1
EXHIBIT 1.1
1,000,000 Units
Each Unit Consisting of
One Share of Series A Convertible Preferred Stock
and
One Public Common Stock Purchase Warrant
of
ELDORADO ARTESIAN SPRINGS, INC.
UNDERWRITING AGREEMENT
_______________, 2000
AMERICAN FRONTEER FINANCIAL CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Section 1. Introductory.
ELDORADO ARTESIAN SPRINGS, INC., a Colorado corporation (the
"Company"), proposes to sell to the several underwriters (the "Underwriters")
named in Schedule I hereto for whom you are acting as Representative (the
"Representative") an aggregate of 1,000,000 units (the "Units"), each Unit
consisting of one share of the Company's Series A Convertible Preferred Stock,
par value $.001 per share (the "Series A Preferred Stock") and one public common
stock purchase warrant (the "Public Warrants"). The respective amounts of the
Units to be so purchased from the Company by the several underwriters are set
forth opposite their names in Schedule I hereto.
In addition, the Company proposes to sell to the Representative
warrants to purchase up to 100,000 shares of Series A Preferred Stock and
100,000 Public Warrants in accordance with the terms and conditions provided for
herein ("Representative's Warrants").
You have advised the Company that you or the Underwriters, as the case
may be, propose to make a public offering of their respective portions of the
Units on the effective date of the registration statement hereinafter referred
to, or as soon thereafter as in your judgment is advisable.
2
The Company hereby confirms its agreements with respect to the
purchase of the Units by you or the Underwriters, as the case may be, as
follows.
Section 2. Representations and Warranties of the Company.
The Company represents and warrants to the several Underwriters that:
(a) A registration statement on Form SB-2 (File No. 333-68553) with
respect to the Units (including the Units to be issued upon exercise of the
Representative's Warrants), the Series A Preferred Stock and the Public Warrants
which comprise the Units (including the Units to be issued upon the exercise of
the Representative's Warrant), the Series A Preferred stock to be issued as
dividends, and the common stock of the Company (the "Common Stock") which is to
be issued upon the conversion of Series A Preferred Stock and the exercise of
the Public Warrants (including the Series A Preferred Stock and the Public
Warrants which comprise the Units to be issued upon the exercise of the
Representative's Warrant), has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules" and "Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission. If the Company prepares and files prior to the effective date of
such registration statement an amendment or amendments to such registration
statement, such amendment or amendments will have been similarly prepared. There
have been delivered to you two signed copies of such registration statement and
all amendments, if any, together with two copies of each exhibit filed
therewith. Conformed copies of such registration statement and amendments, if
any, (but without exhibits) and of any related preliminary prospectus have been
delivered to you in such reasonable quantities as you have requested for you and
for each of the Underwriters, as the case may be. The Company will next file
with the Commission one of the following: (i) prior to effectiveness of such
registration statement, a further amendment thereto, including the form of final
prospectus, or (ii) a final prospectus in accordance with Rules 430A and 424(b)
of the Rules and Regulations. As filed, such amendment and form of final
prospectus, or such final prospectus, shall include all Rule 430A Information
and, except to the extent that you shall agree in writing to a modification,
shall be in all substantive respects in the form furnished to you prior to the
date and time that this Agreement was executed and delivered by the parties
hereto, or, to the extent not completed at such date and time, shall contain
only such specific substantive changes (beyond that contained in the latest
Preliminary Prospectus) as the Company shall have previously advised you in
writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement becomes
effective and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date (as hereinafter defined), shall also mean
such registration statement as so amended; provided, however, that such term
shall also include all Rule 430A Information deemed to be included in such
registration statement at the time such registration statement becomes effective
as provided by Rule 430A of the Rules and Regulations. The term "Preliminary
Prospectus" shall mean any preliminary prospectus referred to in the preceding
paragraph and any
2
3
preliminary prospectus included in the Registration Statement at the time it
becomes effective that omits Rule 430A Information. The term "Prospectus" as
used in this Agreement shall mean the prospectus relating to the Units in the
form in which it is first filed with the Commission pursuant to Rule 424(b) of
the Rules and Regulations or, if no filing pursuant to Rule 424(b) of the Rules
and Regulations is required, shall mean the form of final prospectus included in
the Registration Statement at the time such registration statement becomes
effective. The term "Rule 430(A) Information" means information with respect to
the Units and the offering thereof permitted to be omitted from the Registration
Statement when it becomes effective pursuant to Rule 430(A) of the Rules and
Regulations. Any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Form SB-2 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be.
(b) The Company does not own or control, directly or indirectly, any
corporation, association or other entity. The Company has been duly organized
and is validly existing as a corporation in good standing under the laws of the
state of its incorporation, with full power and authority (corporate and other)
to own or lease its properties and conduct its business as described in the
Registration Statement and is duly qualified to do business as a foreign
corporation and is in good standing in all other jurisdictions in which the
nature of its business or the character or location of its properties requires
such qualification, except where failure to so qualify will not materially
affect its business, properties or financial condition. Except as described in
the Registration Statement, the Company does not own any interest in any
corporation or other business entity that has any material assets, liabilities
or operations.
(c) The authorized capital stock of the Company as of the Effective
Date is set forth under "Description of Securities" in the Prospectus. The
shares of issued and outstanding capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable and have
been issued and sold by the Company in compliance in all material respects with
applicable Federal and state securities laws; the Units, the securities
comprising the Units, the securities to be issued upon conversion or exercise of
the securities comprising the Units, the Series A Convertible Preferred Stock to
be issued as dividends, and the Units issuable upon exercise of the
Representative's Warrants (all such securities hereinafter referred to
collectively as the Unit Securities) have been duly authorized and when issued
and paid for as contemplated herein will be validly issued, fully paid and
non-assessable; and no preemptive rights of stockholders exist with respect to
any of these securities or the issue and sale thereof. The Company has full
power and lawful authority to authorize, issue and sell the Units to be sold by
it hereunder on the terms and conditions set forth herein and the Unit
Securities, and no consent, approval, authorization or other order of anyone,
including any governmental authority, is required in connection with the
authorization, issuance and sale of the Units, the Unit Securities or the
Representative's Warrants, except such as may be required under the Act or state
or corporate securities laws, all of which have been duly obtained. Neither the
filing of the Registration Statement, nor the offering or sale of the Units or
the Unit Securities as contemplated by this Agreement gives rise to any rights,
other than those which have been
3
4
waived or satisfied, for or relating to the registration of any other shares of
the Company's capital stock under the Act.
(d) The information set forth under the caption "Capitalization" in the
Prospectus is true, correct and complete as to the matters customarily covered
under such a caption. All of the Units and the Unit Securities conform to the
description thereof contained in the Registration Statement. The form of
certificates for the Units and the Unit Securities conform to the corporate law
of the State of Colorado. Except as disclosed in the Prospectus, there are no
outstanding rights, options or warrants for the purchase of any securities of
the Company, and, except as disclosed in the Registration Statement, the Company
is not a party to any agreement pursuant to which any person has the right to
purchase any securities of the Company.
(e) Except as disclosed in the Registration Statement, the Company has
not (i) issued any capital stock or any options, warrants, convertible
securities or other rights to purchase its capital stock, (ii) increased its
long-term or short-term debt, or (iii) declared or paid any dividends on its
capital stock.
(f) Neither the Commission nor the "blue sky" or securities authority
of any jurisdiction has issued an order preventing or suspending the
effectiveness or use of any Prospectus relating to the proposed offering of the
Units nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and will
conform to, the requirements of the Act and the Rules and Regulations. The
Registration Statement and any amendments thereto do not contain, and will not
contain, any untrue statement of a material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the Company
makes no representations or warranties as to information contained in or omitted
from the Registration Statement, or any such amendment or supplement, in
reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any Underwriter through the Representative,
specifically for use in the preparation thereof.
