1
EXHIBIT 1.1
FORM OF
UNDERWRITING AGREEMENT
AMONG
XXXXXXXXX XXXX & CO., INC.,
NHANCEMENT TECHNOLOGIES INC.
AND
XXXXX X. XXXXXXXXX
2
TABLE OF CONTENTS
PAGE
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SECTION 1
Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Representative's Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2
Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Registration Statement on Form SB-2 and Related Prospectus . . . . . . . . . . . . . . . . . . . 2
2.2 Accuracy of Registration Statement and Related Prospectus . . . . . . . . . . . . . . . . . . . . 3
2.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Incorporation and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Legality of Outstanding Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Legality of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Prior Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Representative's Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.16 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.17 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 Availability of Information Concerning the Company . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 Suspension Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.22 Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.24 Florida Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3
Representations and Warranties of the Selling Shareholder . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Ownership of Selling Shareholder Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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3.4 Accuracy of Registration Statement and Related Prospectus . . . . . . . . . . . . . . . . . . . . 9
3.5 Payment of Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4
Issue, Sale and Delivery of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Appointment of Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Default by a Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Principal Terms of Representative's Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Inspection of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.7 Representative's Expense Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8 Mutual Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 Sales Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.10 Re-offers By Selected Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5
Registration Statement and Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Representative's Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Copies of Preliminary Prospectus and Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Post-Effective Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.4 Use of Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6
Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Filing of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Declaration of Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Amendments at the Request of the Representative . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Further Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.6 Reports to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.7 Expenses of Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.8 Stockholder Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.9 1933 Act Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.11 Transfer Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.12 Information About the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.13 Due Diligence Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.14 Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.15 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.16 Sales Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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6.17 1934 Act Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.18 No Material Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.19 Bound Volumes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.20 Financial Consulting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.21 Restriction on Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.22 Public Relations Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.23 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8
Effectiveness of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9
Conditions to the Representative's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Accuracy of Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.5 No Material Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.6 Review by Representative's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.7 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.8 Opinion of Counsel to Selling Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.9 BDO Xxxxxxx, LLP Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.10 Xxxxxxxx Xxxxxxx & Xxxx LLP Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.11 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.12 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.13 Selling Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.14 Opinion of Representative's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.15 Tender of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.16 Blue Sky Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.17 Approval of Representative's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.18 Officer's Certificate as a Company Representation . . . . . . . . . . . . . . . . . . . . . . . . 39
9.19 NASDAQ Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.20 Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 10
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.1 Termination by Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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10.2 Termination by Representative--"Market Out" . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3 Survival of Obligations After Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.4 Suspension Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 11
Representative's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.1 Registration as Broker-Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.2 No Pending Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.3 Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 12
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 13
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.1 Sole Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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EXHIBITS
Representative's Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A
SCHEDULES
Underwriting Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I
List of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.19
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UNDERWRITING AGREEMENT
Xxxxxxxxx Xxxx & Co., Inc.
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Gentlemen:
NHancement Technologies Inc., a Delaware corporation (unless the
context requires otherwise, referred to herein, together with its subsidiaries,
as the "Company") and Xxxxx X. Xxxxxxxxx, the record and beneficial owner of
the Selling Shareholder Shares (hereinafter defined) (the "Selling
Shareholder"), hereby confirm their agreement with Xxxxxxxxx Xxxx & Co., Inc.,
a Colorado corporation (the "Representative"), and with the other members of
the Underwriting Group named in Schedule I attached hereto (individually
referred to as "Member" and collectively referred to as "Members"), including
the Representative (hereinafter the "Underwriting Group") as follows (if there
is no Schedule I attached, all references in this Agreement to the Underwriting
Group shall be deemed to refer only to the Representative):
SECTION 1
Description of Securities
1.1 Offering. The Company represents, covenants, warrants and
agrees that its authorized, issued and outstanding capitalization, when the
offering (the "Offering") of the Shares (hereinafter defined) contemplated
hereby is permitted to commence and at the Closing Date (hereinafter defined),
will be as set forth in the Registration Statement and related Prospectus (as
such terms are hereinafter defined or described). The Company proposes to
issue, offer and sell to the Underwriting Group an aggregate of 1,700,000
Shares (the "Company Shares"), at an offering price of $____ per Share (the
"Offering Price") and on the terms hereinafter set forth. In addition, the
Selling Shareholder proposes to sell to the Underwriting Group an aggregate of
600,000 Shares (the "Selling Shareholder Shares") as defined below, at an
Offering Price of $____ per Share and on the terms hereinafter set forth. The
Underwriting Group shall also have an over-allotment option to purchase from
the Company up to an additional 345,000 Shares as provided in Section 4.1
hereof.
1.2 Shares. As used herein, the shares of the Company's common
stock, $0.01 par value, which include both the Company Shares and the Selling
Shareholder Shares, may be referred to as the "Stock" or the "Common Stock",
and the shares of the Common Stock to be registered in the Registration
Statement, including those which comprise the over-allotment option described
above, but excluding the Representative's Warrant Stock (defined below), may be
referred to as the "Shares".
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1.3 Representative's Warrant. As partial consideration for the
services of the Representative hereunder, the Company will authorize, issue,
sell and deliver to the Representative on the Closing Date for a purchase price
of $100.00, a warrant (the "Representative's Warrant") to purchase a certain
number of shares of the Common Stock (the "Representative's Warrant Stock"), as
more fully set forth at Section 4.4 of this Agreement.
SECTION 2
Representations and Warranties of the Company
In order to induce the Representative to enter into this Agreement,
the Company hereby represents and warrants to, and agrees with, the
Representative as follows:
2.1 Registration Statement on Form SB-2 and Related Prospectus. A
Registration Statement on Form SB-2 (File No. 333-15563) and a Prospectus on
the form specified by Form SB-2 with respect to the Shares, copies of which
have been delivered heretofore by the Company to the Representative, have been
prepared carefully by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the rules and
regulations promulgated thereunder, including, but not limited to, Regulations
C and S-B (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission"), and the Registration Statement and related
Prospectus, together with all exhibits and other documents required by the
Rules and Regulations have been filed by the Company with the Commission under
the 1933 Act; and the Company will use its best efforts to cause and assist the
Commission in declaring the same effective as promptly as possible. The
Company may file one or more additional amendments to the Registration
Statement and related Prospectus with the Commission on or prior to the
Effective Date defined in Section 8 of this Agreement, and copies of each such
amendment will be delivered to the Representative for its approval prior to
such filing.
As used in this Agreement, the terms "Registration Statement on Form
SB-2" and "Registration Statement" refer to and mean the Registration Statement
on Form SB-2 prepared by the Company in connection with the Offering and any
and all amendments thereto including, but not limited to, exhibits and
financial statements and, in the event of any amendment after the Effective
Date, the term "Registration Statement on Form SB-2" or "Registration
Statement" is inclusive of such amendments. The term "Prospectus" refers to
and means the Prospectus, including the Preliminary Prospectus (hereinafter
defined) prepared by the Company in the form specified by Form SB-2 and all
amendments thereto, and, in the event of any amendment or supplement to such
Prospectus after the Effective Date, the term "Prospectus" shall refer to and
mean such Prospectus inclusive of such amendments or supplements; and the term
"Preliminary Prospectus" means any prospectus included in the Registration
Statement before the Effective Date.
2.2 Accuracy of Registration Statement and Related Prospectus.
The Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus with
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respect to the Shares, and each Preliminary Prospectus has conformed in all
material respects with the requirements of the 1933 Act and the applicable
Rules and Regulations and 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. On the Effective Date and on the Closing Date, the Registration
Statement and Prospectus will comply in all respects with the requirements of
the 1933 Act and the Rules and Regulations for the purpose of the proposed
Offering of the Shares; and all statements of material fact contained in the
Registration Statement and Prospectus will be true and correct, except, to the
extent that the Preliminary Prospectus anticipates facts that will be true and
correct as of the Effective Date that are not true on the date of the
Preliminary Prospectus, and neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
the Company does not make any representations or warranties as to the
information contained in or omitted from the Registration Statement or
Prospectus in reliance upon written information furnished on behalf of the
Representative specifically for use therein.
2.3 Financial Statements. The audited and other financial
statements of the Company, together with related schedules and notes as set
forth in the Registration Statement and Prospectus, present correctly and truly
the financial position and results of operations of the Company as of the
respective dates, and for the respective periods, to which they apply. Such
statements have been prepared in accordance with generally accepted accounting
principles and the applicable rules and regulations of the Commission relating
to financial statements. All financial statements filed with the Registration
Statement and Prospectus will reflect all liabilities of the Company,
contingent or otherwise, required to be set forth therein under generally
accepted accounting principles in effect as of the respective dates thereof and
will include adequate reserves for all federal and state tax liabilities
incurred prior to their respective dates and the Company will have no material
liabilities, contingent or otherwise, obligations or claims against it except
as set forth therein.
2.4 Independent Public Accountants. BDO Xxxxxxx, LLP and
Xxxxxxxx, Cardozo & Xxxx LLP, who have certified or will certify certain of the
financial statements filed or to be filed with the Commission as part of the
Registration Statement and Prospectus and, as experts, have reviewed certain
other information of a financial or accounting nature contained in the
Registration Statement and Prospectus, are independent certified public
accountants as required by the 1933 Act.
2.5 No Material Adverse Change. Except as may be reflected in or
contemplated by the Registration Statement and Prospectus, subsequent to the
dates as of which information is given therein and through the Closing Date:
(1) there shall not have been any material adverse change
in the condition, financial or otherwise, or in the results of
operations of the Company or in its business taken as a whole;
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(2) there shall not have been any material transaction
entered into by the Company other than transactions in the ordinary
course of the Company's business;
(3) the Company shall not have incurred any material
obligations, contingent or otherwise, which are not disclosed in the
Registration Statement and Prospectus;
(4) there shall not have been any change in the capital
stock or long-term debt (except current payments thereof) of the
Company; and
(5) the Company shall not have paid or declared any
dividends or made any other distribution in respect of the capital
stock of the Company.
2.6 No Defaults. Other than as disclosed in the Registration
Statement and Prospectus, the Company is not in default in the performance of
any obligation, agreement or condition contained in any debenture, note or
other evidence of indebtedness or any indenture or loan agreement of the
Company. The execution and delivery of this Agreement and the consummation of
the transactions herein contemplated and compliance with the terms of this
Agreement will not conflict with or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, the certificate of
incorporation, as amended, or bylaws, as amended, of the Company, any note,
indenture, mortgage, deed of trust or other agreement or instrument to which
the Company is a party or by which it or any of its property is bound, or any
existing law, order, rule, regulation, writ, injunction or decree of any
government, governmental instrumentality, agency or body, arbitration tribunal
or court, domestic or foreign, having jurisdiction over the Company or its
property. The consent, approval, authorization or order of any court or
government instrumentality, agency or body is not required for the consummation
of the transactions herein contemplated except such as may be required under
the 1933 Act or under the Blue Sky, or securities laws, of any state or
jurisdiction.
2.7 Incorporation and Standing. The Company is, and at the
Closing Date will be, duly incorporated and validly existing in good standing
as a corporation under the laws of its jurisdiction of incorporation and with
full power and authority (corporate and other) to own its property and conduct
its business, present and proposed, as described in the Registration Statement
and Prospectus, and the Company has and will have an authorized and outstanding
capital stock as set forth in the Registration Statement and Prospectus; the
Company has full power and authority to enter into this Agreement; the Company
owns, free and clear of any lien, charge or encumbrance, all of the unissued
capital stock as set forth in the Registration Statement and Prospectus; and
the Company is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which it owns or leases real property or transacts
business requiring such qualification, and in which the failure to so qualify
would have a material adverse effect on the Company.
