EX-1
900,000 Units
SmartPros Ltd.
UNDERWRITING AGREEMENT
___________, 2004
Xxxxxxx Investment Company, Inc.
As Representative of the
several Underwriters
000 XX Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Gentlemen:
SmartPros Ltd., a Delaware corporation (the "COMPANY"), proposes to sell
to the several underwriters (the "UNDERWRITERS") named in Schedule I hereto for
whom you are acting as Representative (the "REPRESENTATIVE") an aggregate of
900,000 Units (the "FIRM UNITS") issued by the Company. Each Unit will consist
of two shares (individually a "Share" and collectively the "SHARES") of the
common stock, par value $0.0001, of the Company ("COMMON STOCK") and one
redeemable warrant (individually a "WARRANT" and collectively the "Warrants").
Each Warrant entitles the holder thereof to purchase one share of Common Stock
(collectively the "Warrant Shares") at a price equal to 75% of initial public
offering price of a Unit as set forth in Section 2 below. The Warrants are to be
issued under the terms of a Warrant Agreement (the "WARRANT AGREEMENT") by and
between the Company and American Stock Transfer & Trust Company, as warrant
agent (the "WARRANT AGENT"), in each case substantially in the form most
recently filed as an exhibit to the Registration Statement (hereinafter
defined). The respective number of the Firm Units to be so purchased by the
several Underwriters are set forth opposite their names in SCHEDULE I hereto.
The Company also proposes to grant to the Representative an option to purchase
in aggregate up to 135,000 additional Units (the "OPTION UNITS"), identical to
the Firm Units, as set forth below. Unless specified to the contrary, all
references herein to "Units" shall be deemed to include the Firm Units and the
Option Units (to the extent the aforementioned option has been exercised) and
all references herein to Shares, Warrants and Warrant Shares shall be deemed to
include the Shares, Warrants and Warrant Shares underlying the Option Units (to
the extent the aforementioned option has been exercised).
As the Representative, you have advised the Company that: (a) that you
are authorized to enter into this Agreement for yourself as Representative and
on behalf of the several Underwriters; and (b) the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm Units
set forth opposite their respective names in SCHEDULE I.
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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:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each of the Underwriters as follows:
(a) A registration statement on Form SB-2 (File No.
_____________) with respect to the Units 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. Copies of such registration statement, including any
amendments thereto, the preliminary prospectuses (meeting the requirements 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 you. Such registration statement, together with any
registration statement filed by the Company pursuant to Rule 462(b) of the Act,
herein referred to as the "REGISTRATION STATEMENT," which shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. "PROSPECTUS" means: (i) the form of prospectus
first filed with the Commission pursuant to Rule 424(b); or (ii) the last
preliminary prospectus included in the Registration Statement filed prior to the
time it becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Units, together with any term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "PRELIMINARY PROSPECTUS."
(b) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Except as described in the
Registration Statement, the Company does not own a controlling interest in any
other corporation or other business entity that has any material assets,
liabilities or operations. Each entity that the Registration Statement discloses
as being controlled by the Company (each a "SUBSIDIARY" and, collectively, the
"SUBSIDIARIES") has been duly organized and is validly existing under the laws
of its jurisdiction of organization and has the necessary legal power and
authority to own or lease its properties and to conduct its business as
described in the Registration Statement. The Company and each Subsidiary is duly
qualified to transact business in all jurisdictions in which the conduct of its
business requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, property, rights, assets, management, business
or prospects of the Company and the Subsidiaries considered as a whole (a
"Material Adverse Effect").
(c) The outstanding shares of each class or series of capital
stock or other equity interests of the Company and each Subsidiary have been
duly authorized and validly issued and are fully paid and non-assessable and,
except as disclosed in the Registration Statement, have been issued and sold by
the Company or the Subsidiary in compliance in all material respects with
applicable securities laws; the issuance and sale of the Units have been duly
authorized by all necessary corporate action and, when issued and paid for as
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contemplated herein, the Units will be validly issued, fully paid and
non-assessable; and no preemptive rights of shareholders exist with respect to
any security of the Company or the issue and sale thereof. Except as set forth
in the Registration Statement, neither the filing of the Registration Statement
nor the offering or sale of the Units as contemplated by this Agreement gives
rise to any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock or other securities
of the Company. The Company has duly and validly reserved, out of its authorized
and unissued Common Stock, for issuance upon exercise of the Warrants, including
the Warrants underlying the Units and the Warrants underlying the Units
underlying the Representative's Warrant, a number of shares sufficient for such
purposes.
(d) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct in all material respects.
The Common Stock conforms and the Warrants and the Representative's Warrants
will conform to the respective descriptions thereof contained in the
Registration Statement in all material respects. The forms of certificates for
the Common Stock, the Warrants and the Representative's Warrant conform in all
material respects to the requirements of the corporate law of Delaware.
(e) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Units nor instituted 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 the Company
and will conform in all material respects to the requirements of the Act and the
Rules and Regulations. The Registration Statement, the Prospectus and any
amendments or supplements thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which such
statements were or are made; 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 any Underwriter through the Representative,
specifically for use in the preparation thereof and further provided that, with
respect to information included in the Registration Statement and the Prospectus
in reliance on the opinion of experts identified therein, such representation is
given to the Company's best knowledge.
