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SUNRISE PRESCHOOLS, INC.
333,333 SHARES
UNDERWRITING AGREEMENT
____________________, 1995
X.X. XxXxx Securities, Inc.
South Coast Financial Securities, Inc.
(As Representatives of the several
Underwriters named in Schedule 1 hereto)
c/o X.X. XxXxx Securities, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Dear Sirs:
Sunrise Preschools, Inc., a Delaware corporation (the "Company"),
hereby confirms its agreement (this "Agreement") with the several underwriters
named in Schedule 1 hereto (the "Underwriters"), for whom you have been duly
authorized to act as representatives (in such capacity, the "Representatives"),
as set forth below.
1. Securities. Subject to the terms and conditions herein contained, the
Company proposes to issue and sell to the Underwriters an aggregate of 333,333
shares (the "Firm Shares") of Series C Preferred Stock of the Company. The
Company also proposes to issue and sell to the several Underwriters not more
than 50,000 additional Shares if requested by the Representatives as provided in
Section 3.2 of this Agreement. Any and all Shares to be purchased by the
Underwriters pursuant to Section 3.2 of this Agreement are referred to herein as
the "Option Shares," and the Firm Shares and any Option Shares are collectively
referred to herein as the "Shares."
2. Representations and Warranties of the Company.
2.1 Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the several Underwriters
that:
2.1.1 A registration statement on Form SB-2 (File No.
33-________) with respect to the Shares, including a prospectus subject to
completion, has been filed by the Company in conformity with the requirements of
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), and one or more amendments to such
registration statement may have been so filed. After the execution of this
Agreement, the Company will file with the Commission either (i) if such
registration statement,
EXHIBIT 1.1
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as it may have been amended, has been declared by the Commission to be effective
under the Act, a prospectus in the form most recently included in an amendment
to such registration statement (or, if no such amendment shall have been filed,
in such registration statement), with such changes or insertions as are required
by Rule 430A under the Act or permitted by Rule 424(b) under the Act and as have
been provided to and approved by the Representatives prior to the execution of
this Agreement, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the Act,
an amendment to such registration statement, including a form of prospectus, a
copy of which amendment has been furnished to and approved by the
Representatives prior to the execution of this Agreement. As used in this
Agreement, the term "Registration Statement" means such registration statement,
as amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto and including any information omitted
therefrom pursuant to Rule 430A under the Act and included in the Prospectus (as
hereinafter defined); the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or any amendment
thereto (including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment thereto at the time it was or is
declared effective); and the term "Prospectus" means the prospectus first filed
with the Commission pursuant to Rule 424(b) under the Act or, if no prospectus
is required to be filed pursuant to said Rule 424(b), such term means the
prospectus included in the Registration Statement.
2.1.2 Neither the Commission nor the "blue sky" or securities
authority of any jurisdiction has issued any order preventing or suspending the
use of any Preliminary Prospectus. When any Preliminary Prospectus was filed
with the Commission it (i) contained all statements required to be stated
therein in accordance with, and complied in all material respects with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. When the Registration Statement or any amendment thereto was or is
declared effective, it (i) contained or will contain all statements required to
be stated therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading. When the Prospectus or
any amendment or supplement thereto is filed with the Commission pursuant to
Rule 424(b) (or, if the Prospectus or such amendment or supplement is not
required to be so filed, when the Registration Statement or the amendment
thereto containing such amendment or supplement to the Prospectus was or is
declared effective) and on the Closing Date the Prospectus, as amended or
supplemented at any such time, (i) contained or will contain all statements
required to be stated therein in accordance with, and complied or will comply
in all material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this Section 2.1.2 do not apply to statements or omissions made
in any Preliminary Prospectus, the Registration Statement or any amendment
thereto or the Prospectus or any
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amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein.
2.1.3 Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the state of its jurisdiction of incorporation and is duly qualified to
transact business as a foreign corporation and is in good standing under the
laws of all other jurisdictions where the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where the
failure to be so qualified does not amount to a material liability or disability
to it.
2.1.4 Each of the Company and its subsidiaries has full power
(corporate and other) to own or lease its properties and conduct its business as
described in the Registration Statement and the Prospectus or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus; and the Company has
full power (corporate and other) to enter into this Agreement and to carry out
all the terms and provisions hereof to be carried out by it.
2.1.5 Other than the subsidiaries of the Company listed in
Exhibit 21 to the Registration Statement, the Company has no subsidiaries and
does not own any shares of stock or any other equity interest in any firm,
partnership, association or other entity.
2.1.6 The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus. All of the issued shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable. The Shares have been duly authorized and at
the Closing Date after payment therefor in accordance herewith will be validly
issued, fully paid and nonassessable. No person is entitled to have such
securities registered under the Registration Statement.
2.1.7 The capital stock of the Company conforms to the
description thereof contained in the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus.
2.1.8 The Company is the lawful owner of the Shares to be
offered and sold by the Company hereunder and upon sale and delivery of, and
payment for, such Shares, as provided herein, the Company will convey to the
purchasers thereof good and marketable title to such Shares, free and clear of
any security interests, liens, encumbrances, equities, claims or other defects.
2.1.9 The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or might reasonably be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Shares or Common Stock of the Company (the "Common Stock").
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2.1.10 The Company has not since the filing of the Registration
Statement (i) sold, bid for, purchased, attempted to induce any person to
purchase, or paid anyone any compensation for soliciting purchases of, the
Shares or (ii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company (except for
the sale of Shares by the Company under this Agreement).
2.1.11 The financial statements and schedules of the Company
included in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) fairly present the
financial position of the Company and the results of operations and changes in
financial condition as of the dates and periods therein specified. Such
financial statements and schedules have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved (except as otherwise noted therein) and include all financial
information required to be included by the Act. The selected financial data set
forth under the captions "Summary Financial Data," "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations" in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus) fairly present, on the
basis stated in the Prospectus (or such Preliminary Prospectus), the information
included therein.
