Xxxxxxx Foods, Inc.
UNDERWRITING AGREEMENT
dated _________, 2007
XXXXXXX INVESTMENT COMPANY, INC.
UNDERWRITING AGREEMENT
_________, 2007
Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxxx
Xxxxxxxx, Xxxxxx 00000
Ladies and Gentlemen:
INTRODUCTORY. Xxxxxxx Foods, Inc., an Oklahoma corporation (the
"COMPANY") proposes to issue and sell to the several underwriters named in
Schedule A (the "UNDERWRITERS") an aggregate of 2,150,000 Units, each Unit
consisting of (i) one share of the Company's common stock ("COMMON STOCK"), (ii)
one redeemable Class A warrant to purchase one share of Common Stock (each a
"CLASS A WARRANT" and, collectively, the "CLASS A WARRANTS"), and (iii) one
redeemable Class B warrant to purchase one share of Common Stock (each a "CLASS
B WARRANT", collectively, the "CLASS B WARRANTS" and, together with the Class A
Warrants, the "WARRANTS"). The Warrants are to be issued under the terms of a
Warrant Agreement (the "WARRANT AGREEMENT") by and between the Company and
Computershare Trust Company, as warrant agent (the "WARRANT AGENT"),
substantially in the form most recently filed as an exhibit to the Registration
Statement (hereinafter defined). The 2,150,000 Units to be sold by the Company
are collectively called the "FIRM UNITS". In addition, the Company has granted
to the Underwriters an option to purchase up to an additional 322,500 Units (the
"OPTIONAL UNITS"), as provided in Section 2. The Firm Units and, if and to the
extent such option is exercised, the Optional Units are collectively called the
"UNITS". Xxxxxxx Investment Company, Inc. has agreed to act as representative of
the several Underwriters (in such capacity, the "REPRESENTATIVE") in connection
with the offering and sale of the Units.
The Company confirms its agreement with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents, warrants and covenants to each Underwriter as
follows:
(a) FILING OF THE REGISTRATION STATEMENT. The Company has prepared
and filed with the Securities and Exchange Commission (the "COMMISSION") a
registration statement on Form S-1 (File No. 333-137861), which contains a form
of prospectus to be used in connection with the public offering and sale of the
Units. Such registration statement, as amended, including the financial
statements, exhibits and schedules thereto, and the documents incorporated by
reference in the prospectus contained in the registration statement at the time
such registration statement became effective, in the form in which it was
declared effective by the Commission under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (collectively, the
"SECURITIES ACT"), and including any required information deemed to
be a part thereof at the time of effectiveness pursuant to Rule 430A, Rule 430B
or Rule 430C under the Securities Act, or pursuant to the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder (collectively,
the "EXCHANGE ACT"), is called the "REGISTRATION STATEMENT." Any registration
statement filed by the Company pursuant to Rule 462(b) under the Securities Act
is called the "RULE 462(B) REGISTRATION STATEMENT," and from and after the date
and time of filing of the Rule 462(b) Registration Statement the term
"REGISTRATION STATEMENT" shall include the Rule 462(b) Registration Statement.
Such prospectus, in the form first filed pursuant to Rule 424(b) under the
Securities Act after the date and time that this Agreement is executed and
delivered by the parties hereto (the "EXECUTION TIME"), or, if no filing
pursuant to Rule 424(b) under the Securities Act is required, the form of final
prospectus relating to the Units included in the Registration Statement at the
effective date of the Registration Statement, is called the "PROSPECTUS." All
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, the Company's preliminary prospectus included in the
Registration Statement (each a "PRELIMINARY PROSPECTUS"), the Prospectus, or any
amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("XXXXX"). Any reference herein to any preliminary
prospectus or the Prospectus or any supplement or amendment to either thereof
shall be deemed to refer to and include any documents incorporated by reference
therein as of the date of such reference.
(b) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Registration
Statement has been declared effective by the Commission under the Securities
Act. The Company has complied to the Commission's satisfaction with all requests
of the Commission for additional or supplemental information. No stop order
preventing or suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best knowledge of the
Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied or
will comply in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to XXXXX (except as may be permitted by
Regulation S-T under the Securities Act), was identical in content to the copy
thereof delivered to the Underwriters for use in connection with the offer and
sale of the Units other than with respect to any artwork and graphics that were
not filed. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times until the expiration of the prospectus
delivery period required under Section 4(3) of the Securities Act, complied and
will comply in all material respects with the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. The Prospectus (including any Prospectus wrapper), as
amended or supplemented, as of its date and at all subsequent times until the
Underwriters have completed their distribution of the offering of the Units, did
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in
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reliance upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by the Representative expressly for use
therein, it being understood and agreed that the only such information furnished
by the Representative consists of the information described as such in Section 8
hereof. There are no contracts or other documents required to be described in
the Prospectus or to be filed as exhibits to the Registration Statement that
have not been described or filed as required.
(c) DISCLOSURE PACKAGE. The term "DISCLOSURE PACKAGE" shall mean
(i) the preliminary prospectus, as amended or supplemented, (ii) the issuer free
writing prospectuses as defined in Rule 433 of the Securities Act (each, an
"ISSUER FREE WRITING PROSPECTUS"), if any, identified in Schedule B hereto,
(iii) the pricing terms set forth in Schedule C to this Agreement, and (iv) any
other free writing prospectus that the parties hereto shall hereafter expressly
agree in writing to treat as part of the Disclosure Package. As of 9:00 a.m.
(Eastern time) on the date of this Agreement (the "INITIAL SALE TIME"), the
Disclosure Package did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The preceding sentence does not apply to statements in or omissions
from the Disclosure Package based upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representative specifically for use therein, it being understood and agreed that
the only such information furnished by or on behalf of any Underwriter consists
of the information described as such in Section 8 hereof.
(d) COMPANY NOT INELIGIBLE ISSUER. (i) At the time of filing the
Registration Statement and (ii) as of the date of the execution and delivery of
this Agreement (with such date being used as the determination date for purposes
of this clause (ii)), the Company was not and is not an Ineligible Issuer (as
defined in Rule 405 of the Securities Act), without taking account of any
determination by the Commission pursuant to Rule 405 of the Securities Act that
it is not necessary that the Company be considered an Ineligible Issuer
(e) ISSUER FREE WRITING PROSPECTUSES. No Issuer Free Writing
Prospectus includes any information that conflicts with the information
contained in the Registration Statement, including any document incorporated by
reference therein that has not been superseded or modified. The foregoing
sentence does not apply to statements in or omissions from any Issuer Free
Writing Prospectus based upon and in conformity with written information
furnished to the Company by any Underwriter through the Representative
specifically for use therein, it being understood and agreed that the only such
information furnished by any Underwriter consists of the information described
as such in Section 8 hereof.
(f) OFFERING MATERIALS FURNISHED TO UNDERWRITERS. The Company has
delivered to the Representative five complete manually signed copies of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the Representative have
reasonably requested for each of the Underwriters.
(h) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY. The Company
has not distributed and will not distribute, prior to the later of each
Subsequent Closing Date (as defined
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below) and the completion of the Underwriters' distribution of the Units, any
offering material in connection with the offering and sale of the Units other
than a preliminary prospectus, the Prospectus, any Issuer Free Writing
Prospectus reviewed and consented to by the Representative, and the Registration
Statement.
(i) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized (to the extent applicable), executed and delivered by, and is a valid
and binding agreement of, the Company, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by applicable law
and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.
(j) AUTHORIZATION OF THE COMMON STOCK; VALIDITY OF WARRANTS AND
WARRANT AGREEMENT.
(i) The Common Stock included in the Units to be purchased by the
Underwriters from the Company (including units purchasable on exercise
of the Underwriters' overallotment option described in Section 2(c) and
the Representative's Warrants described in Section 2(h)) has been duly
authorized and reserved for issuance and sale pursuant to this
Agreement and, in the case of Common Stock issuable on exercise of the
Representative's Warrants, the terms thereof and, when so issued and
delivered by the Company, will be validly issued, fully paid and
nonassessable.
(ii) The Warrants included in the Units to be purchased by the
Underwriters from the Company have been duly and validly authorized by
all required corporate actions and will, when issued and delivered by
the Company pursuant to this Agreement, be validly executed and
delivered by, and will be valid and binding agreements of, the Company,
enforceable in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights
and remedies of creditors or by general equitable principles.
