EXHIBIT 1.1
500,000 Units
I-Sector Corporation
UNDERWRITING AGREEMENT
May ___, 2004
▇▇▇▇▇▇▇ Investment Company, Inc.
As Representative of the
Several Underwriters
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I-Sector Corporation, a Delaware corporation (the "Company"), proposes
to sell to the several underwriters (the "Underwriters") named in Schedule I
hereto for whom you are acting as Representative (the "Representative") an
aggregate of 500,000 Units (the "Firm Units"). Each Unit will consist of two
shares (individually, a "Share" and, collectively, the "Shares") of the common
stock, par value $0.01 of the Company ("Common Stock") and one warrant
(individually, a "Warrant" and, collectively, the "Warrants") each to purchase
one share of Common Stock. The Warrants are to be issued under the terms of a
Warrant Agreement (the "Warrant Agreement") by and between the Company and
American Stock Transfer & Trust Company, as warrant agent (the "Warrant Agent"),
in each case substantially in the form most recently filed as an exhibit to the
Registration Statement (hereinafter defined). The respective number of the Firm
Units to be so purchased by the several Underwriters are set forth opposite
their names in Schedule I hereto. The Company also proposes to grant to the
Representative an option to purchase in aggregate of up to 75,000 additional
Units, identical to the Firm Units (the "Option Units"), as set forth below. The
Firm Units and the Option Units (to the extent the aforementioned option is
exercised) are herein collectively referred to as the "Units."
As the Representative, you have advised the Company (a) that you are
authorized to enter into this Agreement for yourself as Representative and on
behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm Units
set forth opposite their respective names in Schedule I.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company. The Company
represents and warrants to each of the Underwriters as follows:
(a) A registration statement on Form S-2 (File No.
333-113575) with respect to the Units has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and has been
filed with the Commission. Copies of such registration statement, including any
amendments thereto, the preliminary prospectuses (meeting the requirements of
the Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have heretofore been
delivered by the Company to you. Such registration statement, together with any
registration statement filed by the Company pursuant to Rule 462(b) of the Act,
herein referred to as the "Registration Statement," which shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. "Prospectus" means (i) the form of prospectus
first filed with the Commission pursuant to Rule 424(b) or, if no such
prospectus is filed pursuant to such rule, (ii) the last preliminary prospectus
included in the Registration Statement filed prior to the time it becomes
effective or filed pursuant to Rule 424(a) under the Act that is delivered by
the Company to the Underwriters for delivery to purchasers of the Units,
together with the term sheet or abbreviated term sheet filed with the Commission
pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus included
in the Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus."
(b) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. Except as
described in the Registration Statement, the Company does not own a controlling
interest in any other corporation or other business entity that has any material
assets, liabilities or operations. Each entity that the Registration Statement
discloses as being controlled by the Company (each a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly organized and is validly
existing under the laws of its jurisdiction of organization and has the
necessary legal power and authority to own or lease its properties and to
conduct its business as described in the Registration Statement. The Company and
each Subsidiary is duly qualified to transact business in all jurisdictions in
which the conduct of its business requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
condition (financial or otherwise), results of operations, business or prospects
of the Company and its Subsidiaries taken as a whole (a "Material Adverse
Effect").
(c) The outstanding shares of each class or series of
capital stock or other equity interests of the Company and each Subsidiary have
been duly authorized and validly issued and are fully paid and non-assessable
and, except as disclosed in the Registration Statement, have been issued and
sold by the Company or the Subsidiary in compliance in all material respects
with applicable securities laws; the issuance and sale of the Units have been
duly authorized by all necessary corporate action and, when issued and paid for
as contemplated herein, the Units will be validly issued, fully paid and
non-assessable; and no preemptive rights
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of shareholders exist with respect to any security of the Company or the issue
and sale thereof. Except as set forth in the Registration Statement, neither the
filing of the Registration Statement nor the offering or sale of the Units as
contemplated by this Agreement gives rise to any rights, other than those which
have been waived or satisfied, for or relating to the registration of any shares
of Common Stock or other securities of the Company. The Company has duly and
validly reserved, out of its authorized and unissued Common Stock, for issuance
upon exercise of Warrants a number of shares sufficient for such purposes,
including Warrants included in the Option Units and Units obtainable on exercise
of the Representative's Warrants issuable as described in Section 2(d) (the
"Representative's Warrants").
(d) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. The Common Stock
conforms and the Units, the Warrants and the Representative's Warrants will
conform to the description thereof contained in the Registration Statement in
all material respects. The forms of certificates for the Units, the Common
Stock, the Warrants and the Representative's Warrants conform to the
requirements of the General Corporation Law of Delaware in all material
respects.
(e) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Units nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements that are required to be stated therein by the Company
and will conform to the requirements of the Act and the Rules and Regulations.
The Registration Statement and any amendment thereto do not contain, and will
not contain, any untrue statement of a material fact and do not omit, and will
not omit, to state any material fact required to be stated therein or necessary
to make the statements therein not misleading. The Prospectus, including any
amendments and supplements thereto, do not contain, and will not contain, any
untrue statement of material fact; and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment or supplement,
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any Underwriter through the Representative,
specifically for use in the preparation thereof.
(f) The consolidated financial statements of the Company,
together with related notes and schedules as set forth in the Registration
Statement, present fairly the consolidated financial position and the results of
operations and cash flows of the Company and its consolidated subsidiaries at
the indicated dates and for the indicated periods. The impact of each material
accounting judgment made in the preparation of the financial statements included
in the Registration Statement has been fairly and adequately disclosed in the
notes thereto or elsewhere in the Registration Statement. Such financial
statements and related schedules have been prepared in accordance with generally
accepted principles of accounting, consistently applied throughout the periods
involved, except as disclosed in the Registration Statement, and all adjustments
necessary for a fair presentation of results for such periods have been made.
