UNDERWRITING AGREEMENT
, 1997
Cohig & Associates, Inc.
As Representative of the Several
Underwriters Named in Schedule I Hereto
0000 Xxxxx Xxxxxxxx Xxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Gentlemen:
Creative Host Services, Inc., a California corporation (the "Company"),
hereby confirms its agreement with you (the "Representative") and with the other
Underwriters, including the Representative, named in Schedule I hereto
(hereinafter "the Underwriters") as follows:
SECTION 1
DESCRIPTION OF SECURITIES
The Company proposes to issue and sell to the Underwriters 1,000,000 shares
(the "Shares") of Common Stock, no par value per share (the "Securities"). The
Underwriters propose to purchase 1,000, 000 Shares ("Firm Shares" ) (the "Firm
Securities") at a purchase price of $_______ PER SHARE. The Underwriters shall
also have an option (the "Over-allotment Option") to purchase up to an
additional 150,000 Shares ("Over-allotment Shares" or "Over-allotment
Securities"), as provided in Section 3.1 hereof.
The Company proposes to issue and sell to the Representative and its
designees on the Closing Date (hereinafter defined) for an aggregate purchase
price of $100, warrants (Representative's Warrants) to purchase 100,000 shares
of Common Stock, exercisable at $______ PER SHARE.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Underwriters to enter into this Agreement, the
Company hereby represents and warrants to and agrees with each Underwriter that:
2.1 REGISTRATION STATEMENT AND PROSPECTUS. A registration statement on
Form SB-2 (FILE NO. 333-6722) has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations of the Securities and Exchange Commission
(the "Commission") thereunder, and said registration statement has been filed
with the Commission. Copies of such registration statement and any amendments,
and all forms of the related prospectuses contained therein, have been delivered
to the Representative. Such registration statement, including the prospectus,
Part II, and documents incorporated by reference therein and financial schedules
and exhibits thereto, as amended at the time when it shall become effective, is
herein referred to as the "Registration Statement," and the prospectus included
as part of the Registration Statement on file with the Commission when it shall
become effective or, if the procedure in Rule 430A of the Rules and Regulations
(as defined below) under the Securities Act is followed, the prospectus that
discloses all the information that was omitted from the prospectus on the
effective date pursuant to such Rule, and in either case, together with any
changes contained in any prospectus filed with the Commission by the Company
with your consent after the effective date of the Registration Statement, is
herein referred to as the "Final Prospectus." If the procedure in Rule 430A is
followed, the prospectus included as part of the Registration Statement on the
date when the Registration Statement became effective is referred to herein as
the "Effective Prospectus." Any prospectus included in the Registration
Statement and in any amendments thereto prior to the effective date of the
Registration Statement is referred to herein as a "Preliminary Prospectus." For
purposes of this Agreement, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under the Securities Act.
Included in the Registration Statement are the Firm Securities and the
Over-allotment Securities; 100,000 shares reserved against exercise of the
Representative's Warrants; 800,000 shares of Common Stock to be issued upon
conversion of 800,000 shares of Preferred Stock; and 462,500 Warrants to be
reoffered by certain Selling Shareholders and 462,500 shares of Common Stock
underlying such Warrants; and 35,000 shares of Common Stock issuable upon
exercise of options.
As used in this Agreement, the term "Effective Date" refers to the date the
Commission declares the Registration Statement effective pursuant to Section 8
of the Securities Act.
2.2 ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. The Commission has
not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Securities, and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Securities Act
and the applicable Rules and Regulations and to the best of the Company's
knowledge has not included at the time of filing any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; except that the
foregoing shall not apply to statements in or omissions from any Preliminary
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Representative, or from any Underwriter through
the Representative, specifically for use in the preparation thereof.
When the Registration Statement becomes effective and on the Closing Date
(hereinafter defined), the Registration Statement, the Effective Prospectus (and
on the Closing Date, the Final Prospectus) will contain all statements which are
required to be stated therein in accordance with the Securities Act and the
Rules and Regulations. No such document will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; except that the
foregoing does not apply to information contained in or omitted from the
Registration Statement or the Effective Prospectus or Final Prospectus in
reliance upon written information furnished by the Representative, or by any
Underwriter through the Representative, specifically for use in the preparation
thereof. The Company will not at any time hereafter file any amendments to the
Registration Statement or in accordance with Rule 424(b) of the Rules and
Regulations of which the Representative shall not have been previously advised
in advance of filing or to which the Representative shall reasonably object in
writing.
2.3 FINANCIAL STATEMENTS. Stonefield, Josephson, whose reports appear in
the Effective Prospectus and the Final Prospectus, are, and during the periods
covered by their reports were, independent accountants as required by the
Securities Act and the applicable Rules and Regulations. The financial
statements and schedules (including the related notes) included in the
Registration Statement, any Preliminary Prospectus or the Effective Prospectus
or the Final Prospectus, present fairly the financial position, the results of
operations, and changes in financial position of the entities purported to be
shown thereby at the dates and for the periods indicated; and such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods indicated.
2.4 NO MATERIAL ADVERSE CHANGE. Except as may be reflected in or
contemplated by the Effective Prospectus or the Final Prospectus, subsequent to
the dates as of which information is given in the Effective Prospectus or the
Final Prospectus, and prior to the Closing Date, (a) there shall not have been
any material adverse change in the condition, financial or otherwise, of the
Company or in its business taken as a whole; (b) there shall not have been any
material transaction entered into by the Company other than transactions in the
ordinary course of business; (c) the Company shall not have incurred any
material liabilities, obligations or claims, contingent or otherwise, which are
not disclosed in the Effective Prospectus or the Final Prospectus; (d) except in
the ordinary course of business and with the consent of the Representative,
there shall not have been nor will there be any change in the capital stock or
long-term debt (except current payments) of the Company; and (e) the Company has
not and will not have paid or declared any dividends or other distributions on
its capital stock.
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2.5 NO DEFAULTS. Other than as disclosed in the Effective Prospectus or
the Final Prospectus, the Company is not in any default (which has not been
waived) 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. 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
articles of incorporation, as amended, or by-laws of the Company; any note,
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its property is bound,
other than for which the Company has received a consent or waiver of such
conduct, breach or default or except where such default would not have a
material adverse effect on the business of the Company; 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 governmental
instrumentality, agency or body is not required for the consummation of the
transactions herein contemplated except such as may be required under the
Securities Act or under the securities laws of any state or jurisdiction.
2.6 INCORPORATION AND STANDING. The Company is, and at the Closing Date
(hereinafter defined) and the Over-allotment Closing Date (hereinafter defined)
will be, duly incorporated and validly existing in good standing as a
corporation under the laws of the jurisdiction of its organization, with full
corporate power and corporate authority to own its property and conduct its
business, present and proposed, as described in the Effective Prospectus and the
Final Prospectus; the Company has full corporate power and corporate authority
to enter into this Agreement; is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character or location of
its properties (owned or leased) or the nature of its business makes such
qualification necessary except where the failure to be so qualified would not
have a material adverse effect on the Company; and the Company holds all
material licenses, certificates, and permits from governmental authorities
necessary for the conduct of its business as described in the Effective
Prospectus and Final Prospectus.
2.7 CAPITALIZATION. The Company's authorized and outstanding
capitalization on the Effective Date and on the Closing Date (hereinafter
defined), and on the Over-allotment Closing Date (hereinafter defined) are and
will be as set forth under the caption "Capitalization" in the Effective
Prospectus and the Final Prospectus. The Common Stock, the Warrants, and the
Representative's Options conform to the description thereof contained under the
captions "Description of Securities" and "Underwriting" in the Effective
Prospectus and the Final Prospectus. The outstanding shares of Common Stock
have been, and the Securities, upon issuance and delivery against payment
therefor in the manner described herein, will be, duly authorized and validly
issued, fully paid and nonassessable. No sales of securities have been made by
the Company in violation of the registration or anti-fraud provisions of the
Securities Act or in violation of any other federal law or laws of any state or
jurisdiction.
2.8 LEGALITY OF SECURITIES. The Shares, the Representative's Warrants,
and the Common Stock issuable upon the exercise of the Representative's Warrants
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. There are no preemptive rights or other rights to
subscribe for or to purchase, or any restriction upon the voting or transfer of,
any shares of Common Stock pursuant to the Company's articles of incorporation,
by-laws or other governing documents or any agreement or other instrument to
which the Company is a party or by which it may be bound. Neither the filing of
the Registration Statement nor the offering or sale of the Securities 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. The Representative's Warrants, when sold and delivered, will
constitute valid and binding obligations of the Company enforceable in
accordance with the terms thereof. A sufficient number of shares of Common
Stock of the Company has been reserved for issuance upon exercise of the
Representative's Warrants.
2.9 PRIOR SALES. No unregistered securities of the Company, of an
affiliate or of a predecessor of the Company have been sold within three years
prior to the date hereof, except as disclosed in the Registration Statement.
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2.10 LITIGATION. Except as set forth in the Effective Prospectus and the
Final Prospectus, there is, and at the Closing Date there will be, no action,
suit or proceeding before any court, arbitration tribunal or governmental agency
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 which
would materially affect the properties or assets of the Company.
