1
EXHIBIT 1.4
2,500,000 SHARES
USTEL, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
November __, 1996
Cruttenden Xxxx Incorporated
As Representative of the Several Underwriters
Named in Schedule II Attached Hereto
00000 Xxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Ladies and Gentlemen:
UStel, Inc., a Minnesota corporation (the "Company"), and the
stockholders of the Company located on Schedule I attached hereto (the "Selling
Stockholders") severally propose to issue and sell an aggregate of 2,500,000
shares (the "Offered Shares") of the Company's common stock, $0.01 par value
(the "Common Stock"), to Cruttenden Xxxx Incorporated (the "Representative") and
the several underwriters named in Schedule II hereto (collectively with the
Representative, the "Underwriters" and individually, an "Underwriter," which
terms shall also include any Underwriter substituted as hereinafter provided in
Section 12). The Offered Shares consist of 2,000,000 shares of Common Stock to
be issued and sold by the Company and 500,000 outstanding shares of Common Stock
to be sold by the Selling Stockholders. The Offered Shares shall be offered to
the public at an initial offering price of $_____ per Offered Share (the
"Offering Price").
In addition, the several Underwriters, in order to cover
over-allotments in the sale of the Offered Shares, may purchase from the Company
and the Selling Stockholders within 45 days after the Effective Date (as
hereinafter defined), for their own account for offering to the public at the
Offering Price, up to _______ and ______, respectively, additional shares of
Common Stock (the "Optional Shares"), upon the terms and conditions set forth in
Section 5 hereof. The Offered Shares and the Optional Shares are hereinafter
collectively referred to as
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the "Shares." The Company, intending to be legally bound hereby, confirms its
agreement with each of the Underwriters as follows:
The Company and Consortium Acquisition Corporation, a
California corporation that is wholly-owned by the Company ("Acquisition
Corp."), have entered into a merger agreement and plan of reorganization (the
"Merger Agreement") with Consortium 2000, Inc., a California corporation
("Consortium 2000"), dated August 14, 1996 pursuant to which Acquisition Corp.
will merge into Consortium 2000 and Consortium 2000 will become a wholly-owned
subsidiary of the Company (the "Merger").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) The Company has prepared in conformity with the
requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules, regulations, releases and instructions
(the "Regulations") of the Securities and Exchange Commission
(the "SEC") under the Act in effect at all applicable times
and has filed with the SEC a registration statement on Form
SB-2 (File No. 333-____) and one or more amendments thereto
registering the Shares under the Act. Any preliminary
prospectus included in such registration statement or filed
with the SEC pursuant to Rule 424(a) of the Regulations is
hereinafter called a "Preliminary Prospectus." The various
parts of such registration statement, including all exhibits
thereto and the information contained in any form of final
prospectus filed with the SEC pursuant to Rule 424(b) of the
Regulations in accordance with Section 6(a) of this Agreement
and deemed by virtue of Rule 430A of the Regulations to be
part of such registration statement at the time it was
declared effective, each as amended at the time such
registration statement became effective, and each registration
statement, if any, filed pursuant to Rule 462(b) under the Act
increasing the size of the offering registered under the Act,
are hereinafter collectively referred to as the "Registration
Statement." The final prospectus in the form included in the
Registration Statement or first filed with the SEC pursuant to
Rule 424(b) of the Regulations and any amendments or
supplements thereto is hereinafter referred to as the
"Prospectus."
(b) The Registration Statement has or will become
effective under the Act as of the Effective Date, and the SEC
has not issued any stop order suspending the
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effectiveness of the Registration Statement or preventing or
suspending the use of any Preliminary Prospectus nor has the
SEC instituted, threatened to institute or, to the Company's
knowledge, contemplated proceedings with respect to such an
order. The Company has not received any stop order suspending
the sale of the Shares in any jurisdiction designated by the
Representative pursuant to Section 6(f) hereof, and no
proceedings for that purpose have been instituted or, to the
Company's knowledge, are threatened or contemplated. The
Company has complied with all requests of the SEC and any
state securities commission in a state designated by the
Representative pursuant to Section 6(f) hereof, for additional
information to be included in the Registration Statement or
Prospectus or otherwise. Each Preliminary Prospectus conformed
to the requirements of the Act and the Regulations as of its
date and did not as of its date contain an untrue statement of
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading, except the foregoing shall not apply to statements
in or omissions from any Preliminary Prospectus in reliance
upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriter through
the Representative expressly for use therein. The Registration
Statement on the date on which it was declared effective by
the SEC (the "Effective Date") conformed, and any
post-effective amendment thereof on the date it shall become
effective, and the Prospectus at the time it is filed with the
SEC pursuant to Rule 424(b) of the Regulations and on the
Closing Date (as defined in Section 4 hereof) and any Option
Closing Date (as defined in Section 5(b) hereof) will conform,
to the requirements of the Act and the Regulations, and none
of the Registration Statement, any post-effective amendment
thereof and the Prospectus will, on any of such respective
dates, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading,
except that this representation and warranty does not apply to
statements in or omissions from the Registration Statement or
the Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by or on
behalf of any Underwriter through the Representative expressly
for use therein. It is understood that the written information
described in Section 13 constitutes the only information
furnished
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in writing by or on behalf of any Underwriter for
inclusion in any Preliminary Prospectus, the Prospectus
or the Registration Statement.
(c) The consolidated financial statements (including
the notes thereto) filed as part of any Preliminary
Prospectus, the Prospectus and the Registration Statement
present fairly the consolidated financial position of the
Company, each corporation or other entity of which the Company
owns or will own fifty percent or more of the outstanding
equity securities as of the Closing Date (individually a
"Subsidiary") and collectively the "Subsidiaries") and
Consortium 2000 as of the respective dates thereof, and the
results of operations and cash flows of the Company, its
Subsidiaries and Consortium 2000, for the periods indicated
therein, all in conformity with generally accepted accounting
principles consistently applied through the periods involved,
except as may be otherwise stated therein. The supporting
schedules included in the Registration Statement fairly state
the information required to be stated therein in relation to
the basic financial statements taken as a whole. The other
financial and statistical information included in the
Prospectus, including without limitation the data under the
captions "Prospectus Summary" and "Selected Financial Data,"
presents fairly the information shown therein and has been
compiled on a basis consistent with that of the audited
financial statements included in the Registration Statement
and the books and records of the Company, its Subsidiaries and
Consortium 2000.
(d) The unaudited pro forma consolidated financial
statements included in the Registration Statement and the
Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act and (i)
management of the Company believes that the assumptions
underlying the pro forma adjustments are reasonable, (ii) the
pro forma adjustments have been properly applied to the
historical amounts in the compilation of such statements, and
(iii) such statements fairly present, with respect to the
Company, its Subsidiaries and Consortium 2000, the
consolidated pro forma financial position and results of
operations and other information purported to be shown therein
at the respective dates or for the respective periods therein
specified.
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(e) The Company does not have any Subsidiaries other
than Acquisition Corp. and Celmart Communications, Inc., a
Nevada corporation, and the Company does not own any stock or
other equity interest in, or control, directly or indirectly,
any other corporation, partnership or other entity.
(f) Each of the Company, the Subsidiaries and
Consortium 2000 is a corporation duly incorporated, validly
existing and in good standing under the laws of its
jurisdiction of incorporation with all necessary corporate
power and authority, and all required licenses, permits,
certifications, registrations, approvals, consents and
franchises to own or lease and operate its properties and to
conduct its business as described in the Prospectus and to
execute, deliver and perform this Agreement. Each of the
Company, the Subsidiaries and Consortium 2000 is duly
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified
would not have a material adverse effect on the Company and
its Subsidiaries or Consortium 2000.
(g) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and the
Warrant to purchase the shares of Common Stock to be issued
and sold to the Representative under the terms of the Warrant
Agreement (as hereinafter defined) in accordance with Section
6(p) of this Agreement (the "Representative's Warrant").
(h) This Agreement, the Warrant Agreement and the
Representative's Warrant have been duly authorized, executed
and delivered by the Company and constitute its valid and
binding obligations, enforceable against the Company in
accordance with their respective terms, except as rights to
indemnity and contribution hereunder or thereunder may be
limited by federal or state securities laws or principles of
public policy, and except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles. The
Merger Agreement has been duly authorized, executed and
delivered by the Company, Acquisition Corp. and Consortium
2000 and constitutes the valid and binding agreement of the
Company, Acquisition Corp. and
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Consortium 2000 enforceable against each of them in accordance
with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors'
rights generally. This Agreement, the Warrant Agreement, the
Representative's Warrant and the Merger Agreement conform to
the description thereof in the Prospectus.
(i) The execution, delivery and performance of this
Agreement, the Warrant Agreement and the Representative's
Warrant by the Company and the consummation of the Merger does
not and will not, with or without the giving of notice or the
lapse of time, or both, (A) conflict with any terms or
provisions of the Certificate of Incorporation or Bylaws of
the Company, its Subsidiaries or Consortium 2000, as amended
to the date hereof and the Closing Date or Option Closing
Date, as the case may be; (B) result in a breach of,
constitute a default under, result in the termination or
modification of or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the
properties of the Company, its Subsidiaries or Consortium 2000
pursuant to any indenture, mortgage, deed of trust, contract,
commitment or other agreement or instrument to which the
Company, its Subsidiaries or Consortium 2000 is a party or by
which any of their respective properties or assets are bound
or affected, the effect of which would have a material adverse
effect on the business or properties of the Company, its
Subsidiaries or Consortium 2000; (C) violate any law, rule,
regulation, judgment, order or decree of any government or
governmental agency, instrumentality or court, domestic or
foreign, having jurisdiction over the Company, its
Subsidiaries or Consortium 2000 or any of their respective
properties or businesses; or (D) result in a breach,
termination or lapse of the power and authority of the
Company, its Subsidiaries or Consortium 2000 to own or lease
and operate their respective properties and conduct its
business as described in the Prospectus, the effect of which
would have a material adverse effect on the business or
properties of the Company, its Subsidiaries or Consortium
2000.