The summary financial and statistical data of the Company included in the
Registration Statement presents fairly the information shown therein and such
data has been compiled on a basis
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consistent with the financial statements presented therein and the books and
records of the Company.
(g) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and Deloitte & Touche LLP, who
have certified certain of the financial statements filed with the Commission as
part of the Registration Statement, are each independent public accountants as
required by the Act and the Rules and Regulations.
(h) There is no action, suit, claim or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary before any court or administrative agency or otherwise which if
determined adversely to the Company or such Subsidiary might result in a
Material Adverse Effect or prevent the consummation of the transactions
contemplated hereby, except as set forth in the Registration Statement.
(i) The Company and each Subsidiary either has or has
disposed of in the ordinary course of business since December 31, 2003 good and
marketable title to all of its properties and assets, tangible and intangible,
reflected in the consolidated balance sheet of the Company and its consolidated
Subsidiaries as of that date that is a part of the financial statements included
in the Registration Statement, and has good and marketable title to all other
property described in the Registration Statement as owned by the Company or a
Subsidiary, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except those reflected in such financial statements (or as described in the
Registration Statement) or which are not material. All of the leases and
subleases under which the Company or any Subsidiary holds properties are in full
force and effect (with only such exceptions as are commonly accepted by prudent
companies engaged in the business of the Company or such Subsidiary) and neither
the Company nor any Subsidiary has received notice of any claim that is
materially adverse to rights of the Company or any Subsidiary under any of such
leases or subleases.
(j) The Company, for itself and its Subsidiaries that
have been consolidated for tax purposes, has filed all federal, state, local and
foreign income tax returns which have been required to be filed (or have valid
extensions for filing thereof) and has paid all taxes indicated by said returns
and all assessments received by it to the extent that such taxes have become due
and are not being contested in good faith. All tax liabilities have been
adequately provided for in the financial statements of the Company. Except as
described in the Registration Statement, all of the Subsidiaries are
consolidated with the Company for tax purposes.
(k) Since the respective dates as of which information is
given in the Registration Statement, as it may have been amended or
supplemented, there has not been any change or any development involving a
prospective Material Adverse Effect whether or not occurring in the ordinary
course of business; and there has not been any material transaction entered into
or any material transaction that is probable of being entered into by the
Company or any Subsidiary, other than transactions in the ordinary course of
business and changes and transactions described in the Registration Statement,
as it may be amended or supplemented. Neither the Company nor any Subsidiary has
any material contingent obligations which are not disclosed in the Company's
financial statements included in the Registration Statement or elsewhere in the
Prospectus.
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(l) Neither the Company nor any Subsidiary is, nor, with
the giving of notice or lapse of time or both, will any such entity be, in
violation of or in default under its Certificate of Incorporation or Bylaws or
other charter documents or under any agreement, lease, contract, indenture or
other instrument or obligation to which it is a party or by which it, or any of
its properties, is bound and which default would have Material Adverse Effect.
The execution and delivery of this Agreement and the consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which any member of the Company is a party, or of the
Certificate of Incorporation or Bylaws of the Company or any order, rule or
regulation applicable to the Company of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(m) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Units for public offering by
the Underwriters under state securities or Blue Sky laws) has been obtained or
made and is in full force and effect.
(n) The Company or a Subsidiary holds all material
patents, patent rights trademarks, trade names, copyrights, trade secrets and
licenses of any of the foregoing (collectively, "Intellectual Property Rights")
that are necessary to the conduct of its businesses; there is no claim pending
or, to the best knowledge of the Company, threatened against the Company or any
Subsidiary or any of their respective officers, directors or employees alleging
any infringement of Intellectual Property Rights, or any violation of the terms
of any license relating to Intellectual Property Rights, nor does the Company
know of any basis for any such claim. The Company knows of no material
infringement by others of Intellectual Property Rights owned by or licensed to
the Company or a Subsidiary. The Company or a Subsidiary has obtained, is in
compliance in all material respect with and maintains in full force and effect
all material licenses, certificates, permits, orders or other, similar
authorizations granted or issued by any governmental agency (collectively
"Government Permits") required to conduct its business as it is presently
conducted. No proceeding to revoke, limit or otherwise materially change any
Government Permit has been commenced or, to the Company's knowledge, is
threatened against the Company or any Subsidiary, and the Company has no reason
to anticipate that any such proceeding will be commenced against the Company or
any Subsidiary. Except as disclosed or contemplated in the Prospectus, the
Company has no reason to believe that any pending application for a Government
Permit will be denied or limited in a manner inconsistent with the Company's
business plan as described in the Prospectus.
(o) The Company and each Subsidiary is in all material
respects in compliance with all applicable Environmental Laws. The Company has
no knowledge of any past, present or, as anticipated by the Company, future
events, conditions, activities, investigation, studies, plans or proposals that
(i) would interfere with or prevent compliance with any Environmental Law by the
Company or any Subsidiary in all material respects, or (ii) could
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reasonably be expected to give rise to any common law or other liability, or
otherwise form the basis of a claim, action, suit, proceeding, hearing or
investigation, involving the Company or any Subsidiary and related to Hazardous
Substances or Environmental Laws that could reasonably be expected to have a
Material Adverse Effect. Except for the prudent and safe use and management of
Hazardous Substances in the ordinary course of the Company's business, (i) no
Hazardous Substance is or has been used, treated, stored, generated,
manufactured or otherwise handled on or at any Facility and (ii) to the
Company's best knowledge, no Hazardous Substance has otherwise come to be
located in, on or under any Facility. No Hazardous Substances are stored at any
Facility except in quantities necessary to satisfy the reasonably anticipated
use or consumption by the Company. No litigation, claim, proceeding or
governmental investigation is pending regarding any environmental matter for
which the Company or any Subsidiary has been served or otherwise notified or, to
the knowledge of the Company, threatened or asserted against the Company or any
Subsidiary, or the officers or directors of the Company or any Subsidiary in
their capacities as such, or any Facility or the Company's business. There are
no orders, judgments or decrees of any court or of any governmental agency or
instrumentality under any Environmental Law which specifically apply to the
Company or any Subsidiary, any Facility (to the knowledge of the Company with
respect to any Facility) or any of the Company's or any Subsidiary's operations.
