1
EXHIBIT 1.2
CRAGAR INDUSTRIES, INC.
850,000 SHARES OF COMMON STOCK
AND
850,000 COMMON STOCK PURCHASE WARRANTS
UNDERWRITING AGREEMENT
_______________, 1996
Xxxxxxxxx & Co.
As Representative of the
Several Underwriters
referred to herein
0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Ladies and Gentlemen:
CRAGAR Industries, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several underwriters (the "Underwriters")
named in Schedule I hereto for whom you are acting as representative (the
"Representative") an aggregate of 850,000 shares (the "Firm Shares") of Common
Stock, $.01 par value per share (the "Common Stock"), and 850,000 redeemable
common stock purchase warrants (the "Firm Warrants") exercisable for one share
of Common Stock each (the "Firm Warrants") (the Firm Shares and the Firm
Warrants together, the "Firm Securities"). The respective amounts of the Firm
Securities to be so purchased by the several Underwriters are set forth opposite
their names in Schedule I hereto. The Company also proposes to sell, at the
Underwriters' option, an aggregate of up to 127,500 additional shares (the
"Option Shares") of Common Stock and up to 127,500 additional Warrants (the
"Option Warrants") (the Option Shares and the Option Warrants together, the
"Option Securities") as discussed more fully in Section 2 below. The Company
further agrees to issue, upon the Closing Date as hereafter defined in Section
2, certain warrants (the "Representative's Warrants") to the Representative or
its designees as more fully discussed in Section 4(p) below. The Firm
Securities, the Option Securities (to the extent the aforementioned option is
exercised) and the shares into which the Warrants are exercisable are herein
collectively called the "Securities."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
2
1. Representations and Warranties of the Company.
The Company represents, warrants, and agrees as follows:
(a) A registration statement on Form SB-2 (File No.
333-13415) with respect to the Securities, including a form of
prospectus subject to completion, has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission under
the Act. Copies of such registration statement, including any
pre-effective and post-effective amendments thereto, the prospectuses
subject to completion (meeting the requirements of Rule 430A of the
Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have
heretofore been delivered by the Company to the Representative. Such
registration statement, herein referred to as the "Registration
Statement," upon filing of the Prospectus referred to below with the
Commission, shall be deemed to include all information omitted
therefrom in reliance upon Rule 430A and contained in the Prospectus or
term sheet referred to below, has been declared effective by the
Commission under the Act, and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement.
The term "Prospectus" as used in this Agreement means (i) the
prospectus in the form included in the Registration Statement, or (ii)
if the prospectus included in the Registration Statement omits
information in reliance upon Rule 430A under the Act and such
information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act or as part of a post-effective
amendment to the Registration Statement after the Registration
Statement becomes effective, the prospectus as so filed, or (iii) if
the prospectus included in the Registration Statement omits information
in reliance upon Rule 430A under the Act and such information is
included in a term sheet (as described in Rule 434(b) under the Act)
filed with the Commission pursuant to Rule 424(b) under the Act, the
prospectus included in the Registration Statement and such term sheet,
taken together. The prospectus subject to completion in the form
included in the Registration Statement at the time of the initial
filing of such Registration Statement with the Commission and as such
prospectus is amended from time to time until the date upon which the
Registration Statement is declared effective by the Commission is
referred to in this Agreement as the "Preliminary Prospectus."
(b) The Company is a corporation duly formed, validly
existing, and in good standing under the laws of the State of Delaware,
with full corporate power and corporate authority to own or lease its
properties and conduct its business as described in the Registration
Statement; the Company is qualified to transact business in all
jurisdictions in which the conduct of its business requires such
qualification, except where the failure to qualify would not have a
material adverse effect upon the business or property of the Company.
(c) The Company has authorized and outstanding
capital stock as set forth under the heading "Capitalization" in the
Prospectus; the outstanding shares of Common Stock of the Company have
been duly authorized and validly issued, are fully paid and
nonassessable, and have been issued in compliance with all federal and
state securities laws;
2
3
all of the Securities to be issued and sold by the Company pursuant to
this Agreement have been duly authorized and, when issued and paid for
as contemplated herein, will be validly issued, fully paid, and
nonassessable; and no preemptive rights of stockholders exist with
respect to any of the Securities nor the issue and sale thereof; no
stockholder of the Company has any right pursuant to any agreement to
require the Company to register, in the Registration Statement, the
sale of any shares owned by such stockholder under the Act; all
necessary and proper corporate proceedings have been taken to validly
authorize the issuance and sale of the Securities and no further
approval or authority of the stockholders or the Board of Directors of
the Company is required for the issuance and sale of the Securities to
be sold by the Company as contemplated herein.
(d) The Securities conform in all material respects
to the description thereof in the Registration Statement. Except as
specifically disclosed in the Registration Statement and the financial
statements of the Company and the related notes thereto, the Company
does not have outstanding any options or warrants to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities, or obligations. The
descriptions of the Company's stock option and other stock-based plans,
and of the options or other rights granted and exercised thereunder,
set forth in the Prospectus are accurate summaries and fairly present
the information required to be shown with respect to such plans and
rights in all material respects. The Company and its affiliates are not
currently offering any securities other than the Securities, nor have
they offered or sold any of the Company's securities, except as
described in the Registration Statement.
(e) The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus relating to the proposed offering of the Firm Securities nor
instituted or, to the best knowledge of the Company, threatened
instituting proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto
will contain, all statements that are required to be stated therein by,
and in all respects conform or will conform, as the case may be, to the
requirements of, the Act and the Rules and Regulations. Neither the
Registration Statement nor any amendment thereto, and neither the
Prospectus nor any supplement thereto, contains or will contain, as the
case may be, any untrue statement of a material fact or omits or will
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; provided, however, that the
Company makes no representations or warranties as to information
contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and
in conformity with, written information furnished to the Company by or
on behalf of the Representative specifically for use in the preparation
thereof.
(f) The financial statements of the Company, together
with related notes and schedules included in the Registration
Statement, present fairly in all material respects the financial
position and the results of operations of the Company, at the indicated
dates and for the indicated periods. Such financial statements,
schedules and related notes have been
3
4
prepared in accordance with generally accepted accounting principles,
consistently applied throughout the periods involved, and all
adjustments necessary for a fair presentation of results for such
periods have been made. The summary and selected financial and
statistical data and schedules included in the Registration Statement
present fairly the information shown therein and have been compiled on
a basis consistent with the financial statements presented therein. No
other financial statements or schedules are required to be included in
the Registration Statement.
(g) There is no action, suit, or proceeding pending
or, to the best knowledge of the Company, after due inquiry, threatened
against the Company before any court or regulatory, governmental, or
administrative agency or body, or arbitral forum, that might result in
a material adverse change in the business or financial condition of the
Company, except as set forth in the Registration Statement. Except as
set forth in the Registration Statement, the Company is not subject to
the provisions of any injunction, judgment, decree, or order of any
court, regulatory body, administrative agency, or other governmental
body or arbitral forum, that might result in a material adverse change
in the business, assets, or condition of the Company.
(h) The Company has good and marketable title to all
of the properties and assets reflected in either the financial
statements or as described in the Registration Statement and such
properties and assets are not subject to liens, mortgages, security
interests, pledges, or encumbrances of any kind, except those reflected
in such financial statements or as described in the Registration
Statement, and except for equipment leases entered into by the Company
in the ordinary course of its business and such encumbrances that,
individually or in the aggregate, would not have a material adverse
effect on the business or financial condition of the Company. The
Company occupies its leased properties under valid and binding leases
conforming in all material respects to the description thereof set
forth in the Registration Statement.
