1,200,000 SHARES
TRAINING DEVICES INTERNATIONAL, INC.
(a Colorado corporation)
(No Par Value)
UNDERWRITING AGREEMENT
_______________ - , 2000
XXXXXXX XXXXXXXX SECURITIES CORPORATION
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
Ladies/Gentlemen:
Training Devices International, Inc., a Colorado corporation (the
"Company"), hereby confirms its agreement withKashner Davidson Securities
Corporation ("Xxxxxxx") as representative of the several underwriters named in
Schedule A hereto (collectively, the "Underwriters") as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
approximately 1,200,000 shares (the "Firm Shares") of its authorized and
unissued common stock, no par value (the "Common Stock"), to the Underwriters
upon the terms and subject to the conditions set forth herein. The Company also
proposes to grant to the Underwriters an option to purchase, for the sole
purpose of covering over-allotments in connection with the sale of Firm Shares,
an aggregate of up to 180,000 additional shares ("Option Shares") of Common
Stock upon the terms and subject to the conditions set forth herein and as
provided in Section 7 hereof. As used in this Agreement, the term "Shares" shall
include the Firm Shares and the Option Shares. All shares of Common Stock of the
Company, including the Shares, are hereinafter referred to as "Common Stock."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company
represents and warrants to and agrees with the Underwriters, as follows:
(a) A registration statement on Form SB-2 (File No. 333-85479) (the
"Registration Statement") with respect to the Shares, including a prospectus
subject to completion, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the applicable rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act,
and has been filed with the Commission. Any amendments to such registration
statement and any amended prospectuses subject to completion, as may have been
required prior to the date hereof, have been similarly prepared and filed with
the Commission. The Company will file any additional amendments to the
Registration Statement and any amended prospectuses subject to completion, as
may hereafter be required. The Company meets the requirements for use of a
registration statement on Form SB-2. Copies of the Registration Statement and
any amendments and copies of each related prospectus subject to completion have
been delivered to you.
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If the Registration Statement has been declared effective under the
Securities Act by the Commission, the Company will prepare and promptly file
with the Commission the information omitted from the Registration Statement
pursuant to Rule 430A(a) of the Rules and Regulations or as part of a
post-effective amendment to the Registration Statement (including a final form
of prospectus). If the Registration Statement has not been declared effective
under the Securities Act by the Commission, the Company will prepare and
promptly file a further amendment to the Registration Statement, including a
final form of prospectus. The term "Registration Statement" as used in this
Agreement shall mean such Registration Statement, including financial
statements, schedules and exhibits, in the form in which it became or becomes,
as the case may be, effective (including, if the Company omitted information
from the Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations, the information deemed to be a part of the Registration Statement
at the time it became effective pursuant to Rule 430A(b) of the Rules and
Regulations) and, in the event of any amendment thereto after the effective date
of such Registration Statement, shall also mean (from and after the
effectiveness of such amendment) such Registration Statement as so amended. The
term "Prospectus" as used in this Agreement shall mean the prospectus relating
to the Shares as included in the Registration Statement at the time it becomes
effective (including, if the Company omitted information from the Registration
Statement pursuant to Rule 430A(a) of the Rules and Regulations, the information
deemed to be a part of the Registration Statement at the time it became
effective pursuant to Rule 430A(b) of the Rules and Regulations), except that if
any revised prospectus shall be provided to the Underwriters by the Company for
use in connection with the offering of the Shares that differs from the
Prospectus on file with the Commission at the time the Registration Statement
became or becomes, as the case may be, effective (whether or not such revised
prospectus is required to be filed with the Commission pursuant to Rule
424(b)(3) of the Rules and Regulations), the term "Prospectus" shall refer to
such revised prospectus from and after the time it is first provided to the
Underwriters for such use.
(b) The Commission has not issued any order preventing or suspending the
use of any preliminary prospectus or instituted proceedings for that purpose,
and each such preliminary prospectus has conformed in all material respects to
the requirements of the Securities Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and at the time the
Registration Statement became or becomes, as the case may be, effective and at
all times subsequent thereto up to and on the Closing Date (hereinafter defined)
and on any later date on which Option Shares are to be purchased, (i) the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Securities Act and the Rules and Regulations, and will
in all material respects conform to the requirements of the Securities Act and
the Rules and Regulations, and (ii) neither the Registration Statement nor the
Prospectus, nor any amendments or supplements thereto, 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, in light of the
circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties contained in this subparagraph
shall apply to information contained in or omitted from the Registration
Statement or the Prospectus or any such amendment or supplement in reliance
upon, and in conformity with, written information furnished to the Company by
any Underwriter specifically for inclusion or exclusion therein or therefrom.
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(c) Each contract, agreement, instrument, lease, license or other item
required to be described in the Registration Statement or the Prospectuses or
filed as an exhibit to the Registration Statement has been so described or
filed, as the case may be.
(d) The Company and each of its Subsidiaries (as such term is defined in
Rule 405 under the Securities Act) has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its organization, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement; each of the Company and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the ownership or leasing of its properties or the
conduct of its business requires such qualification except where the failure to
be so qualified or to be in good standing would not have a material adverse
effect on the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its Subsidiaries considered as a whole;
each of the Company and its Subsidiaries is in possession of and operating in
compliance with all authorizations, licenses, certificates, consents, orders and
permits from state, Federal and other regulatory authorities which are material
to the conduct of its business, all of which are valid and in full force and
effect; neither the Company nor its Subsidiaries is in violation of its charter
or bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, or any material lease, contract,
joint venture, or other agreement or instrument to which it is a party or by
which its property is bound or in violation of any law, order, rule, regulation,
writ, injunction, judgment or decree of any government, governmental agency or
body or court, domestic or foreign, of which it has knowledge except such
failures to comply as would not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries considered as a
whole.
(e) The Company has full legal right, power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This Agreement
and the Warrant Agreement (the "Warrant Agreement") by and between the Company
and the Managing Underwriter have been duly authorized, executed and delivered
by the Company and are valid and binding agreements on the part of the Company,
enforceable in accordance with their respective terms, except as rights to
indemnification and contribution hereunder may be limited by applicable law and
except as the enforcement hereof may be limited by applicable bankruptcy,
insolvency, reorganization moratorium or other similar laws relating to or
affecting creditors' rights generally, or by general equitable principles; the
performance of this Agreement and the Warrant Agreement and the consummation of
the transactions herein and therein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any material indenture, mortgage, deed of trust, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, or any material
lease, contract, joint venture or other agreement or instrument to which the
Company is a party or by which the property of the Company is bound including
any licenses from third parties, or (ii) the Articles of Incorporation and
Bylaws of the Company, or (iii) any law, order, rule, regulation, writ,
injunction, judgment or decree of any government or governmental agency or body
or court, domestic or foreign, having jurisdiction over the Company or over the
properties of the Company, except for breaches, violations or defaults that
individually or in the aggregate, would not have a material adverse effect on
the Company; and no consent, approval, authorization or order of any court or
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governmental agency or body is required for the consummation of the transactions
herein contemplated, except such as may be required under the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or under
state or other securities or Blue Sky laws, all of which requirements have been
satisfied in all material respects.
(f) Except as disclosed in the Registration Statement or the Prospectus,
there is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or its Subsidiaries which
(i) is required to be disclosed in the Registration Statement or the Prospectus
or which might result in any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise, or which might
materially and adversely affect the properties or assets thereof; or (ii) which
might be expected to materially and adversely affect the consummation of the
transactions contemplated by this Agreement; all pending legal or governmental
proceedings to which the Company or its Subsidiaries is a party or of which any
of their respective properties or assets is the subject which are not described
in the Registration Statement, including ordinary routine litigation incidental
to the Company's business, could not reasonably be expected to result in a
material adverse change in the condition, financial or otherwise, or the
earnings, business affairs or business properties of the Company and its
Subsidiaries considered as one enterprise; and there are no contracts or
documents of the Company or its Subsidiaries which are required to be described
in the Registration Statement or the Prospectus, or to be filed as exhibits
thereto, by the Securities Act or by the Rules and Regulations which have not
been accurately described in all material respects and filed as exhibits to the
Registration Statement. To the best of the Company's knowledge, the contracts so
described in the Prospectus are in full force and effect on the date hereof, and
neither the Company nor its Subsidiaries is in breach of or default under, and
to the Company's knowledge, no other party is in material breach of or material
default under, any of such contracts, except for any liabilities specifically
described in the Registration Statement.