Neither the Company nor any Subsidiary has received from a governmental
authority or other person (i) any notice that it is a potentially responsible
person for any Contaminated site or (ii) any request for information about a
site alleged to be Contaminated or regarding the disposal of Hazardous
Substances. There is no litigation or proceeding against any other person by the
Company or any Subsidiary regarding any environmental matter. The Company has
disclosed in the Prospectus or made available to the Underwriters and their
counsel true, complete and correct copies of any reports, studies,
investigations, audits, analyses, tests or monitoring in the possession of or
initiated by the Company or any Subsidiary pertaining to any environmental
matter relating to the Company, any Subsidiary, their past or present operations
or any Facility.
For the purposes of the foregoing paragraph, "Environmental Laws" means
any applicable federal, state or local statute, regulation, code, rule,
ordinance, order, judgment, decree, injunction or common law pertaining in any
way to the protection of human health or the environment, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Toxic Substances
Control Act, the Clean Air Act, the Federal Water Pollution Control Act and any
similar or comparable state or local law; "Hazardous Substance" means any
hazardous, toxic, radioactive or infectious substance, material or waste as
defined, listed or regulated under any Environmental Law; "Contaminated" means
the actual existence on or under any real property of Hazardous Substances, if
the existence of such Hazardous Substances triggers a requirement to perform any
investigatory, remedial, removal or other response action under any
Environmental Laws or if such response action legally could be required by any
governmental authority; "Facility" means any property currently owned, leased or
occupied by the Company.
(p) Neither the Company, nor to the Company's knowledge,
any of its affiliates, has taken or intends to take, directly or indirectly, any
action which is designed to cause or result in, or which constitutes or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock or the Warrants to facilitate the sale or
resale of the Units.
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(q) The Company is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
(r) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) 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. The Company has adopted Disclosure Controls and Procedures, as
defined in Section 13a-14(c) of the rules and regulations adopted under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and has
implemented such procedures as adopted and has evaluated the effectiveness of
such Disclosure Controls and Procedures not less than ninety days prior to the
filing date of each report on Form 10-Q or Form 10-K filed by the Company since
August 29, 2002.
(s) The Company and each Subsidiary carries, or is
covered by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.
(t) The Company and each Subsidiary is in compliance in
all material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any Subsidiary would have any liability; neither
the Company nor any Subsidiary has incurred and the Company does not expect that
it or any Subsidiary will incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company or any Subsidiary would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, which would cause the loss of such qualification.
(u) The Company and each Subsidiary is in compliance with
all laws, rules, regulations, orders of any court or administrative agency,
operating licenses or other requirements imposed by any governmental body
applicable to it, including, without limitation, all applicable laws, rules,
regulations, licenses or other governmental standards applicable to its business
except for matters of non-compliance that would not have a Material Adverse
Effect; and the conduct of the business of the Company and each Subsidiary, as
described in the Prospectus, will not cause the Company or such Subsidiary to be
in violation of any such presently existing requirements.
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(v) Each of the Warrants and the Representative's
Warrants have been authorized for issuance to the purchasers thereof or to the
Representative or its designees, as the case may be, and will, when issued,
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; the securities to be
issued upon exercise of the Warrants and the Representative's Warrants, when
issued and delivered against payment therefor in accordance with the terms
thereof, will be duly and validly issued, fully paid, nonassessable and free of
preemptive rights, and all corporate action required to be taken for the
authorization and issuance of the Warrants and the Representative's Warrants,
and the securities to be issued upon their exercise, have been validly and
sufficiently taken. The execution by the Company of the Warrant Agreement and
the Representative's Warrants has been duly authorized by all required action of
the Company and, when so executed and delivered (and assuming due and valid
execution by the Warrant Agent, in the case of the Warrant Agreement) will
constitute the valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity and limitations on the remedy of specific performance.
(w) Except as disclosed in the Prospectus, neither the
Company nor any of its officers, directors or affiliates have caused any person,
other than the Underwriters and ▇▇▇▇ ▇▇▇▇▇, to be entitled to reimbursement of
any kind, including, without limitation, any compensation that would be
includable as underwriter compensation under the NASD's Corporate Financing Rule
with respect to the offering of the Units, as a result of the consummation of
such offering based on any activity of such person as a finder, agent, broker,
investment adviser or other financial service provider.
(x) Except as described in the Prospectus, the Company
does not directly or indirectly control or have a material interest in any other
business entity.
(y) The Common Stock is traded on the American Stock
Exchange ("AMEX"). The Units, the Common Stock and the Warrants have been
approved for listing on the AMEX upon the effectiveness of the Registration
Statement and the Company has satisfied all of the requirements of AMEX for such
listing and for the trading of its Common Stock, Units and Warrants on AMEX.
