EXHIBIT 1.1
5,000,000 Shares
COLORADO GREENHOUSE HOLDINGS, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
_____________, 1998
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Xxxxx LLC
As Representatives of the
Several Underwriters
c/o BT Alex. Xxxxx Incorporated
Xxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Gentlemen:
Colorado Greenhouse Holdings, Inc., a Delaware corporation (the "Company")
and certain shareholders of the Company (the "Selling Shareholders"), propose to
sell to the several underwriters (the "Underwriters") named in Schedule I hereto
for whom you are acting as representatives (the "Representatives") an aggregate
of 5,000,000 shares of the Company's Common Stock, $.001 par value (the "Firm
Shares"), of which 3,500,000 shares will be sold by the Company and 1,500,000
shares will be sold by the Selling Shareholders. The respective amounts of the
Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto, and the respective amounts to be sold
by the Selling Shareholders are set forth opposite their names in Schedule II
hereto. Certain Selling Shareholders named in Schedule III hereto also propose
to sell at the Underwriters' option an aggregate of up to 750,000 additional
shares of the Company's Common Stock (the "Option Shares") as set forth below.
The Company and the Selling Shareholders are sometimes referred to herein
collectively as the "Sellers."
As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to exercise the over-allotment option in whole
or in
-1-
part for the accounts of the several Underwriters. The Firm Shares and
the Option Shares (to the extent the aforementioned option is exercised) are
herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING SHAREHOLDERS.
--------------------------------------------------------------------------
(a) The Company represents and warrants to each of the Underwriters as
follows:
(i) A registration statement on Form S-1 (File No. 333-______) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462 (b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (a) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (b) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Shares, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary
prospectus included in the Registration Statement prior to the time it becomes
effective is herein referred to as a "Preliminary Prospectus."
(ii) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Each of the subsidiaries
of the Company as listed in Exhibit A hereto (collectively, the "Subsidiaries")
has been duly organized and is validly existing as a corporation or limited
liability company in good standing under the laws of the jurisdiction of its
incorporation or formation, with corporate or other power and authority to own
or lease its properties and conduct its business as described in the
Registration Statement. The Subsidiaries are the only subsidiaries, direct or
indirect, of the Company. The Company and each of the Subsidiaries are duly
qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification. The outstanding shares of capital
stock or membership interests of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable and,
-2-
except to the extent shown in Exhibit A hereto, are owned by the Company or
another Subsidiary free and clear of all liens, encumbrances and equities and
claims; and no options, warrants or other rights to purchase, agreements or
other obligations to issue or other rights to convert any obligations into
shares of capital stock or ownership interests in the Subsidiaries are
outstanding.
(iii) The outstanding shares of Common Stock of the Company,
including all shares to be sold by the Selling Shareholders, have been duly
authorized and validly issued and are fully paid and non-assessable (subject to
consummation of the transactions contemplated by this Agreement in the case of
shares of Common Stock issuable upon automatic conversion of the outstanding
shares of the Company's Preferred Stock); the portion of the Shares to be issued
and sold by the Company have been duly authorized and when issued and paid for
as contemplated herein will be validly issued, fully paid and non-assessable; no
preemptive rights of stockholders exist with respect to any of the Shares or the
issue and sale thereof; and all shares of Common Stock of the Company to be
issued upon conversion of all outstanding shares of the Company's Preferred
Stock as described in the Registration Statement have been duly authorized and,
upon conversion of such Preferred Stock, will be validly issued, fully paid and
non-assessable. Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives rise to
any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock. On the Closing Date
(as hereinafter defined), all then outstanding shares of the Company's Preferred
Stock will be automatically converted into shares of the Company's Common Stock,
in the manner and in the amounts set forth in the Registration Statement; and
the Company has provided all notices, or obtained all waivers of notice, and
taken all other action, necessary to effect such automatic conversion.
(iv) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the description
thereof contained in the Registration Statement. The form of certificates for
the Shares conforms to the corporate law of the jurisdiction of the Company's
incorporation.
(v) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform, to the
requirements of the Act and the Rules and Regulations. The Registration
Statement and any amendment thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact; and do not omit, and will not omit, to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
-3-
conformity with, written information furnished to the Company by or on behalf of
any Underwriter through the Representatives, specifically for use in the
preparation thereof.
(vi) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the results of
operations and cash flows of the Company and the consolidated Subsidiaries, at
the indicated dates and for the indicated periods. Such financial statements
and related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed herein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data included in the Registration Statement present fairly the
information shown therein, and such data have been compiled on a basis
consistent with the financial statements presented therein and the books and
records of the Company.
(vii) Xxxxxx Xxxxxxxx, LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and of the Subsidiaries taken as a whole or to prevent the
consummation of the transactions contemplated hereby, except as set forth in the
Registration Statement.
(ix) The Company and the Subsidiaries have good and marketable title
to all of the properties and assets reflected in the financial statements
described above (or as described in the Registration Statement), subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except those reflected
in such financial statements (or as described in the Registration Statement) or
which are not material in amount. The Company and the Subsidiaries occupy their
leased properties under valid and binding leases conforming in all material
respects to the description thereof set forth in the Registration Statement.