(g) The financial statements of the Company, together with related
notes and schedules as set forth in the Registration Statement, present fairly
the financial position and the results of operations and cash flows of the
Company as of the indicated dates and for the indicated periods. Such financial
statements and related schedules have been prepared in accordance with generally
accepted accounting principles, consistently applied through the periods
involved, except as disclosed therein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data of the Company included in the Registration Statement
present fairly the information shown therein and such data has been compiled on
a basis consistent with the financial statements presented therein and the books
and records of the Company.
4
5
(h) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(i) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company before any court or
administrative agency or otherwise which if determined adversely to the Company
might result in any material adverse change in the earnings, business,
management, properties assets, rights, operations, condition (financial or
otherwise) or prospects of the Company or to prevent the consummation of the
transactions contemplated hereby.
(j) The Company has good and marketable title to all of the properties
and assets reflected in the financial statements (or as described in the
Registration Statement), subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those reflected in such financial statements (or
as described in the Registration Statement) or which are not material in amount.
All of the leases and subleases under which the Company is the lessor or
sublessor of properties or assets or under which the Company holds properties or
assets as lessee or sublessee as described in the Registration Statement are in
full force and effect and, except as described in the Registration Statement,
the Company is not in default with respect to any of the terms or provisions of
any of such leases or subleases and, except as described in the Registration
Statement, no claim has been asserted by anyone adverse to rights of the Company
as lessor, sublessor, lessee or sublessee under any of the leases or subleases
to which it is a party, or affecting or questioning the right of the Company to
continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Registration
Statement; and the Company owns or leases all such properties described in the
Registration Statement as are necessary to its operations as now conducted.
(k) The Company (i) has filed all Federal, state, local and foreign
income tax returns which have been required to be filed and has paid all taxes
for which they are liable and all assessments received by it to the extent that
such taxes or assessment have become due and are not being contested in good
faith and has furnished all information returns it is required to furnish
pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), (ii) has
established adequate reserves for such taxes which are not due and payable, and
(iii) do not have any tax deficiency or claims outstanding, proposed or assessed
against them. All tax liabilities have been adequately provided for in the
financial statements of the Company.
(l) Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, there has not been
any material adverse change or any development involving a prospective material
adverse change in or affecting the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company, whether or not occurring in the ordinary course of business, and
there has not been any material transaction entered into or any material
transaction that is probable of being entered into by the Company, other than
transactions in the ordinary course of business and changes and transactions
described in
5
6
the Registration Statement, as it may be amended or supplemented. The Company
has no material contingent obligations which are not disclosed in the Company's
financial statements included in the Registration Statement.
(m) The Company is not, nor, with the giving of notice or lapse of time
or both, will not be, in violation of or in default under its Articles of
Incorporation, as amended, or by-laws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound and which default is material in respect
of the earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the creation
of any lien, charge or encumbrance pursuant to, any indenture, mortgage, deed of
trust or other agreement or instrument to which the Company is a party, or of
the Articles of Incorporation or by-laws of the Company or any statute or any
order, rule or regulation applicable to the Company, or of any court or of any
regulatory body or administrative agency or other governmental body having
jurisdiction over the Company, or any judgment or order of any court or other
tribunal by which the Company may be bound; in each case where the breach or
default would have a material adverse effect on the Company.
(n) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or "blue sky" laws) has been
obtained or made and is in full force and effect.
(o) Except as set forth in the Registration Statement, the Company owns
or possesses adequate rights to use all material patents, patent rights, patent
applications, inventions, trademarks, trademark applications, trade names,
service ▇▇▇▇▇, ▇▇▇▇ registrations, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) franchises and licenses and other intangible
properties and assets (all of the foregoing being herein called "Intellectual
Property Rights") necessary for the conduct of its business and has not received
any notice of conflict with the asserted rights of others in respect thereof.
All Intellectual Property Rights that the Company owns or has pending, or under
which it is licensed are accurately described in the Registration Statement.
There is no right under any Intellectual Property Rights necessary to the
business of the Company as presently conducted or as the Registration Statement
may indicate it contemplates conducting, except as accurately described in the
Registration Statement. Except as set forth in the Registration Statement, to
the knowledge of the Company, it has not infringed, is not infringing, and has
received no notice of infringement with respect to, asserted Intellectual
Property Rights of others,
6
7
except for such infringement or alleged infringement that has had, or cannot be
reasonably expected to have, a material adverse effect on the financial
condition, results of operations, business, properties, assets or future
prospects of the Company. Except as accurately described in the Registration
Statement, to the knowledge of the Company, there is no infringement by others
of any of the Intellectual Property Rights of the Company. Except as accurately
described in the Registration Statement, to the knowledge of the Company, there
is no Intellectual Property Rights of any other entity or person which has had
or may in the future have a material adverse effect on the financial condition,
results of operations, business, properties, assets or future prospects of the
Company.
(p) The Company holds all material licenses, certificates, permits,
orders or other similar authorizations granted or issued by any governmental
agency (collectively the "Government Permits") required to conduct its business
and is in all material respects complying therewith. No proceeding to revoke,
limit or otherwise materially change any Government Permit has been commenced
or, to the Company's knowledge, is threatened against the Company.
(q) To its knowledge, the Company is in compliance with all laws,
rules, regulations, orders of the United States, any state, county or locality
or of any court or administrative agency, operating licenses or other
requirements imposed by any governmental body, except as in the aggregate do not
have and will not in the future have a material adverse effect upon the
operations, business, properties or assets of the Company, including, to the
knowledge of the Company and without limitation, all applicable laws, rules,
regulations, licenses or other governmental standards relating to any business
conducted or proposed to be conducted by the Company; and the conduct of the
business of the Company, as described in the Registration Statement, will not
cause the Company to be in violation of any such requirements.
(r) Neither the Company nor, to the Company's knowledge, any of its
affiliates, has taken or intends to take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any of the Company's securities to facilitate the sale or resale of the
Units.
(s) The Company is not an "investment company" within the meaning of
such term under the Investment Company Act of 1940, as amended (the "1940 Act"),
and the rules and regulations of the Commission thereunder.
(t) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are executed
in accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is
7
8
permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(u) The Company carries, or is covered by, insurance in such amounts
and covering such risks as is adequate for the conduct of its business and the
value of its properties and as is customary for companies engaged in similar
industries.
(v) The Company is in compliance with all regulations of the United
States Food and Drug Administration (the "FDA"), except where noncompliance
would not have a material adverse effect on the business operations or financial
condition of the Company. Except with respect to pending applications, there are
no rulemaking or similar proceedings before the FDA which affects or involves
the Company or any of the processes or products which the Registration Statement
discloses the Company has developed, is developing or proposes to develop or
uses or proposes to use which, in each case, if the subject of an action or
decision unfavorable to the Company, individually or in the aggregate with all
such rulemaking or similar proceedings, would reasonably be expected to have a
material adverse effect on the business operations, or financial condition of
the Company.
(w) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of medical wastes or hazardous
substances by the Company (or, to the knowledge of the Company, any of its
predecessors in interest) at, upon or from any of the property now or previously
owned or leased by the Company in violation of any applicable law, ordinance,
rule, regulation, order, judgment, decree or permit or which could reasonably be
expected to require remedial action under any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit, except for any violation or
remedial action which would not have, or could not be reasonably likely to have,
individually or in the aggregate with all such violations and remedial actions,
a material adverse effect on the business, operations or financial condition of
the Company; there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or of any
medical wastes or hazardous substances due to or caused by the Company with
respect to which the Company had knowledge, except for any such spill,
discharge, leak, emission, injection, escape, dumping or release which would not
have or could not be reasonably likely to have, individually or in the aggregate
with all such spills, discharges, leaks, emissions, injections, escapes,
dumpings or releases, a material adverse effect on the business, operations or
financial condition of the Company; and the terms "hazardous substances" and
"medical wastes" shall have the meanings specified in any applicable local,
state, federal and foreign laws or regulations with respect to environmental
protection.