(f) The consolidated financial statements of the Company,
together with related notes and schedules as set forth in the Registration
Statement, present fairly the consolidated financial position and the results of
operations and cash flows of the Company and its consolidated subsidiaries at
the indicated dates and for the indicated periods. The impact of each material
accounting judgment made in the preparation of the financial statements included
in the Registration Statement has been fairly and adequately disclosed in the
notes thereto or elsewhere in the Registration Statement. Such financial
statements and related schedules have been prepared in accordance with generally
accepted principles of accounting, consistently applied throughout the periods
involved, except as disclosed herein
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and in the Registration Statement, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data of the Company included in the Registration Statement
presents fairly the information shown therein and such data has been compiled on
a basis consistent with the financial statements presented therein and the books
and records of the Company.
(g) McGladrey & Xxxxxx, who have certified certain of 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. There are no facts or circumstances that would cause the
selection and/or engagement of McGladrey & Xxxxxx as auditors of the Company's
financial statements included in the Registration Statement or the Prospectus to
constitute a violation of Title II of the Xxxxxxxx-Xxxxx Act of 2002 or any
rules adopted or proposed to be adopted pursuant thereto.
(h) There is no action, suit, claim or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any
Subsidiary before any court or administrative agency or otherwise, which, if
determined adversely to the Company or such Subsidiary, might reasonably be
expected to have a Material Adverse Effect or prevent the consummation of the
transactions contemplated hereby, except as set forth in the Registration
Statement.
(i) The Company and each Subsidiary either has, or has disposed
of in the ordinary course of business since December 31, 2003, good and
marketable title to all of its properties and material assets, tangible and
intangible, reflected in the consolidated balance sheet of the Company and its
consolidated Subsidiaries as of that date that is a part of the financial
statements included in the Registration Statement, and has good and marketable
title to all other property described in the Registration Statement as owned by
the Company or a Subsidiary, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those reflected in such financial statements (or
as described in the Registration Statement) or which are not material. All of
the leases and subleases under which the Company or any Subsidiary holds
properties are in full force and effect (with only such exceptions as are
commonly accepted by prudent companies engaged in the business of the Company or
such Subsidiary) and neither the Company nor any Subsidiary has received notice
of any claim that is materially adverse to the rights of the Company or any
Subsidiary under any of such leases or subleases.
(j) The Company, for itself and its Subsidiaries that have been
consolidated for tax purposes, has filed all federal, state, local and foreign
income tax returns which have been required to be filed prior to the date hereof
(other than those income tax returns as to which the Company has timely filed a
request for an extension to file) and has paid all taxes indicated by said
returns and all assessments received by the Company to the extent that such
taxes have become due and are not being contested in good faith. All material
tax liabilities have been adequately provided for in the financial statements of
the Company. Except as described in the Registration Statement, all of the
Subsidiaries are consolidated with the Company for tax purposes.
(k) Since the respective dates as of which information is given
in the Registration Statement, as it may have been amended or supplemented,
there has not been any
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change or development involving a prospective change whether or not occurring in
the ordinary course of business, that has had or might reasonably be expected to
have a Material Adverse Effect and there has not been any material transaction
entered into or any material transaction that is probable of being entered into
by the Company or any Subsidiary, other than transactions in the ordinary course
of business and changes and transactions described in the Registration
Statement, as it may be amended or supplemented. Neither the Company nor any
Subsidiary has any material contingent obligations that are not disclosed in the
Company's financial statements included in the Registration Statement or
elsewhere in the Prospectus.
(l) Neither the Company nor any Subsidiary is, nor, with the
giving of notice or lapse of time or both, will any such entity be, in violation
of or in default under its Certificate of Incorporation or Bylaws or other
charter documents or under any agreement, lease, contract, indenture or other
instrument or obligation to which it is a party or by which it, or any of its
properties, is bound and which default might reasonably be expected to have a
Material Adverse Effect. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated and the fulfillment of the
terms hereof will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust or other agreement or instrument to which the Company is a party, or of
the Certificate of Incorporation or Bylaws of the Company or any order, rule or
regulation applicable to the Company of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction, except to
the extent such conflict, breach, default or violation would not have a Material
Adverse Effect.
(m) No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any Subsidiary or any of their respective properties or assets is required
for the execution, delivery and performance of this Agreement, the Warrant
Agreement, the Representative's Warrant or the consummation of the transactions
contemplated hereby or thereby, or by the Registration Statement and by the
Prospectus, including the issuance, sale and delivery of the Securities, except
the registration under the 1933 Act of the Securities and such consents,
approvals, authorizations, orders, registrations, filings, qualifications,
licenses and permits as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the Securities and by the
National Association of Securities Dealers, Inc. (the "NASD").