(j) The Company has authorized and outstanding
capital stock and, as of the date or dates indicated the
Company had the capitalization, set forth under the caption
"Capitalization" in the Prospectus and will have the
as-adjusted capitalization set forth under the
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caption "Capitalization" in the Prospectus. On the Effective
Date, the Closing Date and any Option Closing Date, there will
be no options or warrants for the purchase of, other
outstanding rights to purchase, agreements or obligations to
issue or agreements or other rights to convert or exchange any
obligation or security into, capital stock of the Company or
securities convertible into or exchangeable for capital stock
of the Company, except as described in the Prospectus.
(k) The authorized capital stock of the Company,
including, without limitation, the outstanding shares of
Common Stock and the Shares being issued on the Closing Date
and Option Closing Date (if any and to the extent applicable),
conforms to the descriptions thereof in the Prospectus, and
such descriptions conform to the descriptions thereof set
forth in the instruments defining the same. The information in
the Prospectus insofar as it relates to outstanding options
that have been granted to employees, consultants and directors
and the Representative's Warrant, in each case as of the
Effective Date, the Closing Date and any Option Closing Date,
is true, correct and complete in all material respects. As of
the Closing Date, all of the outstanding capital stock or
other securities evidencing equity ownership of the
Subsidiaries will have been duly and validly authorized and
issued and will be fully paid and nonassessable and will be
owned, directly or indirectly, by the Company, free and clear
of any security interest, claim, lien or encumbrance; there
are no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, any shares
of capital stock or other equity interest in any Subsidiary.
(l) The outstanding shares of Common Stock (including
the Shares to be sold by the Selling Stockholders) have been
duly authorized and are validly issued, fully paid and
non-assessable. The Warrant Agreement and the Representative's
Warrant, as of the Closing Date, will have been duly
authorized and validly issued. The shares of Common Stock
issuable pursuant to the Representative's Warrant, when issued
in accordance with the respective terms thereof, will be duly
authorized, validly issued, fully paid and non-assessable.
None of such outstanding shares of Common Stock were, and none
of the Representative's Warrant or the shares of Common Stock
issuable upon exercise of the Representative's Warrant will
be, issued in violation of any preemptive rights of any
security
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holder of the Company. The Company has reserved a sufficient
number of shares of Common Stock for issuance pursuant to the
Representative's Warrant. The holders of the outstanding
shares of Common Stock are not, and will not be, subject to
personal liability solely by reason of being such holders, and
the holders of shares of Common Stock issuable pursuant to the
Representative's Warrant will not be subject to personal
liability solely by reason of being such holders. The offers
and sales of the outstanding shares of Common Stock were, and
the issuance of Common Stock upon exercise of the
Representative's Warrant will be, made in conformity with
applicable registration requirements or exemptions therefrom
under federal and applicable state securities laws.
(m) The issuance and sale of the Shares by the
Company have been duly authorized and, when the Shares have
been duly delivered against payment therefor as contemplated
by this Agreement, the Shares will be validly issued, fully
paid and non-assessable, and the holders thereof will not be
subject to personal liability solely by reason of being such
holders. None of the Shares will be issued in violation of any
preemptive rights of any security holder of the Company. The
certificates representing the Shares are in proper legal form
under, and conform to the requirements of the Minnesota
Business Corporation Act, as amended (the "MBCA"). Neither the
filing of the Registration Statement nor the offering or sale
of the Shares as contemplated by this Agreement gives any
security holder of the Company any rights, other than those
which have been waived, for or relating to the registration of
any shares of Common Stock or other security of the Company.
(n) No consent, approval, authorization, order,
registration, license or permit of any court, government,
governmental agency, instrumentality or other regulatory body
or official is required for the valid authorization, issuance,
sale and delivery by the Company of any of the Shares
(including the anticipated use of proceeds therefrom), or for
the execution, delivery or performance by the Company of this
Agreement or the Merger Agreement, except such as may be
required for the registration of the Shares under the Act, the
Regulations and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which consent, approval and
authorization have been obtained, and for compliance with the
applicable state securities
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or Blue Sky laws, or the Bylaws, rules and other
pronouncements of the National Association of Securities
Dealers, Inc. (the "NASD"). The Common Stock is registered
under Section 12(g) of the Exchange Act and all necessary
filings have been made to include the Shares in such
registration. Upon the effectiveness of the Registration
Statement, the Shares will be listed on the Nasdaq National
Market. The Company has taken no action designed, or likely,
to have the effect of terminating the registration of the
Common Stock under Section 12(g) of the Exchange Act, nor has
the Company received any notification that the SEC is
contemplating terminating such registration.
(o) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of or references
to contracts, agreements or other documents, are accurate in
all material respects and present or summarize fairly, the
information required to be disclosed under the Act and the
Regulations, and there are no contracts, agreements or other
documents required to be described or referred to in the
Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement under the Act or the
Regulations that have not been so described, referred to or
filed, as required.
(p) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, there has not
been (A) any material adverse change (including, whether or
not insured against, any material loss or damage to any
assets), or development involving a prospective material
adverse change, in the general affairs, properties, assets,
management, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects of the
Company and the Subsidiaries or Consortium 2000, (B) any
transaction entered into by the Company or any Subsidiary that
is material to the Company and the Subsidiaries and not in the
ordinary course of business, (C) any dividend or distribution
of any kind declared, paid or made by the Company on its
capital stock, (D) any liabilities or obligations, direct or
indirect, incurred by the Company, any Subsidiary or
Consortium 2000 that are material to the Company and the
Subsidiaries or Consortium 2000, or (E) any material change in
the short-term debt or long-term debt of the Company, any
Subsidiary or Consortium 2000. The Company, the Subsidiaries
and Consortium 2000 do
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not have any contingent liabilities or obligations that
are material and that are not disclosed in the
Prospectus.
(q) The Company has not distributed and, prior to the
later to occur of the Closing Date, the Option Closing Date or
the completion of the distribution of the Shares, will not
distribute any offering material in connection with the
offering or sale of the Shares other than the Registration
Statement, each Preliminary Prospectus and the Prospectus, in
any such case only as permitted by the Act and the
Regulations.
(r) Each of the Company, the Subsidiaries and
Consortium 2000 has filed with the appropriate federal, state
and local governmental agencies, and all foreign countries and
political subdivisions thereof, all tax returns that are
required to be filed, or has duly obtained extensions of time
for the filing thereof and has paid all taxes shown on such
returns and all assessments received by it to the extent that
the same have become due. None of the Company, the
Subsidiaries or Consortium 2000 has executed or filed with any
taxing authority, foreign or domestic, any agreement extending
the period for assessment or collection of any income taxes or
is a party to any pending action or proceeding by any foreign
or domestic governmental agencies for the assessment or
collection of taxes, and no claims for assessment or
collection of taxes have been asserted against the Company,
the Subsidiaries or Consortium 2000 that might materially
adversely affect the general affairs, properties, assets,
condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company and
the Subsidiaries or Consortium 2000.
(s) BDO Xxxxxxx, LLP, which is certifying the
financial statements and supporting schedules included in the
Prospectus and forming a part of the Registration Statement,
is a firm of independent public accountants as required by the
Act and the Regulations.
(t) None of the Company, the Subsidiaries or
Consortium 2000 is in violation of, or in default under, any
of the terms or provisions, of (A) its Certificate of
Incorporation or Bylaws, each as amended to the date hereof,
the Closing Date or the Option Closing Date, as the case may
be, (B) any indenture, mortgage, deed of trust, contract, loan
or credit agreement, commitment or other agreement or
instrument
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to which the Company, the Subsidiaries or Consortium 2000 is a
party or by which any of them or any of their properties are
bound or affected, (C) any law, rule, regulation, judgment,
order or decree of any government or governmental agency,
instrumentality or court, domestic or foreign, having
jurisdiction over the Company, the Subsidiaries or Consortium
2000 or any of their properties or businesses, including
without limitation any federal, state or foreign law relating
to the telecommunications business or (D) any license, permit,
certification, registration, approval, consent or franchise
referred to in subsections (f) or (n) of this Section 1,
except where such violation or default would not have a
material adverse effect on the business or properties of the
Company and the Subsidiaries or Consortium 2000.
(u) There are no claims, actions, suits, proceedings,
arbitrations, investigations or inquiries pending before or,
to the Company's knowledge, threatened or contemplated by, any
governmental agency, instrumentality, court or tribunal,
domestic or foreign, or before any private arbitrational
tribunal, relating to or affecting the Company, the
Subsidiaries or Consortium 2000 or their properties or
businesses that might affect the issuance or validity of any
of the Shares or the validity of any of the outstanding shares
of Common Stock, or that, if determined adversely to the
Company, the Subsidiaries or Consortium 2000, respectively,
would, individually or in the aggregate, result in any
material adverse change in the general affairs, properties,
assets, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects, of
the Company and the Subsidiaries or Consortium 2000; nor, to
the Company's knowledge, is there any reasonable basis for any
such claim, action, suit, proceeding, arbitration,
investigation or inquiry; all pending legal or governmental
proceedings to which the Company, any Subsidiary or Consortium
2000 is a party or of which any of their property is the
subject which are not described in the Registration Statement
and the Prospectus, including ordinary routine litigation
incidental to the business, are, considered in the aggregate,
not material. There are no outstanding orders, judgments or
decrees of any court, governmental agency, instrumentality or
other tribunal enjoining the Company, the Subsidiaries or
Consortium 2000 from, or requiring the Company, the
Subsidiaries or Consortium 2000 to take or refrain from taking
any action, or to
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which the Company, the Subsidiaries or Consortium 2000, or any
of their properties, assets or businesses is bound or subject.