(iii) The Representative's Warrants have been duly and validly
authorized by all required corporate actions and will, when issued and
delivered by the Company pursuant to this Agreement, be validly
executed and delivered by, and will be valid and binding agreements of,
the Company, enforceable in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles.
(iv) The Common Stock issuable on exercise of the Warrants has been
duly authorized and reserved for issuance and sale pursuant to their
terms and, when issued and delivered by the Company pursuant to such
warrants, will be validly issued, fully paid and nonassessable.
(v) The Warrant Agreement has been duly and validly authorized by all
required corporate actions of the Company and will, when executed and
delivered (and assuming
4
due and valid execution by the Warrant Agent) constitute a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of
creditors or by general equitable principles.
(vi) Each of the Warrants and the Representative's Warrants will, when
issued, possess rights, privileges, and characteristics as represented
in the most recent form of Warrant Agreement or Representative's
Warrants, as the case may be, filed as an exhibit to the Registration
Statement.
(k) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS. Except as
fairly and accurately described in the Registration Statement, there are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(l) NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed in
the Disclosure Package, subsequent to the respective dates as of which
information is given in the Disclosure Package: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company (any such change
is called a "MATERIAL ADVERSE CHANGE"); (ii) the Company has not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company in
respect of its capital stock.
(m) INDEPENDENT ACCOUNTANTS. Xxxx & Xxxx, P.C., who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) filed with the Commission as
a part of the Registration Statement and included in the Disclosure Package and
the Prospectus, is an independent registered public accounting firm as required
by the Securities Act and the Exchange Act.
(n) PREPARATION OF THE FINANCIAL STATEMENTS. Each of the
historical and pro-forma financial statements filed with the Commission as a
part of or incorporated by reference in the Registration Statement, and included
or incorporated by reference in the Disclosure Package and the Prospectus,
presents fairly the information provided as of and at the dates and for the
periods indicated. Such financial statements comply as to form with the
applicable accounting requirements of the Securities Act and have been prepared
in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as may be expressly
stated in the related notes thereto. No other financial statements or supporting
schedules are required to be included or incorporated by reference in the
Registration Statement. Each item of historical or pro-form financial data
relating to the operations, assets or liabilities of the Company and its
predecessor set forth in summary form in each of the preliminary
5
prospectus and the Prospectus fairly presents such information on a basis
consistent with that of the complete financial statements contained in the
Registration Statement.
(o) INCORPORATION AND GOOD STANDING; SUBSIDIARIES. The Company has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Disclosure Package and the Prospectus and to enter
into and perform its obligations under this Agreement. The Company is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required except for such
jurisdictions where the failure to so qualify or to be in good standing would
not, individually or in the aggregate, result in a Material Adverse Change. The
Company does not own or control, directly or indirectly, any corporation,
association or other entity.
(p) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. The
authorized, issued and outstanding capital stock of the Company is as set forth
in the each of the Disclosure Package and the Prospectus under the caption
"Capitalization" (other than for subsequent issuances, if any, pursuant to
employee benefit plans described in each of the Disclosure Package and the
Prospectus or upon exercise of outstanding options or warrants described in the
Disclosure Package and Prospectus, as the case may be). The Common Stock
conforms, and, when issued and delivered as provided in this Agreement, the
Class A Warrants, the Class B Warrants and the Representative's Warrants will
comply in all material respects to the description thereof contained in the each
of the Disclosure Package and Prospectus. All of the issued and outstanding
shares of Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable and have been issued in compliance with federal and state
securities laws. None of the outstanding shares of Common Stock were issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or equity or debt securities convertible
into or exchangeable or exercisable for, any capital stock of the Company other
than those accurately described in the Disclosure Package and the Prospectus.
The description of the Company's stock option, stock bonus and other stock plans
or arrangements, and the options or other rights granted thereunder, set forth
or incorporated by reference in each of the Disclosure Package and the
Prospectus accurately and fairly presents the information required to be shown
with respect to such plans, arrangements, options and rights.
(q) QUOTATION. The Units, the Common Stock, the Class A Warrants
and the Class B Warrants have been approved for quotation on the Nasdaq Capital
Market and on the Boston Stock Exchange under the symbols "FOODU," "FOOD,"
"FOODW" and "FOODZ," respectively.
(r) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED. The Company is not in violation of its
charter or by-laws or in default (or, with the giving of notice or lapse of
time, would be in default) ("Default") under any indenture, mortgage, loan or
credit agreement, note, contract, franchise, lease or other instrument to which
it is a party or by which it or it may be bound (including, without limitation,
such agreements and
6
contracts filed as exhibits to the Registration Statement or to which any of the
property or assets of the Company is subject (each, an "Existing Instrument")),
except for such Defaults as would not, individually or in the aggregate, result
in a Material Adverse Change. The Company's execution, delivery and performance
of this Agreement and consummation of the transactions contemplated hereby and
by the Disclosure Package and the Prospectus (i) have been duly authorized by
all necessary corporate action and will not result in any violation of the
provisions of the charter or by-laws of the Company, (ii) will not conflict with
or constitute a breach of, or Default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to, or require the consent of any other party to, any Existing
Instrument, except for such conflicts, breaches, Defaults, liens, charges or
encumbrances as would not, individually or in the aggregate, result in a
Material Adverse Change and (iii) will not result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company. No consent, approval, authorization or other order of, or registration
or filing with, any court or other governmental or regulatory authority or
agency, is required for the Company's execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby and by
the Disclosure Package and the Prospectus, except the registration or
qualification of the Units under the Securities Act and applicable state
securities or blue sky laws and from the National Association of Securities
Dealers, Inc. (the "NASD").
(s) NO MATERIAL ACTIONS OR PROCEEDINGS. Except as otherwise
disclosed in the Disclosure Package and the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or affecting the Company, (ii) which
have as the subject thereof any officer or director (in such capacities) of, or
property owned or leased by, the Company or (iii) relating to environmental or
discrimination matters, where in any such case (A) there is a reasonable
possibility that such action, suit or proceeding might be determined adversely
to the Company and (B) any such action, suit or proceeding, if so determined
adversely, would reasonably be expected to result in a Material Adverse Change
or adversely affect the consummation of the transactions contemplated by this
Agreement. No material labor dispute with the employees of the Company exists
or, to the best of the Company's knowledge, is threatened or imminent except for
such disputes as would not, individually or in the aggregate, result in a
Material Adverse Change.
(t) INTELLECTUAL PROPERTY RIGHTS. The Company owns or possesses
sufficient trademarks, trade names, patent rights, copyrights, domain names,
licenses, approvals, trade secrets and other similar rights (collectively,
"INTELLECTUAL PROPERTY RIGHTS") reasonably necessary to conduct its businesses
as now conducted; and the expected expiration of any of such Intellectual
Property Rights would not result in a Material Adverse Change. The Company has
not received any notice of infringement or conflict with asserted Intellectual
Property Rights of others, which infringement or conflict, if the subject of an
unfavorable decision, would result in a Material Adverse Change. The Company is
not a party to or bound by any options, licenses or agreements with respect to
the Intellectual Property Rights of any other person or entity that are required
to be set forth in the Disclosure Package and the Prospectus and are not
described in all material respects. None of the technology employed by the
Company has been obtained or is being used by the Company in violation of any
contractual obligation binding on the Company or, to the Company's knowledge,
any of its officers, directors or employees or otherwise in violation of the
rights of any persons.
7
(u) ALL NECESSARY PERMITS, ETC. Except as otherwise disclosed in
the Disclosure Package and the Prospectus or except as would not result in a
Material Adverse Change, the Company possesses such valid and current
certificates, authorizations or permits issued by the appropriate state, federal
or foreign regulatory agencies or bodies necessary to conduct its businesses,
and the Company has not received any notice of proceedings relating to the
revocation or modification of, or non-compliance with, any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could result in a Material Adverse
Change.
(v) TITLE TO PROPERTIES. The Company has good and marketable title
to all the properties and assets reflected as owned in the financial statements
referred to in Section 1(n) above (or elsewhere in the Disclosure Package and
the Prospectus), in each case free and clear of any security interests,
mortgages, liens, encumbrances, equities, claims and other defects, except such
as do not materially and adversely affect the value of such property and do not
materially interfere with the use made or proposed to be made of such property
by the Company. The real property, improvements, equipment and personal property
held under lease by the Company are held under valid and enforceable leases,
with such exceptions as are not material and do not materially interfere with
the use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company.