(n) The Company or a Subsidiary holds all material patents,
patent rights, trademarks, trade names, copyrights, trade secrets and licenses
of any of the foregoing (collectively, "INTELLECTUAL PROPERTY RIGHTS") that are
necessary to the conduct of its businesses; there is no claim pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary or
any of their respective officers, directors or employees alleging any
infringement of material Intellectual Property Rights, or any violation of the
terms of any material license relating to Intellectual Property Rights, nor does
the Company know of any basis for any such claim. The Company knows of no
infringement by others of material Intellectual Property Rights owned by or
licensed to the Company or a Subsidiary. The Company or a Subsidiary has
obtained, is in compliance in all material respects with and maintains in full
force and effect all material licenses, certificates, permits, orders or other,
similar authorizations granted or issued by any governmental agency
(collectively
5
"GOVERNMENT PERMITS") required to conduct its business as it is presently
conducted. No proceeding to revoke, limit or otherwise materially change any
Government Permit has been commenced or, to the Company's knowledge, is
threatened against the Company or any Subsidiary, and the Company has no reason
to anticipate that any such proceeding will be commenced against the Company or
any Subsidiary. Except as disclosed or contemplated in the Prospectus, the
Company has no reason to believe that any pending application for a Government
Permit will be denied or limited in a manner inconsistent with the Company's
business plan as described in the Prospectus.
(o) The Company and each Subsidiary is in all material respects
in compliance with all applicable Environmental Laws. The Company has no
knowledge of any past, present or, as anticipated by the Company, future events,
conditions, activities, investigation, studies, plans or proposals that: (i)
would interfere with or prevent compliance with any Environmental Law by the
Company or any Subsidiary or (ii) could reasonably be expected to give rise to
any common law or other liability, or otherwise form the basis of a claim,
action, suit, proceeding, hearing or investigation, involving the Company or any
Subsidiary and related to Hazardous Substances or Environmental Laws. Except for
the prudent and safe use and management of Hazardous Substances in the ordinary
course of the Company's business: (i) no Hazardous Substance is or has been
used, treated, stored, generated, manufactured or otherwise handled on or at any
Facility and (ii) to the Company's knowledge, no Hazardous Substance has
otherwise come to be located in, on or under any Facility. No Hazardous
Substances are stored at any Facility except in quantities necessary to satisfy
the reasonably anticipated use or consumption by the Company. No litigation,
claim, proceeding or governmental investigation is pending regarding any
environmental matter for which the Company or any Subsidiary has been served or
otherwise notified or, to the knowledge of the Company, threatened or asserted
against the Company or any Subsidiary, or the officers or directors of the
Company or any Subsidiary in their capacities as such, or any Facility or the
Company's business. There are no orders, judgments or decrees of any court or of
any governmental agency or instrumentality under any Environmental Law which
specifically apply to the Company or any Subsidiary, any Facility or any of the
Company's or any Subsidiary's operations. Neither the Company nor any Subsidiary
has received from a governmental authority or other person: (i) any notice that
it is a potentially responsible person for any Contaminated site or (ii) any
request for information about a site alleged to be Contaminated or regarding the
disposal of Hazardous Substances. There is no litigation or proceeding against
any other person by the Company or any Subsidiary regarding any environmental
matter. The Company has disclosed in the Prospectus or made available to the
Underwriters and their counsel true, complete and correct copies of any reports,
studies, investigations, audits, analyses, tests or monitoring in the possession
of or initiated by the Company or any Subsidiary pertaining to any environmental
matter relating to the Company, any Subsidiary, their past or present operations
or any Facility.
For the purposes of the foregoing paragraph, "ENVIRONMENTAL LAWS" means
any applicable federal, state or local statute, regulation, code, rule,
ordinance, order, judgment, decree, injunction or common law pertaining in any
way to the protection of human health or the environment, including without
limitation, the Resource Conservation and Recovery Act of 1976, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Toxic Substances Control Act, as amended, the Clean Air Act, as
amended, the Hazardous Material Transportation Act, as amended, the Occupational
Safety and Health Act of 1970, as amended, the Federal Water Pollution Control
Act, as amended, and any similar or
6
comparable state or local law; "HAZARDOUS SUBSTANCE" means any hazardous, toxic,
radioactive or infectious substance, material or waste as defined, listed or
regulated under any Environmental Law; "CONTAMINATED" means the actual existence
on or under any real property of Hazardous Substances, if the existence of such
Hazardous Substances triggers a requirement to perform any investigatory,
remedial, removal or other response action under any Environmental Laws or if
such response action legally could be required by any governmental authority;
"FACILITY" means any property currently owned, leased or occupied by the
Company.
(p) Neither the Company, nor to the Company's best knowledge,
any of its affiliates, has taken or intends to take, directly or indirectly, any
action which is designed to cause or result in, or which constitutes or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock or the Warrants to facilitate the sale or
resale of the Units.
(q) The Company is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940, as amended, and
the rules and regulations of the Commission thereunder.
(r) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that: (i) material
transactions are executed in accordance with management's general or specific
authorization; (ii) material transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(s) The Company and each Subsidiary carries, or is covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar industries.
(t) The Company and each Subsidiary is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any Subsidiary would have any liability; neither
the Company nor any Subsidiary has incurred and the Company does not expect that
it or any Subsidiary will incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "CODE"); and each
"pension plan" for which the Company or any Subsidiary would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, which would cause the loss of such qualification.
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(u) The Company and each Subsidiary is in material compliance
with all laws, rules, regulations, orders of any court or administrative agency,
operating licenses or other requirements imposed by any governmental body
applicable to it, including, without limitation, all applicable laws, rules,
regulations, licenses or other governmental standards applicable to its business
other than to the extent to which non-compliance or violations would not have a
Material Adverse Effect; and the conduct of the business of the Company and each
Subsidiary, as described in the Prospectus, will not cause the Company or such
Subsidiary to be in violation of any such requirements other than to the extent
to which non-compliance or violations would not have a Material Adverse Effect.