2.8 Legality of Outstanding Common Stock. At the Closing Date,
the Company will have an authorized capitalization of 20,000,000 shares of
Common Stock, $0.01 par value per share, of which no more than 4,175,300 shares
(excluding shares issued pursuant to exercise of
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the over-allotment option described in Section 4.1) will be issued and
outstanding, and no shares of which will be held in the treasury of the
Company. At the Closing Date, the outstanding shares of Common Stock will have
been duly and validly authorized and issued, and will be fully paid and
nonassessable. The outstanding shares of Common Stock conform to all
statements with regard thereto contained in the Registration Statement and
Prospectus. No offers or sales of the Common Stock or other securities have
been made by the Company in violation of the 1933 Act. On the Effective Date,
and through and including the Closing Date, there will be no outstanding
options, warrants or other rights (however characterized or described) to
purchase any shares of the Common Stock or securities convertible into Common
Stock, except as described in the Registration Statement and Prospectus.
2.9 Legality of Securities. The Shares, the Representative's
Warrant, and the Representative's Warrant Stock have been duly and validly
authorized and, when issued and delivered against payment therefor as provided
in this Agreement, will be validly issued, fully paid and nonassessable. Said
securities, upon issuance, will not be subject to any preemptive right of any
stockholder of the Company, and no preemptive rights will exist with respect to
any securities of the Company through the Closing Date or until the expiration
of the Representative's Warrant Period (hereinafter defined). The
Representative's Warrant, when sold and delivered, will constitute a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms. A sufficient number of shares of the Common Stock have been
reserved for issuance as Representative's Warrant Stock upon exercise thereof.
The Shares, the Representative's Warrant and the Representative's Warrant Stock
will conform to all statements with regard thereto in the Registration
Statement and Prospectus.
2.10 Prior Sales. No shares of the Common Stock or other
securities of the Company have been sold by the Company, or by or on behalf of
or for the benefit of any officer, director, predecessor, affiliate, promoter,
associate, principal security holder, Representative or other controlling
person of the Company since three years prior to the date hereof, except as set
forth in the Registration Statement.
2.11 Litigation. Except as set forth in the Registration Statement
and Prospectus, there is, and at the Closing Date there will be, no litigation,
cause of action, suit or proceeding before any court or governmental agency,
authority, or body pending or, to the knowledge of the Company, threatened,
which might result in judgments against the Company not adequately covered by
insurance or which collectively might result in any material adverse change in
the condition (financial or otherwise), the business or the prospects of the
Company or would materially affect the properties or assets of the Company.
2.12 Representative's Warrant. Upon delivery and receipt of
payment for the Representative's Warrant to be sold by the Company as set forth
in Section 4.4 of the Agreement, the Representative and its assignees will
receive good and marketable title thereto, free and clear of all liens,
encumbrances, charges and claims whatsoever; and the Company will have on the
Effective Date and at the time of delivery of the Representative's Warrant,
full legal
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right, power and authority required by law to issue, sell, transfer and deliver
the Representative's Warrant in the manner provided hereunder.
2.13 Finder. The Company represents that no finder's fee has been
or will be paid in connection herewith. It is understood that, should a claim
be made for any finder's fee in connection with the sale of the Shares and
based upon any agreement by the Company, the Company will indemnify the
Representative with respect to any such claim.
2.14 Exhibits. There are no contracts, instruments or other
documents which are required by the 1933 Act or by the Rules and Regulations to
be filed as exhibits to the Registration Statement which have not been so
filed; and each contract or other instrument (however characterized or
described) to which the Company is a party and to which reference is made in
the Registration Statement and Prospectus has been duly and validly executed,
is in full force and effect in all material respects and is enforceable against
the parties thereto in accordance with its terms, and none of such contracts or
instruments has been assigned by the Company; and the Company knows of no
present situation or condition or fact which would prevent compliance by the
parties with the terms of such contracts or instruments as amended to date.
Except for amendments or modifications of such contracts or instruments in the
ordinary course of business, the Company has no intention of exercising any
right which would cause any other party to the contract to cancel any of their
obligations under any of such contracts or instruments, and the Company has no
knowledge that any other party to any of such contracts or instruments has any
intention not to render full performance thereunder.
2.15 Tax Returns. The Company has filed all federal, foreign,
state and local tax returns which are required to be filed, and has paid all
taxes shown on such returns and on all assessments received by it to the extent
such taxes have become due. All taxes with respect to which the Company is
obligated have been paid or adequate accruals have been set up to cover any
taxes which remain unpaid.
2.16 Property. Except as otherwise set forth in, or contemplated
by, the Registration Statement and Prospectus: (i) the Company has good title,
free and clear of all liens, encumbrances and defects, except liens for current
taxes not due and payable, to all real and personal property and assets
described in the Registration Statement and Prospectus as being owned by the
Company, subject only to such exceptions as are not material and do not affect
adversely the present or prospective business of the Company; and (ii) the
properties, including equipment, referred to in the Registration Statement and
Prospectus as being held under lease or option by the Company, are held under
valid, subsisting and enforceable leases or options with only such exceptions
which collectively are not material and do not affect adversely the present or
prospective business of the Company.
2.17 Use of Proceeds. The Company shall apply the proceeds from
the sale of the Shares solely and exclusively to the purposes set forth in the
Registration Statement and Prospectus.
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2.18 Authority. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action, and this
Agreement is the valid and binding obligation of the Company enforceable
against it in accordance with its terms.
2.19 Subsidiaries. The Company has no subsidiaries except for
those described on Schedule 2.19 hereto. Unless the context expressly requires
otherwise, all references in this Agreement to the Company shall refer to the
Company and all of its Subsidiaries.
2.20 Availability of Information Concerning the Company. All
documents and other information relating to the Company's affairs shall be made
available upon request to the Representative and its counsel at the
Representative's office or at the office of its counsel, and copies of any such
documents shall be furnished upon request to the Representative or its counsel.
Prior to the Effective Date, the contents of all such documents and other
information shall be subject to the approval of the Representative and, if not
so approved, the Representative may choose not to proceed with the Offering.
Notice of disapproval of any document shall be given to the Company or counsel
to the Company within a reasonable time after the document is made available to
the Representative or its counsel. Included within the documents to be made
available are the Company's articles of incorporation, as amended, and related
charter documents, bylaws and amendments thereto, minutes of all meetings and
other actions taken by the Company's incorporators, directors and stockholders,
all financial statements, correct copies of any material contracts, licenses,
leases or agreements to which the Company is a party or by which it or its
property is bound, including contracts for the sale of products or services in
the normal course of business and including any employee (including officers
and/or directors) incentive plans and any other type of fringe benefit plan, of
whatever nature, and copies of all patents, patent applications, trademarks and
trademark applications in which the Company may have an interest.
2.21 Suspension Orders. The Company shall advise the
Representative immediately and confirm in writing the receipt of any threat of,
or the initiation of any steps or proceedings which would impair or prevent the
right to offer any of the securities, or the issuance by the Commission or
other regulatory authority of any stop order or suspension order or other
prohibition preventing or impairing the proposed transactions.
2.22 Transfer Agent. The Company has appointed American Securities
Transfer & Trust, Incorporated, 0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxx 00000, as its transfer agent (the Transfer Agent") for the Common
Stock.
2.23 Employment Agreements. The Company has entered into and
delivered to the Representative employment agreements with each of Xxxxxx X.
Xxxx, Xxxxxxx X. Xxxx and Xxxxx X. Xxxxxxxxx, which employment agreements
specifically include limits on bonus compensation, noncompetition covenants and
confidentiality provisions satisfactory to the Representative. Voice Plus,
Inc. has entered into and delivered to the Representative employment agreements
with each of Xxxxx X. Xxxxx and Xxxxxxx X. Xxxxxxx, which employment agreements
specifically include limits on bonus compensation, noncompetition
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covenants and confidentiality provisions satisfactory to the Representative.
The Company has obtained a key-man life insurance policy on the life of Xxxxxx
X. Xxxx, in the amount of $1,000,000.
2.24 Florida Compliance. The Company has complied and will comply
with all provisions of Florida Statutes Section 517.075 (Chapter 92-198, Laws
of Florida). Neither the Company, nor any affiliate thereof, does business
with the government of Cuba or with any person or affiliate located in Cuba.
SECTION 3
Representations and Warranties of the Selling Shareholder.
In order to induce the Representative to enter into this Agreement,
the Selling Shareholder hereby represents and warrants to, and agrees with, the
Representative as follows:
3.1 Ownership of Selling Shareholder Shares. The Selling
Shareholder owns all issued and outstanding shares of Common Stock of Voice
Plus, Inc. and at the Closing Date will own the Selling Shareholder Shares free
and clear of any liens, charges, claims, security interests or encumbrances.
3.2 Validity of Agreement. The Agreement has been duly
authorized, executed and delivered by Selling Shareholder and the sale of the
Selling Shareholder Shares by the Selling Shareholder and the compliance by the
Selling Shareholder with all of the provisions of this Agreement and the
consummation of the transactions contemplated herein will not conflict with,
result in a breach or violation of, or constitute, either by itself or upon
notice or passage of time or both, a default under any indenture, mortgage,
deed of trust, loan agreement, lease, franchise, license or other contract,
agreement or instrument to which the Selling Shareholder is a party or by which
the Selling Shareholder is bound or to which any property or assets of the
Selling Shareholder are subject.
3.3 Representations and Warranties. To the knowledge of the
Selling Shareholder, all of the representations and warranties of the Company
contained in this Agreement are true and correct as of the date hereof.
3.4 Accuracy of Registration Statement and Related Prospectus.
The material set forth under "Principal and Selling Stockholders" in the
Prospectus, insofar as it relates to the Selling Shareholder, is accurate and
complete.
3.5 Payment of Costs and Expenses. The Selling Shareholder shall
be responsible for and pay a pro rata share of the non-accountable expense
allowance of the Representative (equal to 3% of the gross proceeds derived from
the sale of the Selling Shareholder Shares) and the Representative's discount
from the Offering Price (equal to 7% of the gross proceeds derived
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from the sale of the Selling Shareholder Shares). Selling Shareholder shall be
entitled to receive only the purchase price specified in Section 4.1 for the
Selling Shareholder Shares.
SECTION 4
Issue, Sale and Delivery of the Shares
4.1 Appointment of Representative. The Company hereby agrees to
sell 1,700,000 Shares and the Selling Shareholder agrees to sell 600,000 Shares
to the Members, severally and not jointly, and each Member, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase from the Company, severally
and not jointly, the number of Shares set forth opposite their respective names
in Schedule I attached hereto at a purchase price of $____ per Share. The
Company hereby grants to the Underwriting Group an over-allotment option for a
period of thirty (30) days after the Effective Date to purchase at a purchase
price of $____ per Share up to 345,000 additional Shares of Common Stock. Such
Shares shall be purchased for the account of each Member as nearly as
practicable in the proportion that the number of Shares set opposite the name
of each of the Members in Schedule I attached hereto bears to the 2,300,000
Shares purchased prior to the exercise of the over-allotment option. The
obligations of the Members hereunder are subject to, among other things: (a)
notice from the Commission of effectiveness of the Registration Statement; (b)
receipt of written advice from the NASD, pursuant to Section 1 of Article III
of the NASD's Rules of Fair Practice, approving the fairness and reasonableness
of the underwriting arrangements in connection with the sale of the Shares; (c)
qualification of the sale of the Shares under applicable state laws and the
absence of any action by any government body, agency or official prohibiting
the sale of the Shares; and (d) the terms and conditions contained in this
Agreement and in the Registration Statement and Prospectus covering the sale of
the Shares to which this Agreement relates.