(v) Except as otherwise stated in the Prospectus, the
Company, the Subsidiaries and Consortium 2000 own, or possess
adequate rights to use all patents, patent applications,
trademarks, trademark registrations, applications for
trademark registration, trade names, service marks, licenses,
inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or
confidential technology, information, systems, design
methodologies and devices or procedures developed or derived
from the Company's, the Subsidiaries' or Consortium 2000's
businesses), trade secrets, confidential information,
processes and formulations necessary for, used in or proposed
to be used in the conduct of their businesses as described in
the Prospectus (collectively, the "Intellectual Property")
that, if not so owned or possessed, would materially adversely
affect the general affairs, properties, condition (financial
or otherwise), results of operations, stockholders' equity,
business or prospects of the Company and the Subsidiaries or
Consortium 2000. None of the Company, the Subsidiaries or
Consortium 2000 has infringed, is infringing or has received
any notice of conflict with the asserted rights of others with
respect to the Intellectual Property, and, to the Company's
knowledge, no others have infringed upon or are in conflict
with the Intellectual Property.
(w) The Company, the Subsidiaries and Consortium 2000
have obtained all permits, licenses and other authorizations
that are required under all environmental laws (collectively,
the "Environmental Laws"), other than any permits, licenses or
other authorizations which, if not obtained, would not have a
material adverse effect on the business or properties of the
Company and the Subsidiaries or Consortium 2000. Each of the
Company, the Subsidiaries and Consortium 2000 is in compliance
with all terms and conditions of any required permits,
licenses and authorizations, and is in compliance with all
other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws, except where
the failure to so comply would not have a material adverse
effect on the Company and the Subsidiaries or Consortium 2000.
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(x) There are no present or past events, conditions,
circumstances, activities, practices, incidents, actions or
plans relating to the business as currently being conducted by
the Company, the Subsidiaries and Consortium 2000 that
interfere with or prevent compliance with or continued
compliance with the Environmental Laws, the non-compliance
with which would have a material adverse effect on the Company
and the Subsidiaries or Consortium 2000, or which would be
reasonably likely to give rise to any material legal liability
(whether statutory or common law) or otherwise would be
reasonably likely to form the basis of any claim, action,
demand, suit, proceeding, hearing, notice of violation, study,
investigation, remediation, or clean up based on or related to
the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the
emission, discharge, release into the workplace, community or
environment of any pollutant, contaminant, chemical or
industrial, toxic, or hazardous substance or waste, which
claim, action, demand, suit, proceeding, hearing, notice of
violation, study, investigation, remediation, or clean up
would have a material adverse effect on the Company and the
Subsidiaries or Consortium 2000.
(y) Each of the Company, the Subsidiaries and
Consortium 2000 has good and marketable title in fee simple to
all real property, interests in real property and personal
property (tangible and intangible) described in the Prospectus
as being owned by it, in each case, free and clear of all
liens, security interests, charges or encumbrances, except
such as are described in the Prospectus or which do not
materially affect the aggregate value of such property and
interests taken as a whole and do not interfere with the use
made and proposed to be made of such property and interests by
the Company, any of its Subsidiaries or Consortium 2000. Each
of the Company, the Subsidiaries and Consortium 2000 has
adequately insured the property of the Company, the
Subsidiaries and Consortium 2000, respectively, against loss
or damage by fire or other casualty and maintains, in adequate
amounts, insurance against such other risks as management of
the Company deems appropriate. Except as described in the
Prospectus, none of the Company, the Subsidiaries or
Consortium 2000 owns any real property, and all real property
used or leased by the Company, the Subsidiaries and Consortium
2000, as described in the Prospectus (collectively, the
"Premises"), is held
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by the Company, the Subsidiaries or Consortium 2000, as
applicable, under a valid, subsisting and enforceable lease,
and except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights
generally or by general equitable principles. The Premises,
and all operations conducted thereon, are now and, since the
Company, the Subsidiaries or Consortium 2000, as applicable,
began to use such Premises, always have been and, to the
Company's knowledge, prior to when the Company, the
Subsidiaries or Consortium 2000, as applicable, began to use
such Premises, always had been, in compliance with the
Environmental Laws. There is no, and the Company, the
Subsidiaries and Consortium 2000 have not received notice of
any, claim, demand, investigation, regulatory action, suit or
other action instituted or threatened against any of them or
the Premises relating to any of the Environmental Laws. None
of the Company, the Subsidiaries or Consortium 2000 has
received any notice of material violation, citation,
complaint, order, directive, request for information or
response thereto, notice letter, demand letter or compliance
schedule to or from any governmental or regulatory agency
arising out of or in connection with hazardous substances (as
defined by applicable Environmental Laws) on, about, beneath,
arising from, or generated at the Premises.
(z) The Company, the Subsidiaries and Consortium 2000
each maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's
general or specific authorization, (B) transactions are
recorded as necessary in order to permit preparation of
financial statements in accordance with generally accepted
accounting principles and to maintain accountability for
assets, (C) access to assets is permitted only in accordance
with management's general or specific authorization and (D)
the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(aa) No unregistered securities of the Company have
been sold by the Company or on behalf of the Company by any
person or persons controlling, controlled by or under common
control with the Company within the three years prior to the
date hereof, except as disclosed in the Registration
Statement.
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(ab) Each contract or other instrument (however
characterized or described) to which the Company, the
Subsidiaries or Consortium 2000 is a party or by which any of
the properties or business of it or them is bound or affected
and to which reference has been made in the Prospectus or
which has been filed as an exhibit to the Registration
Statement has been duly and validly executed by the Company,
the Subsidiaries or Consortium 2000, as applicable, and by the
other parties thereto. Except as described in the Prospectus,
each such contract or other instrument is in full force and
effect and is enforceable against the parties thereto in
accordance with its terms, and except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable
principles, and none of the Company, the Subsidiaries,
Consortium 2000 or any other party is in default thereunder
and no event has occurred that, with the lapse of time or the
giving of notice, or both, would constitute a default
thereunder.
(ac) Except as disclosed in the prospectus, and
except for the Company's 401(k) plan, none of the Company, the
Subsidiaries or Consortium 2000 has any employee benefit plan,
profit sharing plan, employee pension benefit plan or employee
welfare benefit plan or deferred compensation arrangements
(collectively, "Plans") that is subject to the provisions of
the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations thereunder ("ERISA"). To
the Company's knowledge, all Plans that are subject to ERISA
are, and have been at all times since their establishment, in
compliance with ERISA and, to the extent required by the
Internal Revenue Code of 1986, as amended (the "Code"), in
compliance with the Code. To the Company's knowledge, none of
the Company, the Subsidiaries or Consortium 2000 has had any
employee pension benefit plan that is subject to Part 3 of
Subtitle B of Title 1 of ERISA or any defined benefit plan or
multiemployer plan. To the Company's knowledge, none of the
Company, the Subsidiaries or Consortium 2000 has maintained
retiree life and retiree life and retiree health insurance
plans that are employee welfare benefit plans providing for
continuing benefit or coverage for any employee or any
beneficiary of any employee after such employee's termination
of employment, except as required by Section 4980B of the
Code. To the Company's knowledge, no fiduciary or other party
in interest with respect to any of the
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16
Plans has caused any of such Plans to engage in a "prohibited
action" as defined in Section 406 of ERISA. As used in this
subsection, the terms "defined benefit plan," "employee
benefit plan," "employee pension benefit plan," "employee
welfare benefit plan," "fiduciary" and "multiemployer plan"
shall have the respective meanings assigned to such terms in
Section 3 of ERISA.
(ad) To the best knowledge of the Company, none of
the Company, the Subsidiaries or Consortium 2000 is engaged in
any unfair labor practice which would have a material adverse
effect on the Company and its Subsidiaries considered as one
enterprise or Consortium 2000. Except for matters which are
not material in the aggregate to the Company and its
Subsidiaries or Consortium 2000, (A) there is (x) no unfair
labor practice complaint pending or, to the best of their
knowledge, threatened against the Company, any of its
Subsidiaries or Consortium 2000, respectively, before the
National Labor Relations Board, and no grievance or
arbitration proceeding arising out of or under collective
bargaining agreements is pending or, to the best of their
knowledge, threatened, (y) no strike, labor dispute, slowdown
or stoppage pending or, to the best knowledge of the Company
after due inquiry, threatened against the Company, any of its
Subsidiaries or Consortium 2000, respectively, and (z) no
union representation question existing with respect to the
employees of the Company, any of its Subsidiaries or
Consortium 2000, respectively, and, to the best knowledge of
the management of the Company, no union organizing activities
are taking place and (B) there has been no violation of any
federal, state or local law relating to discrimination in the
hiring, promotion or pay of employees, of any applicable wage
or hour laws, nor any provisions of ERISA or the rules and
regulations promulgated thereunder.
(ae) Except for certain compensation to be paid to
the Representative, the Company has not incurred any liability
for any finder's fees or similar payments in connection with
the transactions contemplated herein.
(af) Except as disclosed in the Prospectus, there are
no business relationships or related party transactions
required to be disclosed therein by Item 404 of Regulation S-B
of the Regulations.
