EXHIBIT 1.1
COMMUNICATION SYSTEMS INTERNATIONAL, INC.
_________________ Shares/1/
Common Stock
UNDERWRITING AGREEMENT
June ___, 1998
CRUTTENDEN ▇▇▇▇ INCORPORATED
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND COMPANY, INCORPORATED
▇▇▇▇▇▇▇ BROS., L.P.
As Representatives of the Several Underwriters
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Communication Systems International, Inc., a Colorado corporation (the
"Company"), and certain shareholders of the Company (the "Selling Shareholders")
hereby confirm their agreement with the several underwriters named in Schedule 1
hereto (the "Underwriters"), for whom you have been duly authorized to act as
representatives (in such capacity, the "Representatives"), as set forth below.
If you are the only Underwriters, all references herein to the Representatives
shall be deemed to be to the Underwriters.
1. SECURITIES. Subject to the terms and conditions herein contained, the
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Company proposes to sell an aggregate of _____ shares and the Selling
Shareholders propose to sell an aggregate of _____ shares to the several
Underwriters (the "Firm Securities") of the Company's Common Stock, no par value
per share (the "Common Stock"). The Company also proposes to sell to the several
Underwriters not more than __________ additional shares of Common Stock (15% of
the Firm Securities to be sold by the Company) if requested by the
Representatives as provided in Section 4 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 "Option Securities." The Firm Securities and any
Option Securities are collectively referred to herein as the "Securities."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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(a) The Company represents and warrants to, and agrees with, each of
the several Underwriters that:
(i) a registration statement on Form S-1 (File No. 333-47045)
with respect to the Securities, including a prospectus subject to
completion, has been filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of
1933, as amended (the "Act"), and one or more amendments to
____________________
/1/Plus an option to purchase up to additional shares to cover
over-allotments, if any.
such registration statement may have been so filed. After the
execution of this Agreement, the Company will file with the Commission
either (A) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the
Act, a prospectus in the form most recently included in an amendment
to such registration statement (or, if no such amendment shall have
been filed, in such registration statement), with such changes or
insertions as are required by Rule 430A under the Act or permitted by
Rule 424(b) under the Act, and as have been provided to and approved
by the Representatives prior to the execution of this Agreement, or
(B) if such registration statement, as it may have been amended, has
not been declared by the Commission to be effective under the Act, an
amendment to such registration statement, including a form of
prospectus, a copy of which amendment has been furnished to and
approved by the Representatives prior to the execution of this
Agreement. As used in this Agreement, the term "Registration
Statement" means the registration statement initially filed relating
to the Securities, as amended at the time when it was or is declared
effective, including all financial schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule 430A
under the Act and included in the Prospectus (as hereinafter defined);
the term "Preliminary Prospectus" means each prospectus subject to
completion filed with such registration statement or any amendment
thereto (including the prospectus subject to completion, if any,
included in the Registration Statement or any amendment thereto at the
time it was or is declared effective); the term "Prospectus" means:
the prospectus first filed with the Commission pursuant to Rule 424(b)
under the Act; or if no prospectus is required to be filed pursuant to
Rule 424(b) under the Act, the prospectus included in the Registration
Statement.
(ii) The Commission has not issued or, to the best knowledge of
the Company, threatened or contemplated any order preventing or
suspending the use of any Preliminary Prospectus; no stop order
suspending the sale of the Securities in any jurisdiction has been
issued and no proceedings for that purpose are pending or, to the best
knowledge of the Company, threatened or contemplated, and any request
of the Commission for additional information (to be included in the
Registration Statement, any Preliminary Prospectus or the Prospectus
or otherwise) has been complied with. When the Prospectus or any
amendment or supplement to the Prospectus is filed with the Commission
pursuant to Rule 424(b) (or, if the Prospectus or any part thereof or
such amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such
amendment or supplement to the Prospectus was or is declared
effective) and on the Firm Closing Date and any Option Closing Date
(both as hereinafter defined), the Prospectus, as amended or
supplemented at any such time, (A) contained or will contain all
statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission thereunder
and (B) did not or will not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The foregoing provisions of this paragraph
(ii) do not apply to statements or omissions made in the Registration
Statement or any amendment thereto or the Prospectus or any amendment
or supplement thereto in
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reliance upon and in conformity with written information furnished to
the Company by any Underwriter through the Representatives
specifically for use therein.
(iii) The Company and International Telephone Company, which
will be a subsidiary of the Company at the Closing Date (the
"subsidiary") have been duly organized and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation and are duly qualified to transact
business as foreign corporations and are in good standing under the
laws of all other jurisdictions where the ownership or leasing of
their respective properties or the conduct of their respective
businesses requires such qualification, except where the failure to be
so qualified does not result in a material adverse change in the
condition (financial or otherwise), business, prospects, net worth or
results of operations of the Company and its subsidiary, taken as a
whole (a "Material Adverse Effect").
(iv) The Company and its subsidiary have full power (corporate
and other) to own or lease their respective properties and conduct
their respective businesses as described in the Registration Statement
and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus); the Company has full power
(corporate and other) and authority to enter into this Agreement and
to carry out all the terms and provisions hereof to be carried out by
it; and the Company has full power (corporate and other) and authority
to execute and deliver the warrants to purchase Common Stock to be
issued and sold to the Representatives under the terms of the Warrant
Agreement (as hereinafter defined) in accordance with Section 6(n)
hereto (the "Representatives' Warrants").
(v) The issued shares of capital stock of the Company's
subsidiary have been duly authorized and validly issued, are fully
paid and nonassessable and are owned beneficially by the Company free
and clear of any security interests, liens, encumbrances, equities or
claims, other than the pledge thereof to secure the Mandatory
Redeemable Convertible Promissory Notes issued in December 1997 (the
"Bridge Notes"). The Common Stock issuable pursuant to the
Representatives' Warrants, when issued in accordance with the terms
thereof, will be duly authorized, validly issued, fully paid and
nonassessable. The Representatives' Warrants and the shares of Common
Stock issuable thereunder were not and will not be issued in violation
of any preemptive rights of any security holder of the Company. The
Company has reserved a sufficient number of shares of Common Stock for
issuance pursuant to the Representatives' Warrants. The holders of
the Common Stock issuable pursuant to the Representatives' Warrants
will not be subject to personal liability solely by reason of being
such holders. The issuance and sale of the Common Stock pursuant to
the Representatives' Warrants will be made in conformity with the
applicable registration requirements or exemptions therefrom under
federal and applicable state securities law.
(vi) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus). All of
the issued shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable.
The Firm Securities and the Option Securities have been duly
authorized and at the
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Firm Closing Date or the related Option Closing Date (as the case may
be), after payment therefor in accordance herewith, will be validly
issued, fully paid and nonassessable. At the Firm Closing Date or the
Option Closing Date, no holders of outstanding shares of capital stock
of the Company will be entitled as such to any preemptive or other
rights to subscribe for any of the Securities, and no holder of
securities of the Company has any right which has not been fully
exercised or waived to require the Company to register the offer or
sale of any securities owned by such holder under the Act in the
public offering contemplated by this Agreement.
(vii) The capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus), and this Agreement, the Warrant Agreement and the
Representatives' Warrants conform in all material respects to the
descriptions thereof contained in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus).
(viii) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there are no outstanding (A) securities or obligations of
the Company or its subsidiary convertible into or exchangeable for any
capital stock of the Company or its subsidiary, (B) warrants, rights
or options to subscribe for or purchase from the Company or its
subsidiary any such capital stock or any such convertible or
exchangeable securities or obligations, or (C) obligations of the
Company or its subsidiary to issue any shares of capital stock, any
such convertible or exchangeable securities or obligations, or any
such warrants, rights or options.
(ix) The financial statements and schedules of the Company and
its subsidiary included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present in all material respects the
financial position of the Company and its subsidiary and the results
of operations and cash flows as of the dates and periods therein
specified. Such financial statements and schedules have been prepared
in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved (except as
otherwise noted therein). The selected financial data set forth under
the captions "Summary Financial Information" and "Capitalization" in
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) fairly present, in accordance with
GAAP, as applicable, on the basis stated in the Prospectus (or such
Preliminary Prospectus), the information included therein. No other
financial statements or schedules are required to be included in the
Registration Statement.
(x) ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., which has audited the
financial statements of the Company, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Company,
LLP, which has audited the financial statements of the subsidiary and
delivered their reports with respect to the audited financial
statements included in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), are independent public accountants as
required by the Act and the applicable rules and regulations
thereunder.
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(xi) The execution and delivery of this Agreement, the Warrant
Agreement and the Representatives' Warrants have been duly authorized
by the Company; this Agreement has been duly executed and delivered by
the Company and, as of the Closing Date, the Warrant Agreement and the
Representatives' Warrants will have been duly executed and delivered
by the Company and this Agreement is, and the Warrant Agreement and
the Representatives' Warrants when executed and delivered by the
Company on the Closing Date, and in the case of the Representatives'
Warrants, paid for by the Representatives, will be the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability
may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to rights
and remedies of creditors or by general equitable principles. The
information in the Registration Statement and the Prospectus insofar
as it relates to the Representatives' Warrants, in each case as of the
date on which the Registration Statement is declared effective by the
Commission, the Closing Date and any Option Closing Date, is true,
correct and complete in all material respects.