(i) The Company has filed (or has received extensions
with regard to) all federal, state, local, and foreign income tax
returns that have been required to be filed and has paid all taxes
indicated by said returns and has paid all tax assessments received by
it. There is no income, sales, use, transfer, or other tax deficiency
or assessment that has been or might reasonably be expected to be
asserted or threatened against the Company that might result in a
material adverse change in the business or financial condition of the
Company. The Company has paid all sales, use, transfer, and other taxes
applicable to it and its business and operations.
(j) Since the respective dates as of which
information is given in the Registration Statement, as it may be
amended or supplemented, and prior to the Closing Date and Option
Closing Date, and except in each case as described in or as
contemplated by the Registration Statement and Prospectus, (i) there
has not been any 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; (ii) there
has not been any transaction entered into by the Company, other than
transactions in the ordinary course of business or transactions
specifically described in the Registration Statement as it may be
4
5
amended or supplemented; (iii) the Company has not sustained any
material loss or interference with its businesses or properties from
fire, flood, windstorm, accident, or other calamity; (iv) the Company
has not paid or declared any dividends or other distribution with
respect to its capital stock and the Company is not in default in the
payment of principal of or interest on any outstanding debt
obligations; and (v) there has not been any change in the capital stock
(other than the sale of the Securities or the exercise of outstanding
stock options or warrants as described in the Registration Statement)
or material increase in indebtedness of the Company. The Company does
not have any material contingent obligation which is not disclosed in
the Registration Statement (or contained in the financial statements or
related notes thereto), as such may be amended or supplemented.
(k) The Company is not in violation or default under
any provision of its Certificate of Incorporation or Bylaws and is not
in material violation or default under any of its agreements, leases,
licenses, contracts, franchises, mortgages, permits, deeds of trust,
indentures, or other instruments or obligations to which the Company is
a party or by which it or any of its properties is bound or may be
materially affected (collectively, "Contracts").
(l) The execution and performance of this Agreement
and the consummation of the transactions herein contemplated do not and
will not conflict with or result in a breach of, or violation of, any
of the terms or provisions of, or constitute, either by itself or upon
notice or the passage of time or both, a default under, any Contract to
which the Company is a party or by which the Company or any of its
property may be bound or affected, except where such breach, violation,
or default would not have a material adverse effect on the business or
financial condition of the Company, or violate any of the provisions of
the Certificate of Incorporation or Bylaws of the Company or violate
any order, judgment, statute, rule, or regulation applicable to the
Company of any court or of any regulatory, administrative, or
governmental body or agency or arbitral forum having jurisdiction over
the Company or any of its property.
(m) The Company has the legal right, corporate power
and corporate authority to enter into this Agreement and perform the
transactions contemplated hereby. This Agreement has been duly
authorized, executed, and delivered by the Company and, assuming due
authorization, execution and acceptance by the Representative on behalf
of the several Underwriters, constitutes a legally binding agreement
enforceable against the Company in accordance with its terms, except as
the enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium, or other similar
laws affecting the rights of creditors generally and subject to the
effect of general principles of equity (including, without limitation,
matters of public policy and equitable principles).
(n) Each approval, registration, qualification,
license, permit, consent, order, authorization, designation,
declaration, or filing by or with any regulatory, administrative, or
other governmental body or agency necessary in connection with the
execution and delivery by the Company of this Agreement and the
consummation of the transactions herein contemplated (except such
additional actions as may be required to qualify the Securities for
public offering under state securities or Blue Sky laws) has been
obtained or made and each is in full force and effect.
5
6
(o) The Company owns or possesses adequate and
sufficient rights by license agreement or otherwise to use and enjoy
the full rights in and to all patents, patent rights, trade secrets,
license or royalty arrangements, trademarks and trademark rights,
service marks, trade names, copyrights, know how or proprietary
techniques or rights thereto of others, and governmental, regulatory,
or administrative authorizations, orders, permits, certificates, and
consents necessary for the conduct of the business of the Company other
than those that would not individually or in the aggregate have a
material adverse effect on the Company; the Company is not aware of any
pending or threatened action, suit, proceeding, or claim by others,
either domestically or internationally, that the Company is violating
any (i) patents, patent rights, copyrights, trademarks, or trademark
rights, inventions, service marks, trade names, licenses or royalty
arrangements, trade secrets, know how or proprietary techniques or
rights thereto of others, or (ii) governmental, regulatory or
administrative authorizations, orders, permits, certificates, and
consents; the Company is not aware, after due diligence, of any rights
of third parties to, or any infringement of, any of the Company's
patents, patent rights, trademarks or trademark rights, copyrights,
licenses or royalty arrangements, trade secrets, know how or
proprietary techniques, as well as processes and substances, or rights
thereto of others, that could materially adversely affect the use
thereof by the Company or that would have a material adverse effect on
the Company; the Company is not aware of any pending or threatened
action, suit, proceeding, or claim by others challenging the validity
or scope of any of such patents, patent rights, trademarks, or
trademark rights, copyrights, licenses or royalty arrangements, trade
secrets, know how, or proprietary techniques or rights thereto of
others. The Company possesses no patent.
(p) There are no Contracts or other documents
required to be described in the Registration Statement or to be filed
as exhibits to the Registration Statement by the Act or by the Rules
and Regulations that have not been described or filed as required.
(q) The Company is conducting its business in
compliance with all applicable laws, rules, and regulations of the
jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state, federal, and foreign
environmental laws and regulations, except where the failure to so
comply would not have a material adverse effect on the business or
financial condition of the Company. The Company possesses adequate
certificates or permits issued by the appropriate federal, state, and
local regulatory authorities necessary to conduct its business and to
retain possession of its properties. The Company has not received any
notice of any proceeding relating to the revocation or modification of
any such federal, state, and local regulatory certificates or permits.
(r) All transactions among the Company and the
officers, directors, and affiliates of the Company have been accurately
disclosed, in all material respects, in the Prospectus, to the extent
required to be disclosed in the Prospectus in accordance with the Act
and the Rules and Regulations. As used in this Agreement, the term
"affiliate" shall mean a person or entity controlling, controlled by,
or under common control with, any specified person or entity, or the
ability to direct, directly or indirectly, the management or policies
of the controlled person or entity, whether through the ownership of
voting securities, by contract, positions of employment, family
relationships, service as an officer, director, or partner of the
person or entity, or otherwise.
6
7
(s) The Company has not, to the best of its
knowledge, directly or indirectly, (i) made any unlawful contribution
to any candidate for public office, or failed to disclose fully any
contribution in violation of law, or (ii) made any payment to any
federal, state, local, or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United States or
any other such jurisdiction.
(t) The Company maintains insurance of the types and
in the amounts that it deems adequate for its business including, but
not limited to, general liability insurance and insurance covering all
real and personal property owned or leased by the Company against all
risks customarily insured against by similar businesses, all of which
insurance is in full force and effect.
(u) KPMG Peat Marwick, L.L.P., who have audited and
certified the financial statements filed with the Commission as part of
the Registration Statement, are independent public accountants as
required by the Act and the Rules and Regulations.
(v) The Company has taken all appropriate steps
reasonably necessary or appropriate to assure that no offering, sale,
or other disposition of any Common Stock of the Company will be made
directly or indirectly, by any of its affiliates, directors or
executive officers for a period of 12 months after the date of the
Prospectus, or by the persons specified in Schedule II for the periods
specified therein, in each case, except as otherwise provided herein or
with the prior written consent of the Representative. For a period of
two years from the date of the Prospectus, the Company, at its expense,
shall provide the Representative with copies of the Company's daily
transfer sheets, which shall be mailed to the Representative no less
frequently than weekly.
(w) The Company is classified as a "C" corporation
with the Internal Revenue Service.