(z) The Company has adopted organizational structures and
policies sufficient to comply with the requirements of the AMEX corporate
governance rules in effect as of the date hereof (the "AMEX Corporate Governance
Rules"). Without limiting the generality of the foregoing, the Company's Board
of Directors has validly appointed an Audit Committee and a Compensation
Committee whose composition satisfies the requirements of the AMEX Corporate
Governance Rules. The Board of Directors and/or the Audit Committee or
Compensation Committee, as the case may be, has adopted a charter governing the
respective activities of the Audit and Compensation Committees that satisfies
the requirements of the AMEX Corporate Governance Rules. The Audit Committee and
the Compensation Committee have each acted in accordance with the provisions of
their respective charters, as amended from time to time in all material
respects.
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(aa) Neither the Board of Directors nor the Audit
Committee has been informed, nor is any director of the Company aware, of (i)
any significant deficiencies in the design or operation of the Company's
internal controls which could adversely affect the Company's ability to record,
process, summarize and report financial data or any material weakness in the
Company's internal controls, except for the internal control deficiencies
disclosed under the heading "Controls and Procedures" in the Registration
Statement; or (ii) any fraud, whether or not material, that involves management
or other employees of the Company who have a significant role in the Company's
internal controls.
(bb) Each of the certifications made by the principal
executive and principal financial officers of the Company pursuant to Section
302 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and regulations adopted
thereunder was correct in all material respects when made.
2. Purchase, Sale and Delivery of the Units.
(a) On the basis of the representations, warranties and
covenants herein contained, and subject to the conditions herein set forth, the
Company agrees to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $____ per Unit, the number
of Firm Units set forth opposite the name of each Underwriter in Schedule I
hereof, subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Units to be sold hereunder is to
be made in New York Clearing House funds and, at the option of the
Representative, by bank wire to an account specified by the Company, certified
or bank cashier's checks drawn to the order of the Company, against either
uncertificated delivery of Firm Units or of certificates therefor (which
delivery, if certificated, shall take place in such location in New York, New
York as may be specified by the Representative) to the Representative for the
several accounts of the Underwriters. Such payment is to be made at the offices
of the Representative at the address set forth on the first page of this
agreement, at 7:00 a.m., Pacific time, on the third business day after the date
of this Agreement or at such other time and date not later than five business
days thereafter as you and the Company shall agree upon, such time and date
being herein referred to as the "Closing Date." (As used herein, "business day"
means a day on which the New York Stock Exchange is open for trading and on
which banks in New York are open for business and not permitted by law or
executive order to be closed.) Except to the extent uncertificated Firm Units
are delivered at closing, the certificates for the Firm Units will be delivered
in such denominations and in such registrations as the Representative requests
in writing not later than the second full business day prior to the Closing
Date, and will be made available for inspection by the Representative at least
one business day prior to the Closing Date.
(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriters to purchase the
Option Units at the price per Unit as set forth in Section 2(a). The option
granted hereby may be exercised in whole or in part by giving written notice (i)
at any time before the Closing Date and (ii) only once thereafter within 45 days
after the date of this Agreement, by the Representative to the Company setting
forth the number of Option Units as to which the Underwriters are exercising the
option, the names and denominations in which the Option Units are to be
registered and the time and date at which
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certificates representing such Units are to be delivered. The time and date at
which certificates for Option Units are to be delivered shall be determined by
the Representative but shall not be earlier than three nor later than 10 full
business days after the exercise of such option, nor in any event prior to the
Closing Date (such time and date being herein referred to as the "Option Closing
Date"). If the date of exercise of the option is three or more days before the
Closing Date, the notice of exercise shall set the Closing Date as the Option
Closing Date. The option with respect to the Option Units granted hereunder may
be exercised only to cover over-allotments in the sale of the Firm Units by the
Underwriters. The Representative may cancel such option at any time prior to its
expiration by giving written notice of such cancellation to the Company. To the
extent, if any, that the option is exercised, payment for the Option Units shall
be made on the Option Closing Date in New York Clearing House funds and, at the
option of the Representative, by bank wire to an account specified by the
Company or certified or bank cashier's check drawn to the order of the Company
for the Option Units to be sold by the Company in consideration either of
uncertificated delivery of Option Units or delivery of certificates therefor
(which delivery, if certificated, shall take place in such location in New York,
New York as may be specified by the Representative) to the Representative for
the several accounts of the Underwriters. Except to the extent uncertificated
Option Units are delivered at closing, the certificates for the Option Units
will be delivered in such denominations and in such registrations as the
Representative requests in writing not later than the second full business day
prior to the Option Closing Date, and will be made available for inspection by
the Representative at least one business day prior to the Option Closing Date.
(d) In addition to the sums payable to the Representative
as provided elsewhere herein, the Representative shall be entitled to receive at
the Closing, for itself alone and not as Representative of the Underwriters, as
additional compensation for its services, Representative's Warrants for the
purchase of up to 50,000 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.
3. Offering by the Underwriters.
(a) It is understood that the several Underwriters are to
make a public offering of the Firm Units as soon as the Representative deems it
advisable to do so. The Firm Units are to be initially offered to the public at
the initial public offering price set forth in the Prospectus. The
Representative may from time to time thereafter change the public offering price
and other selling terms. To the extent, if at all, that any Option Units are
purchased pursuant to Section 2 hereof, the Representative will offer them to
the public on the foregoing terms.
(b) It is further understood that you will act as the
Representative for the Underwriters in the offering and sale of the Units in
accordance with an Agreement Among Underwriters entered into by you and the
several other Underwriters.
4. Covenants of the Company. The Company covenants and agrees
with the several Underwriters that:
(a) The Company will (i) use its best efforts to cause
the Registration Statement to become effective or, if the procedure in Rule 430A
of the Rules and Regulations is
10
followed, to prepare and timely file with the Commission under Rule 424(b) of
the Rules and Regulations a Prospectus in a form approved by the Representative
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and Regulations,
and (ii) not file any amendment to the Registration Statement or supplement to
the Prospectus of which the Representative shall not previously have been
advised and furnished with a copy or to which the Representative shall have
reasonably objected in writing or which is not in compliance with the Rules and
Regulations.