2.1.12 Xxxxxx Xxxxxxxx LLP, who have certified certain of the
financial statements of the Company and delivered their report with respect to
the audited financial statements and schedules included in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), are independent public accountants as
required by the Act and the applicable rules and regulations thereunder.
2.1.13 The execution and delivery of this Agreement and
consummation of the transactions contemplated herein have been duly authorized
by the Company and this Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with the terms thereof, except as may be
limited by public policy considerations.
2.1.14 No legal or governmental proceedings are pending to which
the Company or any of its subsidiaries is a party or to which the property of
the Company or any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not described
therein (or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), and, to the best knowledge of the Company, after due inquiry, no
such proceedings have been threatened against the Company or any of its
subsidiaries or with respect to any of their respective properties; and no
contract or other document is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) or filed as required.
2.1.15 The issuance, offering and sale of the Shares by the
Company pursuant to this Agreement, the compliance by the Company with the other
provisions of this Agreement and the consummation of the other transactions
herein contemplated do not (i) require
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the consent, approval, authorization, registration or qualification of or with
any governmental authority, except such as have been obtained, such as may be
required under state securities or blue sky laws and, if the registration
statement filed with respect to the Shares (as amended) is not effective under
the Act as of the time of execution hereof, such as may be required (and shall
be obtained as provided in this Agreement) under the Act, or (ii) conflict with
or result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries or any of their
properties is bound, or the charter documents or bylaws of the Company, or any
statute or any judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to the Company or any of its
subsidiaries.
2.1.16 Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus), (i)
the Company has not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business; (ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock; and (iii) there has not been any material change in
the capital stock, short-term debt or long-term debt of the Company, except in
each case as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
2.1.17 The Company owns the trademarks described in the
Prospectus (or if the Prospectus is not in existence, the most recent
Preliminary Prospectus). The Company owns or possesses, or can acquire on
reasonable terms, all material patents, patent applications, trademarks (other
than those referred to above), service marks, trade names, licenses, copyrights
and proprietary or other confidential information currently employed by it in
connection with its business and the Company has not received any notice of
infringement of or conflict with asserted rights of any third party with respect
to any of the foregoing trademarks which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding would result in a material
adverse change in the condition (financial or otherwise), business prospects,
net worth or results of operations of the Company, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
2.1.18 The Company possesses all certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business, and the Company has not received
any notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in a
material adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company, except as
described in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
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2.1.19 Except as described in the Registration Statement and in
the Prospectus or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus, there are no outstanding (i) securities or obligations
of the Company convertible into or exchangeable for any capital stock of the
Company, (ii) warrants, rights or options to subscribe for or purchase from the
Company any such capital stock or any such convertible or exchangeable
securities or obligations, or (iii) obligations of the Company to issue such
shares, any such convertible or exchangeable securities or obligations, or any
such warrants, rights or obligations.
2.1.20 The Company is not in breach of any term or provision of
its Certificate of Incorporation or Bylaws; no default exists, and no event has
occurred which with notice or lapse of time or both, would constitute a default,
in the due performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, lease, note, bank loan or credit agreement
or any other agreement or instrument to which the Company or its properties may
be bound or affected in any respect which would have a material adverse effect
on the condition (financial or otherwise), business, properties, prospects, net
worth or result of operations of the Company.
2.1.21 Except as disclosed in the Registration Statement and in
the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), the Company has no knowledge that it or any of its
subsidiaries is in violation of any laws, ordinances, governmental rules or
regulations to which it is subject which would have a material adverse effect on
the condition (financial or otherwise), business, properties, prospects, net
worth or results of operations of the Company.
2.1.22 The Company and each of its subsidiaries has good and
marketable title to all items of personal property owned by it, free and clear
of any security interest, liens, encumbrances, equities, claims and other
defects, except such as do not materially and adversely effect the value of such
property and do not interfere with the use made or proposed use to be made of
such property by the Company or its subsidiaries, and any real property and
buildings held under lease by the Company or any of its subsidiaries are held
under valid, subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made or proposed to be made of such
property and buildings by the Company or its subsidiaries, except as described
in or contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
2.1.23 Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), and
except as may otherwise be indicated or contemplated herein or therein, (i) the
Company has not entered into any transaction with an affiliate of the Company or
declared, paid or made any dividend or distribution of any kind on or in
connection with any class of its capital stock, and (ii) the Company has no
knowledge of any transaction between any affiliate of the Company and any
significant customer or supplier of the Company, except in its ordinary course
of business.
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2.1.24 The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
2.1.25 The Company knows of no outstanding claims for services
in the nature of a finder's fee or origination fee or other compensation on
account of the employment of a broker or finder in connection with the
transactions contemplated by this Agreement.
2.1.26 The Company conducts its operations in a manner that does
not subject it to registration as an investment company under the Investment
Company Act of 1940, as amended, and the transactions contemplated by this
Agreement will not cause the Company to become an investment company subject to
registration under the Investment Company Act of 1940, as amended.
2.1.27 The Company and each of its subsidiaries is insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the business in which it is
engaged; the Company and each of its subsidiaries has not been refused any
insurance coverage sought or applied for; and the Company has no reason to
believe that it or its subsidiaries will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not materially and adversely affect the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company and its subsidiaries, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
2.1.28 The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested extensions
thereof (except in any case in which the failure so to file would not have a
material adverse effect on the Company (and has paid all taxes required to be
paid by it and any other assessment, fine or penalty levied against it, to the
extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good faith or
as described in or contemplated by the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus).