(x) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
or any of its subsidiaries would have any
8
9
liability; neither the Company nor any subsidiary has incurred and does not
expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Code, including the regulations and published interpretations
thereunder; and each "pension plan" for which the Company or any of its
subsidiaries would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would cause the loss
of such qualification. Determination letters have been received from the
Internal Revenue Service with respect to each ERISA plan which is intended to
comply with Section 401(a) of the Code stating that such ERISA plan and the
attendant trust are qualified thereunder. Neither the Company nor any subsidiary
has never completely or partially withdrawn from a "multiemployer plan."
(y) The Representative's Warrants have been duly authorized for
issuance to the Representative and will, when issued, possess rights, privileges
and characteristics as represented in the most recent form of Representative's
Warrant filed as an exhibit to the Registration Statement; the securities to be
issued upon exercise of the Representative's Warrants, when issued and delivered
against payment therefor in accordance with the terms of the Representative's
Warrants, will be duly and validly issued, fully paid, non-assessable and free
of preemptive rights, and all corporate action required to be taken for the
authorization and issuance of the Representative's Warrants, and the securities
to be issued upon their exercise, have been validly and sufficiently taken.
(z) The Company has caused each officer and director to furnish to the
Representative, on or prior to the date of this Agreement, a letter or letters,
in form and substance satisfactory to the Underwriters ("Lockup Agreements"),
pursuant to which each such person shall agree: (A) not to offer to sell, sell,
contract to sell, sell short or otherwise dispose of, any shares of Common Stock
or other capital stock of the Company, or any other securities convertible,
exchangeable or exercisable for shares or derivatives of Common Stock owned by
such person, or request the registration for the offer or sale of any of the
foregoing (or as to which such person has the right to direct the disposition
of) for a period of one year after the effective date of the Registration
Statement, directly or indirectly, except with the prior written consent of the
Representative.
(aa) The Company has not at any time during the last five 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. The
Company's internal accounting controls and procedures are sufficient to enable
the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(bb) Except as disclosed in the Prospectus, neither the Company nor any
of its officers, directors or affiliates have caused any person, other than the
Underwriters, to be
9
10
entitled to reimbursement or compensation of any kind, including, without
limitation, any compensation that would be includable as underwriter
compensation under the NASD's Corporate Financing Rule with respect to the
offering of the Units, as a result of the consummation of such offering based on
any activity of such person as a finder, agent, broker, investment adviser or
other financial service provider.
(cc) The Units, the Preferred Stock, the Warrants and the shares of the
Company's common stock, par value $.001 per share (the "Common Stock") have been
approved for listing on the Nasdaq Small Cap Market.
(dd) The Company has all requisite power and authority to execute,
deliver, and perform this Agreement and the agreement with respect to the
Representative's Warrants (the "Representative's Warrant Agreement"). All
necessary corporate proceedings of the Company have been duly taken to authorize
the execution, delivery and performance of this Agreement and the
Representative's Warrant Agreement by the Company. This Agreement and the
Representative's Warrant Agreement have been duly authorized, executed and
delivered by the Company, are the legal, valid and binding obligation of the
Company, and are enforceable as to the Company in accordance with their
respective terms (subject to applicable bankruptcy, insolvency and other laws
affecting creditors' rights generally and except as rights to indemnity and
contribution hereunder may be limited by federal or state securities laws and
public policy). Except as described in the Registration Statement, no consent,
authorization, approval, order, lien, certificate, or permit of or from, or
declaration or filing with, any federal, state, local or other governmental
authority or any court or other tribunal is required for the execution, delivery
or performance of this Agreement and the Representative's Warrant Agreement by
the Company (except filings under the Act which have been or will be made before
the Closing Date and such consents consisting only of consents under "blue sky"
or securities laws which have been obtained at or prior to the date of this
Agreement). No consent of any party to any contract, agreement, instrument,
lease, license, arrangement, or understanding to which the Company or any of its
subsidiaries is a party, or to which any of its properties or assets are
subject, is required for the execution, delivery or performance of this
Agreement and the Representative's Warrant Agreement; and the execution,
delivery and performance of this Agreement and the Representative's Warrant
Agreement will not violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both) entitle any party
to terminate or declare a default under any such material contract, agreement,
instrument, lease, license, arrangement or understanding, or violate or result
in a breach of any term of the Articles of Incorporation or by-laws of the
Company, or violate, result in a breach of, or conflict with, any law, rule,
regulation, order, judgment, or decree binding on the Company or any of its
subsidiaries or to which any of their operations, businesses, properties, or
assets is subject.
(ee) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement,
the Company has not incurred any liabilities or obligations, direct or
contingent, not in the ordinary course of business, or entered into any
transaction not in the ordinary course of business, which is material to the
10
11
business of the Company, and there has not been any change in the capital stock
of, or any incurring of long-term debt by, the Company, or any issuance of
options except for the issuance of options pursuant to the Stock Option Plan
described in the Registration Statement, warrants or other rights to purchase
the capital stock of the Company or any adverse change or any development
involving, so far as the Company can now reasonably foresee, a prospective
adverse change in its condition (financial or other), net worth, results of
operations, business, management or properties which would be material to the
business or financial condition of the Company, and the Company has not become
party to, and neither the business nor the property of the Company has become
the subject of, any material litigation whether or not in the ordinary course of
business.
(ff) On the Closing Dates all transfer or other taxes (including
franchise, capital stock or other tax, other than income taxes imposed by any
jurisdiction), if any, which are required to be paid in connection with the sale
and transfer of the Units to the Representative will have been fully paid or
provided for by the Company and all laws imposing such taxes will have been
fully complied with.
(gg) Any contract, agreement, instrument, lease or license required to
be described in the Registration Statement or the Prospectus has been properly
described therein. Any contract, agreement, instrument, lease, or license
required to be filed as an exhibit to the Registration Statement has been filed
with the Commission as an exhibit to the Registration Statement.
(hh) The Company has no subsidiaries.
(ii) Except as set forth in the Prospectus, no officer, director,
principal stockholder or partner of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the Rules
and Regulations) of any of the foregoing persons or entities has or has had,
either directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company or any of its subsidiaries, or
(B) purchases from or sells or furnishes to the Company or any of its
subsidiaries any goods or services, or (ii) a beneficial interest in any
contract or agreement to which the Company or any of its subsidiaries is a party
or by which it may be bound or affected. Except as set forth in the Prospectus
under "Certain Transactions", there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company or any of its
subsidiaries, on the one hand, and any officer, director, principal stockholder
of the Company or any of its subsidiaries, or any partner, affiliate or
associate of any of the foregoing persons or entities, on the other hand,
required to be set forth in the Prospectus.
(jj) Any certificate signed by any officer of the Company and delivered
to the Representative or to Representative's Counsel (as defined herein) shall
be deemed a
11
12
representation and warranty by the Company to the Representative as to the
matters covered thereby.
(kk) The minute book of the Company has been made available to the
Representative and contains a complete record in all material respects of all
meetings and actions of the directors and stockholders of the Company,
respectively, since the time of its incorporation, contains a complete record of
all matters discussed at all such meetings and accurately reflects all
transactions referred to in such minutes in all material respects.
(ll) Except and to the extent the same may be described in the
Prospectus, no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have the
right to include any securities issued by the Company in the Registration
Statement or in any other registration statement to be filed by the Company or
to require the Company to file a registration statement under the Act and except
as described in the Registration Statement, no person or entity holds any price
protection anti-dilution rights with respect to any securities of the Company.
(mm) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance in all material respects
with all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours. There are no pending investigations involving the Company or
any of its subsidiaries by the U.S. Department of Labor or any other
governmental agency responsible for the enforcement of such federal, state,
local or foreign laws and regulations. There is no unfair labor practice charge
or complaint against the Company or any of its subsidiaries pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against or involving the Company or
any of its subsidiaries, or any predecessor entity, and none has ever occurred.
No representation question exists respecting the employees of the Company or any
of its subsidiaries and no collective bargaining agreement or modification
thereof is currently being negotiated by the Company. No grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company.
