EXHIBIT 1.1
[1,723,222] SHARES/1/
COST-U-LESS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
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_____________, 1998
CRUTTENDEN ▇▇▇▇ INCORPORATED
As Representative of the several Underwriters
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Ladies and Gentlemen:
Cost-U-Less, Inc., a Washington corporation (the "Company"), addresses you
as the Representative (the "Representative") of each of the persons, firms and
corporations listed in Schedule A hereto (herein collectively called the
"Underwriters") and hereby confirms its agreement with the several Underwriters
as follows:
1. DESCRIPTION OF SHARES.
The Company proposes to issue and sell [1,600,000]shares of its authorized
and unissued Common Stock, $.001 par value per share, and certain shareholders
of the Company listed on Schedule B hereto (the "Selling Shareholders") propose
to sell an aggregate of [123,222] shares of Common Stock (said [1,723,222]
shares being herein called the "Firm Shares") to the several Underwriters. In
addition, the Company proposes to grant to the Underwriters an option to
purchase up to [240,000] additional shares of the Company's Common Stock (the
"Option Shares"), as provided in Section 5 hereof. The Company also proposes to
sell to you, individually and not in your capacity as Representative, warrants
(the "Representative's Warrants") to purchase up to [160,000] shares of Common
Stock of the Company (the "Representative's Warrant Stock"), which sale will be
consummated in accordance with the terms and conditions of the Representative's
Warrant Agreement (the "Representative's Warrant Agreement"), the form of which
is filed as an exhibit to the Registration Statement described below. As used
in this Agreement, the term "Shares" shall include the Firm Shares and the
Option Shares. All shares of Common Stock of the Company to be outstanding
after giving effect to the sales contemplated hereby, including the sale of the
Shares, are hereinafter referred to as "Common Stock." Unless
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/1/ Plus an option to purchase up to [240,000] additional shares from the
Company to cover over-allotments, if any.
the context otherwise requires, references herein to the "Company" include Cost-
U-Less, Inc. together with its subsidiaries described in the Prospectus (as
hereinafter defined).
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents and warrants to and agrees with each Underwriter
that:
(a) A registration statement on Form S-1 (File No. 333______) with
respect to the Shares, including a prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the applicable rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Act and has been filed with the Commission; such
amendments to such registration statement and such prospectus as may have been
required prior to the date hereof have been similarly prepared and filed with
the Commission; and the Company will file such additional amendments to such
registration statement and such prospectus as may hereafter be required.
Copies of such registration statement and amendments and of each related
prospectus (the "Preliminary Prospectuses") have been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and promptly
file with the Commission the information previously omitted from the
registration statement pursuant to Rule 430A(a) of the Rules and Regulations
pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and Regulations
or as part of a post-effective amendment to the registration statement
(including a final form of prospectus). If the registration statement relating
to the Shares has not been declared effective under the Act by the Commission,
the Company will prepare and promptly file an amendment to the registration
statement, including a final form of prospectus. The term "Registration
Statement" as used in this Agreement shall mean such registration statement,
including financial statements, schedules and exhibits, in the form in which it
became or becomes, as the case may be, effective (including, if the Company
omitted information from the registration statement pursuant to Rule 430A(a) of
the Rules and Regulations, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule 430A(b)
of the Rules and Regulations) and, in the event of any amendment thereto after
the effective date of such registration statement, shall also mean (from and
after the effectiveness of such amendment) such registration statement as so
amended. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares as included in such Registration Statement at
the time it becomes effective (including, if the Company omitted information
from the Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations, the information deemed to be a part of the Registration Statement
at the time it became effective pursuant to Rule 430A(b) of the Rules and
Regulations), except that if any revised prospectus shall be provided to the
Underwriters by the Company for use in connection with the offering of the
Shares that differs from the prospectus on file with the Commission at the time
the Registration Statement became or becomes, as the case may be, effective
(whether or not such revised prospectus is required to be filed with the
Commission pursuant to Rule 424(b)(3) of the Rules and Regulations), the term
"Prospectus" shall
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refer to such revised prospectus from and after the time it is first provided to
the Underwriters for such use.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such Preliminary Prospectus, at the time of filing thereof,
has conformed in all material respects to the requirements of the Act and the
Rules and Regulations and, as of its date, has not included any untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up to
and on the Closing Date (hereinafter defined) and on any later date on which
Option Shares are to be purchased, (i) the Registration Statement and the
Prospectus, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (ii) the Registration Statemen, did not and will not include 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,
and (iii) the Prospectus did not and will not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that none of the representations and warranties
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contained in this subparagraph (b) shall apply to information contained in or
omitted from the Registration Statement or Prospectus in reliance upon, and in
conformity with, written information relating to (i) any Underwriter furnished
to the Company by such Underwriter specifically for use in the preparation
thereof or (ii) any Selling Shareholder furnished to the Company by such Selling
Shareholder specifically for use in the preparation thereof.
(c) The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed in
Exhibit 21 of the Registration Statement. The Company and each of its
subsidiaries has been duly incorporated and is validly existing as a corporation
in good standing under the laws of the jurisdiction of its incorporation with
full power and authority (corporate and other) to own, lease and operate its
properties and conduct its business as described in the Prospectus; the Company
and each of its subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company taken as a whole; no
proceeding has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification; the Company is in possession of and operating in compliance with
all authorizations, licenses, certificates, consents, orders and permits from
state, federal and other regulatory authorities that are material to the conduct
of its business, all of which are valid and in full force and effect; the
Company is not in material violation of its charter or bylaws or in default in
the performance or observance of any material obligation, agreement, covenant or
condition contained in any material bond, debenture, note or other evidence of
indebtedness, or in any
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material lease, contract, indenture, mortgage, deed of trust, loan agreement,
joint venture or other agreement or instrument to which the Company is a party
or by which it or its properties or assets may be bound; and the Company is not
in violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its properties or assets.
(d) The Company has full legal right, power and authority to enter
into this Agreement and the Representative's Warrant Agreement and to perform
the transactions contemplated hereby and thereby. Each of this Agreement and
the Representative's Warrant Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement on the part of the
Company, enforceable in accordance with its terms, except as rights to
indemnification under this Agreement or the Representative's Warrant Agreement
may be limited by applicable law and except as the enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the performance of this Agreement and the Representative's
Warrant Agreement and the consummation of the transactions herein or therein
contemplated will not violate any provisions of the charter, bylaws or other
organizational document of the Company and will not result in a breach or
violation of any of the terms and provisions of, or constitute, either by itself
or upon notice or the passage of time or both, a default under any bond,
debenture, note or other evidence of indebtedness, or under any lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which its
properties or assets may be bound, or any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or over its
properties or assets. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or over its properties
or assets is required for the execution and delivery of this Agreement or the
Representative's Warrant Agreement and the consummation by the Company of the
transactions herein and therein contemplated, except such as may be required
under the Act or under state or other securities or Blue Sky laws, all of which
requirements have been satisfied in all material respects.