- 16 -
17
(ag) The Company is familiar with the Investment
Company Act of 1940, as amended (the "1940 Act"), and the
rules and regulations thereunder, and has in the past
conducted, and intends in the future to continue to conduct,
its affairs in such a manner to ensure that it will not become
an "investment company" within the meaning of the 1940 Act and
such rules and regulations.
(ah) None of the Company, the Subsidiaries or
Consortium 2000 or any director, officer, agent, employee or
other person associated with or acting on behalf of the
Company, the Subsidiaries or Consortium 2000 has, directly or
indirectly, (A) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
relating to any political activity, (B) made any unlawful
payment to foreign or domestic governments or governmental
officials or employees or to foreign or domestic political
parties or campaigns from corporate funds, (C) violated any
provision of the Foreign Corrupt Practices Act of 1977, as
amended, or (D) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(ai) The Company, its Subsidiaries and Consortium
2000 have all governmental licenses, certificates, permits,
authorizations, approvals, franchises or other rights
necessary to carry on their business as such business is
presently conducted by them. The Company does not have any
reason to believe that any governmental body or agency is
considering limiting, suspending or revoking any such license,
certificate, permit, authorization, approval, franchise or
right in any material respect. The Company does not have any
reason to believe that any such license, permit or approval
necessary in the future to conduct the business of the
Company, its Subsidiaries and Consortium 2000 as described in
the Prospectus will not be granted upon application, or that
any governmental agencies are investigating the Company, any
of its Subsidiaries and Consortium 2000 other than in ordinary
course administrative reviews or an ordinary course review of
the transactions contemplated hereby.
(aj) The Directors' and Officers' Questionnaires
delivered by the Company to the Representatives on or prior to
the Execution Time are true and correct in all material
respects.
- 17 -
18
(ak) 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 or directors 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.
(al) Except as set forth in the Registration
Statement and Prospectus, the Company has not consummated the
acquisition or disposition of any business or property which
is "significant" to the Company within the meaning of
Regulation S-X under the Act, and no such acquisition or
disposition is probable.
(am) Each of the Company and the Subsidiaries has
filed with the applicable foreign and domestic regulatory
authorities each and every statement, report, information or
form required by any applicable law, regulation or order and
all such filings or admissions were in compliance with
applicable laws when filed, and no deficiencies have been
asserted by any regulatory commission, agency or authority
with respect to such filings or submissions. Except as
disclosed in the Registration Statement and the Prospectus,
there is not pending any change under any federal, state or
foreign law, regulation, license or permit that would have a
material adverse effect on the business, properties, business
prospects, financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole. None of the
Company or the Subsidiaries has received any notice of, or, to
the knowledge of the Company, been threatened with or is under
investigation with respect to, a violation or a possible
violation of any provision of any federal, state or foreign
law, regulation or order.
(an) To the extent necessary to comply with the
regulation of telecommunications carriers, the Company and the
Subsidiaries have all necessary material consents,
authorizations, approvals, orders, certificates and permits of
and from, and have made all declarations and filings with, all
United States federal and state and foreign authorities to
own, lease, license and use its properties and assets and to
conduct its business in the manner described in the
Prospectus, except as described in the Prospectus, and all
material agreements or arrangements of the Company
- 18 -
19
comply with all applicable United States federal and
state and foreign laws.
(ao) Solely with respect to matters specifically
relating to the regulation of telecommunications carriers
administered by United States federal or state or foreign
governmental authorities, including, and limited to, the
Federal Communications Commission (the "FCC") and state public
utility commissions or similar state authorities
(collectively, "PUCs" and, individually, a "PUC"), the
execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement and
the Merger Agreement will not contravene any provision of
applicable law or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over
the Company or any subsidiary, and no consent, approval,
authorization or order of, or qualification with, any
governmental body or agency is required for the performance by
the Company of its obligations under this Agreement.
Any certificate signed by any officer of the Company in such
capacity and delivered to the Representative or to counsel for the Underwriters
pursuant to this Agreement shall be deemed a representation and warranty by the
Company to the several Underwriters as to the matters covered thereby.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. The
Selling Stockholders severally represent and warrant to each Underwriter that:
(a) Such Selling Stockholder is the lawful owner of
the Shares to be sold by such Selling Stockholder pursuant to
this Agreement and has, and on the Closing Date (and Option
Closing Date, if applicable) will have, good and clear title
to such Shares, free of all restrictions on transfer, liens,
encumbrances, security interests and claims whatsoever.
(b) Upon delivery of and payment for such Shares
pursuant to this Agreement, good and clear title to such
Shares will pass to the Underwriters, free of all restrictions
on transfer, liens, encumbrances, security interests and
claims whatsoever.
(c) Certificates in negotiable form for such Selling
Stockholder's Shares have been placed in custody for delivery
pursuant to the terms of this Agreement, under a Custody
Agreement duly authorized,
- 19 -
20
executed and delivered by such Selling Stockholder in the form
heretofore furnished to you (the "Custody Agreement") with ,
as Custodian (the "Custodian"); the Shares represented by the
certificates so held in custody for such Selling Stockholder
are subject to the interests hereunder of the Underwriters,
the Company and the other Selling Stockholder; the
arrangements for custody and delivery of such certificates
made by such Selling Stockholder hereunder and under the
Custody Agreement, are not subject to termination by any acts
of such Selling Stockholder, or by operation of law, whether
by the death or incapacity of such Selling Stockholder or the
occurrence of any other event; and if any such death,
incapacity or any other such event shall occur before the
delivery of such Shares hereunder, certificates for the Shares
will be delivered by the Custodian in accordance with the
terms and conditions of this Agreement and the Custody
Agreement as if such death, incapacity or other event had not
occurred, regardless of whether or not the Custodian shall
have received notice of such death, incapacity or other event.
(d) Such Selling Stockholder has, and on the Closing
Date will have, full legal right, power and authority to enter
into this Agreement and the Custody Agreement and to sell,
assign, transfer and deliver such Shares in the manner
provided herein and therein, and this Agreement and the
Custody Agreement have been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder and each
of this Agreement and the Custody Agreement is a valid and
binding agreement of such Selling Stockholder enforceable in
accordance with its terms, except as rights to indemnity and
contribution hereunder may be limited by applicable law.
(e) Such Selling Stockholder has not taken, and will
not take, directly or indirectly, any action designed to, or
which might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares
pursuant to the distribution contemplated by this Agreement,
and other than as permitted by the Act, such Selling
Stockholder has not distributed and will not distribute any
prospectus or other offering material in connection with the
offering and sale of the Shares.
- 20 -
21
(f) The execution, delivery and performance of this
Agreement by such Selling Stockholder, compliance by such
Selling Stockholder with all the provisions hereof and the
consummation of the transactions contemplated hereby will not
require any consent, approval, authorization or other order of
any court, regulatory body, administrative agency or other
governmental body (except as such may be under the Act, state
securities laws or Blue Sky laws) and will not conflict with
or constitute a breach of any of the terms or provisions of
agreement, indenture or other instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder or
property of such Selling Stockholder is bound, or violate or
conflict with any laws, administrative regulation or ruling or
court decree applicable to such Selling Stockholder or
property of such Selling Stockholder.
(g) Such parts of the Registration Statement under
the caption "Principal and Selling Stockholders" which
specifically relate to such Selling Stockholder do not, and
will not on the Closing Date (and any Option Closing Date, if
applicable), contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light
of circumstances under which they were made, not misleading.
(h) At any time during the period described in
paragraph 6(b) hereof, if there is any change in the
information referred to in paragraph 2(g) above, such Selling
Stockholder will immediately notify you of such change.
(i) Such Selling Stockholder is not aware, and has no
reason to believe, that any representation or warranty of the
Company set forth in Section 1 above is untrue or inaccurate
in any material respect.
3. PURCHASE AND SALE OF OFFERED SHARES. On the basis of the
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, (i) the Company shall sell
2,000,000 Offered Shares; and (ii) the Selling Stockholders agree to sell
500,000 Offered Shares to the several Underwriters at the Offering Price less
the underwriting discount shown on the cover page of the Prospectus (the
"Underwriting Discount"), and the Underwriters, severally and not jointly, shall
purchase from the Company and the Selling Stockholders, on a firm commitment
basis, at the Offering Price
- 21 -
22
less the Underwriting Discount, the respective Offered Shares set forth opposite
their names on Schedule II hereto. In making this Agreement, each Underwriter is
contracting severally, and not jointly, and, except as provided in Sections 5
and 12 hereof, the agreement of each Underwriter is to purchase only that number
of Offered Shares specified with respect to that Underwriter in Schedule II
hereto. The Underwriters shall offer the Offered Shares to the public as set
forth in the Prospectus.
4. PAYMENT AND DELIVERY. Payment for the Offered Shares shall be made
to the Company and the Selling Stockholders by certified or official bank check
payable to the order of the Company and the Selling Stockholders in next day
funds, at the offices of Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, Beverly
Hills, California, or at such other location as shall be agreed upon by the
Company and the Representative, or in immediately available funds wired to such
account or accounts as the Company and the Selling Stockholders may specify
(with all costs and expenses incurred by the Underwriters in connection with
such settlement (including, but not limited to, interest or cost of funds
expenses) to be borne by the Company and the Selling Stockholders), against
delivery of the Offered Shares to the Representative at such place as you shall
designate, for the respective accounts of the Underwriters. Such payments and
delivery will be made at 7:00 a.m., Pacific time, on the fourth business day
after the date of this Agreement or at such other time and date thereafter as
the Representative and the Company shall agree upon. Such time and date are
referred to herein as the "Closing Date." The certificates representing the
Offered Shares to be sold and delivered will be in such denominations and
registered in such names as the Representative requests not less than two full
business days prior to the Closing Date, and will be made available to the
Representative for inspection, checking and packaging at the office of the
Company's Transfer Agent, on the business day prior to the Closing Date. The
Representative has advised the Company that each Underwriter has authorized the
Representative to accept delivery of the Offered Shares and to make payment and
receipt therefor.