(x) The Company's Board of Directors consists of
those persons listed in the Prospectus. Except as disclosed in the
Prospectus, none of such persons is employed by the Company nor is any
of them affiliated with the Company, except for service on its Board of
Directors.
(y) Except as provided for herein, no broker's or
finder's fees or commissions are due and payable by the Company, and
none will be paid by it.
(z) Neither the Company, nor to its knowledge, after
due and diligent inquiry, any person other than the Representative, has
made any representation, promise, or warranty, whether verbal or in
writing, to anyone, whether an existing stockholder or not, that any of
the Securities will be reserved for or directed to them during the
proposed public offering.
2. Purchase, Sale and Delivery of the Firm Securities. On the basis of
the representations, warranties, and covenants herein contained, and subject to
the conditions herein set forth, the Company agrees to sell to the Underwriters
and each Underwriter agrees, severally and not
7
8
jointly, to purchase, at the gross price per Share and per Warrant indicated in
the Prospectus (the "Initial Price") less the Underwriters' discount of ten
percent (10%) of the Initial Price, the Firm Shares and the number of Firm
Securities set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.
Payment for the Firm Securities to be sold hereunder is to be made by
certified or bank cashier's check(s) drawn to the order of the Company for the
Firm Securities, against delivery of certificates therefor to the Representative
for the several accounts of the Underwriters. Such payment is to be made at the
offices of X'Xxxxxx, Cavanagh, Anderson, Xxxxxxxxxxxxx & Xxxxxxxx, P.A., Xxx
Xxxx Xxxxxxxxx Xx., Xxxxxxx, Xxxxxxx 00000-0000 at 10:00 A.M., Phoenix time, on
the third business day after the date of this Agreement, or at such other time
and date not later than four business days thereafter as the Representative and
the Company shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the Boston
Stock Exchange, Inc. is open for trading and on which banks in Arizona are open
for business and not permitted by law or executive order to be closed.) The
certificates for the Firm Securities shall be in definitive form with engraved
borders and will be delivered in such denominations and in such registrations as
the Representative requests in writing not later than the second business day
prior to the Closing Date, and will be made available for inspection by the
Representative at least two business days prior to the Closing Date at the
offices of the Representative or American Stock Transfer & Trust Company located
in New York City or New Jersey, as the Representative elects. Delivery of the
certificates for the Firm Securities shall be made against payment therefor at
either of such offices, as the Representative elects.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
grants an option to the several Underwriters to purchase the Option Securities
at the Initial Price, less the Underwriters' discount, subject to adjustment as
provided in Section 9. The maximum number of Option Securities to be sold by the
Company is 127,500 shares of Common Stock and 127,500 Warrants. The option
granted hereby may be exercised in whole or in part, but only once, and at any
time upon written notice given within 45 days after the Closing Date, by the
Representative on behalf of the several Underwriters, to the Company setting
forth the number of Option Securities as to which the several Underwriters are
exercising the option, the names and denominations in which the Option
Securities are to be registered, and the time and date at which such
certificates are to be delivered. The certificates for Option Securities are to
be delivered to a location designated by the Representative on a date designated
by the Representative (which may be the same as the Closing Date but shall in no
event be earlier than the Closing Date nor earlier than three nor later than ten
business days after the giving of the notice referred to above) (such time and
date being herein referred to as the "Option Closing Date"). Except as otherwise
agreed by the Representative on behalf of the several Underwriters in writing,
the number of Option Securities to be purchased by each Underwriter shall be in
the same proportion to the total number of Option Securities being purchased as
the number of Firm Securities being purchased by such Underwriter bears to the
total number of the Firm Securities, adjusted by the Representative in such
manner as to avoid fractional shares. The option with respect to the Option
Securities granted hereunder may be exercised solely to cover over-allotments in
the sale of the Firm Securities by the Underwriters or to permit purchases by
the Underwriters to the extent permitted by law. The Representative may cancel
such option at any time, in whole or in part, prior to its expiration, by giving
written notice of such cancellation to the
8
9
Company. To the extent, if any, that the option is exercised, payment for
the Option Securities shall be made on the Option Closing Date by certified or
bank cashier's check(s) drawn to the order of the Company for the Option
Securities, against delivery of certificates therefor at the offices of
X'Xxxxxx, Cavanagh, Anderson, Xxxxxxxxxxxxx & Xxxxxxxx, P.A. noted above.
3. Offering by the Underwriters. It is understood that the several
Underwriters are to make a public offering of the Firm Securities as soon as
practicable after the Registration Statement becomes effective. The Firm
Securities are to be initially offered to the public at the Initial Price set
forth in the Prospectus. The Representative may from time to time thereafter
change the public offering price and other selling terms. To the extent, if at
all, that any Option Securities are purchased pursuant to Section 2 hereof, the
Representative will offer them to the public on the foregoing terms.
It is further understood that the Representative will act on behalf of
the Underwriters in the offering and sale of the Securities, in accordance with
a Master Agreement Among Underwriters entered into by the Representative and the
several other Underwriters on or prior to the date hereof.
4. Covenants of the Company. The Company covenants and agrees with the
several Underwriters that:
(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a prospectus or term
sheet (as described in Rule 434(b) of the Rules and Regulations) containing
information previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A of the Rules and Regulations and (ii) not
file any amendment to the Registration Statement or supplement to the Prospectus
of which the Representative shall not previously have been advised and furnished
with a copy or to which the Representative shall have reasonably objected in
writing or which is not in compliance with the Rules and Regulations.
(b) The Company will advise the Representative promptly and
will confirm such advice in writing (i) when the Registration Statement has
become effective, (ii) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any additional
information, or (iii) of the issuance by the Commission or any state securities
commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any proceedings
for that purpose, and the Company will use its best efforts to prevent the
issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representative in
endeavoring to qualify the Securities for sale under the securities laws of such
jurisdictions as the Representative may have reasonably requested in writing and
will make such applications, file such documents, furnish such information, and
take such other actions as may be reasonably required by federal or state
securities laws or regulations whether before, during, or after the offering.
The Company will, from time to time, prepare and file such statements, reports,
and other documents, as are or may be required to continue such qualifications
in effect for so long a period as the Representative may reasonably
9
10
request for distribution of the Securities; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation or to take
any action that would subject it to service of process in suits, other than
relating to the sale of the Securities, in any jurisdiction where it is not now
so subject.
(d) The Company will register the Common Stock and the
Warrants with the Commission under the provisions of Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and will
maintain such registration in effect for a period of five years from the
effective date of the Registration Statement. The Company will qualify the
Securities for trading on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") and for listing on the Boston Stock
Exchange (the "BSE") and will use its best efforts to maintain such
qualification and listing for as long as the Common Stock is qualified for
inclusion in NASDAQ and on the BSE.
(e) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary Prospectus
as the Representative may reasonably request. The Company will deliver to, or
upon the order of, the Representative during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representative may
reasonably request. The Company will deliver to the Representative at or before
the Closing Date, two signed copies of the Registration Statement and all
amendments thereto, including all exhibits filed therewith, and will deliver to
the Representative such number of copies of the Registration Statement, without
exhibits, but including any information incorporated by reference, and of all
amendments thereto, as the Representative may request.
(f) If during the period of time in which a Prospectus is
required to be delivered under the Act, by an underwriter or dealer, any event
shall occur as a result of which, in the judgment of the Company or in the
opinion of counsel for the Representative, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein not
misleading, or if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Registration Statement, including the
Prospectus as so amended or supplemented, will not be misleading, or so that the
Registration Statement, including the Prospectus, will comply with the Act.