4.2 Default by a Member. If for any reason one or more Members
shall fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 10 hereof) to
purchase and pay for the number of Shares agreed to be purchased by such
Member, the Company shall immediately give notice thereof to the
Representative, and the non-defaulting Members shall have the right within
twenty-four (24) hours after the receipt by the Representative of such notice,
to purchase or procure one or more other Members to purchase, in such
proportions as may be agreed upon between the Representative and such
purchasing Member or Members, and upon the terms herein set forth, the Shares
which such defaulting Member or Members agreed to purchase. If the non-
defaulting Members fail to make such arrangements with respect to all such
Shares, the number of Shares which each non-defaulting Member is otherwise
obligated to purchase under the Agreement shall be automatically increased pro
rata to absorb the remaining Shares which the defaulting Member or Members
agreed to purchase; provided, however, that the non-defaulting Members shall
not be obligated to purchase the Shares which the defaulting Member or Members
agreed to purchase if the aggregate number of such Shares exceeds ten percent
(10%) of the total number of Shares which all Members agreed to purchase
hereunder. If the total number of
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Shares which the defaulting Member or Members agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within twenty-four (24) hours next succeeding the
twenty-four (24) hour period above referred to, to make arrangements with other
underwriters or purchasers satisfactory to the Representative for the purchase
of such Shares on the terms herein set forth. In any such case, either the
Representative or the Company shall have the right to postpone the Closing
determined as provided in Section 4.6 hereof for not more than seven (7)
business days after the date originally fixed as the Closing pursuant to said
Section in order that any necessary changes in the Registration Statement, the
Prospectus or any other documents or arrangements may be made. If neither the
non-defaulting Members nor the Company shall make arrangements within the
twenty-four (24) hour periods stated above for the purchase of all the Shares
which the defaulting Member or Members agreed to purchase hereunder, this
Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Member and without
any liability on the part of any non-defaulting Member to the Company.
Nothing contained in this Section 4.2 shall relieve any defaulting
Member of its liability, if any, to the Company or to the remaining Members for
damages occasioned by its default hereunder.
4.3 Offering Price. After the Commission notifies the Company
that the Registration Statement has become effective, the Members propose to
offer the Shares to the public at an Offering Price of $____ per Share as set
forth in the Prospectus. The Members may allow such concessions and discounts
upon sales to selected dealers as may be determined from time to time by the
Representative. Payment for the Shares (including Shares included in the over-
allotment option) which the Representative agrees to purchase shall be made to
the Company and to the Selling Shareholder or to their order by certified or
official bank check or checks in the amount of the purchase price by or on
behalf of the Representative at the offices of Xxxxxx & Xxxxxxx LLP in Denver,
Colorado, or by wire transfer in the amount of the purchase price pursuant to
instructions delivered by the Company and Selling Shareholder, upon delivery to
the Representative of certificates for the Shares in definitive form in such
numbers and registered in such names as the Representative shall request in
writing at least two (2) full business days prior to such delivery.
4.4 Principal Terms of Representative's Warrant. Upon payment for
the Shares, at the Closing the Company shall sell and deliver to the
Representative and/or its designees, the Representative's Warrant to purchase
230,000 shares of Common Stock, for a purchase price of $100.00. The
Representative's Warrant shall be in the form attached as Exhibit A hereto and
shall be in form and content acceptable to counsel for the Representative; and
the Representative's Warrant shall evidence the right of the Representative to
purchase 230,000 shares of the Common Stock and shall be exercisable commencing
one (1) year after the Effective Date and for a period of four (4) years
thereafter (such four (4) year period shall be known as the "Representative's
Warrant Period") and shall contain antidilution and adjustment provisions
acceptable to the Representative. The Representative's Warrant shall be
exercisable at an exercise price of $______ per share (120% of the Offering
Price). On the fifth anniversary of the
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Effective Date, the Representative's Warrant shall expire. The Company will
not be obligated to sell and deliver the Representative's Warrant, and the
Representative will not be obligated to purchase and pay for the
Representative's Warrant, except upon payment for the Shares. The
Representative's Warrant to be acquired by the Representative and/or its
designees shall be restricted from sale, transfer, exercise, assignment or
hypothecation for twelve (12) months after the Effective Date, except to
officers of the Representative and to Members and their respective officers or
partners or other designees. Such designation will only be made prior to the
Effective Date if the Representative determines that such designation would not
violate the interpretation of the Board of Governors of the NASD relating to
the review of corporate financing arrangements. The Representative has
disclosed to the Company, and the Company has agreed, that the Representative
may transfer, after twelve (12) months from the date of the Representative's
Warrant, a portion or all of the Representative's Warrant to certain persons,
including, but not limited to, the Representative's officers, directors,
stockholders, employees, or registered representatives. The Representative and
the Company agree that such transfers will only be made if they do not violate
the registration provisions of the 1933 Act. The Representative's Warrant
Stock will be registered by the Company in the Registration Statement.
4.5 Inspection of Certificates. For the purpose of expediting the
checking and packaging of the certificates for the securities comprising the
Shares and the Representative's Warrant, the Company agrees to make the
certificates available for inspection by the Representative at the main office
of the Representative in Denver, Colorado, at least one (1) full business day
prior to the proposed delivery date.
4.6 Closing. The time and date of delivery and payment hereunder
is herein called the "Closing Date". The Company and the Selling Shareholder
will deliver the Shares to the Representative at the offices of Xxxxxx &
Whitney LLP in Denver, Colorado or at such other location as may be specified
by the Representative, at 10:00 a.m. New York time, against payment of the
purchase price, on the third full business day after commencement of the
Offering or, if the Offering commences after 4:30 p.m., New York time, on the
fourth full business day after commencement of the Offering, or such earlier
time as may be agreed upon by the Representative and the Company. Should the
Representative elect to exercise any part of the over-allotment option pursuant
to Section 4.1 hereof, the time and date of delivery and payment for said over-
allotment Shares shall be as mutually agreed, but not later than the thirtieth
(30th) calendar day after the Effective Date. Said date is hereinafter
referred to as the "Over-allotment Closing Date."
4.7 Representative's Expense Allowance. It is understood that the
Company will reimburse the Representative for its expenses on a non-accountable
basis in the amount of three percent (3%) of the gross proceeds from the sale
of the Shares (i.e., $____ per Share), including proceeds from the sale of the
Shares included in the over-allotment option, less a credit to the Company at
Closing of $20,000. In no event shall this expense allowance be refundable or
accountable, except as provided in the next paragraph.
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The Company and the Representative mutually acknowledge that the
Company paid the Representative $20,000 towards the Representative's
nonaccountable expense allowance, and the Representative hereby acknowledges
receipt of such portion of the nonaccountable expense allowance. At the
Closing and, if applicable, on the Over-allotment Closing Date, the Company
shall pay to the Representative the unpaid balance of such expense allowance to
defray the expenses incurred by the Representative in connection with the
Offering. The Representative's expenses shall include, but are not to be
limited to, the fees of Representative's counsel, plus any additional expenses
and fees, travel expenses, postage expenses, duplication expenses, long
distance telephone expenses and other expenses incurred by the Representative
in connection with the proposed sale of the Shares.
4.8 Mutual Warranty. The parties represent and warrant that as of
the date hereof and as of the Closing Date, the representations and warranties
herein contained and the statements contained in all certificates delivered by
any party to another pursuant to this Agreement shall in all respects be true
and correct.
4.9 Sales Reports. The Representative covenants that reasonably
promptly after the Closing Date it will supply the Company with all information
requested in writing by the Company and required from the Representative for
the completion of Form SR as may be required by Rule 463 of Regulation C and
such additional information as the Company may reasonably request to be
supplied to the securities commissions of the states in which the Shares have
been qualified for sale.
4.10 Re-offers By Selected Dealers. On each sale by the
Representative of any of the Shares through such dealers and institutions
agreeing to purchase Shares under the Selected Dealers Agreement with the
Representative (each, a "Selected Dealer"), the Representative shall require
the Selected Dealer purchasing any such Shares to agree to re-offer the same on
the terms and conditions of the Offering set forth in the Registration
Statement and Prospectus.
SECTION 5
Registration Statement and Prospectus
5.1 Representative's Copies. The Company shall deliver to the
Representative, without charge, two (2) signed copies of the Registration
Statement including all financial statements and exhibits and amendments or
supplements thereto as filed with the Commission and shall deliver without
charge to the Representative an additional seven (7) conformed copies of the
Registration Statement and any amendments or supplements thereto, including
such financial statements and exhibits. The signed copies of the Registration
Statement so furnished to the Representative shall include signed copies of any
and all consents and certificates of the independent public accountants
certifying to the financial statements included in the Registration Statement
and Prospectus and signed copies of any and all consents and certificates of
any other person whose profession gives authority to statements made by him and
who is named in the Registration Statement or Prospectus as having prepared,
certified or reviewed any part thereof.
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5.2 Copies of Preliminary Prospectus and Prospectus. Prior to the
Effective Date, the Company shall procure at its expense and shall deliver to
Members and to other broker/dealers, as many printed copies of each Preliminary
Prospectus filed with the Commission bearing the statement required by Rule
481(b)(2) of Regulation C under the 1933 Act as may be required by the
Representative. The Company consents to the use of the same by Members and by
dealers prior to the Effective Date. In addition, on and after the Effective
Date, the Company shall procure at its expense as many printed copies of the
Prospectus at such addresses as the Representative may direct for the purposes
contemplated by this Agreement and shall deliver such printed copies of the
Prospectus within one (1) business day after the Effective Date.
5.3 Post-Effective Amendments. If, during such period of time as
in the opinion of the Representative or its counsel a Prospectus relating to
the sale of the Shares contemplated hereby is required to be delivered under
the 1933 Act, any event occurs or any event known to the Company relating to or
affecting the Company shall occur as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or if it
is necessary at any time after the Effective Date to amend or supplement the
Prospectus to comply with the 1933 Act, the Company shall forthwith notify the
Representative thereof and shall prepare and file with the Commission such
further amendment to the Registration Statement or supplemental or amended
Prospectus as may be required and shall furnish and deliver to the
Representative and to others whose names and addresses are designated by the
Representative, all at the cost of the Company, a reasonable number of copies
of the amended or supplemented Prospectus which, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the Prospectus not misleading in the
light of the circumstances existing when it is delivered to a purchaser or
prospective purchaser and which will comply in all respects with the 1933 Act;
and in the event the Representative shall be required to deliver a Prospectus
ninety (90) days or more after the Effective Date, upon request of the
Representative, the Company shall prepare promptly such Prospectus as may be
necessary to permit compliance with the requirements of Section 10 of the 1933
Act.
5.4 Use of Prospectus. The Company authorizes the Members in
connection with the distribution of the Shares, and all dealers to whom any of
the Shares may be sold to or through the Members to use the Prospectus as from
time to time amended or supplemented in connection with the offering and sale
of the Shares and in accordance with the applicable provisions of the 1933 Act,
the applicable Rules and Regulations and the applicable state securities or
Blue Sky laws.
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SECTION 6
Covenants of the Company
The Company covenants and agrees with the Representative and other
Members that:
6.1 Filing of Amendments. After the date hereof, the Company will
not at any time, whether before or after the Effective Date, file any amendment
or supplement to the Registration Statement or Prospectus, a copy of which
amendment or supplement the Representative shall not previously have been
furnished a reasonable time prior to the proposed filing thereof, and as to
which the Representative or its counsel shall have reasonably objected in
writing on the ground that it is not in compliance with the 1933 Act or the
Rules and Regulations. The Company agrees to supply the Representative's
counsel with the contents of any oral comments and copies of all comments,
correspondence and orders received from the Commission in connection with the
filing of any Registration Statement or amendment or supplement thereto.