(x) The Company and the Subsidiaries have filed all Federal, State,
local and foreign income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due. All tax
liabilities have been adequately provided for in the financial statements of the
Company.
-4-
(xi) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise), or
prospects of the Company and its Subsidiaries taken as a whole, whether or not
occurring in the ordinary course of business, and there has not been any
material transaction entered into or any material transaction that is probable
of being entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and transactions
described in the Registration Statement, as it may be amended or supplemented.
The Company and the Subsidiaries have no material contingent obligations which
are not disclosed in the Company's financial statements which are included in
the Registration Statement.
(xii) Neither the Company nor any of the Subsidiaries is or with the
giving of notice or lapse of time or both, will be, in violation of or in
default under its Charter or By-Laws or Articles of Organization, as
applicable, or under any agreement, lease, contract, indenture or other
instrument or obligation to which it is a party or by which it, or any of its
properties, is bound and which default is of material significance in respect of
the condition, financial or otherwise of the Company and its Subsidiaries taken
as a whole or the business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and the
Subsidiaries taken as a whole. The execution and delivery of this Agreement and
the consummation of the transactions herein contemplated and the fulfillment of
the terms hereof will not conflict with or result in a breach of any of the
material terms or provisions of, or constitute a material default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or any Subsidiary is a party, or of any of the terms or provisions of
the Charter or By-Laws or Articles of Organization of the Company or any of the
Subsidiaries, as applicable, or any order, rule or regulation applicable to the
Company or any Subsidiary of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(xiv) The Company and each of the Subsidiaries hold all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their businesses as described in the Registration
Statement; and neither the Company nor any of the Subsidiaries has infringed any
patents, patent rights, trade names, trademarks or copyrights, which
infringement is material to the business of the Company and the Subsidiaries
taken as a
-5-
whole. The Company knows of no material infringement by others of patents,
patent rights, trade names, trademarks or copyrights owned by or licensed to the
Company.
(xv) Neither the Company, nor to the Company's knowledge, any of its
affiliates, has taken or may take, directly or indirectly, any action designed
to cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
shares of Common Stock to facilitate the sale or resale of the Shares. The
Company acknowledges that the Underwriters may engage in passive market making
transactions in the Shares on The Nasdaq Stock Market in accordance with Rule
103 under Regulation M of the Exchange Act.
(xvi) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company Act of
1940 and the rules and regulations of the Commission thereunder.
(xvii) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to financial assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xviii) The Company and each of its Subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.
(xix) The Company and each of its Subsidiaries is in compliance in
all material respects with all applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"), except that Forms 5500 for the Company's
401(k) Plan were filed incorrectly for the years 1992 and 1993, and the Company
is in the process of taking appropriate remedial action; no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan" (as
defined in ERISA) for which the Company would have any liability; the Company
has not incurred and does not expect to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the "Code");
and each "pension plan" for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification.
-6-
(xx) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of doing Business with Cuba, and the Company
---------------------------------------------------------
further agrees that if it commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Commission or
with the Florida Department of Banking and Finance (the "Department"), whichever
date is later, or if the information reported or incorporated by reference in
the Prospectus, if any, concerning the Company's business with Cuba or with any
person or affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as appropriate,
in a form acceptable to the Department.
(xxi) The Company and each of its Subsidiaries is in compliance in
all material respects with: (i) all laws governing the production, labeling,
packaging and sale of fresh vegetables and all rules and regulations of the
United States Department of Agriculture, the United States Food and Drug
Administration and state and local governmental agencies relative to enforcement
and administration of such laws; and (ii) all federal laws governing the
employment of immigrants into the United States and all rules and regulations of
the United States Immigration and Naturalization Service relative to enforcement
and administration of such laws.
(b) Each of the Selling Shareholders severally represents and warrants
as follows:
(i) Such Selling Shareholder now has and at the Closing Date and
the Option Closing Date, as the case may be (as such dates are hereinafter
defined), will have good and marketable title to the Firm Shares and the Option
Shares (or to the shares of the Company's Preferred Stock which will be
automatically converted into such Firm Shares or Option Shares on the Closing
Date) to be sold by such Selling Shareholder on such date, free and clear of any
liens, encumbrances, equities and claims, and full right, power and authority to
effect the sale and delivery of such Firm Shares and Option Shares; and upon the
delivery of, against payment for, such Firm Shares and Option Shares pursuant to
this Agreement, the Underwriters will acquire good and marketable title thereto,
free and clear of any liens, encumbrances, equities and claims.
(ii) Such Selling Shareholder has placed in custody under a custody
agreement (the "Custodian Agreement" and, together with all other similar
agreements executed by the other Selling Shareholders, the "Custody Agreements")
with [Trust Co.], as custodian (the "Custodian"), for delivery under this
Agreement, certificates in negotiable form (with signature guaranteed by a
commercial bank or trust company having an office or correspondent in the United
States or a member firm of the New York or American Stock Exchanges)
representing the Firm Shares and the Option Shares to be sold by the Selling
Shareholder hereunder.