(g) The Company will make generally available to its
stockholders, as soon as it is practicable to do so, but in any event not later
than 15 months after the effective date of the Registration Statement, an
earnings statement in reasonable detail, covering a period of at least 12
consecutive months beginning after the effective date of the Registration
Statement, which earnings statement shall satisfy the requirements of Section 11
(a) of the Act and Rule 158 of the Rules and Regulations and will advise the
Representative in writing when such statement has been so made available and
will furnish the Representative with a true and correct copy thereof.
(h) The Company will, for a period of five years from the
effective date of the Registration Statement, deliver to the Representative
copies of annual reports and copies of all other documents, reports, and
information furnished by the Company to its stockholders or filed with any
securities exchange pursuant to the requirements of such exchange or with the
Commission pursuant
10
11
to the Act or the Exchange Act. The Company will deliver to the Representative
similar reports with respect to significant subsidiaries, as that term is
defined in the Rules and Regulations, which are not consolidated in the
Company's financial statements.
(i) The Company will apply the net proceeds of the sale of the
Securities sold by it materially in accordance with the statements under the
caption "Use of Proceeds" in the Prospectus.
(j) The Company has required each of its directors, executive
officers, affiliates, and each of its security holders listed on Schedule II, to
enter into agreements not to sell any shares of the Company's Common Stock for a
period of time ending on the date specified on Schedule II with respect to such
director, executive officer, affiliate, or security-holder (being a period
ending 12 months or 90 days, as so specified, from the date of the Prospectus),
without the prior written consent of the Representative. The Company has
furnished the Representative with an executed copy of each such agreement
substantially in the form attached as Schedule III which has been executed by
each person or entity specified in Schedule II.
(k) The Company has made original documents (or true copies
thereof) and other information relating to the Company's affairs available to
the Underwriters and to their counsel. Included within the documents made
available have been at least the Certificate of Incorporation and all amendments
thereto, the Bylaws and all amendments thereto, minutes of all of the meetings
of the incorporators, directors, and stockholders, all financial statements, and
copies of all Contracts to which the Company is a party or in which the Company
has an interest.
(l) For a period of five years from the effective date of the
Registration Statement, the Company shall provide the Representative, on not
less than an annual basis, with internal forecasts setting forth projected
results of operations for each quarterly and annual period in the two fiscal
years following the respective dates of such forecasts. Such forecasts shall be
provided to the Representative more frequently than annually if prepared more
frequently by management, and revised forecasts shall be prepared and provided
to the Representative when required to reflect more current information, revised
assumptions, or actual results that differ materially from those set forth in
the forecasts. Such forecasts shall be kept confidential unless made public
directly or indirectly by the Company or unless required by law or court order
to be made available to any person or entity and such forecasts shall not be
used in violation of applicable securities laws, and the Representative shall
indemnify the Company for any breach of this covenant. In addition, for a period
of five years from the effective date of the Registration Statement, the Company
will provide to the Representative on a timely basis periodic statements setting
forth such information regarding the Company's results of operations and
financial position (including balance sheet, profit and loss statements, and
data regarding outstanding purchase orders) as is regularly prepared by the
management of the Company, in any such case to the extent such information is
not covered by Section 4(h) above.
(m) The Company has appointed American Stock Transfer & Trust
Company as the Company's transfer agent. Unless the Representative otherwise
consents in writing, the Company will continue to retain such transfer agent, or
a transfer agent reasonably satisfactory to the Representative, for a period of
five years following the effective date of the Registration Statement. The
Company will make arrangements to have available at the office of the transfer
agent sufficient
11
12
quantities of certificates representing Shares of Common Stock issuable upon the
exercise of the Warrants as may be needed for the quick and efficient transfer
of such Securities. During such five year period, at the request of the
Representative, the Company shall cause such transfer agent to provide the
Representative on a monthly basis with copies of the Company's stock transfer
sheets and, when requested by the Representative, a current list of the
Company's security holders, including a list of the beneficial owners of
securities held by a depository trust company, and other nominees.
(n) For a period of five years from the effective date of the
Registration Statement, the Company, at its expense, shall continue to retain
KPMG Peat Marwick, L.L.P., or another accounting firm reasonably acceptable to
the Representative, as its regularly engaged independent certified public
accountants and shall cause such accountants to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's 10-Q quarterly report, and the filing of quarterly financial
information to stockholders.
(o) Except with the Representative's approval, the Company
agrees that the Company will not do any of the following for 25 days after the
Closing Date or the Option Closing Date, whichever occurs later:
(i) Undertake or authorize any change in its capital
structure or authorize, issue or permit any public or private
offering of additional securities;
(ii) Authorize, create, issue, or sell any funded
obligations, notes, or other evidences of indebtedness, except
in the ordinary course of business;
(iii) Consolidate or merge with or into any other
corporation or effect a material corporate reorganization of
the Company; or
(iv) Create any mortgage or any lien upon any of its
properties or assets, except in the ordinary course of its
business.
(p) The Company shall deliver to the Representative warrants
(the "Representative's Warrants") to purchase, for $.001 per warrant, in the
aggregate 85,000 Shares of Common Stock and 85,000 Warrants in the form attached
hereto as Appendix "A." The Representative's Warrants will be exercisable for a
four-year term, commencing one year after the effective date of the Registration
Statement, at an exercise price equal to one hundred twenty percent (120%) of
the Initial Price of the Firm Securities. The Representative's Warrants shall
not be redeemable by the Company, and shall be exercisable at any time
commencing one year after the effective date of the Registration Statement and
continuing for four years thereafter.
(q) For a period commencing on the date hereof and ending 12
months after the effective date of the Registration Statement, neither the
Company nor any of its officers or directors will hold discussions with any
member of the news media or issue news releases or other publicity about the
Company regarding the financial condition or any significant event of the
Company without the approval of the Company's legal counsel named in the
Prospectus under the heading
12
13
"Legal Matters," or such other counsel as may be approved by the Representative.
During such period, the Company will deliver to the Representative copies of
such news releases or other publicity about the Company promptly after
distribution thereof.
(r) For a period of five years from the effective date of the
Registration Statement, the Company will appoint a non-voting advisor,
designated by the Representative, to its Board of Directors; such designee shall
attend meetings of the Board and receive no more or less compensation than is
paid to other non-management directors of the Company and shall be entitled to
receive reimbursement for all reasonable costs incurred in attending such
meetings, including, but not limited to, food, lodging, and transportation. To
the extent permitted by law, the Company will indemnify the Representative and
its designee for the actions of such designee as a director of the Company. In
the event the Company maintains a liability insurance policy affording coverage
for the acts of its officers and directors, it will agree, if possible, to
include both the Representative and its designee as an insured under such
policy. If the Representative does not exercise its option to designate an
advisor to the Company's Board of Directors, the Representative shall
nonetheless have the right to send a representative (who need not be the same
individual from meeting to meeting) to observe each meeting of the Board of
Directors. The Company agrees to give the Representative notice of each such
meeting and to provide the Representative with an agenda and minutes of the
meeting no later than it gives such notice and provides such items to the
directors.