(nn) Immediately prior to the effective date of the Registration
Statement there shall be no more than ________ shares of Common stock issued and
outstanding; there shall be no more than ______ shares of Common Stock reserved
for issuance upon the exercise of securities issued by the Company which are
convertible to and exercisable for shares of Common Stock. Of the total shares
of Common Stock outstanding or reserved for issuance, no more than ________
shares of Common Stock are reserved for issuance under the Stock Option Plan
described in the Registration Statement, after giving effect to the grant prior
to the date hereof of options to purchase _______ shares thereunder.
12
13
Section 4. Representations and Warranties of the Underwriters.
(a) American Fronteer Financial Corporation, for itself or as the
Representative, on behalf of the several Underwriters, as the
case may be, represents and warrants to the Company that the
information set forth (i) on the cover page of the Prospectus
with respect to price, underwriting discounts and commissions
and terms of offering and (ii) under "Underwriting" in the
Prospectus was the only information furnished to the Company
by it or on behalf of the Underwriters, as the case may be,
for use in connection with the preparation of the Registration
Statement and the Prospectus and is correct in all material
respects.
(b) If applicable, the Representative represents and warrants that
it has been authorized by each of the other Underwriters as
the Representative to enter into this Agreement on its behalf
and to act for it in the manner herein provided.
(c) Each of the Underwriters identified herein represent that they
have, and will maintain during all times that this Agreement
is in effect, sufficient net capital to perform their
obligations under this Agreement.
Section 5. Purchase, Sale and Delivery of Underwritten Units and
Representative's Warrants
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell 1,000,000 Units to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $____ per Unit, the number
of Units set forth opposite the name of each underwriter in Schedule I hereof,
subject to adjustment in accordance with Section __ hereof. Provided, however,
that in no event shall the purchase price be less than $5.00 per Unit or that
the total proceeds to the Company from this offering be less than that amount
required to comply with the qualification requirements for designation of the
Units for inclusion on the Nasdaq SmallCap Market.
(b) The Company agrees to have the Units available for inspection,
checking and packaging by the Representative in _______________ not later than
1:00 PM on the business day prior to the Closing Date.
(c) Payment for the Units to be sold hereunder is to be made in New
York Clearing House funds and, at the option of the Representative by certified
or bank cashier's checks drawn to the order of the Company or bank wire to an
account specified by the Company against either uncertificated or certificated
delivery of the Units (which delivery, if certificated, shall take place in such
location in Denver, Colorado as may be specified by the Representative) to the
Representative for the several accounts of the Underwriters. Such payment is to
be made at the offices of American Fronteer Financial Corporation, at ____ a.m.,
Denver, Colorado time, on the third business day after the date of this
Agreement or at such other time and date not later than five business days
thereafter as the Representative and the Company shall agree, such time and date
being herein referred to as the "Closing Date." (As used herein, "business day"
means a day on which the New York Stock Exchange is open for trading and on
which banks in New York are open for business
13
14
and not permitted by law or executive order to be closed.) Except to the extent
uncertificated Units are delivered at closing, the certificates for the Units
will be delivered in such denominations and in such registrations as the
Representative shall request in writing not later than the second full business
day prior to the Closing Date, and will be made available for inspection by the
Representative at least one business day prior to the Closing Date.
(d) In addition to the sums payable to the Representative as provided
elsewhere herein, the Representative shall be entitled to receive at the
closing, for itself alone and not as representative of the Underwriters, as
additional compensation for its services, purchase warrants (the
"Representative's Warrants") at a cost of $ 0.01 per warrant or $1,000 for the
purchase of up to 100,000 shares of Series A Preferred Stock at a price of
$______ per share and up to 100,000 Public Warrants at a price of $_______ per
Public Warrant, upon the terms and subject to adjustment as described in the
form of Representative's Warrant filed as an exhibit to the Registration
Statement.
Section 6. Offering By the Underwriters
It is understood that the several Underwriters are to make a public
offering of the Units as soon as the Representative deems it advisable to do so.
The Units are to be initially offered to the public at the initial public
offering price set forth in the Prospectus. The Representative may from time to
time thereafter change the public offering price and other selling terms. It is
further understood that the Representative will act as representative of the
Underwriters in the offering and sale of the Units in accordance with an
Agreement Among Underwriters entered into by the Representative and the several
other Underwriters.
Section 7. Covenants of the Company
The Company covenants and agrees with the several Underwriters that:
(a) The Company shall: (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representative containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy or to which the
Representative shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.
(b) The Company shall advise the Representative promptly: (A) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (B) of receipt of any comments from the Commission, (C) of any
request of the
14
15
Commission for amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information, and (D) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any proceedings
for that purpose. The Company will use its best efforts to prevent the issuance
of any such stop order preventing or suspending the use of the Prospectus and to
obtain as soon as possible the lifting thereof, if any is issued.
(c) The Company shall cooperate with the Representative in endeavoring
to qualify the Units, the Series A Preferred Stock and the Public Warrants which
comprise the Units, the Series A Preferred Stock to be issued as dividends and
the Common Stock into which the Series A Preferred Stock is convertible and the
Public Warrants are exercisable for sale under the securities laws of such
jurisdictions as the Representative may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents as are or
may be required to continue such qualifications in effect for so long a period
as the Representative may reasonably request.
(d) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary Prospectus
as the Representative may reasonably request. The Company will deliver to, or
upon the order of, the Representative during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representative may
reasonably request. The Company will deliver to the Representative at or before
the Closing Date, three signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Representative such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representative
may reasonably request.
(e) The Company will comply with the Act and the Rules and Regulations,
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Units as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in light of the circumstances existing at
the time the Prospectus is delivered to a purchaser, not misleading, or if it is
necessary at any time to amend or supplement the Prospectus to comply with any
law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so
15
16
amended or supplemented will not, in light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
(f) The Company shall: (A) deliver to its stockholders annual reports
containing financial statements audited by its independent accountants, and (B)
for a period of five years from the Closing Date, deliver to the Representative
copies of annual reports and quarterly reports concerning unaudited financial
information for each of the first three quarters of each fiscal year and copies
of all other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange or the NASD pursuant to the
requirements of such exchange or the NASD or with the Commission pursuant to the
Act or the Exchange Act. The Company will deliver to the Representative similar
reports with respect to significant subsidiaries, as that term is defined in the
Rules and Regulations, which are not consolidated in the Company's financial
statements.
(g) Except with the prior written consent of the Representative, no
offering, sale, short sale or other disposition of any shares of the Common
Stock, par value $.001 per share (the "Common Stock") or other securities
convertible into or exchangeable or exercisable for shares of Common Stock or
derivative of Common Stock will be made for a period of one hundred and eighty
(180) days after the effective date of this Registration Statement directly or
indirectly, by the Company other than the issuance of Common Stock upon
conversion of the Series A Preferred Stock, sale of Common Stock upon exercise
of the Public Warrants, upon exercise of options outstanding, on the effective
date, under the stock option plan of the Company referred to in the Registration
Statement, or sale of Common Stock upon the exercise of the 1998 Warrants
referred to the Registration Statement.
(h) The Company shall list the Common Stock, the Units, the Series A
Preferred Stock and the Public Warrants on the Nasdaq Small Cap Market and
thereafter to maintain such listing.
(i) The Company shall apply the net proceeds of its sale of the Units
as set forth in the Prospectus and shall file such reports with the Commission
with respect to the sale of the Units and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.
(j) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Units in such a manner as would
require the Company to register as an investment company under the 1940 Act.
(k) The Company shall maintain the currency of the prospectus forming a
part of an effective registration statement, which may be the Registration
Statement, filed with respect to the Units, including the Units to be issued
upon exercise of the Representative's Warrants, the Series A Preferred Stock and
the Public Warrants which comprise the Units, the Series A Preferred Stock to be
issued as dividends, the Common Stock into which the
16
17
Series A Preferred Stock is convertible and the Public Warrants are exercisable,
at all times during which any shares of the Series A Preferred Stock or any
Public Warrants remain outstanding.