(b) The Company will advise the Representative promptly
(i) when the Registration Statement or any post-effective amendment thereto
shall have become effective, (ii) of receipt of any comments from the
Commission, (iii) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any additional
information, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of the
Prospectus or of the institution of any proceedings for that purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representative in
endeavoring to qualify the Units for sale under the securities laws of such
jurisdictions as the Representative may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representative may reasonably request for distribution of the Units.
(d) The Company will deliver to, or upon the order of,
the Representative, from time to time, as many copies of any Preliminary
Prospectus as the Representative may reasonably request. The Company will
deliver to, or upon the order of, the Representative during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representative may reasonably request. The Company will deliver to the
Representative at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representative such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), and of all amendments thereto, as
the Representative may reasonably request.
(e) The Company will comply with the Act and the Rules
and Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of the
Units as contemplated in this Agreement and the Prospectus. If during the period
in which a prospectus is required by law to be delivered by an Underwriter or
dealer, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of counsel to the Underwriters, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the
11
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances existing at the time
the Prospectus is so delivered, be misleading, or so that the Prospectus will
comply with the law.
(f) The Company will make generally available to its
security holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration Statement, an
earnings statement (which need not be audited) in reasonable detail, covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise you in writing when such statement has been so made
available.
(g) The Company will, for a period of five years from the
Closing Date, deliver to the Representative copies of annual reports and copies
of all other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act;
provided, however, the Company is not required to deliver documents that have
been filed with the Commission and are generally available to the public in
electronic format. The Company will deliver to the Representative similar
reports with respect to significant subsidiaries, as that term is defined in the
Rules and Regulations, which are not consolidated in the Company's financial
statements.
(h) The Company will make no offering, sale, short sale
or other disposition of any shares of Common Stock of the Company or other
securities convertible into or exchangeable or exercisable for shares of Common
Stock or derivatives of Common Stock (or agreement therefor), directly or
indirectly, for a period of ninety days after the date of this Agreement
otherwise than hereunder, or pursuant to contractual obligations existing on the
date hereof or pursuant to employee benefit plans in effect on the date hereof,
or with the prior written consent of the Representative, which consent will not
be unreasonably withheld, delayed or conditioned.
(i) The Company will use its best efforts to list,
subject to notice of issuance of the Units, the Common Stock and the Warrants on
the AMEX and to cause such listing to remain in effect with respect to each such
security unless and until (i) such security expires; (ii) such security is
listed on another exchange or automated quotation system of at least comparable
reputation; or (iii) the Company is no longer required to file reports under
Section 12 of the Exchange Act.
(j) The Company has caused each officer and director to
furnish to you, on or prior to the date of this agreement, a letter or letters,
in form and substance satisfactory to the Underwriters ("Lockup Agreements"),
pursuant to which each such person has agreed not to offer, sell, sell short or
otherwise dispose of any shares of Common Stock or other capital stock
12
of the Company, or any other securities convertible, exchangeable or exercisable
for Common Stock or derivatives of Common Stock owned by such person or request
the registration for the offer or sale of any of the foregoing (or as to which
such person has the right to direct the disposition) for a period of ninety days
after the date of this Agreement, directly or indirectly, except with the prior
written consent of the Representative.
(k) The Company shall apply the net proceeds of its sale
of the Units as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Units and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Units in such a manner as
would require the Company to register as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act").
(m) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
for the Common Stock, and shall comply with the provisions of the Warrant
Agreement with respect to the appointment and maintenance of a Warrant Agent for
the Warrants.
(n) The Company will not take, directly or indirectly,
any action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
5. Costs and Expenses.
(a) The Representative shall be entitled to reimbursement
from the Company, for itself alone and not as Representative of the
Underwriters, to a non-accountable expense allowance equal to 2% of the
aggregate initial public offering price of the Firm Units and any Option Units
purchased by the Underwriters. The Representative shall be entitled to withhold
this allowance (less any portion of the allowance prepaid by the Company) on the
Closing Date related to the purchase of the Firm Units or the Option Units, as
the case may be.
(b) In addition to the payment described in Paragraph (a)
of this Section 5, the Company will pay all costs, expenses and fees incident to
the performance of the obligations of the Company under this Agreement,
including, without limitation, the following: accounting fees of the Company;
the fees and disbursements of counsel for the Company; the cost of printing and
delivering to, or as requested by, the Underwriters copies of the Registration
Statement, Preliminary Prospectuses, and the Prospectus; the AMEX additional
listing application; the costs of due diligence investigation of the principals
of the Company; the filing fees of the Commission; the filing fees and expenses
of the underwriting terms and arrangements; any AMEX listing fee; and the
expenses incurred in connection with the qualification of the Units under state
securities or Blue Sky laws. Any transfer taxes imposed on the sale of the Units
to the several Underwriters will be paid by the Company. The Company agrees to
pay all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, incident to the offer and sale of
directed Units by the Underwriters to employees
13
and persons having business relationships with the Company. The Company shall
not, however, be required to pay for any of the Underwriters' expenses (other
than as described above) except that, if this Agreement shall not be
consummated, then the Company shall reimburse (less any advances paid to the
Underwriter or its counsel) the several Underwriters for accountable
out-of-pocket expenses up to $100,000, including fees and disbursements of
counsel, reasonably incurred in connection with investigating, marketing and
proposing to market the Units or in contemplation of performing their
obligations hereunder; but the Company shall not in any event be liable to any
of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Units.