6.2 Declaration of Effectiveness. The Company shall use its best
efforts to cause the Registration Statement and any post-effective amendment
subsequently filed to become effective as promptly as practicable, but shall
not obtain an Effective Date or allow the Registration Statement to become
effective without the approval of the Representative. The Company will
promptly advise the Representative, and will confirm such advice in writing:
(1) when the Registration Statement shall have become
effective and when any amendment thereto shall have become effective
and when any amendment of or supplement to the Prospectus shall have
been filed with the Commission;
(2) when the Commission shall make a request or
suggestion for any amendment to the Registration Statement or the
Prospectus or for additional information and the nature and substance
thereof;
(3) of the issuance by the Commission of any order
suspending the effectiveness of the Registration Statement pursuant to
Section 8 of the 1933 Act or of the initiation of any proceeding for
that purpose;
(4) of the happening of any event which, in the judgment
of the Company, makes any material statement in the Registration
Statement or Prospectus untrue or which requires the making of any
change in the Registration Statement or Prospectus in order to make
the statements therein not misleading; and
(5) of the refusal to qualify or the suspension of the
qualification of the Shares for offering or sale in any jurisdiction
or of the institution of any proceeding for any of such purposes.
The Company shall use every reasonable effort to prevent the issuance of any
such order or of any order preventing or suspending such use, to prevent any
such refusal to qualify or any such
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suspension and to obtain as soon as possible a lifting of any such order, the
reversal of any such refusal and the termination of any such suspension.
6.3 Amendments at the Request of the Representative. The Company
shall prepare and file promptly with the Commission, upon the request of the
Representative, such amendments or supplements to the Registration Statement
and Prospectus in form satisfactory to counsel to the Company as, in the
opinion of counsel to the Representative, may be necessary or advisable in
connection with the sale of the Shares and will use its best efforts to cause
the same to become effective as promptly as possible.
6.4 Blue Sky. (1) The Company shall, at its sole cost and expense
and when and as requested by the Representative, apply for and qualify the sale
of the Shares in all states in which the Representative reasonably requests in
order to qualify under such state's Blue Sky laws. The Company agrees that the
Representative will instruct its counsel to make all of the appropriate
filings, and the Company agrees to advance to the Representative the estimated
attorneys' fees of the Representative incurred in connection therewith and to
pay any balance of such fees promptly upon the Representative's request
therefor. The maximum number of Shares to be offered in the entire offering
shall be registered in each state (or if sales will be permitted by exemption
rather than registration, the exemption shall be obtained for such maximum
number of Shares), unless the Representative agrees otherwise in writing. The
Company will advance to the Representative all filing fees for all state
filings. The Company will continue such qualifications in effect so long as
required for the purposes of the sale of the Shares. Copies of the
applications for the registration of securities filed with the various states
shall be supplied to the Company's and Representative's counsel, and copies of
all comments and orders received from the various states will be supplied to
Company's and Representative's counsel. (2) No less than one week prior to the
expected Effective Date of the Registration Statement, and immediately prior to
the release of the Preliminary Prospectus, Representative's counsel shall
prepare and deliver to both parties and other counsel, a Preliminary Blue Sky
Memorandum, including, among other things, all states wherein the proposed sale
of the Shares has been qualified or registered for sale and the number of
Shares registered in any such state, and all states where an exemption from
qualification or registration is available, and the basis thereof. Immediately
prior to the Effective Date of the Registration Statement, counsel who prepared
the Blue Sky filings shall prepare and deliver to both parties and other
counsel a final Blue Sky Memorandum, including, among other things, all states
wherein the offering may be sold to the public and all states where an
exemption from qualification or registration is available, the basis thereof,
and the number of Shares which may be sold in each such state.
6.5 Further Reports. The Company, at its own expense, shall
prepare and give and shall continue to give such financial statements and other
information to the Commission and the proper public bodies of the states in
which the Shares may be qualified as may be required from time to time by the
Commission and such proper public bodies and will furnish the Representative
with copies thereof promptly upon the filing thereof with the Commission or
such proper public bodies.
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6.6 Reports to Representative. During the period of five (5)
years from the Closing Date, the Company shall deliver to the Representative
copies of each annual report of the Company, and also shall deliver to the
Representative:
(1) within ninety (90) days (or such later period for
filing of the Company's Annual Report on Form 10-K as may be permitted
under Rule 12b-25) after the close of each fiscal year of the Company,
a financial report of the Company on a consolidated basis (if
applicable) and a similar financial report of all unconsolidated
subsidiaries, if any, all such reports to include a balance sheet as
of the end of the preceding fiscal year, an income statement, a
statement of cash flow, all to be in reasonable detail and certified
by independent public accountants who may, however, be the regularly
employed independent public accountant of the Company;
(2) within forty-five (45) days (or such later period for
filing of the Company's Quarterly Report on Form 10-Q as may be
permitted under Rule 12b-25) after the end of each quarterly fiscal
period of the Company, other than the last quarterly fiscal period in
any fiscal year, copies of the consolidated (if applicable) income
statement and statement of changes in financial condition for that
period and the balance sheet as of the end of that period of the
Company and the income statement, statement of changes in financial
condition and the balance sheet of each unconsolidated subsidiary, if
any, of the Company for that period, all subject to year-end
adjustment, certified by the principal financial or accounting officer
of the Company;
(3) copies of all other statements, documents or other
information which the Company shall mail or otherwise make available
to any class of its security holders or shall file with the Commission
pursuant to the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act") or otherwise;
(4) copies of all news, press or public information
releases when made; and
(5) subject to such assurances of confidentiality as the
Company may request with respect to any non-public information, upon
request in writing from the Representative, furnish to the
Representative such other information as reasonably may be requested
with reference to the property, business and affairs of the Company.
If the Company shall fail to furnish to the Representative financial
statements as provided in subparagraphs (1) and (2) above within the times
specified, and the Company has not received an extension of such time for
filing or is not in the immediate process of preparing such filing, the
Representative shall have the right to have such financial statements prepared
by independent public accountants of its own choosing and the Company shall
furnish such independent public accountants such data and assistance and access
to such records as they may reasonably require to enable them to prepare such
statements and shall pay their reasonable fees and expenses in preparing the
same.
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6.7 Expenses of Offering. The Company shall pay, whether or not
the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement, including
all expenses incident to the authorization, issuance and delivery of the Shares
and Representative's Warrant, any original issue taxes in connection therewith,
all transfer taxes, if any, incident to the initial sale of the Shares, the
Representative's Warrant and Representative's Warrant Stock, if such sales are
consummated, the initial fees and expenses of the Transfer Agent, if any, the
fees and expenses of the Company's counsel and accountants, the costs and
expenses incident to the preparation, printing and filing under the 1933 Act
and with the NASD of the Registration Statement and Prospectus and any
amendments or supplements thereto, the cost of preparing and filing all
exhibits to the Registration Statement, this Agreement, the Blue Sky
Memorandums and the Questionnaires to officers and directors of the Company for
the obtaining of information for the Registration Statement and Preliminary and
final Prospectus, the cost of printing and furnishing to the Representative
copies of the Registration Statements and copies of the Preliminary and final
Prospectus as herein provided, and the cost of qualifying the Shares under the
state securities or Blue Sky laws as provided in Section 6.4 herein, including
filing fees. In addition to the above, the Company shall also pay all
expenses, up to a maximum of $15,000, incurred in connection with the placement
of a "tombstone" advertisement in the national edition of The Wall Street
Journal, Investor's Business Daily, Investment Dealers Digest and the Rocky
Mountain News or any other periodical determined appropriate by the
Representative, after Closing of the Offering. For a period of twelve (12)
months following the Effective Date, the Company will be responsible for
reasonable travel expenses for visits to or on behalf of the Company by a
representative of the Representative when necessarily occasioned by material
adverse changes or events in the business of the Company. These expenses shall
be paid promptly by the Company upon receipt of a billing from the
Representative. The Company, at its sole expense, shall also make a
representative of its management available for the Representative's corporate
manager's meeting after the completion of the Offering, and the Company shall
be responsible for all reasonable expenses related to such meeting.
6.8 Stockholder Reports. The Company shall, as promptly as
possible after each annual fiscal period, render and distribute reports to its
stockholders which will include audited statements of its operations and cash
flow during such period and its balance sheet as of the end of such period.
6.9 1933 Act Reporting. Within the time during which the
Prospectus is required to be delivered under the 1933 Act, the Company shall
comply at its own expense with all requirements imposed upon it by the 1933
Act, the Rules and Regulations as from time to time in force and any order of
the Commission, so far as is necessary to permit the continuance of offers,
sales and trading of the Shares.
6.10 Use of Proceeds. The Company will apply the net proceeds from
the sale of the Shares solely and exclusively in the manner set forth in the
Registration Statement and Prospectus.
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6.11 Transfer Sheets. The Company shall issue at the Closing
irrevocable instructions to the Transfer Agent to provide the Representative,
for its confidential use and at the Company's expense, reasonable access to its
daily transfer sheets (provided such access does not result in expense to the
Company) and, annually upon request of the Representative to the Transfer Agent
therefor (but more frequently in the event of an investigation requiring the
same or inquiry therefor by the Commission or other government body or agency
or by the NASD), with lists of stockholders of the Company, all for a period of
five (5) years after the Closing Date.
6.12 Information About the Company. The Company shall deliver to
the Representative the documents described in Section 2.20. In addition, at
Closing, the Company shall deliver to the Representative or its counsel,
certificates of good standing in each state where the Company does business,
certificates as to tax status, incumbency or any other certificate or document
which the Representative may reasonably require prior to Closing.
6.13 Due Diligence Investigation. Prior to the Closing Date, the
Company shall cooperate with the Representative in such investigation as it may
make or cause to be made of all the properties, business and operations of the
Company in connection with the sale of the Shares, and the Company shall make
its officers and directors available to the Representative for interrogation,
without cost or expense, in connection therewith, and the Company shall make
available such information in its possession as the Representative may
reasonably request.
6.14 Transfer Agent. During the period three years after the
Closing Date, the Company shall not change or terminate the appointment of the
Transfer Agent pursuant to Section 2.22 hereto, without first obtaining the
written consent of the Representative, which consent shall not be unreasonably
withheld.
6.15 Conditions Precedent. The Company shall use due diligence to
comply or cause to be complied with all conditions precedent to the several
obligations of the Representative specified in this Agreement.
6.16 Sales Reports. If applicable, the Company shall file with the
Commission all required reports on Form SR in accordance with the provisions of
Rule 463 of Regulation C under the 1933 Act and shall provide a copy of each
such report to the Representative and its counsel.
6.17 1934 Act Registration. Simultaneously with a declaration of
effectiveness of the Registration Statement, the Company, at its sole cost and
expense, shall register the Common Stock by filing with the Commission,
pursuant to Section 12(g) of the 1934 Act, a Registration Statement on Form 10,
or Form 8-A, or other appropriate filing, containing such information and
documents as the Commission may specify. Two (2) signed copies of the
Registration Statement on Form 10, or Form 8-A, or other appropriate filing,
including the certified financial statements and other required exhibits, shall
be supplied to the Representative prior to the filing thereof. In addition, any
amendments or supplements as may be made by the Company or required by the
Commission to the Registration Statement on Form 10, or Form 8-A, or other
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appropriate filing, will be furnished to the Representative after the filing
thereof with the Commission. The Company shall thereafter comply with all
periodic reporting and proxy solicitation requirements imposed by the
Commission pursuant to the 1934 Act, so long as the Company is legally required
to do so and shall furnish the Representative promptly with copies of all
materials filed with the Commission pursuant to the 1934 Act or otherwise
furnished to stockholders of the Company. In addition, the Company agrees to
qualify, simultaneously with a declaration of effectiveness of the Registration
Statement, and maintain such qualification with respect to its Common Stock for
listing on the Nasdaq SmallCap Market ("Nasdaq SmallCap"). The Company shall
also maintain its listing and qualification for listing in the Standard &
Poor's Corporation Records so as to afford the availability of secondary
trading under the Blue Sky laws of various states.