(l) The Company shall maintain the currency of the prospectus forming a
part of an effective registration statement, which may be the Registration
Statement, filed with respect to the Units, the Representative's Warrant, the
Series A Preferred Stock and the Public Warrants which comprise the Units
(including the Series A Preferred Stock and the Public Warrants issuable upon
exercise of the Representative's Warrant), the Series A Preferred Stock to be
issued as dividends, the Common Stock into which the Series A Preferred Stock is
convertible and the Public Warrants issuable upon exercise of the
Representative's Warrant is convertible or exercisable, respectively) at all
times during which any shares of the Series A Preferred Stock or any Public
Warrants remain outstanding.
(m) The Company shall maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar for the Common
Stock, the Units, the Series A Preferred Stock, and the Public Warrants.
(n) The Company shall not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
Section 8. Expenses.
(a) Expenses of the Company. The Company agrees with each Underwriter
that the Company will pay and bear all costs in connection with the preparation,
printing and filing of the Registration Statement (including financial
statements, schedules and exhibits), Preliminary Prospectuses and the Prospectus
and any amendments or supplements thereto; the printing of this Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreement, the Preliminary
Blue Sky Survey and any supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to any of the
foregoing; the issuance and delivery of the Units hereunder to the several
Underwriters, including transfer taxes, if any, the cost of all certificates
representing the Units and the Series A Preferred Stock and the Public Warrants
comprising the Units, and transfer agents' and registrars' fees; the fees and
disbursements of counsel for the Company; all fees and other charges of the
Company's independent certified public accountants; the cost of furnishing the
several Underwriters copies of the Registration Statement (including appropriate
exhibits), Preliminary Prospectus and the Prospectus, and any amendments or
supplements to any of the foregoing; Nasdaq Small Cap Market application fees
and the cost of qualifying the Common Stock, the Units, the Series A Preferred
Stock and the Public Warrants under the laws of such jurisdictions as you may
reasonably designate; the costs and expenses of two Due Diligence presentations
(one in Chicago and one in Denver); and all other expenses directly incurred by
the Company in connection with the performance of its
17
18
obligations hereunder; provided, however, that the Company shall not be
obligated to pay the fees and disbursements of counsel for the Underwriters.
(b) Non-Accountable Allowance. Upon the consummation of the
transactions contemplated hereunder and, in any event, not later than the date
of the Closing, the Company shall reimburse American Fronteer Financial
Corporation for its expenses on a non-accountable basis in the amount of
$_______________, of which amount a total of $ ___________ has been advanced at
the date of this Agreement. In the event this offering is not completed in
accordance with the terms of this Agreement, American Fronteer Financial
Corporation shall repay to the Company all funds advanced less an amount equal
to the out of pocket expenses actually incurred by American Fronteer Financial
Corporation for this offering and which are reasonably accounted for by it to
the Company. Such amount of out of pocket expenses shall not exceed the maximum
provided for herein.
Section 9. Conditions of the Obligations of the Underwriters.
The obligations of the several Underwriters to purchase and pay for the
Units on the Closing Date shall be subject to the accuracy, as of the date
hereof and as of the Closing Date, of the representations and warranties on the
part of the Company contained herein, to the performance by the Company of its
covenants and obligations hereunder, to the accuracy of the statements of
Company officers made pursuant to the provisions hereof, and to the following
additional conditions:
(a) The Registration Statement shall have become effective not later
than 4:00 P.M., Colorado time, on the date following the date of this Agreement,
or at such later time as shall have been consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of Underwriters' counsel.
(b) All corporate proceedings by the Company and other legal matters in
connection with this Agreement, the form of the Registration Statement and the
Prospectus, and the registration, qualification, authorization, issue, sale and
delivery of the Units, the Series A Preferred Stock and the Public Warrants
shall have been reasonably satisfactory to Underwriters' counsel, and such
counsel shall have been furnished with such papers and information as counsel
may reasonably have requested to enable counsel to pass upon the matters
referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have been any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse
18
19
and that makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering of the Units as contemplated by the Prospectus.
(d) You shall have received on the Closing Date on which Units are
purchased, the following opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the
Company, dated the Closing Date, addressed to the Representative, on behalf of
the Underwriters (and stating that it may be relied upon by counsel for the
Underwriters), to the effect that:
(i) The Company is a corporation in good standing under the laws of the
jurisdiction of its incorporation;
(ii) The Company has the corporate power and authority to own, lease
and operate its properties and to conduct its business as described in
the Prospectus;
(iii) The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction, if any, in
which the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where failure to be so
qualified or be in good standing would not have a material adverse
effect on the condition (financial or otherwise), earnings, operations
or business of the Company;
(iv) To such counsel's knowledge, the Company does not own or control,
directly or indirectly, any corporation, association or other entity;
(v) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus under the caption "Capitalization" as
of the dates stated therein, the issued and outstanding shares of
capital stock of the Company have been duly and validly issued and are
fully paid and nonassessable, and, to such counsel's knowledge, will
not have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or
other similar right of stockholders;
(vi) The Units, the Series A Preferred Stock and the Public Warrants
comprising the Units, the shares of Common Stock which are issuable
upon conversion of the Series A Preferred Stock and exercise of the
Public Warrants each have been duly authorized and, upon issuance and
delivery against payment therefor in accordance with the terms hereof,
will be duly and validly issued and fully paid and nonassessable, and
will not have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or
other similar right of stockholders, and will be offered and sold in
compliance in all material respects with applicable securities laws;
(vii) The Company has the corporate power and authority to enter into
this Agreement and to issue, sell and deliver to the Underwriters the
Units to be issued and sold by it hereunder;
19
20
(viii) The Company has the corporate power and authority to issue, sell
and deliver to the Representative the Representative's Warrants to be
issued and sold by it hereunder;
(ix) Each of this Agreement, the Series A Preferred Stock, the Public
Warrants and the Representative's Warrant has been duly authorized by
all necessary corporate action on the part of the Company and has been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, is a valid and binding
agreement of the Company, enforceable in accordance with its terms,
except insofar as indemnification provisions may be limited by
applicable law and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by equitable
principles;
(x) The Registration Statement has become effective under the Act and,
to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceeding for
that purpose have been instituted or are pending or threatened under
the Act;
(xi) The Registration Statement and the Prospectus, and each amendment
or supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which
such counsel need express no opinion), as of the effective date of the
Registration Statement, complied as to form in all material respects
with the requirements of the Securities Act of 1933 and the applicable
Rules and Regulations thereunder;
(xii) The information in the Prospectus under the captions
"Management," "Certain Transactions," "Description of Capital Stock,"
and "Shares Eligible for Future Sale," and in the Registration
Statement in Items 24 and 26 and insofar as such information
constitutes matters of law or legal conclusions, has been reviewed by
such counsel and is a fair summary of such matters and conclusions;
(xiii) The form of certificate evidencing the Units, the Series A
Preferred Stock, the Public Warrants and the Common Stock to be issued
upon conversion of the Series A Preferred Stock and exercise of the
Public Warrants, each filed as an exhibit to the Registration Statement
complies with Colorado law;
(xiv) The description in the Registration Statement and the Prospectus
of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the
Securities Act of 1933 and the applicable Rules and Regulations
thereunder;
(xv) To such counsel's knowledge, there are no agreements, contracts,
leases or documents to which the Company is a party of a character
required to be
20
21
described or referred to in the Registration Statement or Prospectus or
to be filed as an exhibit to the Registration Statement which are not
described or referred to therein or filed as required;
(xvi) The execution and delivery of this Agreement and the
Representative's Warrant and the performance of and the consummation of
