1,000,000 SHARES
DATA DIMENSIONS, INC.
COMMON STOCK
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UNDERWRITING AGREEMENT
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, 1996
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Cruttenden Xxxx Incorporated
As Representative of the Several Underwriters
Named in Schedule I Attached Hereto
00000 Xxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Dear Sirs:
Data Dimensions, Inc., a Delaware corporation (the "Company"), and the
stockholders of the Company named in Schedule II hereto (collectively, the
"Selling Stockholders"), severally propose to issue and sell an aggregate of
1,000,000 shares of the Company's Common Stock, $0.001 par value (the "Common
Shares"), to Cruttenden Xxxx Incorporated (the "Representative") and the several
underwriters named in Schedule I hereto (collectively with the Representative,
the "Underwriters" and individually, an "Underwriter," which terms shall also
include any Underwriter substituted as hereinafter provided in Section 12). The
Common Shares consist of 951,666 shares to be issued and sold by the Company and
48,334 outstanding shares to be sold by the Selling Stockholders. The
aforementioned 1,000,000 Common Shares to be issued and sold to the several
Underwriters by the Company and the Selling Stockholders are hereinafter
referred to as the "Offered Shares." The Offered Shares shall be offered to the
public at an initial offering price of $ per Offered Share (the "Offering
Price").
In addition, the several Underwriters, in order to cover over-allotments in
the sale of the Offered Shares, may purchase from the Company within 45 days
after the Effective Date (as
hereinafter defined), for their own account for offering to the public at the
Offering Price, up to 150,000 additional Common Shares (the "Optional Shares"),
upon the terms and conditions set forth in Section 5 hereof. The Offered Shares
and the Optional Shares are hereinafter collectively referred to as the
"Shares." The Company, intending to be legally bound hereby, confirms its
agreement with each of the Underwriters as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) The Company has prepared in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the rules,
regulations, releases and instructions (the "Regulations") of the
Securities and Exchange Commission (the "SEC") under the Act in effect
at all applicable times and has filed with the SEC a registration
statement on Form SB-2 (File No. 333-841) and one or more amendments
thereto registering the Shares under the Act. Any preliminary
prospectus included in such registration statement or filed with the
SEC pursuant to Rule 424(a) of the Regulations is hereinafter called a
"Preliminary Prospectus." The various parts of such registration
statement, including all exhibits thereto and the information
contained in any form of final prospectus filed with the SEC pursuant
to Rule 424(b) of the Regulations in accordance with Section 6(a) of
this Agreement and deemed by virtue of Rule 430A of the Regulations to
be part of such registration statement at the time it was declared
effective, each as amended at the time such registration statement
became effective, are hereinafter collectively referred to as the
"Registration Statement." The final prospectus in the form included
in the Registration Statement or first filed with the SEC pursuant to
Rule 424(b) of the Regulations and any amendments or supplements
thereto is hereinafter referred to as the "Prospectus."
(b) The Registration Statement has or will become effective
under the Act as of the Effective Date, and the SEC has not issued any
stop order suspending the effectiveness of the Registration Statement
or preventing or suspending the use of any Preliminary Prospectus nor
has the SEC instituted, threatened to institute or, to the Company's
knowledge, contemplated proceedings with respect to such an order.
The Company has not received any stop order suspending the sale of the
Shares in any jurisdiction designated by the Representative pursuant
to Section 6(f) hereof, and no proceedings for that purpose have been
instituted or, to the Company's knowledge, are threatened or
contemplated. The Company has complied with any request of the SEC
and, to the Company's knowledge, any state securities commission in a
state designated by the Representative pursuant to Section 6(f)
hereof, for additional information to be included in the Registration
Statement or Prospectus or otherwise. Each Preliminary Prospectus
conformed to the Act and the Regulations as of its date and did not as
of its date contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, except the foregoing
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shall not apply to statements in or omissions from any Preliminary
Prospectus in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of any Underwriter
through the Representative expressly for use therein. The
Registration Statement on the date on which it was declared effective
by the SEC (the "Effective Date") conformed, and any post-effective
amendment thereof on the date it shall become effective, and the
Prospectus at the time it is filed with the SEC pursuant to Rule
424(b) of the Regulations and on the Closing Date (as defined in
Section 4 hereof) and any Option Closing Date (as defined in Section
5(b) hereof) will conform, to the requirements of the Act and the
Regulations, and neither the Registration Statement, any
post-effective amendment thereof nor the Prospectus will, on any of
such respective dates, 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
this representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriter through the
Representative expressly for use therein. It is understood that the
written information described in Section 13 constitutes the only
information furnished in writing by or on behalf of any Underwriter
for inclusion in any Preliminary Prospectus, the Prospectus or the
Registration Statement.
(c) The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, with all
necessary corporate power and authority, and all required licenses,
permits, certifications, registrations, approvals, consents and
franchises to own or lease and operate its properties and to conduct
its business as described in the Prospectus and to execute, deliver
and perform this Agreement. The Company is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on
the Company.
(d) The Company does not own any stock or other equity interest
in, or control, directly or indirectly, any corporation, partnership
or other entity.
(e) The Company has all necessary corporate power and authority
to execute and deliver the Warrant to purchase Common Shares to be
issued and sold to the Representative under the terms of the Warrant
Agreement (as hereinafter defined) in accordance with Section 6(p) of
this Agreement (the "Representative's Warrant").
(f) This Agreement, the Warrant Agreement and the
Representative's Warrant have been duly authorized, executed and
delivered by the Company and constitute its valid and binding
obligations, enforceable against the Company in
3
accordance with their respective terms, except as rights to indemnity
and contribution hereunder or thereunder may be limited by federal or
state securities laws or principles of public policy, and except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles. This Agreement, the Warrant Agreement and the
Representative's Warrant conform to the description thereof in the
Prospectus.
(g) The execution, delivery and performance of this Agreement,
the Warrant Agreement and the Representative's Warrant by the Company
does not and will not, with or without the giving of notice or the
lapse of time, or both, (A) conflict with any terms or provisions of
the Certificate of Incorporation or By-laws of the Company, as amended
to the date hereof and the Closing Date or Option Closing Date, as the
case may be; (B) result in a breach of, constitute a default under,
result in the termination or modification of or result in the creation
or imposition of any lien, security interest, charge or encumbrance
upon any of the properties of the Company pursuant to any indenture,
mortgage, deed of trust, contract, commitment or other agreement or
instrument to which the Company is a party or by which any of its
properties or assets are bound or affected, the effect of which would
have a material adverse effect on the business or properties of the
Company; (C) violate any law, rule, regulation, judgment, order or
decree of any government or governmental agency, instrumentality or
court, domestic or foreign, having jurisdiction over the Company or
any of its properties or businesses or (D) result in a breach,
termination or lapse of the power and authority of the Company to own
or lease and operate its properties and conduct its business as
described in the Prospectus, the effect of which would have a material
adverse effect on the business or properties of the Company.
(h) The Company has authorized and outstanding capital stock
and, as of the date or dates indicated the Company had the
capitalization, set forth under the caption "Capitalization" in the
Prospectus and will have the as-adjusted capitalization set forth
under the caption "Capitalization" in the Prospectus. On the
Effective Date, the Closing Date and any Option Closing Date, there
will be no options or warrants for the purchase of, other outstanding
rights to purchase, agreements or obligations to issue or agreements
or other rights to convert or exchange any obligation or security
into, capital stock of the Company or securities convertible into or
exchangeable for capital stock of the Company, except as described in
the Prospectus.
(i) The authorized capital stock of the Company, including,
without limitation, the outstanding Common Shares and the Shares being
issued on the Closing Date and Option Closing Date (if any and to the
extent applicable), conforms to the descriptions thereof in the
Prospectus, and such descriptions conform to the descriptions thereof
set forth in the instruments defining the same. The information in
the Prospectus insofar as it relates to outstanding options that
4
have been granted to employees, consultants and directors, the
Representative's Warrant and the Warrants, in each case as of the
Effective Date, the Closing Date and any Option Closing Date, is true,
correct and complete in all material respects.
(j) The outstanding Common Shares have been duly authorized and
are validly issued, fully paid and non-assessable. The Employee
Options and the Warrants have been duly authorized and validly issued
and are valid and binding obligations enforceable against the Company
in accordance with their terms, and except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles. The Warrant
Agreement and the Representative's Warrant, as of the Closing Date,
will have been duly authorized and validly issued and, when executed
and delivered by the Company, will be valid and binding obligations
enforceable against the Company in accordance with their terms, and
except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or by general equitable
principles. The Common Shares issuable pursuant to the Employee
Options, the Representative's Warrant and the Warrants, when issued in
accordance with the respective terms thereof, will be duly authorized,
validly issued, fully paid and non-assessable. None of such
outstanding Common Shares, Employee Options, or Warrants were, and
none of the Representative's Warrant or such issuable Common Shares
will be, issued in violation of any preemptive rights of any security
holder of the Company. The Company has reserved a sufficient number
of Common Shares for issuance pursuant to the Employee Options, the
Representative's Warrant and the Warrants. The holders of the
outstanding Common Shares are not, and will not be, subject to
personal liability solely by reason of being such holders, and the
holders of the Common Shares issuable pursuant to the Employee
Options, the Representative's Warrant and the Warrants will not be
subject to personal liability solely by reason of being such holders.
The offers and sales of the outstanding Common Shares, the Employee
Options and the Warrants were, and the issuance of the Common Shares
pursuant to the Employee Options, the Representative's Warrant and the
Warrants will be, made in conformity with applicable registration
requirements or exemptions therefrom under federal and applicable
state securities laws.