(v) Each of the Warrants and the Representative's Warrant have
been authorized for issuance to the purchasers thereof or to the Representative
or its designees, as the case may be, and will, when issued, and delivered
pursuant to this Agreement and, in the case of the Warrants, countersigned by
the Warrant Agent as provided in the Warrant Agreement, will have been duly
executed, issued and delivered and will constitute valid and legally binding
obligations of the Company and the holders thereof will possess the rights,
privileges, and characteristics as represented in the most recent form of
Warrant Agreement or Representative's Warrant, as the case may be, filed as an
exhibit to the Registration Statement; the securities to be issued upon exercise
of the Warrants and the Representative's Warrant, when issued and delivered
against payment therefor in accordance with the terms thereof, will be duly and
validly issued, fully paid, nonassessable and free of preemptive rights, and all
corporate action required to be taken for the authorization and issuance of the
Warrants and the Representative's Warrant, and the securities to be issued upon
their exercise, have been validly and sufficiently taken. The execution by the
Company of the Warrant Agreement and the Representative's Warrant has been duly
authorized by all required action of the Company and, when so executed and
delivered (and assuming due and valid execution by the Warrant Agent, in the
case of the Warrant Agreement) will constitute the valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(w) Except as disclosed in the Prospectus, neither the Company
nor any of its officers, directors or affiliates have caused any person, other
than the Underwriters, to be entitled to reimbursement of any kind, including,
without limitation, any compensation that would be includable as underwriter
compensation under the NASD's Corporate Financing Rule with respect to the
offering of the Units, as a result of the consummation of such offering based on
any activity of such person as a finder, agent, broker, investment adviser or
other financial service provider.
(x) Except as described in the Prospectus, the Company does not
directly or indirectly control or have a material interest in any other business
entity.
(y) The Units, the Common Stock and the Warrants have been
approved for listing on the American Stock Exchange ("AMEX") upon the
effectiveness of the Registration Statement and the Company has satisfied all of
the requirements of AMEX for such listing and for the trading of its Common
Stock, Units and Warrants on AMEX.
(z) The Company has adopted organizational structures and
policies sufficient to comply with the requirements of the AMEX Corporate
Governance Rules in effect as of the date hereof (collectively, the "AMEX
CORPORATE GOVERNANCE RULES"), other than with respect to the appointment of an
"audit committee
8
financial expert." Without limiting the generality of the foregoing, the
Company's Board of Directors has validly appointed an Audit Committee and a
Compensation Committee whose composition satisfies the requirements of the AMEX
Corporate Governance Rules. The Board of Directors and/or the Audit Committee or
Compensation Committee, as the case may be, has adopted a charter governing the
respective activities of the Audit and Compensation Committees that satisfies
the requirements of the AMEX Corporate Governance Rules. The Audit Committee and
the Compensation Committee have each acted in accordance with the provisions of
their respective charters, as amended from time to time.
(aa) Neither the Board of Directors nor the Audit Committee has
been informed, nor is any director of the Company aware, of: (i) any significant
deficiencies in the design or operation of the Company's internal controls which
could adversely affect the Company's ability to record, process, summarize and
report financial data or any material weakness in the Company's internal
controls; or (ii) any fraud, whether or not material, that involves management
or other employees of the Company who have a significant role in the Company's
internal controls.
(bb) The Company and each Subsidiary has complied with all
provisions of Section 517.075 Florida Statutes, relating to doing business with
the Government of Cuba or with any person or affiliate located in Cuba.
2. PURCHASE, SALE AND DELIVERY OF THE UNITS.
(a) 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 jointly, to purchase, at a price of $______ per Unit (which
price reflects an underwriter's discount of 9%), the number of Firm Units set
forth opposite the name of each Underwriter in Schedule I hereof, subject to
adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Units to be sold hereunder is to be
made in New York Clearing House funds and, at the option of the Representative,
by bank wire to an account specified by the Company, certified or bank cashier's
checks drawn to the order of the Company, against either uncertificated delivery
of Firm Units or of certificates therefor (which delivery, if certificated,
shall take place in such location in New York, New York as may be specified by
the Representative) to the Representative for the several accounts of the
Underwriters. Such payment is to be made at the offices of the Representative at
the address set forth on the first page of this agreement, at 7:00 a.m., Pacific
time, on the third business day after the date of this Agreement or at such
other time and date not later than five business days thereafter as you 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 New
York Stock Exchange is open for trading and on which banks in New York are open
for business and not permitted by law or executive order to be closed.) Except
to the extent uncertificated Firm Units are delivered at closing, the
certificates for the Firm Units will be delivered in such denominations and in
such registrations as the Representative requests in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representative at least one business day prior to the
Closing Date.