(iii) Such Selling Shareholder has duly and irrevocably executed and
delivered a power of attorney (the "Power of Attorney") and, together with all
other similar agreements executed by the other Selling Shareholders, the "Powers
of Attorney") appointing the Custodian, as attorney-in-fact, with full power of
substitution, and with full authority to execute and deliver
-7-
this Agreement and to take such other action as may be necessary or desirable to
carry out the provisions hereof on behalf of the Selling Shareholder.
(iv) Such Selling Shareholder has full right, power and authority to
execute and deliver this Agreement, the Power of Attorney and the Custodian
Agreement and to perform its obligations under such Agreements. The execution
and delivery of this Agreement, the Power of Attorney, the Custodian Agreement
and the consummation by such Selling Shareholder of the transactions herein and
therein contemplated and the fulfillment by such Selling Shareholder of the
terms hereof and thereof will not require any consent, approval, authorization,
or other order of any court, regulatory body, administrative agency or other
governmental body (except as may be required under the Act, state securities
laws or Blue Sky laws) and will not result in a breach of any of the terms and
provisions of, or constitute a default under, organizational documents of such
Selling Shareholder, if not an individual, or any indenture, mortgage, deed of
trust or other agreement or instrument to which such Selling Shareholder is a
party, or of any order, rule or regulation applicable to such Selling
Shareholder of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction.
(v) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has constituted, or
which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Common Stock of the Company and, other than as
permitted by the Act, the Selling Shareholder will not distribute any prospectus
or other offering material in connection with the offering of the Shares.
(vi) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties of the
Company contained herein or the information contained in the Registration
Statement, such Selling Shareholder has no reason to believe that the
representations and warranties of the Company contained in this Section 1 are
not true and correct, is familiar with the Registration Statement and has no
knowledge of any material fact, condition or information not disclosed in the
Registration Statement which has adversely affected or may adversely affect the
business of the Company or any of the Subsidiaries; and the sale of the Firm
Shares and the Option Shares by such Selling Shareholder pursuant hereto is not
prompted by any information concerning the Company or any of the Subsidiaries
which is not set forth in the Registration Statement. The information pertaining
to such Selling Shareholder in the Prospectus is complete and accurate in all
material respects.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
----------------------------------------------
(a) On the basis of the representations, warranties and covenants herein
contained, and subject to the conditions herein set forth, each of the Sellers
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_____ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.
-8-
(b) Each of the Selling Shareholders specifically agrees that the Firm
Shares and Option Shares represented by the certificates held in custody for the
Selling Shareholders under the Custodian Agreement are subject to the interests
of the Underwriters hereunder, that the arrangements made by the Selling
Shareholders for such custody are to that extent irrevocable, and that the
obligations of the Selling Shareholders hereunder shall not be terminable by any
act or deed of the Selling Shareholders (or by any other person, firm or
corporation including the Company, the Custodian or the Underwriters) or by
operation of law (including the death of an individual Selling Shareholder or
the dissolution of a corporate Selling Shareholder) or by the occurrence of any
other event or events, except as set forth in the Custodian Agreement. If any
such event should occur prior to the delivery to the Underwriters of the Firm
Shares or the Option Shares hereunder, certificates for the Firm Shares or the
Option Shares, as the case may be, shall be delivered by the Custodian in
accordance with the terms and conditions of this Agreement as if such event had
not occurred. The Custodian is authorized to receive and acknowledge receipt of
the proceeds of sale of the Shares held by it against delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in same
day funds via wire transfer to the order of the Company for the Shares to be
sold by it and to the order of [Trust Co.], "as custodian" for the Shares to be
sold by the Selling Shareholders, in each case, against delivery of certificates
therefor to the Representatives for the several accounts of the Underwriters.
Such payment and delivery are to be made at the offices of BT Alex. Xxxxx
Incorporated, One Bankers Trust Plaza, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, at 10:00 a.m., Baltimore time, on the third business day after the date
of this Agreement or at such other time and date not later than five business
days thereafter as you and the Company shall agree upon, such time and date
being herein referred to as the "Closing Date." (As used herein, "business day"
means a day on which the New York Stock Exchange is open for trading and on
which banks in New York are open for business and not permitted by law or
executive order to be closed.) The certificates for the Firm Shares will be
delivered in such denominations and in such registrations as the Representatives
request in writing not later than the second full business day prior to the
Closing Date, and will be made available for inspection by the Representatives
at least one business day prior to the Closing Date.