2.1.29 The Company has obtained from each of its directors and
officers his or her enforceable written agreement that for a period of one year
from the date of the Prospectus he or she will not, without the Representatives'
prior written consent, offer, pledge, sell, contract to sell, grant any option
for the sale or otherwise dispose of, directly or indirectly, any shares of
Common Stock or any security which by its terms is convertible into, exercisable
or exchangeable for shares of Common Stock of the Company.
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2.1.30 The Company is current in all of its filings required
under the Securities and Exchange Act of 1934, as amended (the "Exchange Act").
2.1.31 Each certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters shall be deemed
to be a representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
3. Purchase Sale and Delivery of the Shares.
3.1 On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to each of the Underwriters, and
each of the Underwriters, severally and not jointly, agrees to purchase from the
Company, at a purchase price of $__________ per Share, the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule 1 hereto. One or
more certificates in definitive form for the Firm Shares that the several
Underwriters have agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as the Representatives shall
request upon notice to the Company at least 48 hours prior to the Firm Closing
Date, shall be delivered by or on behalf of the Company to the Representatives
for the respective accounts of the Underwriters, against payment by or on behalf
of the Underwriters of the purchase price therefor by either wire transfer of
immediately available funds or certified or official bank check or checks drawn
upon or by a California Clearing House bank and payable in next day funds to the
order of the Company. Delivery of the documents, certificates and opinions
described in Section 8 of this Agreement and payment for the Firm Shares and
delivery of the Firm Shares shall be made at the offices of X.X. XxXxx
Securities, Inc., 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000,
at 6:30 a.m., California time, on the [fifth] full business day following the
date hereof, or at such other places, time or date as the Representatives and
the Company may agree upon or as the Representatives may determine pursuant to
Section 8 hereof, such time and date of delivery against payment being herein
referred to as the "Firm Closing Date." The Company will make such certificate
or certificates for the Firm Shares available for checking and packaging by the
Representatives at the offices of the Company's transfer agent or registrar (or
the correspondent or the agent of the Company's transfer agent or registrar) at
least 24 hours prior to the Firm Closing Date.
3.2 For the purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Shares as contemplated by the
Prospectus, the Company hereby grants to the several Underwriters an option to
purchase, severally and not jointly, the Option Shares. The purchase price to be
paid for any Option Shares shall be the same price per share as the price per
share for the Firm Shares set forth above in Section 3.1, plus, if the purchase
and sale of any Option Shares take place after the Firm Closing Date and after
the Firm Shares are trading "ex-dividend," an amount equal to the dividends
payable on such Option Shares. The option granted hereby may be exercised as to
all or any part of the Option Shares from time to time within forty-five days
after the date of the Prospectus. The Underwriters shall not be under any
obligation to purchase any of the Option Shares prior to the exercise of such
option.
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The Representatives may from time to time exercise the option granted hereby by
giving notice in writing or by telephone (confirmed in writing) to the Company
setting forth the aggregate number of Option Shares as to which the several
Underwriters are then exercising the option and the date and time for delivery
of and payment for such Option Shares. Any such date of delivery shall be
determined by the Representatives but shall not be earlier than two business
days or later than seven business days after such exercise of the option and, in
any event, shall not be earlier than the Firm Closing Date. The time and date
set forth in such notice, or such other time on such other dates as the
Representatives and the Company may agree upon or as the Representatives may
determine pursuant to Section 9 hereof, is herein called the "Option Closing
Date" with respect to such Option Shares. Upon each exercise of the option as
provided herein, the Company shall become obligated to sell to each of the
several Underwriters, and, subject to the terms and conditions herein set forth,
each of the Underwriters (severally and not jointly) shall become obligated to
purchase from the Company, the same percentage of the total number of the Option
Shares as to which the several Underwriters are then exercising the option as
such Underwriter is obligated to purchase of the aggregate number of Firm
Shares, as adjusted by the Representatives in such manner as it deems advisable
to avoid fractional shares. If the option is exercised as to all or any portion
of the Option Shares, one or more certificates in definitive form for such
Option Shares, and payment therefor, shall be delivered on the related Option
Closing Date in the manner, and upon the terms and conditions, set forth in
Section 3.1, except that reference therein to the Firm Shares and the Firm
Closing Date shall be deemed, for purposes of this Section 3.2, to refer to such
Option Shares and Option Closing Date, respectively,
3.3 It is understood that you, individually and not as the
Representatives, may (but shall not be obligated to) make payment on behalf of
any Underwriter or Underwriters for any of the Shares to be purchased by such
Underwriter or Underwriters. No such payment shall relieve such Underwriter or
Underwriters from any of its of their obligations hereunder.
4. Offering by the Underwriters. Upon the Company's authorization of the
release of the Firm Shares the several Underwriters propose to offer such Shares
for sale to the public upon the terms set forth in the Prospectus. If the option
set forth in Section 3.2 of this Agreement is exercised, then upon the Company's
authorization of the release of the Option Shares the several Underwriters
propose to offer such Shares for sale to the public upon the terms set forth in
the Prospectus.
5. Covenants of the Company. Except as otherwise stated below, the
Company covenants and agrees with each of the Underwriters that:
5.1 The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and any
amendments thereto, to become effective as promptly as possible. If required,
the Company will file the Prospectus and any amendment or supplement thereto
with the Commission in the manner and within the time period required by Rule
424(b) under the Act. During any time when a prospectus relating to the Shares
is required to be delivered under the Act, the Company (i) will comply with all
requirements imposed upon it by the Act and the rules and regulations of the
Commission
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thereunder to the extent necessary to permit the continuance of sales of or
dealings in the Shares in accordance with the provisions hereof and of the
Prospectus, as then amended or supplemented, and (ii) will not file with the
Commission the prospectus or the amendment referred to in the second sentence of
Section 2.1.1 hereof, any amendment or supplement to such prospectus or any
amendment to the Registration Statement of which the Representatives shall not
previously have been advised and furnished with a copy for a reasonable period
of time prior to the proposed filing and as to which filing the Representatives
shall not have given their consent. The Company will prepare and file with the
Commission, in accordance with the rules and regulations of the Commission,
promptly upon request by the Representatives or counsel for the Underwriters,
any amendments to the Registration Statement or amendments or supplements to the
Prospectus that may be necessary or advisable in connection with the
distribution of the Shares by the several Underwriters, and the Company will use
its best efforts to cause any such amendment to the Registration Statement to be
declared effective by the Commission as promptly as possible. The Company will
advise the Representatives, promptly after receiving notice thereof, of the time
when the Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement thereto has
been filed and will provide evidence satisfactory to the Representatives of each
such filing or effectiveness.