5. OPTION TO PURCHASE OPTIONAL SHARES.
(a) For the purposes of covering any over-allotments in
connection with the distribution and sale of the Offered Shares as
contemplated by the Prospectus, subject to the terms and conditions
herein set forth, the several Underwriters are hereby granted an option
by the Company to purchase all or any part of the Optional Shares from
the Company and the Selling Stockholders (the "Over-allotment Option").
The purchase price per share to be paid for the Optional Shares shall
be the Offering Price less the
- 22 -
23
Underwriting Discount. The Over-allotment Option granted hereby may be
exercised by the Representative on behalf of the several Underwriters
as to all or any part of the Optional Shares at any time (but not more
than once) within 45 days after the Effective Date. No Underwriter
shall be under any obligation to purchase any Optional Shares prior to
an exercise of the Over-allotment Option.
(b) The Over-allotment Option granted hereby may be exercised
by the Representative on behalf of the several Underwriters by giving
notice to the Company by a letter sent by registered or certified mail,
postage prepaid, telex, telegraph, telegram or facsimile (such notice
to be effective when sent), addressed as provided in Section 14 hereof,
setting forth the number of Optional Shares to be purchased, the date
and time for delivery of and payment for the Optional Shares and
stating that the Optional Shares referred to therein are to be used for
the purpose of covering over-allotments in connection with the
distribution and sale of the Offered Shares. If such notice is given
prior to the Closing Date, the date set forth therein for such delivery
and payment shall not be earlier than either two full business days
thereafter or the Closing Date, whichever occurs later. If such notice
is given on or after the Closing Date, the date set forth therein for
such delivery and payment shall be a date selected by the
Representative that is not later than three full business days after
the exercise of the Over-allotment Option. The date and time set forth
in such a notice is referred to herein as the "Option Closing Date,"
and a closing held pursuant to such a notice is referred to herein as
the "Option Closing." The number of Optional Shares to be sold to each
Underwriter pursuant to the exercise of the Over- allotment Option
shall be the number that bears the same ratio to the aggregate number
of Optional Shares being purchased through such Over-allotment Option
exercise as the number of Offered Shares opposite the name of such
Underwriter in Schedule II hereto bears to the total number of all
Offered Shares; subject, however, to such adjustment as the
Representative may approve to eliminate fractional shares and subject
to the provisions for the allocation of Optional Shares purchased for
the purpose of covering over-allotments set forth in Section 10 of the
Agreement Among Underwriters. Upon the exercise of the Over-allotment
Option, the Company shall become obligated to sell to the
Representative for the respective accounts of the Underwriters, and on
the basis of the representations, warranties, covenants and agreements
herein contained, but subject to the terms and conditions herein set
forth, and the several Underwriters shall become severally, but not
- 23 -
24
jointly, obligated to purchase from the Company, the number of Optional
Shares specified in each notice of exercise of the Over-allotment
Option.
(c) Payment for the Optional Shares shall be made to the
Company and the Selling Stockholders by certified or official bank
check payable to the order of the Company in next day funds, at the
office of Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, Beverly Hills,
California, or such other location as shall be agreed upon by the
Company and the Representative, or in immediately available funds wired
to such accounts as the Company and the Selling Stockholders may
specify (with all costs and expenses incurred by the Underwriters in
connection with such settlement in immediately available funds
(including, but not limited to, interest or cost of funds expenses) to
be borne by the Company and the Selling Stockholders), against delivery
of the Optional Shares to the Representative at such place as you shall
designate, for the respective accounts of the Underwriters. The
certificates representing the Optional Shares to be issued and
delivered will be in such denominations and registered in such names as
the Representative requests not less than two full business days prior
to the Option Closing Date, and will be made available to the
Representative for inspection, checking and packaging at the office of
the Company's Transfer Agent on the business day prior to the Option
Closing Date.
6. CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY. The Company
covenants and agrees with the several Underwriters as follows:
(a) If Rule 430A of the Regulations is employed, the Company
will timely file the Prospectus pursuant to and in compliance with Rule
424(b) of the Regulations and will advise the Representative of the
time and manner of such filing.
(b) The Company will not at any time, whether before or after
the Registration Statement shall have become effective, during such
period as, in the opinion of counsel for the Underwriters, the
Prospectus is required by law to be delivered in connection with sales
by the Underwriters or a dealer, file or publish any amendment or
supplement to the Registration Statement or Prospectus of which the
Representative have not been previously advised and furnished a copy,
or which is not in compliance with the Regulations, or, during the
period before the distribution of the Offered Shares and the Optional
Shares is completed, file or publish any amendment or supplement to the
- 24 -
25
Registration Statement or Prospectus to which the Representative
reasonably objects in writing.
(c) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time and date that this
Agreement is executed and delivered by the parties hereto, to become
effective and will advise the Representative immediately, and confirm
such advice in writing, (i) when the Registration Statement, or any
post-effective amendment to the Registration Statement, is filed with
the SEC, (ii) of the receipt of any comments from the SEC, (iii) when
the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective, or when any
supplement to the Prospectus or any amended Prospectus has been filed,
(iv) of any request of the SEC for amendment or supplementation of the
Registration Statement or Prospectus or for additional information, (v)
during the period when the Prospectus is required to be delivered under
the Act and Regulations, of the happening of any event which in the
Company's judgment makes any material statement in the Registration
Statement or the Prospectus untrue or which requires any changes to be
made in the Registration Statement or Prospectus in order to make any
material statements therein not misleading and (vi) of the issuance by
the SEC of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use
of any Preliminary Prospectus or the Prospectus, the suspension of the
qualification of any of the Shares for offering or sale in any
jurisdiction in which the Underwriters intend to make such offers or
sales, or of the initiation or threatening of any proceedings for any
such purposes. The Company will use its best efforts to prevent the
issuance of any such stop order or of any order preventing or
suspending such use and, if any such order is issued, to obtain as soon
as possible the lifting thereof.
(d) The Company has delivered to the Representative, without
charge, and will continue to deliver from time to time until the
Effective Date, as many copies of each Preliminary Prospectus as the
Representative may reasonably request. The Company will deliver to the
Representative, without charge, as soon as possible after the Effective
Date, and thereafter from time to time during the period when delivery
of the Prospectus is required under the Act, such number of copies of
the Prospectus (as supplemented or amended, if the Company makes any
supplements or amendments to the Prospectus) as the Representative may
reasonably request. The Company hereby consents to the use of such
copies of each Preliminary Prospectus and the Prospectus for
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26
purposes permitted by the Act, the Regulations and the securities or
Blue Sky laws of the jurisdictions in which the Shares are offered or
sold by the several Underwriters and by all dealers to whom Shares may
be offered or sold, both in connection with the offering and sale of
the Shares and for such period of time thereafter as the Prospectus is
required by the Act to be delivered in connection with sales by any
Underwriter or dealer. The Company has furnished or will furnish to the
Representative two signed copies of the Registration Statement as
originally filed and of all amendments thereto, whether filed before or
after the Effective Date, two copies of all exhibits filed therewith
and two signed copies of all consents and certificates of experts, and
will deliver to the Representative such number of conformed copies of
the Registration Statement, including financial statements and
exhibits, and all amendments thereto, as the Representative may
reasonably request.
(e) The Company will comply with the Act, the Regulations, the
Exchange Act and the rules and regulations thereunder so as to permit
the continuance of offers and sales of, and dealings in, the Shares for
as long as may be necessary to complete the distribution of the Shares
as contemplated hereby.
(f) The Company will furnish such information as may be
required and otherwise cooperate in the registration or qualification
of the Shares, or exemption therefrom, for offering and sale by the
several Underwriters and by dealers under the securities or Blue Sky
laws of such jurisdictions in which the Representative determines to
offer the Shares, after consultation with the Company, and will file
such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification;
provided, however, that no such qualification shall be required in any
jurisdiction where, solely as a result thereof, the Company would be
subject to taxation or qualification as a foreign corporation doing
business in such jurisdiction where it is not now so qualified or to
take any action which would subject it to service of process in suits,
other than those arising out of the offering or sale of the Shares, in
any jurisdiction where it is not now so subject. The Company will, from
time to time, prepare and file such statements and reports as are or
may be required to continue such qualification in effect for so long a
period as is required under the laws of such jurisdiction for such
offering and sale.
(g) Subject to subsection (b) of this Section 6, in case of
any event, at any time within the period during
- 26 -
27
which, in the opinion of counsel for the Underwriters, a prospectus is
required to be delivered under the Act and Regulations, as a result of
which event any Preliminary Prospectus or the Prospectus, as then
amended or supplemented, would contain, in the judgment of the Company
or in the opinion of counsel for the Underwriters, an untrue statement
of a material fact, or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, if it is necessary at
any time to amend any Preliminary Prospectus or the Prospectus to
comply with the Act and Regulations or any applicable securities or
Blue Sky laws, the Company promptly will prepare and file with the SEC,
and any applicable state securities commission, an amendment or
supplement that will correct such statement or omission or an amendment
that will effect such compliance and will furnish to the Representative
such number of copies of such amendment or amendments or supplement or
supplements to such Preliminary Prospectus or the Prospectus (in form
and substance satisfactory to the Representative and counsel for
Underwriters) as the Representative may reasonably request. For
purposes of this subsection, the Company will furnish such information
to the Representative, the Underwriters' counsel and counsel for the
Company as shall be necessary to enable such persons to consult with
the Company with respect to the need to amend or supplement any
Preliminary Prospectus or the Prospectus, and shall furnish to the
Representative and the Underwriters' counsel such further information
as each may from time to time reasonably request. If the Company and
the Representative agree that any Preliminary Prospectus or the
Prospectus should be amended or supplemented, the Company, if requested
by the Representative, will, if and to the extent required by law,
promptly issue a press release announcing or disclosing the matters to
be covered by the proposed amendment or supplement.