6.18 No Material Change. The Company shall not, except as
described in the Prospectus or with approval of the Representative, until (a)
the termination of this Agreement prior to the Closing pursuant to Sections
10.1 or 10.2, or (b) the expiration of ninety (90) days after the Effective
Date, whichever occurs later:
(1) undertake or authorize any change in its capital
structure or authorize or issue or permit any public offering of any
additional shares of its capital stock, except as herein provided;
(2) authorize, create, issue or sell any funded
obligations, notes or other evidences of indebtedness, except in the
ordinary course of business and maturing not more than twelve (12)
months from the date thereof; or
(3) consolidate, merge or form a joint venture with or
into or acquire any other enterprise (whether in the form of a
corporation or otherwise) or create any mortgage or lien upon any of
its properties or assets other than in the ordinary course of
business.
6.19 Bound Volumes. The Company shall supply to the Representative
and the Representative's counsel, at the Company's cost, two sets of bound
transcripts each containing all of the Closing materials within a reasonable
time after the Closing Date, not to exceed six (6) months.
6.20 Financial Consulting Agreement. At the time of Closing, the
Company shall enter into a financial consulting agreement with the
Representative in the form attached hereto as Exhibit B, pursuant to which the
Representative shall receive a consulting fee of $65,000 per annum. The
services of the Representative pursuant to the agreement shall include, but
shall not be limited to, advising the Company in connection with possible
acquisitions, stockholder relations (including the preparation of the annual
report), long term financial planning, corporate reorganizations, expansion and
capital structure and other financial assistance. The term of the consulting
agreement shall be one (1) year commencing at the completion of this Offering.
The
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Representative has been paid $25,000 of this fee and will receive the balance
of $40,000 at the completion of this Offering.
6.21 Restriction on Sale of Securities. Prior to the declaration
of effectiveness of the Registration Statement, the Company will obtain from
the following identified stockholders, and deliver to the Representative,
agreements from said persons concerning restrictions on future sales of
securities owned by them immediately prior to the declaration of effectiveness
of the Registration Statement by the Commission: Selling Shareholder, Xxxx
Xxxxxx, Xxxxxx X. Xxxx, Xxxxxxx X. Xxxx, Xxxxxx Xxxxxx, Xxxx X. Xxxxxx, Xxxxxxx
X. Xxxxxxxx, Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxxxx. All of said agreements
shall be on a form for which prior approval has been obtained from the
Representative, but shall include agreements that such securities and
underlying securities may not be publicly sold during the eighteen (18)-month
period following the Effective Date, without the prior written consent of the
Representative, which shall not be unreasonably withheld; provided, however,
that such securities may be sold during that time period, provided that such
sale or disposition is a privately negotiated transaction, that the purchaser
agrees in writing with the Representative to the provisions of the transferor's
written agreement with the Representative and the disposition is otherwise in
accordance with applicable securities laws. Notwithstanding the foregoing,
the number of shares owned by Xxxx Xxxxxx equal to [100,000] Shares may be sold
at the six-month anniversary of the Effective Date and, subject to certain
agreements with the Company and the Representative, the number of shares owned
by Selling Shareholder equal to [150,000] Shares may be sold at the one year
anniversary of the Effective Date.
6.22 Public Relations Firm. The Company shall engage a public
relations firm, acceptable to the Representative, by the Effective Date of the
Registration Statement.
6.23 Board of Directors. For three years after the Effective Date,
the Company shall give written notice to the Representative of all Board of
Directors' meetings at the time such meeting is called and as such notice is
given to the Company's directors and the Representative shall be entitled to
have an observer attend all such Board of Directors' meetings, with any
expenses paid by the Company. Such observer shall be an affiliate of the
Representative.
SECTION 7
Indemnification
(a) The Company agrees to indemnify and hold harmless the
Representative and each person, if any, who controls the Representative, its
affiliated companies and each of the Representative's and such affiliated
companies' respective officers, directors, agents and controlling persons
(within the meaning of each of Section 20 of the 1934 Act and Section 15 of the
1933 Act) (each of the foregoing, including the Representative, is individually
referred to in this Section 7 as a "Representative" and collectively are
referred to as the "Representative") against any losses, claims, damages or
liabilities, joint or several, brought by a third party, to which such
Representative or each such controlling person may become subject, under the
1933
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Act, the 1934 Act, the common law 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 in the Registration Statement, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto or made orally or in writing
to the Representative or to any representative of a Member, or the omission or
alleged omission to state in the Registration Statement, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
(provided that the Company shall not be liable to the Representative under the
indemnity agreement in this subsection (i) with respect to any Preliminary
Prospectus or Prospectus to the extent that any such loss, claim, damage or
liability (or action in respect thereof) results from the fact that such
Representative sold Common Stock to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Preliminary Prospectus or Prospectus as then amended or supplemented if the
Company has previously furnished copies thereof to such Representative); or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any application or other statement executed by the Company or
based upon written information furnished by the Company and filed in any
jurisdiction in order to qualify the Shares under, or exempt the Shares or the
sale thereof from qualification under, the securities laws of such
jurisdiction, or the omission or alleged omission to state in such application
or statement a 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; and, subject to the provisions this Section 7, will
reimburse the Representative for any legal or other expenses reasonably
incurred by the Representative in connection with investigating, defending or
settling any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of, or is based upon, an
untrue statement, or alleged untrue statement, omission or alleged omission,
made in reliance upon and in conformity with information furnished to the
Company by, or on behalf of, the Representative in writing specifically for use
in the preparation of the Registration Statement or any such post effective
amendment thereof, any such Preliminary Prospectus or the Prospectus or other
application or statement filed under any states' securities, or blue sky, law
or any such amendment thereof or supplement thereto. This indemnity agreement
is in addition to any liability which the Company may otherwise have. Any
losses, claims, damages, liabilities or expenses for which the Representative
is entitled to indemnification under this Section 7 shall be paid by the
Company as such losses, claims, damages or expenses are incurred. At the
election of the Representative, and subject to subsection (d) below, the
Representative may request, and is entitled to receive, from the Company
reimbursement for legal or other expenses reasonably incurred on a monthly
basis, with the effect that the Company will pay in full each detailed invoice
for legal or other expenses incurred by the Representative within 30 days after
the date of presentation thereof by the Representative.
(b) The Selling Shareholder agrees to indemnify and hold
harmless the Representative and each person, if any, who controls the
Representative within the meaning of Section 15 of the Act against any losses,
claims, damages or liabilities, joint or several, to which
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the Representative or each such controlling person may become subject, under
the Act, the Exchange Act, the common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of, or
are based upon any breach or violation of any representation or warranty of the
Selling Shareholder contained in Section 3 of this Agreement; and, subject to
the provisions of paragraph (d) of this Section 7, will reimburse the
Representative and each such controlling person for any legal or other expenses
reasonably incurred by the Representative or controlling person in connection
with investigating or defending against any such loss, claim, damage, liability
or action; provided, however, that the Selling Shareholder will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of, or is based upon, an untrue statement, or alleged untrue
statement, omission or alleged omission, made in reliance upon and in
conformity with information furnished to the Selling Shareholder or the Company
by, or on behalf of, the Representative in writing specifically for use in the
preparation of the Registration Statement or any such post effective amendment
thereof, any such Preliminary Prospectus or the Prospectus or other application
or statement filed under any states' securities, or blue sky, law or any such
amendment thereof or supplement thereto. Provided further that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any untrue statement, alleged untrue statement, omission or alleged omission
made in any Preliminary Prospectus but eliminated or remedied in the
Prospectus, such indemnity agreement shall not inure to the benefit of the
Representative (or to the benefit of any person who controls such
Representative), if the person asserting any loss, claim, damage or liability
purchased the Shares from the Representative which are the subject thereof, was
not sent or given a copy of the Prospectus with, or prior to, the written
confirmation of the sale of such Shares to such person. This indemnity
agreement is in addition to any liability which the Selling Shareholder may
otherwise have. Notwithstanding the foregoing provisions of this Section 7(b),
in no event shall (i) the liability of the Selling Shareholder in respect of
the indemnification obligations hereunder exceed the net proceeds received by
the Selling Shareholder from the sale of the Selling Shareholder Shares, or
(ii) the indemnified party become entitled to indemnification from the Selling
Shareholder unless and until such indemnified party has exhausted all
indemnification and contribution rights that it may have against the Company
under this Agreement. Any losses, claims, damages, liabilities or expenses for
which the Representative is entitled to indemnification under this Section 7
shall be paid by the Selling Shareholder as such losses, claims, damages or
expenses are incurred. At the election of the Representative, and subject to
subsection (d) below, the Representative may request, and is entitled to
receive, from the Selling Shareholder reimbursement for legal or other expenses
reasonably incurred on a monthly basis, with the effect that the Selling
Shareholder will pay in full each detailed invoice for legal or other expenses
incurred by the Representative within 30 days after the date of presentation
thereof by the Representative.
(c) The Representative agrees to indemnify and hold
harmless the Company, each of the Company's directors, each of the Company's
officers who has signed the Registration Statement, each person who controls
the Company within the meaning of Section 15 of the 1933 Act and the Selling
Shareholder against any losses, claims, damages or liabilities, joint or
several, to which the Selling Shareholder, the Company or any such director,
officer, or controlling person may become subject, under the 1933 Act, the 1934
Act, the common law or otherwise,
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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 in the Registration Statement,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state in the Registration
Statement, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any application or other statement
executed by the Company or by the Representative or based upon written
information furnished by the Company or the Representative and filed in any
jurisdiction in order to qualify the Shares under, or exempt the Shares or the
sale thereof from qualification under, the securities laws of such
jurisdiction, or the omission or alleged omission to state in such application
or statement a 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; in each of the above cases to the extent, but only the
extent, that such untrue statement, alleged untrue statement, omission or
alleged omission, was made in reliance upon and in conformity with information
contained in the material set forth under the sections entitled "Underwriting",
"Risk Factors--Possible Volatility of Stock Prices; Xxxxx Stock Rules" and
"Risk Factors--Secondary Trading Market" of the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto; any losses, claims, damages, liabilities or expenses for which the
Company is entitled to indemnification under this Section 7 shall be paid by
the Representative as such losses, claims, damages or expenses are incurred.
This indemnity agreement is in addition to any liability which the
Representative may otherwise have. At the election of the Company, and subject
to subsection (d) below, the Company may request, and is entitled to receive,
from the Representative reimbursement for legal or other expenses reasonably
incurred on a monthly basis, with the effect that the Representative will pay
in full each detailed invoice for legal or other expenses incurred by the
Company within 30 days after the date of presentation thereof by the Company.
