UA/CS/WTS
11/1/96
OCUREST LABORATORIES, INC.
UNDERWRITING AGREEMENT
_______________, 1996
RAF Financial Corporation
One Norwest Center
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Gentlemen:
OCUREST LABORATORIES, INC. ("Company"), a Florida corporation, and the
selling shareholders named in Schedule II hereto ("Selling Shareholders") hereby
confirm their agreement with you, as Representative, and with the other members
of the Underwriting Group as follows:
SECTION 1
DESCRIPTION OF OFFERING AND SECURITIES
The Underwriting Group proposes to purchase from the Company a total of
1,200,000 Units ("Firm Units"), each Unit consisting of one share of Common
Stock of the Company ("Share") and one Class A Common Stock Purchase Warrant.
The Class A Common Stock Purchase Warrants will be referred to as "Class A
Warrants" in this Agreement and in the Agreement Among Underwriters. The
Representative, either on its own behalf or on behalf of the members of the
Underwriting Group, will have an overallotment option to purchase up to an
additional 180,000 Units ("Overallotment Units"), consisting of up to 180,000
Shares ("Overallotment Shares") and up to 180,000 Class A Warrants
("Overallotment Class A Warrants") to cover overallotments. Such Overallotment
Units, Shares, and Overallotment Class A Warrants are collectively referred to
herein as the "Overallotment Securities." Except as otherwise stated herein, the
Firm Units and the Overallotment Securities are collectively referred to herein
as the "Securities." The Company agrees to sell to the Underwriting Group all of
the Firm Units, and the Company agrees to sell to the Representative all of the
Overallotment Securities except for the Overallotment Shares which are sold to
the Representative by Selling Shareholders. The Selling Shareholders have the
right to sell to the
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Representative up to the first 180,000 of the Overallotment Shares. The Units
will be initially offered for sale to the public at a price of $4.00 per Unit.
Such price is referred to herein as the "Public Offering Price." The Company's
authorized and outstanding capitalization when the offering of the Firm
Securities is permitted to commence and at the Closing Date (hereinafter
defined) and at the Option Closing Date (hereinafter defined) will be as set
forth in the Registration Statement (hereinafter defined) and the Prospectus
(hereinafter defined) included therein. Any Overallotment Shares sold to the
Representative by the Selling Shareholders will be referred to herein as the
"Selling Shareholders Shares."
The Shares and Class A Warrants comprising the Units will not be
separately tradeable or transferable for a period of six months after the
effective date (hereinafter defined) or earlier at the discretion of the
Representative. The date upon which the Shares and Class A Warrants become
separately tradeable and transferable will be referred to herein as the
"Detachment Date."
One Class A Warrant entitles the holder to purchase one share of the
Company's Common Stock ("Warrant Share") at $4.80 per share ("Exercise Price")
at any time after the Detachment Date and until ___________, 1999. Commencing on
the Detachment Date, the Company has the right to call all of the Class A
Warrants for redemption at a price $.55 per Class A Warrant at any time until
the end of the second year after the date of the Prospectus (hereinafter
defined) and thereafter at a price of $.75 per Class A Warrant at any time until
the end of the third year after the date of the Prospectus (hereinafter defined)
and thereafter prior to the expiration of the Class A Warrants. The Class A
Warrants may be redeemed upon 30 days prior written notice given at any time
after the Common Stock of the Company has traded for at least $6.72 for at least
20 consecutive trading days ending within 10 days prior to the date of the
notice of redemption. For purposes of determining the daily trading price of the
Company's Common Stock: (i) if the Common Stock is listed on a national stock
exchange or admitted to unlisted trading privileges on any such exchange or
quoted on a trading system of the National Association of Securities Dealers,
Inc. ("NASD") such as the NASDAQ Small Cap Market or the NASDAQ National Market
System ("NASDAQ/ NMS"), then the last reported sale price of the Common Stock
each day shall be used, but if no such sale has occurred on any of such days or
if the last sale price is not reported, then the average of the closing bid
prices for the Common Stock for such day on such exchange or system shall be
used; or (ii) if the Common Stock is not then traded on any such exchange or
system then the average of the daily bid prices for the Company's Common Stock
reported by the National Quotation Bureau, Inc. shall be used if the Company's
Common Stock is included in the National Quotation System.
On the effective date, only the Units will be listed for quotation on
the NASDAQ Small Cap Market. The Company will use its best efforts to have the
Shares and Class A Warrants listed for quotation on the NASDAQ Small Cap Market
on the Detachment Date and thereafter, and the Company will use its best efforts
to delist the Units from quotation on the NASDAQ Small Cap Market at the same
time as the Shares and Class A Warrants become listed for quotation on the
NASDAQ Small Cap Market. The foregoing agreements by the Company are
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subject to the Company's ability to meet the NASDAQ Small Cap Market maintenance
requirements on the Detachment Date.
The Class A Warrants contain adjustment provisions protecting the
holders thereof against dilution of their interests represented by the Warrant
Shares upon the occurrence of certain events. Holders of the Class A Warrants,
as such, have no voting power; are not en titled to dividends; and in the event
of liquidation, dissolution, or winding up of the Company, are not be entitled
to participate in the Company's assets. The Company agrees to take what ever
actions are necessary so that during the period that the Class A Warrants are
exercisable, a registration statement relating to the Warrant Shares will be
effective and current with the Securities and Exchange Commission ("Commission")
and the Company agrees to use its best efforts so that during such period the
Class A Warrants may be exercised by the holders thereof under the securities
laws in those states in which any of the Securities are sold in the public
offering under the Registration Statement and in those states in which
registered holders reside who in the aggregate own at least 2% of the Class A
Warrants outstanding during the period that such Class A Warrants are
exercisable. The Company agrees that its obligations set forth in the preceding
sentence shall remain in full force and effect regardless of whether or not the
"market price" of the Company's Common Stock is less than the Exercise Price
under the Class A Warrants. The Company agrees not to call the Class A Warrants
for redemption at any time that such registration statement is not effective and
current with the Commission and the states described in the previous sentence.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the members of the Underwriting Group to enter into
this Agreement, the Company hereby represents and warrants to and agrees with
the members of the Underwriting Group as follows:
2.01. REGISTRATION STATEMENT AND PROSPECTUS. A registration statement
on Form SB- 2 (File No. 333-10323) ("Registration Statement") with respect to
the Securities, the Warrant Shares, and the Representative's Warrants and
Representative's Class A Warrants (hereinafter defined), including the related
Prospectus, copies of which have heretofore been delivered by the Company to the
Representative, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended ("Act"), and the rules
and regulations ("Rules and Regulations") of the Commission thereunder, and said
Registration Statement has been filed with the Commission under the Act; one or
more amendments to said Registration Statement, copies of which have heretofore
been delivered to the Representative, has or have heretofore been filed with the
Commission; and the Company may file with the Commission on or prior to the
effective date additional amendments to said Registration Statement, including
the final Prospectus. As used in this Agreement, the term "Registration
Statement" refers to and means said Registration Statement and all amendments
thereto, including the Prospectus, all
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exhibits and all financial statements, as it becomes effective; the term
"Prospectus" refers to and means the Prospectus included in the Registration
Statement when it becomes effective; and the term "Preliminary Prospectus"
refers to and means any Prospectus included in said Registration Statement
before it becomes effective. The terms "effective date" and "effective" refer to
the date the Commission declares effective, pursuant to Section 8 of the Act,
the Registration Statement.
2.02. ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. The Commission
has not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Securities and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Act and the
applicable Rules and Regulations of the Commission thereunder and to the best of
the Company's knowledge has not included at the time of filing any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein not misleading. When the Registration Statement
becomes effective and on the Closing Date and on the Option Closing Date, the
Registration Statement and Prospectus and any further amendments or supplements
thereto will contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations thereunder for the
purposes of the proposed public offering of the Securities, all statements of
material fact contained in the Registration Statement and Prospectus will be
true and correct and neither the Registration Statement nor the Prospectus will
include 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; provided, however, the Company does not make any representations
or warranties as to information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon written information furnished on
behalf of the members of the Underwriting Group specifically for use therein.
2.03. FINANCIAL STATEMENTS. The financial statements of the Company
together with related schedules and notes as set forth in the Registration
Statement and Prospectus present fairly the financial position of the Company
and the results of its operations and the changes in its financial position at
the respective dates and for the respective periods for which they apply. Such
financial statements have been prepared in accordance with generally accepted
principles of accounting consistently applied throughout the periods concerned
except as otherwise stated therein.
2.04. INDEPENDENT PUBLIC ACCOUNTANTS. The accountants which have
audited the financial statements filed or to be filed with the Commission as
part of the Registration
Statement and Prospectus, are independent certified public accountants with
respect to the Company within the meaning of the Act and the Rules and
Regulations thereunder.
2.05. NO CONTINGENT LIABILITIES AND NO MATERIAL ADVERSE CHANGE.
Except as disclosed in the Registration Statement and Prospectus, neither the
Company nor any of its subsidiaries, if any, have any material contingent
liabilities, obligations or claims nor have they received threats of claims or
regulatory action. Except as may be reflected in or contemplated
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by the Registration Statement or the Prospectus, subsequent to the dates as of
which information is given in the Registration Statement and Prospectus and
prior to the Closing Date and the Option Closing Date, (i) there shall not have
been any material adverse change in the condition, financial or otherwise, of
the Company or its subsidiaries, if any, or in the business of the Company or
its subsidiaries; (ii) there shall not have been any material adverse transac
tion entered into by the Company or any of its subsidiaries, if any; (iii)
neither the Company nor any of its subsidiaries, if any, shall have incurred any
material obligations, contingent or otherwise, which are not disclosed in the
Prospectus; (iv) there shall not have been any change in the outstanding
securities or long term debt (except current payments) of the Company or any of
its subsidiaries, if any; (v) the Company has not and will not have paid or
declared any dividends or other distributions on its Common Stock or other
securities; and (vi) there shall not have been any change in the officers or
directors of the Company.
2.06. NO DEFAULTS. Neither the Company nor any of its subsidiaries, if
any, is in default under any of the contracts, leases, subleases, licenses or
agreements to which they are a party. Except as disclosed in the Prospectus,
neither the Company nor any of its subsidiaries, if any, is in default, which
has not been waived, in the performance of any material obligation, agreement or
condition contained in any debenture, note or other evidence of indebtedness or
any indenture or loan agreement. The execution and delivery of this Agreement,
the consummation of the transactions herein contemplated and the compliance with
the terms of this Agreement will not conflict with or result in a breach of any
of the terms, conditions or provisions of, or constitute a default under, the
articles of incorporation, as amended, or bylaws of the Company or any of its
subsidiaries, if any, any note, indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company or any of its
subsidiaries, if any, is a party or by which it, its subsidiaries, if any, or
any of their property is bound, or any existing law, order, rule, regulation,
writ, injunction or decree of any government, governmental instrumentality,
agency or body, arbitration tribunal or court, domestic or foreign, having
jurisdiction over the Company, its subsidiaries, if any, or their property. The
consent, approval, authorization or order of any court or governmental
instrumentality, agency or body is not required for the consummation of the
transactions herein contemplated except such as may be required under the Act or
under the blue sky or securities laws of any state or jurisdiction.
2.07. INCORPORATION AND STANDING. The Company is and at the Closing
Date and at the Option Closing Date will be duly incorporated and validly
existing in good standing as a corporation under state law with authorized and
outstanding capital stock as set forth in the Registration Statement and the
Prospectus and with full power and authority (corporate and other) to own its
property and conduct its business, present and proposed, as described in the
Registration Statement and Prospectus; the Company has full power and authority
to enter into this Agreement; and the Company is duly qualified and in good
standing as a foreign corporation in each jurisdiction, if any, in which it owns
or leases real property or transacts business requiring such qualification. All
of the Company's subsidiaries, if any, are identified and described in the
Registration Statement. Each of the Company's subsidiaries, if any, is and
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at the Closing Date and at the Option Closing Date will be duly incorporated and
validly existing in good standing as a corporation under state law with
authorized and outstanding capital stock as set forth in the Registration
Statement and the Prospectus and with full power and authority (corporate and
other) to own its property and conduct its business, present and proposed, as
described in the Registration Statement and Prospectus, and is duly qualified
and in good standing as a foreign corporation in each jurisdiction in which it
owns or leases real property or transacts business requiring such qualification,
except where the failure to so qualify would not be materially adverse to the
Company's business taken as a whole.
2.08. LEGALITY OF OUTSTANDING SECURITIES. The outstanding shares of
Common Stock of the Company and each of its subsidiaries, if any, have been duly
and validly authorized and issued, are fully paid and nonassessable and conform
to all statements with regard thereto contained in the Registration Statement
and Prospectus. No sales of securities have been made by the Company in
violation of the registration provisions of the Act or in violation of any other
federal or state laws.