(xii) No legal or governmental proceedings are pending to which
the Company or its subsidiary is a party or to which the property of
the Company or its subsidiary is subject that are required to be
described in the Registration Statement or the Prospectus and are not
described therein (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus), and, to the Company's knowledge, no
such proceedings have been threatened against the Company or its
subsidiary or with respect to any of their respective properties; and
no contract or other document is required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement that is not described therein (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus) or filed as required.
(xiii) The issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement and of the
Representatives' Warrants to the Representatives by the Company
pursuant to the Warrant Agreement; the execution and delivery of this
Agreement, the Warrant Agreement and the Representatives' Warrants by
the Company; the compliance by the Company with the provisions of this
Agreement, the Warrant Agreement and the Representatives' Warrants;
and the consummation of all transactions contemplated therein do not
(A) require the consent, approval, authorization, registration or
qualification of or with any court, government or governmental
authority, domestic or foreign, except such as have been obtained,
such as may be required under state securities or blue sky laws, such
as may be required by the National Association of Securities Dealers,
Inc. (the "NASD") and, if the Registration Statement filed with
respect to the Securities (as amended) is not effective under the Act
as of the time of execution hereof, such as may be required (and shall
be obtained as provided in this Agreement) under the Act, or (B)
conflict with or result in a breach or violation of any of the terms
and provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, lease or other agreement or instrument to
which the Company or its subsidiary is a party or by which the Company
or its subsidiary or any of their respective properties are bound, or
the charter documents or by-laws of the Company or its subsidiary, or
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any statute or any judgment, decree, order, rule or regulation of any
court or other governmental authority or any arbitrator applicable to
the Company or its subsidiary, which would have a Material Adverse
Effect.
(xiv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), neither the Company nor its subsidiary has sustained any
loss or interference with their respective businesses or properties
having or resulting in a Material Adverse Effect from fire, flood,
hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding and there has not been any event, circumstance, or
development that results in, or that the Company believes would result
in, a Material Adverse Effect, except in each case as described in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(xv) The Company and its subsidiary have not, directly or
indirectly (except for the sale of Securities under this Agreement),
(i) taken any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or (ii)
since the filing of the Registration Statement (A) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases
of, the Securities or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities
of the Company.
(xvi) (a) The Company and its subsidiary possess all
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct
their respective businesses except where the failure to possess any
such item would not have a Material Adverse Effect, and (b) neither
the Company nor its subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit that, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect, except as described in the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(xvii) The Company is not an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and this
transaction will not cause the Company to become an investment company
subject to registration under the 1940 Act.
(xviii) The Company and its subsidiary have filed all foreign,
federal, state and local tax returns that are required to be filed or
has requested extensions thereof (except in any case in which the
failure so to file would not have a Material Adverse Effect) and has
paid all taxes required to be paid by them and any other assessment,
fine or penalty levied against them, to the extent that any of the
foregoing is due and payable, except for any such assessment, fine or
penalty that is currently being
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contested in good faith or as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(xix) Except for the shares of capital stock of the subsidiary
owned by the Company, and except with respect to the merger pending
with GlobalTel Resources, Inc. ("GlobalTel") neither the Company nor
its subsidiary owns any shares of stock or any other equity securities
of any corporation or has any equity interest in any firm,
partnership, association or other entity.
(xx) The books, records and accounts of the Company and its
subsidiary accurately and fairly reflect, in reasonable detail, the
transactions in and dispositions of the assets of the Company and its
subsidiary, respectively. The Company and its subsidiary maintain a
system of internal accounting controls sufficient to provide
reasonable assurance that (A) transactions are executed in accordance
with management's general or specific authorizations; (B) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles
and to maintain asset accountability; (C) access to assets is
permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxi) Except as described in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), no default exists and no event has occurred
that, with notice or lapse of time or both, would constitute a
default, in the due performance and observance of any term, covenant
or condition of any contract, indenture, mortgage, deed of trust,
lease or other agreement or instrument to which the Company or its
subsidiary is a party or by which the Company or its subsidiary or any
of their respective properties is bound or may be affected, in any
respect that would have a Material Adverse Effect. The agreements to
which the Company or its subsidiary is a party described in the
Registration Statement are valid agreements, enforceable by the
Company or its subsidiary, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles and, to the best
of the Company's knowledge, the other contracting party or parties
thereto are not in material breach or material default under any of
such agreements.
(xxii) The Company and the subsidiary have not distributed and,
prior to the later of (A) the Firm Closing Date or any Option Closing
Date and (B) the completion of the distribution of the Securities,
will not distribute any written offering material in connection with
the offering and sale of the Securities other than the Registration
Statement or any amendment thereto, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or other materials,
if any, permitted by the Act.
(xxiii) The Company and its subsidiary have good and marketable
title to all personal property owned by each of them, in each case
free and clear of any security
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interests, liens, encumbrances, equities, claims and other defects,
except for those relating to debts of the Company or its subsidiary
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus) and those that do not interfere with the use made or
proposed to be made of such property by the Company or its subsidiary,
and any real property and buildings held under lease by the Company or
its subsidiary are held under valid, subsisting and enforceable leases
(except as enforceability may be limited by the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating
to rights and remedies of creditors or by general equitable
principles), with such exceptions as are not material and do not
interfere with the use made or proposed to be made of such property
and buildings by the Company or its subsidiary, in each case except as
described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus). The
Company and its subsidiary own or lease all such properties as are
necessary to their respective operations as now conducted and as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus).
(xxiv) No labor dispute with the employees of the Company or its
subsidiary exists or to the Company's knowledge, is threatened or
imminent that could result in a Material Adverse Effect, except as
described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), and the
Company is not aware of an existing, imminent or threatened labor
disturbance by the employees of any principal suppliers,
manufacturers, contractors or others that could result in a Material
Adverse Effect, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(xxv) The Company and its subsidiary own or possess all material
trademarks, service marks, trade names, licenses, copyrights and
proprietary or other confidential information currently employed by
them in connection with their respective businesses, and neither the
Company nor its subsidiary has received any notice of infringement of
or conflict with asserted rights of any third party with respect to
any of the foregoing which, singly or in the aggregate, if the subject
of unfavorable decisions, rulings or findings, would have a Material
Adverse Effect, except as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus). The description of the Company's agreements with its
independent sales agents and carriers and resellers, and the
agreements relating to its strategic relationships, contained in the
Registration Statement and the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), are true
and complete in all material respects. All such agreements are valid,
binding and in full force and effect and neither the Company nor its
subsidiary is, or has received any notice that it is, in default (or
with the giving of notice or lapse of time or both, would be in
default) under any such agreements.
(xxvi) The Company and its subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in
which they are engaged; and neither the
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Company nor its subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect, except as described in or contemplated
by the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(xxvii) The Common Stock will be registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), on the date hereof and is traded on the OTC Bulletin
Board and, upon notice of issuance, the Securities will be traded on
the Nasdaq SmallCap Market, and the Company has taken no action
designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting
the Common Stock from the OTC Bulletin Board or that could in the
future cause the Common Stock to be delisted from the Nasdaq SmallCap
Market, nor has the Company received any notification that the
Commission or The Nasdaq Stock Market, Inc. is contemplating
terminating such registration or listing.
(xxviii) Neither the Company nor the subsidiary has at any time
during the last five (5) years (A) made any unlawful contribution to
any candidate for foreign office or failed to disclose fully any
contribution in violation of law, or (B) made any payment to any
federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
(xxix) Any pro forma financial or other information and related
notes included in the Registration Statement, each Preliminary
Prospectus and the Prospectus comply (or, if the Prospectus has not
been filed with the Commission, as to the Prospectus, will comply) in
all material respects with the requirements of the Act and the rules
and regulations of the Commission thereunder and present fairly in all
material respects the pro forma information shown, as of the dates and
for the periods covered by such pro forma information. Such pro forma
information, including any related notes and schedules, has been
prepared on a basis consistent with the historical financial
statements and other historical information, as applicable, included
in the Registration Statement, the Preliminary Prospectus and the
Prospectus, except for the pro forma adjustments specified therein,
and give effect to assumptions made on a reasonable basis to give
effect to historical and, if applicable, proposed transactions
described in the Registration Statement, each Preliminary Prospectus
and the Prospectus.
(xxx) Except as set forth in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there are no outstanding loans, advances or guaranties of
indebtedness by the Company or its subsidiary to or for the benefit of
any of (i) its "affiliates," as such term is defined in the Act and
the rules and regulations thereof or (ii) any of the members of the
families of any of them.
(xxxi) The Company and its subsidiary have no liability,
absolute or contingent, relating to: (A) public health or safety; (B)
worker health or safety; (C)
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product defect or warranty (except, as to product defect or warranty,
as is disclosed in the Registration Statement and Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus)); or (D) pollution, damage to or protection of the
environment, including, without limitation, relating to damage to
natural resources, emissions, discharges, releases or threatened
releases of hazardous materials into the environment (including,
further without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or otherwise relating to the
manufacture, processing, use, treatment, storage, generation,
disposal, transport or handling of any hazardous materials, except any
such liability that would not result in a material adverse effect.
The Company is not aware of the date hereof of the existence of any
such liability, absolute or contingent, of the type discussed above.
As used herein, "hazardous material" includes chemical substances,
wastes, pollutants, contaminants, hazardous or toxic substances,
constituents, materials or wastes, whether solid, gaseous or liquid in
nature.
(xxxii) Neither the Company nor its subsidiary is presently
doing business with the government of Cuba or with any person or
affiliate located in Cuba.
