3,000,000 Shares
ANTIGUA ENTERPRISES INC.
Common Shares
UNDERWRITING AGREEMENT
DRAFT OF Friday, January 16, 1998
3,000,000 Shares(1)
ANTIGUA ENTERPRISES, INC.
Common Shares
UNDERWRITING AGREEMENT
CRUTTENDEN XXXX INCORPORATED
XXXXXX, XXXXX XXXXX INCORPORATED
As Representative of the Several Underwriters
c/o Cruttenden Xxxx Incorporated
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Antigua Enterprises Inc., a British Columbia corporation (the
"Company"), and a shareholder of the Company named in Schedule B hereto
(hereafter called the "Selling Shareholder") address you as the Representatives
of each of the persons, firms and corporations listed in Schedule A hereto
(herein collectively called the "Underwriters") and hereby confirm their
respective agreements with the several Underwriters as follows:
DESCRIPTION OF SHARES. The Company proposes to issue and sell 3,000,000
shares of its authorized and unissued common stock, no par value per share
("Common Shares"), to the several Underwriters. The 3,000,000 Common Shares to
be sold by the Company are hereinafter called the "Firm Shares". The Selling
Shareholder also proposes to grant to the Underwriters an option to purchase up
to 450,000 additional Common Shares (the "Option
--------------------------
(1) Plus an option to purchase up to 450,000 additional shares from the
Selling Shareholder to cover over-allotments.
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Shares"), as provided in Section 7 hereof. As used in this Agreement, the term
"Shares" shall include the Firm Shares and the Option Shares. All shares of
common stock, no par value per share, of the Company to be outstanding after
giving effect to the sales contemplated hereby, including the Shares, are
hereinafter referred to as "Common Shares."
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
SELLING SHAREHOLDER.
The Company represents and warrants to and agrees with each
Underwriter that:
A registration statement on Form S-1 (File No.
333-39929) with respect to the Shares, including a prospectus subject to
completion, has been prepared by the Company in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the applicable rules
and regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act and has been filed with the
Commission; such amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration statements
pursuant to Rule 462(b) of the Rules and Regulations as may have been required
prior to the date hereof have been similarly prepared and filed with the
Commission; and the Company will file such additional amendments to such
registration statement, such amended prospectuses subject to completion and such
abbreviated registration statements as may hereafter be required. Copies of such
registration statement and amendments, of each related prospectus subject to
completion (the "Preliminary Prospectuses") and of any abbreviated registration
statement pursuant to Rule 462(b) of the Rules and Regulations have been
delivered to you.
If the registration statement relating to the Shares
has been declared effective under the Act by the Commission, the Company will
prepare and promptly file with the Commission the information omitted from the
registration statement pursuant to Rule 430A(a) or, if Cruttenden Xxxx
Incorporated, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information required
to be included in any term sheet filed pursuant to Rule 434(b) or (c), as
applicable, of the Rules and Regulations pursuant to subparagraph (1), (4) or
(7) of Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to the registration statement (including a final form of prospectus).
If the registration statement relating to the Shares has not been declared
effective under the Act by the Commission, the Company will prepare and promptly
file an amendment to the registration statement, including a final form of
prospectus, or, if Cruttenden Xxxx Incorporated, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the information required to be included in any term sheet filed
pursuant to Rule 434(b) or (c), as applicable, of the Rules and Regulations. The
term "Registration Statement" as
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used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits (including exhibits incorporated by
reference), in the form in which it became or becomes, as the case may be,
effective (including, if the Company omitted information from the registration
statement pursuant to Rule 430A(a) or files a term sheet pursuant to Rule 434 of
the Rules and Regulations, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule 430A(b)
or Rule 434(d) of the Rules and Regulations) and, in the event of any amendment
thereto or the filing of any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations relating thereto after the effective date of
such registration statement, and shall also mean (from and after the
effectiveness of such amendment or the filing of such abbreviated registration
statement) such registration statement as so amended, together with any such
abbreviated registration statement. The term "Prospectus" as used in this
Agreement shall mean the prospectus relating to the Shares as included in such
Registration Statement at the time it becomes effective (including, if the
Company omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part of the
Registration Statement at the time it became effective pursuant to Rule 430A(b)
of the Rules and Regulations); provided, however, that if in reliance on Rule
434 of the Rules and Regulations and with the consent of Cruttenden Xxxx
Incorporated, on behalf of the several Underwriters, the Company shall have
provided to the Underwriters a term sheet pursuant to Rule 434(b) or (c), as
applicable, prior to the time that a confirmation is sent or given for purposes
of Section 2(10)(a) of the Act, the term "Prospectus" shall mean the "prospectus
subject to completion" (as defined in Rule 434(g) of the Rules and Regulations)
last provided to the Underwriters by the Company and circulated by the
Underwriters to all prospective purchasers of the Shares (including the
information deemed to be a part of the Registration Statement at the time it
became effective pursuant to Rule 434(d) of the Rules and Regulations).
Notwithstanding the foregoing, if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the offering of the
Shares that differs from the prospectus referred to in the immediately preceding
sentence (whether or not such revised prospectus is required to be filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations), the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriters for such use. If in reliance on Rule 434
of the Rules and Regulations and with the consent of Cruttenden Xxxx
Incorporated, on behalf of the several Underwriters, the Company shall have
provided to the Underwriters a term sheet pursuant to Rule 434(b) or (c), as
applicable, prior to the time that a confirmation is sent or given for purposes
or Section 2(10)(a) of the Act, the Prospectus and the term sheet, together,
will not be materially different from the prospectus in the Registration
Statement.
The Commission has not issued any order preventing or
suspending the
4
use of any Preliminary Prospectus or instituted proceedings for that purpose,
and each such Preliminary Prospectus has conformed in all material respects to
the requirements of the Act and the Rules and Regulations and, as of its date,
has not included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and at the time the
Registration Statement became or becomes, as the case may be, effective and at
all times subsequent thereto up to and on the Closing Date (hereinafter defined)
and on any later date on which Option Shares are to be purchased, (i) the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (ii) the Registration Statement, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that none of the representations and
warranties contained in this subparagraph (b) shall apply to information
contained in or omitted from the Registration Statement or Prospectus, or any
amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof.
The Company and each of its subsidiaries have been
duly incorporated and organized and are validly existing and duly qualified as
corporations in good standing under the laws of the jurisdiction of their
incorporation with full power and authority (corporate and other) to own, lease
and operate their properties and conduct their business as described in the
Prospectus; the Company and each of its subsidiaries are duly qualified to do
business as a foreign corporation or registered as an extra-provincial
corporation and are in good standing in each jurisdiction in which the ownership
or leasing of their properties or the conduct of their business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company;
no proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
registration or qualification; the Company and each of its subsidiaries are in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from all governmental and other
regulatory authorities that are material to the conduct of its business, all of
which are valid, existing, in good standing, and in full force and effect and
none of these authorizations, licenses, certificates, consents,
5
orders and permits contain any burdensome term likely to have a material adverse
effect on the business of the Company; the Company and each of its subsidiaries
are not in violation of their memorandum, articles or bylaws or in default in
the performance or observance of any material obligation, agreement, covenant or
condition contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any of its subsidiaries, respectively is a party or by which its
properties may be bound; and the Company and each of its subsidiaries are not in
material violation of any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or a subsidiary or
over their properties of which it has knowledge. The Company does not own or
control, directly or indirectly, any corporation, association or other entity
except that the Company is the registered and beneficial owner of all of the
outstanding shares of Southhampton Enterprises, Inc., a Texas corporation
("SEI"), and (ii) SEI is the registered and beneficial owner of all of the
outstanding shares of Antigua Group, Inc., a Nevada corporation, in each case
free and clear of all mortgages, liens, charges, pledges, security interests,
encumbrances, claims or demands whatsoever, and not person, firm or corporation
has any agreement or option or right or privilege (whether preemptive or
contractual) capable of becoming an agreement for the purchase from the Company
of all or any part of such shares, and all such shares have been validly issued
and are outstanding as fully paid and non-assessable, except as set forth in the
Registration Statement or Prospectus.
The Company has full legal right, power and authority
to enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the Company
and is a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the execution, delivery and performance of this Agreement
and the consummation of the transactions herein contemplated have been duly
authorized by all necessary corporate action and will not result in a material
breach or violation of any of the terms and provisions of, or constitute a
material default under, (i) any material bond, debenture, note or other evidence
of indebtedness, or under any material lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or instrument to
which the Company is a party or by which the Company or its properties may be
bound, (ii) the memorandum, articles or bylaws of the Company or (iii) any law,
policy, order, rule, regulation, writ, injunction, judgment or decree of any
court, government or governmental agency or body, domestic or foreign, having
6
jurisdiction over the Company or its properties. No consent, approval,
authorization or order of or qualification with any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or its properties is required for the execution and delivery of this
Agreement and the consummation by the Company of the transactions herein
contemplated, except such as may be required under the Act, or under state or
other securities or Blue Sky laws, all of which requirements have been satisfied
in all material respects. The transactions herein contemplated comply in all
material respects with applicable Canadian securities laws. No order, ruling or
determination having the effect of suspending the sale or ceasing the trading of
the Shares or any other security of the Company has been issued or made by any
securities commission or stock exchange or any other regulatory authority and is
continuing in effect and no proceedings for that purpose have been instituted or
are pending or, to the best of the Company's knowledge, contemplated or
threatened by any such authority or under any applicable securities laws.