(h) The Company will make generally available to its security
holders as soon as practicable and in any event not later than 45 days
after the end of the period covered thereby, an earnings statement of
the Company (which need not be audited unless required by the Act, the
Regulations, the Exchange Act or the rules or regulations thereunder)
that shall comply with Section 11(a) of the Act and cover a period of
at least 12 consecutive months beginning not later than the first day
of the Company's fiscal quarter next following the Effective Date.
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28
(i) For a period of five years from the Effective Date, the
Company will deliver to the Representative: (A) a copy of each report
or document, including, without limitation, reports on Forms 8-K, 10-C,
10-K and 10-Q (or such similar forms as may be designated by the SEC),
registration statements and any exhibits thereto, filed with or
furnished to the SEC or any securities exchange or the NASD, as soon as
practicable after the date each such report or document is so filed or
furnished, (B) as soon as practicable, copies of any reports or
communications (financial or other) of the Company mailed to its
security holders and (C) every material press release in respect of the
Company or the Subsidiaries or their affairs that was released or
prepared by the Company or the Subsidiaries.
(j) During the course of the distribution of the Shares, the
Company has not taken, nor will it take, directly or indirectly, any
action designed to or that might, in the future, reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Common Stock.
(k) The Company will cause each person listed on Schedule III
hereto to execute a legally binding and enforceable agreement (a
"lockup agreement") to, for the period commencing on the Effective Date
and ending 180 days after the Effective Date, not sell, offer to sell,
contract to sell, grant any option for the sale of or otherwise
transfer or dispose of any shares of Common Stock (except for the sale
of the Shares as contemplated by this Agreement), any options to
purchase Common Stock or any securities convertible into or
exchangeable for Common Stock without the prior written consent of the
Representative, which lockup agreement shall be in form and substance
satisfactory to the Representative and the Underwriters' counsel, and
deliver such lockup agreement to the Representative prior to the
Effective Date. Appropriate stop transfer instructions will be issued
by the Company to the transfer agent for the securities affected by the
lockup agreements.
(l) The Company will not sell, issue, contract to sell, offer
to sell or otherwise dispose of any Common Stock, options to purchase
Common Stock or any other security convertible into or exchangeable for
Common Stock, from the date of the Effective Date through 180 days
after the Effective Date, without the prior written consent of the
Representative, except for the sale of the Shares as contemplated by
this Agreement, the granting of options, and the issuance of Common
Stock upon their exercise, under the
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29
Company's stock option plans described in the Prospectus and the
issuance of the Representative's Warrant.
(m) The Company will use all reasonable efforts to maintain
the inclusion of the Common Stock on the Nasdaq National Market (or on
the a national securities exchange) for a period of five years after
the date hereof.
(n) The Company shall, at its sole cost and expense, supply
and deliver to the Representative and the Underwriters' counsel, within
a reasonable period after the Closing Date, six transaction binders,
each of which shall include the Registration Statement, as amended or
supplemented, all exhibits to the Registration Statement, each
Preliminary Prospectus, the Prospectus, the Preliminary Blue Sky
Memorandum and any supplement thereto and all underwriting and other
closing documents.
(o) The Company will use the net proceeds from the sale of the
Shares to be sold by it hereunder substantially in accordance with the
description thereof set forth in the Prospectus and shall file such
reports with the SEC with respect to the sale of such Shares and the
application of the proceeds therefrom as may be required in accordance
with Rule 463 under the Act.
(p) On the Closing Date, the Company shall sell to the
Representative, at a purchase price of $0.001 per warrant, a
Representative's Warrant to purchase 160,000 shares of Common Stock.
Such Representative's Warrant shall be issued pursuant to the terms of
the Warrant Agreement and shall have an exercise price per share equal
to $_____, shall be exercisable during the period beginning on the
first anniversary of the Effective Date and ending on the fifth
anniversary of the Effective Date, and shall contain customary
anti-dilution and registration rights provisions.
(q) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, An Act Relating to Disclosure of Doing Business with Cuba, and
the Company further agrees that if it commences engaging in business
with the government of Cuba or with any person or affiliate located in
Cuba after the date the Registration Statement becomes or has become
effective with the Securities and Exchange Commission or with the
Florida Department of Banking and Finance (the "Department"), whichever
date is later, or if the information reported in the Prospectus, if
any, concerning the Company's business with Cuba or with any person or
affiliate located in Cuba changes in any material
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30
way, the Company will provide the Department notice of such business or
change, as appropriate, in a form acceptable to the Department.
(r) The Company will use its best efforts to do and perform
all things required to be done and performed by it prior to or after
the Closing Date and to satisfy all conditions precedent on its part to
the delivery of the Shares.
7. PAYMENT OF EXPENSES.
(a) Whether or not the transactions contemplated by this
Agreement are consummated and regardless of the reason this Agreement
is terminated, the Company will pay or cause to be paid, and bear or
cause to be borne, all costs and expenses incident to the performance
of the obligations of the Company under this Agreement, including: (i)
the fees and expenses of the accountants and counsel for the Company
incurred in the preparation of the Registration Statement and any
post-effective amendments thereto (including financial statements and
exhibits), each Preliminary Prospectus and the Prospectus and any
amendments or supplements thereto; (ii) printing and mailing expenses
associated with the Registration Statement and any post-effective
amendments thereto, each Preliminary Prospectus, the Prospectus
(including any supplement thereto), this Agreement, the Agreement Among
Underwriters, the Underwriters' Questionnaire, the Selected Dealer
Agreement and related documents and the Preliminary Blue Sky Memorandum
and any supplement thereto; (iii) the costs incident to the
authentication, issuance, delivery and transfer of the Shares to the
Underwriters; (iv) all taxes, if any, on the issuance, delivery and
transfer of the Shares to be sold by the Company; (v) the fees,
expenses and all other costs of qualifying the Shares for the sale
under the securities or Blue Sky laws of those jurisdictions in which
the Shares are to be offered or sold including the fees and
disbursements of Underwriters' counsel and such local counsel as may
have been reasonably required and retained for such purpose; (vi) the
fees, expenses and other costs of, or incident to, securing any review
or approvals by or from the NASD exclusive of fees of the Underwriters'
counsel; (vii) the filing fees of the SEC; (viii) the cost of
furnishing to the Underwriters copies of the Registration Statement,
each Preliminary Prospectus and the Prospectus (including any
supplement or amendment thereto) as herein provided; (ix) the Company's
travel expenses in connection with meetings with the brokerage
community and institutional investors and expenses associated with
hosting such
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31
meetings, including meeting rooms, meals, facilities and ground
transportation expenses; (x) the costs and expenses associated with
settlement in same day funds (including, but not limited to, interest
or cost of funds expenses), if desired by the Company; (xi) the fees
for inclusion of the Shares on the Nasdaq National Market; (xii) the
cost of printing and engraving certificates for the Shares; (xiii) the
cost and charges of any transfer agent; and (xiv) all other costs and
expenses reasonably incident to the performance of its obligations
hereunder that are not otherwise specifically provided for in this
Section 7.
(b) The Company shall pay as due any registration,
qualification and filing fees and any accountable out-of-pocket
disbursements in connection with such registration, qualification or
filing in the jurisdictions in which the Representative determines,
after consultation with the Company, to offer or sell the Shares.
(c) In addition to the foregoing expenses, the Company shall
at the Closing Date pay to the Representative a non-accountable expense
allowance equal to three percent (3%) of the gross proceeds received
from the sale of the Offered Shares. In the event the Over-allotment
Option is exercised, the Company shall pay to the Representative at the
Option Closing Date an additional amount equal to three percent (3%) of
the gross proceeds received upon exercise of the Over-allotment Option.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligation of each
Underwriter to purchase and pay for the Offered Shares that it has agreed to
purchase hereunder on the Closing Date, and to purchase and pay for any Optional
Shares as to which its right to purchase under Section 5 has been exercised on
an Option Closing Date, is subject at the date hereof, the Closing Date and any
Option Closing Date to the continuing accuracy of the representations and
warranties of the Company and the Selling Stockholders set forth herein, to the
performance by the Company and the Selling Stockholders of its covenants,
agreements and obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 1:00 p.m., Pacific time, on the date of this Agreement, or
at such later time or on such later date as the Representative may
agree to in writing; if required by the Regulations, the Prospectus
shall have been filed with the SEC pursuant to Rule 424(b) of the
Regulations within the applicable time period prescribed for such
filing by the Regulations and in accordance with
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32
subsection (a) of Section 6 hereof; on or prior to the Closing Date or
any Option Closing Date, as the case may be, no stop order or other
order preventing or suspending the effectiveness of the Registration
Statement or the sale of any of the Shares shall have been issued under
the act or any state securities law and no proceedings for that purpose
shall have been initiated or shall be pending or, to the
Representatives' knowledge or the knowledge of the Company, shall be
contemplated by the SEC or any authority in any jurisdiction designated
by the Representative pursuant to subsection (f) of Section 6 hereof
and any request on the part of the SEC for additional information shall
have been complied with to the reasonable satisfaction of counsel for
the Underwriters.