(b) Any certificate signed by any officer of the Company and delivered
to the Representatives or to counsel for the Representatives pursuant to
this Agreement shall be deemed a representation and warranty by the Company
to each Underwriter, as to the matters covered thereby.
(c) The Representatives shall receive, at the Firm Closing Date and
any Option Closing Date, representations and warranties of GlobalTel which
shall be identical in form and substance to the representations and
warranties of the Company set forth in Section 2(a) above. Such
representations and warranties shall be set forth in a certificate by the
executive officers of GlobalTel and delivered to the Representatives or to
counsel for the Representatives.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
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Selling Shareholder severally represents and warrants to, and agrees with,
the Company and the Underwriters that:
(a) Such Selling Shareholder has, and at the Closing Date will have,
valid marketable title to the Firm Securities proposed to be sold by such
Selling Shareholder hereunder on such date and full right, power and
authority to enter into this Agreement and to sell, assign, transfer and
deliver such Firm Securities hereunder, free and clear of all voting trust
arrangements, liens, encumbrances, equities, claims and community property
rights; and upon delivery of and payment for such Firm Securities
hereunder, the Underwriters will acquire valid marketable title thereto,
free and clear of all voting trust arrangements, liens, encumbrances,
equities, claims and community property rights.
(b) Such Selling Shareholder has not taken and will not take, directly
or indirectly, any action designed to or which might be reasonably expected
to cause or result, under the Exchange Act (as hereinafter defined) or
otherwise, in stabilization or manipulation of the price of the Firm
Securities, the Option Securities or other shares of Common Stock to
facilitate the sale or resale of the Firm Securities or other shares of
Common Stock.
(c) Such Selling Shareholder has executed and delivered a Selling
Shareholders' Power of Attorney ("Power of Attorney") between the Selling
Shareholder and Parcel, Mauro & ▇▇▇▇▇▇▇▇▇, P.C. (the "Agent"), naming the
Agent as such Selling Shareholder's attorney-in-fact and, by the execution
by any Agent of this Agreement, such Agent hereby represents and warrants
that he has been duly appointed as Attorney-in-Fact by each Selling
Shareholder pursuant to the Power of Attorney for the purpose of entering
into and carrying out this Agreement, and the Power of Attorney has been
duly executed by such Selling Shareholder and a copy thereof has been
delivered to you.
(d) Such Selling Shareholder has deposited in custody with the
custodian, pursuant to a Letter of Transmittal and Custody Agreement
("Custody Agreement") with Parcel, Mauro & ▇▇▇▇▇▇▇▇▇, P.C. (the
"Custodian"), certificates in negotiable form for the Firm Securities to be
sold hereunder by such Selling Shareholder, for the purpose of further
delivery pursuant to this Agreement. Such Selling Shareholder agrees that
the Firm Securities to be sold by such Selling Shareholder on deposit with
the Custodian are subject to the interests of the Company, the Underwriters
and the other Selling Shareholders, that the arrangements made for such
deposit are to that extent irrevocable, and that the obligations of such
Selling Shareholder hereunder shall not be terminated except as provided in
this Agreement or in the Custody Agreement by any act of such Selling
Shareholder, by operation of law, whether, in the case of an individual
Selling Shareholder, by the death or incapacity of such Selling Shareholder
or, in the case of a trust or estate, by the death of the trustee or
trustees or the executor or executors or the termination of such trust or
estate, or, in the case of a partnership or corporation, by the
dissolution, winding-up or other event affecting the legal existence of
such entity, or by the occurrence of any other event. If any individual
Selling Shareholder, trustee or executor should die or become
incapacitated, if any such trust, estate, partnership or corporation should
be terminated, or if any other event should occur before the delivery of
the Firm Securities to be sold by such Selling Shareholder hereunder, the
documents evidencing such Firm Securities then on deposit with the
Custodian shall be delivered by the Custodian in accordance with the terms
and conditions of this Agreement and of the Custody Agreement as if such
death, incapacity, termination or other event had not occurred, regardless
of whether or not the Custodian shall have received notice thereof. Each
Agent has been duly authorized by such Selling Shareholder to execute and
deliver this Agreement and the Custodian has been authorized to receive and
acknowledge receipt of the proceeds of sale of the Firm Securities to be
sold by such Selling Shareholder against delivery thereof and otherwise act
on behalf of such Selling Shareholder.
(e) Each Preliminary Prospectus, insofar as it has related to such
Selling Shareholder and, to the knowledge of such Selling Shareholder in
all other respects, as of its date, has conformed in all material respects
with the requirements of the Act and, as of this date, has not included any
untrue statement of material fact or omitted to state a material fact
necessary to make the statements therein not misleading; and when the
Registration Statement became effective, and at all times subsequent
thereto, up to the Closing Date, (1) such parts of the Registration
Statement and the Prospectus and any amendments or supplements thereto as
relate to such Selling Shareholder, and the Registration Statement and the
Prospectus and any amendments or supplements thereto, to the knowledge of
such Selling Shareholder, in all other respects, will contain all
statements that are required to be stated therein in accordance with the
Act and the Regulations and will in all material respects conform to the
requirements of the Act and the Regulations, and (2) neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, as it relates to such Selling Shareholder, and, to the knowledge
of such Selling Shareholder in all other respects, will include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(f) Such Selling Shareholder will not sell, contract to sell or
otherwise dispose of any Common Stock for a period of 180 days after this
Agreement becomes effective without the prior written consent of the
Company and the Representative.
(g) Except as disclosed in the Prospectus, such Selling Shareholder is
not a party to any formal or informal voting agreements, understandings or
arrangements with respect to the voting of the Common Stock.
4. PURCHASE, SALE AND DELIVERY OF THE SECURITIES.
---------------------------------------------
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein
set forth, (i) the Company and the Selling Shareholders agree to sell
Firm Securities, (ii) each of the Underwriters agrees to
purchase from the Company and the Selling Shareholders at a purchase price
of [$ ] per share, an aggregate number of Firm Securities set forth
opposite the name of such Underwriter in Schedule 1 hereto. One or more
certificates in definitive form for the Firm Securities that the several
Underwriters have agreed to purchase hereunder from the Company and the
Selling Shareholders, in such denomination or denominations and registered
in such name or names as the Representatives request upon notice to the
Company at least 48 hours prior to the Firm Closing Date, shall be
delivered by or on behalf of the Company to the Representatives for the
respective accounts of the Underwriters, against payment by or on behalf of
the Underwriters of the aggregate purchase price therefor by wire transfer
in same day funds (the "Wired Funds") to the account of the Company. Such
delivery of and payment for the Firm Securities shall be made at the
offices of Cruttenden ▇▇▇▇ Incorporated, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 6:30 a.m., Pacific time, on June _____, 1998,
or at such other place, time or date as the Representatives and the Company
may agree upon or as the Representatives may determine
-10-
pursuant to Section 10 hereof, such time and date of delivery against
payment being herein referred to as the "Firm Closing Date." The Company
will make such certificate or certificates for the Firm Securities
available for checking and packaging by the Representatives at the offices
of the Company's transfer agent or registrar at least 24 hours prior to the
Firm Closing Date or, if available, will coordinate the transfer of the
Firm Securities to the Underwriters through the book-entry facilities of
the Depository Trust Company.
(b) For the sole purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Securities as contemplated by
the Prospectus, on the basis of the covenants and agreements of the
Underwriters contained in this Agreement and subject to the terms and
conditions set forth in this Agreement, the Company hereby grants to the
several Underwriters an option to purchase the Option Securities. The
purchase price to be paid for any Option Securities shall be the same price
per share as the price per share for the Firm Securities set forth above in
paragraph (a) of this Section 4. The option granted hereby may be
exercised as to all or any part of the Option Securities from time to time
within 45 days after the date of the Prospectus (or, if such 45th day shall
be a Saturday or Sunday or a holiday, on the next business day thereafter
when the Nasdaq SmallCap Market is open). The Underwriters shall not be
under any obligation to purchase any of the Option Securities prior to the
exercise of such option. The Representatives may from time to time
exercise the option granted hereby by giving notice in writing or by
telephone (confirmed within 24 hours in writing) to the Company setting
forth the aggregate number of Option Securities as to which the several
Underwriters are then exercising the option and the date and time for
delivery of and payment for such Option Securities. Any such date of
delivery shall be determined by the Representatives but shall not be
earlier than two business days or later than five business days after such
exercise of the option and, in any event, shall not be earlier than the
Firm Closing Date. The time and date set forth in such notice, or such
other time on such other date as the Representatives and the Company may
agree upon or as the Representatives may determine pursuant to Section 10
hereof, is herein called the "Option Closing Date" with respect to such
Option Securities. Upon exercise of the option as provided herein, the
Company shall become obligated to sell to each of the several Underwriters,
and, subject to the terms and conditions herein set forth, each of the
Underwriters (severally and not jointly) shall become obligated to purchase
from the Company, the same percentage of the total number of the Option
Securities as to which the several Underwriters are then exercising the
option as such Underwriter is obligated to purchase of the aggregate number
of Firm Securities, as adjusted by the Representatives in such manner as it
deems advisable to avoid fractional shares. If the option is exercised as
to all or any portion of the Option Securities, one or more certificates in
definitive form for such Option Securities, and payment therefor, shall be
delivered on the related Option Closing Date in the manner, and upon the
terms and conditions, set forth in paragraph (a) of this Section 4, except
that reference therein to the Firm Securities and the Firm Closing Date
shall be deemed, for purposes of this paragraph 4(b), to refer to such
Option Securities and Option Closing Date, respectively.
