EXHIBIT 1.1
1,200,000 SHARES OF COMMON STOCK
▇▇▇▇▇▇ ▇▇▇▇▇▇ MARINE, INC.
UNDERWRITING AGREEMENT
___________ , 2002
▇▇▇▇▇▇▇▇▇ Securities, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
▇▇▇▇▇▇ ▇▇▇▇▇▇ Marine, Inc., a Delaware corporation (the "Company"),
hereby confirms its agreement with you (who are sometimes hereinafter referred
to as the "Representative") and with the other members of the underwriting group
(the "Underwriters") named on Schedule 1 hereto as follows:
1. Introductory. Subject to the terms and conditions herein contained,
the Company proposes to sell to the several Underwriters an aggregate of
1,200,000 shares (the "Firm Shares") of the Company's Common Stock (the "Common
Stock"). The Company also proposes to sell to the several Underwriters not more
than 180,000 additional shares of Common Stock (15% of the number of shares
constituting the Firm Shares) if requested by the Representative as provided in
Section 3 of this Agreement. Any and all shares of Common Stock to be purchased
by the Underwriters pursuant to such option are referred to herein as the
"Additional Shares." The Firm Shares and any Additional Shares are collectively
referred to herein as the "Shares."
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters that:
a. The Company has filed with the United States Securities and
Exchange Commission (the "Commission") a registration statement, and
may have filed one or more amendments thereto, on Form SB-2
(Registration No. 333- ), including in such registration statement and
each such amendment a facing sheet, the information called for by Part
I, audited financial statements for the past two fiscal years or such
other period as may be appropriate, the information called for by Part
II, the undertakings to deliver certificates, file reports and file
post-effective amendments, the required signatures, consents of
experts, exhibits, a related preliminary prospectus (a "Preliminary
Prospectus") and any other information or documents which are
required for the registration of the Shares, and the warrants referred
to in Section 5(p) (the "Representative's Warrants") and the shares
referred to in Section 5(p) purchasable upon exercise of the
Representative's Warrants (the "Representative's Warrant Shares"),
under the Securities Act of 1933, as amended (the "Act"). As used in
this Agreement, the term "Registration Statement" means such
registration statement, including incorporated documents, all exhibits
and financial statements and schedules thereto, as amended, when it
becomes effective, and shall include the information with respect to
the Shares, the Representative's Warrants, and the Representative's
Warrant Shares and the offering thereof permitted to be omitted from
the Registration Statement when it becomes effective pursuant to Rule
430A of the General Rules and Regulations promulgated under the Act
(the "Regulations"), which information is deemed to be included therein
when it becomes effective as provided by Rule 430A; the term
"Preliminary Prospectus" means each prospectus included in the
Registration Statement, or any amendments thereto, before it becomes
effective under the Act and any prospectus filed by the Company with
the consent of the Representative pursuant to Rule 424(a) of the
Regulations; and the term "Prospectus" means the final prospectus
included as part of the Registration Statement, except that if the
prospectus relating to the securities covered by the Registration
Statement in the form first filed on behalf of the Company with the
Commission pursuant to Rule 424(b) of the Regulations shall differ from
such final prospectus, the term "Prospectus" shall mean the prospectus
as filed pursuant to Rule 424(b) from and after the date on which it
shall have first been used.
b. When the Registration Statement becomes effective, and at
all times subsequent thereto, to and including the Closing Date (as
defined in Section 3) and each Additional Closing Date (as defined in
Section 3), and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the Representative
or any dealer, and during such longer period until any post-effective
amendment thereto shall become effective, the Registration Statement
(and any post-effective amendment thereto) and the Prospectus (as
amended or as supplemented if the Company shall have filed with the
Commission any amendment or supplement to the Registration Statement or
the Prospectus) will contain all statements which are required to be
stated therein in accordance with the Act and the Regulations, will
comply with the Act and the Regulations, and will not contain any
untrue statement of a material fact or omit
2
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and no event will have
occurred which should have been set forth in an amendment or supplement
to the Registration Statement or the Prospectus which has not then been
set forth in such an amendment or supplement; and no Preliminary
Prospectus, as of the date filed with the Commission, included any
untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading; except that no representation or warranty is
made in this Section 2(b) with respect to statements or omissions made
in reliance upon and in conformity with written information furnished
to the Company as stated in Section 8(b) with respect to the
Underwriters by or on behalf of the Underwriters expressly for
inclusion in any Preliminary Prospectus, the Registration Statement, or
the Prospectus, or any amendment or supplement thereto.
c. Neither the Commission nor the "blue sky" or securities
authority of any jurisdiction has issued an order (a "Stop Order")
suspending the effectiveness of the Registration Statement, preventing
or suspending the use of any Preliminary Prospectus, the Prospectus,
the Registration Statement, or any amendment or supplement thereto,
refusing to permit the effectiveness of the Registration Statement, or
suspending the registration or qualification of the Shares, the
Representative's Warrants, and the Representative's Warrant Shares, nor
has any of such authorities instituted or threatened to institute any
proceedings with respect to a Stop Order.
d. Any contract, agreement, instrument, lease, or license
required to be described in the Registration Statement or the
Prospectus has been properly described therein. Any contract,
agreement, instrument, lease, or license required to be filed as an
exhibit to the Registration Statement has been filed with the
Commission as an exhibit to or has been incorporated as an exhibit by
reference into the Registration Statement.
e. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware,
with full power and authority, and all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits
of and from, and declarations and filings with, all federal, state,
local, and other governmental authorities and all courts and other
tribunals, to own, lease, license, and use its properties and assets
and to carry on the business in the manner described in the Prospectus.
The Company has no subsidiaries. The Company is duly qualified to do
business and is in good standing in every jurisdiction in which
3
its ownership, leasing, licensing, or use of property and assets or the
conduct of its business makes such qualifications necessary.
f. The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock, of which 2,300,000 shares of Common
Stock are issued and outstanding; 8,438 shares of Common Stock are
reserved for issuance of outstanding warrants; 250,000 shares of Common
Stock are reserved for issuance on conversion of 7% subordinated
convertible promissory notes (hereinafter, the "Notes"); and 500,000
shares of Common Stock are reserved for issuance upon the exercise of
options authorized under the Company's option plan; and 2,000,000
shares of Preferred Stock, none of which are issued or outstanding.
Each outstanding share of Common Stock is validly authorized, validly
issued, fully paid, and nonassessable, without any personal liability
attaching to the ownership thereof, and has not been issued and is not
owned or held in violation of any preemptive rights of stockholders.
There is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, or other right calling for the issuance
of, any share of capital stock of the Company or any security or other
instrument which by its terms is convertible into, exercisable for, or
exchangeable for capital stock of the Company, except as set forth
above, and as may be properly described in the Prospectus.
g. The financial statements of the Company included in the
Registration Statement and the Prospectus fairly present with respect
to the Company the financial position, the results of operations, and
the other information purported to be shown therein at the respective
dates and for the respective periods to which they apply. Such
financial statements have been prepared in accordance with generally
accepted accounting principles, except to the extent that certain
footnote disclosures regarding any stub period may have been omitted in
accordance with the applicable rules of the Commission under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
consistently applied throughout the periods involved, are correct and
complete, and are in accordance with the books and records of the
Company. The accountants whose reports on the audited financial
statements are filed with the Commission as a part of the Registration
Statement are, and during the periods covered by their reports included
in the Registration Statement and the Prospectus were, independent
certified public accountants with respect to the Company within the
meaning of the Act and the Regulations. No other financial
4
statements are required by Form SB-2 or otherwise to be included in the
Registration Statement or the Prospectus. There has at no time been a
material adverse change in the financial condition, results of
operations, business, properties, assets, liabilities, or future
prospects of the Company from the latest information set forth in the
Registration Statement or the Prospectus, except as may be properly
described in the Prospectus.
h. There is no litigation, arbitration, claim, governmental or
other proceeding (formal or informal), or investigation pending, or, to
the knowledge of the Company, threatened, or proposed with respect to
the Company or its operations, businesses, properties, or assets,
except as may be properly described in the Prospectus or such as
individually or in the aggregate do not now have and will not in the
future have a material adverse effect upon the operations, business,
properties, or assets of the Company. The Company is not in violation
of, or in default with respect to, any law, rule, regulation, order,
judgment, or decree except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in
the future have a material adverse effect upon the operations,
business, properties, or assets of the Company, nor is the Company
required to take any action in order to avoid any such violation or
default.