2.09. LEGALITY OF SECURITIES. The Securities, the Warrant Shares, the
Representative's Warrants (described in Section 3.04 hereof) and the
Representative's Class A Warrants (described in Section 3.04 hereof) have been
duly and validly authorized and, when issued and delivered against payment as
provided in this Agreement, will be validly issued, fully paid and
nonassessable. The Securities, the Warrant Shares, the Representative's Warrants
and the Representative's Class A Warrants, upon issuance, will not be subject to
the preemptive rights of any shareholders of the Company. The Class A Warrants,
the Representative's Warrants, and the Representative's Class A Warrants, when
sold and delivered, will constitute valid and binding obligations of the Company
enforceable in accordance with their terms. A sufficient number of shares of
Common Stock have been reserved for issuance upon exercise of the Class A
Warrants, the Representative's Warrants, and the Representative's Class A
Warrants. The Securities, the Warrant Shares, the Representative's Warrants and
the Representative's Class A Warrants will conform to all statements in the
Registration Statement and Prospectus made with respect thereto. Upon delivery
of and payment for the Securities, the Representative's Warrants and the
Representative's Class A Warrants to be sold by the Company as set forth in this
Agreement, the persons paying therefor will receive good and marketable title
thereto, free and clear of all liens, encumbrances, charges and claims. The
Company will have on the effective date of the Registration Statement and at the
time of delivery of the Securities, the Representative's Warrants and the
Representative's Class A Warrants full legal right and power and all
authorizations and approvals required by law to sell and deliver the Securities,
Representative's Warrants and Representative's Class A Warrants in the manner
provided here under.
2.10. OUTSTANDING SECURITIES AND LONG TERM DEBT ON EFFECTIVE DATE.
Immediately prior to the effective date, the only shares of capital stock,
warrants, options, or other convertible securities which have been issued by the
Company and which will be outstanding on the effective date will be as described
in the Prospectus, and the Company will not be
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obligated on any long term debt, whether or not recorded on the books, records,
or accounts of the Company and will not be obligated to issue any capital stock,
warrants, options, or other convertible securities except as described in the
Prospectus. Immediately prior to the effective date of the Registration
Statement, the number of shares of Common Stock of the Company outstanding will
not exceed _________ shares on a fully diluted basis unless the Representative
has approved in writing a different maximum number of fully diluted shares. For
purposes of this Underwriting Agreement, the term "fully diluted basis" shall
mean the number of shares of Common Stock actually issued and outstanding plus
the number of shares of Common Stock underlying all issued and outstanding
convertible or excisable securities.
2.11. CUSIP NUMBER. The Company has obtained a CUSIP number for the
Units, Common Stock, and Class A Warrants.
2.12. OPTIONS AND TREASURY SHARES. There are no outstanding options,
warrants or other rights to purchase securities of the Company, however
characterized, except as described in the Registration Statement. Except as
described in the Registration Statement, there are no securities of the Company,
however characterized, held in its treasury. Except as described in the
Registration Statement, the Company has not offered or agreed to purchase or
issue any shares of Common Stock or any convertible securities in the future.
2.13. SUBSIDIARIES. Except as described herein and in the Registration
Statement, the Company has no subsidiaries and does not currently intend to
acquire any subsidiaries or engage in mergers with or the acquisition of any
entity.
2.14. PRIOR SALES. No securities of the Company, or of a predecessor of
the Company, have been sold except as described in the Registration Statement or
as disclosed in writing to the Representative.
2.15. LITIGATION. Except as set forth in the Registration Statement or
except for nonmaterial actions, suits, or proceedings disclosed in writing to
the Representative, there is and at the Closing Date and at the Option Closing
Date there will be no action, suit or proceeding before any court or
governmental agency, authority or body pending or to the knowledge of the
Company threatened against the Company or any of its subsidiaries.
2.16. FINDER. Except as set forth in the Registration Statement, the
Company knows of no outstanding claims against it for compensation for services
in the nature of a finder's fee, origination fee, or financial consulting fee
with respect to the offer and sale of the Securities and Warrant Shares
hereunder.
2.17. EXHIBITS. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act or by
the Rules and Regulations thereunder, which have not been so filed and each
contract to which the Company or any of its subsidiaries, if any, is a party and
to which reference is made in the Prospectus has been duly
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and validly executed, is in full force and effect in all material respects in
accordance with its terms, and none of such contracts has been assigned and the
Company knows of no present situation or condition or fact which would prevent
compliance with the terms of such contracts. Except for amendments or
modifications of such contracts in the ordinary course of business, the Company
has not been advised that any party to any such contract intends to exercise any
right which it may have to cancel any of its obligations under any of such
contracts and has no knowledge that any other party to any such contracts has
any intention not to render full performance under such contracts.
2.18. TAX RETURNS. Except as described in the Registration Statement,
the Company has filed all tax returns which are required to be filed by it and
has paid all taxes shown on such returns and on 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.
2.19. NO PREEMPTIVE RIGHTS. The Company's securities, however
characterized, are not subject to preemptive rights.
2.20. USE OF FORM SB-2. The Company is eligible to use Form SB-2 for
the offering of the Securities, the Warrant Shares, the Representative's
Warrants, and the Representative's Class A Warrants.
2.21. NO SECURITIES BEING OFFERED. Except as described in the
Registration Statement, neither the Company nor any of its subsidiaries, if any,
is currently offering any securities of which it is the issuer.
2.22. CERTIFICATES, PERMITS, LICENSES, APPROVALS, PATENTS AND
TRADEMARKS. The Company and each of its subsidiaries, if any, possess adequate
certificates, permits, licenses, or approvals, issued by the appropriate
federal, state and local regulatory authorities necessary to conduct its
business and to retain possession of its properties. The Company and its sub
sidiaries, if any, have not received any notice of any proceeding relating to
the revocation or modification of any of these certificates, permits, licenses,
or approvals. The Company and each of its subsidiaries, if any, has sufficient
trademarks, patent rights and copyright protection to conduct its business as
now being conducted; and except as described in the Prospectus, the Company has
no knowledge of any use by it or any of its subsidiaries, if any, of the trade
secrets of others, of infringement by it or them of trademarks, patent rights or
copyrights of others, or of any claim being made against the Company or any of
its subsidiaries, if any, regarding trademark, patent or copyright infringement
or use of trade secrets of others.
2.23. TITLE TO PROPERTIES. The Company and each of its subsidiaries, if
any, has marketable title to all properties, including patents, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, copyrights, equipment, and technology, described in the
Registration Statement as owned by it or them. The properties are free and
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clear of all liens, charges, encumbrances or restrictions, however
characterized, except as described in the Registration Statement. All of the
contracts, leases, subleases, patents, patent applications, trademarks,
trademark applications, service marks, service xxxx applications, copyrights,
licenses and agreements, however characterized, under which the Company and each
of its subsidiaries, if any, holds its properties, as described in the
Registration Statement, are in full force and effect.
2.24. NO DIRECTED SALES. The Company has not made any representation,
whether oral or in writing, to any person, whether an existing shareholder or
not, that any of the Securities will be reserved or directed to such person
during the proposed public offering.
2.25. RESTRICTED SECURITIES. Except for shareholders who meet the
requirements of Rule 144(k), the Company has caused each of its current
shareholders who holds "restricted securities" as such term is defined in Rule
144 under the Act to acknowledge that they hold "restricted securities" as
defined in Rule 144.
2.26. NEGOTIATIONS. During the period from the effective date to the
Closing Date or the Option Closing Date, the Company will notify the
Representative in writing from time to time of the status of any negotiations
involving the Company or any of its subsidiaries, if any, relating to any
transaction which would, if consummated, have a material effect upon the Company
or any of its subsidiaries, if any. Also, the Company will consult with its
legal counsel concerning the need to disclose any such negotiations.
2.27. AUTHORITY. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company.
2.28. 0000 XXX. The Company has been advised of the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it will not become an "investment
company" within the meaning of the 1940 Act and such rules and regulations.
2.29. CAMPAIGN CONTRIBUTIONS. The Company has not at any time during
the last five years made any unlawful contribution to any candidate for foreign
office, or failed to disclose fully any contribution in violation of law, or
made any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasipublic duties, other than
payments required or permitted by the laws of the United States of any
jurisdiction thereof.
2.30. SECURITIES ACTIVITIES. The Company has not taken and will not
take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in
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stabilization or manipulation of the price of any security to facilitate the
sale or resale of the Securities.
2.31. ENVIRONMENTAL. Except as specifically described in the
Prospectus, the Company is in compliance with all federal, state, and local
rules, regulations, and policies relating to the use, treatment, storage,
transportation, discharge, emission, or disposal of, or exposure of others to,
toxic substances and protection of health, safety or the environment
("Environmental Laws") which are applicable to its business; there is no pending
or asserted claim, liability, or investigation by any third party or
governmental authority against the Company under Environmental Laws; no
substances which are prohibited or regulated by any Environmental Law or
designated to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment by any governmental agency ("Hazardous Material") are present
or likely to become present on any property which is owned, leased, or occupied
by the Company and no such property has been designated as a SuperFund site,
pursuant to the Comprehensive Response, Compensation, and Liability Act of 1980,
as amended, or otherwise designated as a contaminated site under applicable
federal, state or local law; and the Company has received all permits, licenses,
or other approvals required of it under Environmental Laws to conduct its
business as presently conducted and is in compliance with all terms and
conditions of such permits, licenses, or approvals.
2.32. FOOD AND DRUG COMPLIANCE. The Company's products and the
manufacture and labeling thereof comply with all applicable laws, rules and
regulations relating to or adopted by the United States Food and Drug
Administration ("FDA") and any state and state agency in which such products are
being marketed or sold.
REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS
In order to induce the members of the Underwriting Group to enter into
this Agreement, each of the Selling Shareholders, severally and not jointly,
represents and warrants to and agrees with the members of the Underwriting Group
as follows:
2.33. CUSTODY AGREEMENT. The Selling Shareholder has duly executed and
delivered the custody agreement ("Custody Agreement"), in the form heretofore
delivered to the Representative. The person designated by the Selling
Shareholder in the Custody Agreement as custodian will be referred to herein as
the "Custodian." Certificates in negotiable form representing the Selling
Shareholder's Shares to be sold by the Selling Shareholder hereunder have been
deposited with the Custodian pursuant to the Custody Agreement for the purpose
of delivery pursuant to this Agreement. All authorizations, orders and consents
necessary for the execution and delivery by the Selling Shareholder of this
Agreement and the Custody Agreement have been duly and validly given, and the
Selling Shareholder has full legal right, power and authority to enter into this
Agreement and the Custody Agreement and to sell, assign, transfer and deliver to
the Underwriters the Selling Shareholder's Shares. The Selling Shareholder
agrees that the Common Stock represented by the certificates he has deposited
with
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the Custodian are subject to the interests of the Underwriters hereunder, that
the arrangements made for such custody are to that extent irrevocable, and that
the obligations of the Selling Shareholder hereunder shall not be terminated,
except as provided in this Agreement and the Custody Agreement, by any act of
such Selling Shareholder, by operation of law, whether by the death or
incapacity of the Selling Shareholder, or by the occurrence of any other event.
If any such death or incapacity should occur, or if any other event should
occur, before the delivery of the Selling Shareholder's Shares hereunder, to the
extent not prohibited by law, the certificates for such Common Stock deposited
with the Custodian shall be delivered by the Custodian in accordance with the
terms and conditions of this Agreement and the Custody Agreement as if such
death, incapacity or other event had not occurred, regardless of whether or not
the Custodian shall have received notice thereof.
2.34. TITLE. The Selling Shareholder has, and on the Closing Date and
Option Closing Date will continue to have, valid and marketable title to the
Selling Shareholder's Shares deposited with the Custodian, free and clear of all
liens, encumbrances, equities and claims, and upon delivery of and payment for
the aforesaid shares as herein provided, valid and marketable title thereto,
free and clear of all liens, encumbrances, equities and claims, will be
transferred by the Selling Shareholder to the Underwriters.
2.35. NO BREACH OR DEFAULT. The performance of this Agreement by the
Selling Shareholder and the consummation of the transactions contemplated hereby
and by the Custody Agreement and compliance with the terms of this Agreement and
the Custody Agreement do not and will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under any indenture,
mortgage or other agreement or instrument to which the Selling Shareholder is a
party, or by which the Selling Shareholder is bound, or any existing law, rule,
regulation, judgment, order or decree applicable to the Selling Shareholder of
any court or other governmental body.
2.36. SECURITIES ACTIVITIES. The Selling Shareholder has not taken and
will not take, directly or indirectly, any action designed to, which has
constituted or might constitute, or which might reasonably be expected to cause
or result in any stabilization or manipulation of the price of any security to
facilitate the sale or resale of the Shares.
2.37. ACCURACY OF THE REGISTRATION STATEMENT AND PROSPECTUS AS TO THE
SELLING SHAREHOLDER. To the extent that any statements are made in or any
omissions occur as to the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by the Selling
Shareholder specifically for use therein, such Preliminary Prospectus did
conform, and the Registration Statement and the Prospectus and any amendments or
supplements thereto, when they become effective or are filed with the
Commission, as the case may be, will conform, in all material respects to the
requirements of the Act and the regulations and did not and will not contain any
untrue statement of a material fact or omit to state any fact required to be
stated therein or necessary to make the statements therein not misleading.