(d) In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Selling
Shareholders listed on Schedule III hereto hereby grant an option to the several
Underwriters to purchase the Option Shares at the price per share as set forth
in the first paragraph of this Section 2. The maximum number of Option Shares
to be sold by the Selling Shareholders is set forth opposite their respective
names on Schedule III hereto. The option granted hereby may be exercised in
whole or in part by giving written notice (i) at any time before the Closing
Date and (ii) only once thereafter within 30 days after the date of this
Agreement, by you, as Representatives of the several Underwriters, to the
Attorney-in-Fact, and the Custodian, with a copy to the Company, setting forth
the number of Option Shares as to which the several Underwriters are exercising
the option, the names and denominations in which the Option Shares are to be
registered and the time and date at which
-9-
such certificates are to be delivered. If the option granted hereby is exercised
in part, the respective number of Option Shares to be sold by each of the
Selling Shareholders listed in Schedule III hereto shall be determined on a pro
rata basis in accordance with the percentages set forth opposite their names on
Schedule III hereto, adjusted by you in such manner as to avoid fractional
shares. The time and date at which certificates for Option Shares are to be
delivered shall be determined by the Representatives but shall not be earlier
than three nor later than 10 full business days after the exercise of such
option, nor in any event prior to the Closing Date (such time and date being
herein referred to as the "Option Closing Date"). If the date of exercise of the
option is three or more days before the Closing Date, the notice of exercise
shall set the Closing Date as the Option Closing Date. The number of Option
Shares to be purchased by each Underwriter shall be in the same proportion to
the total number of Option Shares being purchased as the number of Firm Shares
being purchased by such Underwriter bears to the total number of Firm Shares,
adjusted by you in such manner as to avoid fractional shares. The option with
respect to the Option Shares granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Shares by the Underwriters. You, as
Representatives of the several Underwriters, may cancel such option at any time
prior to its expiration by giving written notice of such cancellation to the
Attorney-in-Fact, with a copy to the Company. To the extent, if any, that the
option is exercised, payment for the Option Shares shall be made on the Option
Closing Date in same day funds via wire transfer to the order of "[Trust Co.],
as Custodian" for the Option Shares to be sold by the Selling Shareholders
against delivery of certificates therefor at the offices of BT Alex. Xxxxx
Incorporated, One Bankers Trust Plaza, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
(e) If on the Closing Date or Option Closing Date, as the case may be, any
Selling Shareholder fails to sell the Firm Shares or Option Shares which such
Selling Shareholder has agreed to sell on such date as set forth in Schedule II
-----------
and Schedule III hereto, the Company agrees that it will sell or arrange for the
------------
sale by one or more of the Selling Shareholders of that number of shares of
Common Stock to the Underwriters which represents the Firm Shares or Option
Shares which such Selling Shareholder has failed to so sell, or such lesser
number as may be requested by the Representatives.
3. OFFERING BY THE UNDERWRITERS.
----------------------------
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public upon the terms
and conditions and at the initial public offering price set forth in the
Prospectus. The Representatives may from time to time thereafter change the
public offering price and other selling terms. To the extent, if at all, that
any Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
-10-
4. Covenants of the Company and the Selling Shareholders.
-----------------------------------------------------
(a) The Company covenants and agrees with the several Underwriters that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.
(ii) The Company will advise the Representatives promptly (A) when
the Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (D) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its reasonable best efforts
to prevent the issuance of any such stop order preventing or suspending the use
of the Prospectus and to obtain as soon as possible the lifting thereof, if
issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or
before the Closing Date, four signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will deliver
to the Representatives such number of conformed copies of the Registration
Statement (including such number of copies of the exhibits filed therewith
-11-
that may reasonably be requested), and of all amendments thereto, as the
Representatives may reasonably request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act") and
the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Shares as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading, or, if
it is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with the law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(vii) The Company will, for a period of three years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Securities
Exchange Act of 1934, as amended.
(viii) No offering, sale, short sale or other disposition (or
agreement for such) of any shares of Common Stock of the Company or other
securities convertible into or exchangeable or exercisable for shares of Common
Stock or derivative of Common Stock will be made for a period of 180 days after
the date of this Agreement, directly or indirectly, by the Company otherwise
than hereunder or with the prior written consent of BT Alex. Xxxxx Incorporated,
except that the foregoing shall not apply to: (i) shares issued in any
acquisition by the Company, (ii) the Shares and shares or other securities
issued pursuant to employee benefit plans, stock options plans or other employee
compensation plans existing on the date hereof or pursuant to currently
outstanding options, warrants or rights and (iii) shares issued upon exercise of
options granted under the Company's stock option plan described in the
Prospectus.
-12-
(ix) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on The Nasdaq Stock Market (National Market).
(x) The Company has caused each officer, director and Selling
Shareholder to furnish to you, on or prior to the date of this agreement, a
letter or letters, in form and substance satisfactory to the Underwriters,
pursuant to which each such person shall agree not to offer, sell, sell short or
otherwise dispose of any shares of Common Stock of the Company or other capital
stock of the Company, or any other securities convertible, exchangeable or
exercisable for Common Shares or derivative of Common Stock owned by such person
or request the registration for the offer or sale of any of the foregoing (or
as to which such person has the right to direct the disposition of) for a period
of 180 days after the date of this Agreement, directly or indirectly, except
with the prior written consent of BT Alex. Xxxxx Incorporated ("Lockup
Agreements"); provided, however, that transfers pursuant to applicable laws of
--------
descent and distribution and transfers within the person's Family Group (where,
"Family Group") means spouse, siblings and descendants (whether natural or
adopted) and any of such descendant's spouses), to any trust which at the time
of such transfer and at all times thereafter is and remains solely for the
benefit of such person or such person's Family Group, or to any family
partnership, the partners of which consists solely of such person, such person's
Family Group and/or such trusts, shall not be prohibited so long as such
transferee or transferees shall first have executed a letter or letters
containing the prohibitions on transfer referred to above in this paragraph (x).