2.11 REPRESENTATIVE'S WARRANTS. Upon delivery of and payment for the
Representative's Warrants to be sold by the Company as set forth in Section 3.4
of this Agreement, the Representative and designees of the Representative 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 such Representative's Warrants the
requisite power and authority to sell, transfer and deliver such
Representative's Warrants in the manner provided hereunder.
2.12 FINDER. The Company knows of no outstanding claims against it for
compensation for services in the nature of a finder's fee, origination fee or
financial consulting fee with respect to the offer and sale of the Securities
hereunder except as previously disclosed in writing to the Representative.
2.13 EXHIBITS; CONTRACTS; AGREEMENTS. There are no contracts or other
documents which are required to be filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have not
been so filed and each contract to which the Company is a party and to which
reference is made in the Effective Prospectus and the Final Prospectus has been
duly and validly executed by the Company and, to the best of the Company's
knowledge, is in full force and effect in all material respects in accordance
with its terms, and none of such contracts have been assigned by the Company;
and the Company knows of no present situation or condition or fact which would
prevent compliance with the terms of such contracts, as amended to date. Except
for amendments or modifications of such contracts in the ordinary course of
business, the Company has no intention of exercising any right which it may have
to cancel any of its obligations under any of such contracts, and has no
knowledge that any other party to any of such contracts has any intention not to
render full performance under such contracts. All material terms of each
contract, agreement, plan, arrangement or understanding to which the Company is
a party, or to which it may reasonably be expected to become a party, have been
fully disclosed in the Effective Prospectus and Final Prospectus.
2.14 TAX RETURNS. The Company has filed all federal and state tax
returns which are required to be filed by it and has paid all taxes shown on
such returns and on all assessments received by it to the extent such taxes have
become due. All taxes with respect to which the Company is obligated have been
paid or adequate accruals have been set up to cover any such unpaid taxes.
2.15 PROPERTY. Except as otherwise set forth in or contemplated by the
Effective Prospectus and the Final Prospectus, the Company has good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by it, in each case free and clear of all
liens, encumbrances and defects, except such as are described in the Effective
Prospectus and the Final Prospectus or such as do not materially effect the
value of such property and do not interfere with the use made or proposed to be
made of such property by the Company and any real property and buildings held
under lease by the Company are held by it under valid, existing, and enforceable
leases with such exceptions as are not material and do not interfere with the
use made or proposed to be made of such property and buildings by the Company.
2.16 AUTHORITY. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company, except as rights to indemnity hereunder may be limited by federal or
state securities laws or public policy and except as enforceability may be
limited by bankruptcy, insolvency, or similar laws affecting creditors rights
generally and by general equitable principles.
Creative Host Services, Inc.
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2.17 LOCK-UP. The Company has obtained from its President his written
agreement that for a period of one year from the Effective Date he will not,
without the prior written consent of the Representative, sell or otherwise
dispose of any shares of Common Stock of the Company owned directly or
indirectly or beneficially by him. The Company has also obtained a similar
agreement from each Selling Shareholder that he will not sell or otherwise
dispose of any warrants or shares of Common Stock for a period of 270 days.
2.18 USE OF FORM SB-2. The Company is eligible to use Form SB-2 for the
offer and sale of the Securities.
2.19 GOVERNMENTAL COMPLIANCE. The Company is not in violation of any
law, ordinance, governmental rule or regulation or court decree to which it may
be subject which violation might reasonably be expected to have a material
adverse effect on the condition (financial or other), properties, prospective
results of operations or net worth of the Company.
2.20 STABILIZATION. The Company has not taken and may not 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.
2.21 CUSIP NUMBER. The Company has obtained CUSIP numbers for the Common
Stock and the Warrants.
2.22 SUBSIDIARIES. The Company has no Subsidiaries and it has no present
intention of acquiring or forming any subsidiaries, except as disclosed in the
Effective Prospectus or the Final Prospectus.
2.23 BOOKS AND ACCOUNTS. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions in and
dispositions of the assets of the Company. The systems of internal accounting
controls maintained by the Company are sufficient to provide reasonable
assurances that (w) transactions are executed in accordance with management's
general or specific authorization; (x) transactions are recorded as necessary
(A) to permit preparation of financial statements in conformity with generally
accepted accounting principles and (B) to maintain accountability for assets;
and (z) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
2.24 EMPLOYEES. No labor disturbance by the employees of the Company
exists or is imminent; and the Company is not aware of any existing or imminent
labor disturbance by the employees of any principal suppliers, contract
manufacturing organizations, manufacturers, authorized dealers or distributors
that might be expected to result in any material adverse change in the condition
(financial or otherwise), earnings, operations, business or prospects of the
Company, considered as a whole. No collective-bargaining agreement exists with
any of the Company's employees and, to the best knowledge of the Company, no
such agreement is imminent.
2.25 POLITICAL CONTRIBUTIONS. The Company has not, directly or
indirectly, at any time (x) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of law; (y) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or allowed by all applicable
laws; or (z) violated nor is it in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
2.26 ENVIRONMENTAL LIABILITIES. The Company has no liability, known or
unknown, matured or not matured, absolute or contingent, assessed or unassessed,
imposed or based upon any provision of, or has received notice of any potential
liability under, any foreign, federal, state or local law, rule or regulation or
the common law, or any tort, nuisance or absolute liability theory, or under any
code, order, decree, judgment or injunction applicable to the Company relating
to public health or safety, worker health or safety or pollution, damage to or
protection of the environment, including, without limitation, laws relating to
damage to natural resources, emissions, discharges, releases or threatened
releases of hazardous materials into the environment (including, without
limitation, ambient
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air, surface water, ground water, land surface or subsurface strata), or
otherwise relating to the manufacture, processing, use treatment, storage,
generation, disposal, transport or handling of hazardous materials. As used
herein, "hazardous material" includes chemical substances, wastes, pollutants,
contaminants, hazardous or toxic substances, constituents, materials or wastes,
whether solid, gaseous or liquid in nature.
2.27 INVESTMENT COMPANY ACT. The Company is familiar with the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it will not become an "investment
company" within the meaning of the 1940 Act and such rules and regulations.
2.28 INTELLECTUAL PROPERTY RIGHTS. The Company owns or possesses
adequate rights to use all material trademarks, service marks, trade names and
copyrights described or referred to in the Final Prospectus as owned by or used
by any of them, or which are necessary for the conduct of their business as
described in the Final Prospectus; and the Company has received no notice of
infringement of or conflict with asserted rights of others with respect to any
trademarks, service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the business, properties, condition (financial
or otherwise), prospects or results of operations of the Company taken as a
whole.
SECTION 3
PURCHASE AND SALE OF THE SECURITIES
3.1 PURCHASE OF SECURITIES AND OVER-ALLOTMENT OPTION. Subject to the
terms and conditions and upon the basisof the representations and warranties
herein set forth, the Company agrees to issue and sell to the Underwriters, and
each of the Underwriters agrees to purchase from the Company at a price of
$_____ PER SHARE, severally and not jointly, the number of Shares set forth
opposite their respective names in Schedule I hereto. The Underwriters agree
to offer the Shares to the public as set forth in the Final Prospectus.
The Company hereby grants to the Underwriters an option to purchase from
the Company, solely for the purpose of covering over-allotments in the sale of
Firm Securities, all or any portion of the Over-allotment Shares for a period of
forty-five (45) days after the Effective Date at the purchase price set forth
above. The Representative shall notify the Company of its intention to exercise
the Over-allotment Option at least three (3) days prior to such exercise or
exercises.
3.2 SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in its
obligation to purchase the number of Securities which it has agreed to purchase
under this Agreement, the non-defaulting Underwriters shall be obligated to
purchase (pro rata in proportion to the number of Securities set forth opposite
the name of each non-defaulting Underwriter in Schedule I hereto) the total
number of Securities which the defaulting Underwriter agreed but failed to
purchase; except that the non-defaulting Underwriters shall not be obligated to
purchase any of the Securities if the total number of Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase exceeds
9.09% of the total number of Securities, and any non-defaulting Underwriter
shall not be obligated to purchase more than 110% of the number of Securities
set forth opposite its name in Schedule I hereto purchasable by it pursuant to
the terms of Section 3.1; and provided further that the non-defaulting
Underwriters shall not be obligated to purchase any Securities which the
defaulting Underwriter or Underwriters agreed to purchase if such additional
purchase would cause the Underwriter to be in violation of the net capital rule
of the Commission or other applicable law. If the foregoing maximums are
exceeded, the non-defaulting Underwriters, and any other underwriters
satisfactory to the Representative who so agree, shall have the right, but will
not be obligated, to purchase (in such proportions as may be agreed upon among
them) all the Securities. In any such case, the Representative shall have the
right to postpone the Closing determined as provided in Section 3.3.2 hereof for
not more than seven Business Days after the date originally fixed as the Closing
pursuant to said Section 3.3.2 in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
may be made. If the non-defaulting Underwriters or the other underwriters
satisfactory to the Representative do not elect to purchase the Securities which
the defaulting Underwriter or Underwriters agreed but
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failed to purchase, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or the Company except for the payment of
expenses to be borne by the Company and the Underwriters as provided in Section
3.5 and the indemnity and contribution agreements of the Company and the
Underwriters contained in Section 6 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company or to the non-defaulting Underwriters for
damages caused by its default hereunder.