the transactions herein and therein contemplated (other than
performance of the Company's indemnification obligations concerning
which no opinion need be expressed), which include the issuance of
Series A Preferred Stock and Public Warrants, will not (a) result in
any violation of the Company's charter or bylaws or (b) to such
counsel's knowledge, result in any material breach or violation of any
of the terms and provisions of, or constitute a default under, any
bond, debenture, note or other evidence of indebtedness, or under any
lease, contract, indenture, mortgage, deed of trust, loan agreement,
joint venture or other agreement or instrument known to such counsel
to which the Company is a party or by which its properties are bound,
or any applicable statute, rule or regulation or any order, writ or
decree of any court, government or governmental agency of body having
jurisdiction over the Company or over any of its properties or
operations;
(xvii) No consent, approval, authorization or order of or qualification
with any court, government or governmental agency or body having
jurisdiction over the Company or over any of its properties or
operations is necessary in connection with the consummation by the
Company of the transactions contemplated in this Agreement and the
Representative's Warrant, except as such have been obtained under the
Securities Act or such as may be required under the state or other
securities or Blue Sky laws in connection with the purchase and the
distribution of the Units by the Underwriters as set forth in the final
blue sky memorandum;
(xviii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company of a character
required to be disclosed in the Registration Statement or the
Prospectus by the Securities Act or the Rules and Regulations
thereunder or by the Securities Exchange Act of 1934 or the applicable
Rules and Regulations thereunder, other than those, if any, described
in the Registration Statement or Prospectus;
(xix) The Company is not presently (a) in material violation of its
charter or bylaws, or (b) to such counsel's knowledge, in material
breach of any applicable statute, rule or regulation, order, writ or
decree of any court or governmental agency or body having jurisdiction
over the Company or over any of its properties or operations;
(xx) The Series A Preferred Stock and the Public Warrants to be issued
by the Company pursuant to the terms of the Representative's Warrant,
and the Common Stock to be issued upon their conversion or exercise
pursuant to the terms of the Representative's Warrants, each have been
duly authorized and, upon issuance and delivery against payment
therefor in accordance with the terms of the
21
22
Representative's Warrants and their respective terms, will be duly and
validly issued and fully paid and nonassessable, and to such counsel's
knowledge, will not have been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first
refusal or other similar right of stockholders;
(xxi) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of the common stock
of the Company or other securities of the Company have any registration
rights with respect to securities of the Company, and, except as set
forth in the Registration Statement and Prospectus, all holders of
securities of the Company having rights known to such counsel to
require registration of common stock or other securities, because of
the filing of the Registration Statement by the Company have, with
respect to the offering contemplated thereby, waived such rights or
such rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration Statement
or have included securities in the Registration Statement pursuant to
the exercise of and in full satisfaction of such rights;
(xxii) The offer and sale of all securities of the Company made within
the last three years as set forth in Item 26 of the Registration
Statement were exempt from the registration requirements of the
Securities Act, pursuant to the provisions set forth in such Item, and
from the registration or qualification requirements of all relevant
state securities laws; and
(xxiii) The properties and business of the Company conform to the
descriptions thereof contained in the Registration Statement.
(xxiv) The Company is not in breach of, or in default under, any term
or provision of any license, contract, indenture, mortgage, installment
sale agreement, deed of trust, lease, voting trust agreement,
shareholders' agreement, partnership agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is
a party or by which the Company may be bound or to which the property
or assets (tangible or intangible) of the Company is subject or
affected, which could materially adversely affect the Company; and the
Company is not in violation of any term or provision of its Articles of
Incorporation or by-laws, or, to such counsel's knowledge, in violation
of any franchise, license, permit, judgment, decree, order, statute,
rule or regulation the result of which would materially adversely
affect the condition, financial or otherwise, or the earnings, business
affairs, position, stockholders' equity, value, operations, properties,
business or results of operation of the Company.
(xxv) To the best of counsel's knowledge, there is no claim or action
by any person pertaining to, or any pending or threatened proceeding
which challenges, the exclusive rights of the Company with respect to,
any trademarks, service marks, copyrights, service names, trade names,
patents, patent applications and licenses used in the conduct of the
business of the Company.
22
23
(xxvi) The lock-up agreements are legal, valid and binding obligations
of the parties thereto, enforceable against each such party and any
subsequent holder of the securities subject thereto in accordance with
their terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action, legal
or equitable).
(xxvii) During the course of the preparation of the Registration
Statement, such counsel has participated in conferences with the
officials and other representatives of the Company, the Representative,
counsel to the Underwriters and the independent certified public
accountants of the Company, at which such conferences the contents of
the Registration Statement and Prospectus and related matters were
discussed, and although (except as specified in such counsels' opinion)
they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has
come to the attention of such counsel which leads them to believe that,
at the time the Registration Statement became effective and at all
times subsequent thereto up to and on the Closing Date, the
Registration Statement and any amendment or supplement, when such
documents became effective or were filed with the Commission (other
than the financial statements including supporting schedules and other
financial and statistical information derived therefrom, as to which
such counsel need express no comment) contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statement therein not
misleading, or at the Closing Date, the Prospectus and any amendment or
supplement thereto, contained any untrue statement of a material fact
or omitted to state a material fact necessary to make the statement
therein, in the light of the circumstances under which they were made,
not misleading.
Counsel rendering the foregoing opinion may rely as to questions of law
not involving the laws of the United States or the State of Colorado upon
opinions of local counsel, and as to questions of fact upon representations or
certificates of officers of the Company, and of government officials, in which
case the opinion of counsel is to state that they are so relying and that they
have no knowledge of any material misstatement or inaccuracy in any such
opinion, representation or certificate.
(e) You shall have received on the Closing Date, an opinion of
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, in form and substance satisfactory to you, with
respect to the sufficiency of all such corporate proceedings and other legal
matters relating to this Agreement and the transactions contemplated hereby as
you may reasonably require, and the Company shall have furnished to such counsel
such documents as they may have requested for the purpose of enabling them to
pass upon such matters.
(f) You shall have received on the Closing Date, the opinion of Hill &
▇▇▇▇▇▇▇, P.C., special counsel to the Company for water rights matters, dated
the Closing Date, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters), in form and substance satisfactory
to counsel for the Underwriters, to the effect that as counsel
23
24
to the Company for water rights matters, such counsel has no reason to believe
the statements in the Registration Statement and Prospectus pertaining to water
rights under "Risk Factors," "Eldorado and Its Business - Strategy" and
"Eldorado and Its Business - Water Rights" and all other portions of the
Company's Registration Statement pertaining to water rights contain any untrue
statement of material fact, or fail to disclose any material fact that is
required to be stated therein or is necessary to make the statements made no
misleading, with respect to water rights.
(g) The Representative shall have received at or prior to the Closing
Date from ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Company, a memorandum or
summary, in form and substance satisfactory to the Representative, with respect
to the qualification for offering and sale by the Underwriters or the Units
under the state securities of Blue Sky laws of such jurisdictions as the
Representative may reasonably have designated to the Company.
(h) The Representative shall have received from ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Attorney at Law, counsel for the Underwriters, such written opinion, dated at or
prior to the Closing Date, with respect to the matters covered in paragraphs
(i), (ii), (iii), (v), (vi), (vii) and (viii) of subsection (d) above, as well
as such other related matters as may be reasonably requested, and such counsel
shall have received such papers and information as he may reasonably request to
enable him to pass upon such matters.