(e) There is not any pending or, to the Company's knowledge,
threatened action, suit, claim or proceeding against the Company, or any of its
officers or any of its properties, assets or rights before any court, government
or governmental agency or body, domestic or foreign, having jurisdiction over
the Company or over its officers or properties or otherwise that (i) is
reasonably likely to result in any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company or might materially and adversely affect its properties, assets
or rights, (ii) might prevent consummation of the transactions contemplated
hereby or (iii) is required to be disclosed in the Registration Statement or
Prospectus and is not so disclosed; and there are no agreements, contracts,
leases or documents of the Company of a character required to be described or
referred to in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement by the Act or the Rules and Regulations or
by the Securities Exchange Act of 1934 (the "Exchange
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Act") or the rules and regulations of the Commission thereunder that
have not been accurately described in all material respects in the Registration
Statement or Prospectus or filed as exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, and the authorized and outstanding capital
stock of the Company is as set forth in the Prospectus under the caption
"Capitalization" and conforms to the statements relating thereto contained in
the Registration Statement and the Prospectus (and such statements correctly
state the substance of the instruments defining the capitalization of the
Company); the Firm Shares and the Option Shares have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in accordance with
the terms of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no preemptive right, co-
sale right, registration right, right of first refusal or other similar right of
shareholders exists with respect to any of the Firm Shares or Option Shares or
the issuance and sale thereof other than those that will automatically expire
upon the consummation of the transactions contemplated on the Closing Date. No
further approval or authorization of any shareholder, the Board of Directors of
the Company or others is required for the issuance and sale or transfer of the
Shares except as may be required under the Act, the Rules and Regulations or
under state or other securities or Blue Sky laws. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the Company, and
the related notes thereto, included in the Prospectus, the Company has no
outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The
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 Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights under the Act and the Rules and Regulations.
(g) Ernst & Young LLP and Deloitte & Touche LLP, which have expressed
their opinions with respect to the financial statements of the Company filed
with the Commission as a part of the Registration Statement, which are included
in the Prospectus, are independent accountants within the meaning of the Act and
the Rules and Regulations. The audited financial statements of the Company,
together with the related schedules and notes, and the unaudited financial
information included in the Registration Statement and Prospectus,
fairly present the financial position and the results of operations of the
Company at the respective dates and for the respective periods to which they
apply. Such financial statements of the Company, together with the related
schedules and notes, filed with the Commission as part of the Registration
Statement, have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods as certified by Ernst &
Young LLP and Deloitte & Touche LLP, as
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the case may be. The selected and summary financial and statistical data
included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the audited financial
statements presented therein. No other financial statements or schedules are
required to be included in the Registration Statement.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as specifically
disclosed or contemplated therein, there has not been (i) any material adverse
change in the condition (financial or otherwise), earnings, operations or
business of the Company, (ii) any transaction that is material to the Company,
(iii) any obligation, direct or contingent, incurred by the Company that is
material to the Company, (iv) any change in the capital stock or outstanding
indebtedness of the Company that is material to the Company, (v) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or (vi) any loss or damage (whether or not insured) to the property of
the Company which has a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company.
(i) Except as set forth in the Registration Statement and Prospectus,
(i) the Company has good and marketable title to all properties and assets
described in the Registration Statement and Prospectus as owned by it, free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest, other than such as would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company, (ii) the agreements to which the Company is a party described in the
Registration Statement are valid agreements, enforceable by the Company, except
as the enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles and, to the
Company's knowledge, the other contracting party or parties thereto are not in
material breach or material default under any of such agreements and (iii) the
Company has valid and enforceable leases for all properties described in the
Registration Statement and Prospectus as leased by it, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles. Except as set forth in the
Registration Statement and Prospectus, the Company owns or leases all such
properties as are necessary to its operations as now conducted and as described
in the Registration Statement and the Prospectus.
(j) The Company has timely filed all federal, state, local and foreign
tax returns required to be filed by it and has paid all taxes shown thereon as
due, and there is no tax deficiency that has been or, to the Company's
knowledge, is reasonably likely to be asserted against the Company, which might
have a material adverse effect on the condition (financial or otherwise),
earnings, operations or business of the Company, and all tax liabilities are
adequately provided for on the books of the Company.
(k) The Company maintains insurance with insurers of recognized
financial responsibility of the types and in the amounts generally deemed
adequate for its business including, but not limited to, insurance covering real
and personal property owned or leased by the Company
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against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect;
the Company has not been refused for material reasons any insurance coverage
sought or applied for; and the Company does not have any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition (financial or otherwise), earnings, operations or
business of the Company.
(l) To the Company's knowledge, no labor disturbance by the employees
of the Company exists or is threatened. No collective bargaining agreement
exists with any of the Company's employees and, to the best of the Company's
knowledge, no such agreement is threatened.
(m) Except as disclosed in or specifically contemplated by the
Prospectus, the Company owns or possesses adequate rights to use all patent
rights, trade secrets, mask works, know-how, trademarks, copyrights, licenses,
service marks and trade names that are necessary to conduct its businesses as
described in the Registration Statement and Prospectus; the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of the Company by others with respect to any patent rights,
trade secrets, mask works, know-how, trademarks, copyrights, licenses, service
marks or trade names; and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of others
with respect to any patent rights, trade secrets, mask works, know-how,
trademarks, copyrights, licenses, service marks or trade names which, singly or
in the aggregate, in the event of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company.
(n) The Common Stock has been registered pursuant to Section 12(g) of
the Exchange Act and has been approved for quotation on the Nasdaq National
Market, and the Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or delisting the Common Stock from the Nasdaq National Market, nor has the
Company received any notification that the Commission or the National
Association of Securities Dealers, Inc. ("NASD") is contemplating terminating
such registration or listing.
(o) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations thereunder,
and has in the past conducted, and intends in the future to conduct, its affairs
in such a manner as to ensure that it will not become an "investment company" or
a company "controlled" by an "investment company" within the meaning of the 1940
Act and such rules and regulations.
(p) The Company has not distributed and will not distribute prior to
the later of (i) the Closing Date, or any date on which Option Shares are to be
purchased, as the case may be, and (ii) completion of the distribution of the
Shares, any offering material in connection with the
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offering and sale of the Shares other than any Preliminary Prospectuses, the
Prospectus, the Registration Statement and other materials, if any, permitted by
the Act.