5. Costs and Expenses. The Company will pay or cause to be paid all
costs, expenses and fees in connection with the offering or incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: (a) all
expenses (including any transfer taxes) incurred in connection with the delivery
to the several Underwriters of the Securities sold hereunder, (b) all fees and
expenses (including, without limitation, fees and expenses of the Company's
accountants and counsel, but excluding fees and expenses of counsel for the
Underwriters other than fees in connection with blue sky matters in connection
with the preparation, printing, filing, delivery, and shipping of the
Registration Statement (including the financial statements therein and all
amendments and exhibits thereto)), Preliminary Prospectuses and the Prospectus
as amended or supplemented, (c) the cost of printing, filing, and delivering
this Agreement and other underwriting documents including Underwriters'
Questionnaires, Underwriters' Powers of Attorney, Blue Sky Memoranda, Agreements
Among Underwriters, Selected Dealers Agreements, Invitation Telecopy, and any
letters transmitting the offering materials to the Underwriters or selling group
members (including costs of mailing and shipment), (d) all filing fees and fees
and disbursements of counsel to the Underwriters incurred in connection with the
qualification of the Securities and their components for offer and sale under
the applicable state or foreign securities laws, (e) filing and listing fees of
the Commission, National Association of Securities Dealers, Inc., ("NASD"),
NASDAQ and any other similar entity in connection with the offering, (f) the
cost of printing certificates representing the Securities and issuable upon the
exercise of the Warrants, (g) the costs and charges of any transfer agent or
registrar, (h) the costs of advertising, including but not limited to the Wall
Street Journal and the Arizona Republic, as well as any other advertising
undertaken at the Company's request, (i) the cost of the Company's executive
employees for marketing and public relations associated with "road shows" and
other presentations to NASD approved broker/dealers, (j) the fees for financial
coverage in Standard and Poor's Corporate Record Service, (k) the costs of
preparing, printing and distributing bound volumes for the Representative and
its counsel, and (l) all other costs and expenses incident
13
14
to the performance of the Company's obligations under this Agreement which are
not otherwise provided for in this Section. The Company shall use a printer
acceptable to the Representative. Any transfer taxes imposed on the sale of the
Securities to the several Underwriters will be paid by the Company. The Company
shall pay to the Representative a non-accountable expense allowance of up to
three percent (3%) of the gross proceeds of the Securities, payable at the
Closing(s), of which Twenty-Five Thousand Dollars ($25,000) has been advanced to
the Representative on or before the date hereof, which shall be credited to the
allowance noted above. This expense allowance is in addition to the
Underwriters' discount. The Underwriters shall be responsible for the fees and
disbursements of their counsel, except as noted otherwise in this Section 5. The
Company shall not be required to pay for any of the Underwriters' other
expenses, except that if this Agreement shall not be consummated because the
conditions in Section 7 hereof are not satisfied, or because this Agreement is
terminated by the Representative pursuant to Section 6 hereof, or by reason of
any failure, refusal, or inability on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement or to comply with any of
the terms hereof on its part to be performed, unless such failure to satisfy
said condition or to comply with said terms is due solely to the default of the
Underwriters, then the Company shall reimburse the several Underwriters for
out-of-pocket expenses, including fees and disbursements of counsel, incurred in
connection with investigating, marketing, and proposing to market the Securities
or in contemplation of performing their obligations hereunder, and in any event
the Underwriters may retain amounts theretofore paid to them as set forth above.
6. Conditions of Obligations of the Underwriters. The several
obligations of the Underwriters to purchase the Firm Securities on the Closing
Date and the Option Securities, if any, on the Option Closing Date are subject
to the accuracy, as of the Closing Date or the Option Closing Date, as the case
may be, of the representations and warranties of the Company contained herein,
and to the performance by the Company of its covenants and obligations hereunder
and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., Arizona time, on the date of this Agreement, or such later
date and time as may be consented to in writing by the Representative. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceedings for that purpose
shall have been taken or, to the best knowledge of the Company, after due
inquiry, shall be contemplated by the Commission or any state securities
commission.
(b) The Representative shall have received on the Closing Date
or the Option Closing Date, as the case may be, the opinion of Xxxxx & Xxxxxx,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters to the effect that:
(i) The Company is a corporation duly organized,
validly existing, and in good standing as a corporation under
the laws of the State of Delaware, with corporate power and
corporate authority to own or lease its properties and conduct
its business as described in the Registration Statement; the
Company is duly qualified as a foreign corporation to transact
business in all jurisdictions in which the conduct of its
business requires such qualification, except where the failure
to qualify would
14
15
not have a material adverse effect upon the business or
financial condition of the Company.
(ii) The Company has authorized and outstanding
capital stock as set forth under the caption "Capitalization"
in the Prospectus; and the outstanding shares of Common Stock
of the Company have been duly authorized and validly issued,
are fully paid and nonassessable.
(iii) All of the Securities to be issued and sold by
the Company pursuant to this Agreement have been duly
authorized by all necessary corporate action and, when issued
and delivered to the Underwriters against payment therefor, as
contemplated herein, will be validly issued, fully paid, and
nonassessable. Further, to the best of such counsel's
knowledge, no preemptive rights of stockholders exist with
respect to any of the Securities or the issue and sale
thereof; no stockholder of the Company has any right pursuant
to any agreement to require the Company to register the sale
of any shares owned by such stockholder under the Act in the
public offering contemplated herein; and no further approval
or authority of the stockholders of the Board of Directors of
the Company is required for the issuance and sale of the
Securities to be sold by the Company as contemplated herein.
(iv) The certificates evidencing the Securities to be
delivered hereunder comply in all material respects with the
requirements of Delaware law and the Securities conform in all
material respects to the description thereof contained in the
Prospectus.
(v) Except as specifically disclosed in the
Registration Statement and the financial statements of the
Company, and the related notes thereto, the Company does not
have outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of its capital stock
or any such options, rights, convertible securities, or
obligations. The descriptions of the Company's stock option
and other stock-based plans, and any other options or warrants
heretofore granted by the Company, set forth in the Prospectus
are accurate summaries and fairly present the information
required to be shown with respect to such plans and rights in
all material respects.
(vi) The Registration Statement has become effective
under the Act and no stop order proceedings with respect
thereto have been instituted or are pending or threatened
under the Act and nothing has come to such counsel's attention
to lead them to believe that such proceedings are
contemplated; any required filing of the Prospectus and any
supplement thereto or term sheet (as described in Rule 434(b)
of the Rules and Regulations) relating thereto pursuant to
Rule 424(b) of the Rules and Regulations has been made in
accordance with Rule 424(b).
(vii) The Registration Statement, all Preliminary
Prospectuses, the Prospectus and each amendment or supplement
thereto comply as to form in all
15
16
material respects with the requirements of the Act and the
Rules and Regulations (except that such counsel need express
no opinion as to the financial statements, schedules, and
other financial and statistical information included therein).
(viii) Such counsel does not know of any Contracts or
other documents required to be filed as exhibits to the
Registration Statement or described in the Registration
Statement or the Prospectus that are required to be filed or
described, which are not so filed or described as required,
and such Contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized
in all material respects.
(ix) Except as otherwise described in the
Registration Statement and Prospectus, to the best of such
counsel's knowledge, there is no action or suit pending before
any court of the United States of a character required to be
disclosed in the Prospectus pursuant to the Act and the Rules
and Regulations; and to the best of such counsel's knowledge,
there is no action, suit, or proceeding threatened by a
written communication to the Company against the Company
before any U.S. court or regulatory, governmental, or
administrative agency or body or arbitral forum of a character
required to be disclosed in the Prospectus pursuant to the Act
and the Rules and Regulations; and to the best of such
counsel's knowledge, the Company is not a party or subject to
the provisions of any injunction, judgment, decree, or order
of any court, regulatory body, administrative agency, or other
governmental body or agency or arbitral forum.
(x) The execution and performance of this Agreement
and the consummation of the transactions herein contemplated
do not and will not conflict with or result in the breach of,
or violation of, any of the terms or provisions of, or
constitute, either by itself or upon notice or the passage of
time or both, a default under, any Contract to which the
Company is a party or by which the Company or any of its
property may be bound or affected, except where such breach,
violation, or default would not have a material adverse effect
on the business or financial condition of the Company, or
violate any of the provisions of the Certificate of
Incorporation or Bylaws of the Company or violate any statute,
judgment, decree, order, rule, or regulation known to such
counsel or any court or of any governmental, regulatory, or
administrative body or agency or arbitral forum having
jurisdiction over the Company or any its property.