(d) Promptly after receipt by an indemnified party under
this Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 7, notify in writing the indemnifying
party of the commencement thereof. The omission to so notify the indemnifying
party will not relieve it from any liability under this Section 7 as to the
particular item for which indemnification is then being sought, unless such
omission so to notify prejudices the indemnifying party's ability to defend
such action. In case any such action is brought against any indemnified party
and the indemnified party notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel who shall be
reasonably satisfactory to such indemnified party; and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 7 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation;
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provided, however, that if, in the reasonable judgment of the indemnified party
or parties, it is advisable for such party or parties and any controlling
persons to be represented by separate counsel by reason of a conflict of
interest of the counsel chosen by the indemnifying party, any indemnified party
shall have the right to employ separate counsel to represent it and other
parties and their controlling persons who may be subject to liability arising
out of any claim in respect of which indemnity may be sought by any party
hereunder, in which event the reasonable fees and expenses of such separate
counsel shall be borne by the indemnifying party. In any such event, the
indemnifying party will not be obligated to pay the fees and expenses of more
than one counsel for the indemnified parties with respect to such claim, unless
either (i) the nature of the claim makes it reasonable to engage counsel in
more than one jurisdiction, or, (ii) in the reasonable judgment of any
indemnified party, a conflict of interest may exist between such indemnified
party and any other indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the reasonable fees and
expense of additional counsel or counsels for the indemnified parties. Any
such indemnifying party shall not be liable to any such indemnified party on
account of any settlement of any claim or action effected without the written
consent of such indemnifying party, which consent shall not be unreasonably
withheld. In the event that an indemnifying party assumes the defense of a
claim in accordance with its obligation to indemnify under this Section 7, it
is understood and agreed that the indemnifying party will thereby assume a
fiduciary duty to the indemnified party to conduct the defense of such claim
consistent with the interests of the indemnified party.
SECTION 8
Effectiveness of Agreement
This Agreement shall become effective the later of (a) the
date and time that this Agreement is executed and delivered by the parties
hereto and (b) at 10:00 a.m., Eastern Daylight Time, on the first full business
day following the Effective Date, or at such earlier time after the Effective
Date as the Representative in its discretion shall first release the Shares for
offering to the public. For purposes of this Section 8, the Shares shall be
deemed to have been released to the public upon release by the Representative
of the publication of a newspaper advertisement relating to the Shares or upon
release of a telegram or a letter offering the Shares for sale to securities
dealers, whichever shall first occur.
SECTION 9
Conditions to the Representative's Obligations
The Representative's obligation to purchase the Shares and to make
payment to the Company hereunder on the Closing Date and on the Over-allotment
Closing Date shall be subject to the accuracy, as of the Closing Date and the
Over-allotment Closing Date, of the representations and warranties on the part
of the Company herein contained, to the performance by the Company of all its
agreements herein contained, to the fulfillment of or compliance by the
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Company with all covenants and conditions hereof, and to the following
additional conditions specified in the subsections of this Section 9.
9.1 Effective Date. The effective date of the Registration
Statement (the "Effective Date") shall occur on or prior to 12:00 noon, Denver,
Colorado time, on __________, ____________________, or such later date as the
Representative may agree to in writing. On or prior to the Closing Date, no
order suspending the effectiveness of the Registration Statement pursuant to
Section 8 of the 1933 Act or otherwise shall have been issued and no proceeding
for that purpose shall have been initiated or threatened by the Commission; any
request for additional information on the part of the Commission or the NASD
shall have been complied with to the satisfaction of the Commission or the
NASD, as the case may be; and neither the Registration Statement, the
Prospectus nor any amendment thereto shall have been filed to which counsel to
the Representative reasonably shall have objected in writing.
9.2 Accuracy of Registration Statement. The Representative shall
not have disclosed in writing to the Company that the Registration Statement or
the Prospectus or any amendment thereof or supplement thereto contains an
untrue statement of a fact which, in the opinion of counsel to the
Representative, is material or omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
9.3 Casualty. Between the date hereof and the Closing Date and
Over-allotment Closing Date, the Company shall not have sustained any loss on
account of fire, explosion, flood, accident, calamity, rebellion, civil
uprising, act of a foreign state, or any other cause of such character as
materially adversely affects its business or property considered as an entire
entity, whether or not such loss is covered by insurance.
9.4 Litigation. Except as set forth in the Registration
Statement, between the date hereof and the Closing Date and the Over-allotment
Closing Date, there shall be no litigation instituted or threatened against the
Company, and there shall be no proceeding instituted or threatened against the
Company before or by any federal or state commission, regulatory body or
administrative agency or other government body, domestic or foreign, wherein an
unfavorable ruling, decision or finding would materially adversely affect the
business, franchises, licenses, permits, operations or financial condition or
income of the Company.
9.5 No Material Change. Except as contemplated herein or as set
forth in the Registration Statement and Prospectus, during the period
subsequent to the Effective Date, and prior to the Closing Date and the Over-
allotment Closing Date: (1) the Company shall have conducted its business in
the usual and ordinary manner as the same was being conducted on the Effective
Date, and (2) except in the ordinary course of its business, the Company shall
not have incurred any liabilities or obligations (direct or contingent) or
disposed of any of its assets or entered into any material transaction or
suffered or experienced any materially adverse change in its condition,
financial or otherwise. At the Closing Date and the Over-allotment Closing
Date, the capital stock and surplus accounts of the Company shall be
substantially the same as at the
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Effective Date, without considering the proceeds from the sale of Shares, other
than as may be set forth in the Registration Statement and Prospectus.
9.6 Review by Representative's Counsel. The authorization of the
Shares and the Representative's Warrant, the Registration Statement, the
Prospectus and all corporate proceedings and other legal matters incident
thereto and to this Agreement shall be reasonably satisfactory in all respects
to the Representative and its counsel, and the Company shall have furnished the
Representative and such counsel such documents as they may have requested to
enable them to evaluate the matters referred to in this Section.
9.7 Opinion of Company Counsel. The Company shall have furnished
to the Representative the opinion, dated the Closing Date and the Over-
allotment Closing Date, addressed to the Representative, of Xxxxx, Xxxxxx &
Xxxxxx LLP and/or such other counsel as may be acceptable to the
Representative, to the effect that, based upon a review by them of the
Registration Statement, Prospectus, the Company's articles of incorporation,
bylaws, and relevant corporate proceedings, an examination of such statutes and
such other investigation by such counsel as they deem necessary to express such
opinion:
(1) The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of its
respective state of incorporation (specifying the same and attaching a
certificate of good standing for each), with full corporate power and
authority to own and operate its properties and to carry on its
business as set forth in the Registration Statement and Prospectus.
(2) The Company is duly qualified and registered to
transact the business in which they are respectively engaged and are
qualified and in good standing in each and every foreign or domestic
jurisdiction in which their ownership of property or their conduct of
business requires such qualification or registration and in which
failure to so qualify would have a material adverse effect upon the
business of the Company.
(3) The Company has an authorized and outstanding
capitalization as set forth in the Registration Statement and
Prospectus; the Shares and the Representative's Warrant conform to the
statements concerning them in the Registration Statement and
Prospectus; the outstanding Common Stock of the Company has been duly
and validly issued and is fully paid and nonassessable and no Common
Stock is subject to any preemptive rights; cumulative voting is not
permitted by the holders of any of the Company's securities; the
Shares, Representative's Warrant, and the shares of Representative's
Warrant Stock issuable upon exercise of the Representative's Warrant,
have been duly and validly authorized and, upon issuance thereof and
payment therefor in accordance with this Agreement, will be duly and
validly issued, fully paid and nonassessable, free and clear of all
liens, encumbrances, equities and claims whatsoever, and will not be
subject to any preemptive rights.
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(4) The Representative's Warrant has been duly and
validly authorized and issued and are valid and binding instruments
enforceable against the Company in accordance with their terms.
(5) A sufficient number of shares of Common Stock have
been duly reserved for issuance as Representative's Warrant Stock upon
exercise of the Representative's Warrant.
(6) The holders of the issued and outstanding shares of
Common Stock are, and the holders of the Shares, Representative's
Warrant Stock and Representative's Warrant (when such securities have
been issued and fully paid for in accordance with the provisions of
the Registration Statement) will be entitled to the rights and
preferences set forth in the certificates representing the same.
(7) No consents, approvals, authorizations or orders of
agencies, officers or other regulatory authorities are necessary for
the valid authorization, issue or sale of the Shares, Representative's
Warrant Stock or Representative's Warrant hereunder, except as
required under the 1933 Act or state Blue Sky or other securities
laws.
(8) The issuance and sale of the Shares, Representative's
Warrant Stock and Representative's Warrant and the consummation of the
transactions herein contemplated and compliance with the terms of this
Agreement will not conflict with or result in a breach of any of the
terms, conditions, or provisions of, or constitute a default under,
the Articles of Incorporation, as amended, or Bylaws of the Company,
as amended, or any note, indenture, mortgage, deed of trust or other
agreement or instrument (however characterized or described) known to
such counsel to which the Company is a party or by which the Company
or any of its property is bound or any existing laws, order, rule,
regulation, writ, injunction or decree known to such counsel of any
government, governmental instrumentality, agency, body, arbitration
tribunal or court, domestic or foreign, having jurisdiction over the
Company or its property.
(9) The Registration Statement and Prospectus have become
effective under the 1933 Act and, to the knowledge of such counsel, no
order suspending the effectiveness of the Registration Statement
pursuant to Section 8 of the 1933 Act or otherwise has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated by the Commission under the 1933 Act or otherwise, and
the Registration Statement and Prospectus and each amendment and
supplement thereto comply as to form in all material respects with the
requirements of the 1933 Act and the Rules and Regulations thereunder
(except that no opinion needs to be expressed as to financial
statements and financial data contained in the Registration Statement
or Prospectus).
(10) The Company owns or holds by valid lease the real and
personal properties as shown in the Registration Statement and
Prospectus and, to the extent such properties are owned by the
Company, they are owned free and clear of all liens,
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encumbrances and equities of record except for those expressly
referred to in the Registration Statement and Prospectus and except
for those as do not in the opinion of counsel adversely affect
materially the value of such assets and except for the lien of current
taxes not then due.
(11) This Agreement has been duly authorized and executed
by the Company and is a valid and binding agreement of the Company.
(12) The Company owns one hundred percent (100%) of all of
the issued and outstanding voting stock of each of the Subsidiaries.
(13) The form of certificate for the Shares is in due and
proper form and complies with all applicable statutory requirements.
(14) Nothing has come to the attention of counsel that all
prior offers and sales of securities by the Company were not exempt
from registration under the Act and were not either registered
pursuant to, or exempt from registration under, all pertinent state
securities, or blue sky, laws.
(15) Since _______, 1995, all prior offers and sales of
securities of the Company were exempt from registration under the Act
and were either registered pursuant to, or exempt from registration
under, all pertinent state securities, or blue sky, laws.
(16) To such counsel's knowledge, there are no pending
legal proceedings relating to trademarks, tradenames or service marks
of the Company, and no such proceedings are threatened or
contemplated.
Such opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement in form satisfactory to the
Representative's counsel as the Representative shall reasonably request. As an
illustration of the foregoing, but not as a limitation thereof, it is expected
that such opinion will cover the ownership by the Company of all licenses
required to conduct their businesses and such matters concerning disclosure of
and compliance with applicable environmental laws or regulations as may be
deemed advisable by the Representative.