3.3 PUBLIC OFFERING PRICE. After the Commission notifies the Company
that the Registration Statement has become effective, the Underwriters propose
to offer the Firm Securities to the public at an initial public offering price
of $_______ PER SHARE as set forth in the Final Prospectus. The Underwriters
may allow such discounts and concessions upon sales to selected dealers as may
be determined from time to time by the Representative.
3.3.1 PAYMENT FOR SECURITIES. Payment for the Securities
(including any Securities included in the Over-allotment Option which the
Underwriters agree to purchase) shall be made to the Company or its order
by certified or official bank check or checks, in the amount of the
purchase price by or on behalf of the Underwriters at the offices of the
Representative in Englewood, Colorado, upon delivery to the Representative
or its designee of certificates for the Shares in definitive form in such
numbers and registered in such names as the Representative requests in
writing at least three full business days prior to such delivery. At the
request of the Representative, the Company shall deliver the Securities to
the Underwriters through the facilities of The Depository Trust Company or
as otherwise directed.
3.3.2 CLOSING. The time and date of delivery and payment
hereunder is herein called the "Closing Date" and shall take place at the
office of the Representative in Englewood, Colorado, or at such other
location as may be specified by the Representative, on the fourth Business
Day (as hereinafter defined) following the Effective Date; provided,
however, that such date may be extended for not more than an additional
seven business days by the Representative. Should the Underwriters elect
to exercise any part of the Over-allotment Option pursuant to Section 3.1
above, the time and date of delivery and payment for such Over-allotment
Shares shall be the third Business Day following such exercise of the
Over-allotment Option, or each earlier date as may be agreed upon by the
Representative and the Company. Said date is referred to as the
"Over-allotment Closing Date."
3.3.3 INSPECTION OF CERTIFICATES. For the purpose of expediting
the checking and packaging of the certificates for the Securities, if
requested by the Representative, the Company agrees to make the
certificates available for inspection by the Representative at the main
office of the Representative in Englewood, Colorado, at least two full
business days prior to the proposed delivery date.
3.4 SALE OF REPRESENTATIVE'S OPTIONS. On the Closing Date the Company
will sell and deliver to the Representative and its designees, for a purchase
price of $100, Warrants dated as of the date of the Prospectus substantially in
the form filed as an Exhibit to the Registration Statement with such changes
therein, if any, as may be agreed upon by the Company and the Representative,
to purchase 100,000 SHARES AT $______ PER SHARE. The Company shall not be
obligated to sell and deliver the Representative's Warrants, and the
Representative will not be obligated to purchase and pay for the
Representative's Warrants, except upon payment for the Securities pursuant to
Subsection 3.3.1 hereof.
The Representative's Options shall be non-transferable for a period of one
(1) year following the Effective Date except to the Underwriters and their
respective officers or partners. The Representative's Warrants shall also
contain anti-dilution provisions for stock splits, recombinations and
reorganizations, a one-time demand registration provision, a provision to
convert the Warrants into shares of Common Stock in a "cashless exercise,"
customary piggyback registration rights and shall otherwise be in form and
substance satisfactory to the Representative. The Representative's Warrants
will be exercisable during the four year period commencing one (1) year after
the Effective Date.
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3.5 REPRESENTATIVE'S EXPENSE ALLOWANCE. It is understood that the Company
shall reimburse the Representative, for itself alone and not on behalf of the
other Underwriters, for its expenses on a nonaccountable basis in the amount of
three percent (3%) of the gross proceeds from the sale of the Shares, including
proceeds from the sale of the Over-allotment Shares (hereinafter the "Expense
Allowance"). The Representative acknowledges receipt of $15,000 of said Expense
Allowance, and an additional $30,0000 paid pursuant to a corporate consulting
agreement, both of which will be deducted from the Expense Allowance. On the
Closing Date and, if applicable, on the Over-allotment Closing Date, the
Representative shall be entitled to withhold the unpaid balance of such Expense
Allowance. The Representative shall be solely responsible for all expenses
incurred by it in connection with the offering including, but not limited to,
the expenses of its own counsel except as set forth in Section 5.7 hereof.
Notwithstanding the foregoing, if the Registration Statement does not become
effective, or the offering is never commenced after it becomes effective, or if
this Agreement is terminated as provided herein, the Representative will retain
so much of the Expense Allowance which has been or should have been received by
the Representative from the Company as is equal to its actual accountable
out-of-pocket expenses and reimburse the remainder, if any, to the Company,
provided that the amount of reimbursement of such accountable expenses will not
exceed $45,000. The Representative's expenses shall include, but are not to be
limited to, a fee to compensate the Representative for the services and time of
Representative's counsel (internal and external), plus any additional expenses
and fees, including but not limited to, travel expenses, postage expenses,
duplication expenses, confirmation and other record preparation expenses,
long-distance telephone expenses, consultant and investigator expenses and other
expenses incurred by the Representative in connection with the proposed
offering.
3.6 REPRESENTATIONS OF THE PARTIES. The parties hereto respectively
represent that as of the Closing Date the representations herein contained and
the statements contained in all the certificates theretofore or simultaneously
delivered by any party to another, pursuant to this Agreement, shall in all
material respects be true and correct.
3.7 POST-CLOSING INFORMATION. The Representative covenants that
reasonably promptly after the Closing Date, it will supply the Company with all
information required from the Representative which must be supplied to the
Commission, if any, and such additional information as the Company may
reasonably request to be supplied to the securities authorities for such states
in which the Securities have been qualified for sale.
3.8 RE-OFFERS BY SELECTED DEALERS. On each sale by the Underwriters of
any of the Securities to selected dealers, the Representative shall require the
selected dealer purchasing any such Securities to agree to re-offer the same on
the terms and conditions of the offering set forth in the Final Prospectus.
SECTION 4
REGISTRATION STATEMENT AND PROSPECTUS
4.1 DELIVERY OF REGISTRATION STATEMENTS. The Company shall deliver to the
Representative without charge two (2) manually signed copies of the Registration
Statement, including all financial statements and exhibits filed therewith and
any amendments or supplements thereto, and shall deliver without charge to the
Representative ten (10) conformed copies of the Registration Statement and any
amendment or supplement thereto, including such financial statements and
exhibits. The signed copies of the Registration Statement so furnished to the
Representative will include manually signed copies of any and all consents and
certificates of the independent public accountant certifying to the financial
statements included in the Registration Statement and signed copies of any and
all opinions, consents and certificates of any other persons whose profession
gives authority to statements made by them and who are named in the Registration
Statement as having prepared, certified, or reviewed any part thereof.
4.2 DELIVERY OF PRE-EFFECTIVE PROSPECTUS. The Company will cause to be
delivered to the Underwriters and to other broker-dealers, without charge,
prior to the Effective Date, as many copies of each
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Preliminary Prospectus filed with the Commission bearing in red ink the
statement required by Item 501(c)(8) of Regulation S-K (Reg. 229.501(c)(8)) as
may be required by the Representative. The Company consents to the use of such
documents by the Underwriters and by selected dealers prior to the Effective
Date of the Registration Statement.
4.3 DELIVERY OF PROSPECTUS. The Company will deliver, without charge,
copies of the Effective Prospectus and the Final Prospectus at such addresses
and in such quantities as may be required by the Underwriters for the purposes
contemplated by this Agreement and shall deliver said printed copies of the
Effective Prospectus and the Final Prospectus to the Underwriters and to
selected dealers within one business day after the Effective Date.
4.4 FURTHER AMENDMENTS AND SUPPLEMENTS. If during such period of time as
in the opinion of the Representative or its counsel the Final Prospectus is
required to be delivered under the Securities 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 Final 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 Final Prospectus to comply
with the Securities Act, the Company will forthwith notify the Representative
thereof and prepare and file with the Commission such further amendment to the
Registration Statement or supplement the Final Prospectus (at the expense of the
Company) so as to correct such statement or omission or effect such compliance.
The Company 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 as of the date of
such Prospectus, amendment, or supplement, and which will comply in all respects
with the Securities Act. In the event the Underwriters are required to deliver
a Prospectus beyond completion of their participation in the public offering,
upon request the Company will prepare promptly such Prospectus or Prospectuses
as may be necessary to permit continued compliance with the requirements of
Section 10 of the Securities Act.
4.5 USE OF PROSPECTUS. The Company authorizes the Underwriters and all
selected dealers to whom any of the Securities may be sold to use the Effective
Prospectus and the Final Prospectus, as from time to time amended or
supplemented, in connection with the offer and sale of the Securities and in
accordance with the applicable provisions of the Securities Act, the Rules and
Regulations and state Blue Sky or securities laws.