5.2 The Company will advise the Representatives, promptly after
receiving notice of obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any amendment thereto or any order preventing or suspending the use
of any Preliminary Prospectus of the Prospectus or any amendment or supplement
thereto, (ii) the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, (iii) the institution, threatening or contemplation of
any proceeding for any such purpose or (iv) any request made by the Commission
for amending the Registration Statement, for amending or supplementing the
Prospectus or for additional information. The Company will use its best efforts
to prevent the issuance of any such stop order and, if any such stop order is
issued to obtain the withdrawal thereof as promptly as possible.
5.3 The Company will arrange for the qualification of the Shares for
offering and sale under the securities or blue sky laws of such jurisdictions as
the Representatives may designate and will continue such qualifications in
effect for as long as may be necessary to complete the distribution of the
Shares; provided, however, that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to execute a general consent to
service of process in any jurisdiction.
5.4 If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is necessary at
any time to amend or supplement the Prospectus to comply with the Act or the
rules or regulations of the Commission thereunder, the Company will promptly
notify the Representatives thereof and, subject to Section 6.1 hereof, will
prepare and file with the Commission, at the Company's
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expense, an amendment to the Registration Statement or an amendment or
supplement to the Prospectus that corrects such statement or omission or effects
such compliance.
5.5 The Company will, without charge, provide (i) to the
Representatives and to counsel for the Underwriters a signed copy of the
Registration Statement originally filed with respect to the Shares and each
amendment thereto (in each case including exhibits thereto), (ii) to each other
Underwriter, a conformed copy of such Registration Statement and each amendment
thereto (in each case without exhibits thereto) and (iii) so long as a
prospectus relating to the Shares is required to be delivered under the Act, as
many copies of each Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto as the Representatives may reasonably request. The Company
will provide or cause to be provided to the Representatives, and to each
Underwriter that so requests in writing a copy of each report on Form SR filed
by the Company from time to time as required by Rule 463 under the Act.
5.6 The Company will, as soon as practicable but in any event no
later than 90 days after the period covered thereby, make generally available to
its security holders and to the Representatives a consolidated earnings
statement of the Company and its subsidiaries that satisfies the provisions of
Section 11(a) of the Act and Rule 158 thereunder covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
5.7 The Company will apply the net proceeds from the sale of the
Shares as set forth in the Prospectus and Registration Statement and will not
take any action that would cause it to become an investment company under the
Investment Company Act of 1940, as amended.
5.8 The Company will retain an investor relations firm, approved by
the Representatives, for a minimum of 12 months from the date hereof.
5.9 The Company will cause the Shares to be duly included for
quotation on the [National Association of Securities Dealers Automated
Quotations National Market System] prior to the Closing Date. The Company will
use its best efforts to ensure that the Shares remain included for quotation on
the [National Association of Securities Dealers Automated Quotation National
Market System] following the Closing Date.
5.10 So long as any Common Stock or Preferred Stock is outstanding
until five years after the Closing Date the Company will furnish to the
Representatives (i) as soon as available a copy of each report of the Company
mailed to shareholders and filed with the Commission and (ii) from time to time
such other information concerning the Company as the Representatives may
reasonably request.
5.11 At or prior to the Closing, the Company will deliver to the
Representatives true and correct copies of the Certificate of Incorporation of
the Company and all amendments thereto, all such copies to be certified by the
Secretary of State of the State of Delaware; a good standing certificate from
the Secretary of State of Delaware dated no more than two business
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days prior to the Closing Date; true and correct copies of the bylaws of the
Company, as amended, certified by the Secretary of the Company and true and
correct copies of the minutes of all meetings of the directors and stockholders
of the Company held prior to the Closing Date which in any way relate to the
subject matter of this Agreement.
5.12 On or prior to the Closing Date, the Company will sell to the
Representatives, individually and not as representatives of the Underwriters,
warrants (the "Underwriters' Warrant") to purchase __________ Shares upon the
terms set forth in the Warrant Agreement to be entered into between the Company
and the Representatives on or prior to the Closing Date (the "Underwriters'
Warrant Agreement") for [$100.00].
5.13 At all times prior to the Closing Date, the Company will
cooperate with the Representatives in such investigation as the Representatives
may make or cause to be made of all the properties, business and operations of
the Company in connection with the purchase and public offering of the Shares
and the Company will make available to the Representatives in connection
therewith such information in its possession as the Representatives may
reasonably request.
5.14 No offering, sale or other disposition of any Preferred Stock,
Common Stock, equity or long-term debt (other than the issuance of any shares of
Common Stock upon exercise of options granted under the Company's stock plans or
conversion of the Series B Preferred Stock and Series C Preferred Stock, and
exercise of the Underwriter's Warrant as described in the Registration
Statement), and no purchase of any Common Stock or equity security of Company
will be made within the one year period after the effective date of the
Registration Statement, directly or indirectly, by the Company, otherwise than
hereunder or with the Representatives' consent.
5.15 The Company has appointed American Securities Transfer,
Incorporated as Transfer Agent for the Shares. The Company will not change or
terminate such appointment for a period of two years from the effective date
without first obtaining the written consent of the Representatives, which
consent shall not be unreasonably withheld.