(xi) The Company is not in violation or default under
any provision of any of its Certificate of Incorporation or
Bylaws; and, to the best of such counsel's knowledge, the
Company is not in violation of or default under any Contracts
to which the Company is a party or by which it or any of its
properties is bound or may be affected, except where such
violation or default would not have a material adverse effect
on the business or financial condition of the Company.
16
17
(xii) The Company has the corporate power and
corporate authority to enter into this Agreement and perform
the transactions contemplated hereby. This Agreement has been
duly authorized, executed, and delivered by the Company, and,
assuming due authorization, execution, and acceptance by the
Representative on behalf of the Underwriters, this Agreement
constitutes a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as such
enforceability may be limited by or affected by judicial
decisions and laws governing, limiting, or affecting equitable
remedies or relief generally (including, without limitation,
matters of public policy and equitable principles), whether
considered in a proceeding at law or in equity, or by
bankruptcy, insolvency, liquidation, reorganization,
arrangement, moratorium, or other laws or judicial decisions
relating to or affecting rights of creditors generally, and
except to the extent that rights to indemnity hereunder may be
limited by federal or state securities laws or the public
policy underlying such laws.
(xiii) To the best of such counsel's knowledge, all
approvals, consents, orders, authorizations, designations,
registrations, permits, qualifications, licenses,
declarations, or filings by or with any regulatory,
administrative, or governmental body necessary in connection
with the execution and delivery by the Company of this
Agreement and the consummation of the transactions herein
contemplated have been obtained or made and all are in full
force and effect.
(xiv) To the knowledge of such counsel, the Company
owns or possesses adequate and sufficient rights by license
agreements or otherwise to use and enjoy the full rights in
and to all patents, patent rights, trade secrets, licenses or
royalty arrangements, trademarks and trademark rights, service
marks, trade names, copyrights, know how or proprietary
techniques, or rights thereto of others, and governmental,
regulatory, or administrative authorizations, orders, permits,
certificates, and consents necessary for the conduct of the
business of the Company, except where the failure to possess
the same would not have a material adverse effect on the
business or financial condition of the Company; such counsel
is not aware of any pending or threatened action, suit,
proceeding, or claim by others, either domestically or
internationally, that the Company is violating any patents,
patent rights, copyrights, trademarks or trademark rights,
service marks, trade names, licenses or royalty arrangements,
trade secrets, know how or proprietary techniques, or rights
thereto of others; such counsel is not aware of any rights of
third parties to, or any infringement of, any of the Company's
patents, patent rights, trademarks or trademark rights,
copyrights, licenses or royalty arrangements, trade secrets,
know how or proprietary techniques, the existence of which
would have a material adverse affect on the business or
financial condition of the Company; and such counsel is not
aware of any pending or threatened action, suit, proceeding,
or claim by others challenging the validity or scope of any of
such patents, patent rights, trademarks or trademark rights,
copyrights, license or royalty arrangements, trade secrets,
know how, or proprietary techniques or rights thereto of
others, the existence of which would have a material adverse
effect on the business or financial condition of the Company.
The Company has no patents.
17
18
(xv) No transfer taxes are required to be paid under
any applicable state law in connection with the sale and
delivery of the Securities to the Underwriters hereunder.
In rendering such opinion such counsel may rely as to matters governed
by the laws, other than federal laws of the United States of America, on local
counsel acceptable to the Representative in applicable jurisdictions, provided
that such counsel shall state that they believe that they and the Underwriters
are justified in relying on such other counsel. As to factual matters, such
counsel may rely on certificates obtained from directors and officers of the
Company, its stockholders, and from public officials. Matters stated to
counsel's knowledge shall be made after due and diligent inquiry, and the
opinion shall so note that requirement. In addition to the matters set forth
above, such opinion also shall include a statement to the effect that nothing
has come to the attention of such counsel which leads them to believe that the
Registration Statement, or any amendment thereto, at the time the Registration
Statement or amendment became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or the Prospectus or any amendment or
supplement thereto, at the time it was filed pursuant to Rule 424(b) or at the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that such
counsel need express no view as to financial statements, schedules, and other
financial information and statistical data and information included therein).
Such counsel shall permit X'Xxxxxx, Cavanagh, Anderson, Xxxxxxxxxxxxx &
Xxxxxxxx, P.A. to rely upon such opinion in rendering its opinion under Section
6(c).
(c) The Underwriters shall have received from X'Xxxxxx,
Cavanagh, Anderson, Xxxxxxxxxxxxx & Xxxxxxxx, P.A., counsel for the
Underwriters, an opinion dated the Closing Date and the Option Closing Date, if
any, substantially to the effect that (i) the Registration Statement has become
effective under the Act and to the best of the knowledge of such counsel, no
stop order proceedings with respect thereto have been instituted or are pending
or threatened under the Act; and (ii) the Registration Statement, all
Preliminary Prospectuses, the Prospectus, and each amendment or supplement
thereto comply as to form in all material respects with the requirements of the
Act and the applicable Rules and Regulations thereunder (except that such
counsel need express no opinion as to the financial statements, schedules, and
other financial or statistical information included therein). In rendering such
opinion, X'Xxxxxx, Cavanagh, Anderson, Xxxxxxxxxxxxx & Xxxxxxxx, P.A. may rely
as to all matters governed other than by Arizona and federal laws on the opinion
of counsel referred to in paragraph (b) of this Section 6. In addition to the
matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which leads them
to believe that the Registration Statement, the Prospectus, or any amendment
thereto contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or the Prospectus or any amendment or supplement
thereto, at the time it was filed pursuant to Rule 424(b) or at the Closing Date
or the Option Closing Date, as the case may be, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that such
counsel need express no view as to financial statements, schedules, and other
18
19
financial information included therein). With respect to such statement,
X'Xxxxxx, Cavanagh, Anderson, Xxxxxxxxxxxxx & Xxxxxxxx, P.A. may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.
(d) The Representative and the Company shall have received at
or prior to the Closing Date from X'Xxxxxx, Cavanagh, Anderson, Xxxxxxxxxxxxx &
Xxxxxxxx, P.A., a Blue Sky memorandum, in form and substance satisfactory to the
Representative, with respect to the qualification for offering and sale by the
Underwriters of the Securities under the state securities or Blue Sky laws of
such jurisdictions as the Representative may have designated to the Company in
writing.
(e) The Representative shall have received on the date hereof
and on the Closing Date and the Option Closing Date, as the case may be, a
signed letter from KPMG Peat Marwick, L.L.P., auditors for the Company, dated
the date hereof, the Closing Date and the Option Closing Date, as the case may
be, which shall confirm, on the basis of a review in accordance with the
procedures set forth in the letter signed by such firm and dated and delivered
to the Representative on the date noted above the following matters:
(i) They are independent certified public accountants
with respect to the Company within the meaning of the Act and
the applicable Rules and Regulations.
(ii) The financial statements and schedules included
in the Registration Statement and Prospectus covered by their
reports therein set forth comply as to form in all material
respects with the applicable accounting requirements of the
Act and the applicable Rules and Regulations.