(b) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of Company,
dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
Prospectus, any supplement to the Prospectus and this Agreement and
that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the Closing Date and the Option Closing
Date, if any, with the same effect as if made on the Closing
Date and the Option Closing Date, if any, 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 and the Option Closing Date, if any;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the Company's
knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in the Prospectus (exclusive of any
supplement thereto), there has been no material adverse change
in the condition (financial or other), earnings, business or
properties of the Company and its subsidiaries, whether or not
arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
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33
(c) The Selling Stockholders shall have furnished to the
Representatives a certificate, signed by the Selling Stockholders,
dated the Closing Date and the Option Closing Date, if any, to the
effect that the signer of such certificate has carefully examined the
Registration Statement, the Prospectus, any supplement to the
Prospectus and this Agreement and that the representations and
warranties of such Selling Stockholders in this Agreement are true and
correct in all material respects on and as of the Closing Date to the
same effect as if made on the Closing Date.
(d) All corporate proceedings and other matters incident to
the authorization, form and validity of this Agreement, the Warrant
Agreement, the Representative's Warrant and the Shares and the form of
the Registration Statement, each Preliminary Prospectus and the
Prospectus, and all other legal matters relating to this Agreement and
the transactions contemplated hereby, shall be satisfactory in all
respects to counsel to the Underwriters; the Company shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters; and the
Representative shall have received from the Underwriters' counsel,
Milbank, Tweed, Xxxxxx & XxXxxx, a customary opinion, dated as of the
Closing Date and any Option Closing Date, as the case may be, and
addressed to the Representative individually and as the Representative
of the several Underwriters.
(e) The NASD shall have indicated that it has no objection to
the underwriting arrangements pertaining to the sale of any of the
Shares.
(f) The Representative shall have received copies of the
lockup agreements described in subsection (k) of Section 6 signed by
those persons set forth on Schedule III hereto.
(g) The Representative shall have received at or prior to the
Closing Date from the Underwriters' counsel a memorandum or summary, in
form and substance satisfactory to the Representative, with respect to
the qualification for offering and sale by the Underwriters of the
Shares under the securities or Blue Sky laws of such jurisdictions
designated by the Representative pursuant to subsection (f) of Section
6 hereof.
(h) You shall have received on the Closing Date and on the
Option Closing Date, if any, an opinion from (i) Freshman, Marantz,
Orlanski, Xxxxxx & Xxxxx, counsel for the Company and the Selling
Stockholders, as to federal tax and
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34
securities law and California law and (ii) Xxxx, Plant, Xxxxx, Xxxxx &
Xxxxxxx, counsel for the Company, as to Minnesota law, each dated the
Closing Date and the Option Closing Date, if any, and addressed to the
Underwriters and with reproduced copies or signed counterparts thereof
for each of the Underwriters, substantially in the form attached hereto
as "Exhibit A."
(i) You shall have received on the Closing Date and on the
Option Closing Date, if any, an opinion from communications regulatory
counsel for the Company, dated the Closing Date and the Option Closing
Date, if any, and addressed to Underwriters and with reproduced copies
or signed counterparts thereof for each of the Underwriters,
substantially in the form attached hereto as "Exhibit B."
(j) At the Closing Date and any Option Closing Date: (A) the
Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with
the Act and the Regulations and shall conform, in all material
respects, to the requirements of the Act and the Regulations, and
neither the Registration Statement nor any post-effective amendment
thereto nor the Prospectus and any amendments or supplements thereto
shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, (B) since the respective dates as of which
information is given in the Registration Statement and any
post-effective amendment thereto and the Prospectus and any amendments
or supplements thereto, except as otherwise stated therein, there shall
have been no material adverse change in the properties, condition
(financial or otherwise), results of operations, stockholders' equity,
business or management of the Company, from that set forth therein,
whether or not arising in the ordinary course of business, other than
as referred to in the Registration Statement or Prospectus; (C) since
the respective dates as of which information is given in the
Registration Statement and any post-effective amendment thereto and the
Prospectus or any amendment or supplement thereto, there shall have
been no transaction, contract or agreement entered into by the Company
or the Subsidiaries, other than in the ordinary course of business and
as set forth in the Registration Statement or Prospectus, that has not
been, but would be required to be, set forth in the Registration
Statement or Prospectus; (D) no action, suit or proceeding at law or in
equity shall be pending or, to the knowledge of the Company
- 34 -
35
or the Subsidiaries, threatened against the Company that would be
required to be set forth in Prospectus, other than as set forth
therein, and no proceedings shall be pending or, to the knowledge of
the Company, threatened against the Company or the Subsidiaries before
or by any federal, state or other commission, board or administrative
agency wherein an unfavorable decision, ruling or finding would
materially adversely affect the properties, condition (financial or
otherwise), results of operations, stockholders' equity or business of
the Company or the Subsidiaries, other than as set forth in the
Prospectus. The Representative shall have received at the Closing Date
and any Option Closing Date certificates of each of the Chief Executive
Officer and the Chief Financial Officer of the Company dated as of the
date of the Closing Date or Option Closing Date, as the case may be,
and addressed to the Representative to the effect that the conditions
set forth in this subsection have been satisfied and as to the accuracy
and performance, as of the Closing Date or the Option Closing Date, as
the case may be, of the agreements, representations and warranties of
the Company set forth herein.
(k) At the time this Agreement is executed and at the Closing
Date and any Option Closing Date, the Representative shall have
received a letter addressed to the Representative, individually and as
the Representative of the several Underwriters, and in form and
substance satisfactory to the Representative in all respects from BDO
Xxxxxxx, LLP, dated as of the date of this Agreement, the Closing Date
or Option Closing Date, as the case may be.
(l) The Company shall have executed and delivered an agreement
memorializing the Representative's Warrant in a form satisfactory to
the Representative (the "Warrant Agreement") and there shall have been
tendered to the Representative certificates representing all of the
Representative's Warrant described in subsection (p) of Section 6, to
be purchased by the Representative on the Closing Date.
(m) At the Closing Date and any Option Closing Date, the
Representative shall have been furnished such additional documents,
opinions and certificates, including documents, opinions and
certificates relating to the consummation of the Merger and the Merger
Agreement, as they shall reasonably request.
(n) No action shall have been taken by the NASD, the effect of
which is to make it improper, at any time prior to the Closing Date or
any Option Closing Date, for members of
- 35 -
36
the NASD to execute transactions as principal or as agent in the Shares
or to trade or deal in the Shares, and no proceedings for the purpose
of taking such action shall have been instituted or shall be pending
or, to the Company's or the Representatives' knowledge, shall be
contemplated by the NASD.
If any conditions to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date, shall not have been fulfilled, the
Representative may on behalf of the several Underwriters terminate this
Agreement or, if they so elect, waive any such conditions which have not been
fulfilled or extend the time for their fulfillment.
9. INDEMNIFICATION.
(a) The Company and the Selling Stockholders, jointly and
severally, agree to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), from and against any and all
losses, claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities
or judgments are caused by any such untrue statement or omission or
alleged untrue statement or omission which is based upon information
relating to any Underwriter furnished in writing to the Company by or
on behalf of any Underwriter through the Representative expressly for
use therein. Notwithstanding the foregoing, the liability of the
Selling Stockholders under this paragraph shall be limited to an amount
equal to the net proceeds of the Shares sold by the Selling
Stockholders to the Underwriters.
(b) In case any action shall be brought against any
Underwriter or any person controlling such Underwriter, based upon any
preliminary prospectus, the Registration Statement or the Prospectus or
any amendment or supplement thereto and with respect to which indemnity
may be sought against the Company and the Selling Stockholders, such
Underwriter shall promptly notify the parties against whom
indemnification is being sought (the "Indemnifying Parties")
- 36 -
37
in writing and the Indemnifying Parties shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to
such indemnified party and payment of all fees and expenses. Any
Underwriter or any such controlling person shall have the right to
employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Underwriter or such controlling person unless (i)
the employment of such counsel has been specifically authorized in
writing by the Indemnifying Parties, (ii) the Indemnifying Parties
shall have failed to assume the defense and employ counsel or (iii) the
named parties to any such action (including any impleaded parties)
include both such Underwriter or such controlling person and the
Indemnifying Parties and such Underwriter or such controlling person
shall have been advised by such counsel that there may be one or more
legal defenses available to it which are different from or additional
to those available to the Indemnifying Parties (in which case the
Indemnifying Parties shall not have the right to assume the defense of
such action on behalf of such Underwriter or such controlling person,
it being understood, however, that the Indemnifying Parties shall not,
in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all such Underwriters and controlling persons,
which firm shall be designated in writing by the Representative and
that all such fees and expenses shall be reimbursed as they are
incurred). The Indemnifying Parties shall not be liable for any
settlement of any such action effected without their written consent.