(c) It is understood that you, individually and not as the
Representatives, may (but shall not be obligated to) make payment on behalf
of any Underwriter or Underwriters for any of the Securities to be
purchased by such Underwriter or Underwriters. No such
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payment shall relieve such Underwriter or Underwriters from any of its or
their obligations hereunder.
(d) The Company hereby acknowledges that the wire transfer by or on
behalf of the Underwriters of the purchase price for any Securities does
not constitute closing of a purchase and sale of the Securities. Only
execution and delivery of a receipt (by facsimile or otherwise) for the
Securities by the Underwriters indicates completion of the closing of a
purchase of the Securities from the Company. Furthermore, in the event
that the Underwriters wire funds to the Company prior to the completion of
the closing of a purchase of Securities, the Company hereby acknowledges
that until the Underwriters execute and deliver a receipt for the
Securities, by facsimile or otherwise, the Company will not be entitled to
the wired funds and shall return the wired funds received by it to the
Underwriters as soon as practicable (by wire transfer of same-day funds)
upon demand. In the event that the closing of a purchase of Securities is
not completed and the wired funds are not returned by the Company to the
Underwriters on the same day the wired funds were received by the Company,
the Company agrees to pay to the Underwriters in respect of each day the
wired funds are not returned by it, in same-day funds, interest at the
Prime Rate (as defined in Section 9(a)) on the date hereof on the amount of
such wire funds received by them.
(e) At the Firm Closing Date and any Option Closing Date, the Company
shall pay to the Representatives a non-accountable expense allowance equal
to 2 1/2% of the gross proceeds from the sale of the Securities.
5. OFFERING BY THE UNDERWRITERS. Upon your authorization of the release
----------------------------
of the Firm Securities, the several Underwriters propose to offer the Firm
Securities for sale to the public upon the terms set forth in the
Prospectus.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees with each
------------------------
of the Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, to
become effective as promptly as possible. If required, the Company will
file the Prospectus and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rule
424(b) under the Act. During any time when a prospectus relating to the
Securities is required to be delivered under the Act, the Company (i) will
comply with all requirements imposed upon it by the Act and the rules and
regulations of the Commission thereunder to the extent necessary to permit
the continuance of sales of or dealings in the Securities in accordance
with the provisions hereof and of the Prospectus, as then amended or
supplemented, and (ii) will not file with the Commission the Prospectus or
the amendment referred to in the second sentence of Section 2(a)(i) hereof,
any amendment or supplement to such Prospectus, or any amendment to the
Registration Statement of which the Representatives shall not previously
have been advised and furnished with a copy for a reasonable period of time
prior to the proposed filing and as to which filing the Representatives
shall not have given their consent. The Company will prepare and file with
the Commission, in accordance with the rules and regulations of the
Commission, promptly upon request by the Representatives or counsel for the
Representatives, any amendments to the Registration Statement or amendments
or supplements to the Prospectus that may be deemed necessary or advisable
in connection with the distribution of the Securities by the several
Underwriters, and will use its best efforts to cause any such amendment to
the Registration Statement to be declared effective by the Commission as
promptly as possible.
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The Company will advise the Representatives, promptly after receiving
notice thereof, of the time when the Registration Statement or any
amendment thereto has been filed or declared effective or the Prospectus or
any amendment or supplement thereto has been filed and will provide to the
Representatives copies of each such filing.
(b) The Company will advise the Representatives, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any amendment thereto or any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, (ii) the suspension of the qualification
of the Securities for offering or sale in any jurisdiction, (iii) the
institution, threatening or contemplation of any proceeding for any such
purpose, or (iv) any request made by the Commission for amending the
Registration Statement, for amending or supplementing the Prospectus or for
additional information. The Company will use its best efforts to prevent
the issuance of any such stop order and, if any such stop order is issued,
to obtain the withdrawal thereof as promptly as possible.
(c) The Company will arrange for the qualification of the Securities
for offering and sale under the securities or blue sky laws of such
jurisdictions as the Representatives may designate and will continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Securities; provided, however, that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction. If, after the public offering of the Securities by the
Underwriters and during such period, the Underwriters propose to vary the
terms of offering thereof by reason of changes in general market conditions
or otherwise, the Representatives will advise the Company in writing of the
proposed variation and if, in the opinion either of counsel for the Company
or counsel for the Representatives, such proposed variation requires that
the Prospectus be supplemented or amended, the Company will forthwith
prepare and file with the Commission a supplement to the Prospectus or an
amended Prospectus setting forth such variation. The Company authorizes
the Underwriters and all dealers to whom any of the Securities may be sold
by the Underwriters to use the Prospectus, as from time to time so amended
or supplemented, in connection with the sale of the Securities in
accordance with the applicable provisions of the Act and the rules and
regulations thereunder for such period.
(d) If, at any time prior to the later of (i) the final date when a
prospectus relating to the Securities is required to be delivered under the
Act or (ii) the Option Closing Date, any event occurs as a result of which
the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if for any other reason it
is necessary at any time to amend or supplement the Prospectus to comply
with the Act or the rules or regulations of the Commission thereunder, the
Company will promptly notify the Representatives thereof and, subject to
Section 6(a) hereof, will prepare and file with the Commission, at the
Company's expense, an amendment to the Registration Statement or an
amendment or supplement to the Prospectus that corrects such statement or
omission or effects such compliance.
-13-
(e) The Company will, without charge, provide (i) to the
Representatives and to counsel for the Representatives a signed copy of the
registration statement originally filed with respect to the Securities and
each amendment thereto (in each case including exhibits thereto), (ii) to
each other Underwriter, a conformed copy of such registration statement and
each amendment thereto (in each case without exhibits thereto) and (iii) so
long as a prospectus relating to the Securities is required to be delivered
under the Act, as many copies of each Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto as the Representatives
may reasonably request; without limiting the application of clause (iii) of
this sentence, the Company shall, as soon as practicable following the
determination of the public offering price, deliver to the Underwriters,
without charge, as many copies of the Prospectus and any amendment or
supplement thereto as the Representatives may reasonably request for
purposes of confirming orders that are expected to settle on the Firm
Closing Date.
(f) The Company, as soon as practicable, will make generally available
to its security holders and to the Representatives an earnings statement of
the Company and its subsidiary that satisfies the provisions of Section
11(a) of the Act and Rule 158 thereunder.
(g) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Prospectus.
(h) The Company will not, directly or indirectly, without the prior
written consent of the Representatives on behalf of the Underwriters,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer
of sale, contract of sale, pledge, grant of any option to purchase or other
sale or disposition) of any shares of Common Stock or any securities
convertible into, or exchangeable or exercisable for, shares of Common
Stock for a period of 12 months after the date hereof, except pursuant to
this Agreement, issuances pursuant to warrants and options outstanding
prior to the date hereof, stock options granted under the company's stock
option plan to officers, employees, directors and consultants and any stock
issued on exercise thereof or issuances in connection with an acquisition
or business combination transaction. If the Company plans to issue any
Common Stock or other securities in connection with an acquisition or a
business combination transaction, the Company shall provide the
Representatives with 15 days' advance written notice of its intention to
so issue such securities including the terms of any such proposed
transaction.
(i) The Company will not, directly or indirectly, (i) take any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale
of the Securities or (ii) for a period of 12 months after the date hereof
(A) sell, bid for, purchase, or pay anyone any compensation for soliciting
purchases of, the Securities or (B) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company. The Company will not, directly or indirectly, without the prior
written consent of the Representatives on behalf of the Underwriters,
offer, purchase, offer to purchase, contract to purchase, grant any option
to sell or otherwise purchase or acquire (or announce any offer, purchase,
offer of purchase, contract to purchase, grant of any option to sell or
other purchase or acquisition of) any
-14-
shares of Common Stock or any securities convertible into, or exchangeable
or exercisable for, shares of Common Stock for a period of 12 months after
the date hereof.
(j) The Company will obtain the lockup agreements described in Section
8(e) hereof prior to the Firm Closing Date.
(k) The Company will cause the Securities to be duly traded on the
Nasdaq SmallCap Market prior to the Firm Closing Date. The Company will
use its best efforts to ensure that the Securities continue to be traded on
the Nasdaq SmallCap Market following the Firm Closing Date.
(l) During a period of five years commencing with the date of this
Agreement, the Company will promptly furnish to the Representatives and to
each Underwriter who may so request in writing copies of (i) all periodic
and special reports furnished by it to shareholders of the Company, (ii)
all information, documents and reports filed by it with the Commission, or
the Nasdaq SmallCap Market, (iii) all press releases and material news
items or articles in respect of the Company, its services or affairs
released or prepared by the Company (other than promotional and marketing
materials disseminated solely to customers and potential customers of the
Company in the ordinary course of business) and (iv) any additional
information concerning the Company or its business which the
Representatives may reasonably request.
(m) The Company will use its best efforts to maintain insurance of the
types and in the amounts which it deems adequate for its business
consistent with insurance coverage maintained by companies of similar size
and engaged in similar businesses including, but not limited to, general
liability insurance covering products sold or distributed by the Company,
all real and personal property owned or leased by the Company and its
subsidiary, and against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against.