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2.38. TRANSFER TAXES. No transfer taxes are required to be paid in
connection with the sale, transfer and/or delivery of any of the Shares being
sold to the Underwriters by the Selling Shareholder pursuant to this Agreement.
2.39. COMPANY REPRESENTATIONS. The Selling Shareholder is not aware
that any of the representations and warranties of the Company set forth in this
Agreement are untrue or inaccurate in any material respect.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
SECTION 3
PURCHASE AND SALE OF THE SECURITIES
3.01. PURCHASE OF SECURITIES. The Company hereby agrees to sell to the
members of the Underwriting Group named in Schedule I hereto (for all of whom
the Representative is acting), severally and not jointly, and each member of the
Underwriting Group, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees to purchase
from the Company, severally and not jointly, the number of Firm Units set forth
opposite the name of each member of the Underwriting Group as set forth in
Schedule I hereto at a purchase price of $3.60 per Unit. The Company and each
Selling Shareholder to the extent described in Section 1 of this Agreement
hereby grants to the Representative and the members of the Underwriting Group an
option for a period of 30 days after the effective date to purchase Units,
Shares, or Class A Warrants in order to cover overallotments. Any Overallotment
Securities purchased shall be purchased for the account of the Representative
and/or for the accounts of the members of the Underwriting Group as determined
by the Representative. The purchase price of Overallotment Units is $3.60 per
Unit.
3.01.01. DEFAULT BY MEMBER OF UNDERWRITING GROUP. If for any
reason one or more of the Underwriters shall fail or refuse (otherwise
than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 9 hereof) to purchase and pay
for the number of Firm Units agreed to be purchased by such
Underwriter, the Company shall immediately give notice thereof to the
Representative, and the nondefaulting 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 Firm Units which such defaulting Underwriter or
Underwriters agreed to purchase. If the nondefaulting Underwriters fail
so to make such arrangements with respect to all such Firm Units, the
number of Firm Units which each nondefaulting
- 12 -
Underwriter is otherwise obligated to purchase under this Agreement
shall be automati cally increased pro rata to absorb the remaining Firm
Units which the defaulting Under writer or Underwriters agreed to
purchase; provided, however, that the nondefaulting Underwriters shall
not be obligated to purchase any of the Firm Units if the aggregate
Public Offering Price of the Firm Units which the defaulting
Underwriter or Underwriters agreed to purchase exceeds 10% of the
Public Offering Price of the total Firm Units which all Underwriters
agreed to purchase hereunder. If the total number of Firm Units which
the defaulting Underwriter or Underwriters agreed to purchase shall not
be purchased or absorbed in accordance with this subsection 3.01.01,
then 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 all of the Firm Units which the defaulting Underwriter or
Underwriters agreed to purchase hereunder on the terms herein set
forth. In any such case, either the Representative or the Company shall
have the right to postpone the Closing Date determined as provided in
subsection 3.02.02. hereof for not more than seven business days after
the date originally fixed as the Closing Date pursuant to said
subsection 3.02.02. in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the nondefaulting Underwriters nor
the Company shall make arrangements within the 24 hour periods stated
above for the purchase of all the Firm Units 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 or the Selling Shareholders to
any nondefaulting Underwriter and without any liability on the part of
any nondefaulting Underwriter to the Company or the Selling
Shareholders.
3.01.02. LIABILITY OF DEFAULTING MEMBERS OF THE UNDERWRITING
GROUP. Nothing contained in this Section 3.01 shall relieve any
defaulting member of the Underwriting Group of its liability, if any,
to the Company or to the remaining members of the Underwriting Group
for damages occasioned by its default hereunder.
3.02. PUBLIC OFFERING PRICE. After the Commission notifies the Company
that the Registration Statement has become effective and after this Agreement
becomes effective, the members of the Underwriting Group propose to initially
offer the Units for sale to the public at a Public Offering Price of $4.00 per
Unit. The members of the Underwriting Group may allow such concessions and
discounts upon sales to selected dealers as may be determined from time to time
by the Representative.
3.02.01. PAYMENT FOR FIRM UNITS. Payment for the Firm Units
shall be made to the Company by regular check or checks at the offices
of the Representative set forth above in Denver, Colorado, upon
delivery to the Representative of certificates for the Firm Units in
definitive form in such numbers and registered in such names as the
Representative requests in writing at least two full business days
prior to such delivery.
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The Company agrees not to seek to obtain (i) certification of the
Representative's closing check or checks from the Representative's bank
or banks or (ii) a cashier's check or checks from the Representative's
bank or banks in substitution for the Representative's closing check or
checks. The Company agrees to deposit the Representative's closing
check or checks into the Company's bank account and to allow such check
or checks to clear through the banking system on a "regular way" basis.
Nothing contained in this Section 3.02.01 shall be construed to relieve
the Representative from its obligations created as a result of the
issuance of the Representative's regular check or checks at the
Closing.
3.02.02. CLOSING. The time and date of delivery and payment
hereunder for the Firm Units is herein called the "Closing Date" and
shall take place at the office of the Representative at the address set
forth above in Denver, Colorado, at 10:00 A.M. on the third business
day following the effective date of this Agreement; provided, however,
the Company and the Representative may agree, on the date that this
Agreement becomes legally effective, to an alternative Closing Date and
such alternative Closing Date shall become the Closing Date under this
Agreement. Should the Representative elect to exercise any part of the
overallotment option pursuant to Section 3.01 hereof, the time, date of
delivery and payment for the Overallotment Securities being purchased
shall be as mutually agreed between the Company and the Representative,
but not later than the thirtieth calendar day after the effective date.
Said date is hereinafter referred to as the "Option Closing Date."
3.02.03. INSPECTION OF CERTIFICATES. For the purpose of
expediting the checking and packaging of the certificates for the
Units, Shares, and Class A Warrants, the Company agrees to make the
certificates available for inspection by the Representa tive at the
place designated by the Representative at least one full business day
prior to the proposed delivery date.
3.02.04. PAYMENT TO SELLING SHAREHOLDERS. The Company, the
Selling Shareholders, and the Representative agree that the amount
payable by the Representative to the Custodian on the Option Closing
Date shall be $3.48 for each Selling Shareholder Share which amount
equals the Public Offering Price of each Overallotment Unit of $4.00
less $.40 for the Underwriting Group discount per Unit and less $.12
for the nonaccountable expense allowance per Share payable to the
Representative.
3.03. REPRESENTATIVE'S NONACCOUNTABLE EXPENSE ALLOWANCE. It is
understood that the Company and the Selling Shareholders shall, severally and
not jointly, reimburse the Representative for its expenses on a nonaccountable
basis in the amount of 3% of the Public Offering Price of the Firm Units and
Overallotment Units purchased by the Underwriters. The Representative
acknowledges that it has received $30,000 of the nonaccountable expense
allowance, which amount will be credited against the unpaid balance of such
nonaccountable
- 14 -
expense allowance payable by the Company. On the Closing Date and the Option
Closing Date, the Company and the Selling Shareholders shall pay to the
Representative the unpaid balance of such nonaccountable expense allowance then
due.
3.04. REPRESENTATIVE'S WARRANTS AND REPRESENTATIVE'S CLASS A WARRANTS.
On the Closing Date, the Company will sell warrants to the Representative
("Representative's Warrants") entitling the Representative to purchase a total
of 120,000 shares of the Company's Common Stock. The Representative's Warrants
will be in the form of the Representative's Warrants to Purchase Common Stock
filed as an exhibit to the Registration Statement. In addition, on the Closing
Date, the Company will sell to the Representative a total of 120,000
Representative's Class A Common Stock Purchase Warrants ("Representative's Class
A Warrants") which shall be exactly the same as the Class A Warrants except that
the exercise price for the Representative's Class A Warrants will be ____% of
the exercise price of the Class A Warrants and except as otherwise specified in
this Section 3.04 or in the Prospectus. The total amount that the Representative
shall pay the Company for the Representative's Warrants and the Representative's
Class A Warrants is $100. The Company and the Representative agree that the
Representative's Warrants and the Representative's Class A Warrants may not be
sold, transferred, assigned, pledged, or hypothecated for a period of one year
after the effective date of the Registration Statement except to officers of the
Representative, to members of the Underwriting Group, and to officers of members
of the Underwriting Group and except by will or operation of law. After such one
year period, the Representative's Warrants and the Representative's Class A
Warrants may be sold, transferred, assigned, pledged, or hypothecated provided
that any such transaction is in accordance with the registration or exemption
from registration provisions of the Act and any applicable state securities
laws. If the Representative's Warrants or the Representative's Class A Warrants
are exercised during the first year after the effective date of the Registration
Statement, then any shares of Common Stock of the Company acquired as a result
of any such exercise may not be sold, transferred, assigned, pledged, or
hypothecated until after expiration of such one year period. The
Representative's Class A Warrants shall not be subject to redemption.
3.05. REPRESENTATIONS OF THE PARTIES. The parties hereto respectively
represent that as of the Closing Date and as of the Option Closing Date the
representations herein contained and the statements contained in all the
certificates theretofore or simultaneously delivered by any party to another,
pursuant to this Agreement, shall in all material respects be true and correct.
3.06. POSTCLOSING INFORMATION. The Representative covenants that
reasonably promptly after the Closing Date and after the Option Closing date,
the Representative will
supply the Company with all information that the Company may reasonably request
which must be supplied to the Commission or securities authorities of states in
which the Securities have been qualified for sale.
3.07. REOFFERS BY SELECTED DEALERS. On each sale by the members of
the Underwriting Group of any of the Securities to selected dealers, the
members of the
- 15 -
Underwriting Group shall require the selected dealers purchasing any such
Securities to agree in writing to reoffer such Securities on the terms and
conditions of the offering set forth in the Registration Statement and
Prospectus.
SECTION 4
REGISTRATION STATEMENT AND PROSPECTUS
4.01. DELIVERY OF REGISTRATION STATEMENT. The Company has delivered to
the Representative without charge two signed printed copies of the Registration
Statement, including all financial statements and exhibits filed therewith and
any amendments or supple ments thereto, and shall deliver without charge to the
Representative such number of conformed printed copies of the Registration
Statement as the Representative shall request, including all financial
statements and exhibits filed therewith and any amendments or supplements
thereto. The signed copies of the Registration Statement furnished to the
Representative include signed copies of any and all opinions and consents of the
independent public accountants certifying to the financial statements included
in the Registration Statement and Prospectus and signed copies of any and all
opinions, consents and certificates of any other persons whose profession gives
authority to statements made by them and who are named in the Registration
Statement or Prospectus as having prepared, certified or reviewed any part
thereof.
4.02. DELIVERY OF PRELIMINARY PROSPECTUS AND AGREEMENTS. The Company
will have caused to be delivered, at its expense, to the members of the
Underwriting Group and to other broker dealers specified by the Representative
prior to the effective date of the Registration Statement as many printed copies
of (i) each Preliminary Prospectus filed with the Commission bearing in red ink
the statements required by Item 501 of Regulation S-B, and (ii) each Agreement
Among Underwriters, Underwriting Agreement, and Selected Dealer Agreement, all
as may have been requested by the Representative. The Company consents to the
use of such documents by the members of the Underwriting Group and by
prospective dealers prior to the effective date of the Registration Statement,
so long as such use is in accordance with the applicable provisions of the Act,
the applicable Rules and Regulations thereunder and the applicable state blue
sky or securities laws.
4.03. DELIVERY OF PROSPECTUS. The Company will deliver, at its expense,
to the members of the Underwriting Group and to other broker dealers specified
by the Representative, as many printed copies of the Prospectus as the
Representative may request and will deliver said printed copies of the
Prospectus to the members of the Underwriting Group and such other persons on
the effective date and for such period of time thereafter as the Prospectus is
required by law to be delivered in connection with offers and sales of the
Securities.
4.04. FURTHER AMENDMENTS AND SUPPLEMENTS. If during the period of time
that the Company's Prospectus is required to be delivered under the Act, any
event occurs or any event
- 16 -
known to the Company relating to or affecting the Company shall occur, as a
result of which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact, or omit to state any material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading or if it is necessary at any time
after the effective date to amend or supplement the Prospectus to comply with
the Act, the Company agrees to immediately notify the Representative thereof and
prepare and file with the Commission such further amendment to the Registration
Statement or supplemental or amended Prospectus as may be required and furnish
and deliver to the Representative and to others designated by the
Representative, all at the Company's expense, a reasonable number of copies of
the amended or supplemented Prospectus which as so amended or supplemented will
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading when it is delivered to
a purchaser or prospective purchaser, and which will comply in all respects with
the Act; and in the event the Representative is required to deliver a Prospectus
after the date specified in Rule 174 of the Rules and Regulations, the Company
upon request will prepare promptly such Prospectus or Prospectuses as may be
necessary to permit compliance with the requirements of Section 10 of the Act.
