the Company's independent
certified public accountants, as stated in their letters to be
furnished pursuant to Section 7(e).
k. File no amendment or supplement to the Registration
Statement or Prospectus at any time, whether before or after the
Effective Date of the Registration Statement, unless such filing shall
comply with the Act and the Regulations and unless you shall
previously have been advised of such filing and furnished with a copy
thereof, and you and counsel for
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the Representative shall have approved such filing in writing within a
reasonable time of receipt thereof.
l. Comply with all periodic reporting and proxy solicitation
requirements which may from time to time be applicable to the Company as a
result of the Company's registration under the Exchange Act on a Registration
Statement on Form 8-A .
m. Comply with all provisions of all undertakings contained in
the Registration Statement.
n. Prior to the Closing Date or any Additional Closing Date, as
the case may be, issue no press release or other communication, directly or
indirectly, and hold no press conference and grant no interviews with respect to
the Company, the financial condition, results of operations, business,
properties, assets, or liabilities of the Company, or this offering, without
your prior written consent.
o. File timely with the Commission and the National Association
of Securities Dealers, Inc. (the "NASD"), if required, a report on Form 10-C in
accordance with the Rules and Regulations of the Commission under the Exchange
Act.
p. On or prior to the Closing Date, sell to the Representative
for a total purchase price of $100, Representative's Options entitling the
Representative or its assigns to purchase (i) 120,000 shares of Common Stock at
a price equal to 120% of the public offering price of the Common Stock, and (ii)
120,000 Warrants at a price equal to 120% of the public offering price of the
Warrants, with the terms of the Representative's Options, including exercise
period, anti-dilution provisions, exercise price, exercise provisions,
transferability, and registration rights, to be in the form filed as an exhibit
to the Registration Statement.
q. Until expiration of the Representative's Options, keep
reserved sufficient shares of Common Stock and Warrants for issuance upon
exercise of the Representative's Options, and shares of Common Stock for
issuance upon exercise of the warrants contained in the Representative's
Options.
r. If the Representative, any employee of the Representative or
any company controlled by or under control of the Representative acts as the
introducing broker or finder during the five year period commencing on the
Effective Date with regard to (i) the sale of all or substantially all of the
assets and properties of the Company, (ii) the merger or consolidation of the
Company (other than a merger or consolidation effected for the purpose of
changing the Company's domicile) or (iii) the acquisition by the Company of the
assets or stock of another business entity, which agreement or understanding is
thereafter
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consummated during such five-year period or within one year of expiration of
such five-year period, pay to the Representative or such person(s) as the
Representative may designate an amount equal to 5% of the first $1,000,000 or
portion thereof in value or consideration received or paid by the Company, 4% of
the second $1,000,000 or portion thereof in value or consideration received or
paid by the Company and 3% of such value or consideration received by the
Company in excess of the first $2,000,000 of such value or consideration
received or paid by the Company. The fee payable to the Representative will be
in the same form of consideration as that paid by or to the Company, as the case
may be, in any such transaction. It is understood that the designation of the
Representative to act as a finder is not exclusive and that the Representative
shall not be entitled to the foregoing amounts unless it participates in the
introduction.
s. Within six months of the Closing Date, engage a financial
public relations firm to assist the Company in preparing regular announcements
and disseminating such information to the financial community, such engagement
to extend for a period of at least one year from the date of retention of such
firm.
t. Adopt procedures for the application of the net proceeds it
receives from the sale of the Common Stock and Warrants and apply the net
proceeds from the sale of the Common Stock and Warrants substantially in the
manner set forth in the Registration Statement, which does not contemplate
repayment of debt to officers, directors, stockholders or affiliates of the
Company, unless any deviation from such application is in accordance with the
Registration Statement and occurs only after approval by the Board of Directors
of the Company and then only after the Board of Directors has obtained the
written opinion of recognized legal counsel experienced in federal and state
securities laws as to the propriety of any such deviation.
u. Within the time period which the Prospectus is required to be
delivered under the Act, comply, at its own expense, with all requirements
imposed upon it by the Act, as now or hereafter amended, by the Rules and
Regulations, as from time to time may be enforced, and by any order of the
Commission, so far as necessary to permit the continuance of sales or dealing in
the Common Stock and Warrants.
v. At the Closing, deliver to the Representative true and
correct copies of the Articles of Incorporation of the Company and all
amendments thereto, all such copies to be certified by the Secretary of the
Company; true and correct copies of the by-laws of the
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Company and of the minutes of all meetings of the directors and stockholders of
the Company held prior to the Closing which in any way relate to the subject
matter of this Agreement or the Registration Statement.
w. Use all reasonable efforts to comply or cause to be complied
with the conditions precedent to the several obligations of the Underwriters in
Section 7 hereof.
x. File with the Commission all required information concerning
use of proceeds of the Public Offering in Forms 10-QSB and 10-KSB in accordance
with the provisions of the Act and to provide a copy of such reports to the
Representative and its counsel.
y. Supply to the Representative and the Representative's counsel
at the Company's cost, two bound volumes each containing material documents
relating to the offering of the Common Stock and Warrants within a reasonable
time after the Closing, not to exceed 90 days.