(n) On the Closing Date, the Company will sell to the Representatives,
at a purchase price of $0.001 per warrant, warrants to purchase
shares of Common Stock (in an amount equal to one warrant for each ten Firm
Shares sold). Such Representatives' Warrants will be issued pursuant to
the terms of the Warrant Agreement and will have an exercise price equal to
[$________], subject to adjustment, will be exercisable during the period
beginning on the first anniversary of the Effective Date and ending on the
fifth anniversary of the Effective Date and will contain customary anti-
dilution and registration rights provisions.
(o) 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 Section 12 of the Exchange Act
on a Registration Statement on Form 8-A.
(p) Refrain from filing a Form S-8 Registration Statement (or
successor form of registration statement) in connection with the issuance
of the Company's securities to employees, consultants or advisors for
services for a period of twenty-four (24) months from the Effective Date of
the Registration Statement without the Representatives' prior written
consent.
-15-
(q) For a period of two years after the Effective Date the Company
will not conduct, and for a period of at least five years following the
Effective Date of the Registration Statement will provide the
Representatives at least 30 days' prior written notice of, a sale of any
securities of the Company in a "Regulation S" transaction, with such notice
to specify the type of securities to be offered, the purchase price thereof
and the proposed closing date of the Regulation S transaction.
(r) Inform the Florida Department of Banking and Finance at any time
prior to the consummation of the distribution of the Firm Securities and
the Option Securities by the Representatives if it commences engaging
in business with the government of Cuba or with any person or affiliate
located in Cuba. Such information will be provided within 90 days after
the commencement thereof or after a change occurs with respect to
previously reported information.
7. EXPENSES. The Company will pay all costs and expenses incident to the
--------
performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 12 hereof, including all costs and expenses incident to (i)
the printing or other production of documents with respect to the transactions,
including any costs of printing the Registration Statement originally filed with
respect to the Securities and any amendment thereto, any Preliminary Prospectus
and the Prospectus and any amendment or supplement thereto, this Agreement and
any blue sky memoranda, (ii) all arrangements relating to the delivery to the
Underwriters of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company, (iv) preparation, issuance and delivery to the
Underwriters of any certificates evidencing the Securities, including transfer
agent's and registrar's fees, (v) the qualification of the Securities under
state securities and blue sky laws, including filing fees and fees and
disbursements of counsel for the Company, (vi) the filing fees of the Commission
and the NASD relating to the Securities, (vii) any additional listing fees of
the Securities on the Nasdaq SmallCap Market, (viii) the Company's travel
expenses in connection with meetings with the brokerage community and
institutional investors and expenses associated with hosting such meetings,
including meeting rooms, meals, facilities and ground transportation expenses,
as well as any related expense for roadshow presentations transmitted over the
Internet, and (ix) the cost of preparing a total of eight bound volumes of the
public offering documents for the Representatives and their counsel. If the
sale of the Securities provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth in Section 8 hereof
is not satisfied, because this Agreement is terminated pursuant to Section 12
hereof or because of any failure, refusal or inability on the part of the
Company to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder other than by reason of a default by any of the
Underwriters, the Company will reimburse the Representatives upon demand for all
reasonable out-of-pocket expenses (including counsel fees and disbursements)
that shall have been incurred by them in connection with the proposed purchase
and sale of the Securities. The Company shall not in any event be liable to any
of the Underwriters for the loss of anticipated profits from the transactions
covered by this Agreement. If the sale of the Securities provided for herein is
consummated, the Underwriters shall pay all of their own out-of-pocket expenses
(including the fees and disbursements of their counsel) and the Company shall
have no obligation therefor.
8. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
-------------------------------------------
several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the sole discretion of
-16-
the Representatives, to the accuracy of the representations and warranties of
the Company and the Selling Shareholders contained herein as of the date hereof
and as of the Firm Closing Date, as if made on and as of the Firm Closing Date,
to the accuracy of the statements of the Company's officers made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Shareholders of their covenants and agreements hereunder and to the following
additional conditions:
(a) If the Registration Statement or any amendment thereto filed prior
to the Firm Closing Date has not been declared effective as of the time of
execution hereof, the Registration Statement or such amendment shall have
been declared effective not later than the earlier of (i) 11:00 A.M.,
Pacific time, on the date on which the amendment to the Registration
Statement originally filed with respect to the Securities or to the
Registration Statement, as the case may be, containing information
regarding the offering price of the Securities has been filed with the
Commission, and (ii) such later time and date as shall have been consented
to by the Representatives; if required, the Prospectus and any amendment or
supplement thereto shall have been filed with the Commission in the manner
and within the time period required by Rule 424(b) under the Act; no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of
the Company or the Representatives, shall be contemplated by the
Commission; and the Company shall have complied with any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise).
(b) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Parcel, Mauro & ▇▇▇▇▇▇▇▇▇, P.C., counsel for the Company
and the Selling Shareholders, dated the Closing Date (and stating that it
may be relied on by Berliner ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C., counsel to the
Representatives, in rendering their opinion), to the effect that:
(i) the Company and its subsidiary have been duly organized and
are validly existing as corporations in good standing under the laws
of the States of Colorado and Delaware, respectively, and are duly
qualified to transact business as foreign corporations and are in good
standing under the laws of the jurisdictions in which the operations
or business conducted require such qualification;
(ii) the Company and the subsidiary have the corporate power to
own or lease their properties and conduct their business as described
in the Registration Statement and the Prospectus, and the Company has
the corporate power to enter into this Agreement and to carry out all
the terms and provisions hereof to be carried out by it;
(iii) the issued and outstanding shares of capital stock of the
Company's Subsidiary has been duly authorized and validly issued, are
fully paid and nonassessable and are owned by the Company free and
clear of any perfected security interests (other than those disclosed
in the Prospectus) and the Prospectus accurately describes, to the
extent so described, any material corporation, association, or other
entity owned or controlled, or to be owned and controlled, directly or
indirectly, by the Company;
-17-
(iv) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the issued and
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable,
and were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities; the
Firm Securities have been duly authorized by all necessary corporate
action of the Company and, when issued and delivered to and paid for
by the Underwriters pursuant to this Agreement, will be validly
issued, fully paid and nonassessable; no holders of outstanding shares
of capital stock of the Company are entitled as such to any preemptive
or other rights to subscribe for any of the Securities; no holders of
securities of the Company are entitled to have such securities
registered under the Registration Statement except for those which
have been so registered; the statements set forth under the heading
"Description of Securities" in the Prospectus, insofar as such
statements purport to summarize certain provisions of the capital
stock of the Company, provide a fair summary of such provisions; and
the statements set forth under the headings "Risk Factors - Shares
Eligible for Future Sale; Rights to Acquire Shares," "Risk Factors -
Regulation," "Risk Factors - Risks Associated with International
Operations," "Risk Factors - Legal Proceedings," "Risk Factors -
Charter and Statutory Provisions," "Business - Services," "Business -
Regulation," "Business - Network and Operations," "Management - Stock
Option Plan," "Rescission Offer," "Certain Transactions," "Shares
Eligible for Future Sale," "Description of Securities" in the
Prospectus, insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, provide a
fair and accurate summary of such legal matters, documents and
proceedings in all material respects;
(v) the execution and delivery of this Agreement and the Warrant
Agreement have been duly authorized by all necessary corporate action
of the Company, and this Agreement and the Warrant Agreement have been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, are binding agreements
of the Company, enforceable in accordance with their terms, except
insofar as indemnification provisions may be limited by applicable law
and to which counsel need not express any opinion and except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles;
(vi) no legal or governmental proceedings are pending to which
the Company or the subsidiary is a party or to which the property of
the Company or the subsidiary is subject that are required to be
described in the Registration Statement or the Prospectus and are not
described therein and, to counsel's knowledge, no such proceedings
have been threatened against the Company or its subsidiary or with
respect to any of their respective properties; no contract or other
document is required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein or filed as required;
(vii) to counsel's knowledge, subsequent to the respective dates
as of which information is given in the Registration Statement and the
Prospectus (or, if the
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Prospectus is not in existence, the most recent Preliminary
Prospectus), (A) the Company has not incurred any material liability
or obligation, direct or contingent, nor entered into any material
transaction not in the ordinary course of business; and (B) the
Company has not purchased any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock, except in each case as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus);
(viii) the issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement and of warrants
to the Representatives by the Company pursuant to the Warrant
Agreement; the compliance by the Company with the other provisions of
this Agreement and the Warrant Agreement; and the consummation of the
other transactions contemplated in such agreements do not (A) require
the consent, approval, authorization, registration or qualification of
or with any governmental authority, except such as have been obtained
and such as may be required under state securities or blue sky laws,
by the Nasdaq SmallCap Market and NASD, or (B) conflict with or result
in a breach or violation of any of the terms and provisions of, or
constitute a default under, any material contract, indenture,
mortgage, deed of trust, lease or other agreement or instrument known
to such counsel to which the Company is a party or by which the
Company or any of its properties are bound, or the charter documents
or by-laws of the Company or any statute or any judgment, decree,
order, rule or regulation of any court or other governmental authority
or any arbitrator having jurisdiction over the Company and no further
approval or authorization of the shareholders or the Board of
Directors of the Company is required for (Y) the issuance and sale of
the Securities to be sold by the Company pursuant to this Agreement or
(Z) the issuance and sale of the shares of Common Stock issuable upon
exercise of the Warrant Agreement;
(ix) the Registration Statement is effective under the Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b);
and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or any amendment thereto
has been issued, and no proceedings for that purpose have been
instituted or are threatened by the Commission;
(x) the Registration Statement originally filed with respect to
the Securities and each amendment thereto, and the Prospectus (in each
case, other than the financial statements and other financial and
statistical information contained therein, as to which such counsel
need express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the rules and
regulations of the Commission thereunder;
(xi) the Company is not, and the transactions contemplated by
this Agreement will not cause the Company to become, an investment
