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EXHIBIT 1.1
1,500,000 UNITS
LEGACY BRANDS, INC.
UNDERWRITING AGREEMENT
_________________, 1998
▇▇▇▇▇▇▇ Investment Company, Inc.
As Representative of the Several Underwriters
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Legacy Brands, Inc., a California 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 1,500,000 Units (the "Firm Units"). Each Unit will consist of one
share of the Company's Common Stock, no par value, substantially in the form
filed as an exhibit to the Registration Statement (herein defined) ("Preferred
Stock"), and one Common Stock Purchase Warrant substantially in the form filed
as an exhibit to the Registration Statement ("Warrants"). The respective amounts
of the Firm Units to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto. The Company also proposes to grant to
the Representative an option to purchase an aggregate up to 225,000 additional
Units, identical to the Firm Units, (the "Option Units") as set forth below. The
offer and sale of the Firm Units and the Option Units pursuant to this Agreement
is referred to as the "Offering."
As the Representative, you have advised the Company (a) that you are
authorized to enter into this Agreement for yourself as the Representative and
on behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the number of Firm Units
set forth opposite their respective names in Schedule I. The Firm Units and the
Option Units (to the extent the aforementioned option is exercised) are herein
collectively called the "Units."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
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1. Representations and Warranties of the Company.
The Company represents and warrants to each of the Underwriters as
follows:
(a) A registration statement on Form SB-2 (File No.
333-_________) with respect to the Units has been carefully prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") thereunder and has
been filed with the Commission. Copies of such registration statement, including
any amendments thereto, the preliminary prospectuses (meeting the requirements
of the Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have heretofore been
delivered by the Company to you. Such registration statement, together with any
registration statement filed by the Company pursuant to Rule 462(b) of the Act,
herein referred to as the "Registration Statement," which shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. "Prospectus" means (a) the form of prospectus
first filed with the Commission pursuant to Rule 424(b) or (b) the last
preliminary prospectus included in the Registration Statement filed prior to the
time it becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Units, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus."
(b)(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
California, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement. The Company
is duly qualified to transact business in all jurisdictions in which the conduct
of its business requires such qualification.
(ii) The Company has no subsidiaries and does not own and
never has owned a controlling interest in any corporation or other business
entity that has or ever has had any material assets, liabilities or operations.
(c) This Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company, enforceable
against it in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(d) The outstanding shares of Common Stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable and
have been issued and sold by the Company in compliance in all material respects
with applicable securities laws; the Warrants to be included in the Units have
been duly authorized and when issued and paid for as contemplated
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herein will be validly issued, fully paid and nonassessable; and no preemptive
rights of shareholders exist with respect to any security of the Company or the
issue and sale thereof. Neither the filing of the Registration Statement nor the
offering or sale of the Units as contemplated by this Agreement gives rise to
any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock or other securities
of the Company.
(e) The information set forth under the caption "Capitalization"
in the Prospectus is true and correct. The Common Stock and the Warrants conform
to the description thereof contained in the Registration Statement. The form of
certificates for the Common Stock and Warrants conform to the corporate law of
the jurisdiction of the Company's incorporation.
(f) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Units nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements 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 amendment thereto do not contain, and will not
contain, any untrue statement of a material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any amendments
and supplements thereto do not contain, and will not contain, any untrue
statement of material fact; and do not omit, and will not omit, to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any Underwriter through the Representative, specifically for use in
the preparation thereof.
(g) The financial statements of the Company, together with
related notes thereto as set forth in the Registration Statement, present fairly
the financial position and the results of operations and cash flows of the
Company at the indicated dates and for the indicated periods. Such financial
statements have been prepared in accordance with generally accepted principles
of accounting, consistently applied throughout the periods involved, except as
disclosed herein, 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 have been compiled on a basis consistent
with the financial statements presented therein and the books and records of the
Company.
(h) Coopers & ▇▇▇▇▇▇▇ LLP, 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
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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, except as set forth in the
Registration Statement.
(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) hereinabove described, 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. The Company occupies its leased properties under
valid and binding leases conforming in all material respects to the description
thereof set forth in the Registration Statement.
(k) The Company has filed all Federal, State, local and foreign
income tax returns which have been required to be filed and have paid all taxes
indicated by said returns and all assessments received by it to the extent that
such taxes have become due and are not being contested in good faith. All tax
liabilities have been adequately provided for in the financial statements of the
Company.
(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 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 or elsewhere in the Prospectus.
(m) The Company is not, nor, with the giving of notice or lapse
of time or both, will it be, in violation of or in default under its Articles of
Incorporation or Bylaws 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 of material significance in
respect of the condition, financial or otherwise of the Company, or the
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 herein contemplated
and the fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company is a party, or of the Articles of Incorporation or Bylaws of the Company
or any order, rule or regulation applicable to the Company of any court or of
any regulatory body or administrative agency or other governmental body having
jurisdiction.