There is not any pending or, to the Company's
knowledge, threatened action, suit, claim, investigation or proceeding against
or affecting the Company or any of its subsidiaries, or any of their respective
officers or any of their respective properties, assets or rights before any
court, arbitration tribunal, government or governmental agency or body, domestic
or foreign, having jurisdiction over the Company or its subsidiaries or their
respective directors, officers, former directors or officers, properties or
otherwise which (i) might result in any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company or might materially and adversely affect the Company's
properties, assets or rights, (ii) might prevent consummation of the
transactions contemplated hereby or which could reasonably be expected to put
into question the validity of the issuance of the Shares in accordance with this
Agreement or (iii) is required to be disclosed in the Registration Statement or
Prospectus and is not so disclosed; and there are no agreements, contracts,
leases or documents of the Company of a character required to be described or
referred to in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement by the Act or the Rules and Regulations
which have not been accurately described in all material respects in the
Registration Statement or Prospectus or filed as exhibits to the Registration
Statement.
All outstanding share capital of the Company
(including the Option Shares) has been duly authorized and validly issued and is
fully paid and nonassessable, has been issued in compliance with all applicable
Canadian securities laws, stock exchange rules and regulations, and all
applicable U.S. federal and state securities laws, was not issued in violation
of or subject to any preemptive rights or other rights to subscribe for or
purchase securities, and the authorized and outstanding share capital of the
Company is as set forth in the Prospectus
7
under the caption "Capitalization" and conforms in all material respects to the
statements relating thereto contained in the Registration Statement and the
Prospectus (and such statements correctly state the substance of the instruments
defining the capitalization of the Company); the Firm Shares have been duly
authorized for issuance and sale to the Underwriters pursuant to this Agreement
and, when issued and delivered by the Company against payment therefor in
accordance with the terms of this Agreement, will be duly and validly issued and
outstanding, fully paid and nonassessable, and will be sold free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable interest;
and no preemptive right, co-sale right, registration right, right of first
refusal or other similar right of shareholders exists with respect to any of the
Firm Shares or the issuance and sale thereof other than those that have been
satisfied or expressly waived prior to the date hereof and those that will
automatically expire upon and will not apply to the consummation of the
transactions contemplated on or before the Closing Date. No further approval or
authorization of any shareholder, the Board of Directors of the Company or
others is required for the issuance and sale or transfer of the Shares except as
may be required under the Act or under state or other securities or Blue Sky
laws. Except as disclosed in the Prospectus and the financial statements of the
Company, and the related notes thereto included in the Prospectus, the Company
has no outstanding options to purchase, or any preemptive rights or other rights
or privileges capable of becoming an agreement to subscribe for or to purchase,
any securities or obligations convertible into, or any contracts or commitments
to issue or sell, shares of its share capital or any such options, rights,
convertible securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted and exercised thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights.
Xxxxxx Xxxxxxxx, Independent Auditors ("AA"), which
has examined the consolidated financial statements of the Company, together with
the related schedules and notes, as of September 30, 1997 and 1996 and for the
year ended December 31, 1996 and BDO Dunwoody, Chartered Accountants
(internationally, BDO Binder) ("BDO"), which has examined the consolidated
financial statements of the Company, together with the related notes, as of
December 31, 1995 and for the years ended December 31, 1994 and 1995, filed with
the Commission as a part of the Registration Statement, which are included in
the Prospectus, are independent accountants within the meaning of the Act and
the Rules and Regulations; the audited financial statements of the Company,
together with the related schedules and notes, and the unaudited financial
information, forming part of the Registration Statement and Prospectus, are
complete and correct and fairly present the financial position and the results
of operations of the Company at the respective dates and for the respective
periods to which they apply; and all audited financial statements of the
Company, together with the related schedules and notes, and
8
the unaudited financial information, filed with the Commission as part of the
Registration Statement, have been prepared in accordance with Canadian generally
accepted accounting principles consistently applied throughout the periods
involved except as may be otherwise stated therein and have been reconciled to
generally accepted accounting principles in the United States in accordance with
applicable U.S. securities laws and regulations. The selected and summary
financial and statistical data included in the Registration Statement present
fairly the information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein. The pro
forma financial information set forth in the Registration Statement reflects,
subject to the limitations set forth in the Registration Statement as to such
pro forma financial information, the results of operations of the Company
purported to be shown thereby for the periods indicated and conforms to the
requirements of Regulation S-X of the Rules and Regulations. No other financial
statements or schedules are required to be included in the Registration
Statement.
Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (i) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company, (ii) any
transaction that is material to the Company, except transactions entered into in
the ordinary course of business, (iii) any obligation, direct or contingent,
that is material to the Company, incurred by or asserted against the Company,
except obligations incurred in the ordinary course of business, (iv) any change
in the share capital or outstanding indebtedness of the Company that is material
to the Company, (v) any dividend or distribution of any kind declared, paid or
made on the share capital of the Company, or (vi) any loss or damage (whether or
not insured) to the property of the Company which has been sustained or will
have been sustained which has a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company or its subsidiaries.
Except as set forth in the Registration Statement and
Prospectus, (i) the Company and its subsidiaries have good and marketable title
to all their respective properties and assets described in the Registration
Statement and Prospectus as owned by each of them, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest, other than
such as would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company,
(ii) the agreements to which the Company or its subsidiaries are parties
described in the Registration Statement and Prospectus are valid agreements,
enforceable by the Company or its subsidiaries, as applicable, in accordance
with their terms, except as the enforcement thereof 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, performance of the transactions
9
contemplated thereby have been duly authorized by all necessary corporate action
of the Company or its subsidiaries, as applicable, and, to the Company's
knowledge, the other contracting party or parties thereto are not in material
breach or material default under any of such agreements, and (iii) the Company
or its subsidiaries have valid and enforceable leases for all properties
described in the Registration Statement and Prospectus as leased by it, except
as the enforcement thereof 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. Except as set
forth in the Registration Statement and Prospectus, the Company or its
subsidiaries own or lease all such properties as are necessary to their
respective operations as now conducted or as proposed to be conducted.
The Company and its subsidiaries have timely filed
all necessary Canadian and U.S. federal, provincial, state, local and foreign
income and franchise tax returns and have paid all taxes shown thereon as due,
and there are no actions, suits or proceedings, and there is no tax deficiency
that has been or, to the Company's knowledge, might be asserted against the
Company (or any of its subsidiaries) that might have a material adverse effect
on the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company; and all tax liabilities are adequately
provided for on the books of the Company and adequate provision has been made
for taxes payable for any completed fiscal period for which tax returns are not
yet required to be filed.
The Company and its subsidiaries maintain insurance
with insurers of recognized financial responsibility of the types and in the
amounts generally deemed adequate for their business and consistent with
insurance coverage maintained by similar companies in similar businesses,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company or its subsidiaries against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against,
all of which insurance is in full force and effect; neither the Company nor any
of its subsidiaries have been refused any insurance coverage sought or applied
for; and the Company does not have any reason to believe that it will not be
able to renew its or its subsidiaries existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company.
No labor disturbance by the employees of the Company
or its subsidiaries exists or is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its principal
suppliers, value added resellers, subcontractors, authorized dealers or
international distributors that might be expected to result in a material
adverse change in the condition (financial or otherwise), earnings, operations,
business
10
or business prospects of the Company. No collective bargaining agreement exists
with any of the Company's or its subsidiaries' employees and, to the Company's
knowledge, no such agreement is imminent.
The Company directly or through its subsidiaries,
owns or possesses adequate rights to use all patents, patent rights, inventions,
trade secrets, know-how, trademarks, service marks, trade names and copyrights
which are necessary to conduct its businesses as described in the Registration
Statement and Prospectus; except as set forth in the Registration Statement and
the Prospectus, the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company; the Company has not received any
notice of, and has no knowledge of, any infringement of or conflict with
asserted rights of the Company by others with respect to any patent, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights; and the Company has not received any notice of, nor has it
any knowledge of, any infringement of or conflict with asserted rights of others
with respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights which, individually or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
might have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company.
The Common Shares are registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and are listed on The Nasdaq National Market, and the Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Common Shares under the Exchange Act or delisting the Common
Shares from The Nasdaq National Market, nor has the Company received any
notification that the Commission or the National Association of Securities
Dealers, Inc. ("NASD") is contemplating terminating such registration or
listing.
The Company has been advised concerning the
Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the future
to conduct, its affairs in such a manner as to ensure that it is not and will
not become an "investment company" or a company "controlled" by an "investment
company" within the meaning of the 1940 Act and such rules and regulations.
The Company has not distributed and will not
distribute prior to the later of (i) the Closing Date, or any date on which
Option Shares are to be purchased, as the case may be, and (ii) completion of
the distribution of the Shares, any offering material in connection with
11
the offering and sale of the Shares other than any Preliminary Prospectuses, the
Prospectus, the Registration Statement and other materials, if any, permitted by
the Act.
The Company has not (nor have its subsidiaries) at
any time during the last five (5) years (i) made any unlawful contribution to
any candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or Canada or any jurisdiction thereof.
The Company has not taken and will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Shares to facilitate the sale or resale of the Shares.
Except as otherwise set forth in the Registration
Statement and the Prospectus, each officer and director of the Company, the
Selling Shareholder and each of the Company's shareholders who own at least one
percent (1%) of the outstanding Common Shares of the Company has agreed in
writing that such person will not, directly or indirectly, except as described
below, for a period of 180 days from the date of the final Prospectus, and with
respect to the Selling Shareholder, for a period of 365 days from the date of
the final Prospectus (the "Lock-up Period"), offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Shares, any options or
warrants to purchase any shares of Common Shares or any securities convertible
into or exchangeable for shares of Common Shares (collectively, "Securities")
now owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(i) if such shareholder is an individual, he or she may transfer any shares of
the Company's Common Shares or securities convertible into or exchangeable or
exercisable for Common Shares either during his or her lifetime or on death by
will or intestacy to his or her immediate family or to a trust the beneficiaries
of which are exclusively the undersigned and/or a member of his or her immediate
family; provided, however, that prior to any such transfer each transferee shall
execute an agreement, satisfactory to Cruttenden Xxxx Incorporated, pursuant to
which each transferee shall agree to receive and hold such shares of Common
Shares, or securities convertible into or exchangeable or exercisable for Common
Shares, subject to the provisions hereof, and there shall be no further transfer
except in accordance with the provisions hereof, or (ii) with the prior written
consent of Cruttenden Xxxx Incorporated. For purposes of this Agreement,
"immediate family" shall mean spouse, lineal descendant, father, mother, brother
or sister of the transferor. The foregoing restriction has been expressly agreed
to preclude the holder of the Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a Disposition of
12
Securities during the Lock-up Period, even if such Securities would be disposed
of by someone other than such shareholder. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person has also agreed and consented to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction. The Company has provided to counsel for the Underwriters a complete
and accurate list of all securityholders of the Company as of ________, 1998 and
the number and type of securities held by each securityholder. The Company has
provided to counsel for the Underwriters true, accurate and complete copies of
all of the agreements pursuant to which its officers, directors and shareholders
have agreed to such or similar restrictions (the "Lock-up Agreements") presently
in effect or effected hereby. The Company hereby represents and warrants that it
will not release any of its officers, directors or other shareholders from any
Lock-up Agreements currently existing or hereafter effected without the prior
written consent of Cruttenden Xxxx Incorporated.
Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in compliance, in all material respects, with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of waste and toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to the Company or its business, (ii)
the Company has not received notice from any U.S. or foreign governmental
authority or third party of an asserted claim under Environmental Laws that is
required to be disclosed in the Registration Statement and the Prospectus and is
not so disclosed, (iii) the Company will not be required to make future material
capital expenditures to comply with Environmental Laws and (iv) no property
which is owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. ss. 9601, et
seq.), or otherwise designated as a contaminated site under applicable foreign,
U.S. state or local law.
The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded
13
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers, directors or shareholders of the Company or any of the members of the
families of any of them, except as disclosed in the Registration Statement and
the Prospectus.
No relationship, direct or indirect, exists between
or among the Company or any of its subsidiaries, on the one hand, and the
directors, officers, shareholders, customers or suppliers of the Company or any
of its subsidiaries, on the other hand, which is required to be described in the
Registration Statement or the Prospectus which is not so described.
To the knowledge of the Company, none of the holders
of securities issued by the Company or the directors or officers of the Company
or any associate or affiliate of any of the foregoing had, has or intends to
have, any material interest, direct or indirect, in any material transaction or
any proposed material transaction with the Company which, as the case may be,
materially affects, is material to or will materially affect the Company, except
as disclosed in the Prospectus. There are no outstanding loans, advances or
guaranties of indebtedness by the Company to or for the benefit of any of (i)
its "affiliates," as such term is defined in the Rules and Regulations, (ii) any
of the officers or directors of any of its subsidiaries or (iii) any of the
members of the families of any of them.
Except as disclosed in the Registration Statement or
the Prospectus, the Company has not incurred any liability or potential
liability for any fee, commission, or other compensation on account of the
employment of any broker or finder in connection with this Agreement or the
transactions contemplated by this Agreement, and in the event any person, firm
or corporation engaged by or purporting to be engaged by the Company establishes
a claim for any fee from the Underwriters, the Company covenants to indemnify
and hold harmless the Underwriters with respect thereto and with respect to all
costs reasonably incurred in the defense thereof.
The Company has complied with all provisions of
Section 517.075, Florida statutes relating to doing business with the government
of Cuba or with any person or affiliate located in Cuba.
The Selling Shareholder represents and warrants to and agrees
with each Underwriter and the Company that:
14
The Selling Shareholder is the registered and
beneficial owner of the Option Shares and now has and on the Closing Date will
have valid marketable title to the Shares to be sold by the Selling Shareholder,
free and clear of any mortgage, charge, demand, pledge, lien, security interest,
encumbrance, claim or equitable interest other than pursuant to this Agreement;
and upon delivery of such Shares hereunder and payment of the purchase price as
herein contemplated, each of the Underwriters will obtain valid marketable title
to the Shares purchased by it from the Selling Shareholder, free and clear of
any pledge, lien, security interest pertaining to the Selling Shareholder or the
Selling Shareholder's property, encumbrance, claim or equitable interest,
including any liability for estate or inheritance taxes, or any liability to or
claims of any creditor, devisee, legatee or beneficiary of the Selling
Shareholder.
Such Selling Shareholder has duly authorized (if
applicable), executed and delivered, in the form heretofore furnished to the
Representative, an irrevocable Power of Attorney (the "Power of Attorney")
appointing ____________________________ or _____________________________ as
attorney(s)-in-fact (collectively, the "Attorneys" and individually, an
"Attorney") and a Letter of Transmittal and Custody Agreement (the "Custody
Agreement") with [transfer agent] as custodian (the "Custodian"); each of the
Power of Attorney and the Custody Agreement constitutes a valid and binding
agreement on the part of the Selling Shareholder enforceable in accordance with
its terms, except as the enforcement thereof 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 each of the Selling Shareholder's Attorneys, acting alone, is
authorized to execute and deliver this Agreement and the certificate referred to
in Suction 6(i) hereof on behalf of the Selling Shareholder, to determine the
purchase price to be paid by the several Underwriters to the Selling Shareholder
as provided in Section 3 hereof; to authorize the delivery of the Option Shares
under this Agreement and to duly endorse (in blank or otherwise) the certificate
or certificates representing such Shares or a stock power or powers with respect
thereto, to accept payment therefor, and otherwise to act on behalf of the
Selling Shareholder in connection with this Agreement.
All consents, approvals, authorizations and orders
required for the execution and delivery by the Selling Shareholder of the Power
of Attorney and the Custody Agreement, the execution and delivery by or on
behalf of the Selling Shareholder of this Agreement and the sale and delivery of
the Option Shares under this Agreement (other than, at the time of the execution
hereof (if the Registration Statement has not yet been declared effective by the
Commission), the issuance of the order of the Commission declaring the
Registration Statement effective and such consents, approvals, authorizations or
orders as may be necessary under state or other securities or Blue Sky laws)
have been obtained and are in full force and
15
effect; the Selling Shareholder has full legal right, power and authority to
enter into and perform his obligations under this Agreement and such Power of
Attorney and Custody Agreement, and to sell, assign, transfer and deliver the
Option Shares to be sold by the Selling Shareholder under this Agreement.
The Selling Shareholder will not directly or
indirectly, during the Lock-up Period, effect the Disposition of any Securities
now owned or hereafter acquired directly by the Selling Shareholder or with
respect to which the Selling Shareholder has or hereafter acquires the power of
disposition, otherwise than (i) if such shareholder is an individual, he or she
may transfer any shares of the Company's Common Shares or securities convertible
into or exchangeable or exercisable for Common Shares either during his or her
lifetime or on death by will or intestacy to his or her immediate family or to a
trust the beneficiaries of which are exclusively the undersigned and/or a member
of his or her immediate family; provided, however, that prior to any such
transfer each transferee shall execute an agreement, satisfactory to Cruttenden
Xxxx Incorporated, pursuant to which each transferee shall agree to receive and
hold such shares of Common Shares, or securities convertible into or
exchangeable or exercisable for Common Shares, subject to the provisions hereof,
and there shall be no further transfer except in accordance with the provisions
hereof, or (ii) with the prior written consent of Cruttenden Xxxx Incorporated.
The foregoing restriction is expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a Disposition of Securities
during the Lock-up Period, even if such Securities would be disposed of by
someone other than the Selling Shareholder. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Securities. The Selling Shareholder also agrees and consents to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of the securities held by the Selling Shareholder except in compliance
with this restriction.
Certificates in negotiable form for all Shares to be
sold by the Selling Shareholder under this Agreement, together with a stock
power or powers duly endorsed in blank by the Selling Shareholder, have been
placed in custody with the Custodian for the purpose of effecting delivery
hereunder.
This Agreement has been duly executed and delivered
by or on behalf of the Selling Shareholder and is a valid and binding agreement
of the Selling Shareholder, enforceable in accordance with its terms, except as
rights to indemnification hereunder may be
16
limited by applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles; and the execution, delivery and performance of this Agreement and
the consummation of the transactions herein contemplated will not result in a
material breach or violation of any of the terms and provisions of, or
constitute a material default under, any material bond, debenture, note or other
evidence of indebtedness, or under any material lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Selling Shareholder is a party or by which the Selling
Shareholder, or any Option Shares hereunder, may be bound or, to the Selling
Shareholder's knowledge, result in any violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Selling Shareholder or over the properties of the Selling Shareholder, or, if
the Selling Shareholder is other than a natural person, result in any violation
of any provisions of the memorandum, articles, bylaws or other organizational
documents of the Selling Shareholder.
The Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Shares to facilitate the sale or resale of the Shares.
The Selling Shareholder has not distributed and will
not distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
All information furnished by or on behalf of the
Selling Shareholder relating to the Selling Shareholder and the Option Shares
that is contained in the representations and warranties of the Selling
Shareholder in the Selling Shareholder's Power of Attorney or set forth in the
Registration Statement or the Prospectus is, and at the time the Registration
Statement became or becomes, as the case may be, effective and at all times
subsequent thereto up to and on the Closing Date, and on any later date on which
Option Shares are to be purchased, was or will be, true, correct and complete in
all material respects, and does not, and at the time the Registration Statement
became or becomes, as the case may be, effective and at all times subsequent
thereto up to and on the Closing Date, and on any later date on which Option
Shares are to be purchased, will 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 such information not misleading.
The Selling Shareholder will review the Prospectus
and will comply with all agreements and satisfy all conditions on its part to be
complied with or satisfied pursuant to this Agreement on or prior to the Closing
Date, or any later date on which Option Shares are to be purchased, as the case
may be, and will advise one of its Attorneys and Cruttenden Xxxx
17
Incorporated prior to the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, if any statement to be made on behalf
of the Selling Shareholder in the certificate contemplated by Suction 6(i) would
be inaccurate if made as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be.