i. The Company has good and marketable leasehold title to all
real properties and good title to all other properties and assets which
the Prospectus indicates are owned by it, free and clear of all liens,
security interests, pledges, charges, encumbrances, and mortgages
except as may be properly described in the Prospectus or such as in the
aggregate do not now have and will not in the future have a material
adverse effect upon the operations, business, properties, or assets of
the Company. To the knowledge of the Company, no real property owned,
leased, licensed, or used by the Company lies in an area which is, or
to the knowledge of the Company will be, subject to zoning, use, or
building code restrictions which would prohibit, and no state of facts
relating to the actions or inaction of another person or entity or his
or its ownership, leasing, licensing, or use of any real or personal
property exists or will exist which would prevent, the continued
effective ownership, leasing, licensing, or use of such real property
in the business of the Company as presently conducted or as the
Prospectus indicates it contemplates conducting, except as may be
properly described in the Prospectus, or such as in the aggregate do
not now have and will not in the future have a material adverse effect
upon the operations, business,
5
properties, or assets of the Company or except properties being
developed by the Company for which appropriate zoning and permitting
has not yet been obtained.
j. Neither the Company nor any other party is now or is
expected by the Company to be in violation or breach of, or in default
with respect to complying with, any material provision of any contract,
agreement, instrument, lease, license, arrangement, or understanding
which is material to the Company, and each such contract, agreement,
instrument, lease, license, arrangement, and understanding is in full
force and is the legal, valid, and binding obligation of the parties
thereto and is enforceable as to them in accordance with its terms. The
Company enjoys peaceful and undisturbed possession under all leases and
licenses under which it is operating. The Company is not a party to or
bound by any contract, agreement, instrument, lease, license,
arrangement, or understanding, or subject to any charter or other
restriction, which has had or which the Company believes may in the
future have a material adverse effect on the financial condition,
results of operations, business, properties, assets, liabilities, or
future prospects of the Company. The Company is not in violation or
breach of, or in default with respect to, any term of its Certificate
of Incorporation (or other charter document) or by-laws.
k. All patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, franchises,
technology, know-how and other intangible properties and assets (all of
the foregoing being herein called "Intangibles") that the Company owns
or has pending, or under which it is licensed, are in good standing and
uncontested. Except as otherwise disclosed in the Registration
Statement, the Intangibles are owned by the Company, free and clear of
all liens, security interests, pledges, and encumbrances. The Company
has registered its trademark, "▇▇▇▇▇▇ ▇▇▇▇▇▇ Marine" with the United
States Patent and Trademark Office. There is no right under any
Intangible necessary to the business of the Company as presently
conducted or as the Prospectus indicates it contemplates conducting
(except as may be so designated in the Prospectus). To the knowledge of
the Company, the Company has not infringed and is not infringing any
Intangibles of others and the Company has not received notice of
infringement with respect to asserted Intangibles of others. To the
knowledge of the Company, there is no infringement by others of
Intangibles of the Company. To the knowledge of the Company, there is
no Intangible of others which has had or may in the future have a
materially adverse effect on
6
the financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of the Company.
l. Neither the Company nor any director, officer, agent,
employee, or other person acting with authority on behalf of the
Company has, directly or indirectly: used any corporate funds for
unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended
by the International Anti-Bribery Act of 1998; or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment.
The Company has not accepted any material advertising allowances or
marketing allowances from suppliers to the Company and, to the extent
any advertising allowance has been accepted, the Company has provided
proper documentation to the supplier with respect to advertising as to
which the advertising allowance has been granted.
m. The Company has all requisite power and authority to
execute and deliver, and to perform thereunder each of this Agreement,
the Representative's Warrants and the financial consulting agreement
with the Representative (the "Consulting Agreement"). All necessary
corporate proceedings of the Company have been duly taken to authorize
the execution and delivery, and performance thereunder by the Company
of this Agreement, the Representative's Warrants and the Consulting
Agreement. Each of this Agreement and the Consulting Agreement has been
duly authorized, executed, and delivered by the Company, is a legal,
valid, and binding obligation of the Company, and is enforceable as to
the Company in accordance with its terms. The Representative's Warrants
have been duly authorized by the Company and, when executed and
delivered by the Company, will be a legal, valid, and binding
obligation of the Company, and (subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors'
rights generally) will be enforceable against the Company in accordance
with its terms. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any
federal, state, local, or other governmental authority or any court or
other tribunal is required by the Company for the execution and
delivery, or performance thereunder by the Company of this Agreement,
the Representative's Warrants or the Consulting Agreement except
filings under the Act which have been or will be made before the
Closing Date
7
and such consents consisting only of consents under "blue sky" or
securities laws which are required in connection with the transactions
contemplated by this Agreement and which have been obtained at or prior
to the date of this Agreement. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement, or understanding to
which the Company is a party, or to which any of its properties or
assets are subject, is required for the execution or delivery, or
performance thereunder of this Agreement, the Representative's Warrants
or the Consulting Agreement; and the execution and delivery, and
performance thereunder of this Agreement, the Representative's Warrants
and the Consulting Agreement will not violate, result in a breach of,
conflict with, or (with or without the giving of notice or the passage
of time or both) entitle any party to terminate or call a default under
any such contract, agreement, instrument, lease, license, arrangement,
or understanding, or violate or result in a breach of any term of the
Certificate of Incorporation or by-laws of the Company, or violate,
result in a breach of, or conflict with any law, rule, regulation,
order, judgment, or decree binding on the Company or to which any of
its operations, businesses, properties, or assets are subject.
n. The Shares, the Representative's Warrants and the
Representative's Warrant Shares are validly authorized and reserved for
issuance. The Shares, when issued and delivered in accordance with this
Agreement and the Representative's Warrant Shares, when issued and
delivered upon exercise of the Representative's Warrants, and upon
payment of the exercise price therefor, will be validly issued, fully
paid, and nonassessable, without any personal liability attaching to
the ownership thereof, and will not be issued in violation of any
preemptive rights of stockholders, and the Underwriters will receive
good title to the Shares purchased, the Representative will receive
good title to the Representative's Warrants purchased and any purchaser
of the Representative's Warrant Shares will receive good title thereto,
all such title free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements, and voting
trusts.
o. The Shares, the Representative's Warrants and the
Representative's Warrant Shares conform to all statements relating
thereto contained in the Registration Statement and the Prospectus.
p. Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except
as may otherwise be properly described
8
in the Prospectus, the Company has not (i) issued any securities or
incurred any liability or obligation, primary or contingent, for
borrowed money, (ii) entered into any transaction not in the ordinary
course of business, or (iii) declared or paid any dividend on its
capital stock.
q. Neither the Company nor any of its officers, directors, or
affiliates (as defined in the Regulations), has taken or will take,
directly or indirectly, prior to the termination of the distribution of
securities contemplated by this Agreement, any action designed to
stabilize or manipulate the price of any security of the Company, or
which has caused or resulted in, or which might in the future
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.
r. The Company has not incurred any liability for a fee,
commission, or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by
this Agreement.
s. The Company has obtained from each officer, director and
person or entity that beneficially owns the Company's Common Stock
prior to the date hereof his, her or its enforceable written agreement
that for a period of 12 months from the Effective Date, he, she or it
will not, without the Representative's prior written consent, sell or
undertake any related action described in such written agreement with
respect to the Company's Common Stock owned by such person prior to the
Effective Date. Any such sales will comply with applicable exemptions
from the registration requirements of the Act. Public or private sales
of Common Stock by such persons shall not include gifts, intra-family
transfers or transfers for estate planning purposes, which shall be
exempt from the foregoing provisions. The Company agrees not to sell
its Common Stock for 12 months from the Effective Date in a Regulation
D offering except (i) with the Representative's prior written consent,
(ii) in connection with an acquisition, (iii) upon the exercise of
options granted pursuant to the Company's stock option plan, (iv) upon
exercise of outstanding warrants to purchase 8,438 shares of Common
Stock, or (v) on conversion of the Notes; or (vi) upon exercise of the
Representative's Warrants.
t. Except as otherwise provided in the Registration Statement,
no person or entity has the right to require registration of shares of
Common Stock or other securities of the Company because of the filing
or effectiveness of the Registration Statement.