4.05. USE OF PROSPECTUS. The Company authorizes the members of the
Underwriting Group in connection with the distribution of the Securities and all
dealers who may distribute any of the Securities to use the Prospectus, as from
time to time amended or supplemented, in connection with the offering and sale
of the Securities so long as such use is in accordance with the applicable
provisions of the Act, the applicable Rules and Regulations thereunder and
applicable state blue sky or securities laws.
SECTION 5
COVENANTS OF THE COMPANY
The Company covenants and agrees with the members of the Underwriting
Group that:
5.01. OBJECTION OF REPRESENTATIVE TO AMENDMENTS OR SUPPLEMENTS. After
the date hereof, the Company will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment or supplement
to the Registration Statement or Prospectus (i) unless and until a copy of such
amendment or supplement has been previously furnished to the Representative
within a reasonable time period prior to the proposed filing thereof or (ii) to
which the Representative or legal counsel to the Representative has reasonably
objected, in writing, on the ground that such amendment or supplement is not in
compliance with the Act or the Rules and Regulations.
5.02. COMPANY'S BEST EFFORTS TO CAUSE REGISTRATION STATEMENT TO
BECOME EFFECTIVE. The Company agrees to use its best efforts to cause the
Registration Statement and any amendment thereto to become effective as promptly
as reasonably practicable and will
- 17 -
promptly advise the Representative and will confirm such advice in writing (i)
when the Registration Statement shall have become effective and when any
amendment thereto shall have become effective and when any amendment of or
supplement to the Prospectus shall be filed with the Commission, (ii) when the
Commission shall make, either orally or in writing, a request or suggestion for
any amendment to the Registration Statement or the Prospectus or for any
additional information and the nature and substance thereof, (iii) of the
issuance by the Commission of an order suspending the effectiveness of the
Registration Statement pursuant to Section 8 of the Act or of the initiation of
any proceedings for that purpose, (iv) of the happening of any event which in
the judgment of the Company makes any material statement in the Registration
Statement or Prospectus untrue or which requires the making of any changes in
the Registration Statement or Prospectus in order to make the statements therein
not mis leading, and (v) of the refusal to qualify or the suspension of the
qualification of the Securities for offering or sale in any jurisdiction or of
the institution of any proceedings for any of such purposes. The Company will
use every reasonable effort to prevent the issuance of any such order or of any
order preventing or suspending such use, to prevent any such refusal to qualify
or any such suspension, and to obtain as soon as possible a lifting of any such
order, the reversal of any such refusal and the termination of any such
suspension.
5.03. PREPARATION AND FILING OF AMENDMENTS AND SUPPLEMENTS. The Company
agrees to prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement or
Prospectus, in form satisfactory to legal counsel to the Representative, as in
the opinion of the Representative and of legal counsel to the Company, may be
necessary in connection with the offering or distribution of the Securities and
will use its best efforts to cause the same to become effective as promptly as
possible.
5.04. BLUE SKY QUALIFICATION. The Company agrees to use its best
efforts to register or qualify the Securities or such part thereof as the
Representative may determine for sale under the blue sky laws of such states as
are requested by the Representative. The Company will be assisted by legal
counsel for the Representative in registering or qualifying the Securities for
sale under such blue sky laws. The Company will pay all of the filing fees and
legal fees, costs and expenses incurred by such legal counsel in so registering
or qualifying such Securities within 30 days after receipt of a reasonably
itemized statement. Although legal counsel for the Representative will be
assisting the Company in registering and qualifying the Securities with the
states and foreign jurisdictions selected by the Representative and although
legal counsel for the Representative will be compensated by the Company for such
services, such Representative's legal counsel will not have an attorney/client
relationship with the Company and it is understood that all legal advice
concerning such registrations and qualifications will be provided to the Company
by legal counsel for the Company. The Representative's legal counsel will
forward to legal counsel for the Company copies of all documents and
correspondence sent to or received from such states in connection with such
registrations and qualifications at the time such documents and correspondence
are sent or received by legal counsel for the Representative.
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5.05. FINANCIAL STATEMENTS. The Company at its own expense agrees to
prepare and give and will continue to give such financial statements and other
information and reports to and as may be required by the Commission or the
proper public bodies of the states in which the Securities may be registered or
qualified.
5.06. REPORTS AND FINANCIAL STATEMENTS TO THE REPRESENTATIVE. For a
period of five years from the Closing Date, the Company agrees to deliver to the
Representative copies of each annual report of the Company and copies of all
reports it is required to file or make available pursuant to the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and will deliver to the
Representative: (i) within 90 days (plus any extensions of time that the
Commission grants to the Company to file its annual report on the appropriate
Form) after the close of each fiscal year of the Company, a financial report of
the Company and its subsidiaries, if any, on a consolidated basis, and a similar
financial report of all of the Company's material unconsolidated subsidiaries,
if any, all such reports to include a balance sheet as of the end of the
preceding fiscal year, a statement of operations, a statement of stockholders'
equity and statement of cash flows covering such fiscal year, and all to be in
reasonable detail and certified by independent public accountants for the
Company; (ii) within 45 days (plus any extensions of time that the Commission
grants to the Company to file its quarterly report on the appropriate Form)
after the end of each quarterly fiscal period of the Company other than the last
quarterly fiscal period in any fiscal year, copies of the consolidated
statements of operations, stockholders' equity and cash flows for the quarterly
fiscal period and the fiscal year to the end of such quarterly fiscal period,
and the balance sheet as of the end of that period of the Company and its
subsidiaries, if any, and the equivalent financial statements of all of the
Company's material unconsolidated subsidiaries, if any, for that period, all
subject to year end adjustment, certified by the principal financial or
accounting officer of the Company; (iii) copies of all other statements,
documents or other information which the Company mails or otherwise makes
available to any class of its security holders or files with the Commission;
(vi) copies of all news, press or public information releases when made; (v)
copies of all letters to the Company from its independent certified public
accountants concerning actual or potential deficiencies in the Company's
accounting procedures or internal control of funds; and (vi) upon request in
writing from the Representative, such other information as may reasonably be
requested and which may be properly disclosed to the Representative with
reference to the property, business and affairs of the Company and its sub
sidiaries, if any. If the Company fails to furnish the Representative with
financial statements as herein provided, within the times specified herein, upon
notice to the Company the Representa tive shall have the right to have such
financial statements prepared by independent public ac countants of such
Representative's own choosing and the Company agrees to furnish such independent
public accountants such data and assistance and access to such records as they
may reasonably require to enable them to prepare such statements and to pay
their reasonable fees and expenses in preparing the same; provided, however, the
Company shall have the right to furnish the financial statements to the
Representative at any time after the Representative retains independent public
accountants to prepare the financial statements in which event the amount of
- 19 -
fees that the Company shall be obligated to pay to the independent public
accountants selected by the Representative will be limited to those fees
(including any retainer paid) actually incurred to the point in time that the
Company furnishes the required financial statements.
5.07. EXPENSES PAID BY THE COMPANY. The Company agrees to pay, whether
or not the transactions contemplated hereunder are consummated or this Agreement
is prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement, including
all expenses incident to the authorization, issuance, and delivery of the
Securities, Representative's Warrants, and the Representative's Class A
Warrants, any original issue taxes in connection therewith, all transfer taxes,
if any, incident to the initial sale of the Securities to the public, the fees
and expenses of the Company's personnel in connection with the offering, the
costs, fees, and expenses incident to the preparation, printing and filing under
the Act and with the NASD of the Registration Statement, or supplements thereto,
the cost of printing, reproducing and filing all exhibits to the Registration
Statement, the Agreement Among Underwriters, this Agreement, the Selected Dealer
Agree ment and any other underwriting documents, the cost of printing and
delivering to the Representative, the members of the Underwriting Group, and
selected dealers copies of the Registration Statement and copies of the
Agreement Among Underwriters, this Agreement and the Selected Dealer Agreement,
and any other underwriting documents, the Preliminary Prospectus and the
Prospectus as herein provided, the costs and legal counsel fees of qualifying
the Securities and Warrant Shares under the state securities or blue sky laws as
provided in Section 5.04 herein, the cost of providing the Representative with
two bound volumes of the Registration Statement, as amended, all exhibits
thereto, all state filings and all correspondence relating to the Registration
Statement and all state filings and the expenses of Company representatives in
attending a reasonable number of "due diligence" meetings (which shall include
all presentations specified by the Representative) held by the Representative.
5.08. REPORTS TO SHAREHOLDERS. For so long as the Company's Common
Stock is registered under the Exchange Act, the Company agrees to hold an annual
meeting of shareholders for the election of directors within 180 days after the
end of each of the Company's fiscal years and, within 180 days after the end of
each of the Company's fiscal years to send to each of the Company's shareholders
the audited financial statements of the Company as of the end of the fiscal year
just completed prior thereto. Such financial statements shall be those required
by Rule 14a-3 under the Exchange Act and shall be included in an annual report
meeting the requirements of such Rule. Further, the Company agrees, so long as
such Common Stock is so registered:
(i) to send, within 30 days after the Closing Date, a letter to
shareholders of the Company which welcomes them as
shareholders and discusses the business conducted by the
Company since the effective date.
(ii) to send, at least every sixty days for a period of three years
after the effective date, a letter or report to shareholders
of the Company and to broker dealers
- 20 -
which are then market markers of Securities of the Company on
NASDAQ ("market makers"), which contains a narrative
discussion of the Company's financial status and results of
operations and a narrative discussion of the business
conducted by the Company since the last report or letter to
shareholders and market makers.
(iii) during the period after three years from the effective date,
to send to each of the Company's shareholders and market
makers in printed form within 60 days after the end of each
fiscal quarter, reasonably itemized financial statements of
the Company for the quarter just ended and a narrative
discussion of such financial statements and the business
conducted by the Company during such quarter.
If the Company materially breaches any of its agreements set forth in this
Section 5.08, the parties agree that any such breach will result in irreparable
harm to the Representative for which an adequate remedy for damages will not
exist and therefor the Representative shall be entitled to seek and obtain a
court injunction in equity which orders the Company to comply with its
agreements set forth in this Section 5.08 and which requires the Company to
reimburse the Representative for its costs, including reasonable attorney fees,
incurred in obtained such injunctive order.
5.09. SECTION 11(A) FINANCIALS. The Company agrees to send to each
holder of its securities and agrees to deliver to the Representative, as soon as
practicable, but in no event later than the first day of the sixteenth full
calendar month following the effective date, an earnings statement (as to which
no opinion need be rendered but which will satisfy the provisions of Section
11(a) of the Act) covering a period of at least 12 months beginning after the
effective date.
5.10. POSTEFFECTIVE AVAILABILITY OF PROSPECTUS. Within the time during
which the Prospectus is required to be delivered under the Act, the Company
agrees to 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 in force, and by any order of the Commission, so far as necessary
to permit the continuance of sales of the Securities.
5.11. APPLICATION OF PROCEEDS. The Company intends to apply the net
proceeds from the sale of the Securities substantially in the manner set forth
in the Registration Statement. Except for cumulative changes of less than
$100,000 in each specific item set forth in the "Use of Proceeds" section of the
definitive Prospectus, the Company will not deviate from such use without giving
written notice of such proposed deviation to the Representative at least 10
business days prior to any such deviation. Pending utilization of the net
proceeds by the Company for business purposes, all of the unused net proceeds
from the sale of the Securities will be invested in short term United States
government securities in a nondiscretionary account of the Company with the
Representative.
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5.12. DELIVERY OF DOCUMENTS. Prior to the Closing Date, the Company
agrees to 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 state of the state of incorporation of the
Company; true and correct copies of the bylaws of the Company and of the minutes
of all meetings of the directors and shareholders of the Company held prior to
the Closing Date; and true and correct copies of all material contracts to which
the Company or any of its subsidiaries, if any, is a party.
5.13. COOPERATION WITH REPRESENTATIVE'S DUE DILIGENCE. At all times
prior to the Closing Date, the Company agrees to cooperate with the
Representative, legal counsel to the Representative, and the Representative's
consultants in such investigation as the Representative may make or cause to be
made of the Company and its affiliates and the Company agrees to make available
to the Representative in connection therewith such information and documents
relating to the Company and its affiliates as the Representative may reasonably
request.
5.14. [INTENTIONALLY BLANK]
5.15. LIMITATIONS ON COMPANY. Except with the Representative's prior
written consent, the Company agrees that the Company will not do the following
until (a) the termination of this Agreement or (b) the number of days after the
effective date for which the Prospectus is required to be used pursuant to Rule
174 of the Rules and Regulations, whichever occurs later:
(i) Undertake or authorize any change in its capital
structure;
(ii) Borrow any funds other than in the ordinary course of
business or as otherwise contemplated by the Prospectus;
(iii) Consolidate or merge with or into any other corporation;
or
(iv) Create any mortgage or any lien upon any of its properties
or assets other than in the ordinary course of business or
as otherwise contemplated by the Prospectus.