The Selling Shareholder does not have, or has waived
prior to the date hereof, any preemptive right, co-sale right or right of first
refusal or other similar right to purchase any of the Shares that are to be sold
by the Company to the Underwriters pursuant to this Agreement; the Selling
Shareholder does not have, or has waived prior to the date hereof; any
registration right or other similar right to participate in the offering made by
the Prospectus, other than such rights of participation as have been satisfied
by the participation of the Selling Shareholder in the transactions to which
this Agreement relates in accordance with the terms of this Agreement; and the
Selling Shareholder does not own any warrants, options or similar rights to
acquire, and does not have any right or arrangement to acquire, any capital
stock, rights, warrants, options or other securities from the Company, other
than those described in the Registration Statement and the Prospectus.
No person, firm or corporation has (except for the
Underwriters) any agreement or option or right or privilege (whether pre-emptive
or contractual) capable of becoming an agreement for the purchase from him or it
of all or any part of the Option Shares.
To the best knowledge of the Selling Shareholder, and
after due inquiry (i) each part of the Registration Statement, when such part
became effective, did not contain and each such part, as amended or
supplemented, if applicable, will 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, (ii) the Prospectus does not
contain and, as amended or supplemented, if applicable, will 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, except that the representations and
warranties set forth in this paragraph (l) do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein, and (iii) the Selling
Shareholder, is not aware that, and has no reason to believe that, any of the
representations and warranties of the Company set forth in Section 2.I. above is
untrue or inaccurate in any material respect.
PURCHASE, SALE AND DELIVERY OF SHARES On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter
18
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of $ _________ per Share, the respective number of Firm Shares which is
set forth opposite the name of such Underwriter in Schedule A hereto (subject to
adjustment as provided in Section 10).
The certificates in negotiable form for the Option Shares have
been placed in custody (for delivery under this Agreement) under the Custody
Agreement. The Selling Shareholder agrees that the certificates for the Option
Shares of the Selling Shareholder so held in custody are subject to the
interests of the Underwriters hereunder, that the arrangements made by the
Selling Shareholder for such custody, including the Power of Attorney is to that
extent irrevocable and that the obligations of the Selling Shareholder hereunder
shall not be terminated by any act of the Selling Shareholder or by operation of
law, whether by the death or incapacity of the Selling Shareholder or the
occurrence of any other event, except as specifically provided herein or in the
Custody Agreement. If the Selling Shareholder should die or be incapacitated, or
if any other such event should occur before the delivery of the certificates for
the Option Shares hereunder, the Option Shares to be sold by the Selling
Shareholder shall, except as specifically provided herein or in the Custody
Agreement, be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity or other event had not
occurred, regardless of whether the Custodian shall have received notice of such
death or other event.
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made against
payment of the purchase price therefor by the several Underwriters by certified
or official bank check or checks drawn in next-day funds, payable to the order
of the Company and the Custodian (and the Company and the Custodian each agrees
not to deposit any such check in the bank on which it is drawn, and not to take
any other action with the purpose or effect of receiving immediately available
funds, until the business day following the date of delivery to the Company and,
in the event of any breach of the foregoing, the Company or the Selling
Shareholder as the case may be, shall reimburse the Underwriters for the
interest lost and any other expenses borne by the Underwriters by reason of such
breach), at the offices of Xxxx Xxxx Xxxx & Freidenrich 0000 Xxxxxxxxx Xxxxx,
Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx (or at such other place as may be agreed upon
among the Representative, the Company and the Attorneys), at 7:00 A.M., San
Diego time (a) on the third (3rd) full business day following the first day that
Shares are traded, (b) if this Agreement is executed and delivered after 1:30
P.M., San Diego time, the fourth (4th) full business day following the day that
this Agreement is executed and delivered or (c) at such other time and date not
later than seven (7) full business days following the first day that Shares are
traded as the Representative, the Company and the Attorneys may determine (or at
such time and date to which payment and
19
delivery shall have been postponed pursuant to Section 10 hereof), such time and
date of payment and delivery being herein called the "Closing Date"; provided,
however, that if the Company has not made available to the Representative a copy
of the Prospectus within the time provided in Section 4(d) hereof, the
Representative may, in its sole discretion, postpone the Closing Date until no
later than two (2) full business days following delivery of copies of the
Prospectus to the Representative. The certificates for the Firm Shares to be so
delivered will be made available to you at such office or such other location
including, without limitation, in New York City, as you may reasonably request
for checking at least one (1) full business day prior to the Closing Date and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to the Closing Date. If the
Representative so elects, delivery of the Firm Shares may be made by credit
through full fast transfer to the accounts at The Depository Trust Company
designated by the Representative.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the
several Underwriters intend to make a public offering (as such term is described
in Section 11 hereof) of the Firm Shares at a public offering price of $
__________ per Share. After the public offering, the several Underwriters may,
in their discretion, vary the public offering price.
The information set forth on the front cover page (insofar as
such information relates to the Underwriters) concerning stabilization,
over-allotment and passive market making by the Underwriters, and under the
caption "Underwriting" in any Preliminary Prospectus and in the Prospectus
constitutes the only information furnished by the Underwriters to the Company
for inclusion in any Preliminary Prospectus, the Prospectus or the Registration
Statement, and you, on behalf of the respective Underwriters, represent and
warrant to the Company and the Selling Shareholder that the statements made
therein do not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
The Company will use its best efforts to cause the
Registration Statement
20
and any amendment thereof, if not effective at the time and date that this
Agreement is executed and delivered by the parties hereto, to become effective
as promptly as possible; the Company will use its best efforts to cause any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations as may be required subsequent to the date the Registration Statement
is declared effective to become effective as promptly as possible; the Company
will notify you, promptly after it shall receive notice thereof, of the time
when the Registration Statement, any subsequent amendment to the Registration
Statement or any abbreviated registration statement has become effective or any
supplement to the Prospectus has been filed; if the Company omitted information
from the Registration Statement at the time it was originally declared effective
in reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the Rules
and Regulations, the Company will provide evidence satisfactory to you that the
Prospectus and term sheet meeting the requirements of Rule 434(b) or (c), as
applicable, of the Rules and Regulations have been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (7) of Rule 424(b) of
the Rules and Regulations; if for any reason the filing of the final form of
Prospectus is required under Rule 424(b)(3) of the Rules and Regulations, it
will provide evidence satisfactory to you that the Prospectus contains such
information and has been filed with the Commission within the time period
prescribed; it will notify you promptly of any request by the Commission for the
amending or supplementing of the Registration Statement or the Prospectus or for
additional information; promptly upon your request, it will prepare and file
with the Commission any amendments or supplements to the Registration Statement
or Prospectus which, in the opinion of counsel for the several Underwriters
("Underwriters' Counsel"), may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters; it will promptly prepare and
file with the Commission, and promptly notify you of the filing of, any
amendments or supplements to the Registration Statement or Prospectus which may
be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act, any
event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, it will prepare promptly
upon request, but at the expense of such Underwriters, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be
21
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Act; and it will file no amendment or supplement to the Registration Statement
or Prospectus which shall not previously have been submitted to you a reasonable
time prior to the proposed filing therefor to which you shall reasonably object
in writing, subject, however, to compliance with the Act and the Rules and
Regulations and the provisions of this Agreement.
The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
initiation or threat of proceeding for that purpose; and it will promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued.
The Company will use its best efforts (including by
providing full cooperation with your counsel, whose services in this matter are
required and which you and the Company will seek to expedite) to qualify the
Shares for offering and sale under the securities laws of such jurisdictions as
you may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, except that the
Company shall not be required in connection therewith or as a condition thereof
to qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be required by the laws of such jurisdiction for such purpose.
The Company will furnish to you, as soon as
available, and, in the case of the Prospectus and any term sheet or abbreviated
term sheet under Rule 434, in no event later than the first full business day
following the first day that Shares are traded, copies of the Registration
Statement (two of which will be signed and which will include all exhibits),
each Preliminary Prospectus, the Prospectus and any amendments or supplements to
such documents, including any prospectus prepared to permit compliance with
Section 10(a)(3) of the Act, all in such quantities as you may from time to time
reasonably request. Notwithstanding the foregoing, if Cruttenden Xxxx
Incorporated, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the Company shall provide
to you copies of a Preliminary Prospectus updated in all respects through the
date specified by you in such quantities as you may from time to time reasonably
request.
The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration
22
Statement, an earnings statement (which will be in reasonable detail but need
not be audited) complying with the provisions of Section 11(a) of the Act and
covering a twelve (12) month period beginning after the effective date of the
Registration Statement.
During a period of five (5) years after the date
hereof, the Company will furnish to its shareholders as soon as practicable
after the end of each respective period, annual reports (including financial
statements audited by independent certified public accountants) and, upon
request by a shareholder, unaudited quarterly reports of operations for each of
the first three quarters of the fiscal year, and will furnish to you and the
other several Underwriters hereunder, upon request (i)<0- 95>concurrently with
furnishing such reports to its shareholders, statements of operations of the
Company for each of the first three (3) quarters in the form furnished to the
Company's shareholders, (ii)<0- 95>concurrently with furnishing to its
shareholders, a balance sheet of the Company as of the end of such fiscal year,
together with statements of operations, of shareholders' equity, and of cash
flows of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent certified public accountants,
(iii)<0- 95>as soon as they are available, copies of all reports (financial or
other) mailed to shareholders, (iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, any
securities exchange or the NASD, (v) every material press release and every
material news item or article in respect of the Company or its affairs which was
generally released to shareholders or prepared by the Company, and (vi) any
additional information of a public nature concerning the Company, or its
business which you may reasonably request. During such five (5) year period, if
the Company shall have active subsidiaries, the foregoing financial statements
shall be on a consolidated basis to the extent that the accounts of the Company
and such subsidiaries are consolidated, and shall be accompanied by similar
financial statements for any significant subsidiary which is not so
consolidated.