9
u. The Company is eligible to use Form SB-2 for registration
of the Shares, the Representative's Warrants and the Representative's
Warrant Shares.
v. No unregistered securities of the Company, of an affiliate
of the Company or of a predecessor of the Company have been sold within
three years prior to the date hereof, except as described in the
Registration Statement.
w. Except as set forth in the Registration Statement, there is
and at the Closing Date there will be no action, suit or proceeding
before any court, arbitration tribunal or governmental agency,
authority or body pending or, to the knowledge of the Company,
threatened which might result in judgments against the Company not
adequately covered by insurance or which collectively might result in
any material adverse change in the condition (financial or otherwise),
the business or the prospects of the Company or would materially affect
the properties or assets of the Company.
x. The Company has filed all federal and state tax returns
which are required to be filed by it and has paid all taxes shown on
such returns and all assessments received by it to the extent such
taxes have become due. All taxes with respect to which the Company is
obligated have been paid or adequate accruals have been set up to cover
any such unpaid taxes.
y. Except as set forth in the Registration Statement:
i. The Company has obtained all permits, licenses and
other authorizations which are required under the
Environmental Laws for the ownership, use and operation of
each location operated or leased by the Company (the
"Property"), all such permits, licenses and authorizations, if
any, obtained are in effect, no appeal nor any other action is
pending to revoke any such permit, license or authorization,
and the Company is in material compliance with all material
terms and conditions of all such permits, licenses and
authorizations, if any, obtained by the Company.
ii. To the knowledge of the Company, the Company and
the Property are in compliance with all Environmental Laws
including, without limitation, all restrictions, conditions,
standards, limitations, prohibitions, requirements,
obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder.
10
iii. The Company has not, and to the knowledge of the
Company, no other person has released, placed, stored, buried
or dumped any Hazardous Substances, Oils, Pollutants or
Contaminants or any other wastes produced by, or resulting
from, any business, commercial, or industrial activities,
operations, or processes, on, beneath, or adjacent to the
Property or any property formerly owned, operated or leased by
the Company except for inventories of such substances to be
used, and wastes generated therefrom, in the ordinary course
of business of the Company (which inventories and wastes, if
any, were and are stored or disposed of in accordance with
applicable laws and regulations and in a manner such that
there has been no release of any such substances into the
environment).
iv. Except as provided to the Representative, there
exists no written or tangible report, synopsis or summary of
any asbestos, toxic waste or Hazardous Substances, Oils,
Pollutants or Contaminants investigation made with respect to
all or any portion of the assets of the Company (whether or
not prepared by experts and whether or not in the possession
of the executive officers of the Company).
v. Definitions: As used herein:
(1) Environmental Laws means all federal,
state and local laws, regulations, rules and
ordinances relating to pollution or protection of the
environment, including, without limitation, laws
relating to Releases or threatened Releases of
Hazardous Substances, Oils, Pollutants or
Contaminants into the indoor or outdoor environment
(including, without limitation, ambient air, surface
water, groundwater, land, surface and subsurface
strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
Release, transport or handling of Hazardous
Substances, Oils, Pollutants or Contaminants.
(2) Hazardous Substances, Oils, Pollutants
or Contaminants means all substances defined as such
in the National Oil and Hazardous Substances
Pollutant Contingency Plan, 40 C.F.R. 300.6, or
defined as such under any Environmental Law.
11
(3) Release means any release, spill,
emission, discharge, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environmental
(including, without limitation, ambient air, surface
water, groundwater, and surface or subsurface strata)
or into or out of any property, including the
movement of Hazardous Substances, Oils, Pollutants or
Contaminants through or in the air, soil, surface
water, groundwater or any property.
z. No authorization, approval, consent or order of, or filing
with, any Federal, state or local governmental body, authority, self
regulatory authority, agency or official (collectively, the
"Governmental Authorities") is necessary in connection with the
issuance and sale of the Shares and the consummation of the
transactions contemplated hereby, except such as may be required by the
NASD or have been obtained under the applicable laws, rules and
regulations maintained and enforced by the Governmental Authorities in
their respective jurisdictions or under the Act, state securities or
Blue Sky laws or regulations.
aa. The Company is not an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended (the "1940
Act").
bb. The Shares have been approved for listing on the Nasdaq
SmallCap Market.
cc. Except as previously disclosed in writing to the
Representative by the Company or its stockholders, neither the Company
nor any of such stockholders directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, or has any other association with (within the meaning of
Article I, Section 1(m) of the Bylaws of the National Association of
Securities Dealers, Inc.), any member firm of the National Association
of Securities Dealers, Inc.
All of the above representations and warranties shall survive
the performance or termination of this Agreement.
3. Purchase, Sale, and Delivery of the Shares. On the basis of
the representations, warranties, covenants, and agreements of the
Company herein contained, but subject to the terms and conditions
herein set forth, the Company agrees to sell to the Underwriters,
severally and not jointly, and the Underwriters, severally and not
jointly, agree to purchase from the Company the number of Firm Shares
set forth opposite the Underwriters' names in Schedule 1 hereto.
12
The purchase price per Firm Share to be paid by the
Underwriters shall be $4.50. The initial public offering price of the
Shares shall be $5.00.
Payment for the Firm Shares by the Underwriters shall be made
by wire transfer or by certified or official bank check in clearing
house funds, payable to the order of the Company at the offices of
▇▇▇▇▇▇▇▇▇ Securities, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place in Denver, Colorado as the
Representative shall determine and advise the Company by at least two
full days' notice in writing, upon delivery of the Shares to the
Representative. Such delivery and payment shall be made at 10:00 a.m.,
Mountain Time, on the third business day following the time of the
initial public offering, as defined in Section 10(a) hereof, unless the
Commission declares the Registration Statement effective after 4:30
p.m. Eastern time, in which event delivery and payment shall be made on
the fourth (4th) business day following the time of the initial public
offering. The time and date of such delivery and payment are herein
called the "Closing Date."
In addition, the Company hereby grants to the Representative
the option to purchase all or a portion of the Additional Shares as may
be necessary to cover over-allotments, at the same purchase price per
Additional Share as the price per Firm Share provided for in this
Section 3. The Representative may purchase Additional Shares when
exercising such option, in its sole discretion. This option may be
exercised by the Representative on the basis of the representations,
warranties, covenants, and agreements of the Company herein contained,
but subject to the terms and conditions herein set forth, at any time
and from time to time on or before the 45th day following the Effective
Date of the Registration Statement, by written notice by the
Representative to the Company. Such notice shall set forth the
aggregate number of Additional Shares as to which the option is being
exercised, and the time and date, as determined by the Representative,
when such Additional Shares are to be delivered (such time and date are
herein called an "Additional Closing Date"); provided, however, that no
Additional Closing Date shall be earlier than the Closing Date nor
earlier than the third business day after the date on which the notice
of the exercise of the option shall have been given nor later than the
eighth business day after the date on which such notice shall have been
given; and further provided, that not more than two Additional Closings
shall be noticed and held following purchase of Additional Shares by
the Representative.
13
Payment for the Additional Shares shall be made by wire
transfer or by certified or official bank check in clearing house funds
payable to the order of the Company at the offices of ▇▇▇▇▇▇▇▇▇
Securities, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, or
at such other place in Denver, Colorado as you shall determine and
advise the Company by at least two full days' notice in writing, upon
delivery of certificates representing the Additional Shares to you.
Certificates for the Shares purchased shall be registered in
such name or names and in such authorized denominations as you may
request in writing at least two full business days prior to the Closing
Date or Additional Closing Date, as applicable. The Company shall
permit you to examine and package such certificates for delivery at
least one full business day prior to any such closing with respect
thereto.