(w) TAX LAW COMPLIANCE. The Company has filed all necessary
federal, state and foreign income and franchise tax returns and has paid all
taxes required to be paid by it and, if due and payable, any related or similar
assessment, fine or penalty levied against it. The Company has made adequate
charges, accruals and reserves in the applicable financial statements referred
to in Section 1(n) above in respect of all federal, state and foreign income and
franchise taxes for all periods as to which the tax liability of the Company has
not been finally determined.
(x) COMPANY NOT AN "INVESTMENT COMPANY." The Company has been
advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the "INVESTMENT COMPANY ACT"). The Company is not, and after receipt
of payment for the Units and the application of the proceeds thereof as
contemplated under the caption "Use of Proceeds" in each of the preliminary
prospectus and the Prospectus will not be, an "investment company" within the
meaning of the Investment Company Act and will conduct its business in a manner
so that it will not become subject to the Investment Company Act.
(y) INSURANCE. The Company is insured by recognized, financially
sound and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as the Company reasonably believes are
adequate and customary for its business including, but not limited to, policies
covering real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and earthquakes. The Company
reasonably believes that it will be able (i) to renew its existing insurance
coverage as and when such policies expire or (ii) to obtain comparable coverage
from similar institutions as may be necessary or appropriate to conduct its
business as now conducted and at a cost that would not result in a Material
Adverse Change. The Company has not been denied any insurance coverage which it
has sought or for which it has applied.
8
(z) NO PRICE STABILIZATION OR MANIPULATION. The Company has not
taken and will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or manipulation
of the price of any securities of the Company to facilitate the sale or resale
of the Units or the underlying securities. The Company acknowledges that the
Underwriters may engage in passive market making transactions in the Units on
the Nasdaq Capital Market in accordance with Regulation M under the Exchange
Act.
(aa) RELATED PARTY TRANSACTIONS. There are no business
relationships or related-party transactions involving the Company or any other
person required to be described in the preliminary prospectus or the Prospectus
that have not been described as required.
(bb) DISCLOSURE CONTROLS AND PROCEDURES. The Company has
established and maintains disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) under the Exchange Act), which (i) are designed to
ensure that material information relating to the Company is made known to the
Company's principal executive officer and its principal financial officer by
others within those entities, particularly during the periods in which the
periodic reports required under the Exchange Act are being prepared, (ii) will
be evaluated for effectiveness as of the end of each fiscal quarter and fiscal
year of the Company and (iii) are effective in all material respects to perform
the functions for which they were established. The Company is not aware of (a)
any significant deficiency in the design or operation of internal controls which
could adversely affect the Company's ability to record, process, summarize and
report financial data or any material weaknesses in internal controls or (b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the Company's internal controls.
(cc) COMPANY'S ACCOUNTING SYSTEM. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain 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.
(dd) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. Neither the
Company nor, to the best of the Company's knowledge, any employee or agent of
the Company has made any contribution or other payment to any official of, or
candidate for, any federal, state or foreign office in violation of any law or
of the character required to be disclosed in the Disclosure Package and the
Prospectus.
(ee) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as would not,
individually or in the aggregate, result in a Material Adverse Change (i) the
Company is not in violation of any federal, state, local or foreign law or
regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and
9
petroleum products (collectively, "MATERIALS OF ENVIRONMENTAL CONCERN"), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environment Concern
(collectively, "ENVIRONMENTAL LAWS"), which violation includes, but is not
limited to, noncompliance with any permits or other governmental authorizations
required for the operation of the business of the Company under applicable
Environmental Laws, or noncompliance with the terms and conditions thereof, nor
has the Company received any written communication, whether from a governmental
authority, citizens group, employee or otherwise, that alleges that the Company
is in violation of any Environmental Law; (ii) there is no claim, action or
cause of action filed with a court or governmental authority, no investigation
with respect to which the Company has received written notice, and no written
notice by any person or entity alleging potential liability for investigatory
costs, cleanup costs, governmental responses costs, natural resources damages,
property damages, personal injuries, attorneys' fees or penalties arising out
of, based on or resulting from the presence, or release into the environment, of
any Material of Environmental Concern at any location owned, leased or operated
by the Company, now or in the past (collectively, "ENVIRONMENTAL CLAIMS"),
pending or, to the best of the Company's knowledge, threatened against the
Company or any person or entity whose liability for any Environmental Claim the
Company has retained or assumed either contractually or by operation of law; and
(iii) to the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or against any person or entity whose
liability for any Environmental Claim the Company has retained or assumed either
contractually or by operation of law.
(ff) ERISA COMPLIANCE. The Company and any "employee benefit plan"
(as defined under the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company or its "ERISA
Affiliates" (as defined below) are in compliance in all material respects with
ERISA. "ERISA AFFILIATE" means, with respect to the Company, any member of any
group of organizations described in Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "CODE") of which the Company is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company or any of its ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company or any of its ERISA Affiliates,
if such "employee benefit plan" were terminated, would have any "amount of
unfunded benefit liabilities" (as defined under ERISA). Neither the Company nor
any of its ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or
4980B of the Code. Each "employee benefit plan" established or maintained by the
Company, or any of its ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualification.
10
(gg) COMPLIANCE WITH XXXXXXXX-XXXXX ACT OF 2002. The Company and,
to the best of its knowledge, its officers and directors are in compliance with
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 and the rules and
regulations promulgated in connection therewith (the "XXXXXXXX-XXXXX ACT") that
are effective and are actively taking steps to ensure that they will be in
compliance with other applicable provisions of the Xxxxxxxx-Xxxxx Act upon the
effectiveness of such provisions, including Section 402 related to loans and
Sections 302 and 906 related to certifications.
(hh) RELATIONSHIP WITH PARENT. All of the material transactions and
the current relationship between the Company and ITN Energy Systems, Inc. are
fairly and accurately described in the Registration Statement and the Disclosure
Package and there exists no material agreement or understanding between the
Company and ITN that is not fairly and accurately described in the Registration
Statement and the Disclosure Package.
(ii) MATERIAL UNDERSTANDINGS, GENERALLY. Except as fairly described
in the Prospectus and the Disclosure Package, the Company has not made a
determination to take any action and is not a party to any understanding,
whether or not legally binding, with any other person with respect to the taking
of any action that, if known to prospective purchasers of the Units, would be
likely to affect their assessment of the value or prospects of the Company or
their decision to invest in the Units.
Any certificate signed by an officer of the Company and delivered to
the Representative or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
The Company acknowledges that the Underwriters and, for purposes of the
opinions to be delivered pursuant to Section 5 hereof, counsel to the Company
and counsel to the Underwriters, will rely upon the accuracy and truthfulness of
the foregoing representations and hereby consents to such reliance.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE UNITS.
(a) THE FIRM UNITS. Upon the terms herein set forth, the Company
agrees to issue and sell the Firm Units to the several Underwriters. On the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Underwriters
agree, severally and not jointly, to purchase the Firm Units from the Company.
The purchase price per Firm Unit to be paid by the several Underwriters to the
Company shall be $_______ per Unit.
(b) THE FIRST CLOSING DATE. Delivery of the Firm Units to be
purchased by the Underwriters and payment therefor shall be made at 9:00 a.m.
New York time on _______, 2007, or such other time and date as the
Representative shall designate by notice to the Company (the time and date of
such closing are called the "First Closing Date"). The Company hereby
acknowledges that circumstances under which the Representative may provide
notice to postpone the First Closing Date as originally scheduled include, but
are in no way limited to, any determination by the Company or the Representative
to recirculate to the public copies of an
11
amended or supplemented Prospectus or Disclosure Package or a delay as
contemplated by the provisions of Section 10 or Section 19.
(c) THE OPTIONAL UNITS; EACH SUBSEQUENT CLOSING DATE. In addition,
on the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the Underwriters to purchase up to an aggregate of
322,500 Optional Units from the Company at the purchase price per share to be
paid by the Underwriters for the Firm Units. The option granted hereunder may be
exercised at any time and from time to time upon notice by the Representative to
the Company which notice may be given at any time within 45 days from the date
of this Agreement. Such notice shall set forth (i) the aggregate number of
Optional Units as to which the Underwriters are exercising the option, (ii) the
names and denominations in which the Optional Units are to be registered and
(iii) the time, date and place at which such Optional Units will be delivered
(which time and date may be simultaneous with, but not earlier than, the First
Closing Date; and in such case the term "First Closing Date" shall refer to the
time and date of delivery of the Firm Units and the Optional Units). Each time
and date of delivery, if subsequent to the First Closing Date, is called the
"SUBSEQUENT CLOSING DATE" and shall be determined by the Representative and
shall not be earlier than three nor later than five full business days after
delivery of such notice of exercise.