(iii) On the basis of procedures (but not an
examination in accordance with generally accepted auditing
standards) consisting of a reading of the minutes of meetings
and consents of the stockholders and Board of Directors of the
Company and the committees of such Board subsequent to
September 30, 1996, as set forth in the minute books of the
Company, inquiries of officers and other employees of the
Company who have responsibilities for financial and accounting
matters with respect to transactions and events subsequent to
September 30, 1996, and such other specified procedures and
inquiries to a date not more than three days prior to the date
of such letter, nothing has come to their attention which in
their judgment would indicate that (A) with respect to the
period subsequent to September 30, 1996, there were, as of the
date of the most recent available monthly consolidated
financial statements of the Company and, as of a specified
date not more than three days prior to the date of such
letter, any changes in the capital stock or long-term
indebtedness of the Company or payment or declaration of any
dividend or other distribution, or decrease in net current
assets, total assets or net stockholder's equity, in each case
as compared with the amounts shown in the most recent audited
consolidated financial statements included in the Registration
Statement and the Prospectus, except for changes or decreases
which the Registration Statement and the Prospectus disclose
have occurred or may occur or which are set forth in such
letter or (B) during the period from September 30, 1996, to
the date of the most recent available monthly
19
20
unaudited consolidated financial statements of the Company and
to a specified date not more than five days prior to the date
of such letter, there was any decrease, as compared with the
three-month period ended September 30, 1996, in total revenues
or total or per share net income, except for decreases that
the Registration Statement and the Prospectus disclose have
occurred or may occur or that are set forth in such letter.
(iv) Stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, and other financial information pertaining to the
Company set forth in the Registration Statement and the
Prospectus, which have been specified by the Representative,
to the extent that such amounts, numbers, and percentages and
information may be derived from the general accounting and
financial records of the Company and its subsidiaries or from
schedules furnished by the Company, with the results obtained
from the application of specified reasonings, inquiries and
other appropriate procedures specified by the Representative
(which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set
forth in such letter heretofore delivered, and found them to
be in agreement.
(v) Such other matters as may be reasonably requested
by the Underwriters. All such letters shall be in form and
substance satisfactory to the Representative and its counsel.
(f) The Representative shall have received on the Closing Date
and the Option Closing Date, if any, a certificate or certificates on behalf of
the Company by the Chief Executive Officer and the Chief Financial Officer of
the Company to the effect that, as of the Closing Date or the Option Closing
Date, as the case may be, each of them jointly and severally represents as
follows:
(i) The Registration Statement has become effective
under the Act and no stop order suspending the effectiveness
of the Registration Statement has been issued, and no
proceedings for such purpose have been taken or are, to the
best of their knowledge, after due inquiry, contemplated or
threatened by the Commission or any state securities
commissions.
(ii) They do not know of any investigation,
litigation, or proceeding instituted or threatened against the
Company of a character required to be disclosed in the
Registration Statement which is not so disclosed as required
by the Act or the Rules and Regulations; and they do not know
of any Contract or other document required to be filed as an
exhibit to the Registration Statement which is not so filed.
(iii) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion, as of the
effective date of the Registration Statement, the statements
contained in the Registration Statement were and are correct,
in all material respects, and such Registration Statement and
Prospectus do not omit to state a material fact required to be
stated therein or necessary in order to
20
21
make the statements therein, in light of the circumstances
under which they were made, not misleading and, in their
opinion, since the effective date of the Registration
Statement, no event has occurred which should be set forth in
a supplement to or an amendment of the Prospectus which has
not been so set forth in such supplement or amendment.
(iv) The representations and warranties of the
Company contained in Section 1 hereof are true and correct in
all material respects as of the Closing Date or the Option
Closing Date, as the case may be, as if such representations
and warranties were made as of such date; and all covenants,
agreements, and conditions to be performed or satisfied by the
Company under this Agreement on or prior to the Closing Date
or the Option Closing Date, as the case may be, have been
performed or satisfied.
(g) The Company shall have furnished to the Representative
such further certificates and documents confirming the representations,
warranties and covenants contained herein and related matters as the
Representative may reasonably have requested.
The opinions and certificates described in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
respects satisfactory to the Representative and to X'Xxxxxx, Cavanagh, Anderson,
Xxxxxxxxxxxxx & Xxxxxxxx, P.A., counsel for the Underwriters and any other
counsel for the Underwriters.
If any of the conditions herein provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be. In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. Conditions of the Obligations of the Company. The obligations of the
Company to sell and deliver the Securities required to be delivered as and when
specified in this Agreement are subject to the conditions that at the Closing
Date or the Option Closing Date, as the case may be, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and in
effect or proceedings therefor initiated or threatened.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and its respective affiliates, directors, officers, partners,
employees, agents, counsel, and representatives, (collectively, "Underwriter
Parties") against any losses, claims, damages, or liabilities to which such
Underwriter Parties or any one or more of them may become subject under the Act
or otherwise, insofar as such losses, claims, damages, or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon (i)
any failure by the Company or any of its affiliates, directors, officers,
employees, agents, counsel, and representatives (collectively, the "Company
Parties") to perform any obligation hereunder or any other agreement among any
of the Company Parties and
21
22
any of the Underwriter Parties, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (iii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made, and will
reimburse each Underwriter Party for any legal or other expenses incurred by
such Underwriter Party in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided, however, that
(X) 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 an untrue
statement, or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Underwriters specifically
for use in the preparation thereof (which the parties hereto agree is limited
solely to that information contained in the last paragraph on the cover page and
the paragraph relating to stabilization on page 2 of the Prospectus or
Preliminary Prospectus and in the section thereof entitled "Underwriting"), and
(Y) such indemnity with respect to any Preliminary Prospectus shall not inure to
the benefit of any Underwriter Party from whom the person asserting any such
loss, claim, damage, or liability purchased the Securities which are the subject
thereof if such person did not receive a copy of the Prospectus (or the
Prospectus as amended or supplemented) at or prior to the confirmation of the
sale or such Securities to such person in any case where such delivery is
required by the Act and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented.) This indemnity agreement will be in
addition to any liability that the Company may otherwise have.
(b) Each Underwriter will severally indemnify and hold
harmless the Company Parties against any losses, claims, damages, or liabilities
to which the Company Parties or any one or more of them may become subject,
under the Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any failure by such Underwriter Party to perform any obligations
hereunder or any other agreement among any of the Underwriter Parties and any of
the Company Parties, (ii) any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or (iii) the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and will reimburse any
legal or other expense reasonably incurred by the Company Parties in connection
with investigating or defending any such loss, claim, damage, liability, action,
or proceeding; provided, however, that each Underwriter will be liable in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through such Underwriter specifically
for use in the preparation thereof (which the parties hereto agree is limited
solely to that information contained in the last paragraph on the cover page and
the paragraph relating to stabilization on page 2 of the Prospectus or
Preliminary Prospectus and in the section thereof entitled "Underwriting"). This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
22
23
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was prejudiced by the failure to give such notice,
but the failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of the provisions of Section 8(a)
or (b). In case any such proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party and shall pay as incurred the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the indemnifying party shall pay as incurred the
fees and expenses of the counsel retained by the indemnified party in the event
(i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm for all such
indemnified parties. Such firm shall be designated in writing by the
Representative in the case of parties indemnified pursuant to Sections 8(a) and
by the Company in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages, or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages, or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Securities.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law or if the indemnified party failed to give the
notice required under Section 8(c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, or liabilities (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall
23
24
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting fees and commissions received by the Underwriters, in each case as
set forth in the table on the cover page of the Prospectus. The relative fault
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 on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to above in this Section 8(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions or proceedings in respect thereof)
referred to above in this Section 8(d) shall be deemed to include 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 subsection 8 (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Securities purchased by that Underwriter, and (ii) no person
guilty of fraudulent misrepresentations (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 in this Section
8(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement,
any Preliminary Prospectus, the Prospectus, or any supplement or amendment
thereto, each party against whom contribution may be sought under this Section 8
hereby consents to the jurisdiction of any court having jurisdiction over any
other contributing party, agrees that process issuing from such court may be
served upon him or it by any other contributing party and consents to the
service of such process and agrees that any other contributing party may join
him or it as an additional defendant in any such proceeding in which such other
contributing party is a party.