9
(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Representative to purchase the
Option Units at the price per Unit as set forth in Section 2(a). The option
granted hereby may be exercised in whole or in part by giving written notice:
(i) at any time before the Closing Date and (ii) only once thereafter within 45
days after the date of this Agreement, by the Representative to the Company
setting forth the number of Option Units as to which the Representative is
exercising the option, the names and denominations in which the Option Units are
to be registered and the time and date at which certificates representing such
Units are to be delivered. The time and date at which certificates for Option
Units are to be delivered shall be determined by the Representative but shall
not be earlier than three nor later than 10 full business days after the
exercise of such option, nor in any event prior to the Closing Date (such time
and date being herein referred to as the "OPTION CLOSING DATE"). If the date of
exercise of the option is three or more days before the Closing Date, the notice
of exercise shall set the Closing Date as the Option Closing Date. The option
with respect to the Option Units granted hereunder may be exercised only to
cover over-allotments in the sale of the Firm Units by the Underwriters. The
Representative may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Units shall be made on
the Option Closing Date in New York Clearing House funds and, at the option of
the Representative, by bank wire to an account specified by the Company, or
certified or bank cashier's check drawn to the order of the Company for the
Option Units to be sold by the Company in consideration either of uncertificated
delivery of Option Units or delivery of certificates therefor (which delivery,
if certificated, shall take place in such location in New York, New York as may
be specified by the Representative) to the Representative for the several
accounts of the Underwriters. Except to the extent uncertificated Option Units
are delivered at closing, the certificates for the Option Units will be
delivered in such denominations and in such registrations as the Representative
requests in writing not later than the second full business day prior to the
Option Closing Date, and will be made available for inspection by the
Representative at least one business day prior to the Option Closing Date.
(d) In addition to the sums payable to the Representative as
provided elsewhere herein, the Representative shall be entitled to receive at
the Closing, for itself alone and not as Representative of the Underwriters, as
additional compensation for its services, a warrant for the purchase of up to
90,000 Units at a price of $_____ per Unit, upon the terms and subject to
adjustment and conversion as described in the form of the Representative's
Warrant filed as an exhibit to the Registration Statement.
3. OFFERING BY THE UNDERWRITERS.
(a) It is understood that the several Underwriters are to make
a public offering of the Firm Units as soon as the Representative deems it
advisable to do so. The Firm Units are to be initially offered to the public at
the initial public offering 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 Units are
purchased pursuant to Section 2 hereof, the Representative will offer them to
the public on the foregoing terms.
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It is further understood that you will act as the Representative for the
Underwriters in the offering and sale of the Units in accordance with an
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the several Underwriters that:
(a) The Company will (i) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representative 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: (i)
when the Registration Statement or any post-effective amendment thereto shall
have become effective; (ii) of receipt of any comments from the Commission;
(iii) of any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional information;
and (iv) of the issuance by the 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. 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 Units for sale under the securities laws of such
jurisdictions as the Representative may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent or subject itself to taxation in
any such jurisdiction by reason of such qualification. 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 request for distribution of the
Units.
(d) 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, four 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
(including such number of copies of the exhibits filed
11
therewith that may reasonably be requested), and of all amendments thereto, as
the Representative may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of the
Units as contemplated in this Agreement and the Prospectus. If during the period
in which a prospectus is required by law to be delivered by an Underwriter or
dealer, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of the Representative, it becomes necessary
to amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, 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 Prospectus as
so amended or supplemented will not, in the light of the circumstances existing
at the time the Prospectus is so delivered, be misleading, or so that the
Prospectus will comply with the law.
(f) The Company will make generally available to its security
holders, 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 (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(g) The Company will, for a period of five years from the
Closing Date, 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 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.
(h) The Company will make no offering, sale, short sale or
other disposition of any shares of Common Stock of the Company or other
securities convertible into or exchangeable or exercisable for shares of Common
Stock or derivatives of Common Stock (or agreement therefor), directly or
indirectly, for a period of ninety days after the date of this Agreement
otherwise than hereunder, or pursuant to contractual obligations existing on the
date hereof, or pursuant to employee benefit plans in effect on the date hereof,
or with the prior written consent of the Representative, which consent will not
be unreasonably withheld.
(i) The Company will use its best efforts to list, subject to
notice of issuance of the Units, the Common Stock and the Warrants on AMEX and
to cause such listing to remain in effect with respect to each such security
unless and until: (i) such security expires;
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(ii) such security is listed on another exchange of at least comparable
reputation; or (iii) the Company is no longer required to file reports under
Section 12 of the Exchange Act.
(j) The Company has caused each of its officers and directors,
and such persons who own, in the aggregate, beneficially or of record, 90% of
the shares of the Common Stock outstanding immediately prior to the date hereof
(other than those persons previously identified to you in writing by the
Company), to furnish to you, on or prior to the date of this agreement, a letter
or letters, in form and substance satisfactory to the Underwriters ("LOCK-UP
AGREEMENTS"), pursuant to which each such person has agreed not to offer, sell,
sell short or otherwise dispose of any shares of Common Stock or other capital
stock of the Company, or any other securities convertible, exchangeable or
exercisable for Common Stock or derivatives of Common Stock owned by such person
or request the registration for the offer or sale of any of the foregoing (or as
to which such person has the right to direct the disposition) for a period of
one year after the date of this Agreement, directly or indirectly, except with
the prior written consent of the Representative.
(k) The Company shall apply the net proceeds of its sale of the
Units as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Units and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Units in such a manner as would
require the Company to register as an investment company under the Investment
Company Act of 1940, as amended (the "1940 ACT").
(m) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
for the Common Stock, and shall comply with the provisions of the Warrant
Agreement with respect to the appointment and maintenance of a Warrant Agent for
the Warrants.