5.16 Prior to the Closing Date, the Company shall not issue any press
release or other communication directly or indirectly and shall hold no press
conference with respect to the Company, its financial condition, results of
operations, business, properties, assets, liabilities and any of them, or this
offering, without the prior written consent of the Representatives.
6. Right of First Refusal.
6.1 Consultation with Representatives. For a period of three years
from the date of the definitive prospectus, the Company agrees to consult with
the Representatives in respect of any prospective or actual public or private
offering of securities of the Company for cash other than to employees.
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6.2 Right of First Refusal. For a period of three years from the date
of this Agreement, the Company will not enter into an agreement for any public
or private offering for cash (other than to employees) of any debt or equity
securities of the Company to or through any person, firm or corporation other
than South Coast Financial Securities, Inc. ("South Coast") unless and until the
Company shall have first negotiated for the sale of the Company's securities
with or offered to sell its securities to South Coast. The Company shall notify
South Coast in writing of the Company's intention to offer its securities in a
covered offering and the terms (including the price to South Coast or other
method of determining the underwriting discount or fee) and conditions of the
proposed offering. South Coast shall then have 10 days from the date it receives
such written notice from the Company to decide whether it wishes to participate
as manager, co-manager, or otherwise, as determined by it in the proposed
offering. If South Coast determines that it does not wish to participate in the
proposed offering, then it shall so notify the Company of its intention in
writing not later than 30 days from the receipt of notice from the Company, and
then the Company may within a period of 90 days from the date of receipt of such
notice from South Coast enter into a letter of intent for the public sale or, as
appropriate, a contract for the private sale, of any of its securities through
any other person, firm or corporation on the same general terms and conditions
as those which were tendered to South Coast; provided, however, as to a public
offering, if a definitive underwriting agreement with a firm commitment is not
executed by the Company with such third party within 180 days thereafter, all
the rights of South Coast hereunder shall be reinstated. Nothing in this
Agreement shall be construed as granting the continuation of such preferential
right on the part of South Coast beyond such three-year period. The Company
shall not be required to consult with South Coast concerning any borrowings from
banks and institutional lenders or concerning financing under any equipment
leasing or similar arrangements.
7. Expenses. The Company will pay upon demand all costs and expenses
incident to the performance of the Company's obligations under this Agreement,
whether or not the transactions contemplated herein are consummated or this
Agreement is terminated pursuant to Section 11 hereof, including all costs and
expenses incident to (i) the printing or other production of documents with
respect to the transactions, including any costs of printing the Registration
Statement originally filed with respect to the Shares and any amendment thereto,
any Preliminary Prospectus and the Prospectus and any amendment or supplement
thereto, this Agreement, the Agreement Among Underwriters among the
Representatives, the Underwriters and certain other parties thereto, the
Selected Dealer Agreement among the Representatives, the Underwriters and
certain other parties thereto, and any blue sky memoranda, (ii) all arrangements
relating to the delivery to the Underwriters of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (h) preparation, issuance
and delivery to the Underwriters of any certificates evidencing the Shares,
including transfer agent's and registrar's fees, (v) the qualification of the
Shares under state securities and blue sky laws, including filing fees and fees
and disbursements of counsel for the Underwriters relating thereto, (vi) the
filing fees of the Commission and the National Association of Securities
Dealers, Inc. relating to the Shares, (vii) any quotation of the Shares on the
[National Association of Securities Dealers Automated Quotation National Market
System], (viii) any meetings with prospective investors in the Shares (other
than as shall have been specifically approved in writing by the Representatives
to be paid
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for by the Underwriters) and the cost of "tombstone" advertisements in
publications designated by you, (ix) all other advertising relating to the
offering of the Shares (other than as shall have been specifically approved in
writing by the Representatives to be paid for by the Underwriters). In
addition to the foregoing, the Company shall pay the Representatives a
non-accountable expense allowance equal to 3.0% of the gross sales price of the
Shares to the public set forth on the cover page of the Prospectus. This
non-accountable expense allowance with respect to the Firm Shares shall be paid
to the Representatives on the Firm Closing Date and the non-accountable
expenses with respect to the Option Shares shall be paid to the Representatives
on the Option Closing Date. If the sale of the Shares provided for herein is
not consummated because any condition to the obligations of the Underwriters
set forth in Section 8 hereof is not satisfied, because this Agreement is
terminated pursuant to Section 11 hereof or because of any failure, refusal or
inability on the part of the Company to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder other than by
reason of a default by any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
counsel fees and disbursements) that shall have been incurred by them in
connection with the proposed purchase and sale of the Shares. The Company
shall in no event be liable to any of the Underwriters for the loss of
anticipated profits from the transactions covered by this Agreement.