(k) The issuance and sale of the Shares by the Company have been
duly authorized and, when the Shares have been duly delivered against
payment therefor as contemplated by this Agreement, the Shares will be
validly issued, fully paid and non-assessable, and the holders thereof
will not be subject to personal liability solely by reason of being
such holders. None of the Shares will be issued in violation of any
preemptive rights of any stockholder of the Company. The certificates
representing the Shares are in proper legal form under, and conform to
the requirements of the Delaware General Corporation Law, as amended
(the "GCL"). Neither the filing of the Registration Statement nor the
offering or sale
5
of the Shares as contemplated by this Agreement gives any security
holder of the Company any rights, other than those which have been
waived, for or relating to the registration of any Common Shares or
other security of the Company.
(l) No consent, approval, authorization, order, registration,
license or permit of any court, government, governmental agency,
instrumentality or other regulatory body or official is required for
the valid authorization, issuance, sale and delivery by the Company of
any of the Shares, or for the execution, delivery or performance by
the Company of this Agreement, except such as may be required for the
registration of the Shares under the Act, the Regulations and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which consent, approval and authorization have been obtained, and for
compliance with the applicable state securities or Blue Sky laws, or
the By-laws, rules and other pronouncements of the National
Association of Securities Dealers, Inc. (the "NASD"). The Common
Shares are registered under Section 12(g) of the Exchange Act and all
necessary filings have been made to include the Shares in such
registration. Upon the effectiveness of the Registration Statement,
the Common Shares will be listed on the NASD's Nasdaq SmallCap Market.
The Company has taken no action designed, or likely, to have the
effect of terminating the registration of the Common Shares under
Section 12(g) of the Exchange Act, nor has the Company received any
notification that the SEC is contemplating terminating such
registration.
(m) The statements in the Registration Statement and Prospectus,
insofar as they are descriptions of or references to contracts,
agreements or other documents, are accurate in all material respects
and present or summarize fairly, the information required to be
disclosed under the Act and the Regulations, and there are no
contracts, agreements or other documents required to be described or
referred to in the Registration Statement or Prospectus or to be filed
as exhibits to the Registration Statement under the Act or the
Regulations that have not been so described, referred to or filed, as
required.
(n) The financial statements (including the notes thereto) filed
as part of any Preliminary Prospectus, the Prospectus and the
Registration Statement present fairly the financial position of the
Company, as of the respective dates thereto, and the results of
operations and cash flows of the Company, for the periods indicated
therein, all in conformity with generally accepted accounting
principles consistently applied, except as may be otherwise stated
therein. The supporting schedules included in the Registration
Statement fairly state the information required to be stated therein
in relation to the basic financial statements taken as a whole. The
financial information included in the Prospectus under the captions
"Prospectus Summary" and "Selected Financial Data" presents fairly the
information shown therein and has been compiled on a basis consistent
with that of the audited financial statements included in the
Registration Statement.
6
(o) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
stated therein, there has not been (A) any material adverse change
(including, whether or not insured against, any material loss or
damage to any assets), or development involving a prospective material
adverse change, in the general affairs, properties, assets,
management, condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company, (B) any
transaction entered into by the Company that is material to the
Company and not in the ordinary course of business, (C) any dividend
or distribution of any kind declared, paid or made by the Company on
its capital stock, (D) any liabilities or obligations, direct or
indirect, incurred by the Company that are material to the Company, or
(E) any material change in the short-term debt or long-term debt of
the Company. The Company does not have any contingent liabilities or
obligations that are material and that are not disclosed in the
Prospectus.
(p) The Company has not distributed and, prior to the later to
occur of the Closing Date, the Option Closing Date or the completion
of the distribution of the Shares, will not distribute any offering
material in connection with the offering or sale of the Shares other
than the Registration Statement, each Preliminary Prospectus and the
Prospectus, in any such case only as permitted by the Act and the
Regulations.
(q) The Company has filed with the appropriate federal, state
and local governmental agencies, and all foreign countries and
political subdivisions thereof, all tax returns that are required to
be filed, or has duly obtained extensions of time for the filing
thereof and has paid all taxes shown on such returns and all
assessments received by it to the extent that the same have become
due. The Company has not executed or filed with any taxing authority,
foreign or domestic, any agreement extending the period for assessment
or collection of any income taxes, is not a party to any pending
action or proceeding by any foreign or domestic governmental agencies
for the assessment or collection of taxes, and no claims for
assessment or collection of taxes have been asserted against the
Company that might materially adversely affect the general affairs,
properties, assets, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects of the
Company.
(r) BDO Xxxxxxx, LLP, which is certifying the financial
statements included in the Prospectus and forming a part of the
Registration Statement, is a firm of independent public accountants as
required by the Act and the Regulations.
(s) The Company is not in violation of, or in default under, any
of the terms or provisions, of (A) its Certificate of Incorporation or
By-laws, each as amended to the date hereof, the Closing Date or the
Option Closing Date, as the case may be, (B) any indenture, mortgage,
deed of trust, contract, loan or credit
7
agreement, commitment or other agreement or instrument to which the
Company is a party or by which it or any of its properties are bound
or affected, (C) any law, rule, regulation, judgment, order or decree
of any government or governmental agency, instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of
its properties or businesses or (D) any license, permit,
certification, registration, approval, consent or franchise referred
to in subsections (b) or (c) of this Section 1, except where such
violation or default would not have a material adverse effect on the
business or properties of the Company.
(t) There are no claims, actions, suits, proceedings,
arbitrations, investigations or inquiries pending before or, to the
Company's knowledge, threatened or contemplated by, any governmental
agency, instrumentality, court or tribunal, domestic or foreign, or
before any private arbitrational tribunal, relating to or affecting
the Company or its properties or businesses that might affect the
issuance or validity of any of the Shares or the validity of any of
the outstanding Common Shares, or that, if determined adversely to the
Company, would, in any case or in the aggregate, result in any
material adverse change in the general affairs, properties, assets,
condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects, of the Company; nor, to
the Company's knowledge, is there any reasonable basis for any such
claim, action, suit, proceeding, arbitration, investigation or
inquiry. There are no outstanding orders, judgments or decrees of any
court, governmental agency, instrumentality or other tribunal
enjoining the Company from, or requiring the Company to take or
refrain from taking any action, or to which the Company, or any of its
properties, assets or businesses is bound or subject.
(u) Except as otherwise stated in the Prospectus, the Company
owns, or possesses adequate rights to use all patents, patent
applications, trademarks, trademark registrations, applications for
trademark registration, trade names, service marks, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential technology,
information, systems, design methodologies and devices or procedures
developed or derived from the Company's businesses), trade secrets,
confidential information, processes and formulations necessary for,
used in or proposed to be used in the conduct of its business as
described in the Prospectus (collectively, the "Intellectual
Property") that, if not so owned or possessed, would materially
adversely affect the general affairs, properties, condition (financial
or otherwise), results of operations, stockholders' equity, business
or prospects of the Company. The Company has not infringed, is not
infringing and has not received any notice of conflict with the
asserted rights of others with respect to the Intellectual Property,
and, to the Company's knowledge, no others have infringed upon or are
in conflict with the Intellectual Property.
8
(v) The Company has obtained all permits, licenses and other
authorizations that are required, to the extent required, under all
environmental laws (collectively, the "Environmental Laws"), other
than any permits, licenses or other authorizations which, if not
obtained, would not have a material adverse effect on the business or
properties of the Company. The Company is in compliance with all
terms and conditions of any required permits, licenses and
authorizations, and is in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental
Laws, except where the failure to so comply would not have a material
adverse effect on the Company.
(w) There are no present or, to the Company's knowledge, past
events, conditions, circumstances, activities, practices, incidents,
actions or plans relating to the business as currently being conducted
by the Company that interfere with or prevent compliance with or
continued compliance with the Environmental Laws, the non-compliance
with which would have a material adverse effect on the Company, or
which would be reasonably likely to give rise to any material legal
liability (whether statutory or common law) or otherwise would be
reasonably likely to form the basis of any claim, action, demand,
suit, proceeding, hearing, notice of violation, study, investigation,
remediation, or clean up based on or related to the generation,
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release
into the workplace, community or environment of any pollutant,
contaminant, chemical or industrial, toxic, or hazardous substance or
waste, which claim, action, demand, suit, proceeding, hearing, notice
of violation, study, investigation, remediation, or clean up would
have a material adverse effect on the Company.
(x) The Company has good and marketable title to all personal
property (tangible and intangible) described in the Prospectus as
being owned by it, free and clear of all liens, security interests,
charges or encumbrances, except such as are described in the
Prospectus or which are not material to the business of the Company.
The Company has adequately insured the personal property of the
Company against loss or damage by fire or other casualty and
maintains, in adequate amounts, insurance against such other risks as
management of the Company deems appropriate. The Company does not own
any real property, and all real property used or leased by the
Company, as described in the Prospectus (the "Premises"), is held by
the Company under a valid, subsisting and enforceable lease, and
except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or by general equitable
principles. The Premises, and all operations conducted thereon, are
now and, since the Company began to use such Premises, always have
been and, to the Company's knowledge, prior to when the Company began
to use such Premises, always had been, in compliance with the
Environmental Laws. There is no, and the Company has not received
notice of any, claim, demand, investigation, regulatory action, suit
or
9
other action instituted or threatened against any of them or the
Premises relating to any of the Environmental Laws. The Company has
not received any notice of material violation, citation, complaint,
order, directive, request for information or response thereto, notice
letter, demand letter or compliance schedule to or from any
governmental or regulatory agency arising out of or in connection with
hazardous substances (as defined by applicable Environmental Laws) on,
about, beneath, arising from or generated at the Premises.