(q) The Company has not at any time during the last five (5) years (i)
made any unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law, or (ii) made any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization in violation of law or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
(s) Except as disclosed in the Registration Statement, each officer,
director and director-nominee of the Company and each beneficial owner of the
Company's Common Stock has agreed in writing that such person will not without
the prior written consent of the Representative (which consent may be withheld
in its sole discretion), for a period of 180 days subsequent to the closing of
the public offering (which currently is expected to take place approximately
three days after the effective date of the Registration Statement) (the "Lock-up
Period"), in any way directly or indirectly, offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or securities convertible or
exchangeable or exercisable for Common Stock (other than shares, if any, that
are sold pursuant to this Agreement) (collectively, "Securities") or publicly
announce such person's intention to do any of the foregoing. Furthermore, such
person will also agree and consent to the entry of stop transfer instructions
with the Company's transfer agent against the transfer of the Securities held by
such person except in compliance with this restriction. The Company has
provided to counsel for the Underwriters a complete and accurate list of all
shareholders of the Company and the number and type of securities held by each
shareholder. The Company has provided to counsel for the Underwriters true,
accurate and complete copies of all of the agreements pursuant to which its
officers, directors, director-nominees and shareholders have agreed to such
restrictions (the "Lock-up Agreements"). The Company hereby represents and
warrants that it will not release any of its officers, directors or director-
nominees or other shareholders from any Lock-up Agreements currently existing or
hereafter effected without the prior written consent of the Representative.
(t) Except as set forth in the Registration Statement and Prospectus,
(i) the Company is in material compliance with all rules, laws and regulations
relating to the use, treatment, storage and disposal of toxic substances and
protection of health or the environment (the "Environmental Laws") that are
applicable to its business, (ii) the Company has received no notice from any
governmental authority or third party of an asserted claim under the
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) to its knowledge, the Company is not likely
to be required to make future material capital expenditures to comply with the
Environmental Laws and (iv) no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
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Comprehensive Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. (S) 9601, et seq.), or otherwise designated as a contaminated site under
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applicable state or local law.
(u) 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 authorizations, (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, including without limitation cash receipts,
(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.
(v) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers,
directors or director-nominees of the Company or any of the members of the
families of any of them, except as disclosed in the Registration Statement and
the Prospectus.
(w) The Representative's Warrants have been duly and validly
authorized by the Company and upon delivery to you in accordance with the
Representative's Warrant Agreement will be duly issued and legal, valid and
binding obligations of the Company.
(x) The Representative's Warrant Stock has been duly authorized and
reserved for issuance upon the exercise of the Representative's Warrants and
when issued upon payment of the exercise price therefor will be validly issued,
fully paid and nonassessable shares of Common Stock of the Company.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING SHAREHOLDERS.
Each of the Selling Shareholders severally, and not jointly, represents and
warrants to, and agrees with, the several Underwriters that:
(a) Such Selling Shareholder has, and on the Closing Date will have,
good and marketable title to the Shares proposed to be sold by such Selling
Shareholder hereunder on such closing date and full right, power and authority
to enter into this Agreement and to sell, assign, transfer and deliver such
Shares hereunder, free and clear of all voting trust arrangements, liens,
encumbrances, equities, security interests, restrictions and claims whatsoever,
other than pursuant to this Agreement and the Shareholders' Agreement (as
defined below); and upon delivery of and payment for such Shares hereunder, the
Underwriters will acquire good and marketable title thereto, free and clear of
all liens, encumbrances, equities, claims, restrictions, security interests,
voting trusts or other defects of title whatsoever.
(b) Such Selling Shareholder has executed and delivered a Power of
Attorney and caused to be executed and delivered on his behalf a Custody
Agreement (hereinafter collectively referred to as the "Shareholders'
Agreement") and in connection herewith such Selling
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Shareholder further represents, warrants and agrees that such Selling
Shareholder has deposited in custody, under the Shareholders' Agreement, with
the agent named therein (the "Agent") as custodian, certificates in negotiable
form for the Shares to be sold hereunder by such Selling Shareholder, for the
purpose of further delivery pursuant to this Agreement. Such Selling Shareholder
agrees that the Shares to be sold by such Selling Shareholder on deposit with
the Agent are subject to the interests of the Company and the Underwriters, that
the arrangements made for such custody are to that extent irrevocable, and that
the obligations of such Selling Shareholder hereunder shall not be terminated,
except as provided in this Agreement or in the Shareholders' Agreement, by any
act of such Selling Shareholder, by operation of law, by the death or incapacity
of such Selling Shareholder or by the occurrence of any other event. If the
Selling Shareholder should die or become incapacitated, or if any other event
should occur, before the delivery of the Shares hereunder, the documents
evidencing Shares then on deposit with the Agent shall be delivered by the Agent
in accordance with the terms and conditions of this Agreement and the
Shareholders' Agreement as if such death, incapacity or other event had not
occurred, regardless of whether or not the Agent shall have received notice
thereof. This Agreement and the Shareholders' Agreement have been duly executed
and delivered by or on behalf of such Selling Shareholder and the form of such
Shareholders' Agreement has been delivered to you.
(c) The performance of this Agreement and the Shareholders' Agreement
and the consummation of the transactions contemplated hereby and thereby will
not result in a breach or violation by such Selling Shareholder of any of the
terms or provisions of, or constitute a default by such Selling Shareholder
under, any indenture, mortgage, deed of trust, trust (constructive or other),
loan agreement, lease, franchise, license or other agreement or instrument to
which such Selling Shareholder is a party or by which such Selling Shareholder
or any of its properties is bound, any statute, or any judgment, decree, order,
rule or regulation of any court or governmental agency or body applicable to
such Selling Shareholder or any of its properties, other than breaches or
violations which do not adversely affect such Selling Shareholder's ability to
perform under this Agreement or the Shareholders' Agreement.
(d) Such Selling Shareholder has not taken and will not take, directly
or indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Shares, except usual and customary market maker and brokerage transactions up to
two business days prior to the offering contemplated hereby in each case in
accordance with applicable Commission regulations.
(e) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, are made in reliance upon and in conformity
with written information furnished to the Company by such Selling Shareholder
specifically for use therein, such Preliminary Prospectus and the Registration
Statement did, and the Prospectus and any further amendments or supplements to
the Registration Statement and the Prospectus will, when they become effective
or are filed with the Commission, as the case may be, not contain any untrue
statement of material fact or omit any
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material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were made.
(f) To the best of its knowledge, such Selling Shareholder is not
aware that any of the representations and warranties set forth in Section 2
above is untrue or inaccurate in any material respect.
4. REPRESENTATION, WARRANTIES AND AGREEMENTS OF THE UNDERWRITERS.
The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), in the first
paragraph on page 2, concerning stabilization and over-allotment by the
Underwriters, and in [second] and [seventh] paragraphs under the caption
"Underwriting" in any Preliminary Prospectus and in the final form of Prospectus
filed pursuant to Rule 424(b) constitutes the only information furnished by the
Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement, and you, on behalf of the respective
Underwriters, represent and warrant to the Company that the statements made
therein do not include 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, in the light of the circumstances under which they were
made, not misleading.