z. As soon as possible prior to the Effective Date, and as a
condition of the Underwriter's obligations hereunder, (i) have the Company
listed on an accelerated basis, and to maintain such listing for not less than
ten years from the Closing Date, in Standard & Poor's Standard Corporation
Records; and (ii) have the Common Stock and Warrants quoted on The Nasdaq
SmallCap Market(SM) as of the Effective Date, on the Closing Date, on the
Additional Closing Date and thereafter for at least ten years provided the
Company is in compliance with The Nasdaq SmallCap Market(SM) maintenance
requirements.
aa. As soon as possible prior to the Effective Date and at such
time as the Company qualifies for listing on the Nasdaq National Market, take
all steps necessary to have the Company's Common Stock and Warrants, to the
extent eligible, listed on the Nasdaq National Market.
bb. Continue, for a period of at least five years following the
Effective Date of the Registration Statement, to appoint such auditors as are
reasonably acceptable to the Representative, which auditors shall (i) prepare
consolidated financial statements in accordance with Regulation S-B or, if
applicable, Regulation S-X under the General Rules and Regulations of the Act
and (ii) examine (but not audit) the Company's consolidated financial statements
for each of the first three (3) fiscal quarters prior to the announcement of
quarterly financial information, the filing of the Company's 10-QSB quarterly
report and the mailing of quarterly financial information to security holders.
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cc. Within 90 days of the Effective Date of the Registration
Statement, obtain a "key man" life insurance policy in the amount of $1,000,000
on the life of Xxxxxx X. Xxxxxx, with the Company designated as the beneficiary
of such policy, and pay the annual premiums thereon for a period of not less
than five years from the Effective Date of the Registration Statement.
dd. Cause its transfer agent to furnish the Representative a
duplicate copy of the daily transfer sheets prepared by the transfer agent
during the six-month period commencing on the Effective Date of the Registration
Statement and instruct the transfer agent to timely provide, upon the request of
the Representative, duplicate copies of such transfer sheets and/or a duplicate
copy of a list of stockholders, all at the Company's expense, for a period of 4
1/2 years after such six-month period.
ee. Refrain from filing a Form S-8 Registration Statement for a
period of 18 months from the Effective Date of the Registration Statement
without the Representative's prior written consent. The Company will also
obtain from each holder of options to acquire Common Stock of the Company such
person's written enforceable agreement not to sell shares of Common Stock
pursuant to the exemption afforded by Rule 701 under the 1933 Act for a minimum
period of 18 months from the Effective Date without the prior written consent of
the Representative.
ff. On the Closing Date, enter into a Warrant Exercise Fee
Agreement with the Representative whereby the Company will agree to pay the
Representative a fee of 5% of the aggregate exercise price of each Warrant
exercised commencing one year after the Effective Date, of which a portion may
be allowed by the Representative to the dealer who solicited the exercise (which
may also be the Representative), subject to applicable NASD guidelines.
gg. Afford the Representative the right, but not the obligation,
commencing on the Effective Date and surviving for a period of five years, to
designate an observer to attend meetings of the Board of Directors. The
designee, if any, and the Representative will receive notice of each meeting of
the Board of Directors in accordance with Colorado law, of which no less than
four in-person meetings will be held each year. Any such designee will receive
reimbursement for all reasonable costs and expenses incurred in attending
meetings of the Board of Directors, including but not limited to, food, lodging
and transportation, together with such other fee or compensation as is paid by
the Company to other members of the Board of Directors. Moreover, to the extent
permitted by law, the Representative and its
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designee shall be indemnified for the actions of such designee as an observer to
the Board of Directors and in the event the Company maintains a liability
insurance policy affording coverage for the acts of its officers and/or
directors, to the extent permitted under such policy, each of the Representative
and its designee shall be an insured under such policy.
hh. The Company, on behalf of itself and on behalf of its
officers and directors, hereby grants and covenants to provide the
Representative a non-assignable right of first refusal, which right of first
refusal shall extend for a period of four years after the Effective Date. The
right of first refusal shall entitle the Representative to purchase for its
account, or to sell for the account of the Company, any of the Company's
subsidiaries or any selling security holders or officers, directors or
affiliates of such persons, any debt or equity securities of the Company or
common stock owned by such selling security holders with respect to which the
Company, any of its subsidiaries or successors (other than a successor entity
which has acquired the Company and in which the stockholders of the Company own
less than 25% of the outstanding shares) or selling security holders may seek to
offer and sell pursuant to a registration statement under the Act or in a
private transaction other than with a lending institution. The Company, its
subsidiaries and any selling security holders will consult with 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 the Company than it can secure elsewhere. If the
Representative fails to accept in writing such proposal for financing made by
the Company, its subsidiaries or such selling security holders within 30 days
after the receipt by the Representative of a notice containing such proposal,
then the Representative shall have no further claim or right with respect to the
financing proposal contained in such notice. If thereafter such proposal is
modified, the Company, its subsidiaries or affiliates shall adopt the same
procedure as with respect to the original proposal, except that upon
re-presentation, such term for response by the Representative shall be 15 days.