(xi) The Company shall apply the net proceeds of the sale of the
Firm Shares as set forth in the Prospectus.
(xii) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
(xiii) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.
(xiv) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
(b) Each of the Selling Shareholders covenants and agrees with the several
Underwriters that:
(i) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other capital stock of the Company or
other securities convertible, exchangeable or exercisable for Common Stock or
derivative of Common Stock owned by the Selling Shareholder or request the
registration for the offer or sale of any of the foregoing (or as to which the
Selling Shareholder has the right to direct the disposition of) will be made for
a
-13-
period of 180 days after the date of this Agreement, directly or indirectly,
by such Selling Shareholder otherwise than hereunder or with the prior written
consent of BT Alex. Xxxxx Incorporated, except to the extent permitted by
paragraph (a)(x) of this Section.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations in
lieu thereof).
(iii) Such Selling Shareholder will not take, directly or indirectly,
any action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
5. COSTS AND EXPENSES.
------------------
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company and
the Selling Shareholders; the cost of printing and delivering to, or as
reasonably requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement, the Underwriters'
Invitation Letter, the Listing Application, the Blue Sky Survey and any
supplements or amendments thereto; the filing fees of the Commission; the filing
fee of the NASD relative to its review of the terms of the sale of the Shares by
the Underwriters; the Listing Fee of the Nasdaq Stock Market. Each Selling
Shareholder shall be responsible for the underwriting discounts and commissions
applicable to the Shares being sold by such Selling Shareholder, and, to the
extent, if at all, that any of the Selling Shareholders engage special legal
counsel to represent them in connection with this offering, the fees and
expenses of such counsel shall be borne by such Selling Shareholder. Any
transfer taxes imposed on the sale of the Shares to the several Underwriters
will be paid by the Sellers pro rata. The Sellers shall not, however, be
required to pay for any of the Underwriter's expenses (other than those related
to qualification under NASD regulations); except that, if this Agreement shall
not be consummated because the conditions in Section 6 hereof are not satisfied,
or because this Agreement is terminated by the Representatives pursuant to
Section 11 hereof, or by reason of any failure, refusal or inability on the part
of the Company or the Selling Shareholders to perform any undertaking or satisfy
any condition of this Agreement or to comply with any of the terms hereof on
their part to be performed, unless such failure to satisfy said condition or to
comply with said terms be due to the default or omission of any Underwriter,
then the Company shall reimburse the several Underwriters for their reasonable
out-of-pocket expenses, including fees and disbursements of counsel, reasonably
incurred in connection with investigating, marketing and proposing to market the
Shares or in contemplation of performing their obligations hereunder; but the
Company and the Selling Shareholders shall not in any event
-14-
be liable to any of the several Underwriters for damages on account of loss of
anticipated profits from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
---------------------------------------------
The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company and the
Selling Shareholders contained herein, and to the performance by the Company and
the Selling Shareholders of their covenants and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement and all post-effective amendments thereto
shall have become effective and any and all filings required by Rule 424 and
Rule 430A of the Rules and Regulations shall have been made, and any request of
the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company or the Selling Shareholders, shall be
contemplated by the Commission, and no injunction, restraining order, or order
of any nature by a Federal or state court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the issuance of the
Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Holme Xxxxxxx & Xxxx
LLP, counsel for the Company, dated the Closing Date or the Option Closing Date,
as the case may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; each of the Subsidiaries
has been duly organized and is validly existing as a corporation or limited
liability company in good standing under the laws of the jurisdiction of its
incorporation or formation, with corporate or other power and authority to own
or lease its properties and conduct its business as described in the
Registration Statement; the Company and each of the Subsidiaries are duly
qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification, or in which the failure to qualify
would have a materially adverse effect upon the business of the Company and the
Subsidiaries taken as a whole; and the outstanding shares of capital stock or
membership interests of each of the Subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable and are owned by the
Company or a Subsidiary; and, to the best of such counsel's knowledge, the
outstanding shares of capital stock or membership interests of each of the
Subsidiaries is owned by the Company free and clear of all liens, encumbrances
and equities and claims (except those
-15-
liens and encumbrances shown on Exhibit A hereto), and, to the knowledge of such
counsel, no options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into any shares
of capital stock or membership interests or of ownership interests in the
Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as set
forth under the caption "Capitalization" in the Prospectus; the authorized
shares of the Company's Common Stock have been duly authorized; the outstanding
shares of the Company's Common Stock, including the Option Shares to be sold by
the Selling Shareholders, have been duly and validly issued and are fully paid
and non-assessable (subject to consummation of the transactions contemplated by
the Underwriting Agreement in the case of shares of Common Stock issuable upon
automatic conversion of the outstanding shares of the Company's Preferred
Stock); all of the Shares conform to the description thereof contained in the
Prospectus; the certificates for the Shares, assuming they are in the form filed
with the Commission, are in due and proper form; the Shares to be sold by the
Company pursuant to this Agreement will be validly issued, fully paid and non-
assessable when issued and paid for as contemplated by this Agreement; no
preemptive rights of stockholders exist with respect to any of the Shares or the
issue or sale thereof; all shares of the Company's Common Stock to be issued
upon conversion of all outstanding shares of the Company's Preferred Stock as
described in the Registration Statement have been duly authorized and, upon
conversion of such shares of Preferred Stock, will be validly issued, fully paid
and non-assessable; and as of the consummation of the transactions contemplated
by the Underwriting Agreement, all such shares of Preferred Stock will be
automatically converted into shares of the Company's Common Stock, in the manner
and in the amounts set forth in the Registration Statement, assuming
consummation of the transactions herein contemplated.