The Company will apply the net proceeds from the sale
of the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Shares
If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company or the Selling Shareholder to perform any agreement on their respective
parts to be performed hereunder or to fulfill any condition of the Underwriters'
obligations hereunder, or if the Company shall terminate this Agreement pursuant
to Section 11(a) hereof, or if the Underwriters shall terminate this Agreement
pursuant to Section 11(a) or 11(b), then the provisions of Section 11 of that
certain letter agreement dated
23
June 3, 1997 between you and the Company (the "Letter Agreement") shall govern
payment and reimbursement obligations of the parties notwithstanding that the
Letter Agreement shall have ceased to be of full force or effect for any other
purpose.
If at any time during the ninety (90) day period
after the Registration Statement becomes effective, any rumor, publication or
event relating to or affecting the Company shall occur as a result of which in
your opinion the market price of the Common Shares has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
During the Lock-up Period, the Company will not,
without the prior written consent of Cruttenden Xxxx Incorporated, effect the
Disposition or purchase of, directly or indirectly, any Securities other than
the sale of the Firm Shares and the Option Shares hereunder and the Company's
issuance of options or Common Shares currently reserved for issuance under the
Company's Warrants described in the Registration Statement and the Prospectus.
The Company shall issue and sell to the
Representative upon the Closing Date, at a price of $0.001 per share, warrants
to purchase in the aggregate that number of shares of the Company's Common
Shares equal to ten percent (10%) of the Firm Shares at an exercise price equal
to One Hundred and Twenty Percent (120%) of the public offering purchase price
per share set forth in Section 3 hereof (the "Representative' Warrants"). The
Representative's Warrants shall have a term of five (5) years from the date of
issuance and shall be in substantially the form attached hereto as Exhibit A.
For a period ending upon the earlier of (i) one (1)
year following the Closing Date; and (ii) the closing of a public offering of
the Company's securities in which the Representative has declined to exercise
their rights under this subsection, the Company shall notify the Representative
in writing at least thirty (30) days prior to initiating (A) any proposed
private or public offering of any debt or equity securities (other than bank
debt or similar financing with institutional lending institutions) by the
Company or by any of its majority owned or controlled subsidiaries having as its
principal objective the raising of capital for the Company; or (B) the proposed
public offering of any equity securities by any of the Company's shareholders
owning at least five percent (5%) of the outstanding Common Shares of the
Company. Such written notice shall describe the proposed transaction giving rise
to the notice,
24
including the price and the terms and conditions upon which the Company proposed
to conduct such transaction. The Representative or, at the option of the
Representative, a group of associated investment bankers including and led by
the Representative, shall jointly and severally have the right of first refusal
to manage the offering on substantially the terms and conditions set forth in
the notice. The Representative agrees to provide the Company with notice of its
acceptance of such right of first refusal no later than ten (10) days of receipt
of the Company's notice hereunder. If the Representative fails to exercise their
right of first refusal within the ten (10) day period and the terms of the
proposed subsequent financings thereafter are altered in any material respect,
the Company shall again offer to the Representative this right of first refusal
to manage such subsequent financings upon such altered terms, in the manner
provided in this subsection.
The Company will cause the Shares to be listed on The
Nasdaq National Market, and the Company will comply with all registration,
filing, reporting and other requirements of the Exchange Act and any such
exchange or The Nasdaq National Market which may from time to time be applicable
to the Company, and the Company shall not agree to the delisting from The Nasdaq
National Market without the prior written consent of the Representative.
The Company will use its best efforts to maintain a
board of directors that will at all times include at least two (2) non-employee
directors.
The Company shall at all times maintain director and
officer liability insurance from a responsible insurer with $___________ of
coverage per occurrence.
The Company will use its best efforts to ensure that
all executive officers and key employees listed in the Registration Statement
remain employed by the Company for a minimum of twenty four (24) months after
the Closing Date.
EXPENSES
The Company agrees with each Underwriter that:
The Company will pay and bear all costs and
expenses in connection with the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments or supplements
thereto the Preliminary Blue Sky Memorandum and any Supplemental Blue Sky
Memorandum; the printing of this Agreement, the Agreement Among Underwriters,
the Selected Dealer Agreement, the Underwriters' Questionnaire and Power of
25
Attorney, and any instruments related to any of the foregoing; the issuance and
delivery of the Shares hereunder to the several Underwriters, including transfer
taxes, if any, the cost of all certificates representing the Shares and transfer
agents' and registrars' fees; the fees and disbursements of counsel for the
Company; all fees and other charges of the Company's independent certified
public accountants; the cost of furnishing to the several Underwriters copies of
the Registration Statement (including appropriate exhibits), Preliminary
Prospectus and the Prospectus, and any amendments or supplements to any of the
foregoing; NASD filing fees and the cost of qualifying the Shares under the laws
of such jurisdictions as you may designate (including filing fees and fees and
disbursements of Underwriters' Counsel in connection with such NASD filings and
Blue Sky qualifications); provided, however, that fees of Underwriters counsel
with respect to Blue Sky matters shall not exceed $30,000; and all other
expenses directly incurred by the Company and the Selling Shareholder in
connection with the performance of their obligations hereunder. In addition,
upon the Closing Date the Company will pay Cruttenden Xxxx Incorporated a
non-accountable expense allowance equal to two and one-half percent (2.5%) of
the total proceeds from the offering of the Shares, less $30,000 which has been
previously paid. The provisions of this Section 3(a)(i) are intended to relieve
the Underwriters from the payment of the expenses and costs which the Selling
Shareholder and the Company hereby agree to pay, but shall not affect any
agreement which the Selling Shareholder and the Company may make, or may have
made, for the sharing of any of such expenses and costs. Such agreements shall
not impair the obligations of the Company and the Selling Shareholder hereunder
to the several Underwriters.
In addition to its other obligations under
Section 8 hereof, the Company agrees that as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(a) hereof, it will reimburse the Underwriters on a
monthly basis for all reasonable legal or other expenses incurred in connection
with investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Company's obligation to reimburse the
Underwriters for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Underwriters shall promptly return such payment to the Company
together with interest, compounded daily, determined on the basis of the prime
rate (or other commercial lending rate for borrowers of the highest credit
standing) listed from time to time in The Wall Street Journal which represents
the base rate on corporate loans posted by a substantial majority of the
nation's thirty (30) largest banks (the "Prime Rate"). Any such interim
reimbursement payments which are not made to the Underwriters within thirty (30)
days of a request for reimbursement shall bear interest at the Prime Rate from
the date of such request.
26
In addition to their other obligations under
Section 8 hereof, the Selling Shareholder agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(b) hereof relating to the Selling Shareholder,
it will reimburse the Underwriters on a monthly basis for all reasonable legal
or other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Selling Shareholder's obligation to reimburse the Underwriters for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Selling Shareholder, together with
interest, compounded daily, determined on the basis of the Prime Rate. Any such
interim reimbursement payments which are not made to the Underwriters within
thirty (30) days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request. In no event shall the aggregate amount that
the Selling Shareholder (as a Selling Shareholder) is required to advance
pursuant to this paragraph exceed the net proceeds received by the Selling
Shareholder from sales of the Option Shares contemplated by this Agreement.
In addition to their other obligations under Section
8(c) hereof, the Underwriters severally and not jointly agree that, as an
interim measure during the pendency of any claim, action, investigation, inquiry
or other proceeding described in Section 8(c) hereof, they will reimburse the
Company and the Selling Shareholder on a monthly basis for all reasonable legal
or other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Underwriters' obligation to reimburse the Company and each the Selling
Shareholder for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company and the Selling Shareholder shall promptly return such
payment to the Underwriters together with interest, compounded daily, determined
on the basis of the Prime Rate. Any such interim reimbursement payments which
are not made to the Company and the Selling Shareholder within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
5(a)(ii), 5(a)(iii) and 5(b) hereof, including the amounts of any requested
reimbursement payments, the method of determining such amounts and the basis on
which such amounts shall be apportioned among the reimbursing parties, shall
27
be settled by arbitration conducted under the provisions of the Constitution and
Rules of the Board of Governors of the New York Stock Exchange, Inc. or pursuant
to the Code of Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or a written notice of
intention to arbitrate, therein electing the arbitration tribunal. In the event
the party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand or
notice is authorized to do so. Any such arbitration will be limited to the
operation of the interim reimbursement provisions contained in Sections
5(a)(ii), 5(a)(iii) and 5(b) hereof and will not resolve the ultimate propriety
or enforceability of the obligation to indemnify for expenses which is created
by the provisions of Sections 8(a), 8(b) and 8(c) hereof or the obligation to
contribute to expenses which is created by the provisions of Section 8(e)
hereof.
CONDITIONS OF UNDERWRITERS' OBLIGATIONS The obligations of the several
Underwriters to purchase and pay for the Shares as provided herein shall be
subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and the Selling Shareholder
herein, to the performance by the Company and the Selling Shareholder of their
respective obligations hereunder and to the following additional conditions:
The Registration Statement shall have become
effective not later than 2:00 P.M., San Diego time, on the date following the
date of this Agreement, or such later date and time as shall be consented to in
writing by you; and no stop order suspending the effectiveness thereof shall
have been issued and no proceedings for that purpose shall have been initiated
or, to the knowledge of the Company, the Selling Shareholder or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of Underwriters'
Counsel.
All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Shares, shall have been reasonably satisfactory to Underwriters' Counsel, and
such counsel shall have been furnished with such papers and information as they
may reasonably have requested to enable them to pass upon the matters referred
to in this Section.
Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, or any later date on which Option
Shares are to be purchased, as the case may be, there shall not have been any
change in the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company from that set forth in the Registration
28
Statement or Prospectus, which, in your sole judgment, is material and adverse
and that makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus.