Should the Representative not avail itself of such opportunity, the right of
first refusal shall not be affected thereby, and the right of first refusal
shall continue in effect for the remaining period thereof. The Company further
agrees that any breach by the Company of the Representative's right of first
refusal shall be enforceable through injunctive relief. The offer or sale by
the Company of equity securities in connection with acquisitions or mergers
shall be exempted from the foregoing right of first refusal.
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6. Payment of Expenses. The Company hereby agrees to pay all
expenses (subject to the last sentence of this Section 6) in connection with
the offering, including but not limited to (a) the preparation, printing,
filing, distribution, and mailing of the Registration Statement and the
Prospectus, including NASD, SEC, Nasdaq filing and/or application fees, and the
printing, filing, distribution, and mailing of this Agreement, any Agreement
Among Underwriters, Selected Dealers Agreement, preliminary and final Blue Sky
Memorandums, material to be circulated to the Underwriters by you and other
incidental or related documents, including the cost of all copies thereof and
of the Preliminary Prospectuses and of the Prospectus, and any amendments or
supplements thereto, supplied to the Representative in quantities as
hereinabove stated, (b) the issuance, sale, transfer, and delivery of the
Common Stock and Warrants, the Additional Securities, the Warrant Shares, the
Representative's Options and the Representative's Option Securities, including,
without limitation, any original issue, transfer or other taxes payable thereon
and the costs of preparation, printing and delivery of certificates
representing such securities, as applicable, (c) the qualification of the
Common Stock and Warrants, Additional Securities, Representative's Options,
Representative's Option Securities, and Warrant Shares under state or foreign
"blue sky" or securities laws, (d) the fees and disbursements or counsel for
the Company and the accountants for the Company, (e) the listing of the Common
Stock and Warrants on The Nasdaq SmallCap Market(SM), and (f) the
Representative's non-accountable expense allowance equal to 3% of the aggregate
gross proceeds from the sale of the Common Stock and Warrants and the
Additional Securities. Prior to or immediately following the Closing Date, the
Company shall bear the costs of tombstone announcements not to exceed $3,000,
if requested to do so by the Representative. As an incentive for the
Representative to assist the Company in managing its costs and to minimize the
time of its management personnel in traveling to road shows, the Representative
agrees to limit such road show meetings to not more than two meetings for the
Representative's branch offices and underwriting syndicate members and, in
consideration of such limited road show schedule, the Company shall, upon
receipt of an invoice from the Representative, reimburse the Representative for
any direct accountable expenses incurred by the Representative and its
personnel in presenting and/or attending such meetings subject to a maximum of
such accountable expenses of $10,000. Except as hereinabove provided, the
Company and the Representative shall pay their own expenses incurred in
connection with any road shows.
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The Company has previously remitted to the Representative the sum of
$30,000, which sum has been credited as a partial payment in advance of the
non-accountable expense allowance provided for in Section 6(f) above.
7. Conditions of Underwriters' Obligations. The Underwriters'
obligation to purchase and pay for the Common Stock and Warrants and the
Additional Securities, as provided herein, shall be subject to the continuing
accuracy of the representations and warranties of the Company contained herein
and in each certificate and document contemplated under this Agreement to be
delivered to you, as of the date hereof and as of the Closing Date (or the
Additional Closing Date, as the case may be), to the performance by the Company
of its obligations hereunder, and to the following conditions:
a. The Registration Statement shall have become
effective not later than 5:00 p.m., Mountain time, on the date of this
Agreement or such later date and time as shall be consented to in
writing by you.
b. At the Closing Date and any Additional Closing Date,
you shall have received the favorable opinion of Xxxxx & Xxxxxx, P.C.,
counsel for the Company, dated the date of delivery, addressed to you,
and in form and scope satisfactory to your counsel, to the effect
that:
i. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Colorado, with full power and authority, and all
necessary consents, authorizations, approvals, orders,
certificates, and permits of and from, and declarations and
filings with, all federal, state, local, and other
governmental authorities and all courts and other tribunals,
to own, lease, license, and use its properties and assets and
to conduct its business in the manner described in the
Prospectus. The Company is duly qualified to do business and
is in good standing in every jurisdiction in which its
ownership, leasing, licensing, or use of property and assets
or the conduct of its business makes such qualification
necessary;
ii. The authorized capital stock of the Company
as of the date of this Agreement consisted of 10,000,000
shares of Common Stock, of which 1,800,000 shares of Common
Stock are issued and outstanding, 27,000 shares of Common
Stock are reserved for issuance upon the exercise of
outstanding options and 173,000 shares of Common Stock are
reserved for issuance upon the exercise of the remaining
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options authorized under the Company's option plans; and
1,000,000 shares of Preferred Stock, none of which are issued
and outstanding; and there have been no changes in the
authorized and outstanding capital stock of the Company since
the date of this Agreement, except as contemplated by the
Registration Statement and the Prospectus. Each outstanding
share of capital stock is validly authorized, validly issued,
fully paid, and nonassessable, with no personal liability
attaching to the ownership thereof, has not been issued and is
not owned or held in violation of any preemptive right of
stockholders. There is no commitment, plan, or arrangement to
issue, and no outstanding option, warrant, or other right
calling for the issuance of, any share of capital stock of the
Company or any security or other instrument which by its terms
is convertible into, exercisable for, or exchangeable for
capital stock of the Company, except as set forth above, and
except as is properly described in the Prospectus. There is
outstanding no security or other instrument which by its terms
is convertible into or exchangeable for capital stock of the
Company, except as described in the Prospectus;
iii. There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation pending, threatened, or in prospect (or any
basis therefor) with respect to the Company or any of its
respective operations, businesses, properties, or assets,
except as may be properly described in the Prospectus or such
as individually or in the aggregate do not now have and will
not in the future have a material adverse effect upon the
operations, business, properties, or assets of the Company.