(iii) Except as described in or contemplated by the Prospectus, to
the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company, and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Shares or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(iv) The Registration Statement has become effective under the Act
and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act.
-16-
(v) The Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects with the
requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and related schedules contained therein).
(vi) The statements under the captions "Business -- Company
Trademarks," "Management -- Agreements with Executive Officers," "Management --
Stock Option Plan," "Certain Transactions," "Description of Capital Stock" and
"Shares Eligible for Future Sale" in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or matters of law, fairly
summarize in all material respects the information called for with respect to
such documents and matters.
(vii) Such counsel does not know of any contracts or documents
required under the Rules and Regulations to be filed as exhibits to the
Registration Statement or described in the Registration Statement or the
Prospectus which are not so filed or described as required, and such contracts
and documents as are summarized in the Registration Statement or the Prospectus
are fairly summarized in all material respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Charter or By-Laws of the Company, or any
agreement or instrument known to such counsel to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries may
be bound.
(x) This Agreement has been duly authorized, executed and delivered
by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD or as required by State securities
and Blue Sky laws, as to which such counsel need express no opinion) except such
as have been obtained or made, specifying the same.
(xii) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and application
of the net proceeds therefrom as described in the Prospectus, required to
register as an investment company under the 1940 Act.
-17-
In rendering such opinion, Holme Xxxxxxx & Xxxx LLP may rely as to matters
governed by the laws of states other than Colorado and the general corporation
law of the State of Delaware or Federal laws on local counsel in such
jurisdictions, provided that in each case Holme Xxxxxxx & Xxxx LLP shall state
that they believe that they and the Underwriters are justified in relying on
such other counsel. In addition to the matters set forth above, such opinion
shall also include a statement to the effect that nothing has come to the
attention of such counsel which leads them to believe that (i) the Registration
Statement, at the time it became effective under the Act (but after giving
effect to any modifications incorporated therein pursuant to Rule 430A under the
Act) and as of the Closing Date or the Option Closing Date, as the case may be,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, financial schedules and
statistical information therein). With respect to such statement, Holme Xxxxxxx
& Xxxx LLP may state that their belief is based upon the procedures set forth
therein, but is without independent check and verification.
(c) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinions of one or more counsel to
the Selling Shareholders, each dated the Closing Date or the Option Closing
Date, as the case may be, addressed to the Underwriters (and stating that it may
be relied upon by counsel to the Underwriters) to the effect that:
(i) This Agreement has been duly authorized, executed and delivered
on behalf of the Selling Shareholders.
(ii) Each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as required by State
securities and Blue Sky laws as to which such counsel need express no opinion),
to sell, assign, transfer and deliver the portion of the Shares to be sold by
such Selling Shareholder.
(iii) The Custodian Agreement and the Power of Attorney executed and
delivered by each Selling Shareholder is valid and binding.
-18-
(iv) The Underwriters (assuming that they are bona fide purchasers
within the meaning of the Uniform Commercial Code) have acquired good and
marketable title to the Shares being sold by each Selling Shareholder on the
Option Closing Date free and clear of all liens, encumbrances, equities and
claims.
(d) The Representatives shall have received from Piper & Marbury L.L.P.,
counsel for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, substantially to the effect specified in
subparagraphs (ii), (iii), (iv) and (x) of Paragraph (b) of this Section 6,
subparagraph (i) of Paragraph (c) of this Section 6, and that the Company is a
duly organized and validly existing corporation under the laws of the State of
Delaware. In rendering such opinion, Piper & Marbury L.L.P. may rely as to all
matters governed other than by the laws of the State of Maryland or Delaware or
Federal laws on the opinions of counsel referred to in Paragraphs (b) and (c) of
this Section 6. In addition to the matters set forth above, such opinion shall
also include a statement to the effect that nothing has come to the attention of
such counsel which leads them to believe that (i) the Registration Statement, or
any amendment thereto, as of the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to Rule
430A under the Act) as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading, and (ii) the Prospectus, or any supplement thereto, on the date it
was filed pursuant to the Rules and Regulations and as of the Closing Date or
the Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements, in the light of the circumstances
under which they are made, not misleading (except that such counsel need express
no view as to financial statements, financial schedules and statistical
information therein). With respect to such statement, Piper & Marbury L.L.P.
may state that their belief is based upon the procedures set forth therein, but
is without independent check and verification.