SECTION 5
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Underwriters that:
5.1 OBJECTION OF REPRESENTATIVE TO AMENDMENTS OR SUPPLEMENTS. 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, unless and
until a copy of such amendment or supplement has been furnished to the
Representative a reasonable period of time prior to the proposed filing thereof;
or to which the Representative or counsel for the Representative have reasonably
objected, in writing, on the ground that such amendment or supplement is not in
compliance with the Securities Act or the Rules and Regulations.
5.2 COMPANY'S BEST-EFFORTS TO CAUSE REGISTRATION STATEMENT TO BECOME
EFFECTIVE. The Company will 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, comply with the provisions of and make all requisite
filings with the Commission pursuant to such Rule and to notify the
Representative promptly (in writing, if requested) of all such filings. The
Company shall promptly advise the Representative, and will confirm such advice
in writing (a) when the Registration Statement shall become effective and when
any amendment thereto shall have become effective and
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when any amendment of or supplement to the Effective Prospectus or the Final
Prospectus shall be filed with the Commission; (b) when the Commission makes a
request or suggestion for any amendment to the Registration Statement or the
Effective Prospectus or the Final Prospectus or for additional information and
the nature and substance thereof; and (c) of the happening of any event which in
the judgment of the Company makes any material statement in the Registration
Statement or Effective Prospectus or the Final Prospectus untrue or which
requires the making of any changes in the Registration Statement or the
Effective Prospectus or Final Prospectus in order to make the statements therein
not misleading. The Company shall also promptly notify the Representative, and
confirm such notice in writing, when the Company has knowledge of the issuance
by the Commission of an order suspending the effectiveness of the Registration
Statement pursuant to Section 8 of the Securities Act, suspending or preventing
the use of any Preliminary Prospectus or the Effective Prospectus or Final
Prospectus or suspending the qualification of the Securities for offering or
sale in any jurisdiction, or of the institution of any proceedings for any such
purpose. The Company will use every reasonable effort to prevent the issuance
of any order suspending the effectiveness of the Registration Statement or
refusing or suspending the qualification of the Securities, and to obtain as
soon as possible a lifting of any such suspension order, the reversal of any
such refusal to qualify, and the termination of any such suspension.
5.3 PREPARATION AND FILING OF AMENDMENTS AND SUPPLEMENTS. The Company
agrees to prepare and file promptly with the Commission, upon request of the
Representative, such amendments or supplements to the Registration Statement or
Final Prospectus, in form satisfactory to counsel to the Company, as may be
necessary, in the opinion of counsel to the Representative and of counsel to the
Company; and it shall use its best efforts to cause the same to become effective
as promptly as possible.
5.4 BLUE SKY QUALIFICATION. The Company has used and will use its best
efforts to qualify (blue-sky) the sale of the Securities in those states as may
be agreed upon by the Company and the Representative. Copies of all
applications for the registration of securities and related documents (except
for the Registration Statement and Preliminary or Final Prospectus) filed by the
Representative's counsel with the various states have been supplied to the
Company's counsel, concurrently with their transmission to the various states,
and copies of all comments and orders received from the various states have been
and shall be immediately supplied to the Company's counsel. Immediately prior
to the Effective Date, counsel for the Representative shall advise the
Representative in writing of all states wherein the offering is exempt or has
been registered for sale, canceled, withdrawn or denied, the date of such
event(s) and the number of Securities registered for sale in each such state.
After settlement and closing, the Representative shall notify its counsel of the
number of Securities sold in each such jurisdiction.
5.5 FINANCIAL STATEMENTS. The Company at its own expense will prepare and
give such financial statements and other information to the Commission, or the
proper public bodies of the states in which the Securities may be registered or
qualified, as may be required by them.
5.6 REPORTS AND FINANCIAL STATEMENTS TO THE REPRESENTATIVE. During the
period ending three years from the Closing Date, the Company will deliver to the
Representative copies of each annual report of the Company, and will deliver to
the Representative, within 90 days after the close of each fiscal year of the
Company, a financial report of the Company and its Subsidiaries, if any, on a
consolidated basis, and a similar financial report of all unconsolidated
Subsidiaries, if any. All such reports will include a balance sheet as of the
end of the preceding fiscal year, a statement of operations, a statement of cash
flows and an analysis of shareholders' equity covering such fiscal year, and all
will be in reasonable detail and certified by independent public accountants for
the Company. These requirements will be satisfied if the Company provides to
the Representative copies of its Forms 10-K, Forms 10-Q and Forms 8-K (or other
appropriate forms) when they are filed with the Commission.
If the Company shall fail to furnish the Representative with financial
statements as herein provided, within the times specified herein, the
Representative, after giving reasonable notice of not less than 30 days (and if
the financial statements are not provided within such 30 day period), shall have
the right to have such financial statements prepared by independent public
accountants of its own choosing and the Company agrees to furnish such
independent public accountants such data and assistance and access to such
records as they may reasonably require to enable them to prepare such statements
and to pay their reasonable fees and expenses in preparing the same.
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During the period ending three years from the Closing Date the Company
shall also provide to the Representative 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 which it shall file with the
Commission; and, upon request in writing from the Representative, the Company
shall furnish to the Representative such other information as may reasonably be
requested and which may be properly disclosed to the Representative with
reference to the property, business and affairs of the Company and its
Subsidiaries, if any; provided such written request includes an agreement to
keep confidential any information which should not be disclosed to the public.
5.7 EXPENSES PAID BY THE COMPANY. The Company will pay or cause to be
paid, whether or not the transactions contemplated hereunder are consummated or
the Registration Statement is prevented from becoming effective or this
Agreement is terminated, (a) all expenses (including stock transfer taxes)
incurred in connection with the delivery to the several Underwriters of the
Securities; (b) all fees and expenses (including, without limitation, fees and
expenses of the Company's accountants and counsel, but excluding fees and
expenses of counsel for the Underwriters other than those described in (9)
below) in connection with the preparation, printing, filing, delivery and
shipping of the Registration Statement (including financial statements therein
and all amendments and exhibits thereto), each Preliminary Prospectus, the
Effective Prospectus and the Final Prospectus as amended or supplemented, and
the printing, delivery and shipping of this Agreement and other underwriting
documents, including Underwriter's Questionnaires, Underwriters' Powers of
Attorney, Blue Sky Memoranda, Agreements Among Underwriters, and Selected Dealer
Agreements; (c) the filing fee of the National Association of Securities
Dealers, Inc.; (d) any applicable listing fees; (e) the cost of printing
certificates representing the Shares and Warrants; (f) the cost and charges of
any transfer agent or registrar, and the Warrant agent; (g) the fees and
expenses of the Representative's counsel for qualifying the Securities under the
blue sky laws of various jurisdictions; and (h) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
provided for in this Section. It is understood, however, that, except as
provided in this Section, the Underwriters shall pay all of their own costs and
expenses, including the fees of their counsel, stock transfer taxes on resale of
any of the Securities by them, and any advertising expenses connected with any
offers they may make.
5.8 REPORTS TO SHAREHOLDERS. During the period ending five years from
the Closing Date the Company will, as promptly as possible, but not later than
180 days after the end of its annual fiscal year, render and distribute reports
to its shareholders which will include audited statements of its operations and
cash flows during such period and its balance sheet as of the end of such
period, as to which statements the Company's independent certified public
accountants shall have rendered an opinion.
5.9 SECTION 11(a) FINANCIALS. The Company will make generally available
to its security holders and will deliver to the Representative, as soon as
practicable, an earnings statement (as to which no opinion need be rendered but
which will satisfy the provisions of Section 11(a) of the Securities Act)
covering a period of at least 12 months beginning after the Effective Date.
Compliance by the Company with Rule 158 promulgated under the Securities Act
shall satisfy the requirements of this Section 5.9.
5.10 POST-EFFECTIVE AVAILABILITY OF PROSPECTUS. The Company will comply,
at its own expense, with all requirements imposed upon it by the Securities Act,
as now or hereafter amended, by the Rules and Regulations, as from time to time
may be in force, and by any order of the Commission, so far as necessary to
permit the continuance of sales or dealings in the Shares and the Warrants and
the exercise of the Warrants.
5.11 APPLICATION OF PROCEEDS. The Company will apply the net proceeds
from the sale of the Securities substantially in the manner specifically set
forth in the Final Prospectus. Any deviation from such application must be in
accordance with the Final Prospectus and may occur only after approval by the
board of directors of the Company and then only after the board of directors has
obtained the written opinion as to the propriety of any such deviation provided
by recognized legal counsel well versed in the federal and state securities
laws.
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5.12 AGREEMENTS OF CERTAIN SHAREHOLDERS. The Company has delivered to
the Representative, prior to the execution of this Agreement, the agreements
described in Section 2.17 of this Agreement.
5.13 DELIVERY OF DOCUMENTS. At the Closing, the Company has delivered to
the Representative true and correct copies of the articles of incorporation of
the Company and all amendments thereto; true and correct copies of the by-laws
of the Company and of the minutes of all meetings of the directors and
shareholders of the Company held prior to the Closing Date which in any way
relate to the subject matter of this Agreement. All such copies shall be
certified by the Secretary of the Company.
5.14 COOPERATION WITH REPRESENTATIVE'S DUE DILIGENCE. At all times prior
to the Closing Date, the Company will cooperate with the Representative in such
investigation as the Representative may make or cause to be made of all the
properties, management, business and operations of the Company, and the Company
will make available to the Representative in connection therewith such
information in its possession as the Representative may reasonably request.