5. PURCHASE, SALE AND DELIVERY OF SHARES.
On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, (i) the
Company agrees to issue and sell to the Underwriters [1,600,000] of the Firm
Shares and (ii) each Selling Shareholder agrees, severally and not jointly, to
sell to the Underwriters in the respective amounts set forth in Schedule B
hereto, an aggregate of [123,222] of the Firm Shares. Each Underwriter agrees,
severally and not jointly, to purchase from the Company and the Selling
Shareholders, at a purchase price of $_____ per share, the respective number of
Firm Shares as hereinafter set forth. The obligation of each Underwriter to the
Company and the Selling Shareholders shall be to purchase from the Company and
the Selling Shareholders that number of Firm Shares which is set forth opposite
the name of such Underwriter in Schedule A hereto (subject to adjustment as
provided in Section 11).
Delivery of definitive certificates for the Firm Shares to be purchased by
the Underwriters pursuant to this Section 5 shall be made against payment of the
purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in next-day funds, payable to the order of the
Company and the Selling Shareholders (or the Agent) (and the Company and the
Selling Shareholders agree not to deposit any such check in the bank on which it
is drawn until the day following the date of its delivery to the Company and the
Selling Shareholders) at the offices of the Representative, or such other place
as may be agreed upon among the Representative and the Company, at 6:00 A.M.,
California time, on the third (3rd) full business day following the first day
that Shares are traded (or at such time and date to which payment and delivery
shall have been postponed pursuant to Section 11 hereof), such time and date of
payment and delivery being herein called the "Closing Date." The certificates
for the Firm Shares to be so delivered will be
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made available to you at such office or such other location as you may
reasonably request for checking at least one (1) full business day prior to the
Closing Date and will be in such names and denominations as you may request,
such request to be made at least two (2) full business days prior to the Closing
Date. If the Representative so elects, delivery of the Firm Shares may be made
by credit through full fast transfer to the accounts at The Depository Trust
Company designated by the Representative.
It is understood that you, individually, and not as the Representative of
the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the Closing Date for the
Firm Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of any of
its or their obligations hereunder.
On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
hereby grants to the several Underwriters, for the purpose of covering over-
allotments in connection with the distribution and sale of the Firm Shares only,
a nontransferable option to purchase, in the respective amounts set forth on the
Schedule B, up to an aggregate of [240,000] Option Shares at the purchase price
per share for the Firm Shares set forth in this Section 5. Such option may be
exercised by the Representative on behalf of the several Underwriters on one or
more occasions in whole or in part during the forty-five (45) day period after
the date on which the Firm Shares are initially offered to the public, by giving
written notice to the Company and the Agent. The number of Option Shares to be
purchased by each Underwriter upon the exercise of such option shall be the same
proportion of the total number of Option Shares to be purchased as the number of
Firm Shares purchased by such Underwriter (set forth in Schedule A hereto) bears
to the total number of Firm Shares purchased by the several Underwriters (set
forth in Schedule A hereto), adjusted by the Representative in such manner as to
avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be purchased
by the several Underwriters pursuant to the exercise of the option granted by
this Section 5 shall be made against payment of the purchase price therefor by
the several Underwriters by certified or official bank check or checks drawn in
next-day funds, payable to the order of the Company (and the Company agrees not
to deposit any such check in the bank on which it is drawn until the day
following the date of its delivery). Such delivery and payment shall take place
at the offices of the Representative, or at such other place as may be agreed
upon by the Representative and the Company (i) on the Closing Date, if written
notice of the exercise of such option is received by the Company at least three
(3) full business days prior to the Closing Date, or (ii) on a date which shall
not be later than the fifth (5th) full business day following the date the
Company receives written notice of the exercise of such option, if such notice
is received by the Company less than three (3) full business days prior to the
Closing Date.
To the extent that the option is not exercised for the entire [240,000]
Option Shares, the number of Option Shares to be sold by the Company shall be
that number which bears the same
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relationship to the aggregate number of Option Shares being purchased as the
maximum number of Option Shares being sold by the Company bears to [240,000].
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location as you may reasonably
request for inspection at least two (2) full business days prior to the date of
payment and delivery and will be in such names and denominations as you may
request, such request to be made at least three (3) full business days prior to
such date of payment and delivery. If the Representative so elects, delivery of
the Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representative.
It is understood that you, individually, and not as the Representative of
the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the date of payment and
delivery for the Option Shares to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder.
Upon exercise of any option provided for in this Section 5, the obligations
of the several Underwriters to purchase such Option Shares will be subject (as
of the date hereof and as of the date of payment and delivery for such Option
Shares) to the accuracy of and compliance with the representations, warranties
and agreements of the Company and the Selling Shareholders herein, to the
accuracy of the statements of the Company, officers of the Company and the
Selling Shareholders made pursuant to the provisions hereof, to the performance
by the Company and the Selling Shareholders of their obligations hereunder, and
to the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be reasonably
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may reasonably request in order to evidence the accuracy and completeness of
any of the representations, warranties or statements, the performance of any of
the covenants or agreements of the Company or the Selling Shareholders or the
compliance with any of the conditions herein contained in each case in all
material respects.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 13 hereof) of the Firm Shares at an initial public offering
price of $_____ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
6. FURTHER AGREEMENTS OF THE COMPANY.
The Company agrees with the several Underwriters that:
(a) The Company will use best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; it will notify you,
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promptly after it shall receive notice thereof, of the time when the
Registration Statement or any subsequent amendment to the Registration Statement
has become effective or any supplement to the Prospectus has been filed; if the
Company omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of Rule
424(b) of the Rules and Regulations or as part of a post-effective amendment to
such Registration Statement as originally declared effective which is declared
effective by the Commission; if for any reason the filing of the final form of
Prospectus is required under Rule 424(b)(3) of the Rules and Regulations, it
will provide evidence satisfactory to you that the Prospectus contains such
information and has been filed with the Commission within the time period
prescribed; it will notify you promptly of any request by the Commission for the
amending or supplementing of the Registration Statement or the Prospectus or for
additional information; promptly upon your request, it will prepare and file
with the Commission any amendments or supplements to the Registration Statement
or Prospectus which, in the opinion of counsel for the several Underwriters
("Underwriters' Counsel"), may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters; it will promptly prepare and
file with the Commission, and promptly notify you of the filing of, any
amendments or supplements to the Registration Statement or Prospectus which may
be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act, any
event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, it will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Act; and it will file no amendment or supplement to the Registration
Statement or Prospectus which shall not previously have been submitted to you a
reasonable time prior to the proposed filing thereof or to which you shall
reasonably object in writing, subject, however, to compliance with the Act and
the Rules and Regulations and the rules and regulations of the Commission
thereunder and the provisions of this Agreement.