(g) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, have been
issued in compliance with all Federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities (other than such preemptive rights or other rights to
subscribe for or purchase securities as were fully complied with or expressly
waived or with respect to the violation of which the right to make claim is
barred by the applicable statute of limitations), and the authorized and
outstanding capital stock of the Company conforms in all material respects to
the statements relating thereto contained in the Registration Statement and the
Prospectus (and such statements correctly state the substance of the instruments
defining the capitalization of the Company); the Firm Shares and the Option
Shares to be purchased from the Company hereunder have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in accordance with
the terms of this Agreement, will be duly and validly issued and fully paid and
nonassessable; the 120,000 shares of Common Stock issuable under the warrant
(the "Managing Underwriter's Warrants") to be granted to the Managing
Underwriter under the Warrant Agreement have been duly authorized for issuance
and sale to the Managing Underwriter pursuant to this Agreement and, when issued
and delivered by the Company against payment therefor in accordance with the
terms of the Warrant Agreement, will be duly and validly issued and fully paid
and nonassessable; and no preemptive right,
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co-sale right, registration right, right of first refusal or other similar right
of stockholders exists with respect to any of the Firm Shares, Option Shares or
shares of Common Stock issuable under the Managing Underwriter's Warrant or the
issuance and sale thereof other than those that have been expressly waived prior
to the date hereof and those that will automatically expire upon the
consummation of the transactions contemplated on the Closing Date. No further
approval or authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale or transfer of the Shares except as may be
required under the Securities Act, the Exchange Act or under state or other
securities or Blue Sky laws. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company (including the notes
thereto) included in the Prospectus, the Company has no outstanding options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the Company's
stock option, stock bonus and other stock plans or arrangements, and the options
or other rights granted and exercised thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights. The shares of Common Stock
reserved for issuance upon exercise of the Company's outstanding options and
warrants have been duly and validly authorized and are sufficient in number to
meet the exercise requirements of such options.
(h) Xxxxxx Xxxxxxxx LLP, which has examined the financial statements
(together with related schedules and notes) of the Company filed with the
Commission as a part of the Registration Statement and which are included in the
Prospectus, are independent accountants within the meaning of the Securities Act
and the Rules and Regulations; the audited and pro forma financial statements of
the Company, together with the related schedules and notes, and the unaudited
financial information, forming part of the Registration Statement and
Prospectus, fairly present the financial position and the results of operations
of the Company at the respective dates and for the respective periods to which
they apply; and all audited and pro forma financial statements, together with
the related schedules and notes, and the unaudited and pro forma financial
information, filed with the Commission as part of the Registration Statement,
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except as may be otherwise
stated therein. The selected and summary financial and statistical data included
in the Registration Statement present fairly the information shown therein and
have been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to be
included in the Registration Statement.
(i) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated therein,
(i) there has been no material adverse change in the business, properties,
operations, condition (financial or otherwise) or in the earnings, business
affairs or business prospects of the Company and its Subsidiaries, whether or
not arising in the ordinary course of business, (ii) there have been no
transactions entered into by the Company other than those in the ordinary course
of business, which are material with respect to the Company, (iii) there has
been no obligation that is material to the Company, direct or contingent,
incurred by the Company or any Subsidiary, except obligations incurred in the
ordinary course of business, (iv) there has been no change in the capital stock
of the Company, (v) there has been no change in the outstanding indebtedness of
the Company which is material to the Company, (vi) there has been no dividend or
distribution of any kind declared, paid or
5
made by the Company on behalf of any class of its respective capital stock,
(vii) there has been no redemption, purchase or acquisition or agreement to
redeem, purchase or acquire shares of Common Stock of the Company, (viii) to the
knowledge of the Company, there has been no change in any Federal, state, or
other laws, rules, or regulations (or interpretations thereof) applicable to the
business of the Company that would have a material adverse effect on the
Company, and, to the knowledge of the Company, no such change is proposed other
than as described in the Prospectus.
(j) Except as described in the Prospectus, (i) the Company and its
Subsidiaries have good and marketable title to all properties and assets
described in the Prospectus as owned by them, free and clear of all liens,
charges, encumbrances or restrictions of any kind, except those described in the
Prospectus, or those not material, singly or in the aggregate, to the business
of the Company and its Subsidiaries considered as a whole, (ii) the agreements
to which the Company is a party described in the Prospectus are valid
agreements, enforceable by the Company, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally or by general equitable
principles, and (iii) the Company has valid and enforceable leases for the
properties described in the Prospectus as leased by it except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
(k) All Federal, state, local and foreign tax returns required to be filed
by the Company or its Subsidiaries in any jurisdiction have been filed, and all
material taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from such entities
have been paid other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without penalty
or interest; and adequate charges, accruals and reserves have been provided for
in the financial statements referred to in Section 2(g) above in respect of all
Federal, state, local and foreign taxes for all periods as to which the tax
liability of the Company or its Subsidiaries has not been finally determined or
remains open to examination by applicable taxing authorities.
(l) No labor dispute with the employees of the Company or its Subsidiaries
exists or, to the knowledge of the Company, is imminent; and the Company is not
aware of any existing or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers, contractors or customers which might be
expected to result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise. No collective
bargaining agreement exists with any of the Company's employees and, to the
Company's knowledge, no such agreement is imminent.
(m) The Company and its Subsidiaries own or possess, or can acquire on
reasonable terms, the patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names presently employed by them in connection with the
business now operated by them and neither the Company nor its Subsidiaries has
received any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any patent or proprietary rights
or of any facts or circumstances which would render
6
any patent and proprietary rights invalid or inadequate to protect the interest
of the Company or its Subsidiaries therein, and which infringement or conflict
(if the subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy singly or in the aggregate, would result in any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its Subsidiaries considered as
one enterprise.
(n) Except as set forth in the Prospectus, the Company and its Subsidiaries
are in compliance in all material respects with all applicable laws, statutes,
ordinances, rules or regulations, the enforcement of which, individually or in
the aggregate, would be reasonably expected to have a material adverse effect on
the condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise.
(o) The Common Stock has been approved for quotation on the Nasdaq SmallCap
Market and the Boston Stock Exchange, subject to official notice of issuance.
(p) The Company has been advised concerning the Investment Company Act of
1940, as amended (the "1940 Act"), and the rules and regulations thereunder, and
has in the past conducted, and intends in the future to conduct, its affairs in
such a manner as to ensure that it will not become an "investment company"
within the meaning of the 1940 Act and such rules and regulations.
(q) The Company has not distributed and will not distribute prior to the
Closing Date or on any date on which Option Shares are to be purchased, as the
case may be, any offering material in connection with the offering and sale of
the Shares other than the Prospectus, the Registration Statement and other
materials permitted by the Securities Act.
(r) The Company has not at any time during the last five years (i) made any
unlawful contribution to any candidate for foreign office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
Federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
(s) 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 stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Shares. The Company has not effected any sales of
securities required to be disclosed in Item 26 of Form SB-2 under the Securities
Act, other than as disclosed in the Registration Statement.
(t) Except as may be waived by Xxxxxxx, each officer and director of the
Company and each beneficial owner of at least 5% of the outstanding shares of
Common Stock and options and warrants to purchase Common Stock outstanding prior
to the effective date of the Registration Statement have agreed in writing that
such persons will not offer to sell, contract to sell, sell short, or otherwise
sell or dispose of any shares of Common Stock of the Company, any options or
warrants to purchase any shares of Common Stock of the Company, or any
securities convertible into or exchangeable for shares of the Common Stock owned
directly by such person or with respect to which such person has the power of
disposition otherwise than (i) as a gift or gifts, provided the donee or donees
thereof agree to be bound by this restriction or (ii) with the prior written
consent of Xxxxxxx, for a period expiring two years after the effective date of
the Registration Statement.