(y) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization, (B) transactions are recorded as necessary in
order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain
accountability for assets, (C) access to assets is permitted only in
accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) No unregistered securities of the Company have been sold by
the Company or on behalf of the Company by any person or persons
controlling, controlled by or under common control with the Company
within the three years prior to the date hereof, except as disclosed
in the Registration Statement.
(aa) Each contract or other instrument (however characterized or
described) to which the Company is a party or by which any of the
properties or business of it is bound or affected and to which
reference has been made in the Prospectus or which has been filed as
an exhibit to the Registration Statement has been duly and validly
executed by the Company, and by the other parties thereto. Except as
described in the Prospectus, each such contract or other instrument is
in full force and effect and is enforceable against the parties
thereto in accordance with its terms, and except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles, and neither the
Company, nor any other party is in default thereunder and no event has
occurred that, with the lapse of time or the giving of notice, or
both, would constitute a default thereunder.
(bb) Except as disclosed in the prospectus, and except for the
Company's 401(k) plan, the Company has no employee benefit plan,
profit sharing plan, employee pension benefit plan or employee welfare
benefit plan or deferred compensation arrangements (collectively,
"Plans") that are subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended, or the rules and regulations
thereunder ("ERISA"). To the Company's knowledge, all Plans that are
subject to ERISA are, and have been at all times since their
establishment, in compliance with ERISA and, to the extent required by
the Internal Revenue
10
Code of 1986, as amended (the "Code"), in compliance with the Code.
To the Company's knowledge, the Company has not had any employee
pension benefit plan that is subject to Part 3 of Subtitle B of Title
1 of ERISA or any defined benefit plan or multiemployer plan. To the
Company's knowledge, the Company has not maintained retiree life and
retiree health insurance plans that are employee welfare benefit plans
providing for continuing benefit or coverage for any employee or any
beneficiary of any employee after such employee's termination of
employment, except as required by Section 4980B of the Code. To the
Company's knowledge, no fiduciary or other party in interest with
respect to any of the Plans has caused any of such Plans to engage in
a "prohibited action" as defined in Section 406 of ERISA. As used in
this subsection, the terms "defined benefit plan," "employee benefit
plan," "employee pension benefit plan," "employee welfare benefit
plan," "fiduciary" and "multiemployer plan" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
(cc) To the Company's knowledge, no labor dispute exists with the
employees of the Company and no such labor dispute is imminent. There
is no existing or, to the Company's knowledge, imminent labor
disturbance by the employees of any of the Company's principal
suppliers, contractors or customers (including, without limitation,
any distributors or end-users of its products).
(dd) Except for certain compensation to be paid to the
Representative, the Company has not incurred any liability for any
finder's fees or similar payments in connection with the transactions
contemplated herein.
(ee) Except as described in the Prospectus, the Company is not a
party to, and is not bound by, any agreement pursuant to which any
material royalties, honoraria or fees are payable by the Company to
any person by reason of the ownership or use of any Intellectual
Property.
(ff) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-B of the Regulations.
(gg) 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 continue to conduct, its affairs in such a manner to ensure that it
will not become an "investment company" within the meaning of the 1940
Act and such rules and regulations.
(hh) Neither the Company nor any director, officer, agent,
employee or other person associated with or acting on behalf of the
Company has, directly or indirectly, (A) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful
expenses relating to any political activity, (B) made any unlawful
payment to foreign or domestic governments or governmental
11
officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, (C) violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended or (D) made any
bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
Any certificate signed by any officer of the Company in such capacity
and delivered to the Representative or to counsel for the Underwriters
pursuant to this Agreement shall be deemed a representation and warranty by
the Company to the several Underwriters as to the matters covered thereby.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder severally represents and warrants to each Underwriter that:
(a) Such Selling Stockholder is the lawful owner of the Shares
to be sold by such Selling Stockholder pursuant to this Agreement and
has, and on the Closing Date (and Option Closing Date, if applicable)
will have, good and clear title to such Shares, free of all
restrictions on transfer, liens, encumbrances, security interests and
claims whatsoever.
(b) Upon delivery of and payment for such Shares pursuant to
this Agreement, good and clear title to such Shares will pass to the
Underwriters, free of all restrictions on transfer, liens,
encumbrances, security interests and claims whatsoever.
(c) Such Selling Stockholder has, and on the Closing Date will
have, full legal right, power and authority to enter into this
Agreement and the Custody Agreement between the Selling Stockholders
and American Stock Transfer & Trust Company as Custodian (the "Custody
Agreement") and to sell, assign, transfer and deliver such Shares in
the manner provided herein and therein, and this Agreement and the
Custody Agreement have been duly authorized, executed and delivered by
or on behalf of such Selling Stockholder and each of this Agreement
and the Custody Agreement is a valid and binding agreement of such
Selling Stockholder enforceable in accordance with its terms, except
as rights to indemnity and contribution hereunder may be limited by
applicable law.
(d) The power of attorney signed by such Selling Stockholder
appointing Xxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxx, or either one of
them, as his attorney-in-fact to the extent set forth therein with
regard to the transactions contemplated hereby and by the Registration
Statement and the Custody Agreement has been duly authorized, executed
and delivered by or on behalf of such Selling Stockholder and is a
valid and binding instrument of such Selling Stockholder enforceable
in accordance with its terms and, pursuant to such power of attorney,
such Selling Stockholder has authorized Xxxxx X. Xxxxxx and Xxxxxxx X.
Xxxxxxx, or either one of them, to execute and deliver on his behalf
this Agreement, the Custody Agreement and any other document necessary
or desirable in connection
12
with the transactions contemplated hereby and to deliver the Shares to
be sold by such Selling Stockholder pursuant to this Agreement.
(e) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares pursuant to the distribution
contemplated by this Agreement, and other than as permitted by the
Act, the Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection
with the offering and sale of the Shares.
(f) The execution, delivery and performance of this Agreement by
such Selling Stockholder, compliance by such Selling Stockholder with
all the provisions hereof and the consummation of the transactions
contemplated hereby will not require any consent, approval,
authorization or other order of any court, regulatory body,
administrative agency or other governmental body (except as such may
be under the Act, state securities laws or Blue Sky laws) and will not
conflict with or constitute a breach of any of the terms or provisions
of, or a default under, organizational documents of such Selling
Stockholder, if not an individual, or any agreement, indenture or
other instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder or property of such Selling Stockholder
is bound, or violate or conflict with any laws, administrative
regulation or ruling or court decree applicable to such Selling
Stockholder or property of such Selling Stockholder.
(g) Such parts of the Registration Statement under the caption
"Principal and Selling Stockholders" which specifically relate to such
Selling Stockholder do not, and will not on the Closing Date (and any
Option Closing Date, if applicable), 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, in light of
circumstances under which they were made, not misleading.
(h) At any time during the period described in paragraph 6(b)
hereof, if there is any change in the information referred to in
paragraph 2(g) above, the Selling Stockholder will immediately notify
you of such change.
(i) Such Selling Stockholder is not aware, and has no reason to
believe, that any of the representations and warranties of the Company
set forth in Section 1 above is untrue or inaccurate in any material
respect.
3. PURCHASE AND SALE OF OFFERED SHARES. On the basis of the
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, (i) the Company shall sell
951,666 Offered Shares; and (ii) each Selling Stockholder agrees, severally and
not jointly, to sell the number of Offered Shares set forth opposite such
Selling Stockholder's name in Schedule II hereto, to the several Underwriters at
the
13
Offering Price less the underwriting discount shown on the cover page of the
Prospectus (the "Underwriting Discount"), and the Underwriters, severally and
not jointly, shall purchase from the Company and the Selling Stockholders, on a
firm commitment basis, at the Offering Price less the Underwriting Discount, the
respective Offered Shares set forth opposite their names on Schedule I hereto.
In making this Agreement, each Underwriter is contracting severally, and not
jointly, and, except as provided in Sections 5 and 12 hereof, the agreement of
each Underwriter is to purchase only that number of Offered Shares specified
with respect to that Underwriter in Schedule I hereto. The Underwriters shall
offer the Offered Shares to the public as set forth in the Prospectus.
4. PAYMENT AND DELIVERY. Payment for the Offered Shares shall be made to
the Company by certified or official bank check payable to the order of the
Company in next day funds, at the offices of Xxxxxx, Xxxxxxxx & Xxxxx, Seattle,
Washington, or at such other location as shall be agreed upon by the Company and
the Representative, or in immediately available funds wired to such account or
accounts as the Company may specify (with all costs and expenses incurred by the
Underwriters in connection with such settlement (including, but not limited to,
interest or cost of funds expenses) to be borne by the Company), against
delivery of the Offered Shares to the Representative at such place as you shall
designate, for the respective accounts of the Underwriters. Such payments and
delivery will be made at 7:00 a.m., Pacific time, on the fourth business day
after the date of this Agreement or at such other time and date not later than
four business days thereafter as the Representative and the Company shall agree
upon. Such time and date are referred to herein as the "Closing Date." The
certificates representing the Offered Shares to be sold and delivered will be in
such denominations and registered in such names as the Representative requests
not less than two full business days prior to the Closing Date, and will be made
available to the Representative for inspection, checking and packaging at the
office of the Company's Transfer Agent, on the business day prior to the Closing
Date. The Representative has advised the Company that each Underwriter has
authorized the Representative to accept delivery of the Offered Shares and to
make payment and receipt therefor.
5. OPTION TO PURCHASE OPTIONAL SHARES.
(a) For the purposes of covering any over-allotments in connection
with the distribution and sale of the Offered Shares as contemplated by the
Prospectus, subject to the terms and conditions herein set forth, the
several Underwriters are hereby granted an option by the Company to
purchase all or any part of the Optional Shares from the Company (the
"Over-allotment Option"). The purchase price per share to be paid for the
Optional Shares shall be the Offering Price less the Underwriting Discount.