company subject to registration under the 1940 Act;
(xii) the specimen stock certificate of the Company filed as an
exhibit to the Registration Statement or incorporated by reference
from prior filings made under
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or pursuant to the Act is in due and proper form to evidence shares of
Common Stock, has been duly authorized and approved by the Board of
Directors of the Company and complies with all legal requirements
applicable under the Colorado Business Corporation Act;
(xiii) the descriptions in the Registration Statement and the
Prospectus of the articles of incorporation and bylaws of the Company
and of statutes are accurate and fairly present the information
required to be presented by the Act and the applicable rules and
regulations (provided that counsel need not express any opinion as to
their completeness);
(xiv) except as described in the Prospectus, no holders of
Common Stock or other securities of the Company have registration
rights with respect to securities of the Company;
(xv) the Company is not currently offering any securities for
sale except as described in the Registration Statement;
(xvi) such counsel has no knowledge of any promoter,
affiliate, parent or subsidiaries of the Company except as are
described in the Registration Statement;
(xvii) the Company has no subsidiaries except as disclosed in
the Prospectus;
(xviii) 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 its business (including without limitation, any
such licenses or rights described in the Registration Statement as
being owned or possessed by the Company or any subsidiary) (all of
which are collectively referred to herein as the "Intellectual
Property"); there is no actual or 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) neither the Company nor the subsidiary is a party to any
agreement giving rise to any obligation by the Company or the
subsidiary to pay any third-party royalties or fees of any kind
whatsoever with respect to any technology developed, employed, used
or licensed by the Company or the subsidiary, other than is disclosed
in the Prospectus;
(xx) the Common Stock is eligible for quotation on The Nasdaq
Smallcap Market;
(xxi) all issued and outstanding shares of Common Stock and all
other securities issued and sold or exchanged by the Company or its
subsidiaries have been issued and sold or exchanged in compliance
with all applicable state and federal securities laws and regulations;
(xxii) the Company, the subsidiary and all of their property are
in compliance with all environmental laws and the Company and the
subsidiary are in full compliance with all permits, licenses and
authorizations relating to environmental laws;
(xxiii) at the Closing Date and upon payment of the
consideration set forth in the Registration Statement, the Company
shall have purchased all of the outstanding common stock of the
subsidiary, and shall have received good title to such shares of
common stock of the subsidiary , free and clear of all liens, security
interests, pledges, charges, encumbrances, shareholders' agreements
and voting trusts. Each outstanding share of common stock of the
subsidiary is validly authorized, validly issued, fully paid and
nonassessable, with no personal liability attaching to the ownership
thereof, and has not been issued and is not owned or held in violation
of any preemptive right of shareholders. There is no commitment, plan
or arrangement to issue, and no outstanding option, warrant and or
other right for the issuance of any share of capital stock of the
subsidiary or any other security or other instrument which by its
terms is convertible into, exercisable for, or exchangeable for
capital stock of the subsidiary, except as is properly described in
the Prospectus;
(xxiv) The conversion and/or extension of promissory notes
by promissory note holders of the Company since January 1, 1996 does
not result in an integration with any other offering of securities
by the Company or with this offering;
(xxv) The conversion and/or extension of promissory notes
by promissory note holders of the Company since January 1, 1996 is
exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended, and from the securities
registration requirements of any and all states which have
jurisdiction over such conversion and/or extension transactions;
(xxvi) Any distribution of recision materials, offering
materials or other materials to recipients of the recision offer prior
to this offering being consummated, is in compliance with applicable
federal and state securities laws;
(xxvii) Each Selling Shareholder has duly authorized, executed
and delivered a Power of Attorney and Custody Agreement which
constitute valid and legally binding agreements of such Selling
Shareholder in accordance with their terms, except as enforceability
of the same may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors rights generally;
(xxviii) This Agreement has been duly and validly executed and
delivered by or on behalf of each Selling Shareholder and constitutes
the valid and legally binding agreement of each Selling Shareholder
in accordance with its terms, except as enforceability of the same
may be limited by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and except as to those provisions
relating to indemnity or contribution for liability arising under
federal or state securities laws or under common law, as to which no
opinion need be expressed;
(xxix) Based solely upon representations which such counsel has
obtained from the Selling Shareholders (as to which nothing has come
to the attention of such counsel which has caused such counsel to
believe such representations are untrue) and the examination of the
certificates representing the Common Stock and, assuming that the
Underwriters are good faith purchasers of the Common Stock for value
without notice, the Underwriters will be the owners of such Common
Stock, free and clear of any claims, liens, encumbrances and security
interests whatsoever;
(xxx) To the best knowledge of such counsel, all
authorizations, orders and consents necessary for the execution and
delivery by each Selling Shareholder of this Agreement, the Power of
Attorney and the Custody Agreement have been duly and validly given,
and each Selling Shareholder has full legal rights, power and
authority to enter into this Agreement, the Power of Attorney and the
Custody Agreement and to sell, assign, transfer and deliver to the
Underwriters the number of shares of Common Stock to be sold by such
Selling Shareholder hereunder; and
(xxxi) The performance of this Agreement and the consummation
of the transaction contemplated hereby and by the Power of Attorney
and the Custody Agreement will not result in a breach or violation by
such Selling Shareholder of any of the terms or provisions of, or
constitute a default by such Selling Shareholder under, any indenture,
mortgage, trust (constructive or other), loan agreement or instrument
known to such counsel to which such Selling Shareholder is a party or
by which such Selling Shareholder is bound, any statute, or any
judgment, decree, order, rule or regulation known to such counsel of
any court or governmental agency or body applicable to such Selling
Shareholder.
Such counsel shall also state that such counsel has participated in conferences
with officers and other representatives of the Company, the independent public
accountants of the Company and the subsidiary, the Representatives and counsel
to the Representatives, at which conferences the contents of the Registration
Statement and the Prospectus and related matters were discussed and, although
such counsel has not undertaken to investigate or verify independently and does
not assume any responsibility for factual statements contained in the
Registration Statement and Prospectus (except as otherwise expressly set forth
herein), on the basis of the foregoing they have no reason to believe that the
Registration Statement, as of its effective date, contained 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 or that the
Prospectus, as of its date or the date of such opinion, contained or contains
any untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except such counsel
need express no view as to the financial statements and notes thereto, schedules
and reports thereon, and other financial data included in the Registration
Statement or Prospectus).
In rendering any such opinion, such counsel may rely, as to matters of fact, to
the extent such counsel deems proper, on certificates or opinions of responsible
officers of the Company and public officials, and may limit its opinions to the
laws of the United States of America and the States of Colorado and Delaware, as
appropriate.
References to the Registration Statement and the Prospectus in this paragraph
(b) shall include any amendment or supplement thereto at the date of such
opinion.
(c) At the Firm Closing Date, you shall have received the favorable
opinion of Haligman & Lottner, P.C., telecommunications 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. Each of the Company and its subsidiary is in compliance in
all material respects with all applicable telecommunications-related
rules and regulations of the United States and their respective state
of incorporation, compliance with which is necessary to their business
as currently conducted, including with respect
-20-
to rules, regulations and tariffs promulgated by the Federal
Communications Commission;
ii. To the best knowledge of such counsel after review of the
Company's and the subsidiary's operations, each of the Company and its
subsidiary is in compliance in all material respects with applicable
telecommunications-related rules and regulations of foreign countries
in which the Company and its subsidiary currently operate, including
specifically the countries of Argentina, Brazil, Italy, Lebanon, South
Africa and South Korea;
iii. The statements of international or federal law or
regulations contained under the captions "Risk Factors" and "Business
- Regulation" and other references in the Registration Statement and
Prospectus to telecommunications regulatory matters (collectively, the
"Regulatory Portion") are, in all material respects, correct and
accurate statements or summaries of applicable international, federal
and state law and regulation, subject to the qualifications set forth
therein; and
iv. The Regulatory Portion of the Registration Statement and the
Prospectus, at the time the Registration Statement became effective
and at the Firm Closing Date, did not contain any untrue statement of
a material fact, or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(d) The Representatives shall have received from ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇▇, P.C. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Company, LLP, letters dated,
respectively, the date hereof and the Firm Closing Date, in form and
substance satisfactory to the Representatives, to the effect that:
(i) they are independent accountants with respect to the Company
and its subsidiary, respectively, within the meaning of the Act and
the applicable rules and regulations thereunder;
(ii) in their opinion, the audited financial statements and the
as adjusted financial data examined by them and included in the
Registration Statement and the Prospectus comply in form in all
material respects with the applicable accounting requirements of the
Act and the related published rules and regulations;
(iii) on the basis of carrying out certain specified procedures
(which do not constitute an examination made in accordance with
generally accepted auditing standards) that would not necessarily
reveal matters of significance with respect to the comments set forth
in this paragraph (iii), a reading of the minute books of the
shareholders, the board of directors and any committees thereof of the
Company and its subsidiary, and inquiries of certain officials of the
Company and its subsidiary who have responsibility for financial and
accounting matters, nothing came to their attention that caused them
to believe that at a specific date not more than five business days
prior to the date of such letter, there were any changes in the
capital stock or total debt of the Company and its subsidiary or any
decreases in total assets or shareholders' equity of the Company and
its subsidiary, in each case compared
-21-
with amounts shown on the latest balance sheet included in the
Registration Statement and the Prospectus, or for the period from
April 30, 1997 or October 31, 1997 to such specified date there were
any decreases, as compared with the same period in the prior year, in
total revenue, net loss or net loss per share, respectively, of the
Company and its subsidiary, except in all instances for changes,
decreases or increases set forth in such letters;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages
and financial information that are derived from the general accounting
records of the Company and its subsidiary and are included in the
Registration Statement and the Prospectus, and have compared such
amounts, percentages and financial information with such records of
the Company and its subsidiary and with information derived from such
records and have found them to be in agreement, excluding any
questions of legal interpretation; and
(v) their review of the system of internal controls of the
Company and its subsidiary, to the extent they deemed necessary in
establishing the scope of their examination of the Company's financial
statements as of April 30, 1997 or October 31, 1997 did not disclose
any weaknesses in internal controls that they considered to be
material weaknesses.