6. Conditions of Obligations of the Underwriters. The several
obligations of the Underwriters to purchase the Firm Units on the Closing Date
and the Option Units, if any, on the Option Closing Date are subject to the
accuracy, as of the Closing Date or the Option Closing Date, as the case may be,
of the representations and warranties of the Company contained herein, and to
the performance by the Company of their covenants and obligations hereunder and
to the following additional conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and any and all filings required
by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and
any request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representative and complied with to their reasonable satisfaction. No stop order
suspending the effectiveness of the Registration Statement, as amended from time
to time, shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission and no injunction, restraining order, or order of any nature by a
Federal or state court of competent jurisdiction shall have been issued as of
the Closing Date which would prevent the issuance of the Units.
(b) The Representative shall have received on the Closing
Date or the Option Closing Date, as the case may be, the opinion of ▇▇▇▇▇▇ &
▇▇▇▇▇▇, L.L.P., counsel for the Company, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters (and stating
that it may be relied upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement.
(ii) Each Subsidiary has been duly organized and
is validly existing as a business entity in good standing under the laws of its
jurisdiction of formation with all requisite power and authority under the laws
governing such entities to own or lease its properties and conduct its business
as described in the Registration Statement.
(iii) The Company and each Subsidiary is duly
qualified to transact business in all jurisdictions identified to us by the
Company as those in which the conduct of its business requires such
qualification, except where the failure to qualify would not have a
14
Material Adverse Effect upon the business of the Company, and nothing has come
to our attention that causes us to believe that our reliance on the information
provided by the Company regarding the jurisdictions in which it conducts
business is not reasonable under the circumstances.
(iv) The Company has authorized capital stock as
set forth under the caption "Capitalization" in the Prospectus; the outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable and conform to the description thereof contained
in the Prospectus in all material respects; the certificates for the Common
Stock, the Units and the Warrants are in due and proper form under the General
Corporation Law of Delaware; no preemptive rights of shareholders exist with
respect to the issuance or sale of Common Stock of the Company pursuant to any
applicable statute or the provisions of the Company's Certificate of
Incorporation or Bylaws or pursuant to any contractual obligation known to such
counsel. The Company's ownership interest of record in each Subsidiary is, in
all material respects, as described in the Registration Statement, and to the
knowledge of such counsel, the Company's ownership interest of record is
accurate.
(v) Except as described in or contemplated by
the Prospectus, to the knowledge of such counsel, there are no outstanding
securities of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the Company
and there are no outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock.
(vi) Except as described in the Prospectus, to
the knowledge of such counsel, no holder of any securities of the Company or any
other person has the contractual right, which has not been satisfied or
effectively waived, to cause the Company to sell or otherwise issue to them, or
to permit them to underwrite the sale of, any of the Units or the contractual
right to have any Common Stock or other securities of the Company included in
the Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any shares of
Common Stock or other securities of the Company.
(vii) The Warrant Agreement and the Warrants have
been duly authorized by the Company. When duly executed, authenticated, issued,
delivered and paid for as contemplated in the Registration Statement and the
Warrant Agreement, the Warrant Agreement and the Warrants will constitute
legally binding obligations of the Company, enforceable against it in accordance
with their terms and, in the case of the Warrants, entitled to the benefits of
the Warrant Agreement subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity and limitations on the
remedy of specific performance.
(viii) The shares of Common Stock initially
issuable upon exercise of the Warrants (including Warrants comprising the Option
Units and Warrants issuable on exercise of the Representative's Warrants) have
been duly authorized and reserved for issuance upon such conversion or exercise,
as the case may be, and, when issued upon such conversion or exercise in
15
accordance with the terms of the Warrant Agreement will be validly issued, fully
paid and nonassessable.
(ix) The Representative's Warrants have been duly
authorized by the Company. When duly executed, issued and delivered as
contemplated in the Registration Statement, the Representative's Warrants will
constitute the legally binding obligation of the Company, enforceable against it
in accordance with its terms subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity and
limitations on the remedy of specific performance and provided, however, that
such counsel need not express an opinion as to the enforceability of the
indemnification provisions contained in section 7 of the Representative's
Warrants to the extent those provisions would require indemnity or contribution
toward the liability of a person for such person's own wrongful or negligent
acts or where indemnification or contribution would be contrary to public policy
or prohibited by law. (For purposes of this opinion, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. may
assume that Oregon law is the same as Texas law.)
(x) The Registration Statement has become
effective under the Act and, to the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending or
threatened under the Act.
(xi) The Registration Statement, the Prospectus
and each amendment or supplement thereto comply as to form in all material
respects with the requirements of the Act and the applicable rules and
regulations thereunder (except that such counsel need express no opinion as to
the financial statements and related schedules or financial data therein).
(xii) The statements under the captions "Shares
Eligible for Future Sale" and "Description of Securities" in the Prospectus and
in Item 15 of the Registration Statement, insofar as such statements constitute
a summary of documents referred to therein or matters of law, fairly summarize
in all material respects the information called for with respect to such
documents under the published rules and regulations of the Commission.
(xiii) Such counsel does not know of any contracts
or documents required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are not so filed
or described as required, and such contracts and documents as are summarized in
the Registration Statement or the Prospectus are fairly summarized in all
material respects.
(xiv) Such counsel knows of no legal or
governmental proceedings pending or threatened against the Company or any
Subsidiary, except as (a) described in the Prospectus, (b) described in the
letter from The Law Offices of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C. to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP of
February 6, 2004, (c) described in the letter from Baird, Holm, McSachen,
▇▇▇▇▇▇▇▇, Mamann & ▇▇▇▇▇▇▇▇▇ LLP to The Law Offices of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇.▇.