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(u) Except as described in the Registration Statement, (i) neither the
Company nor its Subsidiaries is in violation of any Federal, state, local or
foreign laws or regulations relating to pollution or protection of human health,
the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened release
of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Environmental
Materials") or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Environmental Materials
(collectively, the "Environmental Laws"), except such violations as would not,
singly or in the aggregate, have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its Subsidiaries considered as one enterprise, and (ii) to
the Company's knowledge, there are no events or circumstances that could form
the basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or
affecting the Company or its Subsidiaries relating to any Environmental
Materials or the violation of any Environmental Laws, which, singly or in the
aggregate, could reasonably be expected to have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its Subsidiaries considered as one enterprise.
(v) The Company and its Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles as in effect in the United States and to maintain asset
accountability; (iii) access to bank accounts is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(w) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus. Neither
the Company nor any employee or agent of the Company has made any payment or
transfer of any funds or assets of the Company or conferred any personal benefit
by use of the Company's assets, or received any funds, assets or personal
benefit in violation of any law, rule or regulation.
(x) On the Closing Date and upon delivery of the Option Shares, as
applicable, all transfer and other taxes (other than income taxes) that are
required to be paid in connection with the sale and transfer of the Shares to
the Underwriters will have been paid.
(y) The Company does not currently have and has never had any pension plan
subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability, the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended,
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including the regulations and published interpretations thereunder (the "Code");
and each "pension plan" for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification.
(z) The Company confirms as of the date hereof that it is in compliance
with all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws
of Florida) AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA (the "Cuba
Act"), and the Company further agrees that if it commences engaging in business
with the government of Cuba or with any person or affiliate located in Cuba
after the date the Registration Statement becomes or has become effective with
the Commission or the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's
business in Cuba or with any person or affiliate located in Cuba changes in any
material way, the Company will provide the Department notice of such business or
change, as appropriate, in a form acceptable to the Department.
(aa) Any certificate signed by any officer of the Company and delivered to
the Underwriters or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby.
(bb) Except as may be set forth in the Prospectus, the Company has not
incurred any liability for a fee, commission, or other compensation on account
of the employment of a broker or finder in connection with the transactions
contemplated by the Underwriting Agreement.
(cc) The Company and each subsidiary is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company and the
subsidiaries are engaged.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter,
severally and not jointly, and each Underwriter, severally and not jointly,
agrees to purchase from the Company, respectively, at a purchase price of
[$7.00] per Share less an underwriting discount of 10.0%, the number of Shares
set forth in SCHEDULE A hereto (subject to adjustment as provided in Section
10).
Delivery of definitive certificates for the Firm Shares to be purchased by
the Underwriters pursuant to this Section 3 shall be made against payment of the
purchase price therefor by the Underwriters by certified or official bank check
in next day funds, payable to the order of the Company at the offices of
[Xxxxxxx Xxxxxxxx Securities Corporation, 00 Xxxxx Xxxx Xxxxxx, Xxxxxxxx,
Xxxxxxx 00000], or at such other place as shall be agreed upon by the
Underwriters and the Company, at 9:30 a.m. on the fourth business day following
the first day that Shares are traded (or at such time and date to which payments
and delivery shall have been postponed pursuant to Section 10 hereof), such time
and date of payment and delivery being herein called the "Closing Date." The
certificates for the Firm Shares to be so delivered will be made available to
you at such office or at such other location as you may reasonably request for
checking at least one business day prior to the Closing Date and will be in such
names and denominations as you may request, such request to be made at least two
business days prior to the Closing Date. If the Underwriters so elect, delivery
of
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the Shares may be made by credit through full fast transfer to the accounts at
Depository Trust Company designated by the Underwriters.
It is understood that Xxxxxxx, individually and not as representative of
the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by Kashner prior to the Closing Date for the
Firm Shares to be purchased by such Underwriter or Underwriters. Any such
payment by Xxxxxxx shall not relieve any such Underwriter or Underwriters of any
of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to offer the Firm Shares to the public as set forth in the
Prospectus.
The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters) and under
"Underwriting" in any Preliminary Prospectus and in the final form of Prospectus
filed pursuant to Rule 424(b) constitutes the only information furnished by the
Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement, and you, on behalf of the
Underwriters, represent and warrant to the Company that the statements made
therein do not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make such
statements, in the light of the circumstances in which they were made, not
misleading.
4. FURTHER COVENANTS OF THE COMPANY. The Company covenants with the several
Underwriters as follows:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; it will notify Xxxxxxx, promptly after it
shall receive notice thereof, of the time when the Registration Statement or any
subsequent amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed; if the Company omitted information
from the Registration Statement at the time it was originally declared effective
in reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to Xxxxxxx that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to Xxxxxxx that the Prospectus contains such information
and has been filed with the Commission within the time period prescribed; it
will notify Xxxxxxx promptly of any request by the Commission for the amending
or supplementing of the Registration Statement or Prospectus or for additional
information; promptly upon request of Xxxxxxx, it will prepare and file with the
Commission any amendments or supplements to the Registration Statement or
Prospectus which, in the opinion of counsel for the several Underwriters, may be
necessary or advisable in connection with the distribution of the Shares by the
Underwriters; it will promptly prepare and file with the Commission, and
promptly notify Xxxxxxx of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or
10
omissions, if, at any time when a prospectus relating to the Shares is required
to be delivered under the Securities Act, any event shall have occurred as a
result of which the Prospectus or any other prospectus relating to the Shares as
then in effect would include any untrue statement of a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, it will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Securities Act; and it will file no amendment or supplement to the
Registration Statement or Prospectus which shall not previously have been
submitted to Xxxxxxx a reasonable time prior to the proposed filing thereof or
to which Xxxxxxx shall reasonably object in writing, subject, however, to
compliance with the Securities Act, the Rules and Regulations thereunder and the
provisions of this Agreement.
(b) The Company will advise Xxxxxxx, promptly after it shall receive notice
or obtain knowledge thereof of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will cooperate with the Underwriters and Underwriters'
counsel in connection with their efforts to qualify the Shares for offering and
sale under the securities laws of such jurisdictions as Xxxxxxx may designate as
to continue such qualifications in effect for so long as may be required for
purposes of the distribution of the Shares, except that the Company shall not be
required in connection therewith or as a condition thereof to qualify as a
foreign corporation or to execute a general consent to service of process in any
jurisdiction or to make any undertaking with respect to the conduct of its
business. In each jurisdiction in which the Shares shall have been qualified as
above provided, the Company will make and file such statements and reports in
each year as are or may be reasonably required by the laws of such jurisdiction.
(d) The Company will furnish Xxxxxxx, as soon as available, copies of the
Registration Statement (two of which will be signed and include all exhibits),
each Preliminary Prospectus, the Prospectus and any amendments or supplements to
such documents, including any prospectus prepared to permit compliance with
Section 10(a)(3) of the Securities Act, all in such quantities as you may from
time to time reasonably request.
(e) The Company will make generally available to its stockholders as soon
as practicable, but in any event not later than the 45th day following the end
of the fiscal quarter first occurring after the first anniversary of the
effective date of the Registration Statement, an earnings statement (which will
be in reasonable detail but need not be audited) complying with the provisions
of Section 11(a) of the Securities Act and covering a twelve-month period
beginning after the effective date of the Registration Statement.
(f) As long as the Company is a reporting company under the Exchange Act,
the Company will furnish to its stockholders, as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of operations for each of the first three (3) quarters
11
of the fiscal year, and for a period of five (5) years after the effective date
of the Registration Statement, the Company will furnish to the several
Underwriters hereunder, upon request (i) concurrently with furnishing such
reports to its stockholders, statements of operations of the Company for each of
the first three (3) quarters in the form furnished to the Company's
stockholders; (ii) concurrently with furnishing to its stockholders, a balance
sheet of the Company as of the end of such fiscal year, together with statements
of operations, of stockholders' equity, and of cash flows of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon of
independent accountants; (iii) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, any
securities exchange or the National Association of Securities Dealers, Inc.