In the event that the letters referred to above set forth any
such changes, decreases or increases which, in the reasonable
discretion of the Representatives, are likely to result in a Material
Adverse Effect, it shall be a further condition to the obligations of
the Underwriters that such letters shall be accompanied by a written
explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary.
References to the Registration Statement and the Prospectus in
this paragraph (c) with respect to either letter referred to above
shall include any amendment or supplement thereto by the date of such
letter.
(e) The Representatives shall have received a certificate, dated the
Firm Closing Date, of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, in their capacities as Chairman of the Board, Chief Executive
Officer and President, respectively, of the Company to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Firm
Closing Date; the Registration Statement, as amended as of the Firm
Closing Date, does not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein not misleading, and the Prospectus, as amended or supplemented
as of the Firm Closing Date, does not include any untrue statement of
a material fact or omit to state any material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company has
performed all covenants and agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to the Firm Closing
Date;
-22-
(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and
no proceedings for that purpose have been instituted or, to the best
of the Company's knowledge, threatened or are contemplated by the
Commission; and
(iii) subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, neither the
Company nor its subsidiary has sustained any loss or interference with
their respective businesses or properties having or resulting in a
Material Adverse Effect from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding, and there has not
been any event, circumstance, or development that results in, or that
the Company reasonably believes will result in, a Material Adverse
Effect, except in each case as described in or contemplated by the
Prospectus (exclusive of any amendment or supplement thereto).
(f) The Representatives shall have received from each officer and
director of the Company and the persons and entities listed in Schedule 3
an agreement to the effect that such person or entity will not, except to
the extent otherwise specifically permitted by the terms of each such
person's or entity's agreement, directly or indirectly, without the prior
written consent of the Representatives, offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale,
pledge, grant of an option to purchase or other sale or disposition) of any
shares of Common Stock or any securities convertible into, or exchangeable
or exercisable for, shares of Common Stock for a period of 12 months after
the date of this Agreement, without the Representatives' prior written
consent, which consent shall not be unreasonably withheld; provided,
however, that intra-family transfers or transfers to trust for estate
planning purposes shall not be so restricted.
(g) On or before the Firm Closing Date, the Representatives and their
counsel shall have received such further certificates, documents or other
information as they may have reasonably requested from the Company.
(h) Upon consummation of the offering of the Securities, the
Securities shall have approved for trading, on notice of issuance, on the
Nasdaq SmallCap Market.
(i) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Berliner ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C., counsel for the
Representatives, with respect to the issuance and sale of the Firm
Securities, the Registration Statement and Prospectus, and such other
related matters as the Representatives may reasonably require, and the
Company shall have furnished to such counsel such documents as they may
reasonably request for the purpose of enabling them to pass upon such
matters.
(j) The Company shall have executed and delivered a Warrant Agreement
in a form satisfactory to the Representatives (the "Warrant Agreement"),
and there shall have been tendered to the Representatives all of the
Representatives' Warrants described in Section 6(n) hereof to be purchased
by the Representatives on the Closing Date.
-23-
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Representatives. The Company shall furnish to the
Representatives such conformed copies of such opinions, certificates, letters
and documents in such quantities as the Representatives and counsel for the
Representatives shall reasonably request.
The respective obligations of the several Underwriters to purchase and pay
for any Option Securities shall be subject, in their discretion, to each of the
foregoing conditions to purchase the Firm Securities, except that all references
to the Firm Securities and the Firm Closing Date shall be deemed to refer to
such Option Securities and the related Option Closing Date, respectively.
9. INDEMNIFICATION AND CONTRIBUTION.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter, its counsel, each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, and each Selling Shareholder, against any losses, claims,
damages or liabilities to which such Underwriter or such controlling person
may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon:
(i) any breach by the Company of its representations or
warranties set forth in Section 2(a) and (b) of this Agreement;
(ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any
amendment thereto, the Prospectus or any amendment or supplement
thereto or (B) any application or other document, or any amendment or
supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Securities under the securities
or blue sky laws thereof or filed with the Commission or any
securities association or securities exchange (each, an
"Application");
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, or the Prospectus or
any amendment or supplement thereto, or any Application, a material
fact required to be stated therein or necessary to make the statements
therein not misleading; or
(iv) any untrue statement or alleged untrue statement of any
material fact made by the Company or prepared at its direction and
contained in any audio, visual, electronic or electronically
transmitted materials produced by the Company or at its direction and
used in connection with the marketing of the Securities, including
without limitation, slides, videos, films, Internet presentations,
tape recordings, and, such party or parties, as the case may be, will
reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with
investigating, defending against or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action;
-24-
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such Registration Statement or any amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or
any Application in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through the Representatives
specifically for use therein; and provided, further, that the Company will not
be liable to any Underwriter or any person controlling such Underwriter with
respect to any such untrue statement or omission made in any Preliminary
Prospectus that is corrected in the Prospectus (or any amendment or supplement
thereto) if the person asserting any such loss, claim, damage or liability
purchased Securities from such Underwriter but was not sent or given a copy of
the Prospectus (as amended or supplemented) at or prior to the written
confirmation of the sale of such Securities to such person in any case where
such delivery of the Prospectus (as amended or supplemented) is required by the
Act, unless such failure to deliver the Prospectus (as amended or supplemented)
was a result of noncompliance by the Company with Section 6(d) and (e) of this
Agreement. The Company shall not, without the prior written consent of the
Representatives, settle or compromise or consent to the entry of any judgment in
any pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not any Underwriter or any
person who controls any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of all of the Underwriters and such controlling persons
from all liability arising out of such claim, action, suit or proceeding.
In addition to its other obligations under this Section 9(a), the Company
agrees that, as an interim measure during the pendency of any claim, action,
investigation, inquiry, or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in this
Section 9(a), it will reimburse the Representatives and each Underwriter on a
monthly basis for all reasonable legal fees or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry, or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse the Representatives or Underwriters for such expenses
and the possibility that such payments might later be held to have been improper
by a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Representatives and
the Underwriters shall promptly return it to the party or parties that made such
payment, together with interest, compounded daily, determined on the basis of
the prime rate (or other commercial lending rate for borrowers of the highest
credit standing) announced from time to time by Bank of America (the "Prime
Rate"). Any such interim reimbursement payments which are not made to the
Representatives and Underwriters within 45 days of a request for reimbursement
shall bear interest at the Prime Rate from the date of such request. This
indemnity agreement shall be in addition to any liabilities which the Company
may otherwise have.
(b) The Selling Shareholders shall indemnify and hold harmless
the Company, each Underwriter, and each person, if any, who controls the
Company and each Underwriter within the meaning of the Act or the Exchange
Act, and all officers, directors, employers, agents and counsel of the
Company and each Underwriter against any and all loss, liability, claim,
damage and expense whatsoever, including, but not limited to, attorneys'
fees and any and all expense whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever or in connection with any investigation or inquiry of,
or action or proceeding that may be brought against, the respective
indemnified parties, arising out of or based upon any untrue statements or
alleged untrue statements of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
application or other document (in this Section 9 collectively called
"application") executed by the Selling Shareholders and based upon written
information furnished by or on behalf of the Selling Shareholders filed in
any jurisdiction in order to qualify all or any part of the Shares under
the securities laws thereof or filed with the SEC or the NASD, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that the foregoing indemnity shall not apply in respect of any
statement or omission made in reliance upon and in conformity with written
information furnished to the Selling Shareholders or any Underwriter
through the Representative expressly for use in any Preliminary Prospectus,
the Registration Statement or Prospectus, or any amendment or supplement
thereof. This indemnity agreement will be in addition to any liability the
Selling Shareholders may otherwise have.
(c) Each Underwriter, severally and not jointly, will indemnify
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, and each Selling Shareholder against any losses, claims,
damages or liabilities to which the Company or any such director, officer
or controlling person of the Company may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged
-25-
untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application; (ii)
the omission or the alleged omission to state therein a material fact
required to be stated in the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or any Application or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives specifically for use therein; or (iii) any use of the
access code for the "NetRoadshow" by other than qualified investors,
registered broker-dealers or investment advisors which results in action
taken against the Company and/or the Selling Shareholders by such third
party obtaining access to the "NetRoadshow"; provided, however, the
Underwriter responsible for distributing such access code to other than a
qualified investor shall be the sole party responsible to the Company and
the Selling Shareholders in connection therewith. The Representatives shall
not, without the prior written consent of the Company and each such named
Selling Shareholder, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not
the Company or any person who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of the Company, such controlling
persons and each such named Selling Shareholder from all liability arising
out of such claim, action, suit or proceeding. This indemnity agreement
will be in addition to any liability which such Underwriter may otherwise
have.