If for any reason one or more Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 10
hereof) to purchase and pay for the number of Firm Shares agreed to be
purchased by such Underwriter, the Company shall immediately give
notice thereof to the Representative, and the non-defaulting
Underwriters shall have the right within 24 hours after the receipt by
the Representative of such notice, to purchase or procure one or more
other Underwriters to purchase, in such proportions as may be agreed
upon among the Representative and such purchasing Underwriter or
Underwriters and upon the terms herein set forth, the Firm Shares which
such defaulting Underwriter or Underwriters agreed to purchase. If the
non-defaulting Underwriters fail so to make such arrangements with
respect to all such Firm Shares, the number of Firm Shares which each
non-defaulting Underwriter is otherwise obligated to purchase under the
Agreement shall be automatically increased pro rata to absorb the
remaining Firm Shares which the defaulting Underwriter or Underwriters
agreed to purchase; provided, however, that the non-defaulting
Underwriters shall not be obligated to purchase the Firm Shares which
the defaulting Underwriter or Underwriters agreed to purchase in excess
of 10% of the total number of Shares which such non-defaulting
Underwriter agreed to purchase hereunder, and provided further that the
non-defaulting Underwriters shall not be obligated to purchase any Firm
Shares which the defaulting Underwriter or Underwriters agreed to
purchase if such additional purchase would cause the Underwriter to be
in violation of the net capital rule of the Commission or other
applicable law. If the total number of Firm Shares which the defaulting
Underwriter or
14
Underwriters agreed to purchase shall not be purchased or absorbed in
accordance with the two preceding sentences, the Company shall have the
right, within 24 hours next succeeding the 24-hour period above
referred to, to make arrangements with other underwriters or purchasers
satisfactory to the Representative for the purchase of such Firm Shares
on the terms herein set forth. In any such case, either the
Representative or the Company shall have the right to postpone the
Closing for not more than seven business days after the date originally
fixed as the Closing in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Underwriters
nor the Company shall make arrangements within the 24-hour periods
stated above for the purchase of all the Firm Shares which the
defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and
without any liability on the part of the Company to any non-defaulting
Underwriter, except the Company shall be liable for actual expenses
incurred by the Representative as provided in Section 10 hereof, and
without any liability on the part of any non-defaulting Underwriter to
the Company.
Nothing contained herein shall relieve any defaulting
Underwriter of its liability, if any, to the Company or to the
remaining Underwriters for damages occasioned by its default hereunder.
4. Offering. The Underwriters are to make a public offering of
the Shares as soon, on or after the effective date of the Registration
Statement, as the Representative deems it advisable so to do. The
Shares are to be initially offered to the public at the initial public
offering price as provided for in Section 3 (such price being herein
called the "public offering price"). After the initial public offering,
you may from time to time increase or decrease the price of the Shares
in your sole discretion, by reason of changes in general market
conditions or otherwise.
5. Covenants of the Company. The Company covenants that it
will:
a. Use its best efforts to cause the Registration Statement to
become effective as promptly as possible. If the Registration Statement
has become or becomes effective with a form of Prospectus omitting
certain information pursuant to Rule 430A of the Regulations, or filing
of the Prospectus is otherwise required under Rule 424(b), the Company
will file the Prospectus, properly completed, pursuant to Rule 424(b)
within the time period prescribed and will provide evidence
satisfactory to you of such timely filing.
15
b. Notify you immediately, and confirm such notice in writing,
(i) when the Registration Statement and any post-effective amendment
thereto become effective, (ii) of the receipt of any comments from the
Commission or the "blue sky" or securities authority of any
jurisdiction regarding the Registration Statement, any post-effective
amendment thereto, the Prospectus, or any amendment or supplement
thereto, and (iii) of the receipt of any notification with respect to a
Stop Order or the initiation or threatening of any proceeding with
respect to a Stop Order. The Company will use its best efforts to
prevent the issuance of any Stop Order and, if any Stop Order is
issued, to obtain the lifting thereof as promptly as possible.
c. During the time when a prospectus relating to the Shares is
required to be delivered hereunder or under the Act or the Regulations,
comply so far as it is able with all requirements imposed upon it by
the Act, as now existing and as hereafter amended, and by the
Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Shares and
Representative's Warrant Shares in accordance with the provisions
hereof and the Prospectus. If, at any time when a prospectus relating
to the Shares or Representative's Warrant Shares is required to be
delivered hereunder or under the Act or the Regulations, any event
shall have occurred as a result of which, in the reasonable opinion of
counsel for the Company or counsel for the Representative, the
Registration Statement or the Prospectus, as then amended or
supplemented, contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, or if, in the opinion of
either of such counsel, it is necessary at any time to amend or
supplement the Registration Statement or the Prospectus to comply with
the Act or the Regulations, the Company will immediately notify you and
promptly prepare and file with the Commission an appropriate amendment
or supplement (in form and substance satisfactory to you) which will
correct such statement or omission or which will effect such compliance
and will use its best efforts to have any such amendment declared
effective as soon as possible.
d. Deliver without charge to you such number of copies of each
Preliminary Prospectus as you may reasonably request and, as soon as
the Registration Statement or any amendment thereto becomes effective
or a supplement is filed, deliver without charge to you two signed
copies of the Registration Statement or such amendment thereto, as the
case may be,
16
including exhibits, and two copies of any supplement thereto, and
deliver without charge to you such number of copies of the Prospectus,
the Registration Statement, and amendments and supplements thereto, if
any, without exhibits, as you may reasonably request for the purposes
contemplated by the Act.
e. Endeavor in good faith, in cooperation with you, at or
prior to the time the Registration Statement becomes effective, to
qualify the Shares and Representative's Warrant Shares for offering and
sale under the "blue sky" or securities laws of such jurisdictions as
you may designate; provided, however, that no such qualification shall
be required in any jurisdiction where, as a result thereof, the Company
would be subject to service of general process or to taxation as a
foreign corporation doing business in such jurisdiction to which it is
not then subject. In each jurisdiction where such qualification shall
be effected, the Company will, unless you agree in writing that such
action is not at the time necessary or advisable, file and make such
statements or reports at such times as are or may be required by the
laws of such jurisdiction.
f. Make generally available (within the meaning of Section
11(a) of the Act and the Regulations) to its security holders as soon
as practicable, but not later than fifteen (15) months after the date
of the Prospectus, an earnings statement (which need not be certified
by independent certified public accountants unless required by the Act
or the Regulations, but which shall satisfy the provisions of Section
11(a) of the Act and the Regulations) covering a period of at least 12
months beginning after the effective date of the Registration
Statement.
g. For a period of 12 months after the date of the Prospectus,
not, without your prior written consent, offer, issue, sell, contract
to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any shares of Common Stock (or any security or
other instrument which by its terms is convertible into, exercisable
for, or exchangeable for shares of Common Stock) in a Regulation D
offering except (i) in connection with an acquisition, (ii) upon the
exercise of options granted pursuant to the Company's stock option
plan, (iii) on exercise of outstanding warrants, and (iv) upon exercise
of the Representative's Warrants.
h. For a period of five years after the Effective Date of the
registration statement, furnish you, without charge, the following:
i. Within 90 days after the end of each fiscal year,
three copies of financial statements certified by independent
certified public accountants, including a balance
17
sheet, statement of operations, and statement of cash flows of
the Company and its then existing subsidiaries, if any, with
supporting schedules (if applicable), prepared in accordance
with generally accepted accounting principles, at the end of
such fiscal year and for the 12 months then ended;
ii. As soon as practicable after they have been sent
to stockholders of the Company or filed with the Commission,
three copies of each annual and interim financial and other
report or communication sent by the Company to its
stockholders or filed with the Commission;
iii. As soon as practicable, two copies of every
press release and every material news item and article in
respect of the Company or its affairs which was released by
the Company;
iv. Notice of any regular or special meeting of the
Company's Board of Directors concurrently with the sending of
such notice to the Company's directors; and
v. Such additional documents and information with
respect to the Company and its affairs and the affairs of any
of its Subsidiaries as you may from time to time reasonably
request.
i. Prior to the Effective Date, and continuing for such period
of time that the Company's Common Stock is publicly traded, designate
and maintain an Audit Committee and a Compensation Committee, the
members of which shall be subject to your reasonable approval, which
will generally supervise the financial affairs of the Company and
review executive compensation, respectively.
j. Furnish to you as early as practicable prior to the Closing
Date and any Additional Closing Date, as the case may be, but not less
than two full business days prior thereto, a copy of the latest
available unaudited interim financial statements of the Company which
have been read by the Company's independent certified public
accountants, as stated in their letters to be furnished pursuant to
Section 7(e).