(n) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
5. COSTS AND EXPENSES.
(a) The Representative shall be entitled to reimbursement from
the Company, for itself alone and not as Representative of the Underwriters, to
a non-accountable expense allowance equal to 3.0% of the gross offering proceeds
from the sale of the Firm Units to the public, or $_______ assuming 900,000 Firm
Units to be sold at $_______ per Unit. The Representative shall be entitled to
withhold this allowance on the Closing Date related to the purchase of the Firm
Units. The Company shall receive as a credit against this non-accountable
expense allowance, any amounts previously paid to the Representative.
(b) In addition to the payment described in Paragraph (a) of
this Section 5, the Company will pay all costs, expenses and fees incident to
the performance of the obligations of the Company under this Agreement,
including, without limiting the generality of
13
the foregoing, the following: accounting fees of the Company; the fees and
disbursements of counsel for the Company; the cost of printing and delivering
to, or as requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement and the AMEX listing
application; the costs of due diligence investigation of the principals of the
Company, the Blue Sky Survey and any supplements or amendments thereto; the
filing fees of the Commission; the filing fees and expenses (including any fees
and disbursements of counsel for the Underwriters) incident to securing the
required review by the NASD Corporate Finance Department of the underwriting
terms and arrangements; the AMEX listing fee; and the expenses, including the
fees and disbursements of counsel for the Underwriters, incurred in connection
with the qualification of the Units under state securities or Blue Sky laws, to
the extent such registration/qualification is required or recommended by counsel
for the Underwriters. Any transfer taxes imposed on the sale of the Units to the
several Underwriters will be paid by the Company. The Company agrees to pay all
costs and expenses of the Underwriters, including the fees and disbursements of
counsel for the Underwriters, incident to the offer and sale of directed Units
by the Underwriters to employees and persons having business relationships with
the Company. Except as set forth above, the Company shall not, however, be
required to pay for any of the Underwriters' expenses (other than those related
to NASD filing fees and state securities or Blue Sky laws) except that, if this
Agreement shall not be consummated, then the Company shall reimburse the several
Underwriters for their actual accountable out-of-pocket expenses, including fees
and disbursements of counsel, reasonably incurred in connection with
investigating, marketing and proposing to market the Units or in contemplation
of performing their obligations hereunder, and any portion of monies advanced to
the Underwriters or the Representative other than actual out-of-pocket
accountable expenses shall be returned to the Company; provided, however, in no
event shall the Company's obligation under this sentence exceed $100,000. The
Company shall not in any event be liable to any of the several Underwriters for
damages on account of loss of anticipated profits from the sale by them of the
Units.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several
obligations of the Underwriters to purchase the Firm Units on the Closing Date
and the Option Units, 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 their covenants and obligations hereunder and
to the following additional conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and any and all filings required
by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and
any request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representative and complied with to their reasonable satisfaction. 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 knowledge of the Company, shall be contemplated by the
Commission and no injunction, restraining order, or order of any nature by a
Federal or state court of competent jurisdiction shall have been issued as of
the Closing Date which would prevent the issuance of the Units.
14
(b) The Representative shall have received on the Closing Date
or the Option Closing Date, as the case may be, the opinion of Morse, Zelnick,
Rose & Lander, LLP, counsel for the Company, dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Underwriters (and
stating that it may be relied upon by counsel to the Underwriters) to the effect
that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement.
(ii) Each Subsidiary has been duly organized and is
validly existing as a business entity in good standing under the laws of its
jurisdiction of formation with all requisite power and authority under the laws
governing such entities to own or lease its properties and conduct its business
as described in the Registration Statement.
(iii) The Company and each Subsidiary is duly qualified to
transact business in all jurisdictions in which the conduct of its business
requires such qualification, or in which the failure to qualify would have a
material adverse effect upon the business of the Company.
(iv) The Company has authorized and outstanding capital
stock as set forth under the caption "Capitalization" in the Prospectus; the
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable; the Shares to be sold by the Company has
been duly authorized and, when issued and delivered in accordance with the terms
of this Agreement, will be validly issued, fully paid and non-assessable; all of
the securities of the Company conform in all material respects to the
description thereof contained in the Prospectus; the certificates for the Common
Stock and the Warrants are in due and proper form under Delaware law and comply
in all material respects with requirements of AMEX; no preemptive rights of
shareholders exist with respect to any of the Common Stock or the issuance or
sale thereof pursuant to any applicable statute or the provisions of the
Company's Certificate of Incorporation or Bylaws or, to such counsel's best
knowledge, pursuant to any contractual obligation. To counsel's knowledge, the
Company's ownership interest in each Subsidiary is, in all material respects, as
described in the Registration Statement.
(v) Except as described in or contemplated by the
Prospectus, to the knowledge of such counsel (a) there are no outstanding
securities of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the Company
and (b) there are no outstanding or authorized options, warrants or rights of
any character obligating the Company to issue any shares of its capital stock or
any securities convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares of such stock; and except as described in
the Prospectus, to the knowledge of such counsel, no holder of any securities of
the Company or any other person has the right, contractual or otherwise, which
has not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Units or the right to have any Common Stock or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
15
(vi) The Warrant Agreement has been duly authorized,
executed and delivered by the Company and the Warrants have been duly
authorized, authenticated, issued and delivered by the Company as contemplated
in the Registration Statement and the Warrant Agreement. The Warrant Agreement
and the Warrants constitute legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms and,
in the case of the Warrants, entitled to the benefits of the Warrant Agreement
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
(vii) The Warrants are exercisable to purchase the Warrant
Shares in accordance with the terms of the Warrant Agreement; the Warrant Shares
initially issuable upon exercise of the Warrants (including the Warrants
underlying the Units issuable on exercise of the Representative's Warrant) have
been duly authorized and reserved for issuance upon such conversion or exercise,
as the case may be, and, when issued upon such conversion or exercise in
accordance with the terms of the Warrant Agreement, will be validly issued,
fully paid and nonassessable.