The Company is not in violation of, or in default with respect
to, any law, rule, regulation, order, judgment, or decree,
except as may be properly described in the Prospectus or such
as in the aggregate have been disclosed to the Representative
and do not now have and will not in the future have a material
adverse effect upon the operations, business, properties, or
assets of the Company; nor is the Company required to take any
action in order to avoid any such violation or default;
iv. Neither the Company nor any other party is
now or is expected by the Company to be in violation or breach
of, or in default with respect to, complying with any material
provision of any contract, agreement, instrument, lease,
license, arrangement, or understanding which is material to
the Company;
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v. The Company is not in violation or breach of,
or in default with respect to, any term of its Articles of
Incorporation or by-laws;
vi. The Company has all requisite power and
authority to execute and deliver and to perform thereunder
this Agreement, the Warrants, the Representative's Options,
the Warrant Exercise Fee Agreement and the Custody Agreement.
All necessary corporate proceedings of the Company have been
taken to authorize the execution and delivery and performance
thereunder by the Company of this Agreement, the Warrants, the
Representative's Options, the Warrant Exercise Fee Agreement
and the Custody Agreement. Each of this Agreement, the
Warrants, the Representative's Options, the Warrant Exercise
Fee Agreement and the Custody Agreement have been duly
authorized, executed and delivered by the Company, and is a
legal, valid, and binding obligation of the Company, and
(subject to applicable bankruptcy, insolvency, and other laws
affecting the enforceability of creditors' rights generally)
enforceable as to the Company in accordance with its
respective terms. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or
filing with, any federal, state, local, or other governmental
authority or any court or other tribunal is required by the
Company for the execution or delivery, or performance
thereunder by the Company of this Agreement, the Warrants,
Representative's Options, the Warrant Exercise Fee Agreement
and the Custody Agreement (except filings under the Act which
have been made prior to the Closing Date and consents
consisting only of consents under "blue sky" or securities
laws which are required in connection with the transactions
contemplated by this Agreement, and which have been obtained
on or prior to the date the Registration Statement becomes
effective under the Act). No consent of any party to any
contract, agreement, instrument, lease, license, arrangement,
or understanding to which the Company is a party, or to which
any of its properties or assets are subject, is required for
the execution or delivery, or performance thereunder of this
Agreement, the Warrants, the Representative's Options, the
Warrant Exercise Fee Agreement or the Custody Agreement; and
the execution and delivery and performance thereunder of this
Agreement, the Warrants, the Representative's Options, the
Warrant Exercise Fee Agreement and the Custody Agreement will
not violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both)
entitle
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any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement,
or understanding, or violate or result in a breach of any term
of the Articles of Incorporation or by-laws of the Company, or
violate, result in a breach of, or conflict with any law,
rule, regulation, order, judgment, or decree binding on the
Company or to which any of its operations, businesses,
properties, or assets are subject;
vii. The shares of Common Stock are, the shares of
Common Stock issuable on exercise of the Warrants will be, the
shares of Common Stock underlying the Representative's Options
will be upon exercise of the Representative's Options, and the
Representative's Option Shares will be upon exercise of the
Warrants underlying the Representative's Options, validly
authorized, validly issued, fully paid, and nonassessable and
are not issued in violation of any preemptive rights of
stockholders, and the Underwriters have received good title to
the Common Stock and Warrants and Additional Securities
purchased by them from the Company, free and clear of all
liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts; upon payment for
the Warrant Shares and the Representative's Securities, the
holders thereof will receive good title to such securities,
free and clear of all liens, security interests, pledges,
charges, encumbrances, stockholders' agreement and voting
trusts. The Common Stock, the Warrants, the Warrant Shares,
the Representative's Options and the Representative's Option
Securities conform to all statements relating thereto
contained in the Registration Statement or the Prospectus;
viii. The Warrant Shares have been duly and validly
reserved for issuance pursuant to the terms of the Warrant
Agreement between the Company and its transfer agent, the
Representative's Option Securities have been duly and validly
reserved for issuance pursuant to the terms of the
Representative's Options or the Warrant Agreement, as the case
may be;
ix. Any contract, agreement, instrument, lease,
or license required to be described in the Registration
Statement or the Prospectus has been properly described
therein. Any contract, agreement, instrument, lease, or
license required to be filed as an exhibit to the Registration
Statement has been filed with the Commission as an
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exhibit to or has been incorporated as an exhibit by reference
into the Registration Statement;
x. Insofar as statements in the Prospectus
purport to summarize the status of litigation or the
provisions of laws, rules, regulations, orders, judgments,
decrees, contracts, agreements, instruments, leases, or
licenses, such statements have been prepared or reviewed by
such counsel and accurately reflect the status of such
litigation and provisions purported to be summarized and are
correct in all material respects;
xi. Except as provided in the Registration
Statement, no person or entity has the right to require