5.16. APPOINTMENT OF TRANSFER AGENT AND WARRANT AGENT. Prior to the
effective date, the Company will have appointed American Securities Transfer &
Trust, Inc., Denver,
Colorado, as transfer agent for the Company's Units and Common Stock and as
warrant agent for the Company's Class A Warrants.
5.17. CERTIFICATES. The Company agrees to make arrangements to have
available at the office of the transfer agent sufficient quantities of the
Company's Units and Common Stock certificates as may be needed for the quick and
efficient transfer of such securities. The Company agrees to make arrangements
to have available at the office of the warrant agent
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sufficient quantities of the Company's Class A Warrant Certificates has may be
needed for quick and efficient transfer of Class A Warrants.
5.18. COMPLIANCE WITH CONDITIONS PRECEDENT. The Company agrees to use
all reasonable efforts to comply or cause to be complied with the conditions
precedent to the obligations of the members of the Underwriting Group in Section
8 hereof.
5.19. FILINGS OF FORMS. The Company agrees to file with the Commission
all required reports on Form SR in accordance with the provisions of Rule 463 of
the Rules and Regulations and will file with the appropriate state securities
authorities any sales and other reports required by the rules and regulations of
such agencies and will provide copies of such reports to the Representative and
to the legal counsel to the members of the Underwriting Group.
5.20. REGISTRATION UNDER THE EXCHANGE ACT. Prior to the effective date
of the Registration Statement, the Company will have made a filing under Section
12(g) of the Exchange Act with respect to the Company's Units, Common Stock and
Class A Warrants. The Company agrees to deliver a copy of such filing to the
Representative and to legal counsel for the Representative when filed. On the
effective date of the Registration Statement, the Company will cause the
Company's filing under Section 12(g) of the Exchange Act to become effective
with the Commission.
5.21. LISTING IN MANUALS. As soon as possible prior to the effective
date, the Company agrees to use its best efforts to have the Company listed in
Xxxxx'x Over-the-Counter Manual and Standard & Poor's Standard Corporation
Records and such other Manuals as are reasonably requested by the
Representative.
5.22. NASDAQ/NMS. The Company agrees to have the Units listed and
available for quotation on the NASDAQ Small Cap Market on the effective date of
the Registration Statement. Subject to the Company's ability to meet the
maintenance requirements of the NASDAQ Small Cap Market on the Detachment Date,
the Company agrees to have its Shares and the Class A Warrants listed and
available for quotation on the NASDAQ Small Cap Market
on the Detachment Date and to delist the Units from quotation on the NASDAQ
Small Cap Market at the same time as the Shares and Class A Warrants become
listed for quotation on the NASDAQ Small Cap Market. The trading symbols shall
be mutually agreeable to the Company and the Representative. As soon as the
Company meets the qualifications required with respect thereto, the Company will
designate its securities for inclusion on the NASDAQ/NMS or, in the alternative,
such national stock exchange as is agreed to between the Company and the
Representative.
5.23. SECONDARY TRADING QUALIFICATION. The Company agrees to qualify
its securities for secondary trading, as soon as legally possible, in California
and such other states as are reasonably requested by the Representative from
time to time.
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5.24. LEGENDS ON STOCK CERTIFICATES. The Company agrees to cause the
stock certificates of its current shareholders that represent "restricted
securities" who have not met the requirements of Rule 144(k), and the stock and
warrant certificates held by officers, directors, or controlling persons of the
Company to be clearly legended as being restricted against transfer without
compliance with the Act and to cause the Company's transfer agent and warrant
agent to put stop transfer instructions against such certificates.
5.25. UNITHOLDERS, STOCKHOLDERS, AND CLASS A WARRANTHOLDERS LISTS AND
TRANSFER SUMMARY. Within 10 business days after the Closing Date and within 10
business days after the Option Closing Date, the Company will deliver to the
Representative complete lists of all holders of the Units, Common Stock, and
Class A Warrants of the Company as of the Closing Date and as of the Option
Closing Date. Each such list shall include the name and address of each such
holder and the number of Units, Shares, or Class A Warrants owned by each such
person as of such date. Within 10 business days after the end of each of the
first 24 calendar months after the Closing Date, the Company will provide the
Representative with a new list containing the information described above as the
end of each such month and a list which shows each transaction involving a
transfer of Units, Shares, or Class A Warrant certificates during such month.
This transfer list shall include the name and address of the transferor and the
transferee and the number of Units, Shares, or Class A Warrants transferred.
5.26. DIRECTORS, OFFICERS AND COMMITTEES. The Company agrees that the
persons comprising the board of directors and officers of the Company on the
effective date must be acceptable to the Representative. Such acceptance will
only be withheld by the Representative if material adverse information is
discovered by the Representative. The Company agrees that for a period of three
years after the effective date, at the request of the Representative, the
Company will permit a representative of the Representative to be present at all
meetings of the board of directors of the Company. The Representative shall be
provided with the same notice of each meeting of the board of directors as is
provided to the board of directors. No compensation shall be paid to such
observer. However, the Company will reimburse out of pocket expenses incurred by
such observer to attend meetings. Such observer shall have no vote at such
meetings; such observer shall be required, prior to attending any such meeting,
to represent in writing to the Company that such observer is familiar with and
will comply with all requirements of the federal securities laws applicable to a
person who comes into possession of material nonpublic information concerning
the Company; and such observer may be excluded from attendance at any such
meeting during the discussion of information which is subject to the attorney
client or accountant client privilege. The board of directors of the Company
will establish an audit and a management compensation committee and will
maintain such committees so long as the Common Stock of the Company is
registered under the Exchange Act.
5.27. RIGHT OF INSPECTION. The Company agrees that for a period of five
years after the effective date, the Representative, at the Representative's
expense, will have the right to have a person or persons selected by the
Representative review the books and records of the
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Company if at any time the audited or unaudited financial statements of the
Company indicate that the Company has realized a net loss after taxes or if a
material adverse change occurs in the Company, provided that the Representative
may cause such review no more than once in any 12 month period.
5.28. PUBLIC RELATIONS FIRM. For a period of at least 24 months after
the effective date, the Company will use a public relations firm which is
mutually acceptable to the
Company and the Representative. The Company shall have sole authority to
determine the compensation and the utilization of such public relations firm.
5.29. MANAGEMENT REFERRALS. Persons whom management of the Company
believe may be interested in purchasing Securities in the public offering will
be referred only to Representative and management of the Company will purchase
Securities in the public offering only through the Representative. The
Representative will have complete control of the distribution of the Securities
in the public offering.
5.30. TAKEOVER PROVISIONS. During the period of three years after the
effective date of the Registration Statement, the Company will not, without the
unanimous consent of those members of the board of directors of the Company who
are not affiliated with either the Company or the Representative, or if there
are no such nonaffiliated directors, without the approval of a majority of a
three person panel, one of whom is to be chosen by directors who are affiliated
with the Company, one of whom is to be chosen by the Representative, and the
third of whom is to be chosen by the two so selected, amend its Articles of
Incorporation or bylaws or enter into any contract or agreement with its
officers, directors, or employees or any other person, for the purpose of
preventing a corporate takeover of the Company; provided, however, only the vote
of approval of a majority of the board of directors of the Company shall be
required for an amendment of the Company's Articles of Incorporation or bylaws
designed to prevent a "two step" takeover of the Company involving a second step
which includes unfair provisions for minority shareholders of the Company or in
similar exigent circumstances in which such action is necessary to carry out the
fiduciary duty of the Company's directors.
5.31. FUTURE SALES.
5.31.01. COMPANY SALES TO AFFILIATES. During the period of two
years after the effective date of the Registration Statement, the
Company will not issue any options, warrants, Common Stock, preferred
stock, or other securities to any officer, director, principal
shareholder of the Company, or affiliate of any such person, without
the prior written consent of the Representative. The term "principal
shareholder" shall mean a person who owns of record or beneficially
more than 5% of the outstanding Common Stock of the Company. Also
excepted from this provision shall be warrants and options, and Common
Stock issued thereunder, which are described in the Registration
Statement and are outstanding on the effective date of the Registration
Statement or which are issued pursuant to a plan which has been
approved in writing by the board of
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directors of the Company and the Representative. Such excluded
securities shall be referred to herein as the "Excluded Securities."
5.31.02. COMPANY SALES TO OTHERS. During the period of three
years after the effective date of the Registration Statement, the
Company will not sell any securities (other than debt securities issued
to financial institutions) not covered by the Registration Statement
without the Representative's prior written consent. Excepted from this
provision shall be sales of securities permitted under Section 5.31.01
and sales of Excluded Securities.
5.31.03. COVERED PERSONS. Prior to the effective date of the
Registration Statement, the Company will cause each of its officers,
directors, 5% or more shareholders, and their affiliates ("Covered
Persons) to agree in writing with the Representative that, without the
prior written consent of the Representative, each such Covered Person
who is an officer, director, or an affiliate of an officer or director,
will not sell for a period of one year after the effective date of the
Registration Statement any of the Company's shares of Common Stock
owned by him or it prior to such effective date. The Company and the
Representative agree that Xxxxxxx Xxxxxx shall be deemed not be a
Covered Person. Such agreement will also provide that if a Covered
Person who is an officer or director of the Company on the effective
date of the Registration Statement ceases to be an officer or director
of the Company during the period of one year after the effective date
of the Registration Statement, then such Covered Person and the
affiliates of such Covered Person will agree not to sell any of the
Company's shares of Common Stock owned by such Covered Person and such
Covered Person's affiliates prior to the effective date of such
Registration Statement until the expiration of one year after the
effective date of the Registration Statement. For purposes of this
Underwriting Agreement, the term "affiliate" shall have the meaning
ascribed to it in Rule 405 under the Act. Such agreements between the
Representative and the Covered Persons will also provide that any sales
of shares of Common Stock of the Company by such persons during the
three year period after the effective date of the Registration
Statement under Rule 144 promulgated by the SEC under the Act ("Rule
144 Sales"), will be executed only through the Representative acting as
a broker or dealer. In such agreement the Representative will agree to
execute such Rule 144 Sales on a competitive basis. If any person
required to execute an agreement under this subsection 5.31.03. has
pledged, or during the applicable period pledges, any of the Company's
shares of Common Stock which are covered by such agreement; such person
shall cause his pledgee to also agree in writing to comply with the
pledgor's agreement with the Representative. A copy of any such written
agreement from the pledgee shall be promptly delivered by the pledgor
to the Representative after execution thereof by the pledgee.
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SECTION 6
INDEMNIFICATION
6.01. INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and
hold harmless the members of the Underwriting Group and each person who controls
any member of the Underwriting Group within the meaning of Section 15 of the Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act or any other statute
or at common law and to reimburse the persons indemnified for any legal or other
expenses (including the cost of any investigation and preparation) incurred by
them in connection with any litigation, whether or not resulting in any
liability, but only insofar as such losses, claims, damages, liabilities and
litigation arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereto or any application or other document filed in order to qualify
the Securities under the blue sky or securities laws of the states where filings
were made, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, all as of the date when the Registration Statement or such
amendment, as the case may be, becomes effective, or any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus (as
amended or supplemented if the Company shall have filed with the Commission any
amendments thereof or supplements thereto), or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that the indemnity agreement contained in this
subsection 6.01 shall not apply to the members of the Underwriting Group or any
person controlling a member of the Underwriting Group in respect of any such
losses, claims, damages, liabilities or actions arising out of or based upon any
such untrue statement or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information peculiarly within the knowledge of a member of the Underwriting
Group and furnished in writing to the Company by a member of the Underwriting
Group specifically for use in connection with the preparation of the
Registration Statement and Prospectus or any such amendment or supplement
thereto. This indemnity agreement is in addition to any other liability which
the Company may otherwise have to the members of the Underwriting Group or to
any person controlling a member of the Underwriting Group. Each member of the
Underwriting Group agrees within 10 days after the receipt by it of written
notice of the commencement of any action against it or against any per son
controlling it as aforesaid, in respect of which indemnity may be sought from
the Company on account of the indemnity agreement contained in this subsection
6.01 to notify the Company in writing of the commencement thereof. The failure
of such a member of the Underwriting Group so to notify the Company of any such
action shall relieve the person to whom such notice was not given from any
liability which it may have to that member of the Underwriting Group or any
person controlling it as aforesaid on account of the indemnity agreement
contained in this subsection 6.01, but shall not relieve the Company from any
other liability
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which it may have to that member of the Underwriting Group or such controlling
person. In case any such action shall be brought against a member of the
Underwriting Group or any such controlling person and the member of the
Underwriting Group shall notify the Company of the commencement thereof, the
Company shall be entitled to participate in (and, to the extent that it shall
wish, to direct) the defense thereof at its own expense, but such defense shall
be conducted by legal counsel of recognized standing and reasonably satisfactory
to such member of the Underwriting Group or such controlling person or persons,
which is a defendant or which are defendants in such litigation. The Company
shall not be liable for amounts paid in settlement of any such litigation if
such settlement was effected without the written consent of the Company. If the
Company elects to direct such defense, the Company agrees to furnish to the
involved member of the Underwriting Group at its request, copies of all
pleadings therein and to apprise the involved member of the Underwriting Group
of all developments therein, all at the Company's expense, and to permit the
member of the Underwriting Group to be an observer therein.