k. File no amendment or supplement to the Registration
Statement or Prospectus at any time, whether before or after the
Effective Date of the Registration Statement, unless such filing shall
comply with the Act and the Regulations and unless you shall previously
have been advised of such filing and furnished with a copy thereof, and
you and counsel for the
18
Representative shall have approved such filing in writing within a
reasonable time of receipt thereof.
l. Comply with all periodic reporting and proxy solicitation
requirements which may from time to time be applicable to the Company
as a result of the Company's registration under the Exchange Act on a
registration statement on Form 8-A .
m. Comply with all provisions of all undertakings contained in
the Registration Statement.
n. Prior to the Closing Date or any Additional Closing Date,
as the case may be, issue no press release or other communication,
directly or indirectly, and hold no press conference and grant no
interviews with respect to the Company, the financial condition,
results of operations, business, properties, assets, or liabilities of
the Company, or this offering, without your prior written consent.
o. Appoint Corporate Stock Transfer, Inc. as its transfer
agent.
p. On or prior to the Closing Date, sell to the Representative
for a total purchase price of $10, Representative's Warrants entitling
the Representative or its assigns to purchase 120,000 shares of Common
Stock at a price equal to 150% of the public offering price of the
Shares, with the terms of the Representative's Warrants, including
exercise period, anti-dilution provisions, exercise price, exercise
provisions, transferability, and registration rights, to be in the form
filed as an exhibit to the Registration Statement.
q. Until expiration of the Representative's Warrants, keep
reserved sufficient shares of Common Stock for issuance as
Representative's Warrant Shares upon full exercise of the
Representative's Warrants.
r. Adopt procedures for the application of the net proceeds it
receives from the sale of the Shares and apply the net proceeds from
the sale of the Shares substantially in the manner set forth in the
Registration Statement, unless any deviation from such application is
in accordance with the Registration Statement and occurs only after
approval by the Board of Directors of the Company and then only after
the Board of Directors has obtained the opinion of recognized legal
counsel experienced in federal and state securities laws as to the
propriety of any such deviation.
19
s. Within the time period which the Prospectus is required to
be delivered under the Act, comply, at its own expense, with all
requirements imposed upon it by the Act, as now or hereafter amended,
by the Rules and Regulations, as from time to time may be enforced, and
by any order of the Commission, so far as necessary to permit the
continuance of sales or dealing in the Shares.
t. At the Closing, deliver to the Representative true and
correct copies of the Certificate of Incorporation of the Company and
all amendments thereto, all such copies to be certified by the
Secretary of the Company; true and correct copies of the by-laws of the
Company and of the minutes of all meetings of the directors and
stockholders of the Company held prior to the Closing which in any way
relate to the subject matter of this Agreement or the Registration
Statement.
u. Use all reasonable efforts to comply or cause to be
complied with the conditions precedent to the several obligations of
the Underwriters in Section 7 hereof.
v. File with the Commission all required information
concerning use of proceeds of the Public Offering in Forms 10-QSB and
10-KSB in accordance with the provisions of the Exchange Act and to
provide a copy of such reports to the Representative and its counsel.
w. Supply to the Representative and the Representative's
counsel at the Company's cost, four leather bound volumes each
containing material documents relating to the offering of the Shares
within a reasonable time after the Closing, not to exceed 90 days.
x. As soon as possible prior to the Effective Date, and as a
condition of the Underwriter's obligations hereunder, (i) if requested
by the Representative, have the Company listed on an accelerated basis,
and to maintain such listing for not less than 10 years from the
Closing Date, in Standard & Poor's Standard Corporation Records; and
(ii) have the Common Stock quoted on The Nasdaq SmallCap Market as of
the Effective Date, on the Closing Date, on the Additional Closing Date
and thereafter for at least 10 years provided the Company is in
compliance with The Nasdaq SmallCap Market maintenance requirements. At
such time as the Common Stock becomes eligible for listing on the
Nasdaq National Market, the Company shall promptly file a "step-up"
application and seek to have the Common Stock traded on the Nasdaq
National Market.
y. Continue, for a period of at least five years following the
Effective Date of the Registration Statement, to appoint such auditors
as are reasonably acceptable to the
20
Representative, which auditors shall (i) prepare financial statements
in accordance with Regulation S-B or Regulation S-X, if applicable,
under the General Rules and Regulations of the Act and (ii) review (but
not audit) the Company's financial statements for each of the first
three fiscal quarters prior to the announcement of quarterly financial
information, the filing of the Company's 10-QSB quarterly report and
the mailing of quarterly financial information to security holders.
z. Cause its transfer agent to furnish the Representative a
duplicate copy of the daily transfer sheets prepared by the transfer
agent during the six-month period commencing on the Effective Date of
the Registration Statement and instruct the transfer agent to timely
provide, upon the request of the Representative, duplicate copies of
such transfer sheets and/or a duplicate copy of a list of stockholders,
all at the Company's expense, for a period of 2 years after such
six-month period.
aa. Refrain from filing a Form S-8 registration statement for
a period of 12 months from the Effective Date of the Registration
Statement without the Representative's prior written consent.
bb. Afford the Representative the right, but not the
obligation, commencing on the Effective Date and surviving for a period
of five years, to designate an observer to attend meetings of the Board
of Directors. The designee, if any, and the Representative will receive
notice of each meeting of the Board of Directors in accordance with
Delaware law. Any such designee will receive reimbursement for all
reasonable costs and expenses incurred in attending meetings of the
Board of Directors, including but not limited to, food, lodging and
transportation, together with such other fee or compensation (but
excluding options or securities) as is paid by the Company to the
independent member of the Board of Directors who is paid the highest
cash fee or compensation among any of the independent directors.
Moreover, to the extent permitted by law, the Representative and its
designee shall be indemnified for the actions of such designee as an
observer to the Board of Directors and in the event the Company
maintains a liability insurance policy affording coverage for the acts
of its officers and/or directors, to the extent permitted under such
policy, each of the Representative and its designee shall be an insured
under such policy.
cc. Comply in all material respects with the Marketplace Rules
of The Nasdaq Stock Market, Inc., including without limitation, the
corporate governance rules.
21
dd. Not permit any stockholder to sell stock held by such
stockholder in reliance on the exemption afforded by Rule 701 within a
period of 12 months from the Effective Date.
6. Payment of Expenses. The Company hereby agrees to pay all expenses
(subject to the last sentence of this Section 6) in connection with the
offering, including but not limited to (a) the preparation, printing, filing,
distribution, and mailing of the Registration Statement and the Prospectus,
including NASD, SEC, Nasdaq filing and/or application fees, and the printing,
filing, distribution, and mailing of this Agreement, any Agreement Among
Underwriters, Selected Dealers Agreement, preliminary and final Blue Sky
Memorandums, material to be circulated to the Underwriters by you and other
incidental or related documents, including the cost of all copies thereof and of
the Preliminary Prospectuses and of the Prospectus, and any amendments or
supplements thereto, supplied to the Representative in quantities as herein
above stated, (b) the issuance, sale, transfer, and delivery of the Firm Shares,
Additional Shares, the Representative's Warrants and the Representative's
Warrant Shares, including, without limitation, any original issue, transfer or
other taxes payable thereon and the costs of preparation, printing and delivery
of certificates representing such securities, as applicable, (c) the
qualification of the Firm Shares, Additional Shares, the Representative's
Warrants and the Representative's Warrant Shares under state or foreign "blue
sky" or securities laws, which qualification shall be undertaken by counsel to
the Representative at the Company's expense, (d) the fees and disbursements of
counsel for the Company and the accountants for the Company, (e) the listing of
the Shares on The Nasdaq SmallCap Market, and (f) the Representative's
non-accountable expense allowance equal to 3% of the aggregate gross proceeds
from the sale of the Shares. Prior to or immediately following the Closing Date,
the Company shall bear the costs of tombstone announcements that shall be made
as reasonably requested by the Representative.
The Company has previously remitted to the Representative the sum of
$50,000, which sum has been credited as a partial payment in advance of the
non-accountable expense allowance provided for in Section 6(f) above.