registration of shares of Common Stock or other securities of
the Company because of the filing or effectiveness of the
Registration Statement;
xii. The Registration Statement has become
effective under the Act. No Stop Order has been issued and no
proceedings for that purpose have been instituted or
threatened;
xiii. The Registration Statement and the
Prospectus, and any amendment or supplement thereto, comply as
to form in all material respects with the requirements of the
Act and the Regulations;
xiv. Such counsel has no reason to believe that
either the Registration Statement or the Prospectus, or any
amendment or supplement thereto, contains any untrue statement
of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading (except that no opinion need be
expressed as to the consolidated financial statements and
other financial data and schedules which are or should be
contained therein);
xv. Since the Effective Date of the Registration
Statement, any event which has occurred which should have been
set forth in an amendment or supplement to the Registration
Statement or the Prospectus has been set forth in such an
amendment or supplement;
xvi. The Company is not currently offering any
securities for sale except as described in the Registration
Statement;
xvii. Such counsel has no knowledge of any
promoter, affiliate, parent or subsidiaries of the Company
except as are described in the Registration Statement;
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xviii. The Company has no subsidiaries except as
described in the Registration Statement;
xix. The Company owns or possesses, free and clear
of all liens or encumbrances and rights thereto or therein by
third parties, the requisite licenses or other rights to use
all trademarks, copyrights, service marks, service names,
trade names and licenses necessary to conduct its business
(including without limitation, any such licenses or rights
described in the Registration Statement as being owned or
possessed by the Company or any subsidiary) (all of which are
collectively referred to herein as the "Intellectual
Property"); there is no actual or pending, or threatened
claim, proceeding or action by any person pertaining to or
which challenges the exclusive rights of the Company with
respect to any of the Company's Intellectual Property; based
on a review of all the Company's products, proposed products
and Intellectual Property, such products, proposed products or
Intellectual Property do not and will not infringe on any
trademarks, copyrights, service marks, service names, trade
names or valid patents or patents pending held by third
parties known to the Company and such counsel;
xx. The Company is not a party to any agreement
giving rise to any obligation by the Company or any subsidiary
to pay any third-party royalties or fees of any kind
whatsoever with respect to any technology developed, employed,
used or licensed by the Company or any subsidiary, other than
is disclosed in the Prospectus;
xxi. The Common Stock and Warrants are eligible
for quotation on The Nasdaq SmallCap Market;
xxii. All issued and outstanding shares of Common
Stock and all other securities issued and sold or exchanged by
the Company or its subsidiaries have been issued and sold or
exchanged in compliance with all applicable state and federal
securities laws and regulations; and
xxiii. The Company and all of its Property are in
compliance with all Environmental Laws and the Company is in
full compliance with all permits, licenses and authorizations
relating to Environmental Laws.
In rendering such opinion, counsel for the Company may rely
(A) as to matters involving the application of laws other than the
laws of the United States and the laws of the
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State of Colorado, to the extent counsel for the Company deems proper
and to the extent specified in such opinion, upon an opinion or
opinions (in form and substance satisfactory to counsel for the
Representative) of other counsel, acceptable to counsel for the
Representative, familiar with the applicable laws, in which case the
opinion of counsel for the Company shall state that the opinion or
opinions of such other counsel are satisfactory in scope, form, and
substance to counsel for the Company and that reliance thereon by
counsel for the Company is reasonable; (B) as to matters of fact, to
the extent the Representative deems proper, on certificates of
responsible officers of the Company; and (C) to the extent they deem
proper, upon written statements or certificates of officers of
departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be
delivered to counsel for the Representative.
c. On or prior to the Closing Date and any Additional
Closing Date, as the case may be, you shall have been furnished such
information, documents, certificates, and opinions as you may
reasonably require for the purpose of enabling you to review the
matters referred to in Sections 7(b) and (c), and in order to evidence
the accuracy, completeness, or satisfaction of any of the
representations, warranties, covenants, agreements, or conditions
herein contained, or as you may reasonably request.
d. At the Closing Date and any Additional Closing Date,
as the case may be, you shall have received a certificate of the chief
executive officer and of the chief financial officer of the Company,
dated the Closing Date or such Additional Closing Date, as the case
may be, to the effect that the conditions set forth in Section 7(a)
have been satisfied, that as of the date of this Agreement and as of
the Closing Date or such Additional Closing Date, as the case may be,
the representations and warranties of the Company contained herein
were and are accurate, and that as of the Closing Date or such
Additional Closing Date, as the case may be, the obligations to be
performed by the Company hereunder on or prior thereto have been fully
performed.
e. At the time this Agreement is executed and at the
Closing Date and any Additional Closing Date, as the case may be, you
shall have received a letter from Xxxxxxxx Xxxxx Xxxxxxx & Xxxxxxx PC,
Certified Public Accountants, addressed to you and dated the date of
delivery but covering a period within three business days of such
date, in form and substance satisfactory to you.