If settled with such written consent, the Indemnifying Parties agree to
indemnify and hold harmless any Underwriter and any such controlling
person from and against any loss or liability by reason of such
settlement. Notwithstanding the immediately preceding sentence, if in
any case where the fees and expenses of counsel are at the expense of
the Indemnifying Parties and an indemnified party shall have requested
the Indemnifying Parties to reimburse the indemnified party for such
fees and expenses of counsel as incurred, the Indemnifying Parties
agree that they shall be liable for any settlement of any action
effected without its written consent if (i) such settlement is entered
into more than ten business days after the receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall
have failed to reimburse the indemnified party in accordance with such
request for reimbursement prior to the date of such settlement. No
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38
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 indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are
the subject matter of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement, any person controlling the Company
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, the Selling Stockholders and each person, if any,
controlling such Selling Stockholders within the meaning of Section 15
of the Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company and the Selling Stockholders to
each Underwriter but only with reference to information relating to
such Underwriter furnished in writing by or on behalf of such
Underwriter through you expressly for use in the Registration
Statement, the Prospectus or any preliminary prospectus. In case any
action shall be brought against the Company, any of its directors, any
such officer or any person controlling the Company or the Selling
Stockholders or any person controlling the Selling Stockholders based
on the Registration Statement, the Prospectus or any preliminary
prospectus and in respect of which indemnity may be sought against any
Underwriter, the Underwriter shall have the rights and duties given to
the Company and the Selling Stockholders by paragraph (b) above (except
that if any Seller shall have assumed the defense thereof, such
Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of such Underwriter),
and the Company, its directors, any such officers and any person
controlling the Company and the Selling Stockholders and any person
controlling the Selling Stockholders shall have the rights and duties
given to the Underwriter by Section 9(b) hereof.
(d) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
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39
judgments (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders
on the one hand and the Underwriters on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the
Selling Stockholders and the Underwriters in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Selling Stockholders and the Underwriters shall be deemed to be in the
same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling
Stockholders, and the total underwriting discounts and commissions
received by the Underwriters, bear to the total price to the public of
the Shares, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault of the Company and the Selling
Stockholders and the Underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and the Selling Stockholders and the Underwriters
agree that it would not be just and equitable if contribution pursuant
to this Section 9(d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 9, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Shares underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been
- 39 -
40
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 9(d) are several in proportion to
the respective number of Shares purchased by each of the Underwriters
hereunder and not joint.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and any Option Closing Date; and such
representations, warranties and agreements of the Underwriters and the Company,
including without limitation the indemnity and contribution agreements contained
in Section 9 hereof and the agreements contained in Sections 7, 10, 11 and 13
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person,
and shall survive delivery of the Shares and termination of this Agreement,
whether before or after the Closing Date or any Option Closing Date.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) This Agreement shall become effective immediately as to
Sections 7, 9, 10, 11 and 13 and, as to all other provisions, (i) if at
the time of execution and delivery of this Agreement the Registration
Statement has not become effective, at 6:30 a.m., Pacific time, on the
first business day following the Effective Date, or (ii) if at the time
of execution and delivery of this Agreement the Registration Statement
has been declared effective, at 6:30 a.m., Pacific time, on the date of
execution of this Agreement; but this Agreement shall nevertheless
become effective at such earlier time after the Registration Statement
becomes effective as the Representative may determine by notice to the
Company or by release of any of the Shares for sale to the public. For
the purposes of this Section 11, the Shares shall be deemed to have
been so released upon the release for publication of any newspaper
advertisement relating to the Shares or upon the release by the
Representative of telegrams (i) advising the Underwriters that the
shares are released for public offering or (ii) offering the Shares for
sale to securities dealers, whichever may occur first. The
Representative may prevent the provisions of this Agreement (other than
those contained in Sections 7, 9, 10, 11 and 13)
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41
hereof from becoming effective without liability of any party to any
other party, except as noted below, by giving the notice indicated in
subsection (c) of this Section 10 before the time the other provisions
of this Agreement become effective.
(b) The Representative shall have the right to terminate this
Agreement at any time prior to the Closing Date as provided in Sections
8 and 12 hereof or if any of the following have occurred: (i) since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company, or the
earnings, business affairs, management or business prospects of the
Company, whether or not arising in the ordinary course of business;
(ii) any outbreak of hostilities or other national or international
calamity or crisis or change in economic, political or financial market
conditions if such outbreak, calamity, crisis or change would, in the
Representative's reasonable judgment, make it impractical or
inadvisable to commence or continue the offering of the Shares; (iii)
suspension of trading generally in securities on the New York Stock
Exchange or the over-the-counter market or limitation on prices (other
than limitations on hours or numbers of days of trading) for securities
or the promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in the
Representative's reasonable opinion materially and adversely affects
trading on either such Exchange or the over-the-counter market; (iv)
the enactment, publication, decree or other promulgation of any federal
or state statute, regulation, rule or order of any court or other
governmental authority which in the Representative's reasonable opinion
materially and adversely affects or will materially and adversely
affect the business or operations of the Company; (v) declaration of a
banking moratorium by either federal or state authorities; (vi) the
taking of any action by any federal, state or local government or
agency in respect of its monetary or fiscal affairs which in the
Representative's reasonable opinion has a material adverse effect on
the securities markets in the United States; (vii) declaration of a
moratorium in foreign exchange trading by major international banks or
other institutions or (viii) trading in any securities of the Company
shall have been suspended or halted by the NASD or the SEC.
(c) If the Representatives elect to prevent this Agreement
from becoming effective or to terminate this
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42
Agreement as provided in this Section 11, the Representative shall
notify the Company thereof promptly by telephone, telex, telegraph or
facsimile, confirmed by letter.
12. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Offered Shares or Optional Shares
hereunder, and if the Offered Shares or Optional Shares with respect to
which such default relates do not exceed the aggregate of ten percent
(10%) of the number of Offered Shares or Optional Shares, as the case
may be, that all Underwriters have agreed to purchase hereunder, then
such Offered Shares or Optional Shares to which the default relates
shall be purchased severally by the non-defaulting Underwriters in
proportion to their respective commitments hereunder.
(b) If such default relates to more than ten percent (10%) of
the Offered Shares or Optional Shares, as the case may be, the
Representative may in its discretion arrange for another party or
parties (including a non-defaulting Underwriter) to purchase such
Offered Shares or Optional Shares to which such default relates, on the
terms contained herein. In the event that the Representative does not
arrange for the purchase of the Offered Shares or Optional Shares to
which a default relates as provided in this Section 12 within 36 hours
after such default, this Agreement may be terminated by the
Representative or by the Company without liability on the part of the
nondefaulting Underwriters (except as provided in Section 9 hereof) or
the Company (except as provided in Sections 7 and 9 hereof), but
nothing herein shall relieve a defaulting Underwriter of its liability,
if any, to the other several Underwriters and to the Company for
damages occasioned by its default hereunder.
(c) If the Offered Shares or Optional Shares to which the
default relates are to be purchased by the non-defaulting Underwriters,
or are to be purchased by another party or parties as aforesaid, the
Representative or the Company shall have the right to postpone the
Closing Date or any Option Closing Date, as the case may be, for a
reasonable period but not in any event exceeding seven days, in order
to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment to
the Registration Statement or supplement to the Prospectus which in the
opinion of counsel for the Underwriters may thereby be made
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necessary. The terms "Underwriters" and "Underwriter" as used in this
Agreement shall include any party substituted under this Section 12
with like effects as if it had originally been a party to this
Agreement with respect to such Offered Shares or Optional Shares.
13. INFORMATION FURNISHED BY UNDERWRITERS. The Representative, on
behalf of the Underwriters, represents and warrants to the Company that the
information appearing in any preliminary prospectus, the Prospectus or the
Registration Statement (a) on the cover page of the Prospectus with respect to
price, underwriting discounts and commissions and terms of offering, (b) on the
inside front cover page with respect to stabilization, (c) in the section
entitled "Underwriting," and (d) in the section entitled "Legal Matters" with
respect to the identity of counsel for the Underwriters was furnished to the
Company by and on behalf of the Underwriters for use in connection with the
preparation of the Registration Statement and the Prospectus and is correct in
all material respects. The parties acknowledge that this information constitutes
the only information furnished in writing by or on behalf of any Underwriter for
inclusion in any preliminary prospectus, the Prospectus or the Registration
Statement referred to in subsection (b) of Section 1 hereof and subsection (a)
of Section 9 hereof.
14. NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered, telexed, telegrammed, telegraphed or telecopied and
confirmed to such Underwriter, c/o Cruttenden Xxxx Incorporated, 00000 Xxx
Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000-0000, Attention: President, with a copy to
Milbank, Tweed, Xxxxxx & XxXxxx, 000 Xxxxx Xxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxxx, Esq.; if sent to the
Company shall be mailed, delivered, telexed, telegrammed, telegraphed or
telecopied and confirmed to UStel, Inc., 0000 Xxxxx Xxxxxxx Xxxxxxxxx #000, Xxx
Xxxxx, Xxxxxx 00000, Attention: President and Chief Executive Officer, with a
copy to Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, 0000 Xxxxxxxx Xxxxxxxxx,
0xx Xxxxx Xxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxx Orlanski, Esq.
15. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, the Company, and the
controlling persons, directors and officers referred to in Section 9 hereof, and
their respective successors, assigns, heirs and legal representatives, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this
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44
Agreement or any provision herein contained. The term "successors" and "assigns"
shall not include any purchaser of the Shares merely because of such purchase.
16. DEFINITION OF BUSINESS DAY. For purposes of this Agreement,
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
18. CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
made and performed entirely within such State.
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If the foregoing correctly sets forth the understanding among the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement by and
among the Underwriters and the Company.
Very truly yours,
USTEL, INC.
By:_____________________________
Its:_______________________
THE SELLING STOCKHOLDERS NAMED IN
SCHEDULE I HERETO
By: ____________________________
Attorney-in-fact
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
CRUTTENDEN XXXX INCORPORATED
By:___________________________
Its:_____________________
Acting severally on behalf of itself and the several Underwriters named
in Schedule II hereto
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