7. Conditions of Underwriters' Obligations. The Underwriters'
obligation to purchase and pay for the Firm Shares and Additional Shares, as
provided herein, shall be subject to the continuing accuracy of the
representations and warranties of the Company contained herein and in each
certificate and document contemplated under this Agreement to be delivered to
you, as of the date hereof and as of
22
the Closing Date (or the Additional Closing Date, as the case may be), to the
performance by the Company of its obligations hereunder, and to the following
conditions:
a. The Registration Statement shall have become effective not
later than 5:00 p.m., Mountain time, on the date of this Agreement or
such later date and time as shall be consented to in writing by you.
b. At the Closing Date and any Additional Closing Date, you
shall have received the favorable opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP,
counsel for the Company, dated the date of delivery, addressed to you,
and in form and scope satisfactory to your counsel, to the effect that:
i. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Delaware, with full power and authority, including
all necessary consents, authorizations, approvals, orders,
certificates, and permits of and from, and declarations and
filings with, all federal, state, local, and other
governmental authorities and all courts and other tribunals,
to own, lease, license, and use its properties and assets and
to conduct its business in the manner described in the
Prospectus. The Company is duly qualified to do business and
is in good standing in every jurisdiction in which its
ownership, leasing, licensing, or use of property and assets
or the conduct of its business makes such qualification
necessary;
ii. The authorized capital stock of the Company as of
the date of this Agreement consisted of 50,000,000 shares of
Common Stock, of which 2,300,000 shares of Common Stock are
issued and outstanding; 8,438 shares of Common Stock are
reserved for issuance of outstanding warrants; 250,000 shares
of Common Stock are reserved for issuance on conversion of the
Notes; and 500,000 shares of Common Stock are reserved for
issuance upon the exercise of options authorized under the
Company's option plan; and 2,000,000 shares of Preferred
Stock, none of which are issued and outstanding; and there
have been no changes in the authorized and outstanding capital
stock of the Company since the date of this Agreement, except
as contemplated by the Registration Statement and the
Prospectus. Each outstanding share of capital stock is validly
authorized, validly issued, fully paid, and nonassessable,
with no personal liability attaching to the ownership thereof,
has not been issued and is not owned or held in violation of
any preemptive right of stockholders. There is no commitment,
plan, or arrangement to issue, and no outstanding option,
warrant, or other right calling for the
23
issuance of, any share of capital stock of the Company or any
security or other instrument which by its terms is convertible
into, exercisable for, or exchangeable for capital stock of
the Company, except as set forth above, and except as is
properly described in the Prospectus. There is outstanding no
security or other instrument which by its terms is convertible
into or exchangeable for capital stock of the Company, except
as described in the Prospectus;
iv. There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation pending, or to the knowledge of such counsel,
threatened or proposed with respect to the Company or any of
its respective operations, businesses, properties, or assets,
except as is properly described in the Prospectus or such as
individually or in the aggregate do not now have and will not
in the future have a material adverse effect upon the
operations, business, properties, or assets of the Company. To
the knowledge of counsel, the Company is not in violation of,
or in default with respect to, any law, rule, regulation,
order, judgment, or decree, except as may be properly
described in the Prospectus and do not now have and will not
in the future have a material adverse effect upon the
operations, business, properties, or assets of the Company,
nor is the Company required to take any action in order to
avoid any such violation or default;
v. Neither the Company nor any other party is now or
is expected by the Company to be in violation or breach of, or
in default with respect to, complying with any material
provision of any contract, agreement, instrument, lease,
license, arrangement, or understanding which is material to
the Company;
vi. Neither the Company nor any Subsidiary is in
violation or breach of, or in default with respect to, any
term of its Certificate of Incorporation or by-laws;
vii. The Company has all requisite power and
authority to execute and deliver and to perform thereunder
this Agreement, the Representative's Warrants and the
Consulting Agreement. All necessary corporate proceedings of
the Company have been taken to authorize the execution and
delivery and performance thereunder by the Company of this
Agreement, the Representative's Warrants and the Consulting
Agreement. Each of this Agreement, the Representative's
Warrants and the Consulting Agreement has been duly
authorized, executed and delivered by the Company, and is a
24
legal, valid, and binding obligation of the Company, and
(subject to applicable bankruptcy, insolvency, and other laws
affecting the enforceability of creditors' rights generally)
enforceable as to the Company in accordance with its
respective terms. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or
filing with, any federal, state, local, or other governmental
authority or any court or other tribunal is required by the
Company for the execution or delivery, or performance
thereunder by the Company of this Agreement, the
Representative's Warrants or the Consulting Agreement (except
filings under the Act which have been made prior to the
Closing Date, and consents consisting only of consents under
"blue sky" or securities laws which are required in connection
with the transactions contemplated by this Agreement, and
which counsel has been advised by counsel to the underwriters
have been obtained on or prior to the date the Registration
Statement becomes effective under the Act). No consent of any
party to any contract, agreement, instrument, lease, license,
arrangement, or understanding to which the Company is a party,
or to which any of its properties or assets are subject, is
required for the execution or delivery, or performance
thereunder of this Agreement, the Representative's Warrants or
the Consulting Agreement; and the execution and delivery and
performance thereunder of this Agreement, the Representative's
Warrants and the Consulting Agreement will not violate, result
in a breach of, conflict with, or (with or without the giving
of notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract,
agreement, instrument, lease, license, arrangement, or
understanding, or violate or result in a breach of any term of
the Certificate of Incorporation or by-laws of the Company, or
to the knowledge of counsel violate, result in a breach of, or
conflict with any law, rule, regulation, order, judgment, or
decree binding on the Company or to which any of its
operations, businesses, properties, or assets are subject;
viii. The Shares are, and the Representative's
Warrant Shares will be upon exercise of the Representative's
Warrants, validly authorized, validly issued, fully paid, and
nonassessable and are not issued in violation of any
preemptive rights of shareholders, and the Underwriters will
have received good title to the Shares purchased by them from
the Company upon payment therefor, free and clear of all
liens, security interests, pledges, charges, encumbrances,
shareholders' agreements, and voting trusts.
25
The Representative's Warrant Shares have been duly and validly
reserved for issuance pursuant to the terms of the
Representative's Warrants. The Shares, the Representative's
Warrants and the Representative's Warrant Shares conform to
all statements relating thereto contained in the Registration
Statement or the Prospectus;
ix. All contracts, agreements, instruments, leases,
and licenses that are required to be described in the
Registration Statement or the Prospectus have been properly
described therein. All contracts, agreements, instruments,
leases, or licenses required to be filed as an exhibit to the
Registration Statement have been filed with the Commission as
an exhibit to or have been incorporated as an exhibit by
reference into the Registration Statement;
x. Insofar as statements in the Prospectus purport to
summarize the status of litigation or the provisions of laws,
rules, regulations, orders, judgments, decrees, contracts,
agreements, instruments, leases, or licenses such statements
have been prepared or reviewed by such counsel and to the
knowledge of such counsel accurately reflect the status of
such litigation and provisions purported to be summarized and
are correct in all material respects;
xi. Except as provided in the Registration Statement,
no person or entity has the right to require registration of
shares of Common Stock or other securities of the Company
because of the filing or effectiveness of the Registration
Statement;
xii. The Registration Statement has become effective
under the Act. No Stop Order has been issued and no
proceedings for that purpose have been instituted or
threatened;
xiii. The Registration Statement and the Prospectus,
and any amendment or supplement thereto, comply as to form in
all material respects with the requirements of the Act and the
Regulations;
xiv. Such counsel has no knowledge that either the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, contains any untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading (except that no opinion need be expressed as to the
financial statements and other financial data and schedules
which are or should be contained therein);
26
xv. Such counsel has no knowledge of any event which
has occurred since the Effective Date which should have been
set forth in an amendment or supplement to the Registration
Statement or the Prospectus that has not been set forth in
such an amendment or supplement;
xvi. The Company is not currently offering any
securities for sale except as described in the Registration
Statement;
xvii. Such counsel has no knowledge of any promoters,
affiliates, parents or Subsidiaries of the Company except as
are described in the Registration Statement;
xviii. To the knowledge of counsel, the Company owns
or possesses, free and clear of all liens or encumbrances and
rights thereto or therein by third parties, the requisite
licenses or other rights to use all trademarks, copyrights,
service marks, service names, trade names and licenses
necessary to conduct business (including without limitation,
any such licenses or rights described in the Registration
Statement as being owned or possessed by the Company) (all of
which are collectively referred to herein as the "Intellectual
Property"); there is no actual or, to counsel's knowledge,
pending or threatened claim, proceeding or action by any
person pertaining to or which challenges the exclusive rights
of the Company with respect to any of the Company's
Intellectual Property;
xix. The Company is not a party to any agreement
giving rise to any obligation by the Company or any Subsidiary
to pay any third-party royalties or fees of any kind
whatsoever with respect to any asset employed or used by the
Company, other than as disclosed in the Prospectus;
xx. The Shares are eligible for quotation on The
Nasdaq SmallCap Market; and
xxi. The issued and outstanding shares of Common
Stock and all other securities issued and sold or exchanged by
the Company were not required to be registered under any
applicable federal securities laws and regulations when issued
and sold or exchanged and were issued and sold or exchanged in
compliance with applicable exemptions from registration under
federal securities laws.