(d) PUBLIC OFFERING OF THE UNITS. The Representative hereby
advises the Company that the Underwriters intend to offer for sale to the
public, as described in the Prospectus, their respective portions of the Units
as soon after this Agreement has been executed and the Registration Statement
has been declared effective as the Representative, in its sole judgment, has
determined is advisable and practicable.
(e) PAYMENT FOR THE UNITS. Payment for the Units to be sold by the
Company shall be made at the First Closing Date (and, if applicable, at any
Subsequent Closing Date) by wire transfer of immediately available funds to the
order of the Company.
It is understood that the Representative has been authorized, for its
own account and the accounts of the several Underwriters, to accept delivery of
and receipt for, and make payment of the purchase price for, the Firm Units and
any Optional Units the Underwriters have agreed to purchase. The Representative,
individually and not as the Representative of the Underwriters, may (but shall
not be obligated to) make payment for any Units to be purchased by any
Underwriter whose funds shall not have been received by the Representative by
the First Closing Date or any Subsequent Closing Date, as the case may be, for
the account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
(f) DELIVERY OF THE UNITS. Delivery of the Firm Units and the
Optional Units shall be made through the facilities of The Depository Trust
Company unless the Representative shall otherwise instruct. Time shall be of the
essence, and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Underwriters.
(g) DELIVERY OF PROSPECTUS TO THE UNDERWRITERS. Not later than
10:00 p.m. on the second business day following the date the Units are first
released by the Underwriters for sale to
12
the public, the Company shall deliver or cause to be delivered, copies of the
Prospectus in such quantities and at such places as the Representative shall
request.
(h) REPRESENTATIVE'S WARRANTS. In addition to the sums payable to
the Representative as provided elsewhere herein, the Representative shall be
entitled to receive at the closing occurring on the First Closing Date, for
itself alone and not as Representative of the Underwriters, as additional
compensation for its services, Representative's Warrants for the purchase of up
to 215,000 Units at a price of $_____ per Unit, upon the terms and subject to
adjustment and conversion as described in the form of Representative's Warrants
filed as an exhibit to the Registration Statement.
SECTION 3. COVENANTS OF THE COMPANY.
The Company covenants and agrees with each Underwriter as follows:
(a) REPRESENTATIVE' REVIEW OF PROPOSED AMENDMENTS AND SUPPLEMENTS.
During the period beginning at the Initial Sale Time and ending on the later of
the First Closing Date or such date as, in the opinion of counsel for the
Underwriters, the Prospectus is no longer required by law to be delivered in
connection with sales by an Underwriter or dealer, including under circumstances
where such requirement may be satisfied pursuant to Rule 172 under the
Securities Act (the "PROSPECTUS DELIVERY PERIOD"), prior to amending or
supplementing the Registration Statement or the Prospectus, including any
amendment or supplement through incorporation by reference of any report filed
under the Exchange Act, the Company shall furnish to the Representative for
review a copy of each such proposed amendment or supplement, and the Company
shall not file any such proposed amendment or supplement to which the
Representative reasonably object.
(b) SECURITIES ACT COMPLIANCE. After the date of this Agreement,
the Company shall promptly advise the Representative in writing (i) when the
Registration Statement, if not effective at the Execution Time, shall have
become effective, (ii) of the receipt of any comments of, or requests for
additional or supplemental information from, the Commission, (iii) of the time
and date of any filing of any post-effective amendment to the Registration
Statement or any amendment or supplement to any preliminary prospectus or the
Prospectus, (iv) of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or of any order or notice
preventing or suspending the use of the Registration Statement, any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which it is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any of
such purposes. The Company shall use its best efforts to prevent the issuance of
any such stop order or prevention or suspension of such use. If the Commission
shall enter any such stop order or order or notice of prevention or suspension
at any time, the Company will use its best efforts to obtain the lifting of such
order at the earliest possible moment, or will file a new registration statement
and use its best efforts to have such new registration statement declared
effective as soon as practicable. Additionally, the Company agrees that it shall
comply with the provisions of Rules 424(b) and 430A, as applicable, under the
Securities Act, including with respect to the
13
timely filing of documents thereunder, and will use its reasonable efforts to
confirm that any filings made by the Company under such Rule 424(b) were
received in a timely manner by the Commission.
(c) EXCHANGE ACT COMPLIANCE. During the Prospectus Delivery
Period, the Company will file all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15 of the Exchange Act in the manner
and within the time periods required by the Exchange Act.
(d) AMENDMENTS AND SUPPLEMENTS TO THE REGISTRATION STATEMENT,
PROSPECTUS AND OTHER SECURITIES ACT MATTERS. If, during the Prospectus Delivery
Period, any event or development shall occur or condition exist as a result of
which the Disclosure Package or the Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein in the light of
the circumstances under which they were made, as the case may be, not
misleading, or if it shall be necessary to amend or supplement the Disclosure
Package or the Prospectus, or to file under the Exchange Act any document
incorporated by reference in the Disclosure Package or the Prospectus, in order
to make the statements therein, in the light of the circumstances under which
they were made, as the case may be, not misleading, or if in the opinion of the
Representative it is otherwise necessary to amend or supplement the Registration
Statement, the Disclosure Package or the Prospectus, or to file under the
Exchange Act any document incorporated by reference in the Disclosure Package or
the Prospectus, or to file a new registration statement containing the
Prospectus, in order to comply with law, including in connection with the
delivery of the Prospectus, the Company agrees to (i) notify the Representative
of any such event or condition (unless such event or condition was previously
brought to the Company's attention by the Representative during the Prospectus
Delivery Period) and (ii) promptly prepare (subject to Section 3(a) and 3(e)
hereof), file with the Commission (and use its best efforts to have any
amendment to the Registration Statement or any new registration statement to be
declared effective) and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Registration Statement, the Disclosure
Package or the Prospectus, or any new registration statement, necessary in order
to make the statements in the Disclosure Package or the Prospectus as so amended
or supplemented, in the light of the circumstances under which they were made,
as the case may be, not misleading or so that the Registration Statement, the
Disclosure Package or the Prospectus, as amended or supplemented, will comply
with law.
(e) PERMITTED FREE WRITING PROSPECTUSES. The Company represents
that it has not made, and agrees that, unless it obtains the prior written
consent of the Representative, it will not make, any offer relating to the Units
that would constitute an Issuer Free Writing Prospectus or that would otherwise
constitute a "FREE WRITING PROSPECTUS" (as defined in Rule 405 of the Securities
Act) required to be filed by the Company with the Commission or retained by the
Company under Rule 433 of the Securities Act; provided that the prior written
consent of the Representative hereto shall be deemed to have been given in
respect of the Free Writing Prospectuses included in Schedule B hereto. Any such
free writing prospectus consented to by the Representative is hereinafter
referred to as a "PERMITTED FREE WRITING PROSPECTUS". The Company agrees that
(i) it has treated and will treat, as the case may be, each Permitted Free
Writing Prospectus as an Issuer Free Writing Prospectus, and (ii) has complied
and will comply, as the case may be, with the requirements of Rules 164 and 433
of the Securities Act applicable
14
to any Permitted Free Writing Prospectus, including in respect of timely filing
with the Commission, legending and record keeping.
(f) COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS.
The Company agrees to furnish the Representative, without charge, during the
Prospectus Delivery Period, as many copies of each of the preliminary
prospectus, the Prospectus and the Disclosure Package and any amendments and
supplements thereto (including any documents incorporated or deemed incorporated
by reference therein) as the Representative may reasonably request.