(viii) The Representative's Warrant has been duly
authorized by the Company. When duly executed, issued and delivered by the
Company as contemplated in the Underwriting Agreement and the Registration
Statement, the Representative's Warrant will constitute the legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
(ix) 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.
(x) The Registration Statement, 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
and statistical data and related schedules therein).
(xi) The statements under the caption "Description of
Securities" in the Prospectus and in Items 24 and 26 of the Registration
Statement, insofar as such statements constitute a summary of documents referred
to therein or matters of law, fairly summarize in all material respects the
information called for with respect to such documents and matters.
(xii) Such counsel does not know of any contracts or
documents required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus 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.
(xiii) Except as described in or contemplated by the
Prospectus, such counsel knows of no material legal or governmental proceedings
pending or threatened against the Company or any Subsidiary.
16
(xiv) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or Bylaws of the
Company, as amended, or any agreement or instrument known to such counsel to
which the Company is a party or by which the Company may be bound.
(xv) Each of this Agreement and the Warrant Agreement has
been duly authorized, executed and delivered by the Company.
(xvi) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or as required by state
securities and Blue Sky laws, as to which such counsel need express no opinion)
except such as have been obtained or made, specifying same.
(xvii) The Company is not, and will not become, as a result
of the consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
The opinions set forth in Paragraphs (b) of this Section shall be based
on the federal laws of the United States of America and the laws of the States
of Delaware and New York. Insofar as the laws of any other jurisdiction apply,
such counsel may rely on local counsel in such jurisdictions, provided that in
each case such counsel shall state that they believe that they and the
Underwriters are justified in relying on such other counsel. With respect to
factual matters, counsel for the Company may rely on (i) certificates issued by
governmental agencies, (ii) certificates executed and delivered by an executive
officer of the Company and (iii) the representations and warranties of the
Company as set forth herein, provided that such counsel shall not have actual
knowledge that any information or statements set forth in such certificates or
any representations and warranties contained herein are untrue, inaccurate,
wrong or misleading and such counsel shall specifically state that they believe
that the Underwriters and their counsel may rely on the same. In addition to the
matters set forth above, the opinion of Morse, Zelnick, Rose & Lander, LLP shall
also include a statement to the effect that nothing has come to the attention of
such counsel that has caused them to believe that (i) the Registration
Statement, at the time it became effective under the Act (but after giving
effect to any modifications incorporated therein pursuant to Rule 430A under the
Act) and as of 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
not misleading in light of the circumstances in which they were made; and (ii)
the Prospectus, or any supplement thereto, on the date it was filed pursuant to
the Rules and Regulations and as of 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 necessary in order to make the statements, in the light
of the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information contained or incorporated therein). With respect to such
statement, Morse, Zelnick, Rose & Lander, LLP may state that their belief is
based upon the procedures set forth therein and, to the extent not set forth
therein, upon other investigations of fact and law as would customarily be
performed by knowledgeable and experienced legal counsel in comparable
circumstances but is otherwise without independent check and verification.
(c) The Representative shall have received from Holland &
Knight LLP, counsel for the Underwriters, an opinion dated the Closing Date or
the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (ix) and (x) of
17
Paragraph (b) of this Section 6. In rendering such opinion Holland & Knight LLP
may rely as to all matters governed other than by the laws of the State of
Oregon or 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 that has caused them to believe that; (i) the Registration
Statement, or any amendment thereto, as of the time it became effective under
the Act (but after giving effect to any modifications incorporated therein
pursuant to Rule 430A under the Act) and as of 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 not misleading and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of 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 necessary in order to make the statements, in the light of
the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein). With respect to such statement, Holland &
Knight LLP may state that their belief is based upon the procedures set forth
therein.
(d) If the Units are to be listed only on an exchange or system
other than the New York Stock Exchange, American Stock Exchange or Nasdaq
National Market, the Representative shall have received at or prior to the
Closing Date from Holland & Knight LLP a memorandum or summary, in form and
substance satisfactory to the Representative, with respect to the qualification
for offering and sale by the Underwriters of the Units under the state
securities or Blue Sky laws of such jurisdictions as the Representative may
reasonably have designated to the Company.
(e) The Representative, on behalf of the several Underwriters,
shall have received, on each of the dates hereof, the Closing Date and the
Option Closing Date, as the case may be, a letter dated the date hereof, the
Closing Date or the Option Closing Date, as the case may be, in form and
substance satisfactory to the Representative, of McGladrey & Xxxxxx confirming
that they are independent public accountants within the meaning of the Act and
the applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material respects
with the applicable accounting requirements of the Act and the related published
Rules and Regulations and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(f) The Representative shall have received on the Closing Date
or the Option Closing Date, as the case may be, a certificate or certificates of
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 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,
18
and no proceedings for such purpose have been taken or are, to his or her
knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to
Rules 424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and Prospectus
did not omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading in light of the
circumstances in which they were made, and since the effective date of the
Registration Statement, no event has occurred which should have been set forth
in a supplement to or an amendment of the Prospectus which has not been so set
forth in such supplement or amendment; and
(v) Since the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been any
change or development involving a prospective change whether or not arising in
the ordinary course of business, which might reasonably be expected to have a
Material Adverse Effect.