The Over-allotment Option granted hereby may be exercised by the
Representative on behalf of the several Underwriters as to all or any part
of the Optional Shares at any time (but not more than once) within 45 days
after the Effective Date. No Underwriter shall be under any obligation to
purchase any Optional Shares prior to an exercise of the Over-allotment
Option.
(b) The Over-allotment Option granted hereby may be exercised by the
Representative on behalf of the several Underwriters by giving notice to
the Company by
14
a letter sent by registered or certified mail, postage prepaid, telex,
telegraph, telegram or facsimile (such notice to be effective when sent),
addressed as provided in Section 14 hereof, setting forth the number of
Optional Shares to be purchased, the date and time for delivery of and
payment for the Optional Shares and stating that the Optional Shares
referred to therein are to be used for the purpose of covering
over-allotments in connection with the distribution and sale of the Offered
Shares. If such notice is given prior to the Closing Date, the date set
forth therein for such delivery and payment shall not be earlier than
either three full business days thereafter or the Closing Date, whichever
occurs later. If such notice is given on or after the Closing Date, the
date set forth therein for such delivery and payment shall be a date
selected by the Representative that is not later than five full business
days after the exercise of the Over-allotment Option. The date and time
set forth in such a notice is referred to herein as the "Option Closing
Date," and a closing held pursuant to such a notice is referred to herein
as the "Option Closing." The number of Optional Shares to be sold to each
Underwriter pursuant to the exercise of the Over-allotment Option shall be
the number that bears the same ratio to the aggregate number of Optional
Shares being purchased through such Over-allotment Option exercise as the
number of Offered Shares opposite the name of such Underwriter in
Schedule I hereto bears to the total number of all Offered Shares; subject,
however, to such adjustment as the Representative may approve to eliminate
fractional shares and subject to the provisions for the allocation of
Optional Shares purchased for the purpose of covering over-allotments set
forth in Section 10 of the Agreement Among Underwriters. Upon the exercise
of the Over-allotment Option, the Company shall become obligated and sell
to the Representative for the respective accounts of the Underwriters, and
on the basis of the representations, warranties, covenants and agreements
herein contained, but subject to the terms and conditions herein set forth,
and the several Underwriters shall become severally, but not jointly,
obligated to purchase from the Company, the number of Optional Shares
specified in each notice of exercise of the Over-allotment Option.
(c) Payment for the Optional Shares shall be made to the Company by
certified or official bank check payable to the order of the Company in
next day funds, at the office of Xxxxxx, Xxxxxxxx & Xxxxx, Seattle,
Washington, or such other location as shall be agreed upon by the Company
and the Representative, or in immediately available funds wired to such
account as the Company may specify (with all costs and expenses incurred by
the Underwriters in connection with such settlement in immediately
available funds (including, but not limited to, interest or cost of funds
expenses) to be borne by the Company), against delivery of the Optional
Shares to the Representative at such place as you shall designate, for the
respective accounts of the Underwriters. The certificates representing the
Optional Shares to be issued and delivered will be in such denominations
and registered in such names as the Representative requests not less than
two full business days prior to the Option Closing Date, and will be made
available to the Representative for inspection, checking and packaging at
the office of the Company's Transfer Agent on the business day prior to the
Option Closing Date.
15
6. CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY. The Company
covenants and agrees with the several Underwriters as follows:
(a) If Rule 430A of the Regulations is employed, the Company will
timely file the Prospectus pursuant to and in compliance with Rule 424(b)
of the Regulations and will advise the Representative of the time and
manner of such filing.
(b) The Company will not at any time, whether before or after the
Registration Statement shall have become effective, during such period as,
in the opinion of counsel for the Underwriters, the Prospectus is required
by law to be delivered in connection with sales by the Underwriters or a
dealer, file or publish any amendment or supplement to the Registration
Statement or Prospectus of which the Representative have not been
previously advised and furnished a copy, or which is not in compliance with
the Regulations, or, during the period before the distribution of the
Offered Shares and the Optional Shares is completed, file or publish any
amendment or supplement to the Registration Statement or Prospectus to
which the Representative reasonably objects in writing.
(c) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time and date that this Agreement is
executed and delivered by the parties hereto, to become effective and will
advise the Representative immediately, and confirm such advice in writing,
(i) when the Registration Statement, or any post-effective amendment to the
Registration Statement, is filed with the SEC, (ii) of the receipt of any
comments from the SEC, (iii) when the Registration Statement has become
effective and when any post-effective amendment thereto becomes effective,
or when any supplement to the Prospectus or any amended Prospectus has been
filed, (iv) of any request of the SEC for amendment or supplementation of
the Registration Statement or Prospectus or for additional information,
(v) during the period when the Prospectus is required to be delivered under
the Act and Regulations, of the happening of any event which in the
Company's judgment makes any material statement in the Registration
Statement or the Prospectus untrue or which requires any changes to be made
in the Registration Statement or Prospectus in order to make any material
statements therein not misleading and (vi) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
or of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus, the suspension of the qualification of any of
the Shares for offering or sale in any jurisdiction in which the
Underwriters intend to make such offers or sales, or of the initiation or
threatening of any proceedings for any such purposes. The Company will use
its best efforts to prevent the issuance of any such stop order or of any
order preventing or suspending such use and, if any such order is issued,
to obtain as soon as possible the lifting thereof.
(d) The Company has delivered to the Representative, without charge,
and will continue to deliver from time to time until the Effective Date, as
many copies of each Preliminary Prospectus as the Representative may
reasonably request. The Company will deliver to the Representative,
without charge, as soon as possible after the Effective Date, and
thereafter from time to time during the period when delivery of the
Prospectus is
16
required under the Act, such number of copies of the Prospectus (as
supplemented or amended, if the Company makes any supplements or amendments
to the Prospectus) as the Representative may reasonably request. The
Company hereby consents to the use of such copies of each Preliminary
Prospectus and the Prospectus for purposes permitted by the Act, the
Regulations and the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered or sold by the several Underwriters and by all
dealers to whom Shares may be offered or sold, both in connection with the
offering and sale of the Shares and for such period of time thereafter as
the Prospectus is required by the Act to be delivered in connection with
sales by any Underwriter or dealer. The Company has furnished or will
furnish to the Representative two signed copies of the Registration
Statement as originally filed and of all amendments thereto, whether filed
before or after the Effective Date, two copies of all exhibits filed
therewith and two signed copies of all consents and certificates of
experts, and will deliver to the Representative such number of conformed
copies of the Registration Statement, including financial statements and
exhibits, and all amendments thereto, as the Representative may reasonably
request.
(e) The Company will comply with the Act, the Regulations, the
Exchange Act and the rules and regulations thereunder so as to permit the
continuance of offers and sales of, and dealings in, the Shares for as long
as may be necessary to complete the distribution of the Shares as
contemplated hereby.
(f) The Company will furnish such information as may be required and
otherwise cooperate in the registration or qualification of the Shares, or
exemption therefrom, for offering and sale by the several Underwriters and
by dealers under the securities or Blue Sky laws of such jurisdictions in
which the Representative determines to offer the Shares, after consultation
with the Company, and will file such consents to service of process or
other documents necessary or appropriate in order to effect such
registration or qualification; provided, however, that no such
qualification shall be required in any jurisdiction where, solely as a
result thereof, the Company would be subject to taxation or qualification
as a foreign corporation doing business in such jurisdiction where it is
not now so qualified or to take any action which would subject it to
service of process in suits, other than those arising out of the offering
or sale of the Shares, in any jurisdiction where it is not now so subject.
The Company will, from time to time, prepare and file such statements and
reports as are or may be required to continue such qualification in effect
for so long a period as is required under the laws of such jurisdiction for
such offering and sale.
(g) Subject to subsection (b) of this Section 6, in case of any
event, at any time within the period during which, in the opinion of
counsel for the Underwriters, a prospectus is required to be delivered
under the Act and Regulations, as a result of which event any Preliminary
Prospectus or the Prospectus, as then amended or supplemented, would
contain, in the judgment of the Company or in the opinion of counsel for
the Underwriters, an untrue statement of a material fact, or omit to state
any material fact necessary in order 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 to amend any
17
Preliminary Prospectus or the Prospectus to comply with the Act and
Regulations or any applicable securities or Blue Sky laws, the Company
promptly will prepare and file with the SEC, and any applicable state
securities commission, an amendment or supplement that will correct such
statement or omission or an amendment that will effect such compliance and
will furnish to the Representative such number of copies of such amendment
or amendments or supplement or supplements to such Preliminary Prospectus
or the Prospectus (in form and substance satisfactory to the Representative
and counsel for Underwriters) as the Representative may reasonably request.
For purposes of this subsection, the Company will furnish such information
to the Representative, the Underwriters' counsel and counsel for the
Company as shall be necessary to enable such persons to consult with the
Company with respect to the need to amend or supplement any Preliminary
Prospectus or the Prospectus, and shall furnish to the Representative and
the Underwriters' counsel such further information as each may from time to
time reasonably request. If the Company and the Representative agree that
any Preliminary Prospectus or the Prospectus should be amended or
supplemented, the Company, if requested by the Representative, will, if and
to the extent required by law, promptly issue a press release announcing or
disclosing the matters to be covered by the proposed amendment or
supplement.
(h) The Company will make generally available to its security holders
as soon as practicable and in any event not later than 45 days after the
end of the period covered thereby, an earnings statement of the Company
(which need not be audited unless required by the Act, the Regulations, the
Exchange Act or the rules or regulations thereunder) that shall comply with
Section 11(a) of the Act and cover a period of at least 12 consecutive
months beginning not later than the first day of the Company's fiscal
quarter next following the Effective Date.