6.02. INDEMNIFICATION BY THE MEMBERS OF THE UNDERWRITING GROUP. The
members of the Underwriting Group agree, in the same manner as set forth in
subsection 6.01. above, to indemnify and hold harmless the Company, the
directors and officers of the Company and each person, if any, who controls the
Company within the meaning of Section 15 of the Act, with respect to any
statement in or omission from the Registration Statement or any amendment
thereto, or the Prospectus (as amended or as supplemented, if amended or
supplemented as aforesaid) or any application or other document filed in any
state or jurisdiction in order to qualify the Securities under the blue sky or
securities laws thereof, or any information furnished pursuant to subsection
3.06 hereof, if such statement or omission was made in reliance upon information
peculiarly within the knowledge of a member of the Underwriting Group and
furnished in writing to the Company by a member of the Underwriting Group or on
its behalf specifically for use in connection with the preparation thereof or
supplement thereto. No member of the Underwriting Group shall be liable for
amounts paid in settlement of any such litigation if such settlement was
effected without the written consent of the member of the Underwriting Group. In
case of commencement of any action in respect of which indemnity may be sought
from a member of the Underwriting Group on account of the indemnity agreement
contained in this subsection 6.02., each person to be indemnified by the member
of the Underwriting Group shall have the same obligation to notify the member of
the Under writing Group as the members of the Underwriting Group have toward the
Company in subsection 6.01. above, subject to the same loss of indemnity in the
event such notice is not given, and the member of the Underwriting Group shall
have the same right to participate in (and, to the extent that the member of the
Underwriting Group shall wish, to direct) the defense of such action at the
expense of the member of the Underwriting Group, but such defense shall be
conducted by legal counsel of recognized standing and reasonably satisfactory to
the Company. If the member of the Underwriting Group elects to direct such
defense, the member of the Underwriting Group agrees to furnish to the Company
at its request copies of all pleadings therein and apprise it of all the
developments therein, all at the expense of the member of the Underwriting
Group, and permit the Company to be an observer therein.
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6.03. CONTRIBUTION. If the indemnification provided for in this Section
6 is unavailable to or insufficient to hold harmless an indemnified party under
subsections 6.01. and 6.02. above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect not only (i) the relative
benefits received by the Company on the one hand and the member of the
Underwriting Group on the other from the offering of the Securities, but also
(ii) the relative fault of the Company and the member of the Underwriting Group
in connection with the statements or omissions which resulted in such losses,
claims, damages, or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the member of the Under writing Group on the other
shall be deemed to be in the same proportion as the total net proceeds from the
public offering of the Securities (before deducting expenses) received by the
Company bears to the total underwriting discount received by the members of the
Underwriting Group, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the member of the Underwriting Group and
the person's relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the members of
the Underwriting Group agree that it would not be just and equitable if
contribution pursuant to this subsection 6.03. were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection 6.03. shall be deemed to include any legal or other expenses to which
such indemnified party would be entitled if subsections 6.01. and 6.02. hereof
were applied. Notwithstanding the provisions of this subsection 6.03., no member
of the Underwriting Group shall be required to contribute any amount in excess
of the amount equal to the total price of the Securities underwritten and
distributed by it to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
6.04. THREAT OF REGULATORY ACTION. The Company and the Representative
agree to advise each other immediately and confirm in writing the receipt of any
threat of or the initiation of any steps or procedures which would impair or
prevent the right to offer the Securities or the issuance of any "suspension
orders" or other prohibitions preventing or impairing the proposed offering of
the Securities. In the case of the happening of any such event, neither the
Company nor the members of the Underwriting Group will acquiesce in such steps,
procedures or suspension orders and each party agrees to actively defend any
such actions or orders unless all parties agree in writing to acquiesce in such
actions or orders.
- 29 -
SECTION 7
EFFECTIVENESS OF AGREEMENT
After this Agreement has been executed by the Company, the Selling
Shareholders, and the Representative, this Agreement shall become effective (i)
at 10:00 A.M., Denver, Colorado Time, on the first full business day after the
effective date of the Registration Statement or (ii) upon release by the
Representative of the Securities for offering after the effective date,
whichever shall first occur. The time of the release by the Representative of
the Securities for offering, for the purposes of this Section 7, shall mean the
time of release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Securities or the
time of the first mailing of copies of the Prospectus relating to the Securities
in connection with a confirmation of a sale of Securities by an Underwriter or
Dealer whichever shall first occur.
SECTION 8
CONDITIONS OF THE OBLIGATIONS OF THE
MEMBERS OF THE UNDERWRITING GROUP
After execution of this Agreement by the Company, the Selling
Shareholders, and the Representative, the obligations of the members of the
Underwriting Group to purchase the Securities and to make payment therefor on
the Closing Date and on the Option Closing Date shall be subject to the
accuracy, as of the Closing Date and as of the Option Closing Date, of the
representations and warranties on the part of the Company and the Selling
Shareholders herein contained, to the performance by the Company and the Selling
Shareholders of all of their agreements and obligations herein contained, to the
fulfillment of or compliance by the Company and the Selling Shareholders with
all covenants and conditions hereof, and to the following additional conditions,
any of which may be waived or modified by the Representative:
8.01. EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have become effective and no order suspending the effectiveness
of the Registration Statement shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission or be pending;
any request for additional information on the part of the Commission (to be
included in the Registration Statement or Prospectus or otherwise) shall have
been complied with to the satisfaction of the Commission; and neither the
Registration Statement nor the Prospectus nor any amendment thereto shall have
been filed to which legal counsel to the members of the Underwriting Group shall
have reasonably objected in writing or have not given its consent.
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8.02. ACCURACY OF REGISTRATION STATEMENT. The Representative shall not
have disclosed in writing to the Company that the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto contains an untrue
statement of a fact which, in the opinion of legal counsel to the members of the
Underwriting Group is material, or omits to state a fact which, in the opinion
of such legal counsel, is material and is required to be stated therein, or is
necessary to make the statements therein not misleading.
8.03. NO MATERIAL ADVERSE CHANGES. No material adverse changes shall
have occurred in or with respect to the officers or directors of the Company. No
material adverse changes shall have occurred in or with respect to the business,
properties, financial condition or credit of the Company or in or with respect
to any conditions affecting the prospects of its business.
8.04. CASUALTY AND OTHER CALAMITY. The Company shall not have sustained
any loss on account of fire, explosion, flood, accident, calamity or any other
cause, of such character as materially adversely affects its business or
property considered as an entire entity, whether or not such loss is covered by
insurance, and no officer or director of the Company shall have suffered any
injury, sickness or disability of a nature which would materially adversely
affect his or her ability to properly function as an officer or director of the
Company.
8.05. LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the
Prospectus or except as disclosed in writing by the Company to the
Representative prior to the effective date of the Registration Statement, there
shall be no litigation instituted or threatened against the Company and there
shall be no proceeding instituted or threatened against the Company before or by
any federal or state commission, regulatory body or administrative agency or
other governmental body, domestic or foreign.
8.06. LACK OF MATERIAL CHANGE. Except as contemplated herein or as set
forth in the Registration Statement and Prospectus, during the period subsequent
to the date of the last audited balance sheet included in the Registration
Statement, the Company (i) shall have conducted its business in the usual and
ordinary manner as the same was being conducted on the date of the last audited
balance sheet included in the Registration Statement, and (ii) except in the
ordinary course of its business, the Company shall not have incurred any
liabilities or obligations (direct or contingent) or disposed of any of its
assets, or entered into any material transaction or suffered or experienced any
materially adverse change in its condition, financial or otherwise. The capital
stock and surplus accounts of the Company shall be substantially the same as at
the date of the last balance sheet included in the Registration Statement,
without considering the proceeds from the sale of the Securities, other than as
may be set forth in the Prospectus.
8.07. REVIEW BY LEGAL COUNSEL TO THE MEMBERS OF THE UNDERWRITING GROUP.
The authorization of the Securities, Representative's Warrants, Representative's
Class A Warrants, Warrant Shares, Registration Statement, Prospectus and all
corporate proceedings and other
- 31 -
legal matters incident thereto and to this Agreement shall be reasonably
satisfactory in all respects to legal counsel to the members of the Underwriting
Group.
8.08. OPINIONS OF LEGAL COUNSEL.
8.08.01. XXXXXXX & ASSOCIATES, P.A., LEGAL OPINION. The
Company shall have furnished to the members of the Underwriting Group
an opinion, dated the Closing Date, addressed to the members of the
Underwriting Group, from Xxxxxxx & Associates, P.A., legal counsel to
the Company, to the effect that based upon a review by them of the
Registration Statement, Prospectus, the Company's articles of
incorporation, bylaws and relevant corporate proceedings and contracts,
an examination of such statutes they deem necessary and based upon such
other investigation by such legal counsel as they deem necessary to
express such opinion:
(i) The Company and each of its subsidiaries, if any,
have been duly incorporated and are validly existing
corporations in good corporate standing under the laws of the
state in which it was incorporated, with full corporate power
and authority to own and operate its properties and to carry
on its business as set forth in the Registration Statement and
Prospectus.
(ii) The Company has authorized and outstanding
securities as set forth in the Registration Statement and
Prospectus; the outstanding securities of the Company and each
of its subsidiaries, if any, and the Securities conform to the
statements concerning them in the Registration Statement and
Prospectus; the outstanding securities of the Company and each
of its subsidiaries, if any, have been duly and validly issued
and are fully paid and nonassessable and contain no preemptive
rights; the Securities being sold by the Company to the
Underwriting Group, the Representative's Warrants and the
Representative's Class A Warrants have been duly and validly
authorized and, upon issuance thereof and payment therefor in
accordance with this Agreement and the Representative's
Warrants and Representative's Class A Warrants will be duly
and validly issued, fully paid and nonassessable and will not
be subject to the preemptive rights of any shareholder of the
Company.
(iii) To legal counsel's knowledge, no consents,
approvals, authorizations or orders of agencies, officers or
other regulatory authorities are known to such legal counsel
which are necessary for the valid authorization, issue or sale
of the Securities being sold by the Company to the
Underwriting Group hereunder, except as required under the Act
or the securities laws of the states in which the Securities
are qualified or except as required by the NASD.
(iv) To legal counsel's knowledge, the issuance and sale
of the Securities being sold by the Company to the
Underwriting Group and the consummation of
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the transactions herein contemplated and compliance with the
terms of this Agreement will not conflict with or result in a
breach of any of the terms, conditions, or provisions of or
constitute a default under the articles of incorporation or
bylaws of the Company, or any note, indenture, mortgage, deed
of trust, or other material agreement or material instrument
known to such counsel to which the Company is a party or by
which the Company or any of its property is bound or any
existing law (provided this Section 8.08 (iv) shall not relate
to federal or state securities laws), order, rule, regulation,
writ, injunction, or decree of any government, governmental
instrumentality, agency, body, arbitration tribunal, or court,
domestic or foreign, having jurisdiction over the Company or
its property and which is known to such counsel.
(v) No preemptive rights exist with respect to the
Company's securities.
(vi) The Company has authorized capitalization as
described in the Registration Statement.
(vii) Based upon written or oral communications from the
Commission, the Registration Statement has become effective
under the Act and, to the knowledge of such legal counsel, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose
has been instituted or is pending or contemplated; legal
counsel has participated in the preparation of the
Registration Statement and Prospectus and each amend ment and
supplement thereto, and no facts have come to the attention of
legal counsel to lead counsel 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 in light of the circumstances under which made
(except for the financial statements and other financial data
included therein, as to which legal counsel expresses no
opinion); and such counsel is familiar with all contracts
referred to in the Registration Statement or Prospectus and
such contracts are sufficiently summarized or disclosed
therein or filed as exhibits thereto as required, and such
legal counsel does not know of any other contracts that are
required to be summarized or disclosed or filed, and such
legal counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company is
subject of such a character required to be disclosed in the
Registration Statement or the Prospectus which are not
disclosed and properly described therein.
(viii) This Agreement has been duly authorized by the
Company and is a valid and binding agreement of the Company
enforceable according to its terms subject to equitable
principles and to applicable bankruptcy, insolvency and other
laws concerning the enforceability of creditors' rights
generally; provided
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that such counsel need express no opinion as to the
enforceability of any indemnification or contribution
provisions contained in this Agreement. A sufficient number of
shares of the Company's Common Stock have been duly reserved
for issuance upon exercise of the Class A Warrants, the
Representative's Warrants, and the Representatives Class A
Warrants.