▇▇ ▇▇▇▇▇ ▇, ▇▇▇▇, (▇) described in the letter from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, General
Counsel of Epixtar Corp., to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP of March 9, 2004, or (e)
described in the letter from ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP of
March 11, 2004.
16
(xv) The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, (i) the Certificate of Incorporation of the Company,
(ii) the Bylaws of the Company, or (iii) any agreement or instrument known to
such counsel to which the Company is a party or by which the Company may be
bound, except in the case of clause (iii) for conflicts, breaches or defaults
which would not have a Material Adverse Effect.
(xvi) Each of this Agreement and the Warrant
Agreement has been duly authorized, executed and delivered by the Company.
(xvii) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or Blue Sky laws, as to
which such counsel need express no opinion) except such as have been obtained or
made, specifying the same.
(xviii) The Company is not required to register as
an investment company under the 1940 Act.
In rendering such opinion, such counsel may rely as to matters governed
by the laws of states other than Texas, or federal laws on local counsel in such
jurisdictions, provided that in each case such counsel shall state that they
believe that they and the Underwriters are justified in relying on such other
counsel. In addition to the matters set forth above, the opinion of ▇▇▇▇▇▇ &
▇▇▇▇▇▇, L.L.P. shall also include a statement to the effect that, based on such
counsels' examination of the registration statement and the Prospectus and their
investigation made in connection with the preparation of the Registration
Statement and Prospectus and conferences with certain officers and employees of
the Company, and without passing on or assuming any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus or any document incorporated by
reference therein (and relying as to materiality to a large extent upon
statements of officers and employees of the Company), nothing has come to the
attention of such counsel that has caused them to believe that (i) the
Registration Statement, at the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) and as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, including any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need express no view as to (1) financial statements, financial data, and
schedules therein or (2) statistical information in the form of market data or
number of employees).
(c) The Representative shall have received from Stoel
Rives LLP, counsel for the Underwriters, an opinion dated the Closing Date or
the Option Closing Date, as the case may
17
be, substantially to the effect specified in subparagraphs (ix) and (x) of
Paragraph (b) of this Section 6. In rendering such opinion Stoel Rives LLP may
rely as to all matters governed other than by the laws of the State of Oregon or
Federal laws on the opinion of counsel referred to in Paragraph (b) of this
Section 6. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of such
counsel that has caused them to believe that (i) the Registration Statement, or
any amendment thereto, as of the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to Rule
430A under the Act) and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any supplement
thereto, on the date it was filed pursuant to the Rules and Regulations and as
of the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, in the light of the circumstances
under which they are made, not misleading (except that such counsel need express
no view as to financial statements, schedules and statistical information
therein). With respect to such statement, Stoel Rives LLP may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.
(d) Unless the offer and sale of the Units are not
subject to qualification in any state as a result of preemption by Section 18 of
the Act, the Representative shall have received at or prior to the Closing Date
from Stoel Rives LLP a memorandum or summary, in form and substance satisfactory
to the Representative, with respect to the qualification for offering and sale
by the Underwriters of the Units under the state securities or Blue Sky laws of
such jurisdictions as the Representative may reasonably have designated to the
Company.
(e) The Representative, on behalf of the several
Underwriters, shall have received, on each of the dates hereof, the Closing Date
and the Option Closing Date, as the case may be, a letter dated the date hereof,
the Closing Date or the Option Closing Date, as the case may be, in form and
substance satisfactory to the Representative, of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP confirming
that they are independent public accountants within the meaning of the Act and
the applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material respects
with the applicable accounting requirements of the Act and the related published
Rules and Regulations and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(f) The Representative shall have received on the Closing
Date or the Option Closing Date, as the case may be, a certificate or
certificates of the Chief Executive Officer and the Chief Financial Officer of
the Company to the effect that, as of the Closing Date or the Option Closing
Date, as the case may be, each of them severally represents as follows:
(i) The Registration Statement has become
effective under the Act and no stop order suspending the effectiveness of the
Registration Statement has been issued,
18
and no proceedings for such purpose have been taken or are, to his knowledge,
contemplated by the Commission;
(ii) The representations and warranties of the
Company contained in Section 1 hereof are true and correct as of the Closing
Date or the Option Closing Date, as the case may be;
(iii) All filings required to have been made
pursuant to Rules 424 or 430A under the Act have been made;
(iv) He has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and Prospectus
did not omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or otherwise,
of the Company or the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the
Company, whether or not arising in the ordinary course of business.
(g) The Company shall have furnished to the
Representative such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein and
related matters as the Representative may reasonably have requested.
(h) The Units, the Common Stock and the Warrants have
been approved for listing upon notice of issuance of the Units on the AMEX.
(i) The Lockup Agreements described in Section 4(j) are
in full force and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representative and to Stoel Rives LLP,
counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.