(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
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National Association of Securities Dealers, Inc. (the "NASD") or such additional
steps as may be necessary to qualify the Units for public offering by the
Underwriters under state securities or Blue Sky laws) has been obtained or made
and is in full force and effect.
(o) The Company holds all material patents, patent rights
trademarks, trade names, copyrights, trade secrets and licenses of any of the
foregoing (collectively, "Intellectual Property Rights") that are necessary to
the conduct of its businesses; there is no claim pending or, to the best
knowledge of the Company, threatened against the Company alleging any
infringement of Intellectual Property Rights, or any violation of the terms of
any license relating to Intellectual Property Rights, nor does the Company know
of any basis for any such claim. The Company knows of no material infringement
by others of Intellectual Property Rights owned by or licensed to the Company.
The Company has obtained, is in compliance in all material respects with and
maintains in full force and effect all material licenses, certificates, permits,
orders or other, similar authorizations granted or issued by any governmental
agency (collectively "Government Permits") required to conduct its business as
it is presently conducted. All applications for additional Government Permits
described in the Prospectus as having been made by the Company have been
properly and effectively made in accordance with the applicable laws and
regulations with respect thereto and such applications constitute, in the best
judgment of the Company's management, those reasonably required to have been
made in order to carry out the Company's business plan as described in the
Prospectus. No proceeding to revoke, limit or otherwise materially change any
Government Permit has been commenced or, to the Company's best knowledge, is
threatened against the Company with respect to materials supplied to the
Company, and the Company has no reason to anticipate that any such proceeding
will be commenced against the Company. Except as disclosed or contemplated in
the Prospectus, the Company has no reason to believe that any pending
application for a Government Permit will be denied or limited in a manner
inconsistent with the Company's business plan as described in the Prospectus.
(p) The Company is in all material respects in compliance with
all applicable Environmental Laws. The Company has no knowledge of any past,
present or, as anticipated by the Company, future events, conditions,
activities, investigation, studies, plans or proposals that (i) would interfere
with or prevent compliance with any Environmental Law by the Company or (ii)
could reasonably be expected to give rise to any common law or other liability,
or otherwise form the basis of a claim, action, suit, proceeding, hearing or
investigation, involving the Company and related in any way to Hazardous
Substances or Environmental Laws. Except for the prudent and safe use and
management of Hazardous Substances in the ordinary course of the Company's
business, (i) no Hazardous Substance is or has been used, treated, stored,
generated, manufactured or otherwise handled on or at any Facility and (ii) to
the Company's best knowledge, no Hazardous Substance has otherwise come to be
located in, on or under any Facility. No Hazardous Substances are stored at any
Facility except in quantities necessary to satisfy the reasonably anticipated
use or consumption by the Company. No litigation, claim, proceeding or
governmental investigation is pending regarding any environmental matter for
which the Company has been served or otherwise notified or, to the knowledge of
the Company, threatened or asserted against the Company, or the officers or
directors of the Company, in their capacities as such, or any Facility or the
Company's business. There are no orders, judgments or decrees of any court or of
any governmental agency or instrumentality under any Environmental Law which
specifically apply to the Company, any Facility or any of the
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Company's operations. The Company has not received from a governmental authority
or other person (i) any notice that it is a potentially responsible person for
any Contaminated site or (ii) any request for information about a site alleged
to be Contaminated or regarding the disposal of Hazardous Substances. There is
no litigation or proceeding against any other person by the Company regarding
any environmental matter. The Company has disclosed in the Prospectus or made
available to the Underwriters and their counsel true, complete and correct
copies of any reports, studies, investigations, audits, analysis, tests or
monitoring in the possession of or initiated by the Company pertaining to any
environmental matter relating to the Company, its past or present operations or
any Facility.
For the purposes of the foregoing paragraph, 'Environmental Laws" means
any applicable federal, state or local statute, regulation, code, rule,
ordinance, order, judgment, decree, injunction or common law pertaining in any
way to the protection of human health or the environment, including without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Toxic Substances
Control Act, the Clean Air Act, the Federal Water Pollution Control Act and any
similar or comparable state or local law; "Hazardous Substance" means any
hazardous, toxic, radioactive or infectious substance, material or waste as
defined, listed or regulated under any Environmental Law; "Contaminated" means
the actual existence on or under any real property of Hazardous Substances, if
the existence of such Hazardous Substances triggers a requirement to perform any
investigatory, remedial, removal or other response action under any
Environmental Laws or if such response action legally could be required by any
governmental authority; "Facility" means any property currently owned, leased or
occupied by the Company.
(q) Neither the Company, nor to the Company's best 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 the Common Stock to facilitate the sale or resale of the Units, Common
Stock or Warrants.
(r) The Company is not an "investment company" within the meaning
of such term under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
(s) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(t) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of their
respective businesses and the value of their respective properties and as is
customary for companies engaged in similar industries.
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(u) 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
would have any liability; the Company has not 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) Section 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company 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.