You shall have received on the Closing Date and on
any later date on which Option Shares are to be purchased, as the case may be,
the following opinion of counsel for the Company and the Selling Shareholder,
dated the Closing Date or such later date on which Option Shares are to be
purchased addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters, to the effect that:
Each of the Company and its subsidiaries
have been duly incorporated and are validly existing as a corporation in good
standing under the laws of the jurisdiction of their incorporation;
Each of the Company and its subsidiaries
have the corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus;
Each of the Company and its subsidiaries are
duly qualified to do business as a foreign corporation and are in good standing
in each jurisdiction, if any, in which the ownership or leasing of their
properties or the conduct of their business (as known to such counsel) requires
such qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company or its subsidiaries,
as applicable. The Company does not own or control, directly or indirectly, any
corporation, association or other entity except that the Company (i) owns all of
the outstanding shares of SEI and (ii) SEI owns all of the outstanding shares of
Antigua Group, Inc.
The authorized, issued and outstanding share
capital of the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and outstanding
shares of capital stock of the Company (including the Option Shares) have been
duly and validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, will not have been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first refusal or
other similar right;
The Firm Shares to be issued by the Company
pursuant to the terms of this Agreement have been duly authorized and, upon
issuance and delivery against payment therefor in accordance with the terms
hereof; will be duly and validly issued and fully paid and nonassessable and
will not have been issued in violation of or subject to any preemptive
29
right, co-sale right, registration right, right of first refusal or other
similar right contained in the Company's memorandum, articles or bylaws or, to
such counsel's knowledge, in any other agreement or contract to which the
Company is a party;
The Company has the corporate power and
authority to enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares to be issued and sold by it hereunder;
This Agreement has been duly authorized by
all necessary corporate action on the part of the Company and has been duly
executed and delivered by the Company and, assuming due authorization, execution
and delivery by you, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except insofar as indemnification
provisions may be limited by applicable law and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by general equitable
principles;
The Registration Statement has become
effective under the Act and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or
threatened under the Act;
The Registration Statement and the
Prospectus, and each amendment or supplement thereto (other than the financial
statements (including supporting schedules), financial data derived therefrom
and other financial and statistical information included therein as to which
such counsel need express no opinion), as of the effective date of the
Registration Statement, complied as to form in all material respects with the
requirements of the Act and the applicable Rules and Regulations;
The information in the Prospectus under the
caption "Description of Securities," to the extent that it constitutes matters
of law or legal conclusions, has been reviewed by such counsel and is a fair
summary of such matters and conclusions; and the forms of certificates
evidencing the Common Shares comply with British Columbia law;
The description in the Registration
Statement and the Prospectus of the memorandum, articles and bylaws of the
Company and of statutes are accurate and fairly present the information required
to be presented by the Act and the applicable Rules and Regulations;
To such counsel's knowledge, there are no
agreements, contracts,
30
leases or documents to which the Company is a party of a character required to
be described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required;
The performance of this Agreement and the
consummation of the transactions herein contemplated (other than performance of
the Company's indemnification obligations hereunder, concerning which no opinion
need be expressed) will not (a) result in any violation of the memorandum,
articles or bylaws of the Company or (b) to such counsel's knowledge, result in
a material breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other evidence of
indebtedness, or any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by which the
Company or its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree of any court, government or governmental agency or body having
jurisdiction over the Company or any of its properties or operations; provided,
however, that such counsel need not express any opinion or belief with respect
to state securities or Blue Sky laws;
No consent, approval, authorization or order
of or qualification with any court, government or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or their
properties or operations is necessary in connection with the consummation by the
Company of the transactions herein contemplated, except such as have been
obtained under the Act or such as may be required under state or other
securities or Blue Sky laws in connection with the purchase and the distribution
of the Shares by the Underwriters;
To such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened against the Company or
any of its subsidiaries of a character required to be disclosed in the
Registration Statement or the Prospectus by the Act or the Rules and
Regulations, other than those described therein;
To such counsel's knowledge, none of the
Company or its subsidiaries is presently (a) in material violation of its
respective memorandum, articles or bylaws, or (b) in material breach of any
applicable statute, rule or regulation known to such counsel or, to such
counsel's knowledge, any order, writ or decree of any court or governmental
agency or body having jurisdiction over the Company or its subsidiaries or over
any of its properties or operations; and
31
To such counsel's knowledge, except as set
forth in the Registration Statement and Prospectus, no holders of Common Shares
or other securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration Statement
and Prospectus, all holders of securities of the Company having rights known to
such counsel to registration of such shares of Common Shares or other
securities, because of the filing of the Registration Statement by the Company
have, with respect to the offering contemplated thereby, waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement or have included
securities in the Registration Statement pursuant to the exercise of and in full
satisfaction of such rights;
the Power of Attorney and Custody Agreement
of the Selling Shareholder have been duly executed and delivered by or on behalf
of the Selling Shareholder, and the Power of Attorney and Custody Agreement of
the Selling Shareholder constitute the valid and binding agreement of the
Selling Shareholder, enforceable in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles;
The Selling Shareholder has full right,
power and authority to enter into and to perform his obligations under this
Agreement and to sell, transfer, assign and deliver the Shares to be sold by the
Selling Shareholder hereunder:
This Agreement has been duly executed and
delivered by or on behalf of the Selling Shareholder; and
Upon the delivery of and payment for the
Shares as contemplated in this Agreement, each of the Underwriters will receive
valid marketable title to the Shares purchased by it from the Selling
Shareholder, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest. In rendering such opinion, such counsel may assume
that the Underwriters are without notice of any defect in the title of the
Shares being purchased from the Selling Shareholder.
In addition, such counsel shall state that such
counsel has acted as legal counsel to the Company and participated in
conferences with officials and other representatives of the Company, the
Representative, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the statements
contained in the Registration Statement
32
or the Prospectus, nothing has come to the attention of such counsel which leads
such counsel to believe that, at the time the Registration Statement became
effective and at all times subsequent thereto up to and on the Closing Date and
on any later date on which Option Shares are to be purchased, the Registration
Statement and any amendment or supplement thereto (other than the financial
statements including supporting schedules, other financial information derived
therefrom and other financial and statistical information included therein, as
to which such counsel need express no comment) contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or at the
Closing Date or any later date on which the Option Shares are to be purchased,
as the case may be, the Registration Statement, the Prospectus and any amendment
or supplement thereto (except as aforesaid) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Counsel rendering the foregoing opinion may rely as
to questions of law not involving the laws of the United States, the States of
Arizona, Florida and Wisconsin or the corporate laws of the Province of British
Columbia upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, the Selling
Shareholder, and of government officials, in which case their opinion is to
state that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to Underwriters'
Counsel.
You shall have received on the Closing Date and on
any later date on which Option Shares are to be purchased, as the case may be,
an opinion of Xxxx Xxxx Xxxx & Freidenrich, a Professional Corporation, and
Fraser & Xxxxxx, Barristers and Solicitors, in form and substance satisfactory
to you, with respect to the sufficiency of all such corporate proceedings and
other legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
You shall have received on the Closing Date and on
any later date on which Option Shares are to be purchased, as the case may be, a
letter from AA, addressed to the Underwriters, dated the Closing Date or such
later date on which Option Shares are to be purchased, as the case may be (in
each case, the "Bring Down Letter"), confirming that they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the applicable published Rules and Regulations and based upon the
procedures described
33
in a letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
two (2) business days prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, (i)<0- 95>confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter that are necessary to reflect any changes in the facts described
in the Original Letter since its date, or to reflect the availability of more
recent financial statements, data or information. The Bring Down Letter shall
not disclose any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. The Original Letter from AA shall be addressed to or for the use
of the Underwriters in form and substance satisfactory to the Underwriters and
shall (i) represent, to the extent true, that they are independent certified
public accountants with respect to the Company within the meaning of the Act and
the applicable published Rules and Regulations, (ii) set forth their opinion
with respect to their examination of the consolidated balance sheet of the
Company as of December 31, 1996 and related consolidated statements of
operations, shareholders' equity and cash flows for the twelve (12) months ended
December 31, 1996, (iii) state that AA has performed the procedures set out in
Statement on Auditing Standards No. 71 ("SAS 71") for a review of interim
financial information and providing the report of AA as described in SAS 71 on
the financial statements for the nine-month period ended September 30, 1997 (the
"Interim Financial Statements"), (iv) state that in the course of such review,
nothing came to their attention that leads them to believe that any material
modifications need to be made to any of the Interim Financial Statements in
order for them to be in compliance with generally accepted accounting principles
consistently applied across the periods presented, (v) state that nothing came
to their attention that caused them to believe that the financial statements
included in the Registration Statement and Prospectus do not comply as to form
in all material respects with the applicable accounting requirements of Rule
11-02 of Regulation S-X and that any adjustments thereto have not been properly
applied to the historical amounts in the compilation of such statements, and
(vi) address other matters agreed upon by AA and you. In addition, you shall
have received from AA a letter addressed to the Company and made available to
you for the use of the Underwriters stating that their review of the Company's
system of internal accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's financial
statements as of December 31, 1996, did not disclose any weaknesses in internal
controls that they considered to be material weaknesses.
34
You shall have received on the Closing Date and on
any later date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, to the effect
that, and you shall be satisfied that:
The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the Closing Date or
any later date on which Option Shares are to be purchased, as the case may be,
and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be;
No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
When the Registration Statement became effective and
at all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein by
the Act and the Rules and Regulations, and in all material respects conformed to
the requirements of the Act and the Rules and Regulations, the Registration
Statement, and any amendment or supplement thereto, did not and does not include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, the Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (a) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company, (b) any
transaction that is material to the Company, except transactions entered into in
the ordinary course of business, (c) any obligation, direct or contingent, that
is material to the Company, incurred by the Company, except obligations incurred
in the ordinary course of business, (d) any change in the capital stock or
outstanding indebtedness of the Company that is material to the Company or is
out of the ordinary course of business of the Company, (e) any
35
dividend or distribution of any kind declared, paid or made on the capital stock
of the Company, or (f) any loss or damage (whether or not insured) to the
property of the Company which has been sustained or will have been sustained
which has a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company.