(g) BLUE SKY COMPLIANCE. The Company shall cooperate with the
Representative and counsel for the Underwriters to qualify or register the Units
for sale under (or obtain exemptions from the application of) the state
securities or blue sky laws of those jurisdictions designated by the
Representative, shall comply with such laws and shall continue such
qualifications, registrations and exemptions in effect so long as required for
the distribution of the Units. The Company shall not be required to qualify as a
foreign corporation or to take any action that would subject it to general
service of process in any such jurisdiction where it is not presently qualified
or where it would be subject to taxation as a foreign corporation. The Company
will advise the Representative promptly of the suspension of the qualification
or registration of (or any such exemption relating to) the Units for offering,
sale or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance of any order
suspending such qualification, registration or exemption, the Company shall use
its best efforts to obtain the withdrawal thereof at the earliest possible
moment.
(h) USE OF PROCEEDS. The Company shall apply the net proceeds from
the sale of the Units sold by it in the manner described under the caption "Use
of Proceeds" in the Disclosure Package and the Prospectus.
(i) TRANSFER AGENT. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Common Stock.
(j) EARNINGS STATEMENT. As soon as practicable and in any event no
later than 15 months after the effective date of the Registration Statement, the
Company will make generally available to its security holders and to the
Representative an earnings statement (which need not be audited) covering a
period of at least twelve months beginning after the effective date of the
Registration Statement that satisfies the provisions of Section 11(a) of the
Securities Act and Rule 158 under the Securities Act.
(k) PERIODIC REPORTING OBLIGATIONS. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq Capital Market all reports and documents required to be filed under the
Exchange Act. Additionally, the Company shall report the use of proceeds from
the issuance of the Units as may be required under Rule 463 under the Securities
Act.
(l) COMPANY TO PROVIDE INTERIM FINANCIAL STATEMENTS. Prior to the
First Closing Date and, if applicable, each Subsequent Closing Date, the Company
will furnish the Underwriters, as soon as they have been prepared by or are
available to the Company, a copy of any unaudited interim financial statements
of the Company for any period subsequent to the
15
period covered by the most recent financial statements appearing in the
Registration Statement and the Prospectus.
(m) QUOTATION. The Company will use its best efforts to include,
subject to notice of issuance, the Units on the Nasdaq Capital Market.
(n) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. During
the period commencing on the date hereof and ending on the 365th day following
the date of the Prospectus, the Company will not, without the prior written
consent of the Representative (which consent may be withheld at the
Representative's sole discretion), directly or indirectly, sell, offer, contract
or grant any option to sell, pledge, transfer or establish an open "PUT
EQUIVALENT POSITION" within the meaning of Rule 16a-1(h) under the Exchange Act,
or otherwise dispose of or transfer, or announce the offering of, or file any
registration statement under the Securities Act (except as contemplated by the
Prospectus) in respect of, any shares of Common Stock, options or warrants to
acquire shares of the Common Stock or securities exchangeable or exercisable for
or convertible into shares of Common Stock (other than as contemplated by this
Agreement with respect to the Units); provided, however, that the Company may
issue shares of its Common Stock or options to purchase its Common Stock, or
shares of Common Stock upon exercise of options, in each case, pursuant to any
stock option, stock bonus or other stock plan, arrangement or contractual
obligation described in the Prospectus, but only if the holders of such shares,
options, or shares issued upon exercise of such options, agree in writing not to
sell, offer, dispose of or otherwise transfer any such shares or options during
such 365-day period without the prior written consent of the Representative
(which consent may be withheld at the Representative's sole discretion).
(o) FUTURE REPORTS TO THE REPRESENTATIVE. During the period of
five years hereafter the Company will furnish, if not otherwise available on
XXXXX, to the Representative at 000 XX Xxxxx Xxxxxxx, Xxxxxxxx, Xxxxxx 00000
Attention: Syndicate Department: (i) as soon as practicable after the end of
each fiscal year, copies of the Annual Report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and statements
of income, shareholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public or certified public
accountants; (ii) as soon as practicable after the filing thereof, copies of
each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as available,
copies of any report or communication of the Company mailed generally to holders
of its capital stock.
(p) INVESTMENT LIMITATION. 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.
(q) NO MANIPULATION OF PRICE. 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.
(r) EXISTING LOCK-UP AGREEMENTS. Except as described in the
Prospectus, there are no existing agreements between the Company and its
security holders that prohibit the sale, transfer,
16
assignment, pledge or hypothecation of any of the Company's securities. The
Company will direct the transfer agent to place stop transfer restrictions upon
the securities of the Company that are bound by such "lock-up" agreements for
the duration of the periods contemplated therein.
SECTION 4. PAYMENT OF 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 2% of the aggregate initial public
offering price of the Firm Units. If this Agreement is terminated by the
Representative pursuant to Section 5, Section 11, or Section 19, or by the
Company pursuant to Section 7, or if the sale to the Underwriters of the Units
on the First Closing Date or Subsequent Closing Date is not consummated because
of any refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Representative
shall be entitled to reimbursement from the Company to a non-accountable expense
allowance only to the extent actually incurred by the Representative.
(b) In addition to the payment described in Paragraph (a) of this
Section 4, the Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of their obligations hereunder and in connection
with the transactions contemplated hereby, including without limitation (i) all
expenses incident to the issuance and delivery of the Units (including all
printing and engraving costs, if any), (ii) all fees and expenses of the
registrar and transfer agent of the Common Stock, (iii) all necessary issue,
transfer and other stamp taxes in connection with the issuance and sale of the
Units to the Underwriters, (iv) all fees and expenses of the Company's counsel,
independent public or certified public accountants and other advisors, (v) all
costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement (including
financial statements, exhibits, schedules, consents and certificates of
experts), each Issuer Free Writing Prospectus, each preliminary prospectus and
the Prospectus, and all amendments and supplements thereto, and this Agreement,
(vi) all filing fees, attorneys' fees and expenses incurred by the Company or
the Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Units for offer and sale under the state securities or blue sky laws, and, if
requested by the Representative, preparing and printing a "Blue Sky Survey" or
memorandum, and any supplements thereto, advising the Underwriters of such
qualifications, registrations and exemptions, (vii) the filing fees incident to,
the NASD's review and approval of the Underwriters' participation in the
offering and distribution of the Units, (viii) the fees and expenses associated
with including the Units on the Nasdaq National Market, and (ix) all other fees,
costs and expenses referred to in Item 13 of Part II of the Registration
Statement. Except as provided in this Section 4, Section 6, Section 8 and
Section 9 hereof, the Underwriters shall pay their own expenses, including the
fees and disbursements of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Firm Units
as provided herein on the First Closing Date and, with respect to the Optional
Units, each Subsequent Closing Date, shall be subject to (1) the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date and each
Subsequent Closing Date as though then made; (2) the timely performance by the
Company of its covenants and other obligations hereunder; and (3) each of the
following additional conditions:
17
(a) ACCOUNTANTS' COMFORT LETTER. On the date hereof, the
Representative shall have received from Xxxx & Xxxx, P.C., independent
registered public accounting firm of the Company, a letter dated the date hereof
addressed to the Underwriters, in form and substance satisfactory to the
Representative, containing statements and information of the type ordinarily
included in accountant's "comfort letters" to underwriters, delivered according
to Statement of Auditing Standards No. 72 (or any successor bulletin), with
respect to the audited and unaudited financial statements and certain financial
information contained in the Registration Statement and the Prospectus (and the
Representative shall have received an additional four conformed copies of such
accountants' letter for the several Underwriters).
(b) EFFECTIVENESS OF REGISTRATION STATEMENT; COMPLIANCE WITH
REGISTRATION REQUIREMENTS; NO STOP ORDER. For the period from and after
effectiveness of this Agreement and prior to the First Closing Date and, with
respect to the Optional Units, any Subsequent Closing Date:
(i) the Company shall have filed the Prospectus with the
Commission (including the information required by Rule 430A
under the Securities Act) in the manner and within the time
period required by Rule 424(b) under the Securities Act; or
the Company shall have filed a post-effective amendment to the
Registration Statement containing the information required by
such Rule 430A, and such post-effective amendment shall have
become effective; and
(ii) no stop order suspending the effectiveness of the
Registration Statement, or any post-effective amendment to the
Registration Statement, shall be in effect and no proceedings
for such purpose shall have been instituted or threatened by
the Commission.
(c) NO MATERIAL ADVERSE CHANGE. For the period from and after the
date of this Agreement and prior to the First Closing Date and, with respect to
the Optional Units, each Subsequent Closing Date, in the judgment of the
Representative there shall not have occurred any Material Adverse Change.