5.15 APPOINTMENT OF TRANSFER AGENT AND WARRANT AGENT. The Company has
appointed American Stock Transfer &Trust, Inc. as Transfer Agent for the Common
Stock and Warrant Agent for the Warrants, subject to the closing of the
offering. The Company will not change or terminate such appointment for a
period of three years from the Effective Date without first obtaining the
written consent of the Representative, which consent shall not be unreasonably
withheld.
5.16 COMPLIANCE WITH CONDITIONS PRECEDENT. The Company will use all
reasonable efforts to comply or cause to be complied with the conditions
precedent to the several obligations of the Underwriters in Section 8 hereof.
5.17 FILING OF FORM SR. If required under the Securities Act, the
Company agrees to file with the Commission all required reports on Form SR in
accordance with the provisions of Rule 463 promulgated under the Securities Act
and to provide a copy of such reports to the Representative and its counsel.
5.18 BOUND VOLUME. The Company shall supply to the Representative and
the Representative's counsel, at the Company's cost, three bound volumes each of
all of the public offering materials within a reasonable time after the closing,
not to exceed three months.
5.19 LISTING IN XXXXX'X AND STANDARD & POOR'S. The Company has applied
to have the Company listed in Xxxxx'x Over-The-Counter Manual or Standard &
Poor's Standard Corporation Records, and it agrees to maintain such listings.
5.20 NASDAQ. The Company has applied to have the Common Stock quoted on
NASDAQ on the Effective Date and it shall continue such listing on NASDAQ or on
a national securities exchange during the entire period each such security is
outstanding; provided that the Company is in compliance with NASDAQ maintenance
requirements. The NASDAQ symbol shall be mutually agreeable to the Company and
the Representative.
5.21 SECONDARY TRADING QUALIFICATION. The Company agrees to use its best
efforts to qualify the Common Stock and Warrants for secondary trading as soon
as legally possible in such states as are requested by the Representative from
time to time, including, without limitation, California and Texas.
5.22 RIGHT OF INSPECTION. For a period of three years after the
Effective Date, the Representative, at the Representative's expense, will have
the right to have a person or persons selected by the Representative review the
books and records of the Company upon seven days' written notice and at
reasonable times. Such person or persons will be required to execute a
confidentiality agreement which will, in part, prohibit disclosure of
information to any party except the Representative, which information shall be
held in confidence unless otherwise specifically agreed to by the Company in
writing.
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5.23 OUTSIDE DIRECTORS, COMMITTEES, EXECUTIVE COMPENSATION. The Company
shall use its best efforts to have at least two members elected to its board of
directors who are not officers or employees of the Company ("outside directors")
on the Effective Date of the Registration Statement, and to cause two such
outside directors to be nominated as directors for two additional one-year
terms. The Company will form independent audit and compensation committees
which shall be comprised of at least three of the Company's directors, at least
a majority of whom shall be outside directors.
5.24 REGISTRATION UNDER THE EXCHANGE ACT. The Company has filed a
Registration Statement under Section 12(g) of the Exchange Act with respect to
the Common Stock and the Warrants. The Company has delivered a copy of such
filing to the Representative and to legal counsel for the Representative. The
Company shall use its best efforts to cause the registration statement under the
Exchange Act to become effective not later than the Effective Date, or as soon
thereafter as possible.
5.25 FINANCIAL CONSULTING AGREEMENT AND MERGER AND ACQUISITION AGREEMENT.
Upon the closing of the proposed offering, the Company shall enter into a
Financial Consulting Agreement and a Merger and Acquisition Agreement with the
Representative pursuant to which the Representative shall receive a consulting
fee of $2,500 per month, payable in advance at the time of closing, for twelve
(12) months from the Closing Date, for services which shall include, but are not
limited to, advising the Company in connection with financial planning,
corporate organization and structure, financial matters in connection with the
operation of the business of the Company, private and public equity and debt
financing and refinancing, the Company's relations with its security holders,
and the preparation and distribution of periodic reports; and the Representative
shall periodically provide to the Company an analysis of the Company's financial
statements. The Merger and Acquisition Agreement shall provide for the payment
to the Representative a fee for advising the Company on any merger or
acquisition related to the size of the merger or acquisition.
5.26 FUTURE SALES. For twelve (12) months from the Effective Date, the
Company will not sell or otherwise dispose of any securities without the prior
written consent of the Representative, which consent shall not be unreasonably
withheld, with the exception of shares issued pursuant to the exercise of
options, warrants, or other convertible securities outstanding on the Effective
Date. For twenty-four (24) months from the Effective Date the Company shall not
sell or issue any securities pursuant to Regulation S under the Act without the
Representative's prior written consent.
During the twelve (12) month period after the Closing Date, the
Representative shall have the right to purchase for its own account or sell for
the account of the Company's officers, directors, and principal shareholders
(any person holding five percent (5%) or more of the Company's voting
securities), and securities sold pursuant to Rule 144 under the Act.
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SECTION 6
INDEMNIFICATION AND CONTRIBUTION
6.1 INDEMNIFICATION BY COMPANY. The Company shall indemnify and hold
harmless each Underwriter against any and all loss, claim, damage or liability,
joint or several, to which such Underwriter may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, or liability
(or action with respect thereto) arises out of or is based upon (a) any
violation of any registration requirements; (b) any improper use of sales
literature by the Company; -C- any untrue statement or alleged untrue statement
made by the Company in Section 2 hereof; (d) any untrue statement or alleged
untrue statement of a material fact contained (I) in the Registration Statement,
any Preliminary Prospectus, the Effective Prospectus, or the Final Prospectus or
any amendment or supplement thereto, or (ii) in any application or other
document, executed by the Company specifically for such application or based
upon written information furnished by the Company, filed in order to qualify the
Securities under the securities laws of the states where filings were made (any
such application, document, or information being hereinafter called "Blue Sky
Application"); or (e) the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, the Effective Prospectus, or
the Final Prospectus or any amendment or supplement thereto or in any Blue Sky
Application a material fact required to be stated therein or necessary to make
the statements therein not misleading; and shall reimburse each Underwriter for
any legal or other reasonable expenses incurred by such Underwriter in
connection with investigating or defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action,
notwithstanding the possibility that payments for such expenses might later be
held to be improper, in which case the person receiving them shall promptly
refund them; except that the Company shall not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company through the Representative by or on
behalf of any Underwriter specifically for use in the preparation of the
Registration Statement, any Preliminary Prospectus, the Effective Prospectus and
the Final Prospectus or any amendment or supplement thereto, or any Blue Sky
Application.
6.2 INDEMNIFICATION BY UNDERWRITERS. Each Underwriter severally, but
not jointly, shall indemnify and hold harmless the Company against any and all
loss, claim, damage or liability, joint or several, to which the Company may
become subject under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability (or action in respect thereto) arises out of or are
based upon (a) any untrue statement or alleged untrue statement of a material
fact contained (i) in the Registration Statement, any Preliminary Prospectus,
the Effective Prospectus or the Final Prospectus or any amendment or supplement
thereto or (ii) in any Blue Sky Application; or (b) the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus, the
Effective Prospectus or the Final Prospectus or any amendment or supplement
thereto or in any Blue Sky Application a material fact required to be stated
therein or necessary to make the statements therein not misleading; except that
such indemnification shall be available in each such case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon information and in
conformity with written information furnished to the Company through the
Representative or on behalf of such Underwriter specifically for use in the
preparation thereof; and shall reimburse any legal or other expenses reasonably
incurred by the Company in connection with the investigation or defending
against any such loss, claim, damage, liability, or action.
6.3 RIGHT TO PROVIDE DEFENSE. Promptly after receipt by an indemnified
party under Section 6.1 or 6.2 above of written notice of the commencement of
any action, the indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under such section, notify the indemnifying
party in writing of the claim or the commencement of that action; the failure to
notify the indemnifying party shall not relieve it of any liability which it may
have to an indemnified party, except to the extent that the indemnifying party
did not otherwise have knowledge of the commencement of the action and the
indemnifying party's ability to defend against the action was prejudiced by such
failure. Such failure shall not relieve the indemnifying party from any other
liability which it may have to the indemnified party or any person identified in
Section 6.3 below. If any such
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claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under such section for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; except that the
Representative shall have the right to employ counsel to represent the
Representative and those other Underwriters who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Underwriters against the Company under such section if, in the Representative's
reasonable judgment, it is advisable for the Representative and those
Underwriters to be represented by separate counsel, and in that event the fees
and expenses of such separate counsel shall be paid by the Company.