You shall be satisfied that, and you shall have
received a certificate dated the Closing Date from the Attorneys for the Selling
Shareholder to the effect that, as of the Closing Date:
The representations and warranties made by
the Selling Shareholder herein are true or correct in all material respects on
the Closing Date or on any later date on which Option Shares are to be
purchased, as the case may be; and
The Selling Shareholder has complied with
all obligations and satisfied all conditions which is required to be performed
or satisfied on the part of such Selling Shareholder at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be.
The Company shall have obtained and delivered to you
an agreement from each officer and director of the Company, the Selling
Shareholder and each other shareholder of the Company who holds more than one
percent (1%) of the total number of Common Shares of the Company then
outstanding, in writing prior to the date hereof that such person will not,
directly or indirectly, except as described below, during the Lock-up Period,
effect the Disposition of any Securities now owned or hereafter acquired
directly by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) if such shareholder is an
individual, he or she may transfer any shares of the Company's Common Shares or
securities convertible into or exchangeable or exercisable for Common Shares
either during his or her lifetime or on death by will or intestacy to his or her
immediate family or to a trust the beneficiaries of which are exclusively the
undersigned and/or a member of his or her immediate family; provided, however,
that prior to any such transfer each transferee shall execute an agreement,
satisfactory to Cruttenden Xxxx Incorporated, pursuant to which each transferee
shall agree to receive and hold such shares of Common Shares, or securities
convertible into or exchangeable or exercisable for Common Shares, subject to
the provisions hereof, and there shall be no further transfer except in
accordance with the provisions hereof, or (ii) with the prior written consent of
Cruttenden Xxxx Incorporated. The foregoing restriction shall have been
expressly agreed to preclude the holder of the Securities from engaging in any
hedging or other transaction which is designed to or reasonably expected to lead
to or result in a Disposition of Securities during the Lock-up Period, even if
such Securities would be disposed of by someone other than the such holder. Such
prohibited hedging or other transactions would
36
include, without limitation, any short sale (whether or not against the box) or
any purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Furthermore, such
person will have also agreed and consented to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of the
Securities held by such person except in compliance with this restriction.
The Company and the Selling Shareholder shall have
furnished to you such other certificates and documents as you shall reasonably
request (including certificates of officers of the Company or the Selling
Shareholder as to the accuracy of the representations and warranties of the
Company and the Selling Shareholder herein, as to the performance by the Company
and the Selling Shareholder of their respective obligations hereunder and as to
the other conditions concurrent and precedent to the obligations of the
Underwriters hereunder.
You shall have received the Representative's
Warrants, in a form reasonably satisfactory to you, duly and validly executed by
the President of the Company.
the Shares have been duly approved for listing on The
Nasdaq National Market.
You shall have received a Blue Sky Memorandum and
Supplemental Blue Sky Memorandum from counsel for the Company of a form
reasonably satisfactory to Underwriters' Counsel.
All such opinions, certificates, letters and
documents will be in compliance with the provisions hereof only if they are
reasonably satisfactory to Underwriters' Counsel. The Company and the Selling
Shareholder will furnish you with such number of conformed copies of such
opinions, certificates, letters and documents as you shall reasonably request.
OPTION SHARES.
On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Selling Shareholder hereby grants to the several Underwriters, for
the purpose of covering over-allotments in connection with the distribution and
sale of the Firm Shares only, a nontransferable option to purchase up to an
aggregate of 450,000 Option Shares at the purchase price per share for the Firm
Shares set forth in Section 3 hereof. Such option may be exercised by the
Representative on behalf of the
37
several Underwriters on one (1) or more occasions in whole or in part during the
period of forty-five (45) days after the date on which the Firm Shares are
initially offered to the public by giving written notice (the "Option Notice")
to the Company and the Selling Shareholder. The number of Option Shares to be
purchased by each Underwriter upon the exercise of such option shall be the same
proportion of the total number of Option Shares to be purchased by the several
Underwriters pursuant to the exercise of such option as the number of Firm
Shares purchased by such Underwriter (set forth in Schedule A hereto) bears to
the total number of Firm Shares purchased by the several Underwriters (set forth
in Schedule A hereto), adjusted by the Representative in such manner as to avoid
fractional shares.
Delivery of definitive certificates for the Option
Shares to be purchased by the several Underwriters pursuant to the exercise of
the option granted by this Section 7 shall be made against payment of the
purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in next-day funds, payable to the order of the
Selling Shareholder (and the Selling Shareholder agrees not to deposit any such
check in the bank on which it is drawn, and not to take any other action with
the purpose or effect of receiving immediately available funds, until the
business day following the date of its delivery to the payee). In the event of
any breach of the foregoing, the Selling Shareholder shall reimburse the
Underwriters for the interest lost and any other expenses borne by them by
reason of such breach. Such delivery and payment shall take place at the offices
of Xxxx Xxxx Xxxx & Freidenrich, 0000 Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx,
Xxxxxxxxxx or at such other place as may be agreed upon among the Representative
and the Selling Shareholder (i) on the Closing Date, if written notice of the
exercise of such option is received by the Selling Shareholder at least two (2)
full business days prior to the Closing Date, or (ii) on a date which shall not
be later than the third (3rd) full business day following the date the Selling
Shareholder receives written notice of the exercise of such option, if such
notice is received by the Selling Shareholder after the date two (2) full
business days prior to the Closing Date.
The certificates for the Option Shares to be so
delivered will be made available to you at such office or such other location
including, without limitation, in New York City, as you may reasonably request
for checking at least one (1) full business day prior to the date of payment and
delivery and will be in such names and denominations as you may request, such
request to be made at least two (2) full business days prior to such date of
payment and delivery. If the Representative so elects, delivery of the Option
Shares may be made by credit through full fast transfer to the accounts at The
Depository Trust Company designated by the Representative.
It is understood that you, individually, and not as
the Representative of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on
38
behalf of any Underwriter or Underwriters whose check or checks shall not have
been received by you prior to the date of payment and delivery for the Option
Shares to be purchased by such Underwriter or Underwriters. Any such payment by
you shall not relieve any such Underwriter or Underwriters of any of its or
their obligations hereunder.
Upon exercise of any option provided for in Section
7(a) hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company and the Selling
Shareholder herein, to the accuracy of the statements of the Company, the
Selling Shareholder and officers of the Company made pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder, to the
conditions set forth in Section 6 hereof, and to the condition that all
proceedings taken at or prior to the payment date in connection with the sale
and transfer of such Option Shares shall be satisfactory in form and substance
to you and to Underwriters' Counsel, and you shall have been furnished with all
such documents, certificates and opinions as you may request in order to
evidence the accuracy and completeness of any of the representations, warranties
or statements, the performance of any of the covenants or agreements of the
Company and the Selling Shareholder or the satisfaction of any of the conditions
herein contained.
INDEMNIFICATION AND CONTRIBUTION
The Company and the Selling Shareholder, jointly and
severally, agree to indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject (including, without limitation, in its capacity
as an Underwriter or as a qualified independent underwriter as defined in Rule
2720 of the Conduct Rules of the NASD) under the Act, the Exchange Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities (or actions in respect thereof) arising out of or based upon (i)
any breach of any representation, warranty, agreement or covenant of the Company
or the Selling Shareholder herein contained, (ii) any untrue statement or
alleged untrue statement or any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and agrees to
reimburse each Underwriter for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss, claim,
39
damage, liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and, provided further, that the indemnity agreement provided in this
Section 8(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall
extend upon the same terms and conditions to, and shall inure to the benefit of
each person, if any, who controls any Underwriter within the meaning of the Act
or the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
The Selling Shareholder, severally and not jointly,
agrees to indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject (including, without limitation, in its capacity as an Underwriter
or as a "qualified independent underwriter" as defined in Rule 2720 of the
Conduct Rules of the NASD) under the Act, the Exchange Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon (i) any
breach of any representation, warranty, agreement or covenant of the Selling
Shareholder herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each Underwriter for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action: provided, however,
40
that the indemnity agreement provided in this Section 8(b) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any losses, claims, damages, liabilities or actions
based upon any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission to state therein a material fact purchased
Shares, if a copy of the Prospectus in which such untrue statement or alleged
untrue statement or omission or alleged omission was corrected had not been sent
or given to such person within the time required by the Act and the Rules and
Regulations, unless such failure is the result of noncompliance by the Company
with Section 4(d) hereof.
The indemnity agreement in this Section 8(b) shall
extend upon the same terms and conditions to, and shall inure to the benefit of
each person, if any, who controls any Underwriter within the meaning of the Act
or the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which such Selling Shareholder may otherwise have.
Each Underwriter, severally and not jointly, agrees
to indemnify and hold harmless the Company and the Selling Shareholder against
any losses, claims, damages or liabilities, joint or several, to which the
Company or the Selling Shareholder may become subject under the Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities (or actions in respect thereof) arising out of or based upon (i)
any breach of any representation, warranty, agreement or covenant of such
Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 8(c) to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof, and agrees to reimburse the Company and the Selling Shareholder for any
legal or other expenses reasonably incurred by the Company and the Selling
Shareholder in connection with investigating or defending any such loss, claim,
damage, liability or action.
The indemnity agreement in this Section 8(c) shall
extend upon the same terms and conditions to, and shall inure to the benefit of,
each officer of the Company who signed the Registration Statement and each
director of the Company, each Selling Shareholder and each person, if any, who
controls the Company or any Selling Shareholder within the
41
meaning of the Act or the Exchange Act. This indemnity agreement shall be in
addition to any liabilities which each Underwriter may otherwise have.
Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 8 except to the extent
that it has been prejudiced by such omission. In case any such action is brought
against any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of the indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i)<0-
95>the indemnified party shall have employed separate counsel in accordance with
the proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Section 8(a),
8(b) or 8(c) hereof who are parties to such action), (ii)<0- 95>the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii)<0- 95>the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; provided that such
consent shall not be unreasonably withheld. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnification could have been sought
42
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on all claims
that are the subject matter of such proceeding.