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f. All proceedings taken in connection with the
issuance, sale, transfer, and delivery of the Common Stock and
Warrants and the Additional Securities shall be satisfactory in form
and substance to you and to counsel for the Representative, and you
shall have received a favorable opinion from counsel to the Company,
dated as of the Closing Date or the Additional Closing Date, as the
case may be, with respect to such of the matters set forth under
Sections 7(b) and 7(c), respectively, and with respect to such other
related matters, as you may reasonably request.
g. The NASD, upon review of the terms of the public
offering of the Common Stock and Warrants and the Additional
Securities, shall not have objected to your participation in such
offering.
h. The Company shall have received notice that the
Common Stock and Warrants will be quoted on The Nasdaq SmallCap
Market(SM) as of the Effective Date. Any certificate or other
document signed by any officer of the Company and delivered to you or
to counsel for the Representative shall be deemed a representation and
warranty by such officer individually and by the Company hereunder to
the Representative as to the statements made therein. If any
condition to your obligations hereunder to be fulfilled prior to or at
the Closing Date or any Additional Closing Date, as the case may be,
is not so fulfilled, you may terminate this Agreement or, if you so
elect, in writing waive any such conditions which have not been
fulfilled or extend the time for their fulfillment.
8. Indemnification and Contribution.
a. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriters, the
Representative, and each of their officers, directors, partners,
employees, agents, and counsel, and each person, if any, who controls
the Representative or any one of the Underwriters within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any and all loss, liability, claim, damage, and expense whatsoever
(which shall include, for all purposes of this Section 8, but not be
limited to, attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever and any
and all amounts paid in settlement of any claim or litigation) as and
when incurred arising out of, based upon, or in connection with (i)
any untrue statement or alleged untrue statement of a material fact
contained (A) in any Preliminary Prospectus, the Registration
Statement, or the Prospectus (as from time to time amended and
supplemented),
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or any amendment or supplement thereto, or (B) in any application or
other document or communication (in this Section 8 collectively called
an "application") in any jurisdiction in order to qualify the Common
Stock and Warrants and Additional Securities under the "blue sky" or
securities laws thereof or filed with the Commission or any securities
exchange; or any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any breach of any representation,
warranty, covenant, or agreement of the Company contained in this
Agreement. The foregoing agreement to indemnify shall be in addition
to any liability the Company may otherwise have, including liabilities
arising under this Agreement; however, the Company shall have no
liability under this Section 8 if such statement or omission was made
in reliance upon and in conformity with written information furnished
to the Company as stated in Section 8(b) with respect to the
Underwriters by or on behalf of the Underwriters expressly for
inclusion in any Preliminary Prospectus, the Registration Statement,
or the Prospectus, or any amendment or supplement thereto, or in any
application, as the case may be.
If any action is brought against the Underwriters, the Representative
or any of their officers, directors, partners, employees, agents, or counsel,
or any controlling persons of an Underwriter or the Representative (an
"indemnified party") in respect of which indemnity may be sought against the
Company pursuant to the foregoing paragraph, such indemnified party or parties
shall promptly notify the Company in writing of the institution of such action
(but the failure so to notify shall not relieve the Company from any liability
it may have other than pursuant to this Section 8(a)) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(satisfactory to such indemnified party or parties) and payment of expenses.
Such indemnified party or parties shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of such indemnified party or parties unless the employment of
such counsel shall have been authorized in writing by the Company in connection
with the defense of such action or the Company shall not have promptly employed
counsel satisfactory to such indemnified party or parties to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be one or more legal defenses available to
it or them or to other indemnified parties which are different from or
additional to those available to the Company, in any of which events such fees
and expenses shall be borne by the Company. Anything in this paragraph to the
contrary notwithstanding, the Company shall
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not be liable for any settlement of any such claim or action effected without
its written consent. The Company agrees promptly to notify the Underwriters
and the Representative of the commencement of any litigation or proceedings
against the Company or against any of its officers or directors in connection
with the sale of the Common Stock and Warrants or the Additional Securities,
any Preliminary Prospectus, the Registration Statement, or the Prospectus, or
any amendment or supplement thereto, or any application.
b. The Underwriters agree to indemnify and hold harmless
the Company, each director of the Company, each officer of the Company
who shall have signed the Registration Statement, each other person,
if any, who controls the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, to the same extent as
the foregoing indemnity from the Company to the Underwriters in
Section 8(a), but only with respect to statements or omissions, if
any, made in any Preliminary Prospectus, the Registration Statement,
or the Prospectus (as from time to time amended and supplemented), or
any amendment or supplement thereto, or in any application, in
reliance upon and in conformity with written information furnished to
the Company as stated in this Section 8(b) with respect to the
Underwriters by or on behalf of the Underwriters expressly for
inclusion in any Preliminary Prospectus, the Registration Statement,
or the Prospectus, or any amendment or supplement thereto, or in any
application, as the case may be; provided, however, that the
obligation of the Underwriters to provide indemnity under the
provisions of this Section 8(b) shall be limited to the amount which
represents the product of the number of shares of Common Stock and
Warrants and Additional Securities sold hereunder and the initial
public offering prices per share of Common Stock and Warrant set forth
on the cover page of the Prospectus. For all purposes of this
Agreement, the amounts of the selling concession and reallowance set
forth in the Prospectus, the information under "Underwriting" and the
identification of counsel to the Representative under "Legal Matters"
constitute the only information furnished in writing by or on behalf
of the Underwriters expressly for inclusion in any Preliminary
Prospectus, the Registration Statement, or the Prospectus (as from
time to time amended or supplemented), or any amendment or supplement
thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so
indemnified based on any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto,
or any application, and in respect of which indemnity may be sought
against the Underwriters pursuant to this Section
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8(b), the Underwriters shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall
have the rights and duties given to the indemnified parties, by the
provisions of Section 8(a).
c. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 8 is for any reason held to be
unavailable to the Underwriters or the Company, then the Company shall
contribute to the damages paid by the several Underwriters, and the
several Underwriters shall contribute to the damages paid by the
Company; provided, however, that 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 such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall
be considered the relative benefits received by each party from the
sale of the Common Stock and Warrants and Additional Securities
(taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Underwriters agree that it would
not be equitable if the amount of such contribution were determined by
pro rata or per capita allocation (even if the Underwriters were
treated as one entity for such purpose). No Underwriter or person
controlling such Underwriter shall be obligated to make contribution
hereunder which in the aggregate exceeds the total public offering
price of the Common Stock and Warrants and Additional Securities
purchased by such Underwriter under this Agreement, less the aggregate
amount of any damages which such Underwriter and its controlling
persons have otherwise been required to pay in respect of the same or
any substantially similar claim. The Underwriters' obligations to
contribute hereunder are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section,
each person, if any, who controls an Underwriter within the meaning of
Section 15 of the Act shall have the same rights to contribution as
such Underwriter, and each director of the Company, each officer of
the Company who signed the Registration Statement, and each person, if
any, who controls the Company within the meaning of Section 15 of the
Act, shall have the same rights to contribution as the Company.
Anything in this Section 8(c) to the contrary notwithstanding, no
party shall be liable for contribution with respect to the
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settlement of any claim or action effected without its written
consent. This Section 8(c) is intended to supersede any right to
contribution under the Act, the Exchange Act, or otherwise.
9. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties, covenants, and agreements of the Underwriters and
the Company, including the indemnity and contribution agreements contained in
Section 8, shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Representative, the Underwriters
or any indemnified person, or by or on behalf of the Company or any person or
entity which is entitled to be indemnified under Section 8(b), and shall
survive termination of this Agreement or the delivery of the Common Stock and
Warrants and the Additional Securities to the Underwriters for a period equal
to the statute of limitations for claims related hereto, but not to exceed an
aggregate of three years from the date hereof. In addition, the provisions of
Sections 5(a), 6, 8, 9, 10, and 12 shall survive termination of this Agreement,
whether such termination occurs before or after the Closing Date or any
Additional Closing Date.
10. Effective Date of This Agreement and Termination Thereof.
a. This Agreement shall be executed within 24 hours of
the Effective Date of the Registration Statement and shall become
effective on the Effective Date or at the time of the initial public
offering of the Common Stock and Warrants, whichever is earlier. The
time of the initial public offering shall mean the time, after the
Registration Statement becomes effective, of the release by the
Representative for publication of the first newspaper advertisement
which is subsequently published relating to the Common Stock and
Warrants or the time, after the Registration Statement becomes
effective, when the Common Stock and Warrants are first released by
the Representative for offering by dealers by letter or telegram,
whichever shall first occur. The Representative or the Company may
prevent this Agreement from becoming effective without liability of
any party to any other party, except as noted below in this Section
10, by giving the notice indicated in Section 10(c) before the time
this Agreement becomes effective.
b. The Representative shall have the right to terminate
this Agreement at any time prior to the Closing Date or any Additional
Closing Date, as the case may be, by giving notice to the Company if
there shall have been a general suspension of, or a general
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limitation on prices for, trading in securities on the New York Stock
Exchange or the American Stock Exchange or in the over-the-counter
market; or if there shall have been an outbreak of major hostilities
or other national or international calamity; or if a banking
moratorium has been declared by a state or federal authority; or if a
moratorium in foreign exchange trading by major international banks or
persons has been declared; or if there shall have been a material
interruption in the mail service or other means of communication
within the United States; or if the Company shall have sustained a
material or substantial loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage, or other calamity or malicious act which,
whether or not such loss shall have been insured, will, in the
Representative's opinion, make it inadvisable to proceed with the
offering, sale, or delivery of the Common Stock and Warrants or the
Additional Securities, as the case may be; or if there shall have been
such material and adverse change in the market for securities in
general so as to make it inadvisable to proceed with the offering,
sale, and delivery of the Common Stock and Warrants or the Additional
Securities, as the case may be, on the terms contemplated by the
Prospectus due to the impaired investment quality of the Common Stock
and Warrants or the Additional Securities; or if the Dow Xxxxx
Industrial Average shall have fallen by 15% or more from its closing
price on the day immediately preceding the date that the Registration
Statement is declared effective by the Commission.
c. If the Representative elects to prevent this
Agreement from becoming effective as provided in this Section 10, or
to terminate this Agreement, it shall notify the Company promptly by
telephone, telex, or telegram, confirmed by letter. If, as so
provided, the Company elects to prevent this Agreement from becoming
effective, the Company shall notify the Representative promptly by
telephone, telex, or telegram, confirmed by letter.