(e) You shall have received, on each of the dates hereof, the Closing Date
and the Option Closing Date, as the case may be, a letter dated the date hereof,
the Closing Date or the Option Closing Date, as the case may be, in form and
substance satisfactory to you, of Xxxxxx Xxxxxxxx, LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating that in their opinion the
financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(f) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief
-19-
Financial Officer of the Company to the effect that, as of the Closing Date or
the Option Closing Date, as the case may be, each of them severally represents
as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registration Statement has
been issued, and no proceedings for such purpose have been taken or are, to his
knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company contained in
Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules 424 or
430A under the Act have been made;
(iv) He or she has carefully examined the Registration Statement and
the Prospectus and, in his or her opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration Statement
were true and correct; and such Registration Statement and Prospectus did not
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading; and since the effective date of the Registration Statement, no
event has occurred which should have been set forth in a supplement to or an
amendment of the Prospectus which has not been so set forth in such supplement
or amendment; and
(v) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and the Subsidiaries taken as a whole, whether or not
arising in the ordinary course of business.
(g) The Company and the Selling Shareholders shall have furnished to the
Representatives such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein and
related matters as the Representatives may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq Stock Market (National
Market).
(i) The Lockup Agreements described in Section 4(x) shall be in full force
and effect.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects reasonably satisfactory to the Representatives and to Piper & Marbury
L.L.P., counsel for the Underwriters.
-20-
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company and the Selling Shareholders of such
termination in writing or by telegram at or prior to the Closing Date or the
Option Closing Date, as the case may be.
In such event, the Selling Shareholders, the Company and the Underwriters
shall not be under any obligation to each other (except to the extent provided
in Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS.
--------------------------------------------
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
---------------
(a) The Company and the Selling Shareholders, jointly and severally, agree
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of the Act, against any losses,
claims, damages or liabilities to which such Underwriter or any such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading; and will
reimburse each Underwriter and each such controlling person upon demand for any
legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such loss,
claim, damage or liability, action or proceeding or in responding to a subpoena
or governmental inquiry related to the offering of the Shares, whether or not
such Underwriter or controlling person is a party to any action or proceeding;
provided, however, that the Company and the Selling Shareholders will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement, or omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representatives specifically for use in the
preparation thereof; further provided, however, that the Company and the Selling
Shareholders will not be liable to any Underwriter that failed to deliver a
final prospectus within the time prescribed by the Securities Act if the claim
arises out of an untrue statement or omission in any preliminary Prospectus that
was corrected in the final Prospectus. In no event, however, shall the
liability of any Selling
-21-
Shareholder for indemnification under this Section 8(a) exceed the proceeds
received by such Selling Shareholder from the Underwriters in the offering. This
indemnity agreement will be in addition to any liability which the Company or
the Selling Shareholders may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Shareholders, and each person, if
any, who controls the Company or the Selling Shareholders within the meaning of
the Act, against any losses, claims, damages or liabilities to which the Company
or any such director, officer, Selling Shareholder or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; and will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, Selling Shareholder or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party and
shall pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing,
the indemnifying party shall pay as incurred (or within 30 days
-22-
of presentation) the fees and expenses of the counsel retained by the
indemnified party in the event (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them or (iii) the indemnifying party shall have
failed to assume the defense and employ counsel acceptable to the indemnified
party within a reasonable period of time after notice of commencement of the
action. It is understood that the indemnifying party shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees and expenses of more than one separate firm for all such
indemnified parties. Such firm shall be designated in writing by you in the case
of parties indemnified pursuant to Section 8(a) and by the Company and the
Selling Shareholders in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. In addition, the indemnifying party will
not, without the prior written consent of the indemnified party, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding of which indemnification may be sought hereunder
(whether or not any indemnified party is an actual or potential party to such
claim, action or proceeding) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under Section 8(a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Selling Shareholders on
the one hand and the Underwriters on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law, then each indemnifying party shall contribute
to such amount paid or payable by such indemnified party in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Shareholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholders bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. The
-23-
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Shareholders on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
8(d). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 8(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
-24-
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company and the Selling Shareholders set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers,
the Selling Shareholders or any persons controlling the Company or any of the
Selling Shareholders, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
-----------------------
If on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter shall fail to purchase and pay for the portion of the Shares which
such Underwriter has agreed to purchase and pay for on such date (otherwise than
by reason of any default on the part of the Company or a Selling Shareholder),
you, as Representatives of the Underwriters, shall use your reasonable efforts
to procure within 36 hours thereafter one or more of the other Underwriters, or
any others, to purchase from the Company and the Selling Shareholders such
amounts as may be agreed upon and upon the terms set forth herein, the Firm
Shares or Option Shares, as the case may be, which the defaulting Underwriter or
Underwriters failed to purchase. If during such 36 hours you, as such
Representatives, shall not have procured such other Underwriters, or any others,
to purchase the Firm Shares or Option Shares, as the case may be, agreed to be
purchased by the defaulting Underwriter or Underwriters, then (a) if the
aggregate number of shares with respect to which such default shall occur does
not exceed 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the other Underwriters shall be obligated, severally, in proportion to
the respective numbers of Firm Shares or Option Shares, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Shares or
Option Shares, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate number of shares of
Firm Shares or Option Shares, as the case may be, with respect to which such
default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case
may be, covered hereby, the Company and the Selling Shareholders or you as the
Representatives of the Underwriters will have the right, by written notice given
within the next 36-hour period to the parties to this Agreement, to terminate
this Agreement without liability on the part of the non-defaulting Underwriters
or of the Company or of the Selling Shareholders except to the extent provided
in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option Closing
Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representatives, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter"