(i) For a period of five years from the Effective Date, the Company
will deliver to the Representative upon request: (A) a copy of each report
or document, including, without limitation, reports on Forms 8-K, 10-C,
10-K and 10-Q (or such similar forms as may be designated by the SEC),
registration statements and any exhibits thereto, filed with or furnished
to the SEC or any securities exchange or the NASD, as soon as practicable
after the date each such report or document is so filed or furnished,
(B) as soon as practicable, copies of any reports or communications
(financial or other) of the Company mailed to its security holders and
(C) every material press release in respect of the Company or its affairs
that was released or prepared by the Company.
(j) During the course of the distribution of the Shares, the Company
has not taken, nor will it take, directly or indirectly, any action
designed to or that might, in the future, reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common
Shares.
(k) The Company will cause each person listed on Schedule III hereto
to execute a legally binding and enforceable agreement (a "lockup
agreement") to, for the period specified on Schedule III hereto, not sell,
offer to sell, contract to sell, grant any
18
option for the sale of or otherwise transfer or dispose of any Common
Shares (except for the sale of the Shares as contemplated by this
Agreement), any options to purchase Common Shares or any securities
convertible into or exchangeable for Common Shares (excluding the issuance
of Common Shares pursuant to the Employee Options) without the prior
written consent of the Representative, which lockup agreement shall be in
form and substance satisfactory to the Representative and the Underwriters'
counsel, and deliver such lockup agreement to the Representative prior to
the Effective Date. Appropriate stop transfer instructions will be issued
by the Company to the transfer agent for the securities affected by the
lockup agreements.
(l) The Company will not sell, issue, contract to sell, offer to sell
or otherwise dispose of any Common Shares, options to purchase Common
Shares or any other security convertible into or exchangeable for Common
Shares, from the date of the Effective Date through 180 days after the
Effective Date, without the prior written consent of the Representative,
except for the sale of the Shares as contemplated by this Agreement, the
granting of options, and the issuance of Common Shares upon their exercise,
under the Company's stock option plans described in the Prospectus, the
issuance of Common Shares pursuant to the Employee Options and the Warrants
and the issuance of the Representative's Warrant.
(m) The Company will use all reasonable efforts to maintain the
inclusion of the Common Shares on the Nasdaq SmallCap Market.
(n) The Company shall, at its sole cost and expense, supply and
deliver to the Representative and the Underwriters' counsel, within a
reasonable period after the Closing Date, six transaction binders, each of
which shall include the Registration Statement, as amended or supplemented,
all exhibits to the Registration Statement, each Preliminary Prospectus,
the Prospectus, the Preliminary Blue Sky Memorandum and any supplement
thereto and all underwriting and other closing documents.
(o) The Company will use the net proceeds from the sale of the Shares
to be sold by it hereunder substantially in accordance with the description
thereof set forth in the Prospectus and shall file such reports with the
SEC with respect to the sale of such Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the
Act.
(p) On the Closing Date, the Company shall sell to the
Representative, at a purchase price of $0.001 per warrant, a
Representative's Warrant to purchase 100,000 Common Shares. Such
Representative's Warrant shall be issued pursuant to the terms of the
Warrant Agreement and shall have an exercise price per share equal to
$______, shall be exercisable during the period beginning on the first
anniversary of the Effective Date and ending on the fifth anniversary of
the Effective Date, and shall contain customary anti-dilution and
registration rights provisions.
19
7. PAYMENT OF EXPENSES.
(a) Whether or not the transactions contemplated by this Agreement
are consummated and regardless of the reason this Agreement is terminated,
the Company will pay or cause to be paid, and bear or cause to be borne,
all costs and expenses incident to the performance of the obligations of
the Company under this Agreement, including: (i) the fees and expenses of
the accountants and counsel for the Company incurred in the preparation of
the Registration Statement and any post-effective amendments thereto
(including financial statements and exhibits), each Preliminary Prospectus
and the Prospectus and any amendments or supplements thereto; (ii) printing
and mailing expenses associated with the Registration Statement and any
post-effective amendments thereto, each Preliminary Prospectus, the
Prospectus (including any supplement thereto), this Agreement, the
Agreement Among Underwriters, the Underwriters' Questionnaire, the Power of
Attorney, the Selected Dealer Agreement and related documents and the
Preliminary Blue Sky Memorandum and any supplement thereto; (iii) the costs
incident to the authentication, issuance, delivery and transfer of the
Shares to the Underwriters; (iv) all taxes, if any, on the issuance,
delivery and transfer of the Shares to be sold by the Company; (v) the
fees, expenses and all other costs of qualifying the Shares for the sale
under the securities or Blue Sky laws of those jurisdictions in which the
Shares are to be offered or sold including the fees and disbursements of
Underwriters' counsel and such local counsel as may have been reasonably
required and retained for such purpose; (vi) the fees, expenses and other
costs of, or incident to, securing any review or approvals by or from the
NASD exclusive of fees of the Underwriters' counsel; (vii) the filing fees
of the SEC; (viii) the cost of furnishing to the Underwriters copies of the
Registration Statement, each Preliminary Prospectus and the Prospectus
(including any supplement or amendment thereto) as herein provided;
(ix) the Company's travel expenses in connection with meetings with the
brokerage community and institutional investors and expenses associated
with hosting such meetings, including meeting rooms, meals, facilities and
ground transportation expenses; (x) the costs and expenses associated with
settlement in same day funds (including, but not limited to, interest or
cost of funds expenses), if desired by the Company; (xi) the fees for
inclusion of the Shares on the Nasdaq SmallCap Market; (xii) the cost of
printing and engraving certificates for the Shares; (xiii) the cost and
charges of any transfer agent; and (xiv) all other costs and expenses
reasonably incident to the performance of its obligations hereunder that
are not otherwise specifically provided for in this Section 7, provided
that, except as specifically set forth in subsection (c) of this Section 7,
the Underwriters shall be responsible for their out-of-pocket expenses,
including their lodging and travel expenses associated with meetings with
the brokerage community and institutional investors, and the fees and
expenses of their counsel for other than Blue Sky work.
(b) The Company shall pay as due any registration, qualification and
filing fees and any accountable out-of-pocket disbursements in connection
with such registration, qualification or filing in the jurisdictions in
which the Representative determines, after consultation with the Company,
to offer or sell the Shares.
20
(c) In addition to the foregoing expenses, the Company shall at the
Closing Date pay to the Representative a non-accountable expense allowance
equal to three percent (3%) of the gross proceeds received from the sale of
the Offered Shares. In the event the Over-allotment Option is exercised,
the Company shall pay to the Representative at the Option Closing Date an
additional amount equal to three percent (3%) of the gross proceeds
received upon exercise of the Over-allotment Option.
(d) In the event the Underwriters are willing to proceed with the
issuance and sale of the Offered Shares as contemplated by this Agreement
and the Company elects not to proceed for any reason, the Company shall
reimburse the Representative for all of their out-of-pocket expenses
incurred in connection with the offering of the Offered Shares (including
but not limited to the fees and disbursements of its counsel), in an amount
not to exceed $150,000.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligation of each
Underwriter to purchase and pay for the Offered Shares that it has agreed to
purchase hereunder on the Closing Date, and to purchase and pay for any Optional
Shares as to which its right to purchase under Section 5 has been exercised on
an Option Closing Date, is subject at the date hereof, the Closing Date and any
Option Closing Date to the continuing accuracy of the representations and
warranties of the Company set forth herein, to the performance by the Company of
its covenants, agreements and obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not later
than 2:30 p.m., Pacific time, on the date of this Agreement, or at such
later time or on such later date as the Representative may agree to in
writing; if required by the Regulations, the Prospectus shall have been
filed with the SEC pursuant to Rule 424(b) of the Regulations within the
applicable time period prescribed for such filing by the Regulations and in
accordance with subsection (a) of Section 6 hereof; on or prior to the
Closing Date or any Option Closing Date, as the case may be, no stop order
or other order preventing or suspending the effectiveness of the
Registration Statement or the sale of any of the Shares shall have been
issued under the act or any state securities law and no proceedings for
that purpose shall have been initiated or shall be pending or, to the
Representatives' knowledge or the knowledge of the Company, shall be
contemplated by the SEC or any authority in any jurisdiction designated by
the Representative pursuant to subsection (f) of Section 6 hereof and any
request on the part of the SEC for additional information shall have been
complied with to the reasonable satisfaction of counsel for the
Underwriters.
(b) All corporate proceedings and other matters incident to the
authorization, form and validity of this Agreement, the Warrant Agreement,
the Representative's Warrant and the Shares and the form of the
Registration Statement, each Preliminary Prospectus and the Prospectus, and
all other legal matters relating to this Agreement and the transactions
contemplated hereby, shall be satisfactory in all respects to counsel to
the Underwriters; the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them
to pass upon such matters; and the Representative shall have received from
the Underwriters' counsel, Xxxxxx,
21
Xxxxxx, White & XxXxxxxxx, a favorable opinion, dated as of the Closing
Date and any Option Closing Date, as the case may be, and addressed to the
Representative individually and as the Representative of the several
Underwriters with respect to the due authorization, execution and delivery
of this Agreement, that the issuance and sale of the Shares have been duly
authorized by the Company, that when the Shares have been duly delivered
against payment therefor as contemplated by this Agreement, they will be
validly issued, fully paid and non-assessable and that the Registration
Statement has become effective under the Act.
(c) The NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of any of the Shares.
(d) The Representative shall have received copies of the lockup
agreements described in subsection (k) of Section 6 signed by those persons
set forth on Schedule III hereto.