In addition to the matters set forth above, such opinion shall also
include a statement to the effect that, although such counsel is not passing
upon and does not assume any responsibility for, the accuracy, completeness or
fairness of any of the statements contained in the Registration Statement or
Prospectus and such counsel makes no representation that it has independently
verified the accuracy, completeness or fairness of such statements, in
connection with such counsel's representation of the Company in the preparation
of the Registration Statement and Prospectus, nothing came to the attention of
such counsel which caused it to conclude that, as of the Effective Date, the
Closing Date or the Over-allotment Closing Date, as the case may be, and
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35
except to the extent that the Preliminary Prospectus anticipates facts true as
of the Effective Date, the Registration Statement or any further amendment
thereto (other than the financial statements and notes thereto and other
financial and statistical data included therein, as to which such counsel need
express no opinion), 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, in light of the circumstances under which they
were made, not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto (other than the financial statements
and notes thereto and other financial and statistical data included therein, as
to which such counsel need express no opinion), contained an untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
9.8 Opinion of Counsel to Selling Shareholder. The Selling
Shareholder shall have furnished to the Representative the opinion, dated the
Closing Date and the Over-allotment Closing Date, addressed to the
Representative, of _________ and/or such other counsel as may be acceptable to
the Selling Shareholder, to the effect that, based upon a review by them of the
Registration Statement, Prospectus, an examination of such statutes and such
other investigation by such counsel as they deem necessary to express such
opinion:
(1) The Agreement has been duly authorized, executed and
delivered by Selling Shareholder and the performance and consummation
of the Agreement by the Selling Shareholder of the transactions
therein contemplated will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any
statute, any agreement or instrument known to us to which the Selling
Shareholder is a party or by which he is bound or to which any of the
property of the Selling Shareholder is subject, or any order, rule or
regulation known to us of any court or governmental agency or body
having jurisdiction over the Selling Shareholder or any of his
properties; an no consent, approval, authorization or order of, or
filing with, any court or governmental agency or body is required for
the consummation of the transactions contemplated by the Agreement in
connection with the sale of the Selling Shareholder Shares thereunder,
except such as have been obtained under the 1933 Act and such as may
be required under any state securities or Blue Sky laws in connection
with the purchase and distribution by the Representative of the
Shares.
(2) Immediately prior to the time of delivery of the
Selling Shareholder Shares to the Representative, the Selling
Shareholder is the sole registered owner of the shares of Common Stock
to be delivered by the Selling Shareholder free and clear of any
claims, liens, encumbrances or security interests of which we are
aware, and, assuming the Representative purchases such shares for
value in good faith and without notice of any adverse claim, upon
delivery of such shares to the Representative and registration of the
Representative in the stock records of the Company, the Representative
will acquire all of the rights of the Selling Shareholder in such
shares free of any adverse claim, lien in favor of the Company and any
restrictions on transfer imposed by the Company.
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Such opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement in form satisfactory to the
Representative's counsel as the Representative shall reasonably request.
9.9 BDO Xxxxxxx, LLP Letter. On the Closing Date and the Over-
allotment Closing Date, the Representative shall have received from BDO
Xxxxxxx, LLP an opinion letter dated the Closing Date and Over-allotment
Closing Date, as applicable, stating that (for this Section 9.9 only,
references to the "Company" shall exclude references to Xxxxxx-Xxxxxxx, Inc.,
dba C. C. & Associates):
(1) They are independent public accountants within the
meaning of the 1933 Act and the Rules and Regulations, and the
response to Item 509 of Regulation S-K as reflected by the
Registration Statement is correct insofar as it relates to them;
(2) In their opinion, the financial statements and
supporting schedules of the Company examined by them at all dates and
for all periods referred to in their opinion letter and included in
the Registration Statement and Prospectus comply as to form in all
material aspects with the applicable requirements of the 1933 Act and
the published Rules and Regulations with respect to registration
statements on Form SB-2;
(3) On the basis of certain indicated procedures (but not
necessarily an examination in accordance with generally accepted
accounting principles), including an examination of the Company's
underlying financial books and records, debt instruments (if any) of
the Company described in the Prospectus, a reading of the latest
available interim unaudited financial statements of the Company,
whether or not appearing in the Prospectus, inquiries to the officers
of the Company and other persons responsible for the Company's
financial and accounting matters, and a reading of the minute books of
the Company, nothing has come to their attention which would cause
them to believe that during the period from the date of the last
audited financial statement, to a specified date not more than five
(5) days prior to the date of such opinion letter:
(a) there has been any material change in the
financial position of the Company not contemplated by and
disclosed in the Prospectus;
(b) there has been any material change in the
capital stock and surplus accounts of the Company or any
payment or declaration of any dividend or other distribution
in respect thereof or exchange therefor or in the debt of the
Company from that shown in its audited balance sheet, in the
Registration Statement and Prospectus, other than as set forth
or contemplated by the Registration Statement and Prospectus;
(c) there have been any material decreases in
working capital or shareholders' equity (deficit) as compared
with amounts shown in the last audited balance sheet included
in the Prospectus; or
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(d) there were any material decreases, as
compared with amounts shown in the last audited balance sheet,
in the cash balance, except in all instances for changes
disclosed in or contemplated by the Registration Statements
and Prospectus; and
(4) On the basis of their examinations referred to in
their opinion letter, report and consent included in the Registration
Statement and Prospectus and the indicated procedures and discussions
referred to in clause (3) above, nothing has come to their attention
which, in their judgment, would cause them to believe or indicate that
(a) the financial statements set forth in the Registration Statement
and Prospectus do not present fairly the financial position and
results of operations of the Company, for the period indicated, in
conformity with generally accepted accounting principles applied on a
consistent basis, and are not in all material respects a fair
presentation of the information purported to be shown, and (b) the
dollar amounts, percentages and other financial information set forth
in the Registration Statement and Prospectus under the captions
"Prospectus Summary", "Risk Factors", "Selected Financial Information"
and "Dilution" are not in agreement with the Company's general ledger,
financial records or computations made by the Company therefrom.
9.10 Xxxxxxxx Xxxxxxx & Xxxx LLP Letter. On the Closing Date and
the Over-allotment Closing Date, the Representative shall have received from
Xxxxxxxx, Cardozo & Xxxx LLP an opinion letter dated the Closing Date and Over-
allotment Closing Date, as applicable, stating that:
(1) They are independent public accountants within the
meaning of the 1933 Act and the Rules and Regulations, and the
response to Item 509 of Regulation S-K as reflected by the
Registration Statement is correct insofar as it relates to them;
(2) In their opinion, the financial statements and
supporting schedules of Xxxxxx-Xxxxxxx, Inc., dba C. C. & Associates
("C.C. & Associates") examined by them at all dates and for all
periods referred to in their opinion letter and included in the
Registration Statement and Prospectus comply as to form in all
material aspects with the applicable requirements of the 1933 Act and
the published Rules and Regulations with respect to registration
statements on Form SB-2;
(3) On the basis of certain indicated procedures (but not
necessarily an examination in accordance with generally accepted
accounting principles), including an examination of C.C. & Associates'
underlying financial books and records, debt instruments (if any) of
C.C. & Associates described in the Prospectus, a reading of the latest
available interim unaudited financial statements of C.C. & Associates,
whether or not appearing in the Prospectus, inquiries to the officers
of C.C. & Associates and other persons responsible for C.C. &
Associates' financial and accounting matters, and a reading of the
minute books of C.C. & Associates, nothing has come to their attention
which would cause them to believe that during the period from the date
of the last
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audited financial statement, to a specified date not more than five
(5) days prior to the date of such opinion letter:
(a) there has been any material change in the
financial position of C.C. & Associates not contemplated by
and disclosed in the Prospectus;
(b) there has been any material change in the
capital stock and surplus accounts of C.C. & Associates or any
payment or declaration of any dividend or other distribution
in respect thereof or exchange therefor or in the debt of C.C.
& Associates from that shown in its audited balance sheet, in
the Registration Statement and Prospectus, other than as set
forth or contemplated by the Registration Statement and
Prospectus;
(c) there have been any material decreases in
working capital or shareholders' equity (deficit) as compared
with amounts shown in the last audited balance sheet included
in the Prospectus; or
(d) there were any material decreases, as
compared with amounts shown in the last audited balance sheet,
in the cash balance, except in all instances for changes
disclosed in or contemplated by the Registration Statements
and Prospectus; and
(4) On the basis of their examinations referred to in
their opinion letter, report and consent included in the Registration
Statement and Prospectus and the indicated procedures and discussions
referred to in clause (3) above, nothing has come to their attention
which, in their judgment, would cause them to believe or indicate that
(a) the financial statements set forth in the Registration Statement
and Prospectus do not present fairly the financial position and
results of operations of C.C. & Associates, for the period indicated,
in conformity with generally accepted accounting principles applied on
a consistent basis, and are not in all material respects a fair
presentation of the information purported to be shown, and (b) the
dollar amounts, percentages and other financial information set forth
in the Registration Statement and Prospectus under the captions
"Prospectus Summary", "Risk Factors", "Selected Financial Information"
and "Dilution" are not in agreement with C.C. & Associates' general
ledger, financial records or computations made by C.C. & Associates
therefrom.
9.11 Officer's Certificate. The Company shall have furnished to
the Representative a certificate of the President and Chief Financial Officer
of the Company, and attested by its Secretary, dated the Closing Date and the
Over-allotment Closing Date, to the effect that:
(1) There is no litigation, arbitration, claim by any
current or former employee or any form of regulatory proceeding
instituted or threatened against the Company of a character required
to be disclosed in the Registration Statement and
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Prospectus which is not disclosed; and there is no material contract
required to be filed as an exhibit to the Registration Statement which
has not been so filed.
(2) The representations and warranties of the Company in
this Agreement are true and correct at and as of the date of the
certificate; the Company has complied with all of its agreements
herein contained; no stop order suspending the effectiveness of the
Registration Statement pursuant to Section 8 of the 1933 Act or
otherwise has been issued at or before the date of the certificate and
no proceeding for that purpose have been initiated at or before the
date of the certificate and, to the best of their knowledge, no such
proceeding has been threatened by the Commission; and that any request
for additional information on the part of the Commission or NASD (to
be included in the Registration Statement or the Prospectus or any
amendment or supplement thereto or otherwise) has been complied with
to the reasonable satisfaction of counsel for the Representative and
no amendment or supplement to the Registration Statement or Prospectus
has been filed to which counsel for the Representative has reasonably
objected after adequate notice.
(3) There has been no material adverse change in the
general affairs of the Company, financial or otherwise, except as
disclosed or indicated in the Registration Statement and Prospectus.
(4) Since the Effective Date, there has not been any
material transaction entered into by the Company other than in the
ordinary course of business.
(5) There are no material direct or indirect contingent
liabilities or obligations of the Company not disclosed in the
Registration Statement and Prospectus.
(6) Since the Effective Date, the Company has not
sustained any loss on account of fire, flood, accident or other
calamity of such character as to interfere materially with the
continuous operation of the Company's business or which materially
adversely affects the financial position or business of the Company
regardless of whether or not such loss shall have been insured.
(7) The Company is not delinquent in the filing of any
federal, state or municipal or other local, state or municipal taxes
required to be reported and paid; to the best of their knowledge
(after diligent investigation in connection therewith) there is no
proposed redetermination or reassessment of such taxes adverse to the
Company; and the Company has paid or provided for, by adequate
reserves, all known tax liabilities.
(8) This Agreement, the consummation of the transactions
herein contemplated and the fulfillment of the terms hereof will not
result in a breach by the Company of any term of, or constitute a
default under, any indenture, mortgage, lease, deed of trust, bank
loan or credit agreement or any other agreement or undertaking
(however characterized or described) of the Company, including by way
of specification
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but not by way of limitation, any agreement or instrument to which the
Company is now a party or pursuant to which it has acquired any right
or obligation by succession or otherwise, and that any existing
agreement materially affecting the Company has been delivered to the
Representative or its counsel.