19
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. Conditions of the Obligations of the Company. The obligations
of the Company to sell and deliver the portion of the Units required to be
delivered as and when specified in this Agreement are subject to the conditions
that at the Closing Date or the Option Closing Date, as the case may be, no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and in effect or proceedings therefor initiated or threatened.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act, against any losses, claims, damages or liabilities to
which such Underwriter or any such controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Units, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof; provided, however, that the
foregoing indemnification with respect to the Preliminary Prospectus shall not
inure to the benefit of any Underwriter from which the person asserting any such
loss, claim, damage or liability, action or proceeding purchased Units if (1) a
copy of the Prospectus (as then amended or supplemented) was required by law to
be delivered to such person at or prior to the written confirmation of the sale
of Units to such person, (2) a copy of the Prospectus (as then amended or
supplemented) was not sent or given to such person by or on behalf of such
Underwriter and such failure was not due to the Company's failure to make
available sufficient quantities of the Prospectus to such Underwriters, and (3)
the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage or liability, action or proceeding. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter severally and not jointly will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Act, against any losses, claims,
damages or liabilities to which the Company or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
20
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that each Underwriter will
be liable in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission has been
made in the Registration Statement, any Preliminary Prospectus, the Prospectus
or such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a) or (b). In case any such proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with such
consent or if there be a
21
final judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. In addition, the indemnifying party will not, without
the prior written consent of the indemnified party, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action
or proceeding of which indemnification may be sought hereunder (whether or not
any indemnified party is an actual or potential party to such claim, action or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Units. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bears to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8(d), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Units
purchased by such Underwriter, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this
22
Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) In any proceeding relating to the Registration
Statement, any Preliminary Prospectus, the Prospectus or any supplement or
amendment thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having jurisdiction
over any other contributing party, agrees that process issuing from such court
may be served upon him or it by any other contributing party and consents to the
service of such process and agrees that any other contributing party may join
him or it as an additional defendant in any such proceeding in which such other
contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses
for which an indemnified party is entitled to indemnification or contribution
under this Section 8 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Units and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Default by Underwriters. If on the Closing Date or the Option
Closing Date, as the case may be, any Underwriter shall fail to purchase and pay
for the portion of the Units which such Underwriter has agreed to purchase and
pay for on such date (otherwise than by reason of any default on the part of the
Company), you, as Representative of the Underwriters, shall use reasonable
efforts to procure within 36 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company such amounts as may be
agreed upon and upon the terms set forth herein, the Firm Units or Option Units,
as the case may be, which the defaulting Underwriter or Underwriters failed to
purchase. If during such 36 hours you, as such Representative, shall not have
procured such other Underwriters, or any others, to purchase the Firm Units or
Option Units, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of Units with
respect to which such default shall occur does not exceed 10% of the Firm Units
or Option Units, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion to the respective numbers of Firm
Units or Option Units, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Units or Option Units, as the case may be, which
such defaulting Underwriter or Underwriters failed to purchase, or (b) if the
aggregate number of Firm Units or Option Units, as the case may be, with respect
to which such default shall occur exceeds 10% of the Firm Units or Option Units,
as the case may be, covered hereby, the Company or you as the Representative of
the Underwriters will have the right, by written notice given within the next
36-hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company except to the extent provided in Section 8 hereof. In the event of a
default by any Underwriter or Underwriters, as set forth in this Section 9, the
Closing Date or Option Closing Date, as the case
23
may be, may be postponed for such period, not exceeding seven days, as you, as
Representative, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. Notices.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, faxed and confirmed as
follows:
if to the Underwriters, to
▇▇▇▇▇▇▇ Investment Company, Inc.
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇
with a copy, which shall not constitute notice, to
Stoel Rives LLP
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
if to the Company, to
I-Sector Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
with copy, which shall not constitute notice, to
▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
11. Termination. This Agreement may be terminated by you by notice
to the Company as follows:
24
(a) at any time prior to the earlier of (i) the time the
Units are released by you for sale by notice to the Underwriters, or (ii) 11:30
a.m. on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the
following has occurred: (i) since the respective dates as of which information
is given in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company, the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company, whether or not arising in
the ordinary course of business, (ii) any outbreak or escalation of hostilities
or declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or change
on the financial markets of the United States would, in your reasonable
judgment, make it impracticable to market the Units or to enforce contracts for
the sale of the Units, (iii) the Dow ▇▇▇▇▇ Industrial Average shall have fallen
by 15 percent or more from its closing price on the day immediately preceding
the date that the Registration Statement is declared effective by the
Commission, (iv) suspension of trading in securities generally on the New York
Stock Exchange or the AMEX or limitation on prices (other than limitations on
hours or numbers of days of trading) for securities on either such Exchange, (v)
the enactment, publication, decree or other promulgation of any statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects or may materially and adversely
affect the business or operations of the Company, (vi) declaration of a banking
moratorium by United States or New York State authorities, (vii) any downgrading
in the rating of the Company's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Exchange Act); (viii) the suspension of trading of the Common Stock or the
Warrants by the Commission or AMEX, or (ix) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs which
in your reasonable opinion has a material adverse effect on the securities
markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors. This Agreement has been and is made solely for the
benefit of the Underwriters, the Company and their respective successors,
executors, administrators, heirs and assigns, and the officers, directors and
controlling persons referred to herein, and no other person will have any right
or obligation hereunder. No purchaser of any of the Units from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. Information Provided by Underwriters. The Company and the
Underwriters acknowledge and agree that the only information furnished or to be
furnished by any Underwriter to the Company for inclusion in the Prospectus or
the Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters), legends required by Item 502(b) of Regulation S-K under the Act
and the information under the caption "Underwriting" in the Prospectus.
25
14. Miscellaneous. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Company or its directors or officers and (c) delivery of and
payment for the Units under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. A facsimile copy or other accurate copy of this
letter or any counterpart of this letter is binding as an original.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Oregon. All disputes relating to this Underwriting
Agreement shall be adjudicated before a court located in Multnomah County,
Oregon to the exclusion of all other courts that might have jurisdiction.
(Remainder of page intentionally left blank; signature page follows)
26
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
I-SECTOR CORPORATION
By: _____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇
Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
▇▇▇▇▇▇▇ INVESTMENT COMPANY, INC.
As Representative of the several
Underwriters listed on Schedule I
By: _____________________________________
Name:
Title:
27
SCHEDULE I
Schedule of Underwriters
Number of Firm Units
Underwriter to Be Purchased
-------------------------------- --------------------
▇▇▇▇▇▇▇ Investment Company, Inc.
▇.▇. ▇▇▇▇ & Company
Pali Capital, Inc.
----------------------------
Total
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