(e) The Representative shall have received at or prior to the Closing
Date from the Underwriters' counsel a memorandum or summary, in form and
substance satisfactory to the Representative, with respect to the
qualification for offering and sale by the Underwriters of the Shares under
the securities or Blue Sky laws of such jurisdictions designated by the
Representative pursuant to subsection (f) of Section 6 hereof.
(f) You shall have received on the Closing Date and on the Option
Closing Date, if any, the following opinions of Xxxxxx, Xxxxxxxx & Xxxxx,
counsel for the Company, dated the Closing Date and the Option Closing
Date, if any, and addressed to the Underwriters and with reproduced copies
or signed counterparts thereof for each of the Underwriters:
(i) the Company is a corporation validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority required to carry
on its business as it is currently being conducted and to own, lease and
operate its properties;
(ii) to such counsel's knowledge after due inquiry (as defined
in such counsel's opinion), the Company is duly qualified and is in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the Company;
(iii) to such counsel's knowledge after due inquiry, the company
owns no capital stock of, or other ownership interests in, any business;
(iv) the Company has authorized and outstanding capital stock as
set forth under the heading "Capitalization" in the Prospectus; all the
outstanding shares of Common Stock (including the Shares to be sold by the
Selling Stockholders) have been
22
duly authorized and validly issued, are fully paid and non-assessable, are
duly authorized for quotation on the Nasdaq SmallCap Market, have been
issued in compliance with all federal and state securities laws, and were
not issued in violation of or subject to any preemptive rights or to such
counsel's knowledge after due inquiry, other rights, which have not been
waived, to subscribe for or purchase securities;
(v) the Shares to be issued and sold by the Company (A)
hereunder and (B) under the Warrant Agreement have been duly authorized,
and when issued and delivered to the Underwriters against payment therefor
as provided by this Agreement and the Warrant Agreement, respectively, will
have been validly issued and will be fully paid and non-assessable, and the
issuance of such Shares is not subject to any preemptive or, to such
counsel's knowledge, other similar rights; the description set forth in the
Prospectus of the Company's stock option, stock bonus and other stock plans
or arrangements, and to such counsel's knowledge after due inquiry, the
options or other rights granted and exercised thereunder, accurately and
fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights; to such counsel's knowledge after
due inquiry, no securityholder of the Company has any right which has not
been waived to require the Company to register the sale of any securities
owned by such securityholder under the Act in the public offering
contemplated by this Agreement; and no further approval or authorization of
the stockholders or the Board of Directors of the Company is required for
(A) the issuance and sale of the Shares to be sold by the Company or the
transfer and sale of the Shares to be sold by the Selling Stockholders
pursuant to this Agreement or (B) the issuance and sale of the Shares
issuable upon exercise of the Warrant Agreement;
(vi) this Agreement and the Warrant Agreement have been duly
authorized, executed and delivered by the Company and (as to this
Agreement) each of the Selling Stockholders and is a valid and binding
agreement of the Company and (as to this Agreement) each Selling
Stockholder, enforceable in accordance with its terms (except as rights to
indemnity and contribution hereunder may be limited by applicable law);
(vii) the authorized capital stock of the Company, including the
Common Stock and the Shares, conforms as to legal matters to the
description thereof contained in the Prospectus;
(viii) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and no
proceedings for that purpose are, to the knowledge of such counsel, pending
before or contemplated by the Commission;
(ix) the statements under the captions "Description of Capital
Stock" in the Prospectus and Items 24 and 26 of Part II of the Registration
Statement insofar as such statements constitute a summary of legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents and
proceedings;
23
(x) the Company is not in violation of its Certificate of
Incorporation or By-Laws and, to counsel's knowledge after due inquiry,
except as to defaults which individually and in the aggregate would not be
material to the Company, the Company is not in default in the performance
of any obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any other agreement,
indenture or instrument to which the Company is a party or by which it or
its property is bound;
(xi) the execution, delivery and performance of this Agreement
and the Warrant Agreement by the Company and (as to this Agreement) each
Selling Stockholder, compliance by the Company and (as to this Agreement)
each Selling Stockholder with all the provisions hereof and of the Warrant
Agreement and the consummation of the transactions contemplated hereby and
by the Warrant Agreement will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the
Act or other securities or Blue Sky laws) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, the Certificate of Incorporation or By-Laws of the Company or (as to
this Agreement) the organizational documents of any Selling Stockholder
that is not an individual or, to such counsel's knowledge after due
inquiry, any agreement, indenture or other instrument to which the Company
or (as to this Agreement) any Selling Stockholder is a party or by which
the Company or (as to this Agreement) any Selling Stockholder or their
respective properties are bound, or violate or conflict with any laws,
administrative regulations or rulings or court decrees known to such
counsel and applicable to the Company or (as to this Agreement) any Selling
Stockholder or their respective properties;
(xii) after due inquiry, such counsel does not know of any legal
or governmental proceeding pending or threatened to which the Company is a
party or to which any of its property is subject which is required to be
described in the Registration Statement or the Prospectus and is not so
described, or of any contract or other document which is required to be
described in the Registration Statement or the Prospectus or is required to
be filed as an exhibit to the Registration Statement which is not described
or filed as required;
(xiii) to such counsel's knowledge, after due inquiry, the
Company has not violated any applicable foreign, federal, state or local
law or regulation, including without limitation any Environmental Laws, any
federal or state law relating to discrimination in the hiring, promotion or
pay of employees, any applicable federal or state wages and hours laws, and
any provisions of the Employee Retirement Income Security Act or the rules
and regulations promulgated thereunder, which in each case might result in
any material adverse change in the business, prospects, financial condition
or results of operation of the Company;
(xiv) to such counsel's knowledge, after due inquiry, the
Company has such permits, licenses, franchises and authorizations of
governmental or regulatory
24
authorities ("permits"), including, without limitation, under any
applicable Environmental Laws, as are necessary to own, lease and operate
its properties and to conduct its business in the manner described in the
Prospectus; to such counsel's knowledge, after due inquiry, the Company has
fulfilled and performed all of its material obligations with respect to
such permits and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or result in
any other material impairment of the rights of the holder of any such
permit, subject in each case to such qualification as may be set forth in
the Prospectus; and, except as described in the Prospectus, such permits
contain no restrictions that are materially burdensome to the Company;
(xv) the Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(xvi) to such counsel's knowledge, after due inquiry, no holder
of any security of the Company has any right to require registration of
shares of Common Stock or any other security of the Company except as
disclosed in the Prospectus;
(xvii) (1) the Registration Statement (including any
registration statement filed under 462(b) of the Act, if any) and the
Prospectus and any supplement or amendment thereto (except for financial
statements as to which no opinion need be expressed) comply as to form in
all material respects with the Act, and (2) such counsel has no reason to
believe that (except for financial statements, as aforesaid) the
Registration Statement and the prospectus included therein at the time the
Registration Statement became effective did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and that the Prospectus, as amended or supplemented, if
applicable (except for financial statements, as aforesaid) does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In giving such opinion with respect to the matters covered by clause
(xvii) such counsel may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification except as specified.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of officers of the Company and of government
officials, in which case their opinion is to state that they are so doing
and copies of said certificates are to be attached to the opinion.
The opinion of Xxxxxx, Xxxxxxxx & Xxxxx described in paragraph (f)
above shall be rendered to you at the request of the Company and shall so
state therein.
25
(g) You shall have received on the Closing Date the following
opinions of counsel for each Selling Stockholder, which counsel shall be
reasonably satisfactory to counsel to the Underwriters. Each opinion shall
be dated the Closing Date, addressed to Underwriters, and in form and scope
satisfactory to counsel for the Underwriters, with reproduced copies or
signed counterparts thereof for each of the Underwriters:
(i) to such counsel's knowledge, after due inquiry, the Custody
Agreement has been duly authorized, executed and delivered by each Selling
Stockholder and is a valid and binding agreement of such Selling
Stockholder enforceable in accordance with its terms;
(ii) to such counsel's knowledge, after due inquiry, each
Selling Stockholder has full legal right, power and authority, and any
approval required by law (other than any approval imposed by the applicable
state securities and Blue Sky laws) to sell, assign, transfer and deliver
the Shares to be sold by him in the manner provided in this Agreement and
the Custody Agreement;
(iii) to such counsel's knowledge, after due inquiry, upon
delivery of the certificates for the Shares to be sold by each Selling
Stockholder pursuant hereto and payment therefor, good and clear title will
pass to the Underwriters (whom such counsel may assume to be bona fide
purchasers), severally, free of all restrictions on transfer, liens,
encumbrances, security interests and claims whatsoever, assuming in each
case that the Underwriters have no notice of any adverse claim with respect
to such Shares; and
(iv) to such counsel's knowledge, after due inquiry, the power
of attorney signed by each Selling Stockholder appointing Xxxxx X. Xxxxxx
and Xxxxxxx X. Xxxxxxx, or either of them, as his attorney-in-fact to the
extent set forth therein with regard to the transactions contemplated
hereby and by the Registration Statement has been duly authorized, executed
and delivered by or on behalf of each Selling Stockholder and is the valid
and binding instrument of such Selling Stockholder enforceable in
accordance with its terms, and pursuant to such power of attorney, each of
the Selling Stockholders has authorized Xxxxx X. Xxxxxx and Xxxxxxx X.
Xxxxxxx, or either of them, to execute and deliver on their behalf this
Agreement and any other document necessary or desirable in connection with
transactions contemplated hereby and to deliver the Shares to be sold by
them pursuant to this Agreement.