("NASD"); (v) every material press release and every material news item or
article in respect of the Company or its affairs which was released or prepared
by the Company (excluding, in each case customary product-related press releases
and articles); and (vi) any additional information of a public nature concerning
the Company, or its business which you may reasonably request. During such
five-year period, if the Company shall have active subsidiaries, the foregoing
financial statements shall be on a consolidated basis to the extent that the
accounts of the Company and its Subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary which
is not so consolidated. For a period of five (5) years from the date of the
Registration Statement, the Company will furnish to Xxxxxxx and, upon request,
to each of the other Underwriters, as soon as available, a copy of each report
of the Company mailed to holders of the Common Stock or publicly filed with the
Commission or any automated quotation system or national securities exchange on
which any class of securities of the Company is listed.
(g) The Company will apply the net proceeds from the sale of the Shares
being sold by it in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
(h) The Company shall comply with all provisions of all undertakings
contained in the Registration Statement.
(i) If the transactions contemplated hereby are not consummated by reason
of any failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed hereunder or to fulfill any condition of
the Underwriters' obligations hereunder, or if the Company shall terminate this
Agreement under Section 11(a), the Company will, in order to reimburse the
several Underwriters for all expenses (including fees and disbursements of
counsel for the several Underwriters) incurred by the Underwriters in
investigating, preparing to market or marketing the Shares, pay to Managing
Underwriter the sum of $25,000, which amount has already been paid.
(j) If at any time during the 90-day period after the Registration
Statement becomes effective, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price of the Common Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from Xxxxxxx advising the Company to the effect set forth above,
forthwith prepare, consult with Xxxxxxx concerning the substance of, and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
Further, pending the offering and for a period of twenty-five (25) days
thereafter (i) the Company
12
agrees and undertakes to consult with the Managing Underwriter prior to
distribution to third parties by the Company of any financial information, news
releases, and/or other publicity regarding the Company, its business, or any
terms of the proposed offering; and (ii) the Underwriter will consult with the
Company prior to the issuance of any research report or recommendation
concerning the Company's securities, and (iii) copies of all documents which
Company or its public relations advisors intend to distribute will be provided
to the Managing Underwriter for review prior to such distribution.
(k) On the Closing Date the Company will sell to Xxxxxxx, for a total price
of $10.00, the Managing Underwriter's Warrants to purchase one share of Common
Stock of the Company for each ten (10) shares of the Company's Common Stock
which have been sold (or purchased by the Underwriters), as set forth in the
Prospectus. The Managing Underwriter's Warrants shall have the terms and be in
the form filed as an exhibit to the Registration Statement. At any time during
the period commencing twelve (12) months and ending five (5) years after the
effective date of the Offering, the Warrants shall be exercisable at an exercise
price per share equal to 120% of the initial public offering price.
(l) As long as the Company is a reporting company under the Exchange Act,
the Company will comply with the Securities Act, the Exchange Act, the rules and
regulations of the NASD and applicable state securities or Blue Sky laws so as
to permit the continuance of sales and dealings in the Common Stock under the
Securities Act, the Exchange Act, the rules and regulations of the NASD, and
applicable state securities or Blue Sky laws, including the filing with the NASD
and the Commission of all reports required to be filed pursuant to the
applicable provisions of the rules and regulations of the NASD, the Securities
Act, and the Exchange Act, and will deliver to the holders of the Common Stock
all reports required to be provided to such holders pursuant to the applicable
provisions of the rules and regulations of the NASD, the Securities Act, the
Exchange Act, and applicable state securities or Blue Sky.
(m) For a period of two (2) years from the Effective Date of the
Registration Statement the Managing Underwriter shall have a right of first
refusal for any public or private offerings of securities to raise capital by
the Company, or any of its affiliates or any of its present or future
subsidiaries. In the event the Company desires to raise additional capital
through the issuance of any securities using the services of an Underwriter,
investment banker or finder the Company shall first submit the proposed terms of
the offering to Xxxxxxx in writing. Xxxxxxx shall have ten (10) business days to
accept or reject such offer. The Company shall not enter into an arrangement
with any other party on terms more favorable than those offered to Xxxxxxx
without first re-offering them to Xxxxxxx.
(n) The Company agrees that it will immediately after the Closing and for a
period of not less than two (2) years thereafter, invite a designee of the
Managing Underwriter (the "Advisor") to attend all meetings at the board of
directors and such Advisor shall receive all notices and other correspondence
and communications sent by the Company to members of its board of directors. The
Company further agrees that, during such two (2) year period, it shall schedule
no less than four (4) formal and "in person" meetings (which may include
telephonic meetings), of its board of directors in each such year which meetings
such Advisor shall be permitted to attend as set forth herein; said meeting
shall be held quarterly each year and advance notice of such meetings shall be
given to the Advisor. The Advisor shall not be entitled to a vote at any such
meetings and shall
13
receive no compensation for his services, except reimbursement of travel
expenses. Further, during such two (2) year period, the Company shall give
notice to the Managing Underwriter with respect to any proposed acquisitions,
mergers, reorganizations or other similar transactions. The Company agrees to
indemnify and hold the Underwriters and such Advisor or Director harmless
against any and all claims, actions, damages, costs and expenses, and judgments
arising solely out of the attendance and participation of your designee at any
such meeting described herein. In the event the Company maintains a liability
insurance policy affording coverage for the acts of its officers and directors,
it agrees, if possible, to include the Advisor as an insured under such policy.
(o) The Company agrees that for a period of three (3) years from the
Effective Date of the Registration Statement, the Company will 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 150 days after the end of
the Company's fiscal years provide the Company's shareholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such financial statements will be those required by
Rule 14a-3 or 14c under the 1934 Act and shall be included in an annual report
pursuant to the requirement of such Rule.
(p) In the event any officer, director, employee or 5% shareholder of the
Company sells any restricted securities of the Company pursuant to Rule 144 or
after such restricted securities have been registered pursuant to a registration
statement (including a registration statement on Form S-8 or such comparable
form) the Company will use its best efforts to effect such transactions through
the Managing Underwriter. The Company agrees that in the event that it
establishes a 401(k) plan or any other type of investment plan for employees
that it will employ the Managing Underwriter as the agent for such plan, if the
agent can provide the same service at the same cost as the best provider the
Company can provide. The Company agrees that in the event that it chooses to
invest any part of the net profits of the proposed offerings or put any part of
such proceeds on account at an investment bank than such proceeds shall be
deposited or invested by the Managing Underwriter.
(q) on the Closing Date, the Company and the Managing Underwriter will
execute a non-exclusive corporate finance agreement pursuant to which the
Managing Underwriter will perform consulting services to the Company for a
twenty four month period for an aggregate fee of $96,000. The entire fee due to
the Managing Underwriter pursuant to the corporate finance agreement shall be
pre-paid at the Closing Date.
(r) The Company has appointed [American Securities Transfer Incorporated]
as transfer agent for the Common Stock, subject to the Closing. The Company will
not change or terminate such appointment for a period of three years from the
Closing Date without first obtaining the written consent of the Managing
Underwriter. For a period of three years after the effective date of the
Registration statement, the Company shall cause the transfer agent to deliver
promptly to the Managing Underwriter a duplicate copy of the daily transfer
sheets relating to trading of the Securities. The Company shall also provide to
the Managing Underwriter, on a weekly basis, copies of the DTC special
securities positions listing report.
(s) During the period of 180 days after the date of this Agreement, the
Company will not at any time, directly or indirectly, take any action designed
to or that will constitute, or that might reasonably be expected to cause or
result in, the stabilization of the Common stock to facilitate the sale or
resale of any of the Securities.
14
(t) The Company will not take any action to facilitate the sale of any
shares of Common Stock pursuant to Rule 144 under the Act if any such sale would
violate any of the terms of the Lock-up Agreements.
(u) The Company will prepare and file a registration statement with the
Commission pursuant to section 12 of the 1934 Act, and will use its best efforts
to have such registration statement declared effective by the Commission on an
accelerated basis on the day after the Effective Date. For this purpose the
Company shall prepare and file with the Commission a general Form of
Registration of Securities (Form 8-A or Form 10).