8. Conditions of the Underwriters' Obligations. Your obligations
to use your best efforts to sell the Shares is provided herein shall be
subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company contained herein as of the date
hereof and as of the Closing Date as if made on and as of the Closing Date, to
the accuracy of the statements of the Company's officers made pursuant to the
provisions hereof, to the performance by the Company of its covenants and
agreements hereunder and to the following additional conditions:
8.1 If the Registration Statement or any amendment
thereto filed prior to the Closing Date has not been declared effective as of
the time of execution hereof, the Registration Statement or such amendment
shall have been declared effective not later than 11:00 a.m., Arizona time, on
the date on which the amendment to the Registration Statement originally filed
with respect to the Shares or to the Registration Statement, as the case may
be, containing information regarding the initial public offering price of the
Shares has been filed with the Commission, or such later time and date as shall
have been consented to by the Representatives; if required, the Prospectus and
any amendment or supplement thereto shall have been filed with the Commission
in the manner and within the time period required by Rule 424(b) under the Act;
no stop order suspending the effectiveness of the Registration Statement or any
amendment thereto shall have been issued, and no proceedings for that purpose
shall have been instituted or threatened or, to the knowledge of the Company or
the Representatives, shall be contemplated by the Commission; and the Company
shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
8.2 The Representatives shall have received an opinion,
dated the Closing Date, of Squire, Xxxxxxx & Xxxxxxx, counsel for the Company,
to the effect that:
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8.2.1 the Company and each of its subsidiaries has
been duly organized and is validly existing as a corporation in good standing
under the laws of the state of its jurisdiction of incorporation, and is duly
qualified to transact business as a foreign corporation and is in good standing
under the laws of all other jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified does not amount to a material liability or
disability to the Company;
8.2.2 the Company has the corporate power to own or
lease its properties; the Company has the corporate power to conduct its
business as described in the Registration Statement and the Prospectus; the
Company has the corporate power to enter into this Agreement and to carry out
all of the terms and provisions hereof to be carried out by it;
8.2.3 the Company has an authorized capitalization
as set forth in the Prospectus; all of the issued shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid and
nonassessable; the Common Stock underlying the Shares has been duly authorized
by all necessary corporate action of the Company, and, when issued and
delivered to and paid for pursuant to this Agreement, will be validly issued,
fully paid and nonassessable; the Shares have been duly authorized for
quotation on the National Association of Securities Dealers Automated Quotation
National Market System; no holders of outstanding shares of capital stock of
the Company are entitled as such to any preemptive or other rights to subscribe
for any of the Shares; and no holders of securities of the Company are entitled
to have such securities registered under the Registration Statement;
8.2.4 the statements set forth under the heading
"DESCRIPTION OF SECURITIES" in the Prospectus, insofar as such statements
purport to summarize certain provisions of the capital stock of the Company,
provide a fair summary of such provisions;
8.2.5 the execution and delivery of this Agreement
has been duly authorized by all necessary corporate action of the Company and
this Agreement is a valid and binding obligation of the Company enforceable in
accordance with its terms except as the enforceability thereof may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general equitable principles;
8.2.6 no legal or governmental proceedings are
pending to which the Company or any of its subsidiaries is a party or to which
the property of the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the Prospectus and
are not described therein, and, to the best knowledge of such counsel, no such
proceedings have been threatened against the Company or any of its subsidiaries
or with respect to any of their properties;
8.2.7 no contract or other documents is required to
be described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement that is not described therein or filed
as required;
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8.2.8 the issuance, offering and sale of the Shares
by the Company pursuant to this Agreement, the compliance by the Company with
the other provisions of this Agreement and the consummation of the other
transactions herein contemplated do not require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained and such as may be required under
state securities or blue sky laws, or conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, lease or other agreement or instrument,
known to such counsel, to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any of their
properties are bound, or the charter documents or bylaws of the Company, or any
statute or any judgment, decree, order, rule or regulation of any court or
other governmental authority or any arbitrator known to such counsel and
applicable to the Company or any of its subsidiaries;
8.2.9 The Registration Statement is effective under
the Act; any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b); and no
stop order suspending the effectiveness of the Registration Statement or any
amendment thereto has been issued, and no proceedings for that purpose have
been instituted or, to the best knowledge of such counsel are threatened or
contemplated by the Commission;
8.2.10 the Registration Statement originally filed
with respect to the Shares and each amendment thereto and the Prospectus (in
each case, other than the financial statements and other financial and
statistical information contained therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
applicable requirements of the Act and the rules and regulations of the
Commission thereunder; and
8.2.11 the Company is not an investment company
within the meaning of the Investment Company Act of 1940, as amended, and, if
the Company uses the proceeds of the sale of the Shares solely as described in
the Prospectus, will not as a result of the sale of such Shares become an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
8.2.12 such counsel shall also state that they have
no reason to believe that the Registration Statement, as of its effective date,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus, as of its date or the date of
such opinion, included or includes any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that in each case such counsel need not express any
opinion as to the financial statements and other financial and statistical
information contained therein.
In rendering any such opinion, such counsel may rely as to matters of fact, to
the extent such counsel deems proper, on certificates of responsible officers
of the Company and public officials.
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References to the Registration Statement and the Prospectus in this Section 8
shall include any amendment or supplement thereto at the date of such opinion.
8.3 The Representatives shall have received an opinion,
dated the Closing Date, of Xxxxxx & XxXxxxx, counsel for the Underwriters, with
respect to the issuance and sale of the Shares, the Registration Statement and
the Prospectus, and such other related matters as the Representatives may
reasonably require, and the Company shall have furnished to such counsel such
documents and certificates as they may reasonably request for the purpose of
enabling them to pass upon such matters.
8.4 The Representatives shall have received from Xxxxxx
Xxxxxxxx LLP a letter or letters dated, respectively, the date hereof and the
Closing Date, in form and substance satisfactory to the Representatives, to the
effect that:
8.4.1 they are independent accountants with respect
to the Company within the meaning of the Act and the applicable rules and
regulations thereunder;
8.4.2 in their opinion, the audited financial
statement and schedules examined by them and included in the Registration
Statement and the Prospectus comply in form in all material respects with the
applicable accounting requirements of the Act and the related published rules
and regulations;
8.4.3 on the basis of a reading of the latest
interim unaudited financial statements of the Company, carrying out certain
specified procedures (which do not constitute an examination made in accordance
with generally accepted auditing standards) that would not necessarily reveal
matters of significance with respect to the comments set forth in this
paragraph, a reading of the minute books of the shareholders, the board of
directors and any committees thereof of the Company, and inquiries of certain
officials of the Company who have responsibility for financial and accounting
matters, nothing came to their attention that caused them to believe that:
(A) the unaudited consolidated financial
statements of the Company included in the Registration Statement and
the Prospectus do not comply in form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations thereunder or are not in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited consolidated
financial statements included in the Registration Statement and the
Prospectus; and
(B) at a specific date not more than
five business days prior to the date of such letter, there were any
changes in the capital stock or long-term debt of the Company or any
decreases in net current assets or stockholders' equity of the
Company, in each case compared with amounts shown on the July 31, 1995
consolidated balance sheet included in the Registration Statement and
the Prospectus, or for the period from July 31, 1995, to such
specified date there were any decreases, as compared with
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the corresponding period in the preceding year, in operating revenues,
operating expenses, other income, net income before income taxes,
income tax benefits, net income (loss) or net income (loss) per share
of the Company, except in all instances for changes, decreases or
increases set forth in such letter;
8.4.4 they have carried out certain specified
procedures, not constituting an audit, with respect to certain amounts,
percentages and financial information that are derived from the general
accounting records of the Company and are included in the Registration
Statement and the Prospectus and have compared such amounts, percentages and
financial information with such records of the Company and with information
derived from such records and have found them to be in agreement, excluding any
questions of legal interpretation.