(h) At the Closing Date and any Option Closing Date: (A) the
Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with the
Act and the Regulations and shall conform, in all material respects, to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor any post-effective amendment thereto nor the Prospectus and
any amendments or supplements thereto shall contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary
26
to make the statements therein, in light of the circumstances under which
they were made, not misleading, (B) since the respective dates as of which
information is given in the Registration Statement and any post-effective
amendment thereto and the Prospectus and any amendments or supplements
thereto, except as otherwise stated therein, there shall have been no
material adverse change in the properties, condition (financial or
otherwise), results of operations, stockholders' equity, business or
management of the Company, from that set forth therein, whether or not
arising in the ordinary course of business, other than as referred to in
the Registration Statement or Prospectus, (C) since the respective dates as
of which information is given in the Registration Statement and any
post-effective amendment thereto and the Prospectus or any amendment or
supplement thereto, there shall have been no transaction, contract or
agreement entered into by the Company, other than in the ordinary course of
business and as set forth in the Registration Statement or Prospectus, that
has not been, but would be required to be, set forth in the Registration
Statement or Prospectus; (D) no action, suit or proceeding at law or in
equity shall be pending or, to the knowledge of the Company, threatened
against the Company that would be required to be set forth in Prospectus,
other than as set forth therein, and no proceedings shall be pending or, to
the knowledge of the Company, threatened against the Company before or by
any federal, state or other commission, board or administrative agency
wherein an unfavorable decision, ruling or finding would materially
adversely affect the properties, condition (financial or otherwise),
results of operations, stockholders' equity or business of the Company,
other than as set forth in the Prospectus. The Representative shall have
received at the Closing Date and any Option Closing Date certificates of
each of the Chief Executive Officer and the Chief Financial Officer of the
Company dated as of the date of the Closing Date or Option Closing Date, as
the case may be, and addressed to the Representative to the effect that the
conditions set forth in this subsection have been satisfied and as to the
accuracy and performance, as of the Closing Date or the Option Closing
Date, as the case may be, of the agreements, representations and warranties
of the Company set forth herein.
(i) At the time this Agreement is executed and at the Closing Date
and any Option Closing Date, the Representative shall have received a
letter addressed to the Representative, individually and as the
Representative of the several Underwriters, and in form and substance
satisfactory to the Representative in all respects (including the
nonmaterial nature of the changes or decreases, if any, referred to in
clause (iii) below) from BDO Xxxxxxx, LLP, dated as of the date of this
Agreement, the Closing Date or Option Closing Date, as the case may be:
(i) confirming that they are independent public accountants
within the meaning of the Act and the Regulations and stating that the
section of the Registration Statement under the caption "Experts" is
correct insofar as it relates to them;
(ii) stating that, in their opinion, the financial statements of
the Company audited by them and included in the Registration Statement
comply in
27
form in all material respects with the applicable accounting
requirements of the Act and the Regulations;
(iii) stating that, on the basis of specified procedures, which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the
latest available unaudited interim financial statements), a reading of
the minutes of the meetings of the stockholders and the Board of
Directors of the Company and audit and compensation committees of such
Board, if any, and inquiries to certain officers and other employees
of the Company who are responsible for financial and accounting
matters and other specified procedures and inquiries, nothing has come
to their attention that would cause them to believe that (A) the
unaudited financial statements and related schedules of the Company
included in the Registration Statement, if any, (I) do not comply in
form in all material respects with the applicable accounting
requirements of the Act and the Regulations or (II) were not fairly
presented in conformity with generally accepted accounting principles
on a basis substantially consistent with that of the audited financial
statements and related schedules included in the Registration
Statement or (B)(I) at a specified date, not more than five business
days prior to the date of such letter there was any change in the
capital stock or short-term or long-term debt of the Company, or any
decrease (increase) in net current assets, total assets or
stockholders' equity as compared with the amounts shown in the
December 31, 1995 unaudited balance sheet of the Company included in
the Registration Statement, other than as set forth in or contemplated
by the Registration Statement and Prospectus, and (II) during the
period from December 31, 1995 to a specified date not more than five
business days prior to the date of such letter, there has been any
decrease (increase), as compared with the corresponding period in the
preceding year, in revenues, operating income or income before income
taxes or in total or per share amounts of net income of the Company
or, if there was any such change or decrease (increase), setting forth
the amount of such change or decrease (increase); and
(iv) stating that they have compared specific dollar amounts,
numbers of shares and other information pertaining to the Company set
forth in the Registration Statement and Prospectus that have been
specified by the Representative prior to the date of this Agreement,
to the extent that such amounts, numbers, percentages and information
may be derived from the general accounting or other records of the
Company with the result obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures
do not constitute an audit in accordance with generally accepted
auditing standards) set forth in the letter, and found them to be in
agreement.
(j) The Company shall have executed and delivered a Warrant Agreement
in a form satisfactory to the Representative (the "Warrant Agreement") and
there shall
28
have been tendered to the Representative certificates representing all of
the Representative's Warrant described in subsection (p) of Section 6, to
be purchased by the Representative on the Closing Date.
(k) At the Closing Date and any Option Closing Date, the
Representative shall have been furnished such additional documents and
certificates as they shall reasonably request.
(l) No action shall have been taken by the NASD, the effect of which
is to make it improper, at any time prior to the Closing Date or any Option
Closing Date, for members of the NASD to execute transactions as principal
or as agent in the Shares or to trade or deal in the Shares, and no
proceedings for the purpose of taking such action shall have been
instituted or shall be pending or, to the Company's or the Representatives'
knowledge, shall be contemplated by the NASD.
If any conditions to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date, shall not have been fulfilled, the
Representative may on behalf of the several Underwriters terminate this
Agreement or, if they so elect, waive any such conditions which have not been
fulfilled or extend the time for their fulfillment.
9. INDEMNIFICATION.
(a) The Company and Xxxxx X. Xxxxxx, jointly and severally (subject
to the limitation set forth in the last sentence of this Section 9(a)),
agree to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), from and against any and all losses, claims, damages,
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities
or judgments are caused by any such untrue statement or omission or alleged
untrue statement or omission which is based upon information relating to
any Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through the Representative expressly for use therein; provided,
however, that the indemnification contained in this paragraph (a) with
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter)
on account of any such loss, claim, damage, liability or expense arising
from the sale of the Shares by such Underwriter to any person if a copy of
the Prospectus shall not have been delivered or sent to such person within
the time required by the Act and the regulations thereunder, provided that
the Company has delivered the Prospectus to the several Underwriters in
requisite quantity on a timely basis to permit such delivery or sending.
29
Notwithstanding the foregoing, the aggregate liability of Xx. Xxxxxx
pursuant to the provisions of this paragraph shall be limited to an amount
equal to the aggregate purchase price received by Mr. Xxxxxx xxxx the sale
of Xx. Xxxxxx'x Shares hereunder.
(b) In case any action shall be brought against any Underwriter or
any person controlling such Underwriter, based upon any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment
or supplement thereto and with respect to which indemnity may be sought
against the Company, such Underwriter shall promptly notify the parties
against whom indemnification is being sought (the "Indemnifying Parties")
in writing and the Indemnifying Parties shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such
indemnified party and payment of all fees and expenses. Any Underwriter or
any such controlling person shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the employment of such counsel has been
specifically authorized in writing by the Indemnifying Parties, (ii) the
Indemnifying Parties shall have failed to assume the defense and employ
counsel or (iii) the named parties to any such action (including any
impleaded parties) include both such Underwriter or such controlling person
and the Indemnifying Parties and such Underwriter or such controlling
person shall have been advised by such counsel that there may be one or
more legal defenses available to it which are different from or additional
to those available to the Indemnifying Parties (in which case the
Indemnifying Parties shall not have the right to assume the defense of such
action on behalf of such Underwriter or such controlling person, it being
understood, however, that the Indemnifying Parties shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel) for
all such Underwriters and controlling persons, which firm shall be
designated in writing by the Representative and that all such fees and
expenses shall be reimbursed as they are incurred). The Indemnifying
Parties shall not be liable for any settlement of any such action effected
without their written consent. If settled with such written consent, the
Indemnifying Parties agree to indemnify and hold harmless any Underwriter
and any such controlling person from and against any loss or liability by
reason of such settlement. Notwithstanding the immediately preceding
sentence, if in any case where the fees and expenses of counsel are at the
expense of the Indemnifying Parties and an indemnified party shall have
requested the Indemnifying Parties to reimburse the indemnified party for
such fees and expenses of counsel as incurred, the Indemnifying Parties
agree that they shall be liable for any settlement of any action effected
without its written consent if (i) such settlement is entered into more
than ten business days after the receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall have failed to
reimburse the indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in
30
respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding.
(c) Each Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, the Company, its directors, its officers
who sign the Registration Statement, and any person who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company
to each Underwriter, but only with respect to the information furnished in
writing by or on behalf of such Selling Stockholder expressly for use in
the Registration Statement, the Prospectus or any preliminary prospectus,
or any amendment or supplement thereto. If any action, suit or proceeding
shall be brought against any Underwriter, any such controlling person of
any Underwriter, the Company, any of its directors, any such officer, or
any such controlling person of the Company, based on the Registration
Statement, the Prospectus or any preliminary prospectus or any amendment or
supplement thereto, and in respect of which indemnity may be sought against
any Selling Stockholder pursuant to this paragraph (c), such Selling
Stockholder shall have the rights and duties given to the Company by
paragraph (b) above (except that if the Company shall have assumed the
defense thereof such Selling Stockholder shall not be required to do so,
but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at such Selling
Stockholder's expense), and each Underwriter, each such controlling person
of any Underwriter, the Company, its directors, any such officer, and any
such controlling person of the Company shall have the rights and duties
given to the Underwriters by paragraph (b) above. The liability of each
Selling Stockholder under this paragraph (c) and paragraph (e) shall be
limited to an amount equal to the net proceeds of the Shares sold by such
Selling Stockholder to the Underwriters.