5. EXPENSES.
(a) The Company agrees with each Underwriter that the Company will pay and
bear all costs and expenses in connection with the preparation, printing and
filing of the Registration Statement (including financial statements, schedules
and exhibits), Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the Preliminary Blue Sky
Survey and any Supplemental Blue Sky Survey, the Underwriters' Questionnaire and
Power of Attorney and any instruments related to any of the foregoing; the
issuance and delivery of the Shares hereunder to the Underwriters, including
transfer taxes, if any, and the cost of all certificates representing the Shares
and transfer agents' and registrars' fees; the fees and disbursements of counsel
for the Company; all fees and other charges of the Company's independent public
accountants; the cost of furnishing to the Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary Prospectus
and the Prospectus, and any amendments or supplements to any of the foregoing;
and all postage costs incurred in connection with the qualification of the
Shares under the laws of such jurisdictions as you may designate; and all other
expenses directly incurred by the Company in connection with the performance of
its obligations hereunder.
(b) Xxxxxxx shall be entitled to receive from the Company, for itself and
not as representative of the Underwriters, a nonaccountable expense allowance
equal to 2.5% of the gross proceeds of the Offering less the $25,000 previously
paid pursuant to the terms of the Engagement Letter.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters to purchase and pay for Shares as provided herein shall be subject
to the accuracy, as of the date hereof and the Closing Date and any later date
on which Option Shares are to be purchased (the "Option Closing Date"), as the
case may be, of the representations and warranties of the Company herein, to the
performance by the Company of its obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement shall have become effective not later than
5:30 p.m. on the date hereof, or with the consent of the Underwriters, at a
later time and date, not later, however, than 5:30 p.m. on the first business
day following the date hereof, or at such later time and date as may be approved
by a majority in interest of the Underwriters; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
Securities Act or proceedings therefor initiated or threatened by the Commission
and any request on the part of the Commission for additional information (to be
included in the Registration Statement or the
15
Prospectus or otherwise) shall have been complied with to the reasonable
satisfaction of counsel to the Underwriters. If the Company has elected to rely
upon Rule 430A of the Rules and Regulations, the price of the Shares and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Underwriters of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations. Qualification under the securities laws
of such states as you may deem necessary to the success of the underwriting of
the issue and sale of the Shares upon the terms and conditions set forth in this
Agreement or contemplated by this Agreement and containing no provisions
unacceptable to you will have been secured, and no stop order (or the equivalent
thereof) will be in effect denying or suspending effectiveness of such
qualification, nor will any stop order proceedings (or the equivalent thereof)
with respect thereto be instituted or pending or threatened under such laws.
(b) At the Closing Date and the Option Closing Date, if any, counsel for
the Underwriters shall have been furnished with such documents and opinions as
they may require for the purpose of enabling them to pass upon the issuance and
sale of the Shares as contemplated herein and related proceedings or in order to
evidence the accuracy of any of the representations and warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Shares as
herein contemplated shall be satisfactory in form and substance to the
Underwriters and counsel for the Underwriters.
(c) There shall not have been, since the date hereof or since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, any change in the condition (financial or otherwise),
earnings, operations, business affairs or business prospects of the Company and
its Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business which, in your sole judgment, is material and
adverse and that makes it, in your sole judgment, impracticable or inadvisable
to proceed with the public offering of the Shares as contemplated by the
Prospectus, and the Underwriters shall have received a certificate of the
President or Vice President of the Company and of the chief financial or chief
accounting officer of the Company, dated as of the Closing Date, to the effect
that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 2 hereof are true and correct with the
same force and effect as though expressly made at and as of the Closing Date,
(iii) the Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to the Closing Date, and
(iv) no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been initiated or
threatened by the Commission or any Blue Sky jurisdiction.
(d) At the Closing Date the Underwriters shall have received:
(1) The opinion, dated as of the Closing Date, of Holland & Xxxx
LLP, counsel for the Company, in form and substance satisfactory to counsel for
the Underwriters, to the effect that:
16
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Colorado.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus and to enter into and perform its
obligations under this Agreement and to issue, sell and deliver to the
Underwriters the Firm Shares or the Option Shares, as the case may be, to be
issued and sold by it hereunder.
(iii) The Company is not qualified to do business as a foreign
corporation in any foreign jurisdictions, and to counsel's knowledge is not
required to be qualified to do business as a foreign corporation in any other
jurisdiction where a failure to be so qualified would have a material adverse
effect on the Company.
(iv) At the Closing Date, after giving effect to the sale of
the Firm Shares, the authorized capital stock of the Company is as set forth in
the Prospectus under the caption "Capitalization" as of the dates stated
therein; the issued and outstanding shares of Common Stock have been duly
authorized and validly issued under Colorado corporate law and are fully paid
and nonassessable and have not been issued in violation of any preemptive right
contained in the Articles of Incorporation or Bylaws of the Company or, to such
counsel's knowledge, any co-sale right, registration right, right of first
refusal or other similar right (other than such preemptive rights or other
rights to subscribe for or purchase securities as were fully complied with or
expressly waived or with respect to the violation of which the right to make a
claim is barred by the applicable statute of limitation).
(v) The Firm Shares and the Option Shares, as the case may be,
to be purchased from the Company hereunder have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company pursuant to this Agreement against payment
therefor in accordance with the terms hereof, will be validly issued and fully
paid and nonassessable, and will not be issued in violation of any preemptive
right under the Articles of Incorporation or Bylaws of the Company or, to such
counsel's knowledge, any co-sale right, right of first refusal or other similar
right and the stockholders of the Company have no preemptive right under the
Articles of Incorporation or Bylaws of the Company or, to such counsel's
knowledge, other rights to purchase any of the Shares; the shares of Common
Stock reserved for issuance upon the exercise of the Underwriters' Warrants have
been duly and validly authorized and are presently sufficient in number to meet
the exercise requirements thereof, and such shares of Common Stock, when issued
upon exercise, will be duly and validly issued, fully paid (assuming exercise in
accordance with the Warrant Agreement and receipt by the Company of the exercise
price thereof) and nonassessable; the stockholders of the Company have no
preemptive right under the Articles of Incorporation or Bylaws of the Company
or, to such counsel's knowledge, other rights to purchase any of the Shares; and
the shares of Common Stock reserved for issuance upon the exercise of the
Company's outstanding options have been duly and validly authorized and are
presently sufficient in number to meet the exercise requirements of such
options, and such shares of Common Stock, when issued upon exercise, will be
duly and validly issued, fully paid (assuming exercise in accordance with the
governing instruments therefor and receipt by the Company of the exercise price
thereof) and nonassessable.
17
(vi) The issuance of the Shares to be purchased hereunder is
not subject to preemptive or other similar rights arising by operation of law
or, to their knowledge and information, otherwise.
(vii) Each Subsidiary has been duly incorporated and is
validly existing as a corporation and is in good standing under the laws of the
jurisdiction of its incorporation, has full corporate power and authority to
own, lease and operate its properties and to conduct it business as described in
the Registration Statement, and is duly qualified as a foreign corporation to
transact business and is in good standing in the State of Colorado, and, to the
best of its knowledge, any Subsidiary is not required to be qualified to do
business as a foreign corporation in any other jurisdiction; all of the issued
and outstanding capital stock of each such Subsidiary has been duly authorized
and validly issued, is fully paid and nonassessable and, to the best of their
knowledge and information, is owned by the Company directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(viii) This Agreement and the Warrant Agreement have been duly
authorized by all necessary corporate action on the part of the Company and have
been duly executed and delivered by the Company and assuming due authorization,
execution and delivery by the Underwriters, if construed under the laws of
Colorado, are valid and binding agreements of the Company, except insofar as
indemnification and contribution provisions may be limited by applicable law or
equitable principles, and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or any general equitable principles.
(ix) The Registration Statement has been declared effective
under the Securities Act; any required filing of the Prospectus pursuant to Rule
424(b) has been made in the manner and within the time period required by Rule
424(b) and, to their knowledge and information, no stop order suspending the
effectiveness of the Registration Statement has been issued under the Securities
Act or proceedings therefor have been initiated or are pending or threatened by
the Commission. The Shares have been approved for inclusion on the Nasdaq
SmallCap Market and the Boston Stock Exchange.