9. Default by Underwriters. If on the Closing Date or the Option
Closing Date, as the case may be, any Underwriter shall fail to purchase and pay
for the portion of the Securities which such Underwriter has agreed to purchase
and pay for on such date (otherwise than by reason of any default on the part of
the Company or the failure to occur of a condition precedent to the Closing),
the Representative on behalf of the Underwriters, shall use its best efforts to
procure as soon as possible but not later than five business days thereafter one
or more of the other Underwriters, or any others, to purchase from the Company
such amounts as may be agreed upon and upon the terms set forth herein, the Firm
Securities or Option Securities, as the case may be, which the defaulting
Underwriter or Underwriters failed to purchase. If during such period the
Representative shall not have procured such other Underwriters, or any others,
to purchase the Firm Securities or Option Securities, as the case may be, agreed
to be purchased by the defaulting Underwriter or Underwriters then (a) if the
aggregate number of shares with respect to which such default shall occur does
not exceed 10% of the Firm Securities or Option Securities, as the case may be,
covered hereby, the other Underwriters shall be obligated, severally, in
proportion to the respective numbers of Firm
24
25
Securities or Option Securities, as the case may be, which such defaulting
Underwriter or Underwriters failed to purchase, or (b) if the aggregate number
of shares of Firm Securities or Option Securities, as the case may be, with
respect to which such default shall occur exceeds 10% of the Firm Securities or
Option Securities, as the case may be, covered hereby, the Company or the
Representative on behalf of the Underwriters will have the right, by written
notice given within the next 24-hour period to the parties to this Agreement, to
terminate this Agreement without liability on the part of the non-defaulting
Underwriters of the Company, except to the extent provided in Section 8 and
Section 5 hereof. In the event of a default by any Underwriter or Underwriters,
as set forth in this Section 9, the Closing Date or Option Closing Date, as the
case may be, may be postponed for such period, not exceeding seven days, as the
Representative may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. Notices. All communications hereunder must be in writing and,
except as otherwise provided herein, will be mailed, delivered, telecopied, or
telegraphed and confirmed as follows: if to the Underwriters, to Xxxxxxxxx &
Co., 0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000; Telephone
(000) 000-0000, Fax: (000) 000-0000; Attention: Xx. Xxxxx Xxxxxxx, with a copy
to X'Xxxxxx, Cavanagh, Anderson, Xxxxxxxxxxxxx & Xxxxxxxx, P.A., Xxx Xxxx
Xxxxxxxxx Xx., Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000-0000; Telephone (602)
000-0000; Fax: (000) 000-0000; Attention: Xxxxxx X. Xxxx, Esq.; if to the
Company, to CRAGAR Industries, Inc., 0000 Xxxxx 00xx Xxxxxx, Xxxxxxx, Xxxxxxx
00000; Telephone: (000) 000-0000, Fax: (000) 000-0000; Attention: Xx. Xxxxxxx X.
Xxxxxxxxx, President.
11. Termination. This Agreement may be terminated by the Representative
by notice to the Company as follows:
(a) at any time prior to the earlier of (i) the time the
Securities are released by the Representative for sale by notice to the
Underwriters, or (ii) 11:30 A.M., Phoenix time, on the first business day
following the date of this Agreement.
(b) at any time prior to the Closing Date if any of the
following has 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 business or financial condition 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 or
political conditions if the effect of such outbreak, calamity, crisis, or change
on the financial markets or economic conditions would, in the reasonable
judgment of the Representative, have a material adverse effect on the securities
markets in the United States, (iii) suspension of trading in securities on the
New York Stock Exchange, Inc., the American Stock Exchange, or the BSE, or
limitation on prices (other than limitations on hours or numbers of days of
trading) for securities on any such exchange, (iv) the enactment, publication,
decree, or other promulgation of any federal or state statute, regulation, rule
or order of any court or other
25
26
governmental authority which in the reasonable opinion of the Representative
materially and adversely affects or will materially or adversely affect the
business or operations of the Company or (v) declaration of a banking moratorium
by either federal or New York authorities.
(c) as provided in Sections 6 and 9 of this Agreement.
This Agreement also may be terminated by the Representative, by notice
to the Company, as to any obligation of the Underwriters to purchase the Option
Securities, upon the occurrence at any time at or prior to the Option Closing
Date of any of the events described in subparagraph (b) above or as provided in
Sections 6 and 9 of this Agreement.
12. Successors. This Agreement has been and is made solely for the
benefit of the Underwriters and the Company and their respective successors,
executors, administrators, heirs, and assigns, and the Underwriter Parties and
Company Parties referred to herein, and no other person will have any right or
obligation hereunder. The term "successors" shall not include any purchaser of
the Securities merely because of such purchase.
13. Miscellaneous. The reimbursement, indemnification, and contribution
agreements contained in this Agreement and the representations and warranties in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter Party, or by or on behalf of any Company Party, and (c) delivery of
and payment for the Securities under this Agreement.
This Agreement and any notices delivered hereunder 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. This Agreement and
any and all notices may be delivered by telecopy and shall be effective upon
receipt, with the original of such document to be deposited promptly in the U.S.
Mail.
The statements set forth in the last paragraph on the cover page, the
paragraph on page 2 with respect to stabilization and under the caption
"Underwriting" in the Prospectus constitute the only written information
furnished by or on behalf of any Underwriter for inclusion in the Prospectus or
the Registration Statement.
This Agreement and all disputes and controversies relating hereto or in
connection with the transactions contemplated hereby shall be governed by, and
construed in accordance with, the laws of the State of New York.
26
27
If the foregoing agreement is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the several
Underwriters in accordance with its terms as of the date first above written.
Very truly yours,
CRAGAR INDUSTRIES, INC.
By:_____________________________________
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of ________________, 1996.
XXXXXXXXX & CO.
As Representative of the several
Underwriters listed on Schedule I
By:_______________________________
Name:
Title:
27
28
SCHEDULE I
Schedule of Underwriters
Number of Firm
Securities to be Purchased
Underwriter Shares Warrants
----------- ------ --------
Xxxxxxxxx & Co.
28
29
SCHEDULE II
NAME PERIOD OF AGREEMENT
---- NOT TO SELL
-----------
29
30
SCHEDULE III
Xxxxxxxxx & Co.
0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Gentlemen:
The undersigned is the holder of shares of capital stock or has the
right to acquire shares of capital stock (collectively "Securities") of CRAGAR
Industries, Inc. (the "Company"). I acknowledge and understand that you are
acting as the Underwriter in the proposed public offering of 850,000 Shares of
Common Stock of the Company and 850,000 Common Stock Purchase Warrants of the
Company, together with up to an additional 127,500 Shares of Common Stock and an
additional 127,500 Common Stock Purchase Warrants (collectively, the
"Securities") as set forth in a Prospectus which the undersigned has reviewed.
In connection with your agreeing to so act, and for your benefit, the
undersigned hereby undertakes and agrees with you that during the period of
[three months/12 months] from the date of the Prospectus relating to the
offering of the Securities, the undersigned will not offer for sale, sell or
otherwise dispose of, directly or indirectly, any securities of the Company, in
any manner whatsoever, whether pursuant to Rule 144 under the Securities Act of
1933 or otherwise, without your prior written consent. The undersigned further
understands that the Company will take such steps as may be necessary to enforce
the foregoing provisions and restrict the sale or transfer of such securities as
provided herein including, but not limited to, notification to the Company's
transfer agent regarding any such restrictions; and the undersigned hereby
agrees to and authorizes any actions and acknowledges that the Company and you
are relying upon this Agreement in taking any such actions.
If the foregoing conforms to your understanding of our agreement,
please so indicate by signing a copy of this Agreement, whereupon it shall
become a binding agreement between and among us.
Very truly yours,
----------------------------------------
Signature
----------------------------------------
Printed Name
----------------------------------------
Number of Shares
30