In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (i) such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
representatives deem such explanation unnecessary, and (ii) such changes,
decreases or increases do not, in the sole judgment of the Representatives,
make it impractical or inadvisable to proceed with the purchase and delivery of
the Shares as contemplated by the Registration Statement, as amended as of the
date hereof.
References to the Registration Statement and the Prospectus in this
Section 8 with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
8.5 The Representatives shall have received a
certificate, dated the Closing Date, of the president and the principal
financial or accounting officers of the Company to the effect that:
8.5.1 the representations and warranties of the
Company in this Agreement are true and correct as if made on and as of the
Closing Date; the Registration Statement, as amended as of the Closing Date,
does not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading, and the
Prospectus, as amended or supplemented as of the Closing Date, does not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company has
performed all covenants and agreements and satisfied all conditions on its part
to be performed or satisfied at or prior to the Closing Date;
8.5.2 no stop order suspending the effectiveness of
the Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to the best
of their knowledge, are contemplated by the Commission; and
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8.5.3 subsequent to the respective dates as of
which information is given in the Registration Statement and the Prospectus,
the Company has not sustained any material loss or interference with its
business or properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any material adverse change, or
any development involving a prospective material adverse change, in the
condition (financial or otherwise), business prospects, net worth or results of
operations of the Company, except in each case as described in or contemplated
by the Prospectus (exclusive of any amendment or supplement thereto).
8.6 The NASD, upon review of the terms of the public
offering of the Shares shall not have objected to the Underwriters'
participation in such offering.
8.7 The counsel to the Representatives and other persons
retained by the Representatives to conduct a due diligence investigation with
respect to the offering shall be satisfied with the results of their respective
due diligence investigations.
8.8 The Shares shall be qualified in such states as the
Representatives may reasonably request pursuant to Section 5.3, and each such
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Date.
8.9 The Representatives shall have received from each
person who is a director or officer of the Company an agreement to the effect
that such person will not, without the prior written consent of the
Representatives, offer, pledge, sell, contract to sell, grant any option for
the sale or otherwise dispose of, directly or indirectly, any shares of Common
Stock or any security which by its terms is convertible into, exercisable or
exchangeable for shares of Common Stock of the Company.
8.10 On or before the Closing Date, the Representatives
and counsel for the Underwriters shall have received such further certificates,
documents or other information as they may have reasonably requested from the
Company.
All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company shall furnish to the Representatives
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
9. Indemnification and Contribution.
9.1 The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act against
any losses, claims, damages or liabilities, joint or several to which such
Underwriter or such controlling person may become subject under the
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Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
(a) any untrue statement or alleged untrue
statement made by the Company in Section 2 of this Agreement,
(b) any untrue statement or alleged untrue
statement of any material fact contained in (i) the registration
statement originally filed with respect to the Shares or any amendment
thereto or any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or (ii) any application or other
document, or any amendment or supplement thereto, executed by the
Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the Shares
under the securities or blue sky laws thereof or filed with the
Commission or any securities association or securities exchange (each
an "Application"), or
(c) the omission or alleged omission to state in
such registration statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto,
or any Application a material fact required to be stated therein or
necessary to make the statements therein not misleading;
and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement
or any amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or any Application in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representatives specifically for use therein; and provided further,
that the Company will not be liable to any Underwriter or any person
controlling such Underwriter with respect to any such untrue statement or
omission made in any Preliminary Prospectus that is corrected in the Prospectus
(or any amendment or supplement thereto) if the person asserting any such loss,
claim, damage or liability purchased Shares from such Underwriter but was not
sent or given a copy of the Prospectus (as amended or supplemented), other than
the documents incorporated by reference therein at or prior to the written
confirmation of the sale of such Shares to such person in any case where such
delivery of the Prospectus (as amended or supplemented) is required by the Act,
unless such failure to deliver the Prospectus (as amended or supplemented) was
a result of noncompliance by the Company with Section 5.5 of this Agreement.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have. The Company will not, without the prior written consent of
each Underwriter, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not such Underwriter
or any person who
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controls such Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of such Underwriter and each such controlling person from
all liability arising out of such claim, action, suit or proceeding.
9.2 Each Underwriter will indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act against
any losses, claims, damages or liabilities to which the Company, any such
director or officer of the Company or any such controlling person of the
Company may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement
or any amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or any Application or (ii) the omission or the
alleged omission to state therein a material fact required to be stated in the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any Application or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representatives specifically for use therein; and, subject to the
limitation set forth immediately preceding this clause, will reimburse, as
incurred, any legal or other expenses reasonably incurred by the Company or any
director, officer or controlling person of the Company in connection with
investigation or defending any such loss, claim, damage, liability or any
action in respect thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
9.3 Promptly after receipt by an indemnified party under
this Section 9 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 9. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available
to the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or
parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so
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to assume the defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not be liable to
such indemnified party under this Section 9 for any legal or other expenses,
other than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel at any one time (in addition to
local counsel) in any one action or separate but substantially similar actions
in the same jurisdiction arising out of the same general allegations or
circumstances, designated by the Representatives in the case of Section 9.1,
representing the indemnified parties under such Section 9.1 who are parties to
such action or actions) or (ii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the consent of the indemnifying party, unless such indemnified party
waived its rights under this Section 9 in which case the indemnified party may
effect such a settlement without such consent.