(d) OPINION OF COUNSEL FOR THE COMPANY. On each of the First
Closing Date and each Subsequent Closing Date the Representative shall have
received the opinion of Morse, Zelnick, Rose & Lander LLP, counsel for the
Company, dated as of the First Closing Date or the Subsequent Closing Date, as
applicable, substantially in the form attached as Exhibit A (and the
Representative shall have received an additional four conformed copies of such
counsel's legal opinion for the several Underwriters).
(e) OPINION OF COUNSEL FOR THE UNDERWRITERS. On each of the First
Closing Date and each Subsequent Closing Date the Representative shall have
received the opinion of Stoel Rives LLP, counsel for the Underwriters, dated as
of the First Closing Date or the Subsequent Closing Date, as applicable, in a
form satisfactory to the Representative (and the Representative shall have
received an additional four conformed copies of such counsel's legal opinion for
the several Underwriters).
18
(f) OFFICERS' CERTIFICATE. On each of the First Closing Date and
each Subsequent Closing Date the Representative shall have received a written
certificate executed by the Chairman of the Board, Chief Executive Officer or
President of the Company and the Chief Financial Officer or Chief Accounting
Officer of the Company, dated as of such Closing Date, to the effect that the
signers of such certificate have reviewed the Registration Statement, the
Prospectus and any amendment or supplement thereto, any Issuer Free Writing
Prospectus and any amendment or supplement thereto and this Agreement, to the
effect set forth in subsection (b)(ii) of this Section 5, and further to the
effect that:
(i) for the period from and after the date of this
Agreement and prior to such Closing Date, there has not
occurred any Material Adverse Change;
(ii) the representations, warranties and covenants of the
Company set forth in Section 1 of this Agreement are true and
correct with the same force and effect as though expressly
made on and as of such Closing Date; and
(iii) the Company has complied with all the agreements
hereunder and satisfied all the conditions on its part to be
performed or satisfied hereunder at or prior to such Closing
Date.
(g) BRING-DOWN COMFORT LETTER. On each of the First Closing Date
and each Subsequent Closing Date, the Representative shall have received from
Xxxx & Xxxx, P.C., independent public or certified public accountants for the
Company, a letter dated such date, in form and substance satisfactory to the
Representative, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to subsection (a) of this Section 5, except
that the specified date referred to therein for the carrying out of procedures
shall be no more than three business days prior to the First Closing Date or
Subsequent Closing Date, as the case may be (and the Representative shall have
received an additional four conformed copies of such accountants' letter the
several Underwriters).
(h) LOCK-UP AGREEMENT FROM CERTAIN SECURITYHOLDERS OF THE COMPANY.
On or prior to the date hereof, the Company shall have furnished to the
Representative an agreement in the form of Exhibit B hereto from each
shareholder of the Company, and such agreement shall be in full force and effect
on each of the First Closing Date and each Subsequent Closing Date.
(i) ADDITIONAL DOCUMENTS. On or before each of the First Closing
Date and each Subsequent Closing Date, the Representative and counsel for the
Underwriters shall have received such information, documents and opinions as
they may reasonably require for the purposes of enabling them to pass upon the
issuance and sale of the Units as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representative by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Optional Units, at any time prior to each
Subsequent Closing Date, which termination shall be without liability on the
part of
19
any party to any other party, except that Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement
is terminated by the Representative pursuant to Section 5, Section 11, or
Section 19, or by the Company pursuant to Section 7, or if the sale to the
Underwriters of the Units on the First Closing Date or Subsequent Closing Date
is not consummated because of any refusal, inability or failure on the part of
the Company to perform any agreement herein or to comply with any provision
hereof, the Company agrees to reimburse the Representative and the other
Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representative and the
Underwriters in connection with the proposed purchase and the offering and sale
of the Units, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges. In
the event of such a termination, the $35,000 advance received by the
Representative against reasonable out-of-pocket expenses incurred in connection
with the offering will be returned to the Company to the extent not actually
incurred by the Representative.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall not
become effective until the later of (i) the execution of this Agreement by the
parties hereto and (ii) notification (including by way of oral notification from
the reviewer at the Commission) by the Commission to the Company of the
effectiveness of the Registration Statement under the Securities Act; provided
that Sections 4(b), 6, 8 and 9 shall at all times be effective.
Prior to such effectiveness, this Agreement may be terminated by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part of (a) the Company to any Underwriter,
except that (solely in the case where the Company has terminated this Agreement
pursuant to this Section 7) the Company shall be obligated to reimburse the
expenses of the Representative and the Underwriters pursuant to Sections 4 and 6
hereof, or (b) any Underwriter to the Company except that the provisions of
Section 8 and Section 9 shall at all times be effective and shall survive such
termination.
SECTION 8. INDEMNIFICATION.
(a) INDEMNIFICATION OF THE UNDERWRITERS.
(1) The Company agrees to indemnify and hold harmless each
Underwriter, its officers and employees, and each person, if any, who controls
any Underwriter within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such loss, claim, damage, liability or expense (or actions
in respect thereof as contemplated below) arises out of or is based (i) upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A, Rule 430B and Rule 430C under
the Securities Act, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading; or (ii) upon any untrue statement or alleged untrue statement of
a material fact contained in any Issuer Free Writing Prospectus, any preliminary
20
prospectus or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; or (iii) in whole or in part upon any inaccuracy in
the representations and warranties of the Company contained herein; or (iv) in
whole or in part upon any failure of the Company to perform its obligations
hereunder or under law; or (v) upon any act or failure to act or any alleged act
or failure to act by any Underwriter in connection with, or relating in any
manner to, the Common Stock or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon any matter covered by clause (i) or (ii)
above, provided that the Company shall not be liable under this clause (v) to
the extent that a court of competent jurisdiction shall have determined by a
final judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its bad faith or willful misconduct; and to
reimburse each Underwriter and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by the
Representative) as such expenses are reasonably incurred by such Underwriter or
such controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; PROVIDED, HOWEVER, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but only
to the extent, arising out of or based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the
Representative expressly for use in the Registration Statement, any Issuer Free
Writing Prospectus, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto). The indemnity agreement set forth in this
Section 8(a)(1) shall be in addition to any liabilities that the Company may
otherwise have.
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer, or controlling person may become subject, under the
Securities Act, the Exchange Act, or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Issuer Free Writing Prospectus, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or arises
out of or is based upon 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 each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Issuer Free Writing
Prospectus, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company by the Representative expressly for use therein; and to
reimburse the Company, or any such director, officer, or controlling person for
any legal and other expense reasonably incurred by the Company, or any such
director, officer, or controlling
21
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The Company
hereby acknowledges that the only information that the Underwriters have
furnished to the Company expressly for use in the Registration Statement, any
Issuer Free Writing Prospectus, any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) are the statements set forth in the table
in the first paragraph and in the sixth and seventh paragraphs (relating to
stabilization and market making activities) under the caption "Underwriting" in
the preliminary prospectus and the Prospectus; and the Underwriters confirm that
such statements are correct. The indemnity agreement set forth in this Section
8(b) shall be in addition to any liabilities that each Underwriter may otherwise
have.
(c) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES. Promptly
after receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (the Representative in the case of Section 8(b) and Section
9), representing the indemnified parties who are parties to such action) or (ii)
the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.