-25-
includes any person substituted for a defaulting Underwriter. Any action taken
under this Section 9 shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
10. NOTICES.
-------
All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows: if to the Underwriters, to BT Alex. Xxxxx Incorporated,
One Bankers Trust Plaza, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxx Xxxxxx, Managing Director; with a copy to BT Alex. Xxxxx
Incorporated, Xxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000. Attention: General
Counsel; if to the Company or the Selling Shareholders, to Colorado Greenhouse
Holdings, Inc., 0000 Xxxx Xxxxxx Xxxx 00, Xxxx Xxxxxx, Xxxxxxxx 00000,
Attention: Xxxxx X. Xxxxxxx, Chief Executive Officer; with a copy to Xxxxxxx X.
Xxxxxxx, Holme, Xxxxxxx & Xxxx LLP, 0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxx 00000.
11. TERMINATION.
-----------
This Agreement may be terminated by you by notice to the Sellers as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company and
its Subsidiaries taken as a whole, whether or not arising in the ordinary course
of business; (ii) any outbreak or escalation of major hostilities or declaration
of war or national emergency or other national or international calamity or
crisis or change in economic or political conditions if the effect of such
outbreak, escalation, declaration, emergency, calamity, crisis or change on the
financial markets of the United States would, in your reasonable judgment, make
it impracticable to market the Shares or to enforce contracts for the sale of
the Shares; (iii) trading generally shall have been suspended or materially
limited on or by, as the case may be, any of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq Stock Market, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade; (iv)
the enactment, publication, decree or other promulgation of any statute,
regulation, rule or order of any court or other governmental authority which in
your reasonable opinion materially and adversely affects or may materially and
adversely affect the business or operations of the Company; (v) declaration of a
banking moratorium by United States or New York State authorities, (vi) the
suspension of trading of the Company's Common Stock on the Nasdaq Stock Market
(National Market), or (vii) the taking of any action by any governmental body or
agency
-26-
in respect of its monetary or fiscal affairs which in your reasonable opinion
has or is likely to have a materially adverse effect on the securities markets
in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
----------
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
------------------------------------
The Company, the Selling Shareholders and the Underwriters acknowledge and
agree that the only information furnished or to be furnished by any Underwriter
to the Company for inclusion in any Prospectus or the Registration Statement
consists of the information set forth in the last paragraph on the front cover
page of the Prospectus (insofar as such information relates to the
Underwriters), legends required by Item 502(d) of Regulation S-K under the Act
and the information under the caption "Underwriting" in the Prospectus.
14. MISCELLANEOUS.
-------------
The reimbursement, indemnification and contribution agreements contained in
this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of
any Underwriter or controlling person thereof, or by or on behalf of the Company
or its directors or officers or by or on behalf of the Selling Shareholders, and
(c) delivery of and payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware.
-27-
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Shareholders, the
Company and the several Underwriters in accordance with its terms.
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Shareholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
COLORADO GREENHOUSE HOLDINGS, INC.
By
----------------------------------------
President
Selling Shareholders listed on Schedule II
By
----------------------------------------
[Trust Company]
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. XXXXX INCORPORATED
XXXXXXXXX & XXXXX LLC
As Representatives of the several
Underwriters listed on Schedule I
By: BT Alex. Xxxxx Incorporated
By:
-------------------------
Authorized Officer
-28-
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
BT Alex. Xxxxx Incorporated.....................
Xxxxxxxxx & Xxxxx LLC...........................
---------
Total 5,000,000
=========
-29-
SCHEDULE II
Schedule of Selling Shareholders
Number of Firm Shares
Selling Shareholder to be Sold
------------------- ---------------------
_________
Total 1,500,000
=========
-30-
SCHEDULE III
SCHEDULE OF OPTION SHARES
Maximum Number Percentage of
of Option Shares Total Number of
Name of Seller to be Sold Option Shares
-------------- ---------------- ---------------
_______ ____
Total............ 750,000 100%
======= ====
-31-
EXHIBIT A
MATERIAL SUBSIDIARIES
---------------------
Subsidiary Foreign Qualifications Liens/Encumbrances
---------- ---------------------- ------------------
Colorado Greenhouse, Inc., a Colorado; New Mexico A lien on all assets was
Colorado corporation granted to Colorado Springs
Production Credit Association
("Farm Credit") together with
a pledge of 100% of its
capital stock
CGH Sales, Inc., a Delaware Colorado; California None
corporation
Colorado Greenhouse, LLC, a Colorado A lien on all assets was
Colorado limited liability granted to Colorado
company Greenhouse, Inc. together with
a pledge of 100% of its
membership interests; both the
lien and the pledge
subsequently have been
assigned to Farm Credit
-32-