6.4 CONTRIBUTION. If the indemnification provided for in Sections 6.1
and 6.2 of this Agreement is unavailable or insufficient to hold harmless an
indemnified party, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of the losses, claims,
damages, or liabilities referred to in Sections 6.1 or 6.2 above (a) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other from the offering of
the Securities; or (b) if the allocation provided by clause (a) above is not
permitted by applicable law, in such proportion as is appropriate to reflect the
relative benefits referred to in clause (a) above but also the relative fault of
the Company 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, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Underwriters shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and un-itemized expenses received by the Underwriters, in each case as
set forth in the table on the cover page of the Final Prospectus. Relative
fault shall be determined by reference to, among other things, whether the
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or the Underwriter and the
parties' relative intent, knowledge, access to information, and opportunity to
correct or prevent such untrue statement or omission. For purposes of this
Section 6.4, the term "damages" shall include any counsel fees or other expenses
reasonably incurred by the Company or the Underwriters in connection with
investigating or defending any action or claim which is the subject of the
contribution provisions of this Section 6.4. Notwithstanding the provisions of
this Section 6.4, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of any such untrue statements or omissions. No person
adjudged guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Under this Section
6.4, each Underwriter's obligations to contribute are several in proportion to
their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it shall promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise (except as specifically
provided in Section 6.3 hereof).
6.5 EXTENSION OF OBLIGATIONS. The obligations of the Company under this
Section 6 shall be in addition to any other liability which the Company may
otherwise have, and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the
Securities Act; and the obligations of the Underwriters under this Section shall
be in addition to any liability that the respective Underwriters may otherwise
have, and shall extend, upon the same terms and conditions, to each director of
the Company (including any person who, with his consent, is named in the
Registration Statement as about to become a director of the Company), to each
officer of the Company who has signed the Registration Statement, and to each
person, if any, who controls the Company within the meaning of the Securities
Act.
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6.6 REIMBURSEMENT OF UNDERWRITERS. In addition to its obligations under
Section 6.1 of this Agreement, the Company agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any loss, claim, damage, or liability
described in Section 6.1 of this Agreement, it will reimburse the Underwriters,
and each of them, on a monthly basis (or more often, if requested) for all
reasonable legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any
portion, or all, of any such interim reimbursement payments are so held to have
been improper, the Underwriters receiving the same shall promptly return such
amounts to the Company together with interest, compounded daily, determined on
the basis of the prime rate (or other commercial lending rate for borrowers of
the highest credit rating) announced from time to time by Norwest Bank of
Denver, Denver, Colorado (the "Prime Rate"). Any such interim reimbursement
payments that are not made to the Underwriters within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request until the date paid.
6.7 REIMBURSEMENT OF THE COMPANY. In addition to their obligations
under Section 6.2 of this Agreement, the Underwriters agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any loss, claim, damage or
liability described in Section 6.2 of this Agreement, they will reimburse the
Company on a monthly basis (or more often, if requested) for all reasonable
legal or other expenses incurred by the Company in connection with investigating
or defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any portion,
or all, of any such interim reimbursement payments are so held to have been
improper, the Company shall promptly return such amounts to the Underwriters
together with interest, compounded daily, determined on the basis of the Prime
Rate. Any such interim reimbursement payments that are not made to the Company
within 30 days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request until the date paid.
SECTION 7
EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective (a) at 10:00 a.m., Colorado time, on
the first full business day after the Effective Date, or (b) upon release by the
Representative of the Securities for sale after the Effective Date, whichever
shall occur later. The Representative shall notify the Company immediately
after the Representative shall have taken any action, by release or otherwise,
whereby this Agreement shall have become effective. For purposes of this
Agreement, the release of the initial public offering of the Firm Securities for
sale to the public shall be deemed to have been made when the Representative
releases, by telegram or otherwise, firm offers of the Firm Securities to
securities dealers or release for publication of a newspaper advertisement
relating to the Firm Securities, whichever occurs first. This Agreement shall,
nevertheless, become effective at such time earlier than the time specified
above, after the Effective Date, as the Representative may determine by notice
to the Company.
SECTION 8
CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS
The obligations of the several Underwriters hereunder to purchase the
Securities and to make payment to the Company hereunder on the Closing Date and
on the Over-allotment Closing Date, if any, shall be subject to the accuracy, as
of the Closing Date and the Over-allotment Closing Date, of each 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 Company with all covenants and conditions
hereof, and to the following additional conditions:
Creative Host Services, Inc.
Underwriting Agreement
Page 16
8.1 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
and all post-effective amendments thereto filed with the Commission prior to the
Closing Date or the Over-allotment Closing Date 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; no stop order suspending the effectiveness of
the Registration Statement or any amendment or supplement thereto shall have
been issued; no proceeding for that purpose shall have been initiated or
threatened by the Commission or be pending; any request for additional
information on the part of the Commission (to be included in the Registration
Statement or Final Prospectus or otherwise) shall have been complied with to the
satisfaction of the Commission; and neither the Registration Statement, the
Effective Prospectus or Final Prospectus, nor any amendment thereto shall have
been filed to which counsel to the Representative shall have reasonably objected
in writing or have not given their consent.
8.2 ACCURACY OF REGISTRATION STATEMENT. The Representative shall not
have advised the Company that the Registration Statement or the Effective
Prospectus or Final 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 not misleading.
8.3 CASUALTY AND OTHER CALAMITY. Since the Effective Date the Company
shall not have sustained any loss on account of fire, explosion, flood,
accident, calamity or any other cause, of such character as materially adversely
affects its business or property considered as an entire entity, whether or not
such loss is covered by insurance, and no officer or director of the Company
shall have suffered any injury, sickness or disability of a nature which would
materially adversely affect his or her ability to properly function as an
officer or director of the Company.
8.4 LITIGATION AND OTHER PROCEEDINGS. Other than as disclosed in the
Registration Statement or Prospectus, there shall be no litigation instituted or
threatened against the Company and there shall be no proceeding instituted or
threatened against the Company before or by any federal or state commission,
regulatory body or administrative agency or other governmental body, domestic or
foreign, wherein an unfavorable ruling, decision or finding would materially
adversely affect the business, management, licenses, operations or financial
condition or income of the Company considered as an entity.
8.5 LACK OF MATERIAL CHANGE. Except as contemplated herein or as set
forth in the Registration Statement and Final Prospectus, during the period
subsequent to the date of the last audited balance sheet included in the
Registration Statement, the Company (a) shall have conducted its business in the
usual and ordinary manner as the same was being conducted on the date of the
last audited balance sheet included in the Registration Statement, and (b)
except in the ordinary course of its business, the Company shall not have
incurred any liabilities, claims or obligations (direct or contingent) or
disposed of any of its assets, or entered into any material transaction or
suffered or experienced any substantially adverse change in its condition,
financial or otherwise. The capital stock and surplus accounts of the Company
shall be substantially the same as at the date of the last audited balance sheet
included in the Registration Statement, without considering the proceeds from
the sale of the Securities, other than as may be set forth in the Final
Prospectus, and except as the surplus reflects the result of continued profits
or losses from operations consistent with prior periods.
8.6 REVIEW BY REPRESENTATIVE'S COUNSEL. The authorization of the
Shares, the Representative's Warrants and the Common Stock issuable upon the
exercise of the Representative's Warrants, the Registration Statement, the
Effective Prospectus and the Final Prospectus and all corporate proceedings and
other legal matters incident thereto and to this Agreement shall be reasonably
satisfactory in all respects to counsel to the Representative.
8.7 OPINION OF COUNSEL. The Company shall have furnished to the
Representative the opinion, dated the Closing Date and, if applicable, the
Over-allotment Closing Date, addressed to the Representative, from Xxxx,
Forward, Xxxxxxxx & Scripps LLP, counsel to the Company, to the effect that
based upon a review by them of the
Creative Host Services, Inc.
Underwriting Agreement
Page 17
Registration Statement, Effective Prospectus and the Final Prospectus, the
Company's articles of incorporation, by-laws, and relevant corporate proceedings
and contracts, and examination of such statutes they deem necessary and such
other investigation by such counsel as they deem necessary to express such
opinion:
(a) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of California,
and has the corporate power and authority to own its properties and to
carry on its business as described in the Registration Statement and
Effective Prospectus and the Final Prospectus.
(b) The Company is duly qualified and in good standing as a foreign
corporation authorized to do business in all jurisdictions in which the
character of the properties owned or held under lease or the nature of the
business conducted requires such qualification except where the failure to
qualify would not have a material adverse effect on the business of the
Company.
(c) The authorized and outstanding capital stock of the Company is as
set forth in the Effective Prospectus and Final Prospectus; the Common
Stock of the Company, the Warrants, and the Representative's Warrants
conform in all material respects to the statements concerning them in the
Effective Prospectus and Final Prospectus; the outstanding Common Stock of
the Company contains no preemptive rights; the Shares, the Warrants, and
the Representative's Warrants have been, and the Common Stock issuable upon
exercise of the Warrants and the Representative's Warrants, will be, duly
and validly authorized and, upon issuance thereof and payment therefor in
accordance with this Agreement, validly issued, fully paid and
nonassessable, and will not be subject to the preemptive rights of any
shareholder of the Company.
(d) A sufficient number of shares of Common Stock have been
duly reserved for issuance upon the exercise of the Warrants and
the Representative's Warrants.