9.4 In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 9 is unavailable or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liability (or actions in respect thereof, each indemnifying
party, in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect (i) the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Shares or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liability (or action
in respect thereof). The relative benefits received by the Company on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Underwriters, the parties' relative intents, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances. The Company and the
Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take into account the equitable
consideration referred to in the first sentence of this Section 9.4.
Notwithstanding any other provision of this Section 9.4, no Underwriter shall
be obligated to make contributions hereunder that in the aggregate exceed the
total public offering price of the
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Shares sold by such Underwriter under this Agreement, less the aggregate amount
of any damages that such Underwriter has otherwise been required to pay in
respect of the same or any substantially similar claim, and 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
hereunder are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 9.4, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
such Underwriter, and each director of the Company, each officer of the Company
who signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, shall have the same right to contribution as the Company as the
case may be.
10. Survival. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers and directors, and the several Underwriters set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, any Underwriter or any controlling person referred to in Section 9
hereof and (ii) delivery of and payment for the Shares. The respective
agreements, covenants, indemnities and other statements set forth in Sections
6, 7 and 9 hereof shall remain in full force and effect, regardless of any
termination or cancellation this Agreement.
11. Termination.
11.1 This Agreement may be terminated in the sole
discretion of the Representatives by notice to the Company given prior to the
Closing Date in the event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Closing Date:
11.1.1 The Company shall have sustained any material
loss or interference with its business or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding or there shall
have been any material adverse change, or any development involving a
prospective material adverse change (including without limitation a change in
management or control of the Company), in the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company, except in each case as described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto);
11.1.2 trading in the Preferred Stock shall have
been suspended by the Commission or the [National Association of Securities
Dealers Automated Quotation National Market System] or trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or the
National Association of Securities Dealers Automated
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Quotation National Market System shall have been suspended or minimum or
maximum prices shall have been established on any such exchange or market
system;
11.1.3 a banking moratorium shall have been declared
by New York, California or United States authorities; or
11.1.4 there shall have been (i) an outbreak or
escalation of hostilities between the United States and any foreign power, (ii)
an outbreak or escalation of any other insurrection or armed conflict involving
the United States or (iii) any other calamity or crisis having an effect on the
financial markets that, in the sole judgment of the Representatives, makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares as contemplated by the Registration Statement, as
amended as of the date hereof.
11.2 Termination of this Agreement pursuant to this
Section 11 shall be without liability of any party to any other party.
12. Information Supplied by Underwriters. The statements set
forth in the last paragraph on the front cover page and under the heading
"Underwriting" in any Preliminary Prospectus or the Prospectus, to the extent
such statements relate to the Underwriters, constitute the only information
furnished by any Underwriter through the Representatives to the Company for the
purposes of Section 2.1.2 and 9.2 hereof. The Underwriters confirm that such
statements, to such extent are correct.
13. Notices. All communications hereunder shall be in writing
and, if sent to any of the Underwriters, shall be mailed (certified or
registered mail, postage prepaid, return receipt requested) or delivered or
sent by facsimile transmission and confirmed in writing to X.X. XxXxx
Securities, Inc., 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000,
Attention: Xx. Xxxxxxx X. XxXxx, President (with a copy to Xxxxxxx X. Xxxxxx,
Esq., Xxxxxx & XxXxxxx, 00000 XxxXxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxxxxxxx 92715), if sent to the Company, shall be mailed (certified or
registered mail, postage prepaid, return receipt requested), delivered or
telegraphed and confirmed in writing to the Company at Sunrise Preschools,
Inc., 0000 Xxxx Xxx Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000,
Attention: Mr. Xxxxx Xxxxx, President (with a copy to Xxxxxxxxxxx X. Xxxxxxx,
Esq., Squire, Xxxxxxx & Xxxxxxx, Two Renaissance Square, 00 Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Arizona 85004). Notices shall be effective if
mailed, 48 hours after deposit in the mail properly addressed, sent by
facsimile, upon receipt and in any other instance, when delivered. The failure
to deliver a copy of any communication to any copy party shall not affect the
effectiveness of such communication.
14. Successors. This Agreement shall inure to the benefit of and
shall be binding upon the several Underwriters, the Company, and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of
this Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole
and exclusive benefit of such
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persons and for the benefit of no other person except that (i) the indemnities
of the Company contained in Section 9 of this Agreement shall also be for the
benefit of any person or persons who control any Underwriter within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Underwriters contained in Section 9 of this Agreement shall
also be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement and any person or persons
who control the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act. No purchaser of Shares through any Underwriter shall
be deemed a successor because of such purchase.
15. Applicable Law. The validity and interpretation of this
Agreement, and the terms and conditions set forth herein, shall be governed by
and construed in accordance with the laws of the State of California without
giving effect to any provisions relating to conflicts of laws.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute an agreement binding the
Company and each of the several Underwriters.
Very truly yours,
SUNRISE PRESCHOOLS, INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx, President
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
X.X. XxXxx Securities, Inc.
South Coast Financial Securities, Inc.
(As Representatives of the several
Underwriters named in Schedule 1 hereto)
By: X.X. XxXxx Securities, Inc.
By: /s/ Xxxxxxx X. XxXxx
----------------------------
Xxxxxxx X. XxXxx, President
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SCHEDULE 1
UNDERWRITERS
Number of Shares
Underwriter to be sold
----------- ----------------
Total ----------------