(d) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, any person controlling the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, each
Selling Stockholder and each person, if any, controlling such Selling
Stockholder within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the
Company and the Selling Stockholders to each Underwriter but only with
reference to information relating to such Underwriter furnished in writing
by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any preliminary prospectus. In
case any action shall be brought against the Company, any of its directors,
any such officer or any person controlling the Company or any Selling
Stockholder or any person controlling such Selling Stockholder based on the
Registration Statement, the Prospectus or any preliminary prospectus and in
respect of which indemnity may be sought against any Underwriter,
31
the Underwriter shall have the rights and duties given to the Company and
the Selling Stockholders by paragraph (b) above (except that if any Seller
shall have assumed the defense thereof, such Underwriter shall not be
required to do so, but may employ separate counsel therein and participate
in the defense thereof but the fees and expenses of such counsel shall be
at the expense of such Underwriter), and the Company, its directors, any
such officers and any person controlling the Company and the Selling
Stockholders and any person controlling such Selling Stockholders shall
have the rights and duties given to the Underwriter by Section 9(b) hereof.
(e) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Selling Stockholders and the Underwriters in connection
with the statements or omissions which resulted in such losses, claims,
damages, liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Selling Stockholders 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 and the Selling Stockholders, and the
total underwriting discounts and commissions received by the Underwriters,
bear to the total price to the public of the Shares, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
of the Company and the Selling Stockholders and the Underwriters shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company, the Selling
Stockholders or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Selling Stockholders and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this
Section 9(e) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of
32
the amount by which the total price at which the Shares 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 such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 9(e) are
several in proportion to the respective number of Shares purchased by each
of the Underwriters hereunder and not joint.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and any Option Closing Date; and such
representations, warranties and agreements of the Underwriters and the Company,
including without limitation the indemnity and contribution agreements contained
in Section 9 hereof and the agreements contained in Sections 7, 10, 11 and 14
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person,
and shall survive delivery of the Shares and termination of this Agreement,
whether before or after the Closing Date or any Option Closing Date.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) This Agreement shall become effective immediately as to Sections
7, 9, 10, 11 and 14 and, as to all other provisions, (i) if at the time of
execution and delivery of this Agreement the Registration Statement has not
become effective, at 6:30 a.m., Pacific time, on the first business day
following the Effective Date, or (ii) if at the time of execution and
delivery of this Agreement the Registration Statement has been declared
effective, at 6:30 a.m., Pacific time, on the date of execution of this
Agreement; but this Agreement shall nevertheless become effective at such
earlier time after the Registration Statement becomes effective as the
Representative may determine by notice to the Company or by release of any
of the Shares for sale to the public. For the purposes of this Section 10,
the Shares shall be deemed to have been so released upon the release for
publication of any newspaper advertisement relating to the Shares or upon
the release by the Representative of telegrams (i) advising the
Underwriters that the shares are released for public offering or
(ii) offering the Shares for sale to securities dealers, whichever may
occur first. The Representative may prevent the provisions of this
Agreement (other than those contained in Sections 7, 9, 10, 11 and 14)
hereof from becoming effective without liability of any party to any other
party, except as noted below, by giving the notice indicated in
subsection (c) of this Section 10 before the time the other provisions of
this Agreement become effective.
(b) The Representative shall have the right to terminate this
Agreement at any time prior to the Closing Date as provided in Sections 8
and 12 hereof or if any of the following have occurred: (i) since the
respective dates as of which information is
33
given in the Registration Statement and the Prospectus, any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the
Company, or the earnings, business affairs, management or business
prospects of the Company, whether or not arising in the ordinary course of
business; (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic, political or
financial market conditions if such outbreak, calamity, crisis or change
would, in the Representative's reasonable judgment, make it impractical or
inadvisable to commence or continue the offering of the Shares; (iii)
suspension of trading generally in securities on the New York Stock
Exchange or the over-the-counter market or limitation on prices (other than
limitations on hours or numbers of days of trading) for securities or the
promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority which in the Representative's
reasonable opinion materially and adversely affects trading on either such
Exchange or the over-the-counter market; (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation,
rule or order of any court or other governmental authority which in the
Representative's reasonable opinion materially and adversely affects or
will materially and adversely affect the business or operations of the
Company; (v) declaration of a banking moratorium by either federal or state
authorities; (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in
the Representatives' reasonable opinion has a material adverse effect on
the securities markets in the United States; (vii) declaration of a
moratorium in foreign exchange trading by major international banks or
other institutions or (viii) trading in any securities of the Company shall
have been suspended or halted by the NASD or the SEC.
(c) If the Representatives elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section 11, the Representative shall notify the Company thereof promptly by
telephone, telex, telegraph or facsimile, confirmed by letter.
12. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Offered Shares or Optional Shares hereunder, and if
the Offered Shares or Optional Shares with respect to which such default
relates do not exceed the aggregate of ten percent (10%) of the number of
Offered Shares or Optional Shares, as the case may be, that all
Underwriters have agreed to purchase hereunder, then such Offered Shares or
Optional Shares to which the default relates shall be purchased severally
by the non-defaulting Underwriters in proportion to their respective
commitments hereunder.
(b) If such default relates to more than ten percent (10%) of the
Offered Shares or Optional Shares, as the case may be, the Representative
may in its discretion arrange for another party or parties (including a
non-defaulting Underwriter) to
34
purchase such Offered Shares or Optional Shares to which such default
relates, on the terms contained herein. In the event that the
Representative does not arrange for the purchase of the Offered Shares or
Optional Shares to which a default relates as provided in this Section 12
within 36 hours after such default, this Agreement may be terminated by the
Representative or by the Company without liability on the part of the
nondefaulting Underwriters (except as provided in Section 9 hereof) or the
Company (except as provided in Sections 7 and 9 hereof), but nothing herein
shall relieve a defaulting Underwriter of its liability, if any, to the
other several Underwriters and to the Company for damages occasioned by its
default hereunder.
(c) If the Offered Shares or Optional Shares to which the default
relates are to be purchased by the non-defaulting Underwriters, or are to
be purchased by another party or parties as aforesaid, the Representative
or the Company shall have the right to postpone the Closing Date or any
Option Closing Date, as the case may be, for a reasonable period but not in
any event exceeding seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus
or in any other documents and arrangements, and the Company agrees to file
promptly any amendment to the Registration Statement or supplement to the
Prospectus which in the opinion of counsel for the Underwriters may thereby
be made necessary. The terms "Underwriters" and "Underwriter" as used in
this Agreement shall include any party substituted under this Section 12
with like effects as if it had originally been a party to this Agreement
with respect to such Offered Shares or Optional Shares.
13. INFORMATION FURNISHED BY UNDERWRITERS. The Representative, on behalf
of the Underwriters, represents and warrants to the Company that the information
appearing in any preliminary prospectus, the Prospectus or the Registration
Statement (a) on the cover page of the Prospectus with respect to price,
underwriting discounts and commissions and terms of offering, (b) on the inside
front cover page with respect to stabilization, (c) in the section entitled
"Underwriting," and (d) in the section entitled "Legal Matters" with respect to
the identity of counsel for the Underwriters was furnished to the Company by and
on behalf of the Underwriters for use in connection with the preparation of the
Registration Statement and the Prospectus and is correct in all material
respects. The parties acknowledge that this information constitutes the only
information furnished in writing by or on behalf of any Underwriter for
inclusion in any preliminary prospectus, the Prospectus or the Registration
Statement referred to in subsection (b) of Section 1 hereof and subsections (a)
and (b) of Section 9 hereof.
14. NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered, telexed, telegrammed, telegraphed or telecopied and
confirmed to such Underwriter, c/o Cruttenden Xxxx Incorporated, 00000 Xxx
Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000-0000, Attention: President, with a copy to
Heller, Ehrman, White & XxXxxxxxx, 6100 Columbia Center, 000 Xxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx 00000-0000, Attention: Xxxxxxx X. Xxxxxxxx; if sent to the
Company shall be mailed, delivered, telexed, telegrammed, telegraphed or
telecopied and
35
confirmed to Data Dimensions, Inc., 000 000xx Xxxxxx X.X., Xxxxxxxx, Xxxxxxxxxx
00000, Attention: President, with a copy to Xxxxxx, Xxxxxxxx & Xxxxx, 0000
Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000-0000, Attention: Xxxxx X.
Xxxxxxxxx.
15. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, the Company, and the
controlling persons, directors and officers referred to in Section 9 hereof, and
their respective successors, assigns, heirs and legal representatives, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors" and "assigns" shall not
include any purchaser of the Shares merely because of such purchase.
16. DEFINITION OF BUSINESS DAY. For purposes of this Agreement, "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
18. CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
made and performed entirely within such State.
36
If the foregoing correctly sets forth the understanding among the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement by and
among the Underwriters and the Company.
Very truly yours,
DATA DIMENSIONS, INC.
By:
------------------------------------------
Its
---------------------------------------
THE SELLING STOCKHOLDERS
NAMED IN SCHEDULE II HERETO
By:
------------------------------------------
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
CRUTTENDEN XXXX INCORPORATED
By:
------------------------------
Its
--------------------------
Acting severally on behalf of itself and the several Underwriters named in
Schedule I hereto
37
SCHEDULE I
UNDERWRITERS
NUMBER OF OFFERED SHARES
UNDERWRITER TO BE PURCHASED
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SCHEDULE II
SELLING STOCKHOLDERS
SCHEDULE III
PERSONS SUBJECT TO LOCKUP AGREEMENTS
NAME LOCKUP PERIOD
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