(e) To such counsel's knowledge, no consents, approvals,
authorizations or orders of agencies, officers or other regulatory
authorities are required for the valid authorization, issuance or sale of
the Common Stock, the Warrants and the Representative's Warrants
contemplated by this Agreement, except for those consents, approvals,
authorizations, and orders which the Company has obtained and which are in
full force and effect under the Securities Act, the Exchange Act, and under
applicable state securities laws in connection with the purchase and
distribution of such securities by the Underwriters, and the clearance of
the underwriting compensation by the NASD.
(f) The issuance and sale of the Securities and the Representative's
Warrants, the consummation of the transactions herein contemplated, and the
compliance with the terms of this Agreement will not conflict with or
result in a breach of any of the terms, conditions, or provisions of or
constitute a default under the articles of incorporation or by-laws of the
Company; nor, to such counsel's knowledge, will they conflict with or
result in a breach of any of the terms, conditions, or provisions of any
note, indenture, mortgage, deed of trust, or other agreement or instrument
to which the Company is a party or by which the Company or any of its
property is bound, other than for which the Company has received a consent
or waiver of such conflict, breach or default, or where such conflict or
breach would not have a material adverse effect on the business of the
Company; or any existing law (provided this paragraph shall not relate to
federal or state securities 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.
(g) On the basis of a reasonable inquiry by such counsel, including
participation in conferences with representatives of the Company and its
accountants at which the contents of the Registration Statement and the
Effective Prospectus and the Final Prospectus and related matters were
discussed, and without expressing any opinion as to the financial
statements or other financial data
Creative Host Services, Inc.
Underwriting Agreement
Page 18
contained therein: (i) nothing has come to such counsel's attention which
leads them to believe that the Registration Statement and the Final
Prospectus, as amended or supplemented by any amendments or supplements
thereto made by the Company prior to the Closing Date, do not comply as to
form in all material respects with the requirements of the Securities Act;
(ii) nothing has come to their attention which leads them to believe that
the Registration Statement or the Final Prospectus, as amended or
supplemented by any such amendments or supplements 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;
(iii) they do not know of any contract or other document required to be
described in or filed as an exhibit to the Registration Statement which is
not so described or filed; and (iv) the Registration Statement has become
effective under the Securities Act, and, to the best of their knowledge, no
stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
pending or contemplated by the Commission.
(h) This Agreement has been duly authorized and executed by the
Company and is a valid and binding agreement of the Company, except as
rights to indemnity hereunder may be limited by federal or state securities
laws or public policy and except as enforceability may be limited by
bankruptcy, insolvency, or similar laws affecting creditors rights
generally and by general equitable principles.
Creative Host Services, Inc.
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(i) The Company is not in default of any of the contracts, licenses,
leases or agreements to which it is a party, and the offering of the
Shares, the Warrants and the Representative's Warrants will not cause the
Company to become in default of any of its contracts, licenses, leases or
agreements.
(j) To such counsel's knowledge the Company is not currently offering
any securities for sale except as described in the Registration Statement.
(k) Counsel has no knowledge of any promoter, affiliate, parent or
subsidiaries of the Company except as are described in the Registration
Statement and Final Prospectus.
(l) To the knowledge of counsel, and without making any statement as
to title, the Company owns all properties described in the Registration
Statement as being owned by it; the properties are free and clear of all
liens, charges, encumbrances or restrictions except as described in the
Registration Statement; all of the leases, subleases and other agreements
under which the Company holds its properties are in full force and effect;
the Company is not in default under any of the material terms or provisions
of any of the leases, subleases or other agreements; and there are no
claims against the Company concerning its rights under the leases,
subleases and other agreements and concerning its right to continued
possession of its properties.
(m) To the knowledge of counsel, the Company has been issued by the
appropriate federal, state and local regulatory authorities the required
licenses, certificates, authorizations or permits necessary to conduct its
business as described in the Registration Statement and to retain
possession of its properties. Counsel is unaware of any notice of any
proceeding relating to the revocation or modification of any of these
certificates or permits.
(n) To the knowledge of counsel, the Company has paid all taxes which
are shown as due and owing on the financial statements included in the
Registration Statement and Final Prospectus.
As to all factual matters, including without limitation the issuance of
stock certificates and receipt of payment therefor, the states in which the
Company transacts business, and the adoption of resolutions reflected by the
Company's minute book, such counsel may rely on the certificate of an
appropriate officer of the Company. Counsel's opinion as to the validity and
enforceability of any and all contracts and agreements referenced herein may
exclude any opinion as to the validity or enforceability of any indemnification
or contribution provisions thereof, or as the validity or enforceability of any
such contract or agreement may be limited by bankruptcy or other laws relating
to or affecting creditors' rights generally and by equitable principles.
8.8 ACCOUNTANT'S LETTER. The Representative shall have received letters
addressed to it dated the Effective Date, the Closing Date and, if applicable,
the Over-allotment Closing Date, respectively, and a draft of such letter at
least five days prior to the Effective Date, the Closing Date and, if
applicable, the Over-allotment Closing Date, from Stonefield, Josephson,
confirming that they are independent public accountants with respect to the
Company within the meaning of the Act and the published Rules and Regulations.
In the letter dated the date of this Agreement, they shall state their
conclusions and findings with respect to such financial, accounting, and
statistical information and other matters contained in the Registration
Statement as have been approved by the Representative prior to the execution of
this Agreement. In the letter dated the Closing Date (and if applicable, the
Over-allotment Closing Date), they shall state as of such date (or, with respect
to matters involving changes or developments since the respective dates as of
which specified financial information is given in the Final Prospectus, as of a
date not more than five days prior to the date of such letter) their conclusions
and findings with respect to the financial information and other matters covered
by their letter dated the date of this Agreement, the purpose of the letter to
be delivered on the Closing Date (and, if applicable, the Over-allotment Closing
Date) being to update in all respects the conclusions and findings set forth in
the prior letter or letters. The Representative shall be furnished without
charge, in addition to the original signed copies, such number of signed or
photostatic or conformed copies of such letters as the Representative shall
reasonably request.
Creative Host Services, Inc.
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8.9 OFFICER'S CERTIFICATE. The Company shall furnish to the
Representative certificates, each signed by the President and Chief Financial
Officer of the Company, one dated as of the Effective Date, one dated as of the
Closing Date, and, if applicable, one dated as of the Over-allotment Closing
Date, to the effect that:
(a) The representations and warranties of the Company in this
Agreement are true and correct at and as of the date of the certificate, and the
Company has complied with all the agreements and has satisfied all the
conditions on its part to be performed or satisfied at or prior to the date of
the certificate.
(b) The Registration Statement has become effective and to the
best of the knowledge of the respective signers no order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose has been initiated or is threatened by the Commission.
(c) The respective signers have each examined the Registration
Statement and the Final Prospectus and any amendments and supplements thereto,
and to the best of their knowledge the Registration Statement and the Final
Prospectus and any amendments and supplements thereto contain all statements
required to be stated therein, do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and, since the Effective
Date, there has occurred no event required to be set forth in an amended or a
supplemented Prospectus which has not been so set forth.
8.10 TENDER OF DELIVERY OF SECURITIES. All of the Securities being
offered by the Company and being purchased from the Company by the Underwriters,
and the Representative's Warrants being purchased from the Company by the
Representative, shall be tendered for delivery in accordance with the terms and
provisions of this Agreement.
8.11 BLUE-SKY REGISTRATION OR QUALIFICATION. The Shares and the Warrants
shall be registered or qualified in such states as the Representative and the
Company may agree pursuant to Section 5.4, and each such registration or
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Date or the Over-allotment Closing Date. On the
Effective Date, on the Closing Date and, if applicable, the Over-allotment
Closing Date, the Representative shall receive from counsel for the
Representative, written information which contains the following:
(a) the names of the states in which applications to register or
qualify the Shares, the Warrants and the Warrant Shares have been filed;
(b) the status of such registrations or qualifications in such
states as of the date of such letter;
(c) a list containing the name of each such state in which the
Shares, the Warrants and the Warrant Shares may be legally offered and sold by a
dealer licensed in such state and the number of each which may be legally
offered and sold in the offering in each such state as of the date of such
letter;
(d) with respect to the written information provided on the
Effective Date, a representation that such counsel will promptly update such
written information if counsel receives actual notice of any material changes in
the information provided therein between the Effective Date and the Closing Date
and, if applicable, Over-allotment Closing Date;
(e) the names of the states in which the offer and sale of the
Shares and Warrants in the offering is exempt from registration or
qualification; and
(f) a statement that the Underwriters and selected dealers in
the offering may rely upon the information contained therein.
Creative Host Services, Inc.
Underwriting Agreement
Page 21
8.12 APPROVAL OF REPRESENTATIVE'S COUNSEL. All opinions, letters,
certificates and evidence mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative, whose approval
shall not be unreasonably withheld. The suggested form of such documents shall
be provided to the counsel for the Representative at least three business days
before the dates they are to be provided, that is, the Effective Date, the
Closing Date, and the Over-allotment Closing Date, if applicable.
8.13 OFFICERS' CERTIFICATE AS A COMPANY REPRESENTATION. Any certificate
signed by an officer of the Company and delivered to the Representative or
counsel for the Representative shall be deemed a representation and warranty by
the Company to the Underwriters as to the statements made therein.