22
(d) SETTLEMENTS. The indemnifying party under this Section 8 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
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
SECTION 9. CONTRIBUTION. If the indemnification provided for in Section
8 is for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying parties on the one hand, and the
indemnified parties, on the other hand, from the offering of the Units pursuant
to this Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the indemnifying parties, on the one hand, and the indemnified parties,
on the other hand, in connection with the statements or omissions or
inaccuracies in the representations and warranties herein which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the indemnifying
parties, on the one hand, and the indemnified parties, on the other hand, in
connection with the offering of the Units pursuant to this Agreement shall be
deemed to be in the same respective proportions as the total net proceeds from
the offering of the Units pursuant to this Agreement (before deducting expenses)
received by the indemnifying parties, and the total underwriting discount
received by the indemnified parties, in each case as set forth on the front
cover page of the Prospectus bear to the aggregate initial public offering price
of the Units as set forth on such cover. The relative fault of the indemnifying
parties, on the one hand, and the indemnified parties, on the other hand, shall
be determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by indemnifying
parties, on the one hand, or the indemnified parties, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
23
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Units underwritten by it and
distributed to the public. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several, and not joint, in proportion to their respective
underwriting commitments as set forth opposite their names in Schedule A. For
purposes of this Section 9, each officer and employee of an Underwriter and each
person, if any, who controls an Underwriter within the meaning of the Securities
Act and the Exchange Act shall have the same rights to contribution as such
Underwriter; and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Securities Act and the Exchange Act shall have
the same rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or each Subsequent Closing Date, as the case may be, any
one or more of the several Underwriters shall fail or refuse to purchase Units
that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Units which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase does not exceed 10% of the aggregate
number of the Units to be purchased on such date, the other Underwriters shall
be obligated, severally, in the proportions that the number of Firm Units set
forth opposite their respective names on Schedule A bears to the aggregate
number of Firm Units set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as may be specified by the
Representative with the consent of the non-defaulting Underwriters, to purchase
the Units which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date. If, on the First Closing Date or each
Subsequent Closing Date, as the case may be, any one or more of the Underwriters
shall fail or refuse to purchase Units and the aggregate number of Units with
respect to which such default occurs exceeds 10% of the aggregate number of
Units to be purchased on such date, and arrangements satisfactory to the
Representative and the Company for the purchase of such Units are not made
within 48 hours after such default, this Agreement shall terminate without
liability of any party to any other party except that the provisions of Section
4(b), Section 6, Section 8 and Section 9 shall at all times be effective and
shall survive such termination. In any such case either the Representative or
the Company shall have the right to
24
postpone the First Closing Date or each Subsequent Closing Date, as the case may
be, but in no event for longer than seven days in order that the required
changes, if any, to the Registration Statement and the Prospectus or any other
documents or arrangements may be effected.
As used in this Agreement, the term "UNDERWRITER" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date and, with respect to Optional Units, each Subsequent Closing Date, whether
before or after notification by the Commission to the Company of the
effectiveness of the Registration Statement under the Securities Act, this
Agreement may be terminated by the Representative by notice given to the Company
if at any time (i) trading or quotation in any of the Company's securities shall
have been suspended or limited by the Commission or by the Nasdaq Capital
Market, or trading in securities generally on either the Nasdaq Stock Market or
the New York Stock Exchange shall have been suspended or limited, or minimum or
maximum prices shall have been generally established on any of such stock
exchanges by the Commission or the NASD; (ii) a general banking moratorium shall
have been declared by any of federal, New York or Oklahoma authorities; (iii)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective substantial change in United States' or
international political, financial or economic conditions that, in the judgment
of the Representative is material and adverse and makes it impracticable to
market the Units in the manner and on the terms described in the Prospectus or
to enforce contracts for the sale of securities; or (iv) in the judgment of the
Representative there shall have occurred any Material Adverse Change (regardless
of whether any loss associated with such Material Adverse Change shall have been
insured). Any termination pursuant to this Section 11 shall be without liability
on the part of (a) the Company to any Underwriter, except that the Company shall
be obligated to reimburse the expenses of the Representative and the
Underwriters pursuant to Sections 4(b) and 6 hereof, (b) any Underwriter to the
Company, or (c) of any party hereto to any other party except that the
provisions of Section 8 and Section 9 shall at all times be effective and shall
survive such termination.
SECTION 12. NO ADVISORY OR FIDUCIARY RESPONSIBILITY. The Company
acknowledges and agrees that: (i) the purchase and sale of the Units pursuant to
this Agreement, including the determination of the public offering price of the
Units and any related discounts and commissions, is an arm's-length commercial
transaction between the Company, on the one hand, and the several Underwriters,
on the other hand, and the Company is capable of evaluating and understanding
and understands and accepts the terms, risks and conditions of the transactions
contemplated by this Agreement; (ii) in connection with each transaction
contemplated hereby and the process leading to such transaction each Underwriter
is and has been acting solely as a principal and is not the financial advisor,
agent or fiduciary of the Company or its affiliates, shareholders, creditors or
employees or any other party; (iii) no Underwriter has assumed or will assume an
advisory, agency or fiduciary responsibility in favor of the Company with
respect to any of the transactions contemplated hereby or the process leading
thereto (irrespective of whether such Underwriter has advised or is currently
advising the Company on other matters)
25
and no Underwriter has any obligation to the Company with respect to the
offering contemplated hereby except the obligations expressly set forth in this
Agreement; (iv) the several Underwriters and their respective affiliates may be
engaged in a broad range of transactions that involve interests that differ from
those of the Company and that the several Underwriters have no obligation to
disclose any of such interests by virtue of any advisory, agency or fiduciary
relationship; and (v) the Underwriters have not provided any legal, accounting,
regulatory or tax advice with respect to the offering contemplated hereby and
the Company has consulted its own legal, accounting, regulatory and tax advisors
to the extent it deemed appropriate. The Company hereby waives and releases, to
the fullest extent permitted by law, any claims that the Company may have
against the several Underwriters with respect to any breach or alleged breach of
agency or fiduciary duty.
This Agreement supersedes all prior agreements and understandings
(whether written or oral) between the Company and the several Underwriters, or
any of them, with respect to the subject matter hereof.
SECTION 13. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Units sold hereunder and any termination of this Agreement.
SECTION 14. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representative:
Xxxxxxx Investment Company, Inc.
000 XX Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Syndicate Department
WITH A COPY TO:
Stoel Rives LLP
000 XX 0xx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx
26
If to the Company:
Xxxxxxx Foods, Inc.
000 X.X. 00xx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
WITH A COPY TO:
Morse, Zelnick, Rose & Lander LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
Any party hereto may change the address for receipt of communications
by giving written notice to the others.
SECTION 15. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and personal representatives and no other
person will have any right or obligation hereunder. The term "SUCCESSORS" shall
not include any purchaser of the Units as such from any of the Underwriters
merely by reason of such purchase.
SECTION 16. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 17. GOVERNING LAW PROVISIONS. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
SECTION 18. CONSENT TO JURISDICTION. Any legal suit, action or
proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby ("RELATED PROCEEDINGS") may be instituted in the federal
courts of the United States of America located in Portland, Oregon or the courts
of the Oregon in each case located in Portland, Oregon (collectively, the
"SPECIFIED COURTS"), and each party irrevocably submits to the exclusive
jurisdiction (except for proceedings instituted in regard to the enforcement of
a judgment of any such court (a "RELATED JUDGMENT"), as to which such
jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail to such
party's address set forth above shall be effective service of process for any
suit, action or other
27
proceeding brought in any such court. The parties irrevocably and
unconditionally waive any objection to the laying of venue of any suit, action
or other proceeding in the Specified Courts and irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such suit,
action or other proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 19. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, the officers or
employees of any Underwriter, any person controlling any Underwriter, the
Company, the officers or employees of the Company, or any person controlling the
Company, (ii) acceptance of the Units and payment for them hereunder and (iii)
termination of this Agreement.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the
Underwriters, the Underwriters' officers and employees, any controlling persons
referred to herein, the Company's directors and the Company's officers who sign
the Registration Statement and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term "SUCCESSORS AND
ASSIGNS" shall not include a purchaser of any of the Units from any of the
several Underwriters merely because of such purchase.
28
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
XXXXXXX FOODS, INC.
By:
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representative as of the date first above written.
XXXXXXX INVESTMENT COMPANY, INC.
Acting as Representative of the several
Underwriters named in the attached Schedule A.
By:
------------------------------------
Name:
Title:
29
SCHEDULE A
NUMBER OF FIRM
UNITS TO BE
UNDERWRITERS PURCHASED
----------------------------------------------------------------- --------------
Xxxxxxx Investment Company, Inc.
Total.................................................... 2,150,000
=========
SCH. A-1
SCHEDULE B
----------
ISSUER FREE WRITING PROSPECTUS
------------------------------
SCH. B-1
SCHEDULE C
----------
PRICING TERMS
-------------
Price per Unit to public: $_______
Underwriting discounts and commissions per Unit: $______
Offering proceeds to the Company, before expenses: $_________
Closing Date: _______, 2007
SCH. C-1
EXHIBIT A
Opinion of counsel for the Company
to be delivered pursuant to Section 5(d) of the Underwriting Agreement.
-----------------------------------------------------------------------
References to the Prospectus in this Exhibit A include any supplements
thereto at the First Closing Date and, if applicable, each Subsequent Closing
Date. Capitalized terms used and not defined herein shall have the meanings
ascribed to them in the Underwriting Agreement.