d. Anything in this Agreement to the contrary
notwithstanding other than Section 10(e), if this Agreement shall not
become effective by reason of an election pursuant to this Section 10
or if this Agreement shall terminate or shall otherwise not be carried
out prior to August 31, 1998 because (i) of any reason solely within
the control of the Company or its stockholders and not due to the
breach of any representation, warranty or covenant or bad faith of the
Representative, (ii) the Company unilaterally withdraws the proposed
Public Offering from the Representative in favor of another
underwriter, (iii) the Company does not permit the Registration
Statement to become effective for any reason other than if the Common
Stock is proposed to be priced at less than $5.00 per share, in which
event this
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provision will not apply, (iv) of any material discrepancy in any
representation by the Company and/or its officers, directors,
stockholders, agents, advisers or representatives, made in writing,
including but not limited to the Registration Statement, to the
Representative, (v) the Company is, directly and/or indirectly,
negotiating with other persons or entities of whatsoever nature
relating to a possible Public Offering of its securities, or (vi) of
any failure on the part of the Company to perform any covenant or
agreement or satisfy any condition of this Agreement by it to be
performed or satisfied, then, in any of such events, the Company shall
be obligated to reimburse the Representative for its out-of-pocket
expenses on an accountable basis. Should the Representative be
required to account for "out-of-pocket" expenses, any expense incurred
by the Representative shall be deemed to be reasonable and
unobjectionable upon a reasonable showing by the Representative that
such expenses were incurred, directly or indirectly, in connection
with the proposed transaction and/or relationship of the parties
hereto, as described herein. In no event will the Representative be
entitled to reimbursement of accountable expenses exceeding $50,000,
inclusive of the $30,000 advanced against the non-accountable expense
allowance. The Representative will return to the Company any portion
of the $30,000 payment previously received that is not used in the
payment of accountable expenses.
e. Notwithstanding any election hereunder or any
termination of this Agreement, and whether or not this Agreement is
otherwise carried out, the provisions of Sections 5(a), 6, 8, 9, and
10 shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
f. Anything in this Agreement to the contrary
notwithstanding other than Sections 10(d) and (e), if this Agreement
shall not be carried out within the time specified herein for any
reason other than as set forth in Section 10(d), the Company shall
have no liability to the Representative other than for the
Representative's accountable expenses up to a maximum aggregate amount
of $30,000, which amount has been paid in advance in accordance with
Section 6 hereof. The Representative will return to the Company any
portion of the $30,000 payment previously received that is not used in
the payment of accountable expenses.
11. Notices. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to the
Representative, shall be mailed, delivered, or sent by facsimile transmission
and confirmed by original letter, to Xxxxxxxxx Securities, Inc., 1120
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Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000, Attention: Xxxxx Xxxx, with
a copy to Xxxxxx X. Xxxxxx, Esq., Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C., 0000
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000; or if sent to the Company
shall be mailed, delivered, or telexed or telegraphed and confirmed by letter,
to Factual Data Corp., 0000 XXX Xxxxxxx, Xxxxxxxx 0, Xxxx Xxxxxxx, Xxxxxxxx
00000, Attention: Xxxxxx X. Xxxxxx, Chief Executive Officer, with a copy to
Xxxxxx X. Xxxx, Esq., Xxxxx & Xxxxxx, P.C., 0000 Xxxxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxxxxx 00000. All notices hereunder shall be effective upon receipt by the
party to which it is addressed.
12. Parties. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Underwriters, the Company, and the persons and
entities referred to in Section 8 who are entitled to indemnification or
contribution, and their respective successors, legal representatives, and
assigns (which shall not include any buyer, as such, of the Common Stock and
Warrants or the Additional Securities) and no other person shall have or be
construed to have any legal or equitable right, remedy, or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
13. Construction. This Agreement shall be construed in accordance
with the laws of the State of Colorado, without giving effect to conflict of
laws. Time is of the essence in this Agreement. The parties acknowledge that
this Agreement was initially prepared by the Representative, and that all
parties have read and negotiated the language used in this Agreement. The
parties agree that, because all parties participated in negotiating and
drafting this Agreement, no rule of construction shall apply to this Agreement
which construes ambiguous language in favor of or against any party by reason
of that party's role in drafting this Agreement.
If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
FACTUAL DATA CORP.
By:
-----------------------------------------
Xxxxxx X. Xxxxxx, Chief Executive Officer
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Accepted as of the date first above written.
Denver, Colorado
XXXXXXXXX SECURITIES, INC.
for itself
By:
----------------------------------------------
Xxxxxx Xxxxxxxxx, President
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FACTUAL DATA CORP.
(A COLORADO CORPORATION)
SCHEDULE 1
This Schedule sets forth the name of each Underwriter referred to in
the Underwriting Agreement and the number of shares of Common Stock and
Warrants to be sold by the Company.
NUMBER OF
SHARES OF NUMBER OF
NAME COMMON STOCK WARRANTS
-------------------------------- ------------ ------------
Xxxxxxxxx Securities, Inc.
--------- ---------
Total 1,200,000 1,200,000
========= =========
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