(i) The Representative shall have received at or prior to the Closing
Date, a letter addressed to the Company and the Representative, on behalf of the
several Underwriters, dated the Closing Date, in form and substance satisfactory
to the Representative, from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇:
(i) confirming that they are, and during the period covered by their
reports included in the Registration Statement that they were,
independent certified public accountants with respect to the Company
within the meaning of the Act and the public Regulations;
(ii) stating that, in their opinion, the financial statements and
schedules of the Company included in the Registration Statement
examined by them comply in form in all material respects with the
applicable accounting requirements of the Act and the Regulations;
(iii) stating that, on the basis of procedures (but not an examination
made in accordance with generally accepted auditing standards)
consisting of a reading of the latest available unaudited interim
financial statements of the Company (and an indication of the date of
the latest available unaudited interim financial statements), a reading
of the latest available minutes of the stockholders and Board of
Directors of the Company and committees of such board, inquiries to
certain officers and other employees of the Company responsible for
financial and accounting matters, and other specified procedures and
inquiries, nothing has come to their attention that caused them to
believe that (A) the unaudited
24
25
financial statements and schedules of the Company included in the
Registration Statement do not comply in form in all material respects
with the applicable accounting requirements of the Act and the Exchange
Act and the related published rules and regulations under either such
act or are not fairly presented in conformity with generally accepted
accounting principles (except to the extent that certain footnote
disclosures regarding any stub period may have been omitted in
accordance with the applicable rules of the Commission under the
Exchange Act) applied on a basis consistent with that of the audited
financial statements appearing therein, (B) any unaudited financial
information of the Company included in the Prospectus was not
determined on a basis substantially consistent with the corresponding
information in the audited financial statements, (C) there was any
change in the capital stock or debt of the Company or any decrease in
the net current assets or stockholders' equity of the Company as of the
date of the latest available monthly financial statement of the Company
or as of a specified date not more than five (5) business days prior to
the date of such letter, each as compared to the amounts shown in the
______________, 2000 balance sheet included in the Registration
Statement, other than as properly described in the Registration
Statement, or any change or decrease (which shall be set forth in such
letter) which the Representative, in its sole discretion shall accept,
or (D) there was any decrease in revenue, net earnings, or net earnings
per share of Common Stock of the Company during the period of
_________, 2000 to the date of the latest available monthly financial
statements of the Company or to a specified date not more than five (5)
business days prior to the date of such letter, each as compared with
the corresponding prior year period, other than as properly described
in the Registration Statement or any decrease (which shall be set forth
in such letter) which the Representative, in its sole discretion shall
accept; and
(iv) stating that they have compared specific numerical data and
financial information pertaining to the Company set forth in the
Registration Statement, each Preliminary Prospectus, and the
Prospectus, if applicable, which have been specified by the
Representative prior to the date of this Agreement, to the extent that
such data and information may be derived from the general accounting
records of the Company, and excluding any questions requiring
interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries, and other appropriate
procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the
letter, and found by them to be in agreement.
(j) You shall have received on the Closing Date, a certificate of the
Company, dated the Closing Date or such later date, signed by the President and
Chief Financial Officer of the Company, to the effect that, and you shall be
satisfied that:
25
26
(i) The representations and warranties of the Company in this Agreement
are true and correct, as if made on and as of the Closing Date, and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Securities Act of
1933 or otherwise;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of each certificate, (a) the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act of 1933 and the Rules and
Regulations thereunder or the Securities Exchange Act of 1934 and the
applicable Rules and Regulations thereunder, as the case may be, and in
all material respects conformed to the requirements of such statutes
and rules and regulations, (b) the Registration Statement, and any
amendment or supplement thereto, did not and does not include any
untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (c) the Prospectus, and any amendments or
supplements thereto, did not and does not include any untrue statement
of material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (c)
the Prospectus, and any amendments or supplements thereto did not and
does not include any untrue statement of material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading; and since the effective date of the
Registration Statement, there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been so
set forth; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been
(a) any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company, (b) any transaction that is material to the Company, except
transactions entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the Company,
incurred by the Company, except obligations incurred in the ordinary
course of business, (d) change in the capital stock or outstanding
indebtedness of the Company that is material to the Company, (e) any
dividend or distribution of any kind declared, paid or made on the
capital stock of the Company, or (f) any loss or damage (whether or not
insured) to the property of the Company which has been sustained or
will have been sustained which has a material adverse affect on the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company.
(k) The Company shall have obtained and delivered to you an agreement
from each officer and director, in writing prior to the date hereof that such
person will not, during the Lock-up Period, effect the disposition of any
securities now owned or hereafter acquired
26
27
directly by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) as a bona fide gift or
gifts, provided the donee or donees thereof agree in writing to be bound by this
restriction, or (ii) with the prior written consent of American Fronteer
Financial Corporation. The foregoing restriction is expressly agreed to preclude
the holder of the securities from engaging in any hedging or other transaction
which is designed to or reasonably expected to lead to or result in a
disposition of securities during the Lock-up Period, even if such securities
would be disposed of by someone other than such holder. Such prohibited hedging
or other transactions would include, without limitation, any short sale (whether
or not against the box) or any purchase, sale or grant of any right (including
without limitation, any put or call option) with respect to any securities of
the Company. Furthermore, such person will have also agreed and consented to the
entry of stop transfer instructions with the Company's transfer agent against
the transfer of the securities held by such person except in compliance with
this restriction.
(l) The Company shall have furnished to you such further certificates
and documents as you shall reasonably request, including certificates of
officers of the Company as to the accuracy of the representations and warranties
of the Company, as to the performance by the Company of its obligations
hereunder and as to the other conditions concurrent and precedent to the
obligations of the Underwriters hereunder.
(m) The Representative's Warrant shall have been issued and sold to
you.
(n) Prior to the Closing Date, the Common Shares, the Units, the Series
A Preferred Stock and the Public Warrants shall have been authorized for
inclusion in the NASDAQ SmallCap Market upon official notice of issuance.
All such opinions, certifications, letters and documents provided for in this
Section 8 will be compliance with the provisions hereof only if they are
reasonably satisfactory to counsel for the Underwriters. The Company will
furnish you with such number of conformed copies of such opinions, certificates,
letters and documents as you shall reasonably request.
Section 10. Substitution of Underwriters
If any Underwriter or Underwriters shall fail to take up and pay for
the number of Units agreed by such Underwriter or Underwriters to be purchased
hereunder upon tender of such Units in accordance with the terms hereof, the
Company shall immediately give notice thereof to you, and the non-defaulting
Underwriters shall have the right within 24 hours after the receipt of said
notice to procure one or more other Underwriters to purchase, in such
proportions as may be agreed upon between you and such purchasing Underwriter or
Underwriters and upon the terms herein set forth, all or part of the shares of
the Units which such defaulting Underwriter or Underwriters agreed to purchase.
If the non-defaulting Underwriters fail to make such arrangements with respect
to all such shares, the number of Units which each non-defaulting Underwriter is
otherwise obligated to purchase under this Agreement shall be automatically
increased on a pro rata basis to absorb the remaining Units which the defaulting
Underwriter or Underwriters agreed to purchase
27
28
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
Section 11. Indemnification.
(a) The Company agrees to indemnify and hold harmless you or each
Underwriter and each person, if any, who controls you or any such Underwriter,
as the case may be, within the meaning of the Act against any losses, claims,
damages, liabilities or expenses, joint or several, to which you or such
Underwriter, as the case may be, or such controlling person may become subject,
under the Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state in any of them a material fact required to be
stated therein or necessary to make the statements in any of them not
misleading; and will reimburse you or each Underwriter, as the case may be, and
each such controlling person for any legal and other expenses reasonably
incurred by you or such Underwriter or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement, the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by you or by or on behalf of any Underwriter through the Representative,
as the case may be, specifically for use therein; and provided further, that
with respect to any untrue statement or omission or alleged untrue statement or
omission made in any Preliminary Prospectus, the indemnity agreement contained
in this paragraph shall not inure to the benefit of you or any Underwriter, as
the case may be, from whom the person asserting any such losses, claims,
damages, liabilities or expenses purchased the Units concerned (or to the
benefit of any person controlling you or such Underwriter, as the case may be)
to the extent that any such loss, claim, damage, liability or expense of you or
such Underwriter, as the case may be, or controlling person results from the
fact that a copy of the Prospectus was not sent or given to such person at or
prior to the written confirmation of sale of such Common Shares to such person
as required by the Act, and if the untrue statement or omission has been
corrected in the Prospectus unless such failure to deliver the Prospectus was a
result of noncompliance by the Company with its obligations under Section 6(e)
hereof; and provided further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in the Registration
Statement, the Prospectus, or any amendment or supplement thereto.