(ix) Except as disclosed in the Registration Statement
and Prospectus, to the knowledge of legal counsel, the Company
is not in default under any of the contracts, licenses, leases
or agreements to which it is a party and which are described
in the Registration Statement or attached thereto as exhibits
and the offering of the Securities being sold by the Company
to the Underwriting Group will not cause the Company to become
in default of any of such contracts, licenses, leases or
agreements.
(x) Except as disclosed in the Registration Statement and
Prospectus and subject to equitable principles, to the
knowledge of legal counsel, the properties owned by the
Company and its subsidiaries, if any, described in the
Registration Statement are free and clear of all liens,
charges, encumbrances or restrictions; all of the leases,
subleases and other agreements known to such counsel under
which the Company and each of its subsidiaries, if any, holds
its properties and conducts its business are in full force and
effect; neither the Company nor any of its subsidiaries, if
any, is in default under any of the material terms or
provisions of any of such leases, subleases or other
agreements known to such counsel; and there are no claims
against the Company or any of its subsidiaries, if any,
concerning its rights under such leases, subleases and other
agreements and concerning its right to continued possession of
its properties.
(xi) Legal counsel is unaware of any affiliate, parent,
or subsidiaries of the Company except as are described in the
Registration Statement and Prospectus.
(xii) To such counsel's knowledge, except as set forth in
the Registration Statement and Prospectus, no holders of
Common Stock or other securities of the Company have
registration rights with respect to securities of the Company
and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having
rights to registration of such Common Stock, or other
securities, because of the filing of the Registration
Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights or such rights have
expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement, or
have included securities in the Registration Statement
pursuant to the exercise of such rights.
- 34 -
In rendering such opinions, such legal counsel shall be
entitled to rely upon Public Authority Documents and upon information
provided by client officials in written Certificates provided that
copies of such Public Authority Documents and Certificates are attached
as exhibits to the written opinion of legal counsel. The term "Public
Authority Documents" shall have the meaning ascribed to it in the Legal
Opinion Accord of the ABA Section of Business Law (1991). Such opinions
may be subject to such qualifications, exceptions, definitions,
limitations as are normally included in similar opinions.
8.08.02. The Company shall furnish to the members of the
Underwriting Group an opinion, dated the Closing Date, addressed to the
members of the Underwriting Group, from ________________________ to the
effect that:
(i) To the knowledge of such counsel, the eye drop
products described in the Prospectus as being marketed by the
Company are in compliance with all laws applicable to the FDA,
all applicable rules and regulations of the FDA and all laws
and regulations of any states in which such products are
marketed.
(ii) Such counsel has not received and is not aware of
the Company having received any notice of any claim by the FDA
or any other governmental agency that the eye drop products
being marketed by the Company are not in compliance with all
applicable rules and regulations of the FDA and any laws and
regulations of any states in which such products are marketed.
In rendering such opinion, such legal counsel shall be
entitled to rely upon Public Authority Documents and upon information
provided by client officials in written Certificates provided that
copies of such Public Authority Documents and Certificates are attached
as exhibits to the written opinion of legal counsel. The term "Public
Authority Documents" shall have the meaning ascribed to it in the Legal
Opinion Accord of the ABA Section of Business Law (1991). Such opinions
may be subject to such qualifications, exceptions, definitions,
limitations as are normally included in similar opinions.
8.08.03. The Company shall furnish to the members of the
Underwriting Group an opinion, dated the Closing Date, addressed to the
members of the Underwriting Group, from Xxxxx, Xxxxx & Xxxxxx, P.C., to
the effect that:
(i) To the knowledge of such counsel, the Company is
the owner of the exclusive worldwide license to make use, and
sell eye drop solutions contained in the Ocurest Delivery
System claimed in United States Patent Nos. 4,909,801 issued
March 20, 1990, and D320,083 issued September 17, 1991 ("U.S.
Patents") held by Acorn Laboratories, Inc. ("Acorn").
- 35 -
(ii) To the knowledge of such counsel, the Company is
the owner of all rights to United States Trademark
Registration Nos. 1,903,891 and is the owner of the exclusive
worldwide license from Acorn to use United States Trademark
Registration 1,492,900 ("U.S. Trademarks") protecting the
shape of the Ocurest Delivery System and the name "Ocurest,"
respectively.
(iii) Such counsel has not received and is not aware of
the Company having received any notice of any claim from any
third party which notice would cause such counsel to conclude
that the Company does not own or possess adequate rights with
respect to the U.S. Patents, the U.S. Trademarks, or other
material patents, patent rights, trademarks, service marks,
trade names, copyrights described or referred to in the
Prospectus as owned or used by the Company or which are
necessary for the conduct of the Company's business or
proposed business as described in the Prospectus.
In rendering such opinion, such legal counsel shall be
entitled to rely upon Public Authority Documents and upon information
provided by client officials in written Certificates provided that
copies of such Public Authority Documents and Certificates are attached
as exhibits to the written opinion of legal counsel. The term "Public
Authority Documents" shall have the meaning ascribed to it in the Legal
Opinion Accord of the ABA Section of Business Law (1991). Such opinions
may be subject to such qualifications, exceptions, definitions,
limitations as are normally included in similar opinions.
8.09. ACCOUNTANT'S LETTER. The Representative shall have received a
letter addressed to the Representative and dated the Closing Date from Xxxxx
Xxxxxxxx, independent public accountants for the Company, stating that with
respect to the Company they are independent public accountants within the
meaning of the Act and the applicable published Rules and Regulations
thereunder; in their opinion, the financial statements audited by them of the
Company at all dates and for all periods referred to in their opinion and
included in the Registration Statement and Prospectus, comply in all material
respects with the applicable accounting requirements of the Act and the
published Rules and Regulations thereunder with respect to registration
statements on Form SB-2; on the basis of certain indicated procedures (but not
an audit in accordance with generally accepted accounting principles), including
reading of the instruments of the Company set forth in the Prospectus, a reading
of the latest available interim unaudited financial statements of the Company,
whether or not appearing in the Prospectus, inquiries of the officers of the
Company or other persons responsible for its financial and accounting matters
regarding the specific items for which representations are requested below and a
reading of the minute book of the Company, nothing has come to their attention,
except as disclosed in their letter, which would cause them to believe that
during the period from the last audited balance sheet included in the
Registration Statement to a specified date not more than two days prior to the
date of such letter:
- 36 -
(i) there has been any material change in the
financial position of the Company other than as contemplated
by disclosures contained in the Prospectus;
(ii) there has been any material change in the capital
stock or surplus accounts of the Company or any payment or
declaration of any dividend or other distribution in respect
thereof or exchange therefor or in the debt of the Company
from that shown in the Company's last audited balance sheet
included in the Prospectus, other than as contemplated by
disclosures contained in the Prospectus;
(iii) there have been any material decreases in working
capital or net worth as compared with amounts shown in the
Company's last audited balance sheet included in the
Prospectus other than as contemplated by disclosures contained
in the Prospectus; and
(iv) the dollar amounts, percentages and other financial
information set forth in the Registration Statement and
Prospectus under the captions "Prospectus Summary," "Risk
Factors," "Capitalization," "Dilution," "Use of Proceeds,"
"Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
"Business," and "Certain Relationships and Transactions" are
not in agreement with the Company's general ledger, financial
records or computations made by the Company therefrom.
Such letter shall also cover such other matters incident to
the transactions contemplated by this Agreement in form satisfactory to the
Representative as the Representative reasonably requests.
8.10. CONFORMED COPIES OF ACCOUNTANT'S LETTER. The Representative shall
be furnished without charge, in addition to the original signed copies, such
number of signed or photostatic or conformed copies of such letters as the
Representative shall reasonably request.
8.11. OFFICER'S CERTIFICATES. The Company shall have furnished to the
Representative two certificates each signed by the president and by the chief
financial officer of the Company, one dated the date of this Agreement and one
dated as of the Closing Date, to the effect that:
(i) The representations and warranties of the Company in
this Agreement are true and correct at and as of the date of
the certificate and the Company has complied with all the
agreements and has satisfied all the conditions on its part to
be performed or satisfied at or prior to the date of the
certificate.
(ii) The Registration Statement has become effective
and no order suspending the effectiveness of the Registration
Statement has been issued and to
- 37 -
the best of the knowledge of the respective signers, after
such respective signers have made inquiry, no proceeding for
that purpose has been initiated or is threatened by the
Commission.
(iii) The respective signers have each carefully examined
the Registration Statement and Prospectus and any amendments
and supplements thereto, and the Registration Statement and
the Prospectus and any amendments and supplements thereto
contain all statements required to be stated therein, and all
statements contained therein are true and correct, and neither
the Registration Statement nor Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading and, since the effective date of the Registration
Statement, there has occurred no event required to be set
forth in an amended or a supplemented Prospectus which has not
been so set forth.
(iv) This Agreement has been, and, as of the Closing
Date, the Representatives Warrants and the Representative's
Class A Warrants will have been, duly authorized and executed
by the Company.
(v) The respective signers have each reviewed the
questionnaires provided to the Representative by each officer,
director, and 5% shareholder of the Company and, to the best
of their knowledge, the statements made in such questionnaires
are true and correct.
(vi) Except as set forth in the Registration Statement
and Prospectus, since the respective dates as of which
information is given in the Registration Statement and
Prospectus and prior to the date of such certificate, (i)
there has not been any material adverse change in the officers
or directors of the Company or any substantially adverse
change, financial or otherwise, in the affairs or condition of
the Company, and (ii) the Company has not incurred any
liabilities, direct or contingent, or entered into any
transactions, otherwise than in the ordinary course of
business.
(vii) Subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus, no dividends or distributions whatever have been
declared and/or paid on or with respect to the securities of
the Company.
8.12. TENDER FOR DELIVERY. All of the Securities being offered by the
Company which are sold in the offering shall be tendered for delivery in
accordance with the terms and provi sions of this Agreement.
- 38 -
8.13. BLUE SKY QUALIFICATION. The Securities shall be qualified in such
states as are reasonably designated by the Representative as set forth in
Section 5.04 hereof and each such qualification shall be in effect and not
subject to any stop order or other proceeding on the Closing Date or Option
Closing Date. On both the effective date of the Registration Statement and on
the Closing Date, the Company and the Representative shall receive from Xxxxx,
XxXxxxxxxx & Xxxxxxxx, P.C., written information which contains the following:
(i) The names of the states in which applications
to register or qualify the Securities have been filed;
(ii) The status of such registrations or
qualifications in such states as of the date thereof;
(iii) A list containing the name of each such state in
which the Securities may be legally offered and sold by a
dealer licensed in such state and the number of each which may
be legally offered and sold in each such state as of the date
thereof;
(iv) With respect to the written information dated on the
effective date, a representation that such legal counsel will
continuously update such written information if any changes
occur in the information provided therein between the
effective date and the Closing Date and Option Closing Date;
and
(v) A statement that the Company, the members of the
Underwriting Group and selected dealers in the offering may
rely upon the information contained therein.
8.14. APPROVAL OF LEGAL COUNSEL TO THE REPRESENTATIVE. All opinions,
letters, certificates and evidence mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if
they are in form and substance satisfactory to legal counsel to the
Representative. The suggested form of such documents shall be provided to the
legal counsel to the Representative at least three business days before the
Closing Date.
8.15. OFFICER'S CERTIFICATE AS A COMPANY REPRESENTATIVE. Any
certificate signed by an officer of the Company and delivered to the
Representative or to legal counsel to the members of the Underwriting Group will
be deemed a representation and warranty by the Company to the members of the
Underwriting Group as to the statements made therein.
- 39 -
SECTION 9
TERMINATION
9.01. TERMINATION BECAUSE OF NONCOMPLIANCE. This Agreement may be
terminated by the members of the Underwriting Group by notice to the Company in
the event that the Company shall have failed or been unable to comply with any
of the terms, conditions or provisions of this Agreement on the part of the
Company to be performed, complied with or fulfilled within the respective times
herein provided for, unless compliance therewith or performance or satisfaction
thereof shall have been expressly waived by the Representative in writing. This
Agreement may be terminated by the Company by notice to the Representative in
the event the members of the Underwriting Group shall have failed or been unable
to comply with any of the terms, conditions or provisions of this Agreement on
the part of the members of the Underwriting Group to be performed, complied with
or fulfilled within the respective times herein provided for, unless compliance
therewith or performance or satisfaction thereof shall have been expressly
waived by the Company in writing.
9.02. TERMINATION BECAUSE OF CHANGES. This Agreement may be terminated
by the members of the Underwriting Group by notice to the Company if the
Representative believes in its sole judgment that any changes have occurred in
or with respect to the management of the Company, that material adverse changes
have occurred in or with respect to the condition or obligations of the Company,
or if the Company shall have sustained a loss or anticipated loss as a result of
a strike, governmental action, fire, flood, accident, contract termination, or
other calamity of such a character as, in the sole judgment of the
Representative, may interfere materially with the conduct of the Company's
business and operations regardless of whether or not such loss or anticipated
loss shall have been insured.