(x) The Registration Statement, Prospectus and each amendment
or supplement to the Registration Statement and Prospectus, as of their
respective effective or issue dates (other than the financial statements and
supporting schedules included therein, as to which no opinion need be rendered)
complied as to form in all material respects with the requirements of the
Securities Act and the applicable Rules and Regulations.
(xi) The terms and provisions of the capital stock of the
Company conform in all material respects to the description thereof contained in
the Prospectus under the caption "Description of Securities."
(xii) The information in the Prospectus under the caption
"Description of Securities" to the extent that they constitute matters of law or
legal conclusions, has been reviewed by such counsel and accurately and fairly
summarizes in such counsel's opinion the matters described therein and to the
knowledge of such counsel, there are no outstanding options, warrants,
convertible securities, or other rights to acquire from the Company any capital
stock, except as
18
described in the Registration Statement; in addition, the forms of certificates
evidencing the Company stock comply with Colorado law.
(xiii) To such counsel's knowledge, except as set forth in the
Prospectus, there is not pending or threatened any action, suit, proceeding,
inquiry or investigation, to which the Company or its Subsidiaries is a party,
or to which the property of the Company or its Subsidiaries is subject, before
or brought by any court or government agency or body, which might reasonably be
expected to result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise, or which might
reasonably be expected to materially and adversely affect the properties or
assets thereof or the consummation of this Agreement or the performance by the
Company of its obligations hereunder; and all pending legal or governmental
proceedings to which the Company or its Subsidiaries is a party or that affect
any of their respective properties that are not described in the Prospectus,
including ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its Subsidiaries considered as one enterprise.
(xiv) The information in the Prospectus under the captions
"Business - Legal Proceedings", " - Governmental Regulation", "Certain
Transactions" and "Description of Capital Stock" in the Prospectus and Items 24
and 26 of Part II of the Registration Statement, to the extent that such items
constitute matter of law, summaries of legal matters, documents or proceedings,
or legal conclusions, has been reviewed by them and is correct in all material
respects, and there are no legal or governmental actions, suits or proceedings
pending or threatened against the Company or its Subsidiaries that are required
to be described in the Prospectus but are not described as required by the
Securities Act or the applicable Rules and Regulations.
(xv) All descriptions in the Prospectus of contracts and other
documents are accurate in all material respects; to their knowledge, there are
no agreements, no contracts, indentures, mortgages, loan agreements, notes,
leases or other instrument required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed as exhibits thereto.
(xvi) No authorization, approval, consent or order of any
court or governmental authority or agency (other than under the Securities Act
or the Rules and Regulations, which have been obtained, or as may be required
under the securities or Blue Sky laws of the various states or foreign
jurisdiction) is required in connection with the due authorization, execution
and delivery of this Agreement or for the offering, issuance or sale of the
Shares to the Underwriters; and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein and
compliance by the Company with its obligations hereunder (other than performance
of the Company's indemnification and contribution obligations hereunder,
concerning which no opinion need be expressed) will not, whether with or without
the giving of notice or lapse of time or both, conflict with or constitute a
breach or violation of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or its Subsidiaries pursuant to any material contract, indenture,
mortgage, loan agreement, note, lease or other instrument (A) which is an
exhibit to the Registration Statement and (B) to which the Company or its
Subsidiaries is a party or by which it or
19
any of them may be bound, or to which any of the property or assets of the
Company or its Subsidiaries is subject, nor will such action result in any
violation of the provisions of the Articles of Incorporation or Bylaws of the
Company, or any applicable law, administrative regulation or court decree,
provided, however, no opinion need be rendered concerning state securities or
Blue Sky laws.
(xvii) To counsel's knowledge, with the exception of the
Managing Underwriter's Warrants and any registration rights mentioned in the
Registration Statement, no holder of any security of the Company has any right
to require registration of any shares of Common Stock or any other security of
the Company and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having rights to
registration of such shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have, with respect to the
offering contemplated thereby, waived such rights or such rights have expired by
reason of lapse of time following notification of the Company's intent to file
the Registration Statement, or have included securities in the Registration
Statement pursuant to the exercise of such rights.
(xviii) The Company is not an "investment company" or an
entity "controlled" by an "investment company" as such terms are defined in the
1940 Act.
(xix) To counsel's knowledge, neither the Company nor its
Subsidiaries are in violation of their charter or by-laws.
In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions) on certificates of responsible officers of the
Company and public officials. All references in the above opinions to "such
counsel's knowledge" or "known to us" or similar phrases mean the conscious
awareness of facts or other information by the lawyer who signs this opinion and
other lawyers at our firm who have active involvement in representing the
Company, including any awareness that results from counsel's work on the
Registration Statement. The opinions of counsel may be based on the current laws
of the United States of America and the State of Colorado and need not include
an interpretation or statement concerning the laws of any other state or
jurisdiction. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including with limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991).
In giving their opinion required by subsection (d)(1) of this Section,
Hollard & Xxxx LLP shall additionally state that nothing has come to their
attention that would lead them to believe that the Registration Statement, at
the time it became effective, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus, at the
effective date of the Registration Statement (unless the term "Prospectus"
refers to a prospectus which has been provided to the Underwriters by the
Company for use in connection with the offering of the Shares which differs from
the Prospectus declared effective by the Commission, in which case at the time
it is first provided to the Underwriters for such use) or at the Closing Date,
included an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Such opinion may state
that such counsel does not assume any responsibility for the accuracy,
completeness or fairness of
20
the statements contained in the Registration Statement and the Prospectus except
as otherwise expressly provided in such opinion, and such counsel need express
no opinion or belief as to the financial statements, schedules, and other
financial or statistical data included in the Registration Statement or
Prospectus.
(2) The opinion, dated as of Closing Date, of McAfee & Xxxx A
Professional Corporation, counsel for the Underwriters, in form and substance
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the Company
shall have furnished to such counsel such papers, opinions and information as
they request to enable them to pass upon such matters.
(e) At the time of the execution of this Agreement, the Underwriters shall
have received from Xxxxxx Xxxxxxxx LLP a letter dated such date, in form and
substance satisfactory to the Underwriters, to the effect that:
(1) they are independent public accountants with respect to the
Company and its Subsidiaries within the meaning of the Securities Act and the
Rules and Regulations;
(2) it is their opinion that the consolidated balance sheet included
in the Registration Statement and covered by their opinion therein complies as
to form in all material respects with the applicable accounting requirements of
the Securities Act and the Rules and Regulations;
(3) based upon limited procedures set forth in detail in such
letter, nothing has come to their attention which causes them to believe that,
at a specified date not more than three days prior to the date of this
Agreement, (A) the unaudited consolidated balance sheet of the Company and its
Subsidiaries included in the Registration Statement does not comply as to form
in all material respects with the applicable accounting requirements of the
Securities Act and the Rules and Regulations or is not presented in conformity
with generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Registration Statement, or (B) at a specified date not more than three days
prior to the date of this Agreement, there has been any change in the capital
stock of the Company or any increase in the combined long term debt of the
Company and its Subsidiaries or any decrease in combined net current assets or
net assets as compared with the amounts shown in the June 30, 1999 balance sheet
included in the Registration Statement or, during the period from June 30, 1999,
to a specified date not more than three days prior to the date of this
Agreement, there were any decreases, as compared with the corresponding period
in the preceding year, in combined revenues, net income or net income per share
of the Company and its Subsidiaries, except in all instances for changes,
increases or decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur;
(4) in addition to the examination referred to in their opinion and
the limited procedures referred to in clause (3) above, they have carried out
certain specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are included in the
Registration Statement and Prospectus and which are specified by the
Underwriters, and have found such amounts, percentages and financial information
to be in
21
agreement with the relevant accounting, financial and other records of the
Company and its Subsidiaries identified in such letter; and
(5) they have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-B and on the
basis of limited procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that caused them to believe
that this information does not conform in all material respects with the
disclosure requirements of Item 402 of Regulation S-B.