8.14 OPINION OF REPRESENTATIVE'S COUNSEL. The Representative shall have
received from Xxxxxx & Xxxxxxx, LLC, counsel for the Representative, opinions
dated the Effective Date, the Closing Date, and, if applicable, the
Over-allotment Closing Date, with respect to the issuance and sale of the
Securities, and such other related matters as the Representative may reasonably
require, and the Company shall have furnished such counsel with all documents
which they may request for the purpose of enabling them to pass upon such
matter.
SECTION 9
TERMINATION
9.1 TERMINATION BECAUSE OF NONCOMPLIANCE. This Agreement may be
terminated in its entirety by the Representative by notice to the Company prior
to its effectiveness in the event that the Company shall have failed or been
unable to comply with any of the terms, conditions or provisions of this
Agreement which the Company is required by this Agreement to be performed,
complied with or fulfilled (including but not limited to those specified in
Sections 2, 3, 4, 5, and 8 hereof) within the respective times herein provided
for, unless compliance therewith or performance or satisfaction thereof shall
have been expressly waived by the Representative in writing.
9.2 MARKET OUT TERMINATION. This Agreement may be terminated by the
Representative by notice to the Company at any time if, in the sole judgment of
the Representative, payment for and delivery of the Securities 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, at law or in equity,
hereafter threatened or filed against the Company by any person or entity, or by
any federal, state or other commission, board or agency wherein any unfavorable
result or decision could materially adversely affect the business, business
prospects, properties, financial condition or 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 new offering or trading restrictions shall have been
generally established by a registered securities exchange, the Commission, NASD
or other applicable regulatory authority which significantly affects the
marketability of the Shares or the Warrants, or trading in securities generally
on any such exchange, NASDAQ or otherwise, 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 such that it would be undesirable,
impracticable or inadvisable in the judgment of the Representative to proceed
with this Agreement or with the public offering of the Securities;
(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
Creative Host Services, Inc.
Underwriting Agreement
Page 22
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 Securities; or
(f) Any suspension of trading in the securities of the Company
in the over-the-counter market or the interruption or termination of quotations
of any security of the Company on the NASDAQ System.
9.3 EFFECT OF TERMINATION HEREUNDER. Any termination of this Agreement
pursuant to this Section 10 shall be without liability of any character
(including, but not limited to, loss of anticipated profits or consequential
damages) on the part of any party hereto, except that the Company shall remain
obligated to pay the costs and expenses provided to be paid by it specified in
Sections 3.5 and 5.7; and the Company and the Underwriters shall be obligated to
pay, respectively, all losses, claims, damages or liabilities, joint or several,
under Sections 6.1 or 6.4 in the case of the Company, and Sections 6.2 or 6.4 in
the case of the Underwriters .
SECTION 10
REPRESENTATIVE'S REPRESENTATIONS AND WARRANTIES
The Representative represents and warrants to and agrees with the Company
that:
10.1 REGISTRATION AS BROKER-DEALER AND MEMBER OF NASD. The
Representative is registered as a broker-dealer with the Commission and is
registered as a securities broker-dealer in all states in which it will sell
Securities and is a member in good standing of the National Association of
Securities Dealers, Inc.
10.2 NO PENDING PROCEEDINGS. There is not now pending or threatened
against the Representative any action or proceeding of which it has been
advised, either in any court of competent jurisdiction, before the Commission or
any state securities regulatory authority concerning activities as a broker or
dealer which are foreseen as affecting the Representative's capacity to complete
the terms of this Agreement.
10.3 COMPANY'S RIGHT TO TERMINATE. In the event any action or proceeding
of the type referred to in Section 10.2 above shall be instituted or threatened
against the Representative at any time prior to the Effective Date hereunder, or
in the event there shall be filed by or against the Representative in any court
pursuant to any federal, state, local or municipal statute, a petition in
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee of its assets or if it makes an assignment for the benefit
of creditors, the Company shall have the right on three days' written notice to
the Representative to terminate this Agreement without any liability to the
Representative or the Company of any kind except for the payment of all expenses
as provided herein.
10.4 REPRESENTATIVE'S COVENANTS. The Representative covenants and agrees
with the Company that (a) it will not offer or sell the Securities in any state
or other jurisdiction where it has not been advised in writing by legal counsel
for the Company that the Securities are qualified for the offer and sale therein
or exempt from such requirements; (b) it will not make any representation to any
person in connection with the offer and sale of the Securities covered hereby
except as set forth in the Registration Statement or as authorized in writing by
the Company and the Representative; (c) it will comply in good faith with all
laws, rules and regulations applicable to the distribution of the securities,
including the Rules of Fair Practice of the NASD; and (d) the Representative has
the authority to execute this Agreement on behalf of all of the Underwriters.
SECTION 11
NOTICE
Except as otherwise expressly provided in this Agreement:
11.1 NOTICE TO THE COMPANY. Whenever notice is required by the
provisions of this Underwriting Agreement to be given to the Company, such
notice shall be in writing addressed to the Company as follows:
Creative Host Services, Inc.
Creative Host Services, Inc.
Underwriting Agreement
Page 23
0000 Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
with a copy to:
Xxxx, Forward, Xxxxxxxx & Scripps LLC
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
11.2 NOTICE TO THE REPRESENTATIVE. Whenever notice is required by the
provisions of this Agreement to be given to the Representative, such notice
shall be given in writing addressed to the Representative as follows:
Cohig & Associates, Inc.
0000 Xxxxx Xxxxxxxx Xxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Corporate Finance Department
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxx & Xxxxxxx, LLC
0000 X. Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
11.3 EFFECTIVE DATE OF NOTICES. Such notices shall be effective on the
date of delivery set forth on the receipt if the notice is sent by registered or
certified mail or any expedited delivery, or, if sent regular mail, three days
from the day of mailing.
SECTION 12
MISCELLANEOUS
12.1 BENEFIT. This Agreement is made solely for the benefit of the
Representative, other Underwriters , the Company, their respective officers,
directors and controlling persons referred to in Section 15 of the Securities
Act and such other persons as are identified in this Agreement, and their
respective successors and assigns, and no other person shall acquire or have any
right under or by virtue of this Agreement. The term "successor" or the term
"successors and assigns" as used in this Agreement shall not include any
purchasers, as such, of any of the Securities.
12.2 SURVIVAL. The respective indemnities, agreements, representations,
warranties, and covenants of the Company or its officers and the Representative
or the Underwriters or the Selling Shareholders as set forth in or made pursuant
to this Agreement and the indemnity and contribution agreements contained in
Section 6 hereof of the Company and the Underwriters (as defined in Section 6)
shall survive and remain in full force and effect, regardless of (a) any
investigation made by or on behalf of the Company or the Underwriters or any
such officer or director thereof or any controlling person of the Company or of
the Underwriters, (b) delivery of or payment for the Securities, and (c) the
Closing Date and, if applicable, the Over-allotment Closing Date, and any
successor of the Company or the Underwriters or any controlling person, officer
or director thereof, as the case may be, shall be entitled to the benefits
hereof.
12.3 GOVERNING LAW. The validity, interpretation and construction of
this Agreement and of each part hereof will be governed by the laws of the State
of Colorado.
Creative Host Services, Inc.
Underwriting Agreement
Page 24
12.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding between the parties hereto, and supersedes all agreements and
understandings including, but not limited to, the Letter of Intent and the
consulting agreement dated August 26, 1996.
12.5 REPRESENTATIVE'S INFORMATION. The statements with respect to the
public offering of the Securities on the inside and outside of both the front
and back cover pages of the Prospectus and under the caption "Underwriting" in
the Final Prospectus constitute the written information furnished by or on
behalf of the Representative referred to in Section 2.2 hereof, in Section 6.1
hereof and Section 6.2 hereof.
12.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together will constitute one and the same instrument.
12.7 DEFINITION OF "BUSINESS DAY" AND "SUBSIDIARY". For purposes of this
Agreement, (a) "Business Day" means any day on which the New York Stock
Exchange, Inc. is open for trading and (b) "Subsidiary" has the meaning set
forth in Rule 405 of the Rules and Regulations.
Please confirm that the foregoing correctly sets forth the Agreement
between you and the Company.
Very truly yours,
ATTEST:
CREATIVE HOST SERVICES, INC.
By By
---------- -----------------------
Secretary President
WE HEREBY CONFIRM AS OF THE DATE HEREOF THAT THE ABOVE SETS FORTH THE
AGREEMENT BETWEEN THE COMPANY AND US.
COHIG & ASSOCIATES, INC.
(for itself and as Representative of
the several Underwriters named in
Schedule I hereto)
By
-----------------------
Creative Host Services, Inc.
Underwriting Agreement
Page 25
CREATIVE HOST SERVICES, INC.
(A California Corporation)
SCHEDULE I
This Schedule sets forth the name of each Underwriter referred to in the
Underwriting Agreement and the number of Shares to be purchased by each
Underwriter.
Number of
Name Shares
---- ------
Cohig & Associates, Inc.
Total ------------------
1,000,000
Creative Host Services, Inc.
Underwriting Agreement
Page 26