xxii. The reincorporation of the Company in the State
of Delaware complied in all respects with applicable
California and Delaware law. Upon such reincorporation
27
being effected, the Delaware corporation succeeded to all of
the rights, privileges and obligations of the California
corporation, and received good and marketable title to all of
the assets of the California corporation, subject to any liens
or encumbrances thereon, all of which are set forth in the
financial statements of the Company and in the Prospectus if
material to the Company or its business.
c. On or prior to the Closing Date and any Additional Closing
Date, as the case may be, you shall have been furnished such
information, documents, certificates, and opinions as you may
reasonably require for the purpose of enabling you to review the
matters referred to in this Section 7, and in order to evidence the
accuracy, completeness, or satisfaction of any of the representations,
warranties, covenants, agreements, or conditions herein contained, or
as you may reasonably request.
d. At the Closing Date and any Additional Closing Date, as the
case may be, you shall have received a certificate of the chief
executive officer and of the chief financial officer of the Company,
dated the Closing Date or such Additional Closing Date, as the case may
be, to the effect that the conditions set forth in Section 7(a) have
been satisfied, that as of the date of this Agreement and as of the
Closing Date or such Additional Closing Date, as the case may be, the
representations and warranties of the Company contained herein were and
are accurate, and that as of the Closing Date or such Additional
Closing Date, as the case may be, the obligations to be performed by
the Company hereunder on or prior thereto have been fully performed.
e. At the time this Agreement is executed and at the Closing
Date and any Additional Closing Date, as the case may be, you shall
have received letters from Ernst & Young LLP, addressed to you and
dated the date of delivery but covering a period within three business
days of such date, in form and substance satisfactory to you.
f. All proceedings taken in connection with the issuance,
sale, transfer, and delivery of the Firm Shares and the Additional
Shares shall be satisfactory in form and substance to you and to
counsel for the Representative, and you shall have received a favorable
opinion from counsel to the Company, dated as of the Closing Date or
the Additional Closing Date, as the case may be, with respect to such
of the matters set forth under Sections 7(b) and with respect to such
other related matters as you may reasonably request.
28
g. The NASD, upon review of the terms of the public offering
of the Firm Shares and the Additional Shares shall have confirmed that
it has not raised any objection with respect to the fairness and
reasonableness of the underwriting terms and arrangements.
h. The Company shall have received notice that the Common
Stock will be quoted on The Nasdaq SmallCap Market as of the Effective
Date.
Any certificate or other document signed by any officer of the Company
and delivered to you or to counsel for the Representative shall be deemed a
representation and warranty by such officer individually and by the Company
hereunder to the Representative as to the statements made therein. If any
condition to your obligations hereunder to be fulfilled prior to or at the
Closing Date or any Additional Closing Date, as the case may be, is not so
fulfilled, you may terminate this Agreement or, if you so elect, in writing
waive any such conditions which have not been fulfilled or extend the time for
their fulfillment.
8. Indemnification and Contribution.
a. Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless the Underwriters, the
Representative, and each of their officers, directors, partners,
employees, agents, and counsel, and each person, if any, who controls
the Representative or any one of the Underwriters within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any
and all loss, liability, claim, damage, and expense whatsoever (which
shall include, for all purposes of this Section 8, but not be limited
to, attorneys' fees, expert witness fees, and any and all expense
whatsoever incurred in investigating, preparing, or defending against
any litigation, commenced or threatened, or any claim whatsoever and
any and all amounts paid in settlement of any claim or litigation) as
and when incurred arising out of, based upon, or in connection with (i)
any untrue statement or alleged untrue statement of a material fact
contained (A) in any Preliminary Prospectus, the Registration
Statement, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or (B) in any
application or other document or communication (in this Section 8
collectively called an "application") in any jurisdiction in order to
qualify the Common Stock under the "blue sky" or securities laws
thereof or filed with the Commission or any securities exchange; or any
omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or (ii) any breach of any representation, warranty,
covenant, or agreement of the Company contained in this Agreement.
29
The foregoing agreement to indemnify shall be in addition to any
liability the Company may otherwise have, including liabilities arising
under this Agreement; however, the Company shall have no liability
under this Section 8 if such statement or omission was made in reliance
upon and in conformity with written information furnished to the
Company as stated in Section 8(b) with respect to the Underwriters by
or on behalf of the Underwriters expressly for inclusion in any
Preliminary Prospectus, the Registration Statement, or the Prospectus,
or any amendment or supplement thereto, or in any application, as the
case may be.
If any action is brought against the Underwriters, the
Representative or any of their officers, directors, partners,
employees, agents, or counsel, or any controlling persons of an
Underwriter or the Representative (an "indemnified party") in respect
of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, such indemnified party or parties shall promptly
notify the Company in writing of the institution of such action (but
the failure so to notify shall not relieve the Company from any
liability it may have other than pursuant to this Section 8(a)) and the
Company shall promptly assume the defense of such action, including the
employment of counsel (satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties
shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense
of such indemnified party or parties unless the employment of such
counsel shall have been authorized in writing by the Company in
connection with the defense of such action or the Company shall not
have promptly employed counsel satisfactory to such indemnified party
or parties to have charge of the defense of such action or such
indemnified party or parties shall have reasonably concluded that there
may be one or more legal defenses available to it or them or to other
indemnified parties which are different from or additional to those
available to the Company, in any of which events such fees and expenses
shall be borne by the Company. Anything in this paragraph to the
contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written
consent. The Company agrees promptly to notify the Underwriters and the
Representative of the commencement of any litigation or proceedings
against the Company or against any of its officers or directors in
connection with the sale of the Shares, any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or
supplement thereto, or any application.
30
b. The Underwriters agree to indemnify and hold harmless the
Company, the Company's counsel, each director of the Company, each
officer of the Company who shall have signed the Registration
Statement, each other person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to
the Underwriters in Section 8(a), but only with respect to statements
or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement, or the Prospectus (as from time to time amended
and supplemented), or any amendment or supplement thereto, or in any
application, in reliance upon and in conformity with written
information furnished to the Company as stated in this Section 8(b)
with respect to the Underwriters by or on behalf of the Underwriters
expressly for inclusion in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto,
or in any application, as the case may be; provided, however, that the
obligation of the Underwriters to provide indemnity under the
provisions of this Section 8(b) shall be limited to the amount which
represents the product of the number of Firm Shares and Additional
Shares sold hereunder and the initial public offering price per Share
set forth on the cover page of the Prospectus. For all purposes of this
Agreement, the amounts of the selling concession and reallowance set
forth in the Prospectus, the information under "Underwriting" and the
identification of counsel to the Representative under "Legal Matters"
constitute the only information furnished in writing by or on behalf of
the Underwriters expressly for inclusion in any Preliminary Prospectus,
the Registration Statement, or the Prospectus (as from time to time
amended or supplemented), or any amendment or supplement thereto, or in
any application, as the case may be. If any action shall be brought
against the Company or any other person so indemnified based on any
Preliminary Prospectus, the Registration Statement, or the Prospectus,
or any amendment or supplement thereto, or any application, and in
respect of which indemnity may be sought against the Underwriters
pursuant to this Section 8(b), the Underwriters shall have the rights
and duties given to the Company, and the Company and each other person
so indemnified shall have the rights and duties given to the
indemnified parties, by the provisions of Section 8(a).
c. In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this
Section 8 is for any reason held to be unavailable to the Underwriters
or the Company, then the Company shall contribute to the damages paid
by
31
the several Underwriters, and the several Underwriters shall contribute
to the damages paid by the Company; provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. In determining the
amount of contribution to which the respective parties are entitled,
there shall be considered the relative benefits received by each party
from the sale of the Firm Shares and Additional Shares (taking into
account the portion of the proceeds of the offering realized by each),
the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission, and any
other equitable considerations appropriate in the circumstances. The
Company and the Underwriters agree that it would not be equitable if
the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as one entity
for such purpose). No Underwriter or person controlling such
Underwriter shall be obligated to make contribution hereunder which in
the aggregate exceeds the total public offering price of the Firm
Shares and Additional Shares purchased by such Underwriter under this
Agreement, less the aggregate amount of any damages which such
Underwriter and its controlling persons have otherwise been required to
pay in respect of the same or any substantially similar claim. The
Underwriters' obligations to contribute hereunder are several in
proportion to their respective underwriting obligations and not joint.