(f) At the Closing Date, the Underwriters shall have received from Xxxxxx
Xxxxxxxx LLP a letter, dated as of the Closing Date, to the effect that they
reaffirm the statements made in the letter furnished pursuant to subsection (e)
of this Section 6, except that the specified date referred to shall be a date
not more than three days prior to the Closing Date and, if the Company has
elected to rely on Rule 430A of the 1933 Act Regulations, to the further effect
that they have carried out procedures as specified in clause (4) of subsection
(e) of this Section 6 with respect to certain amounts, percentages and financial
information specified by the Underwriters and deemed to be a part of the
Registration Statement pursuant to Rule 430(A)(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (4).
(g) At the Closing Date, the Common Stock shall have been approved for
listing on the Nasdaq SmallCap Market and the Boston Stock Exchange.
(h) In the event that the Underwriters exercise their option provided in
Section 7 hereof to purchase all or any portion of the Option Shares, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company hereunder shall be true
and correct as of the Option Closing Date and, at the Option Closing Date, the
Underwriters shall have received:
(1) A certificate, dated the Option Closing Date, of the President
or a Vice President of the Company and of the Chief Financial or Chief
Accounting Officer of the Company confirming that the certificate delivered at
the Closing Date pursuant to Section 5(c) hereof remains true and correct as of
the Option Closing Date (except that all references in such Section to "Closing
Date" shall be deemed to refer to the "Option Closing Date").
(2) The opinions of Holland & Xxxx LLP, counsel for the Company, in
form and substance satisfactory to counsel for the Underwriters, dated the
Option Closing Date, relating to the Option Shares and otherwise to the same
effect as the opinion required by Section 5(b)(1) hereof (except that all
references in such Section to "Closing Date" shall be deemed to refer to the
"Option Closing Date").
(3) The opinion of McAfee & Xxxx A Professional Corporation, counsel
for the Underwriters, dated the Option Closing Date, relating to the Option
Shares to be purchased on the Option Closing Date and otherwise to the same
effect as the opinion required by Section 5(b)(2) hereof (except that all
references in such Section to "Closing Date" shall be deemed to refer to the
"Option Closing Date").
22
(4) A letter from Xxxxxx Xxxxxxxx in form and substance satisfactory
to the Underwriters and dated the Option Closing Date, substantially the same in
form and substance as the letter furnished to the Underwriters pursuant to
Section 5(e) hereof, except that the "specified date" in the letter furnished
pursuant to this Section 6(h)(4) shall be a date not more than three days prior
to the Option Closing Date.
(i) The Company and the Underwriters shall have entered into the Warrant
Agreement and the Company shall have sold to the Underwriters the Underwriters'
Warrants, which shall be in the form attached as an exhibit to the Warrant
Agreement.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Representative by notice to the Company at any time at or prior to Closing Date,
and such termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 4(i) and 8 shall
survive any such termination and remain in full force and effect.
7. OPTION SHARES.
(a) On the basis of the representations and warranties herein contained,
but subject to the terms and conditions herein set forth, the Company hereby
grants to the several Underwriters, for the purpose of covering over-allotments
in connection with the distribution and sale of the Firm Shares only, a
non-transferable option to purchase up to an aggregate 180,000 Option Shares at
the purchase price per share for the Firm Shares set forth in Section 3 hereof.
Such option may be exercised by Xxxxxxx on behalf of the several Underwriters on
one occasion in whole or in part during the period of 45 business days from and
after the date on which the Firm Shares are initially offered to the public, by
giving notice to the Company. The number of Option Shares to be purchased by
each Underwriter upon the exercise of such option shall be the same proportion
of the total number of Option Shares to be purchased by the several Underwriters
pursuant to the exercise of such option as the number of Firm Shares purchased
by such Underwriter (set forth in SCHEDULE A hereto) bears to the total number
of Firm Shares purchased by the several Underwriters (set forth in SCHEDULE A
hereto), adjusted by the Underwriters in such manner as to avoid fractional
shares.
Delivery of definitive certificates for the Option Shares to be purchased
by the several Underwriters pursuant to the exercise of the option granted by
this Section 7 shall be made against payment of the purchase price therefor by
the several Underwriters by certified or official bank check or checks drawn in
same day funds, payable to the order of the Company. Such delivery and payment
shall take place at the offices of Xxxxxxx Xxxxxxxx Securities Corporation, 00
Xxxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxx 00000 or at such other place as may be
agreed upon between the Underwriters and the Company on the Closing Date, if
written notice of the exercise of such option is received by the Company not
later than three full business days prior to the Closing Date.
The certificates for the Options Shares so to be delivered will be made
available to you at such office or other location including, without limitation,
inNew York, as you may reasonably request for checking at least two full
business days prior to the date of payment and delivery and will be in such
names and denominations as you may request, such request to be made at least
23
three full days prior to such date of payment and delivery. If the Underwriters
so elect, delivery of the Shares may be made by credit through full fast
transfer to the accounts at Depository Trust Company by the Underwriters.
It is understood that Xxxxxxx, individually, and not as the representative
of the Underwriters, may (but shall not be obligated to) make payment of the
purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the date of payment and
delivery for the Option Shares to be purchased by such Underwriter or
Underwriters. Any such payment by Xxxxxxx shall not relieve any Underwriter of
any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a) hereof the
obligations of the Underwriters to purchase such Option Shares will be subject
(as of the date hereof and as of the date of payment for such Option Shares) to
the accuracy of and compliance with the representations and warranties of the
Company herein, to the accuracy of the statements of the Company and officers of
the Company made pursuant to the provisions hereof, to the performance by the
Company of their respective obligations hereunder, and to the condition that all
proceedings taken at or prior to the payment date in connection with the sale
and transfer of such Option Shares shall be satisfactory in form and substance
to you and to Underwriters' counsel, and you shall have been furnished with all
such documents, certificates and opinions as you may reasonably request in order
to evidence the accuracy and completeness of any of the representations,
warranties or statements, the performance of any of the covenants of the Company
or the compliance with any of the conditions herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, as
incurred, to which such Underwriter may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any breach of any
representation, warranty, agreement or covenant of the Company herein contained,
or (ii) any untrue statement or alleged untrue statement made by the Company in
Section 2 hereof, or (iii) any untrue statement or alleged untrue statement of a
material fact contained (A) in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (B) in any
blue sky application or other document executed by the Company specifically for
that purpose or based upon written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the Shares
under the securities laws thereof (any such application, documents or
information being hereinafter called a "Blue Sky Application"), or (iii) the
omission or alleged omission to state in the Registration Statement or any
amendment thereto a material fact required to be stated therein or necessary to
make the statements therein not misleading, or the omission or alleged omission
to state in any Preliminary Prospectus, the Prospectus or any supplement thereto
or in any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and shall reimburse each Underwriter
for any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action,
notwithstanding the
24
possibility that payments for such expenses might later be held to be improper,
in which case the person receiving them shall promptly refund them; except that
the Company shall not be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, such Preliminary Prospectus or the
Prospectus, or any amendment or supplement, in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any
Underwriter specifically for use in the preparation thereof and, provided
further, that the indemnity agreement provided in this Section 8(a) with respect
to any Preliminary Prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any losses, claims, charges, liabilities or
litigation based upon any untrue statement or alleged untrue statement of
material fact or omission or alleged omission to state therein a material fact
purchased Shares, if a copy of the Prospectus in which such untrue statement or
alleged untrue statement or omission or alleged omission was corrected has not
been sent or given to such person within the time required by the Securities Act
and the Rules and Regulations thereunder, unless such failure is the result of
noncompliance by the Company with Section 4(d) hereof.