9.03. MARKET OUT TERMINATION. This Agreement may be terminated by the
members of the Underwriting Group by notice to the Company at any time if, in
the judgment of the Representative, payment for and delivery of the Securities
is rendered impracticable or inadvisable because (i) additional material
governmental restrictions not in force and effect on the date hereof shall have
been imposed upon the trading in securities generally, or minimum or maximum
prices shall have been generally established on the New York or American Stock
Exchange, or trading in securities generally on either such Exchange shall have
been suspended, or a general moratorium shall have been established by federal
or state authorities, or (ii) a war or other national calamity or emergency
shall have occurred, or (iii) of any suspension of trading of the Common Stock
of the Company in the over the counter market, or (iv) the occurrence of a
material adverse event affecting the Company which materially impairs the
investment quality of the Securities, or (v) substantial and material adverse
changes in the condition of the securities markets beyond normal fluctuations
have occurred.
9.04. EFFECT OF TERMINATION HEREUNDER. If the members of the
Underwriting Group decide to terminate this Agreement pursuant to this Section 9
or the Company decides to
- 40 -
terminate this Agreement pursuant to Section 10 hereof, such party shall provide
notice of such determination to the other party. In such event, the
Representative shall provide the Company with a statement of the Underwriting
Group's actual accountable out of pocket expenses, which shall include but are
not limited to, fees of legal counsel to the members of the Underwriting Group
and the fees of independent consultants who are not directly or indirectly
affiliated or associated with a member of the NASD and who are retained by the
Underwriting Group to provide a service in connection with the due diligence
investigation of the proposed offering, entertainment expenses, travel expenses,
postage expenses, advertising costs, duplication expenses, long distance
telephone expenses, and any other actual out of pocket accountable expense
incurred by the Underwriting Group in connection with the proposed offering. The
Representative shall not be required to include in such accountable expenses any
of the expenses to be paid by the Company under Section 5.07 hereof, and, if the
Underwriting Group has paid any of such expenses on behalf of the Company, the
Company shall separately reimburse the Underwriting Group for such advances
immediately upon receipt of a statement therefor from the Representative. If
such actual accountable out of pocket expenses are more than the amount of the
nonaccountable expense payments the Company has made to the Underwriting Group,
the Underwriting Group will be entitled to keep the amount of the nonaccountable
expense payments the Company has made to the Underwriting Group and, within 10
days after receipt by the Company of such statement, the Company will pay to the
Representative the excess expenses the Underwriting Group has incurred, but if
the actual accountable out of pocket expenses are less than the amount of
nonaccountable expense payments the Underwriting Group has received from the
Company, the Underwriting Group will return the difference to the Company. The
Company, the members of the Underwriting Group, and the Selling Shareholders
shall not have any liabilities to each other if the Company or the members of
the Underwriting Group decide not to proceed with the proposed offering for any
reason set forth in this Section 9 or in Section 10 hereof, except that the
Company shall remain obligated to pay the costs and expenses provided to be paid
by it as specified in Sections 5.07 and 9.04 hereof; and the Company, and the
members of the Underwriting Group shall be obligated to pay, respectively, all
losses, claims, damages or liabilities, joint or several, under Section 6
hereof.
SECTION 10
REPRESENTATIONS AND WARRANTIES OF
THE MEMBERS OF THE UNDERWRITING GROUP
The members of the Underwriting Group represent and warrant to and
agree with the Company that:
10.01. REGISTRATION AS BROKER DEALER AND MEMBER OF NASD. The members of
the Underwriting Group are registered as broker dealers with the Commission and
are members in good standing of the NASD and are licensed as a dealer in all
states in which they will offer or sell the Securities.
- 41 -
10.02. NO PENDING PROCEEDINGS. There is not now pending against the
Representative any action or proceeding of which it has been advised, either in
any court of competent jurisdiction, before the Commission or any state
securities commission, concerning its activities as a broker or dealer that, in
the opinion of the Representative, would prevent it from acting as such under
federal securities laws or under the laws of the states in which it intends to
offer the Securities.
10.03. COMPANY'S RIGHT TO TERMINATE. In the event any action or
proceeding of the type referred to in Section 10.02 above shall be instituted
against the Representative at any time prior to the Closing Date hereunder, or
in the event there shall be filed by or against the Representative in any court
pursuant to any federal, state, local or municipal statute, a petition in
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee of assets of the Representative or if the Representative
makes an assignment for the benefit of creditors, the Company shall have the
right on written notice to the Representative to terminate this Agreement
without any liability to the members of the Underwriting Group of any kind
except for the payment of expenses as provided in Section 5.07 hereof.
10.4. FINDER. The members of the Underwriting Group know of no
outstanding claims against them for compensation for services in the nature of a
finder's fee, origination fee or financial consulting fee with respect to the
offer and sale of the Securities hereunder.
10.5 COMPLIANCE. The members of the Underwriting Group, severally and
not jointly, agree to offer and sell the Securities being purchased hereunder in
accordance with the requirements of federal and state securities laws and the
rules of the NASD.
SECTION 11
RIGHT OF FIRST REFUSAL
For a period of three years after the effective date of the
Registration Statement, the Representative shall have a preferential right to
purchase for its account or to sell for any account of the Company, its parent
company, if any, or the Company's subsidiaries, if any, any securities with
respect to which the Company, its parent company, or its subsidiaries may seek a
public or private offering within the United States for cash. The Company will
consult the Representative with regard to any such covered offering for cash and
will offer the Representative the opportunity to purchase or sell any such
securities on terms not less favorable to the Company, its parent company, or
its subsidiaries than it or they can secure elsewhere. The Representative will
have 30 days in which to accept such offer. If the Representative rejects such
offer, the Company, its parent company, or its subsidiaries may sell such
securities on terms not less favorable than those offered to the Representative.
If such securities are not sold within a period of 180 days, the Representative
will once again have the rights specified herein with respect to the sale or
purchase of such securities. The Company has
- 42 -
informed the Representative that it has not previously granted a similar right
of first refusal to any other person.
SECTION 12
FEE PAYABLE ON OCCURRENCE OF CERTAIN EVENTS
12.01 MERGERS AND ACQUISITIONS. Subject to the purchase of the Firm
Units by the members of the Underwriting Group, for a period of five years after
the effective date, the Representative will provide consulting services which
are customary in the industry in con nection with, and the Representative will
be paid a consulting fee in connection with any transaction initiated by the
Representative involving, a merger, consolidation, stock exchange, or the
acquisition or sale of all or a material part of the assets or business of any
entity, if such transaction involves the Company, its parent company, or its
subsidiaries. A transaction will be deemed initiated by the Representative if it
is suggested by the Representative to either party to the transaction. The
consulting fee will be computed as follows:
AMOUNT OF THE TRANSACTION FEE
--------------------------------------- -------
$1.00 - $1,000,000 5% plus
$1,000,001 - $2,000,000 4% plus
$2,000,001 - $3,000,000 3% plus
$3,000,001 - $4,000,000 2% plus
$4,000,001 and over 1%
Amount of the transaction includes:
(i) the total proceeds and other consideration being
received by the Company, its parent company, or its
subsidiaries and/or any of their stockholders upon the
consummation of the transaction (including payments made in
installments) inclusive of cash, securities, notes,
liabilities assumed, consulting agreements and agreements not
to compete;
(ii) if a portion of such consideration includes
contingent payments (whether or not related to future earnings
or operations), 50% of the maximum amount of such payments;
and
(iii) in the event that the aggregate consideration for a
transaction consists in whole or in part of securities, for
the purposes of calculating the amount of the consideration,
the value of such securities will be, in the case of the
existence of a public trading market thereof, the average of
the closing sale prices for the five days preceding the
consummation of the transaction or, in the absence of a public
trading market thereof, the fair market value thereof as
- 43 -
agreed to by the parties on the day preceding the
consummation of the transaction.
If the Company, its parent company, or any of its subsidiaries proposes
to engage in any such type of transaction which was not initiated by the
Representative, but in connection with which the Company, its parent company, or
any of its subsidiaries proposes to obtain services from an investment banker,
the Company, its parent company, or such Subsidiary shall provide the
Representative with the first opportunity to provide consulting services which
are customary in the industry in connection therewith. If the Representative
accepts such offer, the fee for such services shall be determined by using 50%
of the full 5% to 1% scale set forth above.
12.02 WARRANT EXERCISE FEE. If the Representative provides written
notice to the Company, at any time after 12 months from the effective date of
the Registration Statement, that the Representative is electing to solicit the
exercise of the Class A Warrants by the holders thereof, the Company will pay to
the Representative a fee of 10% of the aggregate exercise price received by the
Company as a result of the Representatives's solicitation of such holders, if
(i) the market price of the Company's Common Stock on the date a Class A Warrant
is exercised is greater than the exercise price under the Class A Warrants, (ii)
the Class A Warrant is not held in a discretionary account, and (iii) the
solicitation of the exercise of the Class A Warrant is not in violation of Rule
10b-6 promulgated under the Exchange Act.
SECTION 13
NOTICE
Except as otherwise expressly provided in this Agreement:
13.01. NOTICE TO THE COMPANY. Whenever notice is required by the
provisions of this Agreement to be given to the Company or the Selling
Shareholders, such notice shall be in writing addressed as follows:
Ocurest Laboratories, Inc.
0000 XXX Xxxxxxxxx, Xxxxx 000
Xxxx Xxxxx Xxxxxxx, Xxxxxxx 00000
13.02. NOTICES. Whenever notice is required by the provisions of this
Agreement to be given to the members of the Underwriting Group, such notice
shall be given in writing addressed to the Representative at the address set out
at the beginning of this Agreement.
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SECTION 14
MISCELLANEOUS
14.01. BENEFIT. This Agreement is made solely for the benefit of the
members of the Underwriting Group, the Company, their respective officers and
directors and any controlling person referred to in Section 15 of the Act, and
their respective successors and assigns and the Selling Shareholders, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successor" or the term "successors and assigns" as used in
this Agreement shall not include any purchasers, as such, of any of the
Securities. In addition, the indemnity, defense and contribution obligations of
the Company included in Section 6 of this Agreement also inure to the benefit of
the selected dealers and any person who controls the selected dealers within the
meaning of Section 15 of the Act.
14.02. SURVIVAL. The respective indemnities, agreements,
representations, warranties, covenants and other statements as set forth in or
made pursuant to this Agreement and the indemnity and contribution agreements
contained in Section 6 hereof shall survive and remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company, or the
members of the Underwriting Group or any such officer or director thereof or any
controlling person of the Company or of any member of the Underwriting Group,
(ii) delivery of or payment for the Securities, and (iii) the occurrence of
Closing Date and the Option Closing Date; and any successor of the Company, any
member of the Underwriting Group or any controlling person, officer or director
thereof, and any Selling Shareholder, as the case may be, shall be entitled to
the benefits hereof.
14.03. GOVERNING LAW. The validity, interpretation and construction of
this Agreement and of each part hereof will be governed by the laws of the state
of Colorado.
14.04. THE INFORMATION OF THE MEMBERS OF THE UNDERWRITING GROUP.
Notwithstand ing any participation by the legal counsel of the members of the
Underwriting Group in the reorganization and/or revision of the Prospectus, the
statements with respect to the public offering of the Securities on the cover
page of the Prospectus and the Notes thereto and under the caption
"Underwriting" in the Prospectus constitute the only written information
furnished by or on behalf of the members of the Underwriting Group referred to
in Sections 2.02, 6.01 and 6.02 hereof.
14.05. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which together
will constitute one and the same instrument.
- 45 -
Please confirm that the foregoing correctly sets forth the Agreement
between the members of the Underwriting Group and the Company.
Very truly yours,
OCUREST LABORATORIES, INC.
By:_________________________________________________
XXXXXX X. XXXXXX, XX., PRESIDENT AND CHIEF EXECUTIVE
OFFICER
____________________________________________________
XXXXX X. XXXX, SECRETARY
THE SELLING SHAREHOLDERS NAMED ON
SCHEDULE II
By:_________________________________________________
_________________________________, Attorney-in-Fact
THE REPRESENTATIVE, ON BEHALF OF THE UNDERWRITING GROUP, HEREBY CONFIRMS AS
OF THE DATE HEREOF THAT THE ABOVE LETTER SETS FORTH THE AGREEMENT BETWEEN THE
COMPANY AND THE UNDERWRITING GROUP.
RAF FINANCIAL CORPORATION
By:_______________________________________
Xxxxxx X. Xxxx, Senior Vice President
of RAF Financial Corporation, as
Attorney in Fact for the several
Underwriters named in Schedule I to the
Underwriting Agreement
- 46 -
SCHEDULE I
UNDERWRITERS
NUMBER OF
UNDERWRITER UNITS PURCHASED
-------------------------------------------------------------------------------
RAF Financial Corporation
Total _____________
- 47 -
SCHEDULE II
SELLING SHAREHOLDERS
NAME NUMBER OF SHARES
---- ----------------
- 48 -