For purposes of this Section, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act shall have the
same rights to contribution as such Underwriter, and each director of
the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act, shall have the same rights to
contribution as the Company. Anything in this Section 8(c) to the
contrary notwithstanding, no party shall be liable for contribution
with respect to the settlement of any claim or action effected without
its written consent. This Section 8(c) is intended to supersede any
right to contribution under the Act, the Exchange Act, or otherwise.
d. If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and
expenses of counsel and amounts to be paid in settlement of any claim,
proceeding or action, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by Section 8(a)
effected without its written
32
consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered
into, and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of
such settlement.
9. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties, covenants, and agreements of the Underwriters and
the Company, including the indemnity and contribution agreements contained in
Section 8, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Representative, the Underwriters or
any indemnified person, or by or on behalf of the Company or any person or
entity which is entitled to be indemnified under Section 8(b), and shall survive
termination of this Agreement or the delivery of the Firm Shares and Additional
Shares to the Underwriters for a period equal to the statute of limitations for
claims related hereto, but not to exceed an aggregate of five years from the
date hereof.
10. Effective Date of This Agreement and Termination Thereof.
a. This Agreement shall be executed within 24 hours of the
Effective Date of the Registration Statement and shall become effective
on the Effective Date or at the time of the initial public offering of
the Shares, whichever is earlier. The time of the initial public
offering shall mean the time, after the Registration Statement becomes
effective, of the release by the Representative for publication of the
first newspaper advertisement which is subsequently published relating
to the Shares or the time, after the Registration Statement becomes
effective, when the Shares are first released by the Representative for
offering by dealers by letter or telegram, whichever shall first occur.
The Representative or the Company may prevent this Agreement from
becoming effective without liability of any party to any other party,
except as noted below in this Section 10, by giving the notice
indicated in Section 10(c) before the time this Agreement becomes
effective.
b. The Representative shall have the right to terminate this
Agreement at any time prior to the Closing Date or any Additional
Closing Date, as the case may be, by giving notice to the Company (i)
if there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the
Prospectus (exclusive of any supplement
33
thereto), any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects
of the Company, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in
the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or
other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or
economic conditions, in each case the effect of which is such as to
make it, in the judgment of the Representative, impracticable or
inadvisable to market the Shares or to enforce contracts for the sale
of the Shares, or (iii) if trading generally of the Nasdaq SmallCap
Market, the New York Stock Exchange or the Nasdaq National Market has
been suspended or materially limited, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices have been
required, by any of said exchange or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any
other governmental authority, or (iv) or a material disruption has
occurred in commercial banking or securities settlement or clearance
services in the Untied States, or (v) if a banking moratorium has been
declared by either Federal or New York authorities, or (vi) if there
shall have been a material interruption in the mail service or other
means of communication within the United States, or (vii) if the
Company shall have sustained a material or substantial loss by fire,
flood, accident, hurricane, earthquake, theft, sabotage, or other
calamity or malicious act which, whether or not such loss shall have
been insured, will, in the Representative's opinion, make it
inadvisable to proceed with the offering, sale, or delivery of the
Shares, or (viii) if there shall have been such material and adverse
change in the market for securities in general so as to make it
inadvisable to proceed with the offering, sale, and delivery of the
Shares, as the case may be, on the terms contemplated by the Prospectus
due to the impaired investment quality of the Shares, or (ix) if the
Dow ▇▇▇▇▇ Industrial Average or the Nasdaq Composite Index shall have
fallen by 15% or more from its closing price on the day immediately
preceding the date that the Registration Statement is declared
effective by the Commission.
c. Anything in this Agreement to the contrary notwithstanding
other than Section 10(e), if this Agreement shall not become effective
by reason of an election pursuant to this Section 10 or if this
Agreement shall terminate or shall otherwise not be carried out prior
to June 30, 2002 because (i) of any reason solely within the control of
the Company or its stockholders
34
and not due to the breach of any representation, warranty or covenant
or bad faith of the Representative, (ii) the Company unilaterally
withdraws the proposed Public Offering from the Representative in favor
of another underwriter, (iii) the Company does not permit the
Registration Statement to become effective, (iv) of any material
discrepancy in any representation by the Company and/or its officers,
directors, stockholders, agents, advisers or representatives, made in
writing, including but not limited to the Registration Statement, to
the Representative, (v) the Company is, directly and/or indirectly,
negotiating with other persons or entities of whatsoever nature
relating to a possible Public Offering of its securities, or (vi) of
any failure on the part of the Company to perform any covenant or
agreement or satisfy any condition of this Agreement by it to be
performed or satisfied, then, in any of such events, the Company shall
be obligated to reimburse the Representative for its out-of-pocket
expenses on an accountable basis. Should the Representative be required
to account for "out-of-pocket" expenses, any expense incurred by the
Representative shall be deemed to be reasonable and unobjectionable
upon a reasonable showing by the Representative that such expenses were
incurred, directly or indirectly, in connection with the proposed
transaction and/or relationship of the parties hereto, as described
herein. In no event will the Representative be entitled to
reimbursement of accountable expenses exceeding $80,000, inclusive of
the $50,000 advanced against the non-accountable expense allowance. The
Representative will return to the Company any portion of the $50,000
payment previously received that is not used in the payment of
accountable expenses if the Public Offering is not completed.
d. Notwithstanding any election hereunder or any termination
of this Agreement, and whether or not this Agreement is otherwise
carried out, the provisions of Sections 5(a), 6, 8, 9, and 10 shall not
be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
11. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the
Representative, shall be mailed, delivered, or sent by facsimile transmission
and confirmed by original letter, to ▇▇▇▇▇▇▇▇▇ Securities, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇, with a copy to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., Berliner ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C., ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; or if sent to the Company shall be
mailed, delivered, or telexed or telegraphed and confirmed by letter, to ▇▇▇▇▇▇
▇▇▇▇▇▇ Marine, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention:
35
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer, with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Esq., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇. All notices hereunder shall be effective upon receipt by the
party to which it is addressed.
12. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriters, the Company, and the persons and
entities referred to in Section 8 who are entitled to indemnification or
contribution, and their respective successors, legal representatives, and
assigns (which shall not include any buyer, as such, of the Firm Shares and
Additional Shares) and no other person shall have or be construed to have any
legal or equitable right, remedy, or claim under or in respect of or by virtue
of this Agreement or any provision herein contained. No purchaser of Shares from
any Underwriter shall be deemed to be a successor merely by reason of such
purchase.
13. Construction. This Agreement shall be construed in accordance with
the laws of the State of Colorado, without giving effect to conflict of laws.
Time is of the essence in this Agreement. The parties acknowledge that this
Agreement was initially prepared by the Representative, and that all parties
have read and negotiated the language used in this Agreement. The parties agree
that, because all parties participated in negotiating and drafting this
Agreement, no rule of construction shall apply to this Agreement which construes
ambiguous language in favor of or against any party by reason of that party's
role in drafting this Agreement.
If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇ MARINE, INC.
By:
------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer
Accepted as of the date first above written.
Denver, Colorado
▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
for itself and any other Underwriters:
By:
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, President
36
▇▇▇▇▇▇ ▇▇▇▇▇▇ MARINE, INC.
(A DELAWARE CORPORATION)
SCHEDULE 1
This Schedule sets forth the name of each Underwriter referred to in
the Underwriting Agreement and the number of Shares to be sold by the Company.
NUMBER OF
NAME SHARES
-------------------------- ---------
▇▇▇▇▇▇▇▇▇ Securities, Inc.
---------
Total 1,200,000
=========
37