(g) The Company shall have furnished to the Representative such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representative may reasonably have requested.
(h) The Common Stock and the Warrants have been approved for
listing upon notice of issuance of the Units on AMEX.
(i) The Lock-up Agreements described in Section 4(j) are in
full force and effect.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects reasonably satisfactory to the Representative and to Holland & Knight
LLP, counsel for the Underwriters.
If any of the conditions hereinabove 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.
19
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 portion of the Units 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 each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities to which
such Underwriter or any such controlling person 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
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 (ii) 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; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Units, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon 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 Representative
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer or controlling
person 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 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 (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer or controlling person 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
20
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 the Representative
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability that such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of whom
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 materially 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 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 (or within 30 days of presentation) 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; (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; or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. 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 you in the case of parties indemnified pursuant to
Section 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. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding in respect of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
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(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 Units. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law 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
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bears to the total
underwriting discounts 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 (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to 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 (d): (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Units
purchased by such Underwriter; and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations 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.
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(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of: (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company; (ii) acceptance of any Units and payment therefor
hereunder; and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
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 Units 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), you, as Representative of the Underwriters, shall use reasonable
efforts to procure within 36 hours 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 Units or Option Units,
as the case may be, which the defaulting Underwriter or Underwriters failed to
purchase. If during such 36 hours you, as such Representative, shall not have
procured such other Underwriters, or any others, to purchase the Firm Units or
Option Units, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of Units with
respect to which such default shall occur does not exceed 10% of the Firm Units
or Option Units, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion to the respective numbers of Firm
Units or Option Units, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Units or Option Units, as the case may be, which
such defaulting Underwriter or Underwriters failed to purchase or (b) if the
aggregate number of Firm Units or Option Units, as the case may be, with respect
to which such default shall occur exceeds 10% of the Firm Units or Option Units,
as the case may be, covered hereby, the Company or you as the Representative of
the Underwriters will have the right, by written notice given within the next
36-hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company except to the extent provided in Section 8 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 you, as 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 shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows:
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if to the Underwriters, to
Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxxx X.X. Xxxxxxx
with a copy, which shall not constitute notice, to
Holland & Knight LLP
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxx X. xxx Xxxxxx
if to the Company, to
SmartPros Ltd.
00 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx
with copy, which shall not constitute notice, to
Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxxxxx
11. TERMINATION. This Agreement may be terminated by you by notice to
the Company as follows:
(a) at any time prior to the earlier of (i) the time the Units
are released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
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 change or
development involving a prospective change whether or not arising in the
ordinary course of business which has had or might reasonably be expected to
have a Material Adverse Effect; (ii) any outbreak or escalation of hostilities
or declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or change
on the financial markets of the United States would, in your reasonable
judgment, make it impracticable to market the Units or to enforce contracts for
the sale of the Units; (iii) the Dow Xxxxx Industrial Average shall have fallen
by 15 percent or more from its closing price on the
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day immediately preceding the date that the Registration Statement is declared
effective by the Commission; (iv) suspension of trading in securities generally
on the New York Stock Exchange or AMEX or limitation on prices (other than
limitations on hours or numbers of days of trading) for securities on either
such Exchange; (v) the enactment, publication, decree or other promulgation of
any statute, regulation, rule or order of any court or other governmental
authority which in your opinion materially and adversely affects or may
materially and adversely affect the business or operations of the Company; (vi)
declaration of a banking moratorium by United States or New York State
authorities; (vii) the suspension of trading of the Common Stock or the Warrants
by the Commission or AMEX; or (viii) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs which
in your reasonable opinion has a material adverse effect on the securities
markets in the United States; or
(c) 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, the Company and their respective successors,
executors, administrators, heirs and assigns, and the officers, directors and
controlling persons referred to herein, and no other person will have any right
or obligation hereunder. No purchaser of any of the Units from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS. The Company and the
Underwriters acknowledge and agree that the only information furnished or to be
furnished by any Underwriter to the Company for inclusion in the Prospectus or
the Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters), legends required by Item 502(b) of Regulation S-B under the Act
and the information under the caption "Underwriting" in the Prospectus.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants 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 or controlling person thereof, or by or on behalf of
the Company or its directors or officers and (c) delivery of and payment for the
Units under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Oregon. All disputes relating to this Underwriting
Agreement shall be adjudicated before a court located in Multnomah County,
Oregon to the exclusion of all other courts that might have jurisdiction.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS)
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If the foregoing letter 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 among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
SMARTPROS LTD.
By: ______________________________________
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as
of the date first above written.
XXXXXXX INVESTMENT COMPANY, INC.
As Representative of the several
Underwriters listed on Schedule I
By: ______________________________________
Name:
Title:
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SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Units
Underwriter to Be Purchased
------------------------------------------------------ ------------------------
Xxxxxxx Investment Company, Inc.
Total 900,000