In order to provide for just and equitable
contribution in any action in which a claim for indemnification is made pursuant
to this Section 8 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last sight of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 8 provides for indemnification in such case, all the parties hereto
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after contribution from others) in such proportion so
that, the Underwriters severally and not jointly are responsible pro rata for
the portion represented by the percentage that the underwriting discount bears
to the public offering price, and the Company and the Selling Shareholder are
responsible for the remaining portion, provided, however, that (i) no
Underwriter shall be required to contribute any amount in excess of the amount
by which the underwriting discount applicable to the Shares purchased by such
Underwriter exceeds the amount of damages which such Underwriter has otherwise
been required to pay and (ii) no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The contribution agreement in this Section 8(e) shall extend
upon the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter, the Company or the Selling
Shareholder within the meaning of the Act or the Exchange Act and each officer
of the Company who signed the Registration Statement and each director of the
Company.
The liability of the Selling Shareholder for
indemnification pursuant to this Section 8 shall be limited to an amount equal
to the public offering price of the Option Shares sold by the Selling
Shareholder to the Underwriters less underwriting discounts and commissions
related to the securities sold by the Selling Shareholder. The Company and the
Selling Shareholder may agree, as among themselves and without limiting the
rights of the Underwriters under this Agreement, as to the respective amounts of
such liability for which they each shall be responsible.
The parties to this Agreement hereby acknowledge that
they are sophisticated businesspersons who were represented by counsel during
the negotiations regarding the provisions hereof including, without limitation,
the provisions of this Section 8, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 8
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement and
43
Prospectus as required by the Act and the Exchange Act.
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY All representations, warranties, covenants and agreements of the
Company, the Selling Shareholder and the Underwriters herein or in certificates
delivered pursuant hereto, and the indemnity and contribution agreements
contained in Section 8 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter within the meaning of the Act or the
Exchange Act, or by or on behalf of the Company or the Selling Shareholder, or
any of their officers, directors or controlling persons within the meaning of
the Act or the Exchange Act, and shall survive the delivery of the Shares to the
several Underwriters hereunder or termination of this Agreement.
SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters shall
fail to take up and pay for the number of Firm Shares agreed by such Underwriter
or Underwriters to be purchased hereunder upon tender of such Firm Shares in
accordance with the terms hereof, and if the aggregate number of Firm Shares
which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the
aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed to take up and pay for exceeds 10% of the Firm
Shares, the remaining Underwriters shall have the right, but shall not be
obligated, to take up and pay for (in such proportions as may be agreed upon
among them) the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If such remaining Underwriters do not, at the
Closing Date, take up and pay for the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase, the Closing Date
shall be postponed for twenty-four (24) hours to allow the several Underwriters
the privilege of substituting within twenty-four (24) hours (including
non-business hours) another underwriter or underwriters (which may include any
nondefaulting Underwriter) satisfactory to the Company. If no such underwriter
or underwriters shall have been substituted as aforesaid by such postponed
Closing Date, the Closing Date may, at the option of the Company, be postponed
for a further twenty-four (24) hours, if necessary, to allow the Company the
privilege of finding another underwriter or underwriters, satisfactory to you,
to purchase the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If it shall be arranged for the remaining
Underwriters or substituted underwriter or underwriters to take up the Firm
Shares of the defaulting Underwriter or Underwriters as provided in this
44
Section 10, (i) the Company shall have the right to postpone the time of
delivery for a period of not more than seven (7) full business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees promptly to file any amendments to the Registration Statement,
supplements to the Prospectus or other such documents which may thereby be made
necessary, and (ii) the respective number of Firm Shares to be purchased by the
remaining Underwriters and substituted underwriter or underwriters shall be
taken as the basis of their underwriting obligation. If the remaining
Underwriters shall not take up and pay for all such Firm Shares so agreed to be
purchased by the defaulting Underwriter or Underwriters or substitute another
underwriter or underwriters as aforesaid and the Company shall not find or shall
not elect to seek another underwriter or underwriters for such Firm Shares as
aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to
the preceding paragraph of this Section 10, then other than as set forth in the
Letter Agreement, neither the Company nor the Selling Shareholder shall be
liable to any Underwriter (except as provided in Sections 5 and 8 hereof) nor
shall any Underwriter (other than an Underwriter who shall have failed,
otherwise than for some reason permitted under this Agreement, to purchase the
number of Firm Shares agreed by such Underwriter to be purchased hereunder,
which Underwriter shall remain liable to the Company, the Selling Shareholder
and the other Underwriters for damages, if any, resulting from such default) be
liable to the Company or Selling Shareholder (except to the extent provided in
Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any
person substituted for an Underwriter under this Section 10.
EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
This Agreement shall become effective at the earlier
of (i) 6:30 A.M., San Diego time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the public offering shall mean the time
of the release by you, for publication, of the first newspaper advertisement
relating to the Shares, or the time at which the Shares are first generally
offered by the Underwriters to the public by letter, telephone, telegram or
telecopy, whichever shall first occur. By giving notice as set forth in Section
12 before the time this Agreement becomes effective, you, as Representative of
the several Underwriters, or the Company, may prevent this Agreement from
becoming effective without liability of any party to any other party, except as
provided in Sections 4(i) and 8 hereof.
45
You, as Representative of the several Underwriters,
shall have the right to terminate this Agreement by giving notice as hereinafter
specified at any time on or prior to the Closing Date or on or prior to any
later date on which Option Shares are to be purchased, as the case may be, (i)
if the Company or the Selling Shareholder shall have failed, refused or been
unable to perform any agreement on its part to be performed, or because any
other condition of the Underwriters' obligations hereunder required to be
fulfilled is not fulfilled, including, without limitation, any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse, or (ii) if
additional material governmental restrictions, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New York
Stock Exchange or on the American Stock Exchange or in the over the counter
market by the NASD, or trading in securities generally shall have been suspended
on either such exchange or in the over the counter market by the NASD, or if a
banking moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, earthquake, accident or other calamity of such character as to
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or (iv)
if there shall have been a material adverse change in the general political or
economic conditions or financial markets as in your sole judgment makes it
inadvisable or impracticable to proceed with the offering, sale and delivery of
the Shares, or (v) if there shall have been an outbreak or escalation of
hostilities or of any other insurrection or armed conflict or the declaration by
the United States of a national emergency which, in the sole judgment of the
Representatives, makes it impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. In the event of
termination pursuant to subparagraph (i) above, the Company and the Selling
Shareholder shall remain obligated to pay costs and expenses pursuant to
Sections 4(i) and 8 hereof. Any termination pursuant to any of subparagraphs
(ii) through (v) above shall be without liability of any party to any other
party except as provided in Sections 4(i) and 8 hereof.
If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 11, you shall
promptly notify the Company by telephone, telecopy or telegram, in each case
confirmed by letter. If the Company shall elect to prevent this Agreement from
becoming effective, the Company shall promptly notify you by telephone, telecopy
or telegram, in each case, confirmed by letter.
NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed
46
(and confirmed by letter) or telecopied (and confirmed by letter) to you c/o
Cruttenden Xxxx Incorporated, 00000 Xxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx
00000, telecopier number (000) 000-0000, Attention: General Counsel; if sent to
the Company, such notice shall be mailed, delivered, telegraphed (and confirmed
by letter) or telecopied (and confirmed by letter) to 0000 Xxxxx 00xx xxx,
Xxxxxxxxxx, Xxxxxxx, 00000, telecopier number (000) 000-0000, Attention: L.
Xxxxxx Xxxxxx, Chief Executive Officer, if sent to the Selling Shareholder, such
notice shall be sent mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to _______________, as Attorney-in-Fact for
the Selling Shareholder, at 0000 Xxxxx 00xx xxx, Xxxxxxxxxx, Xxxxxxx, 00000,
telecopier number (___) ___-____.
PARTIES. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters, the Company and the Selling Shareholder and their
respective executors, administrators, successors and assigns. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person or entity, other than the parties hereto and their respective executors,
administrators, successors and assigns, and the controlling persons within the
meaning of the Act or the Exchange Act, officers and directors referred to in
Section 8 hereof, any legal or equitable right, remedy or claim in respect of
this Agreement or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or entity. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company and the Selling Shareholder
under this Agreement, you shall act on behalf of each of the several
Underwriters, and the Company and the Selling Shareholder shall be entitled to
act and rely upon any statement, request, notice or agreement made or given by
you jointly or by Cruttenden Xxxx Incorporated on behalf of you.
APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without giving effect to
conflict of law principles.
COUNTERPARTS. This Agreement may be signed in several counterparts,
each of which will constitute an original.
[SIGNATURE PAGE FOLLOWS]
47
If the foregoing correctly sets forth the understanding among
the Company, the Selling Shareholder and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, the Selling Shareholder
and the several Underwriters.
Very truly yours,
ANTIGUA ENTERPRISES, INC.
By
--------------------------------------
SELLING SHAREHOLDER
By
--------------------------------------
Attorney-in-Fact for the Selling
Shareholder named in Schedule B hereto
Accepted as of the date first above written:
CRUTTENDEN XXXX
INCORPORATED
On their behalf and on behalf of each of the
several Underwriters named in Schedule A
hereto.
By: CRUTTENDEN XXXX
INCORPORATED
By:
----------------------------------
Authorized Signatory
48
SCHEDULE A
Number of
Firm Shares
To Be
Underwriters Purchased
------------ ---------
Cruttenden Xxxx Incorporated.........................................
Xxxxxx, Xxxxx Xxxxx Incorporated.....................................
Total....................................................... 3,000,000
===========
49
SCHEDULE B
Name of Selling Shareholder Number of Shares
--------------------------- ----------------
Xxxxxx X. Xxxxxx 450,000
---------------
TOTAL 450,000
50