(b) The Company will advise you promptly after it shall have received
notice or obtained knowledge of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will use reasonable efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
-14-
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be reasonably required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, copies of
the Registration Statement (three of which will be signed and which will include
all exhibits), each Preliminary Prospectus, the Prospectus and any amendments or
supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act (three of which will include all
exhibits) all in such quantities as you may from time to time reasonably
request.
(e) The Company will make generally available to its shareholders as
soon as practicable, but in any event not later than the forty-fifth (45th) day
following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Act and covering a twelve (12)-month
period beginning after the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof and for so
long as the Company is subject to Section 13 or 15 of the Exchange Act, the
Company will furnish to its shareholders as soon as practicable after the end of
each respective period, annual reports (including financial statements audited
by independent certified public accountants) and unaudited quarterly reports of
operations for each of the first three quarters of the fiscal year, and will
furnish to you and the other several Underwriters hereunder, upon request (i)
concurrently with furnishing such reports to its shareholders, statements of
operations of the Company for each of the first three (3) quarters in the form
furnished to the Company's shareholders, (ii) concurrently with furnishing to
its shareholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of shareholders' equity, and of
cash flows of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent certified public accountants, (iii)
as soon as they are available, copies of all reports (financial or other) mailed
to shareholders, (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any securities
exchange or the NASD, (v) every material press release and every material news
item or article in respect of the Company or its affairs which was generally
released to shareholders or prepared by the Company, and (vi) any additional
information of a public nature concerning the Company or its business which you
may reasonably request. During such five (5)-year period, if the Company shall
have active subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the accounts of the Company and its
subsidiaries are consolidated, and shall be accompanied by similar financial
statements for any significant subsidiary that is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
-15-
(h) The Company will maintain a transfer agent and a registrar (which
may be the same entity) for its Common Stock.
(i) The Company will file Form SR in conformity with the
requirements of the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company to
perform any agreement on its part to be performed hereunder or to fulfill any
condition of the Underwriters' obligations hereunder, or if the Company shall
terminate this Agreement pursuant to Section 12(a) hereof, or if the
Underwriters shall terminate this Agreement pursuant to Section 12(b)(i), and,
in the judgment of the Representative, a public offering price of $5.00 or more
per share is available, then the Company shall (i) reimburse the Representative
in full for its out-of-pocket expenses, including without limitation, its legal
fees and disbursements incurred prior to the termination; (ii) pay all Blue Sky
filing fees and expenses, including Blue Sky legal fees not to exceed an
aggregate of $10,000; (iii) indemnify and hold harmless the Representative for
any expenses incurred by the Company in connection with the transactions
contemplated by this Agreement, including but not limited to printing expenses
and its accounting and legal fees; (iv) not sell any of its capital stock to the
public through another underwriter for a period of at least six months, or if it
does so, then the Company shall pay to you $150,000 in addition to the amounts
paid to you pursuant to subparagraphs (i), (ii) and (iii) above, which the
Company and you agree is fair compensation to the Representative for services
performed with respect to the transactions contemplated hereby; and (v) in the
event the Company enters into an agreement to be acquired or merges, sells all
or substantially all of the assets or otherwise effects a corporate
reorganization with any other entity (a "Corporate Transaction") and, as a
result, the public offering contemplated hereby is abandoned, (x) pay you a cash
fee of $250,000, which the Company and you agree is fair compensation to you for
services performed with respect to the public offering contemplated hereby (such
cash fee to be in addition to the amounts paid to you pursuant to subparagraphs
(i), (ii) and (iii) above) or (y) engage you as the Company's exclusive
financial advisor with respect to the Corporate Transaction and upon request of
the Company, you shall act as the Company's investment banker in connection with
any such acquisition and shall render such services as are customary in
connection therewith, in consideration for standard and customary fees.
(k) If at any time during the ninety (90)-day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
if reasonably requested by you, forthwith prepare, and, if permitted by law,
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(l) During the Lock-up Period, the Company will not, without the prior
written consent of the Representative, effect the Disposition of, directly or
indirectly, any Securities
-16-
other than (i) the sale of the Firm Shares and the Option Shares hereunder and,
(ii) the Company's issuance of options or Common Stock under the Company's
presently authorized stock option plans or restricted stock plans (collectively,
the "Option Plans").
7. EXPENSES.
(a) The Company and the Selling Shareholders agree with each
Underwriter that:
(i) The Company and the Selling Shareholders (with the costs
attributable to the Selling Shareholders being based on their pro rata
participation in the Registration Statement) will pay and bear all costs and
expenses in connection with the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments or supplements
thereto; the printing of this Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreement, the Preliminary Blue Sky Survey and any supplemental
Blue Sky Survey, the Underwriters' Questionnaire and Power of Attorney, and any
instruments related to any of the foregoing; the issuance, purchase, sale and
delivery of the Shares hereunder to the several Underwriters, including all fees
and expenses of filing the Registration Statement with the SEC and NASD;
transfer taxes, if any; the cost of all certificates representing the Shares;
transfer agents' and registrars' fees; the fees and disbursements of counsel and
accountants for the Company; all fees and other charges of the Company's
independent certified public accountants; the cost of furnishing to the several
Underwriters copies of the Registration Statement (including appropriate
exhibits), Preliminary Prospectus and the Prospectus, and any amendments or
supplements to any of the foregoing; all fees (including filing fees) and costs
of qualifying the Shares under the laws of such jurisdictions as you may
designate (including fees of counsel for the Underwriters related to such
qualification, up to a maximum of $10,000); the Company's road show costs and
expenses, the cost of preparing bound volumes of the documents relating to the
public offering of Common Stock contemplated hereby; and all other expenses
directly incurred by the Company in connection with the performance of its
obligations hereunder. The Representative shall pay the fees and disbursements
of its counsel and the Representative's road show costs and expenses.
(ii) In addition to its other obligations under Section 7(a)(i)
hereof, if the Shares are sold pursuant to this Agreement, the Company will pay
to the Representative a nonaccountable expense allowance equal to 2.0% of the
initial public offering price of the Shares. This nonaccountable expense
allowance with respect to the Firm Shares shall be paid to you on the Closing
Date and the nonaccountable expense allowance with respect to the Option Shares
shall be paid to you on the closing of the sale to you of such Option Shares.