(d) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement
thereof, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates it has been
irreparably prejudiced by such failure to receive notice.
(e) In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded or shall have been advised by its counsel that there may be one
or more legal defenses available to it and/or other indemnified parties
that conflict with those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such
action on behalf of such indemnified party or parties and such indemnified
party or parties shall have the right to select separate counsel to defend
such action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and approval by such indemnified party of
counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 9 for any legal or
other
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expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying
party shall not be liable for the expenses of more than one separate
counsel (in addition to local counsel) in any one action or separate but
substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the
Representatives in the case of paragraph (a) of this Section 9,
representing the indemnified parties under such paragraph (a) who are
parties to such action or actions) or (ii) the indemnifying party does not
promptly retain counsel satisfactory to the indemnified party or (iii) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
(f) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable or insufficient,
for any reason, to hold harmless an indemnified party in respect of any
losses, claims, damages or liabilities (or actions in respect thereof),
each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Securities or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by applicable law,
not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Selling Shareholders on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total proceeds from the
offering (before deducting expenses) received by the Company and the
Selling Shareholders bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company and the Selling Shareholders on the one hand or by the Underwriters
on the other hand, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company, the Selling Shareholders 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) or by any other
method of allocation that does not take into account the equitable
considerations referred to above in this paragraph (f). Notwithstanding any
other provision of this paragraph (f), no Underwriter shall be obligated to
make contributions hereunder that in the aggregate exceed the total public
offering price of the Securities purchased by such Underwriter under this
Agreement, less the aggregate amount of any damages that such Underwriter
has otherwise been required to pay in respect of the same or any
substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
hereunder are several in proportion to their respective underwriting
obligations and not joint, and as between themselves, contributions
-27-
among Underwriters shall be governed by the provisions of the
Representatives' Agreement Among Underwriters. For the purposes of this
paragraph 9(f), each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall
have the same rights to contribution as such Underwriter, and each director
of the Company, each officer of the Company who signed the Registration
Statement, each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, and each
Selling Shareholder, shall have the same rights to contribution as the
Company.
10. DEFAULT OF UNDERWRITERS. If one or more Underwriters default in their
-----------------------
obligations to purchase Firm Securities or Option Securities hereunder and the
aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, then the other Underwriters may make
arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Securities or Option
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase. If one or more Underwriters so default with respect to an aggregate
number of Securities that is more than ten percent of the aggregate number of
Firm Securities or Option Securities, as the case may be, to be purchased by all
of the Underwriters at such time hereunder, and if arrangements satisfactory to
the Representatives are not made within 36 hours after such default for the
purchase by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives) of the Securities with respect to
which such default occurs, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter or the Company other than as provided
in Section 11 hereof. In the event of any default by one or more Underwriters
as described in this Section 10, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case may be,
established as provided in Section 4 hereof for not more than seven business
days in order that any necessary changes may be made in the arrangements or
documents for the purchase and delivery of the Firm Securities or Option
Securities, as the case may be. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10. Nothing herein shall relieve any defaulting Underwriter from
liability for its default.
11. SURVIVAL. The respective representations, warranties, agreements,
--------
covenants, indemnities and other statements of the Company, its officers, the
Selling Shareholders and the several Underwriters set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Company, any of its officers or directors, any Selling
Shareholder, any Underwriter or any controlling person referred to in Section 9
hereof and (ii) delivery of and payment for the Securities. The respective
agreements, covenants, indemnities and other statements set forth in Sections 7
and 9 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
12. TERMINATION.
-----------
(a) This Agreement may be terminated with respect to the Firm
Securities or any Option Securities in the sole discretion of the
Representatives by notice to the Company
-28-
given prior to the Firm Closing Date or the related Option Closing Date,
respectively, in the event that the Company shall have failed, refused or
been unable to perform all obligations and satisfy all conditions on its
part to be performed or satisfied hereunder at or prior thereto or, if at
or prior to the Firm Closing Date or, such Option Closing Date,
respectively,
(i) after the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change or development involving a prospective adverse change in or
affecting particularly the business, properties, condition (financial
or otherwise), results of operations or prospects of the Company,
whether or not arising in the ordinary course of business, occurs
which would, in the Representatives' sole judgment, make the offering
or the delivery of the Securities impracticable or inadvisable;
(ii) trading in the Common Stock shall have been suspended by the
Commission or the Nasdaq SmallCap Market or minimum or maximum prices
shall have been established on the Nasdaq SmallCap Market;
(iii) a banking moratorium shall have been declared by New York
or United States authorities; or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or
material adverse change in general economic, political or financial
conditions having an effect on the U.S. financial markets that, in the
sole judgment of the Representatives, makes it impractical or
inadvisable to proceed with the public offering or the delivery of the
Securities as contemplated by the Registration Statement, as amended
as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 12 shall be
without liability of any party to any other party except as provided in
Section 11 hereof.
13. INFORMATION SUPPLIED BY UNDERWRITERS. The statements set forth in (a)
------------------------------------
the last paragraph on the front cover page of any Preliminary Prospectus or the
Prospectus, (b) under the heading "Underwriting" in any Preliminary Prospectus
or the Prospectus and (c) on page 2 in any Preliminary Prospectus or the
Prospectus pertaining to stabilization (to the extent such statements relate to
the Underwriters) constitute the only information furnished by any Underwriter
through the Representatives to the Company and the selling Shareholders for the
purposes of Section 9 hereof. The Underwriters confirm that such statements (to
such extent) are correct.
14. NOTICES. All communications hereunder shall be in writing and, if
-------
sent to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Cruttenden ▇▇▇▇ Incorporated,
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to Cohig &
Associates, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, and if sent to the Company, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to the Company at ▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief
Executive Officer.
-29-
15. SUCCESSORS. This Agreement shall inure to the benefit of and shall be
----------
binding upon the several Underwriters, the Selling Shareholders, the Company and
their respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (a)
the indemnities of the Company contained in Section 9 of this Agreement shall
also be for the benefit of any person or persons who control any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
and (b) the indemnities of the Underwriters contained in Section 9 of this
Agreement shall also be for the benefit of the directors of the Company and the
officers of the Company who have signed the Registration Statement and any
person or persons who control the Company within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act. No purchaser of Securities from any
Underwriter shall be deemed a successor because of such purchase.
16. APPLICABLE LAW. The validity and interpretation of this Agreement,
--------------
and the terms and conditions set forth herein, shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to any provisions relating to conflicts of laws.
17. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial
----------------------------------------------
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of California, and
by execution and delivery of this Agreement, the Company accepts for itself and
in connection with its subsidiaries and properties, and the Selling Shareholders
accept, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts and waive any defense of forum non conveniens and irrevocably
agree to be bound by any judgment rendered thereby in connection with this
Agreement. The Company and the Selling Shareholders designate and appoint ▇▇▇▇▇▇
▇. ▇▇▇▇▇ and such other persons as may hereafter be selected by the Company
irrevocably agreeing in writing to so serve, as its agent to receive on its
behalf service of all process in any such proceedings in any such court, such
service being hereby acknowledged by the Company and the Selling Shareholders to
be effective and binding service in every respect. A copy of any such process so
served shall be mailed by registered mail to the Company at its address provided
in Section 14 hereof; provided, however, that, unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity of
service of such process. If any agent appointed by the Company and the Selling
Shareholders refuses to accept service, the Company and the Selling Shareholders
hereby agree that service of process sufficient for personal jurisdiction in any
action against the Company and/or the Selling Shareholders in the State of
California may be made by registered or certified mail, return receipt
requested, to the Company at its address provided in Section 14 hereof, and the
Company and the Selling Shareholders hereby acknowledge that such service shall
be effective and binding in every respect. Nothing herein shall affect the right
to serve process in any other manner permitted by law or shall limit the right
of any Underwriter to bring proceedings against the Company and/or the Selling
Shareholders in the courts of any other jurisdiction.
18. NO RULE OF CONSTRUCTION. The parties acknowledge that this Agreement
-----------------------
was initially prepared by the Representatives, 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.
-30-
19. COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth our understanding please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company, each of the
Selling Shareholders and each of the several Underwriters.
Very truly yours,
COMMUNICATIONS SYSTEMS INTERNATIONAL, INC.
By: ____________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
CRUTTENDEN ▇▇▇▇ INCORPORATED EACH OF THE SELLING SHAREHOLDERS
By: _________________________________ By: _________________________________
Name: __________________________ Attorney-in-fact
Title: __________________________
For themselves and as Representatives.
RWW\IASG\UA.498
-31-
SCHEDULE 1
UNDERWRITERS
NUMBER OF
FIRM SECURITIES
UNDERWRITERS TO BE PURCHASED
------------ ---------------
Cruttenden ▇▇▇▇ Incorporated........................ _________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated........... _________
▇▇▇▇▇▇▇ Bros., L.P. ................................ _________
Total............................................
=========
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SCHEDULE 2
SUBSIDIARY
Name Jurisdiction of Incorporation
---- -----------------------------
International Telephone Company Delaware
-33-
SCHEDULE 3
PERSONS AND ENTITIES SUBJECT TO LOCK-UP AGREEMENTS
Name
----------------------------------------
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