28
29
(b) You or each Underwriter severally, as the case may be, will
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Act, against any losses, claims,
damages, liabilities or expenses to which the Company, or any such director,
officer or controlling person may become subject, under the Act, the Exchange
Act, or other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) arise
out of or are based upon any untrue or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with Section 4 of this Agreement or any other written
information furnished to the Company by you or such Underwriter through the
Representative, as the case may be, specifically for use in the preparation
thereof; and will reimburse the Company, or any such director, officer or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. This indemnity agreement will be in
addition to any liability which you or such Underwriter, as the case may be, may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section or to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and counsel for the indemnified
party shall have reasonably concluded that there may be a conflict between the
positions of the indemnifying party and the indemnified party in conducting the
defense of any such action or that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of
29
30
counsel, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying party.
(d) If the indemnification provided for in this Section 11 is required
by its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or
(c) in respect of any losses, claims, damages, liabilities or expenses referred
to herein, then such applicable indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and you or the Underwriters, as the case may be, from the offering of
the Units or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and you or the Underwriters, as the case may be, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company and you or the Underwriters 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 or you or the Underwriters, as the case may
be, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in subparagraph (c) of this Section 11, any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
subparagraph (c) of this Section 11 with respect to notice of commencement of
any action shall apply if a claim for contribution is to be made under this
subparagraph (d); provided, however, that no additional notice shall be required
with respect to any action for which notice has been given under subparagraph
(c) for purposes of indemnification. The Company and you or the Underwriters, as
the case may be, agree that it would not be just and equitable if contribution
pursuant to this Section 10 were determined solely by pro rata allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 11, neither you nor any
Underwriter, as the case may be, shall be required to contribute any amount in
excess of the amount by which the total underwriting discount received by you or
such Underwriter, as the case may be, in connection with the Units underwritten
by it and distributed to the public exceeds the amount of any damages which you
or such Underwriter has otherwise been required to pay by reason of such untrue
alleged untrue statement or omission or alleged omission. No person guilty of
30
31
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. If applicable, the Underwriters' obligations to
contribute pursuant to this Section 11 are several in proportion to their
respective underwriting commitments and not joint.
(e) In addition to and without in any way limiting the other
obligations of the parties under this Section 11, the Company hereby further
agrees to reimburse you or each Underwriter, as the case may be, and each person
who controls you or any such Underwriter within the meaning of Section 15 of the
Act on a quarterly basis for one-half of all reasonable legal and other expenses
incurred in connection with investigating or defending 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
paragraph (a) of this Section 10, notwithstanding the possibility that such
payments might later be held to be improper, but only under circumstances where
you or such Underwriter has selected separate counsel or elected to participate
in the defense of the action as permitted by the proviso of the second sentence
of Section 11(c) hereof. To the extent that any payment is ultimately held to be
improper, you or each Underwriter, as the case may be, shall promptly refund
such payment.
Section 12. Effectiveness of Registration Statement.
The Company will use its best efforts to cause the Registration
Statement to become effective, to prevent the issuance of any stop order
suspending the effectiveness of the Registration Statement and, if such stop
order be issued, to obtain as soon as possible the lifting thereof.
Section 13. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective: (I) upon the execution and
delivery hereof by the parties hereto; or (ii) if, at the time this Agreement is
executed and delivered, it is necessary for the Registration Statement thereto
to be declared effective before the offering of Units may commence, when
notification of the effectiveness of the Registration Statement has been
released by the Commission. By giving notice of termination by the means set
forth in this Section 12 before the time this Agreement becomes effective, you,
as Representative of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability to any other party, except
as provided in Section 11 hereof.
(b) You, as Representative of the several Underwriters, shall have the
right to terminate this Agreement by giving notice as hereinafter specified at
any time at or prior to the Closing Date, (i) if the Company shall have failed,
refused or been unable to perform any agreement on its part to be performed, or
because any other condition of the Underwriters' obligations hereunder required
to be fulfilled is not fulfilled, including, without limitation, any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and adverse,
or (ii) if additional material governmental restrictions not in force and effect
on the date hereof, shall have been
31
32
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market by the NASD, or trading in
securities generally shall have been suspended on either such exchange or in the
over-the-counter market by the NASD, or if a banking moratorium shall have been
declared by federal, New York, Illinois or Colorado authorities, or (iii) if the
Company shall have sustained a loss by strike, fire, flood, earthquake, accident
or other calamity of such character as to interfere materially with the conduct
of the business and operations of the Company regardless of whether or not such
loss or interference shall have been insured, or (iv) if there shall have been a
material adverse change in the general political or economic conditions or
financial markets as in your reasonable judgment makes it inadvisable or
impracticable to proceed with the offering, sale and delivery of the Common
Shares, or (v) if there shall have been an outbreak or escalation of hostilities
or of any other insurrection or armed conflict or the declaration of the United
States of a national emergency which, in the reasonable opinion of the
Representative, makes it impracticable or inadvisable to proceed with the public
offering of the Common Shares as contemplated by this Prospectus. Any
termination pursuant to this paragraph 13(b) shall be without liability of any
party to any other party except as provided in Section 11 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 13, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case, confirmed
by letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
Section 14. Representations and Indemnities to Survive Delivery.
The respective indemnities, agreements, representations, warranties and
other statements of the Company, of its officers or key employees and of you or
the Underwriters, as the case may be, set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by you individually or on behalf of any Underwriter, as the case may be, or
the Company or any of its or their partners, officers or directors or any
controlling person, and will survive delivery of and payment for the Common
Shares sold hereunder and any termination of this Agreement.
Section 15. Notices.
All communications hereunder shall be in writing and, if sent to you
individually or on behalf of the several Underwriters, shall be mailed,
delivered, telefaxed or telegraphed and confirmed to you at American Fronteer
Financial Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇, Managing Director; and if sent to the Company shall be
mailed, delivered, telefaxed or telegraphed and confirmed to the Company at ▇.▇.
▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇. The
Company, or you may change the address for receipt of communications hereunder
by giving notice to the other.
32
33
Section 16. Successors.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto, including any substitute Underwriters pursuant to Section 10
hereof, and to the benefit of the officers and directors and controlling persons
referred to in Section 11, and in each case their respective successors,
personal representatives and assigns, and no other person will have any right or
obligation hereunder. No such assignment shall relieve any party of its
obligations hereunder. The term "successors" shall not include any purchaser of
the Common Shares as such from you or any of the Underwriters merely by reason
of such purchase.
Section 17. Representative of Underwriters.
If applicable, you will act as Representative for the several
Underwriters in connection with all dealings hereunder, and any action under or
in respect of this Agreement taken by the Underwriters jointly or by American
Fronteer Financial Corporation, as Representative, will be binding upon all the
Underwriters.
Section 18. Partial Unenforceability.
The invalidity or unenforceability of any Section, paragraph or
provision of this Agreement shall not affect the validity or enforceability of
any other Section, paragraph or provision hereof. If any Section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, there shall be deemed to be made such minor changes (and only
such minor changes) as are necessary to make it valid and enforceable.
Section 19. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the internal laws (and not the laws pertaining to conflicts of laws) of the
State of Colorado.
Section 20. General.
This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may be executed in several counterparts, each one of
which shall be an original, and all of which shall constitute one and the same
document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and you, individually or on behalf of
the several Underwriters, as the case may be.
33
34
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement among the Company and American Fronteer
Financial Corporation, or the several Underwriters including you, as the case
may be, all in accordance with its terms.
Very truly yours,
ELDORADO ARTESIAN SPRINGS, INC.
By:
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
The foregoing Underwriting Agreement is hereby confirmed and accepted by us in
Denver, Colorado as of the date first above written.
AMERICAN FRONTEER FINANCIAL CORPORATION
If applicable, acting as Representative of the several Underwriters named in the
attached Schedule A.
By: AMERICAN FRONTEER FINANCIAL CORPORATION
By:
----------------------------------------
▇▇▇▇ ▇▇▇▇, Managing Director
34
35
SCHEDULE A
Number or Units
Name of Underwriter to be Purchased
------------------- ---------------
American Fronteer Financial Corporation
35