(iii) In addition to its other obligations under Section 9
hereof, the Company and the Selling Shareholders, as the case may be, agree
that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding described in Section 9(a) hereof, it
will reimburse the Underwriters, as the case may be, on a monthly basis for all
reasonable legal or other expenses incurred in connection with investigating or
defending any
-17-
such claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and enforceability
of the Company's obligation to reimburse the Underwriters for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriters shall
promptly return such payment to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) listed from time to time in
The Wall Street Journal (the "Prime Rate"). Any such interim reimbursement
payments which are not made to the Underwriters within thirty (30) days of a
request for reimbursement shall bear interest at the Prime Rate from the date of
such request.
(b) In addition to their other obligations under Section 9(b) hereof,
the Underwriters severally and not jointly agree that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 9(b) hereof, they will reimburse the Company and
Selling Shareholders, as the case may be, on a monthly basis for all reasonable
legal or other expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company and the
Selling Shareholders for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction.
To the extent that any such interim reimbursement payment is so held to have
been improper, the Company and the Selling Shareholders shall promptly return
such payment to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company and the Selling Shareholders within
thirty (30) days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
(c) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 7(a)(iii) and 7(b)
hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the reimbursing parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the NASD in Orange
County, California (or as close geographically to Orange County, California as
is reasonably practical). Any such arbitration must be commenced by service of
a written demand for arbitration or a written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 7(a)(iii) and 7(b)
hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses which is created by the provisions of
Sections 9(a) and 9(b) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 9(d) hereof.
-18-
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
The obligations of the several Underwriters to purchase and pay for the
Shares as provided herein shall be subject to the accuracy, as of the date
hereof and the Closing Date and any later date on which Option Shares are to be
purchased, as the case may be, of the representations and warranties of the
Company and the performance by the Company of its obligations hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 2:00 P.M., California time, on the date of this Agreement, or such later
date as shall be consented to in writing by you; and no stop order suspending
the effectiveness thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of the Company or any
Underwriter, threatened by the Commission, and any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction of
Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issuance, sale and delivery of the Shares,
shall have been reasonably satisfactory to Underwriters' Counsel, and such
counsel shall have been furnished with such documents and information as they
may reasonably have requested to enable them to pass upon the matters referred
to in this Section.
(c) You shall be satisfied that since the respective dates as of which
information is given in the Registration Statement and Prospectus, (i) there
shall not have been any change in the capital stock of the Company other than
pursuant to the exercise of outstanding options and warrants disclosed in the
Prospectus or any material change in the indebtedness of the Company, (ii)
except as set forth or contemplated by the Registration Statement or the
Prospectus, no material verbal or written agreement or other transaction shall
have been entered into by the Company, which is not in the ordinary course of
business, (iii) no loss or damage (whether or not insured) to the property of
the Company shall have been sustained which materially and adversely affects the
condition (financial or otherwise), business, results of operations or prospects
of the Company, (iv) no legal or governmental action, suit or proceeding
affecting the Company which is material to the Company or which affects or may
affect the transactions contemplated by this Agreement shall have been
instituted or threatened and (v) there shall not have been any material change
in the condition (financial or otherwise), business, management, results of
operations or prospects of the Company which makes it impractical or inadvisable
in the judgment of the Representative to proceed with public offering or
purchase the Common Shares as contemplated hereby.
(d) You shall have received on the Closing Date and on any later date on
which Option Shares are purchased, as the case may be, an opinion of ▇▇▇▇▇▇▇
Coie LLP, counsel for the Company, dated the Closing Date or such later date on
which Option Shares are purchased,
-19-
addressed to the Underwriters in form as set forth as Exhibit A hereto and
substance satisfactory to counsel for the Underwriters
Counsel rendering such opinion may rely as to questions of fact upon
representations or certificates of officers of the Company, and of government
officials, in which case its opinion is to state that they are so relying and
that they have no knowledge of any material misstatement or inaccuracy in any
such opinion, representation or certificate. Copies of any representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date an opinion or opinions
of counsel for the Selling Shareholders, addressed to the Underwriters dated the
Closing Date in form as set forth as Exhibit B hereto and substance satisfactory
to counsel for the Underwriters.
(f) You shall have received on the Closing Date and on any later date
on which Option Shares are purchased, as the case may be, an opinion of local
counsel for each jurisdiction in which the Company owns a subsidiary (which
counsel are listed on Schedule C hereto), dated the Closing Date or such later
date on which Option Shares are purchased, addressed to the Underwriters in form
as set forth as Exhibit C hereto and substance satisfactory to counsel for the
Underwriters.
(g) You shall have received on the Closing Date and on any later date
on which Option Shares are purchased, as the case may be, an opinion of Summit
Law Group, P.L.L.C. in form and substance satisfactory to you, with respect to
the sufficiency of all such corporate proceedings and other legal matters
relating to this Agreement and the transactions contemplated hereby as you may
reasonably require, and the Company shall have furnished to such counsel such
documents as they may have requested for the purpose of enabling them to pass
upon such matters.
(h) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a letter from
Ernst & Young LLP, addressed to the Company and the Underwriters, dated the
Closing Date or such later date on which Option Shares are purchased, as the
case may be, confirming that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in such
letters delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
three (3) business days prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of such letter, or to reflect
the availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial
-20-
or otherwise), earnings, operations or business of the Company from that set
forth in the Registration Statement or Prospectus, which, in your sole judgment,
is material and adverse and that makes it, in your sole judgment, impracticable
or inadvisable to proceed with the public offering of the Shares as contemplated
by the Prospectus. The Original Letter from Ernst & Young LLP shall be addressed
to or for the use of the Underwriters in form and substance satisfactory to the
Underwriters and shall (i) represent, to the extent true, that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations; (ii) with
respect to the letter from Ernst & Young LLP, set forth its opinion with respect
to its examination of the balance sheets of the Company as of March 29, 1998,
December 31, 1997 and December 31, 1996 and related statements of operations,
shareholders' equity and cash flows for the each of the fiscal years in the
three-year period ended December 31, 1997; and (iii) address other matters
agreed upon by Ernst & Young LLP and you. In addition, you shall have received
from Ernst & Young LLP a letter addressed to the Company and made available to
you for the use of the Underwriters stating that its review of the Company's
system of internal accounting controls, to the extent they deemed necessary in
establishing the scope of its examination of the Company's financial statements
as of March 29, 1998 did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(i) You shall have received on the Closing Date and on any later
date on which Option Shares are purchased, as the case may be, a certificate of
the Company, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, signed by the President and the Chief
Financial Officer of the Company, to the effect that, and you shall be satisfied
that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the
Closing Date or any later date on which Option Shares are to be
purchased, as the case may be, and the Company has complied, in
all material aspects, with all the agreements and satisfied all
the conditions on its part to be performed or satisfied, in all
material respects, at or prior to the Closing Date or any later
date on which Option Shares are to be purchased, as the case may
be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or, to their knowledge, are pending or
threatened under the Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required
to be included therein by the Act and the Rules and Regulations
or the Exchange Act and the applicable rules and regulations of
the Commission thereunder, as the case may be, and in all
material respects conformed to the requirements of the
-21-
Act and the Rules and Regulations or the Exchange Act and the
applicable rules and regulations of the Commission thereunder, as
the case may be, the Registration Statement, and any amendment or
supplement thereto, did not and does not include 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, and any amendment or
supplement thereto, did not and does not include any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and,
since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or
supplemented Prospectus that has not been so set forth; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not
been (a) any material adverse change in the condition (financial
or otherwise), earnings, operations or business of the Company,
(b) any transaction that is material to the Company, (c) any
obligation, direct or contingent, incurred by the Company, that
is material to the Company, (d) any change in the capital stock
or outstanding indebtedness of the Company, (e) any dividend or
distribution of any kind declared, paid or made on the capital
stock of the Company, or (f) any loss or damage (whether or not
insured) to the property of the Company which has a material
adverse effect on the condition (financial or otherwise),
earnings, operations or business of the Company.