(9) They have carefully examined the Registration
Statement and Prospectus and, in their opinion, (a) as of the
Effective Date, the statements contained in the Registration Statement
and Prospectus are true and correct and the Registration Statement and
Prospectus do not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not
misleading (such opinion need not be expressed, however, as to any
material contained in the Registration Statement and Prospectus
furnished by the Representative); and (b) since the Effective Date, no
event has occurred which should have been set forth in a supplement to
or amendment of the Registration Statement or Prospectus which has not
been set forth in such supplement or amendment.
(10) At and as of the Effective Date and the date of the
certificate, there are no agreements, understandings or negotiations
in force and effect, in process or contemplated by them or of which
they are aware to the best of their individual and collective
knowledge which, if in force and effect or in process or so
contemplated would be required to be disclosed.
(11) The officers and directors of the Company have not
taken and will not take, directly or indirectly, any action designed
to, or which might reasonably be expected to, cause or result in the
stabilization or manipulation of the price of the Company's Common
Stock to facilitate the sale and resale of the Shares.
9.12 Secretary's Certificate. The Representative shall have
received from the Secretary of the Company a certificate of incumbency, dated
as of the Closing Date, certifying the names, titles and signatures of the
officers authorized to execute, deliver and perform this Agreement. Attached
to such certificate shall be a copy of the Bylaws of the Company and the
resolutions of the Board of Directors of the Company authorizing the execution,
delivery and performance of this Agreement. Such certificate shall also
certify that such resolutions, the Articles of Incorporation of the Company and
the Bylaws of the Company have been validly adopted and have not been amended
or modified, except as described in the Prospectus.
9.13 Selling Shareholder. The Representative shall have received
from the Selling Shareholder a certificate, dated as of the Closing Date, to
the effect that:
(i) The representations and warranties contained
in Section 3 of this Agreement are true and correct with the
same effect as though expressly made as of the Closing Date
and the Selling Shareholder has performed all covenants and
complied with all conditions required by the Agreement on its
part to be
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performed or complied with by it at or prior to the delivery
of the Selling Shareholder Shares and on such date.
(ii) The information set forth in the Registration
Statement and the Prospectus and any amendments or supplements
thereto under the caption "Principal and Selling
Shareholders," insofar as it relates to the Selling
Shareholder, contains all material statements that are
required to be stated therein in accordance with the Act and
the Regulations and conform in all material respects to the
requirements of the Act and the Regulations, and with respect
to such information, neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto
contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
9.14 Opinion of Representative's Counsel. The Representative shall
have received from Xxxxxx & Xxxxxxx LLP, counsel for the Representative, an
opinion dated the Closing Date, with respect to the incorporation of the
Company, the validity of the Shares, the Registration Statement, the
Prospectus, and other related matters as the Representative may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters.
9.15 Tender of Securities. All the Shares being offered by the
Company and the Selling Shareholder and the Representative's Warrant shall be
tendered for delivery in accordance with the terms and provisions of this
Agreement.
9.16 Blue Sky Qualification. The Shares shall be qualified in such
states as determined under paragraph 5.4 above and each qualification shall be
in effect and not subject to any stop order or other proceeding on the Closing
Date.
9.17 Approval of Representative's Counsel. All opinions, letters,
certificates and documents mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative, whose
approval shall not be unreasonably withheld.
9.18 Officer's Certificate as a Company Representation. Any
certificate signed by an officer of the Company and delivered to the
Representative or to counsel for the Representative will be deemed a
representation and warranty by the Company to the Representative as to the
statements made therein.
9.19 NASDAQ Listing. The Company's Shares must be qualified for
listing on Nasdaq SmallCap on the Effective Date of the Registration Statement.
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9.20 Board Committees. A compensation committee, which shall
consist of at least two (2) independent outside board members, shall be formed
to review executive compensation and make recommendations to the Board of
Directors on an as needed basis. An audit committee of the Board of Directors
shall be formed consisting of at least two independent outside directors. Such
audit committee shall be charged with reviewing all systems and making
recommendations for corrective actions to the Board of Directors on an as
needed basis.
SECTION 10
Termination
10.1 Termination by Representative. This Agreement may be
terminated by Representative by notice to the Company in the event the Company
shall have failed or been unable to comply with any of the terms, conditions,
representations, warranties, covenants or other provisions of this Agreement on
the part of the Company to be performed, complied with or fulfilled within the
respective times herein provided for, unless compliance therewith or
performance or satisfaction thereof shall have been expressly waived by
Representative in writing.
10.2 Termination by Representative--"Market Out". This Agreement
may be terminated by Representative by notice to the Company at anytime if, in
the sole judgment of the Representative, payment for and delivery of the Shares
is rendered impracticable or inadvisable because of: (a) material adverse
changes in the Company's business, business prospects, management, earnings,
properties or conditions, financial or otherwise; (b) any action, suit or
proceedings, threatened or pending, at law or equity against the Company, or by
any federal, state or other commissions, board or agency wherein any
unfavorable result or decision could materially adversely affect the business,
business prospects, properties, financial condition, income or earnings of the
Company; (c) additional material governmental restrictions not in force and
effect on the date hereof shall have been imposed upon the trading in
securities generally, or minimum or maximum prices shall have been generally
established on a registered securities exchange, or trading in securities
generally on any such exchange shall have been suspended, or a general
moratorium shall have been established by federal or state authorities; (d)
substantial and material changes in the condition of the market beyond normal
fluctuations are such that it would be undesirable, impracticable or
inadvisable in the judgment of the Representative to proceed with this
Agreement or with the offering; (e) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
emergency if, in the judgment of the Representative, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it impractical
or inadvisable to proceed with completion of the sale of and payment for the
Shares; (f) the NASDAQ Stock Market, Inc. notifies the Company that the Shares
will not be listed for trading on Nasdaq SmallCap as required under this
Agreement; or (g) any suspension of trading in the common stock of the Company
in the over-the-counter market or the interruption or termination of quotations
of the Shares on the NASDAQ System.
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10.3 Survival of Obligations After Termination. Any termination of
this Agreement under Section 10.1 or 10.2 shall be without liability of any
nature whatsoever (including, but not limited to, loss of anticipated profits
or consequential damages) on the part of either party hereto, except that the
Company shall remain obligated to pay the costs and expenses provided to be
paid by it specified in Section 6.7 (subject to the limitation which entitles
the Representative to return or be paid only the accountable out-of-pocket
expenses described therein); and the Company and the Representative shall be
obligated to pay, respectively, all losses, claims, demands, liabilities and
expenses under Section 7.
10.4 Suspension Proceedings. It is understood that the Company and
the Representative will each advise the other party immediately and confirm in
writing the receipt of any threat of or the initiation of any steps or
procedures which would impair or prevent the right to offer any of the
Company's Shares or the issuance of any "suspension orders" or other
prohibitions preventing or impairing the proposed offering by the Commission or
other regulatory authority.
SECTION 11
Representative's Representations and Warranties
The Representative represents, warrants and agrees with the Company
that:
11.1 Registration as Broker-Dealer. The Representative is
registered as Broker/Dealers with the Commission and are registered as
Broker/Dealers in the State of Colorado and are members in good standing of the
NASD.
11.2 No Pending Proceedings. Except as otherwise disclosed in the
Registration Statement, there is not now pending or threatened against such
Representative any material action or proceeding of which such Representative
has been advised, either in any court of competent jurisdiction, before the
Commission or before any state securities commission concerning such
Representative's activities as brokers or dealers that is material to this
offering, nor has such Representative been named as a "cause" in any such
action or proceeding.
11.3 Finder. The Representative represents that no finder's fee
has been or will be paid in connection herewith. It is understood that should
a claim for finder's fee in connection with the sale of the Shares be made, the
Representative will indemnify the Company with respect to any such claim.
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44
SECTION 12
Notices
All notices, demands or requests required or authorized hereunder
shall only be deemed given sufficiently if in writing and hand delivered by
messenger or courier service or sent by registered mail or certified mail,
return receipt requested and postage prepaid, in the case of the
Representative:
Xxxxxxxxx Xxxx & Co., Inc.
0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, President
with a copy to:
Xxxxxx & Whitney LLP
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
and, in the case of the Company:
NHancement Technologies Inc.
0000 Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Secretary
with a copy to:
Xxxxx, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
and, in the case of the Selling Shareholder:
Xxxxx Xxxxxxxxx
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx Xxxxxxx, XX 00000
Any such notice shall be deemed effectively given on the earlier of
the date of actual receipt or the second business day after delivered,
telecopied, or deposit of the notice with the United States Postal Service.
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45
SECTION 13
Miscellaneous
13.1 Sole Benefit. This Agreement is made solely for the benefit
of the Company, the Representative, the Selling Shareholder, other Members,
their respective officers and directors and any controlling person thereof
within the meaning of Section 15 of the 1933 Act and their respective
successors and assigns; and no other person shall acquire or have any right
under or by virtue of this Agreement. The terms "successors" or "successors
and assigns" shall not under any circumstance include any purchaser, as such
purchaser, of the Shares from any person or of any of the Representative's
Warrant or shares of the Representative's Warrant Stock from any person unless
otherwise expressly provided herein. This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof, and
supersedes all prior agreements and understandings, including, but not limited
to, the Letter of Intent dated September 3, 1996.
13.2 Survival. The respective indemnities, agreements,
representations, warranties, covenants and other statements of the Company or
its officers or directors and of the Representative as set forth in or made
pursuant to this Agreement, and the indemnity agreements of the Company and the
Representative contained in Section 7 hereof shall survive and remain in full
force and effect regardless of: (a) any investigation or inspection made by or
on behalf of the Company or the Representative or any such officer or director
of either of them or any controlling person (within the meaning of Section 15
of the 0000 Xxx) of the Company or of the Representative; (b) delivery of or
payment for the Shares; and (c) the Closing Date.
13.3 Governing Law. This Agreement and all instruments, if any,
delivered in connection herewith or pursuant hereto shall be governed by and
construed in accordance with the substantive laws of the State of Colorado.
13.4 Waiver. All the rights and remedies of either party under
this Agreement are cumulative and are not exclusive of any other rights and
remedies provided by law. Unless expressly stated to the contrary elsewhere
herein, no delay or failure on the part of either party in the exercise of any
right or remedy arising from a breach of this Agreement or any agreement or
instrument executed in connection with this Agreement shall operate as a waiver
of any subsequent right or remedy arising from a subsequent breach of this
Agreement or any agreement or instrument executed in connection with this
Agreement. The consent of any party where required hereunder to any act or
occurrence shall not be deemed to be a consent to any other act or occurrence.
13.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original, but all of which
together shall constitute one and the same instrument.
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46
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose
wherein this letter and your acceptance shall become and evidence a binding
contract between us.
Very truly yours,
NHancement Technologies Inc.,
a Delaware corporation
By:
--------------------------------------
Xxxxxx X. Xxxx, Chairman of the Board,
President and CEO
-----------------------------------------
Xxxxx X. Xxxxxxxxx, Selling
Shareholder
ACCEPTED AND CONFIRMED AS OF THE DAY OF , 1997:
---- ------
Xxxxxxxxx Xxxx & Co., Inc. (for itself and
as representative of Members of the
Underwriting Group)
By:
-------------------------------
Xxxxxxx X. Xxxxxxxxx, President
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47
NHANCEMENT TECHNOLOGIES INC.
SCHEDULE I
This Schedule sets forth the name of each Member referred to in the
above Agreement and the number of Shares to be purchased by each Member.
Name Number of Shares
---- ----------------
-------------------- -------------
--------------------
--------------------
Total
--------------
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