(b) Each Underwriter severally, but not jointly, shall indemnify and hold
harmless the Company against any losses, claims, damages or liabilities, joint
or several, as incurred, to which the Company may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained
(A) in the Registration Statement, Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (B) in any Blue Sky Application, or (ii) the
omission or alleged omission to state in the Registration Statement or any
amendment thereto a material fact required to be stated therein or necessary to
make the statements therein not misleading, or the omission or alleged omission
to state in any Preliminary Prospectus, the Prospectus or any supplement thereto
or in any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; except that such indemnification
shall be available in each such case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company through the Underwriters by or on behalf of such
Underwriter specifically for use in the preparation thereof; and shall reimburse
any legal or other expenses reasonably incurred by the Company in connection
with investigation or defending against any such loss, claim, damage, liability
or action.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the claim or the commencement of that action; the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under such subsection. If any such claim
or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party; provided, however, if
the defendants in any
25
such action include both the indemnified parties and the indemnifying party and
the indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
claim or action, the indemnifying party shall not be liable to the indemnified
party under such subsection for any legal or other expenses subsequently
incurred by the indemnified party in connection with the defense thereof unless
(i) the indemnified party shall have employed separate counsel in accordance
with the proviso to the preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party, representing all the indemnified parties under Section 8(a)
and 8(b) hereof who are parties to such action), (ii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the claim or action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; provided, however, that
such consent shall not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in any action
in which a claim for indemnification is made pursuant to this Section 8 for
which it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters are
responsible pro rata for the portion represented by the percentage that the
underwriting discount bears to the initial public offering price, and the
Company is responsible for the remaining portion; provided, however, that (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter,
and (ii) no person guilty of a fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to a contribution from
any person who is not guilty of such fraudulent misrepresentation. This
subsection (d) shall not be operative as to any Underwriter to the extent that
the Company has received indemnity under this Section 8.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have, and shall
extend, upon the same terms and conditions, to each officer and director of each
Underwriter and to each person, if any, who controls any Underwriter within the
meaning of the Securities Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability that the respective
Underwriters may otherwise have, and shall extend, upon the same terms and
conditions, to each director of the Company (including any person who, with his
consent, is named in the Registration Statement as about to become a director of
the Company), to each officer of the
26
Company who has signed the Registration Statement and to each person, if any,
who controls the Company within the meaning of the Securities Act, in either
case, whether or not such person is a party to any action or proceeding.
(f) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including without limitation the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Securities Act and the
Exchange Act. The parties are advised that Federal or state public policy, as
interpreted by the courts in certain jurisdictions, may be contrary to certain
of the provisions of this Section 8, and the parties hereto hereby expressly
waive and relinquish any right or ability to assert such public policy as a
defense to a claim under this Section 8 and further agree not to attempt to
assert any such defense.
9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, covenants and agreements of the Company contained
in this Agreement (including, without limitation, the agreements of the Company
set forth in Sections 4(i)-(k)), or contained in certificates of officers of the
Company submitted pursuant hereto, and the indemnity and contribution agreements
contained in Section 8 hereof, shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or controlling person, or by or on behalf of the Company, or any of its
officers, controlling persons or directors and shall survive delivery of the
Shares to the several Underwriters hereunder or termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITER. If any Underwriter or Underwriters shall
fail to take up and pay for the number of Firm Shares agreed by such Underwriter
or Underwriters to be purchased hereunder upon tender of such Firm Shares in
accordance with the terms hereof, and if the aggregate number of Firm Shares
which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate number of
Firm Shares which such defaulting Underwriter or Underwriters agreed but failed
to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four hours to allow the several Underwriters the privilege of
substituting within twenty-four hours (including non-business hours) another
underwriter or underwriters (which may include any non-defaulting Underwriter)
satisfactory to the Company. If no such underwriter or underwriters shall have
been substituted as aforesaid by such postponed Closing Date, the Closing Date
may, at the option of the Company, be postponed for a further twenty-four hours,
if necessary to allow the Company the privilege of finding another underwriter
or underwriters, satisfactory to
27
you, to purchase the Firm Shares which the defaulting Underwriter or
Underwriters so agreed but failed to purchase. If it shall be arranged for the
remaining Underwriters or substituted underwriters to take up the Firm Shares of
the defaulting Underwriter or Underwriters as provided in this Section, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven full business days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus, or in
any other documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary, and (ii) the respective number of Firm Shares to
be purchased by the remaining Underwriters and substitute underwriters shall be
taken as the basis of their underwriting obligation. If the remaining
Underwriters shall not take up and pay for all such Firm Shares so agreed to be
purchased by the defaulting Underwriter or Underwriters or substitute another
underwriter or underwriters as aforesaid and the Company shall not find or shall
not elect to seek another underwriter or underwriters for such Firm Shares as
aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the preceding
paragraph of this Section, neither the Company shall be liable to any
Underwriter (except as provided in Sections 5 and 8 hereof )nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the later of (i) execution of
this Agreement, or (ii) when notification of the effectiveness of the
Registration Statement has been released by the Commission.
(b) Xxxxxxx shall have the right to terminate this Agreement by giving
notice as hereinafter specified at any time at or prior to the Closing Date (i)
if the Company shall have failed, refused or been unable, to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company is
not fulfilled including, without limitation, any change in the financial
condition, earnings, operations, business, management, technical staff, or
business prospects of the Company from that set forth in the Registration
Statement or Prospectus which, in the sole judgment of Xxxxxxx, is material and
adverse, or (ii) if trading on the American Stock Exchange or the Nasdaq
National Market shall have been suspended, or minimum or maximum prices for
trading shall have been fixed, or maximum ranges for prices for securities shall
have been required on the American Stock Exchange or the Nasdaq National Market,
by the American Stock Exchange, the Nasdaq National Market or by order of the
Commission or any other governmental authority having jurisdiction, or if a
banking moratorium shall have been declared by Federal, New York or Oklahoma
authorities, or (iii) if on or prior to the Closing Date, or on or prior to any
later date on which Option Shares are to be purchased, as the case may be, the
Company shall have sustained a loss by strike, fire, flood,
28
earthquake, accident or other calamity of such character as to interfere
materially and adversely with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or (iv)
if there shall have been a material adverse change in the general political or
economic conditions or financial markets in the United States as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if on or prior to the Closing
Date, or on or prior to any later date on which Option Shares are to be
purchased, as the case may be, there shall have been an outbreak or escalation
of hostilities or other international or domestic calamity, crises or material
adverse change in political, financial or economic conditions, the effect of
which on the financial markets of the United States is such as to make it in
your reasonable judgment, inadvisable to proceed with the marketing of the
Shares. In the event of termination pursuant to this Section 11(b), the Company
shall remain obligated to pay costs and expenses pursuant to Section 4(j), 5 and
8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone or telecopy, in each case confirmed by letter.
If the Company shall elect to prevent this Agreement from becoming effective,
the Company shall promptly notify you by telephone or telecopy, in each case,
confirmed by letter.
12. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if mailed or transmitted by any
standard form of telecommunication. Notices to the Underwriters shall be
directed to the Underwriters in care of Xxxxxxx Xxxxxxxx Securities Corporation,
00 Xxxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxx;
notices to the Company shall be directed to it at Training Devices
International, Inc., 0000 X. Xxxxxx Xxxxxxx, Xxxxxxxx #0-X, Xxxxxxxxx, Xxxxxxxx
00000-0000, Attention: Xxxxxx X. Xxxxxxxxx.
13. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and their respective executors,
administrators, successors, and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or corporation,
other than the parties hereto and their respective executors, administrators,
successors, and assigns and the controlling persons and officers and directors
referred to in Section 8 hereof any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provisions herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the parties hereto and their respective executors,
administrators, successors, and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or corporation.
No purchaser of the Shares from any Underwriter shall be construed to be a
successor by reason merely of such purchase.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to agreements made
and to be performed in said State. Specified times of day refer to Eastern time.
15. COUNTERPARTS. This Agreement may be signed in several counterparts,
each of which will constitute an original.
29
If the foregoing correctly sets forth your understanding of our agreement,
please sign in the space provided below for that purpose, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriters and the Company in accordance with its terms
*******
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TRAINING DEVICES INTERNATIONAL, INC.
By:
------------------------------------
CONFIRMED AND ACCEPTED, as of the date first above written:
XXXXXXX XXXXXXXX
SECURITIES CORPORATION
By:
------------------------
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SCHEDULE A
UNDERWRITER SHARES PURCHASED
----------- ----------------
Xxxxxxx Davidson Securities Corporation
Total number of shares
32