(j) The Company shall have obtained and delivered to you an agreement
from each officer, director and director-nominee of the Company, and each
beneficial owner of the Common Stock immediately after the offering contemplated
hereby, in writing prior to the date hereof that such person will not, during
the Lock-up Period, effect the Disposition of any Securities now owned or
hereafter acquired directly by such person or with respect to which such person
has or hereafter acquires the power of disposition, otherwise than (i) as a bona
fide gift or gifts, provided the donee or donees thereof agree in writing to be
bound by this restriction, (ii) through an intra-family transfer or transfers to
rusts for estate planning purposes or (iii) with the prior written consent of
the Representative. The foregoing restriction is expressly agreed to preclude
the holder of the Securities from engaging in any hedging or other transaction
which is designed to or reasonably expected to lead to or result in a
Disposition of Securities during the Lock-up Period, even if such Securities
would be disposed of by someone other than the such holder. Such prohibited
hedging or other transactions would include, without limitation, any short sale
(whether or not against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any
Securities or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from Securities. Furthermore, such person will have also agreed and
consented to the entry
-22-
of stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction.
(k) The Company shall have furnished to you such further certificates
and documents as you shall reasonably request, including certificates of
officers of the Company as to the accuracy of the representations and warranties
of the Company, as to the performance by the Company of its obligations
hereunder and as to the other conditions concurrent and precedent to the
obligations of the Underwriters hereunder.
(l) The Representative's Warrant Agreement shall have been entered
into by the Company and you, and the Representative's Warrants shall have been
issued and sold to you pursuant thereto.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and each of the Selling Shareholders, severally and
not jointly, agrees to indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject (including, without limitation, in its capacity
as an Underwriter or as a "qualified independent underwriter" within the meaning
of Schedule E of the Bylaws of the NASD), under the Act, the Exchange Act or
otherwise, specifically including, but not limited to, losses, claims, damages
or liabilities, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) with respect to
the Company, any breach of any representation, warranty, agreement or covenant
of the Company herein contained, or any failure of the Company to perform its
obligations hereunder or under law, (ii) with respect to each of the Selling
Shareholders, arise out of or are based in whole or in part on any inaccuracy in
the representations and warranties of such Selling Shareholder contained herein
or any failure of such Selling Shareholder to perform its obligations hereunder
or under law, (iii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (but, with respect to
each of the Selling Shareholder only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished by such Selling
Shareholder, in its capacity as such, to the Company or the Underwriters,
directly or through such Selling Shareholders' representatives, specifically for
inclusion therein) and agrees to reimburse each Underwriter for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-------- -------
that neither the Company nor any Selling Shareholder shall be liable in any
-23-
such case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement, such
Preliminary Prospectus or the Prospectus, or any such amendment or supplement
thereto, in reliance upon, and in conformity with, written information relating
to any Underwriter furnished to the Company as described in Section 4 hereof,
and, provided further, that the indemnity agreement provided in this Section
-------- -------
9(a) with respect to any Preliminary Prospectus shall not inure to the benefit
of any Underwriter from whom the person asserting any losses, claims, damages,
liabilities or actions based upon any untrue statement or alleged untrue
statement of material fact or omission or alleged omission to state therein a
material fact purchased Shares, if a copy of the Prospectus in which such untrue
statement or alleged untrue statement or omission or alleged omission was
corrected had not been sent or given to such person within the time required by
the Act and the Rules and Regulations, unless such failure is the result of
noncompliance by the Company with Section 6(d) hereof.
The indemnity agreement in this Section 9(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company and the Selling Shareholders against any losses,
claims, damages or liabilities, joint or several, to which the Company may
become subject under the Act or otherwise, specifically including, but not
limited to, losses, claims, damages or liabilities, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company as described in Section 4 hereof, and agrees to
reimburse the Company and the Selling Shareholders for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such loss, claim, damage, liability or action.
The indemnity agreement in this Section 9(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company and each person, if any, who controls the Company or any of the Selling
Shareholders within the meaning of the Act or the Exchange Act. This indemnity
agreement shall be in addition to any liabilities which each Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect
-24-
thereof is to be made against any indemnifying party under this Section 9,
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 otherwise than under this
Section 9. In case any such action is brought against any indemnified party, and
it notified the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it shall
elect 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, that if the defendants in any such action include both the
-------- -------
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party which pose a conflict of interest for such
counsel, 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 the
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 9 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 appropriate local
counsel) approved by the indemnifying party representing all the indemnified
parties under Section 9(a) or 9(b) hereof who are parties to such action), (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 or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; provided that such
--------
consent shall not be unreasonably withheld. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnification could have
been sought hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all liability on claims
that are the subject matter of such indemnification.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 9
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by
-25-
the percentage that the underwriting discount bears to the initial public
offering price, and the Company and the Selling Shareholders are responsible for
the remaining portion, provided, however, that (i) no Underwriter shall be
-------- -------
required to contribute any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter and (ii) no person guilty
of a fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The contribution agreement in this Section 9(d)
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls the Underwriters or the Company
within the meaning of the Act or the Exchange Act and each officer of the
Company who signed the Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 9, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 9 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act. The parties are advised that federal or state public policy, as interpreted
by the courts in certain jurisdictions, may be contrary to certain of the
provisions of this Section 9, and the parties hereto hereby expressly waive and
relinquish any right or ability to assert such public policy as a defense to a
claim under this Section 9 and further agree not to attempt to assert any such
defense.
10. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties, covenants and agreements of the Company
and the Underwriters herein or in certificates delivered pursuant hereto, and
the indemnity and contribution agreements contained in Sections 7 and 9 and
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person
within the meaning of the Act or the Exchange Act, or by or on behalf of the
Company or any of its officers, directors or controlling persons within the
meaning of the Act or the Exchange Act, and shall survive the delivery of the
Shares to the several Underwriters hereunder or termination of this Agreement.