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Oklahoma.
(ii) The Company has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Disclosure Package and the Prospectus and to enter into and perform its
obligations under the Underwriting Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in which
such qualification is required, except for such jurisdictions where the failure
to so qualify or to be in good standing would not, individually or in the
aggregate, result in a Material Adverse Change.
(iv) To the best of such counsel's knowledge, the Company does not
own an equity interest in any other entity.
(v) The authorized, issued and outstanding capital stock of the
Company (including the Common Stock) conforms to the descriptions thereof set
forth in the Disclosure Package and the Prospectus. All of the outstanding
shares of Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable and, to the best of such counsel's knowledge, have been
issued in compliance with the registration and qualification requirements of
federal and state securities laws. The form of certificate used to evidence the
Common Stock complies with all applicable requirements of the charter and
by-laws of the Company and the General Corporation Act of the State of Oklahoma.
The description of the Company's stock option, stock bonus and other stock plans
or arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Disclosure Package and the Prospectus accurately
and fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights.
(vi) No shareholder of the Company or any other person has any
preemptive right, right of first refusal or other similar right to subscribe for
or purchase securities of the Company arising (i) by operation of the charter or
by-laws of the Company or the General Corporation Act of the State of Oklahoma
or (ii) to the best knowledge of such counsel, otherwise.
(vii) The Underwriting Agreement has been duly authorized, executed
and delivered by the Company.
(viii) The Common Stock included in the Units to be purchased by the
Underwriters from the Company (including units purchasable on exercise of the
Underwriters' overallotment option and the Representative's Warrants) has been
duly authorized and reserved for issuance
EX. A-1
and sale pursuant to this Agreement and, in the case of Common Stock issuable on
exercise of the Representative's Warrants, the terms thereof and, when so issued
and delivered by the Company, will be validly issued, fully paid and
nonassessable. The Class A Warrants and Class B Warrants included in the Units
to be purchased by the Underwriters from the Company have been duly and validly
authorized by all required corporate actions and will, when issued and delivered
by the Company pursuant to this Agreement, be validly executed and delivered by,
and will be valid and binding agreements of, the Company, enforceable in
accordance with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles. The Representative's Warrants have been duly and validly
authorized by all required corporate actions and will, when issued and delivered
by the Company pursuant to this Agreement, be validly executed and delivered by,
and will be valid and binding agreements of, the Company, enforceable in
accordance with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles. The Common Stock issuable on exercise of Class A Warrants,
Class B Warrants has been duly authorized and reserved for issuance and sale
pursuant to the terms of such warrants and, when issued and delivered by the
Company pursuant to such warrants, will be validly issued, fully paid and
nonassessable.
(ix) The Warrant Agreement has been duly authorized by the Company.
When duly executed, authenticated, issued and delivered as contemplated in the
Registration Statement and the Warrant Agreement, the Warrant Agreement will
constitute the legally binding agreement of the Company, enforceable against it
in accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(ix) The Registration Statement and the Rule 462(b) Registration
Statement, if any, has been declared effective by the Commission under the
Securities Act. To the best knowledge of such counsel, no stop order suspending
the effectiveness of either of the Registration Statement or the Rule 462(b)
Registration Statement, if any, has been issued under the Securities Act and no
proceedings for such purpose have been instituted or are pending or are
contemplated or threatened by the Commission. Any required filing of the
Disclosure Package and the Prospectus and any supplement thereto pursuant to
Rule 424(b) under the Securities Act has been made in the manner and within the
time period required by such Rule 424(b).
(x) The Registration Statement, including any Rule 462(b)
Registration Statement, the Prospectus, and each amendment or supplement to the
Registration Statement and the Prospectus, and each document deemed to be part
of the Disclosure Package, as of their respective effective or issue dates
(other than the financial statements and supporting schedules included therein
or in exhibits to or excluded from the Registration Statement, as to which no
opinion need be rendered) comply as to form in all material respects with the
applicable requirements of the Securities Act.
EX. A-2
(xi) The Units, the Common Stock, the Class A Warrants and the
Class B Warrants have been approved for quotation on the Nasdaq Capital Market
and on the Boston Stock Market under the symbols "FOOD," "FOODU," "FOODW" and
"FOODZ," respectively.
(xiv) The statements (i) in each of the Disclosure Package and the
Prospectus under the captions "Related Party Transactions", "Description of
Securities" and "Shares Eligible for Future Sale", (ii) under the caption
"Indemnification of Officers and Directors" in Item 24 of the Registration
Statement, (iii) under the caption "Recent Sales of Unregistered Securities in
Item 26 of the Registration Statement, insofar as such statements constitute
matters of law, legal conclusions or summaries of legal matters or documents or
the Company's charter or by-law provisions, have been reviewed by such counsel
and fairly present and summarize, in all material respects, the matters referred
to therein.
(xv) To the best knowledge of such counsel, there are no legal or
governmental actions, suits or proceedings pending or threatened which are
required to be disclosed in the Registration Statement or the Disclosure
Package, other than those disclosed therein.
(xvi) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto; and the descriptions thereof
and references thereto are correct in all material respects.
(xvii) No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the Company's execution, delivery and performance of the
Underwriting Agreement and consummation of the transactions contemplated thereby
and by the Prospectus, except as required under the Securities Act, the
applicable laws of any foreign jurisdiction, applicable state securities or blue
sky laws and from the NASD.
(xviii) The execution and delivery of the Underwriting Agreement by
the Company and the performance by the Company of its obligations thereunder
(other than performance by the Company of its obligations under the
indemnification section of the Underwriting Agreement, as to which no opinion
need be rendered) (i) have been duly authorized by all necessary corporate
action on the part of the Company; (ii) will not result in any violation of the
provisions of the charter or by-laws of the Company; (iii) will not (A)
constitute a breach of, or Default under any Existing Instrument, or (B) result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to, in the case of each of clauses
(A) and (B), any Existing Instrument filed as an exhibit to the Registration
Statement or, to the best knowledge of such counsel, any other material Existing
Instrument; or (iv) to the best knowledge of such counsel, will not result in
any violation of any law, administrative regulation or administrative or court
decree applicable to the Company.
(xix) The Company is not, and after receipt of payment for the Units
and the application of the proceeds thereof as contemplated under the caption
"Use of Proceeds" in the Prospectus and in the Disclosure Package will not be,
an "INVESTMENT COMPANY" within the meaning of Investment Company Act.
EX. A-3
(xx) To the best knowledge of such counsel, there are no persons
with registration or other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by the Underwriting Agreement, except for such rights as have been
duly waived.
(xxi) To the best knowledge of such counsel, the Company is not in
violation of its charter or by-laws or any law, administrative regulation or
administrative or court decree applicable to the Company or is in Default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any material Existing Instrument, except in each such case for such
violations or Defaults as would not, individually or in the aggregate, result in
a Material Adverse Change.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriters at which the contents
of the Registration Statement and the Prospectus, and any supplements or
amendments thereto, and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, including the documents incorporated
by reference therein (other than as specified above), and any supplements or
amendments thereto, on the basis of the foregoing, nothing has come to their
attention which has caused them to believe that (i) either the Registration
Statement or any amendments thereto, at the time the Registration Statement or
such amendments 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 not misleading; (ii) the Prospectus, as
of its date or at the First Closing Date or each Subsequent 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 therein, in the
light of the circumstances under which they were made, not misleading; or (iii)
the items specified in Schedule I, consisting of those included in the
Disclosure Package, contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements therein, in
the light of circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief as to the financial
statements or schedules or other financial data derived therefrom, included or
incorporated by reference in the Registration Statement or the Prospectus or any
amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Act of the State of Oklahoma, or the federal law of the United
States, to the extent they deem proper and specified in such opinion, upon the
opinion (which shall be dated the First Closing Date or each Subsequent Closing
Date, as the case may be, shall be satisfactory in form and substance to the
Underwriters, shall expressly state that the Underwriters may rely on such
opinion as if it were addressed to them and shall be furnished to the
Representative) of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters; provided,
however, that such counsel shall further state that they believe that they and
the Underwriters are justified in relying upon such opinion of other counsel,
and (B) as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Company and public officials.
EX. A-4
EXHIBIT B
FORM OF LOCK-UP AGREEMENT
EX. B-1