11. SUBSTITUTION OF UNDERWRITERS.
If any Underwriter or Underwriters shall fail to take up and pay for the
number of Firm Shares agreed by such Underwriter or Underwriters to be purchased
hereunder upon tender of such Firm Shares in accordance with the terms hereof,
and if the aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters so agreed but failed to purchase does not exceed 10% of the Firm
Shares, the remaining Underwriters shall be obligated, severally in proportion
to their respective commitments hereunder, to take up and pay for the Firm
Shares of such defaulting Underwriter or Underwriters.
-26-
If any Underwriter or Underwriters so defaults and the aggregate number of
Firm Shares which such defaulting Underwriter or Underwriters agreed but failed
to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for twenty-
four (24) hours to allow the several Underwriters the privilege of substituting
within twenty-four (24) hours (including non-business hours) another underwriter
or underwriters (which may include any nondefaulting Underwriter) satisfactory
to the Company. If no such underwriter or underwriters shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for a further twenty-four (24) hours,
if necessary, to allow the Company the privilege of finding another underwriter
or underwriters, satisfactory to you, to purchase the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section 11, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven (7)
full business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary, and (ii) the respective number of Firm Shares to
be purchased by the remaining Underwriters and substituted underwriter or
underwriters shall be taken as the basis of their underwriting obligation. If
the remaining Underwriters shall not take up and pay for all such Firm Shares so
agreed to be purchased by the defaulting Underwriter or Underwriters or
substitute another underwriter or underwriters as aforesaid and the Company
shall not find or shall not elect to seek another underwriter or underwriters
for such Firm Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the preceding
paragraph of this Section 11, the Company shall not be liable to any Underwriter
(except as provided in Sections 7 and 9 hereof) nor shall any Underwriter (other
than an Underwriter who shall have failed, otherwise than for some reason
permitted under this Agreement, to purchase the number of Firm Shares agreed by
such Underwriter to be purchased hereunder, which Underwriter shall remain
liable to the Company and the other Underwriters for damages, if any, resulting
from such default) be liable to the Company (except to the extent provided in
Sections 7 and 9 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 11.
12. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., California time, on the second full business day following the effective
date of the
-27-
Registration Statement, or (ii) the time of the initial public offering of any
of the Shares by the Underwriters after the Registration Statement becomes
effective. The time of the initial public offering shall mean the time of the
release by you, for publication, of the first newspaper advertisement relating
to the Shares, or the time at which the Shares are first generally offered by
the Underwriters to the public by letter, telephone, telegram or telecopy,
whichever shall first occur. By giving notice as set forth in Section 13 before
the time this Agreement becomes effective, you, as Representative of the several
Underwriters, or the Company, may prevent this Agreement from becoming effective
without liability of any party to any other party, except as provided in
Sections 6(j), 7 and 9 hereof.
(b) You, as Representative of the several Underwriters, shall have the
right to terminate this Agreement by giving notice as hereinafter specified at
any time at or prior to the Closing Date or on or prior to any later date on
which Option Shares are purchased, as the case may be, (i) if the Company shall
have failed, refused or been unable to perform any agreement on its part to be
performed, or (ii) because any other condition of the Underwriters' obligations
hereunder required to be fulfilled is not fulfilled, including, without
limitation, any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse, or (iii) if additional material governmental restrictions,
not in force and effect on the date hereof, shall have been imposed upon trading
in securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock Exchange or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iv) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (v) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (vi) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency which,
in the reasonable opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. Any termination pursuant to any of subparagraphs (ii) through
(vi) above shall be without liability of any party to any other party except as
provided in Sections 7 and 9 hereof. In the event of termination pursuant to
subparagraph (i) above, the Company shall also remain obligated to pay costs and
expenses pursuant to Sections 6(j), 7 and 9 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 12, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
-28-
13. NOTICES.
All notices or communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to you shall be mailed,
delivered, telegraphed (and confirmed by letter) or telecopied (and confirmed by
letter) to you c/o Cruttenden ▇▇▇▇ Incorporated, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, telecopier number (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇
▇▇▇▇▇▇▇▇; if sent to the Company, such notice shall be mailed, delivered,
telegraphed (and confirmed by letter) or telecopied (and confirmed by letter) to
▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇.
14. PARTIES.
This Agreement shall inure to the benefit of and be binding upon the
several Underwriters, the Company and the Selling Shareholders and their
respective executors, administrators, successors and assigns. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person or corporation, other than the parties hereto and their respective
executors, administrators, successors and assigns, and their controlling persons
within the meaning of the Act or the Exchange Act, officers and directors
referred to in Section 9 hereof, any legal or equitable right, remedy or claim
in respect of this Agreement or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or corporation.
No purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase. The Agreement
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof.
In all dealings with the Company under this Agreement, you shall act on
behalf of each of the several Underwriters, and the Company shall be entitled to
act and rely upon any statement, request, notice or agreement made or given by
you on behalf of each of the several Underwriters.
15. APPLICABLE LAW.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California.
16. COUNTERPARTS.
This Agreement may be signed in several counterparts, each of which will
constitute an original.
If the foregoing correctly sets forth the understanding among the Company
and the several Underwriters, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
the Company and the several Underwriters.
Very truly yours,
-29-
COST-U-LESS, INC.
By:________________________________
Name:__________________________
Title:_________________________
SELLING SHAREHOLDERS
By:________________________________
Attorney-in-fact
Accepted as of the date first above written:
CRUTTENDEN ▇▇▇▇ INCORPORATED
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By: CRUTTENDEN ▇▇▇▇ INCORPORATED
By:__________________________________
Name:______________________________
Title:_____________________________
-30-
SCHEDULE A
NUMBER OF FIRM SHARES TO BE
UNDERWRITERS PURCHASED
Cruttenden ▇▇▇▇ Incorporated
Total
-31-
SCHEDULE B
SELLING SHAREHOLDERS NUMBER OF OPTION SHARES
-▇▇-
▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Virgin Islands:
----------------------------
▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ of
▇▇▇▇▇ ▇. ▇▇▇▇▇, P.C. USVI
Guam:
----
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ of
▇▇▇▇▇▇▇▇▇ Ball ▇▇▇▇▇▇▇ Case & Ichiki.
American Samoa:
--------------
▇▇▇ ▇▇▇▇ of
Hall & Associates
Curacao, Netherlands Antilles:
-----------------------------
▇▇▇▇▇▇ Chemaley of
Decro Trust N.V.
Fiji and Vanuatu:
----------------
Chen Young of
Young & Associates
New Zealand:
-----------
[Insert Information]
Nevada:
------
[Insert Information]
-33-