(v) The Company is in material compliance with all laws, rules,
regulations, orders of any court or administrative agency, operating licenses or
other requirements imposed by any governmental body applicable to it, including,
without limitation, all applicable laws, rules, regulations, licenses or other
governmental standards applicable to the industries in which the Company
operates; and the conduct of the business of the Company, as described in the
Prospectus, will not cause the Company to be in violation of any such
requirements.
(w) The Warrants have been authorized for issuance to the various
purchasers of the Units and will, when issued, possess rights, privileges, and
characteristics as represented in the most recent form of Warrants filed as an
exhibit to the Registration Statement; the securities to be issued upon exercise
of the Warrants, when issued and delivered against payment therefor in
accordance with the terms of the Warrants, will be duly and validly issued,
fully paid, nonassessable and free of preemptive rights, and all corporate
action required to be taken for the authorization and issuance of the Warrants,
and the securities to be issued upon their exercise, have been validly and
sufficiently taken.
(x) The Representative's Warrants (as defined in Paragraph (d) of
Section 2 hereof) have been 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 Warrants 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, nonassessable 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.
(y) 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 entitled to reimbursement of any kind, including,
without limitation, any compensation that would be includable as underwriter
compensation under the NASD's Corporate Financing Rule with respect to the
offering of the Units, as a result of the consummation of such offering based on
any activity of such person as a finder, agent, broker, investment adviser or
other financial service provider.
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(z) There are no business relationships or related party
transactions involving the Company or any other person required to be described
in the Prospectus that have not been described as required.
2. Purchase, Sale and Delivery of the Units.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_____ per Unit (representing a 10%
discount from the initial public offering price of the Units), the number of
Firm Units set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Units to be sold hereunder is to be made
in New York Clearing House funds and, at the option of the Representative, by
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
delivery of the securities comprising the Firm Units or of certificates therefor
(which delivery, if certificated, shall take place in such location in New York,
New York as may be specified by the Representative) to the Representative for
the several accounts of the Underwriters. Such payment is to be made at the
offices of the Representative, at the address set forth on the first page of
this agreement, at 7:00 a.m., Pacific time, on the third business day after the
commencement of trading of the Units, or at such other time and date not later
than five business days thereafter as you and the Company shall agree upon, such
time and date being herein referred to as the "Closing Date." (As used herein,
"business day" means a day on which the New York Stock Exchange is open for
trading and on which banks in New York are open for business and not permitted
by law or executive order to be closed.) Except to the extent uncertificated
securities comprising the Firm Units are delivered at closing, the certificates
for the securities comprising the Firm Units will be delivered in such
denominations and in such registrations as the Representative requests in
writing not later than the second full business day prior to the Closing Date,
and will be made available for inspection by the Representative at least one
business day prior to the Closing Date.
(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Representative to purchase the
Option Units at the price per Unit as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii)
thereafter (on one or more occasions) within 45 days after the date of this
Agreement, by the Representative to the Company setting forth the number of
Option Units as to which the Representative is exercising the option, the names
and denominations in which the securities comprising the Option Units are to be
registered and the time and date at which certificates representing the
securities comprising such Units are to be delivered. The time and date at which
certificates for the securities comprising the Option Units are to be delivered
shall be determined by the Representative but shall not be earlier than three
nor later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein referred to
as the "Option Closing Date"). If the date of exercise of the option is three or
more days before the Closing Date, the notice of exercise shall set the Closing
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Date as the Option Closing Date. The option with respect to the Option Units
granted hereunder may be exercised only to cover over-allotments in the sale of
the Firm Units by the Underwriters. The Representative may cancel such option at
any time prior to its expiration by giving written notice of such cancellation
to the Company. To the extent, if any, that the option is exercised, payment for
the Option Units shall be made on the Option Closing Date in New York Clearing
House funds and, at the option of the Representative, by certified or bank
cashier's check drawn to the order of the Company for the Option Units to be
sold by the Company or bank wire to an account specified by the Company against
delivery of certificates therefor at the offices of ▇▇▇▇▇▇▇ Investment Company,
Inc. set forth on the first page of this Agreement.
(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 the Representative of the Underwriters,
as additional compensation for its services, purchase warrants (the
"Representative's Warrants") for the purchase of up to 150,000 Units at a price
of $____ per Unit (120% of the initial public offering price of the Units), upon
the terms and subject to adjustment as described in the form of Representative's
Warrants filed as an exhibit to the Registration Statement.
3. Offering by the Underwriters.
It is understood that the several Underwriters are to make a
public offering of the Firm Units as soon as the Representative deems it
advisable to do so. The Firm Units are to be initially offered to the public at
the initial public offering price set forth in the Prospectus. The
Representative may from time to time thereafter change the public offering price
and other selling terms. To the extent, if at all, that any Option Units are
purchased pursuant to Section 2 hereof, the Representative will offer them to
the public on the foregoing terms.
It is further understood that you will act as the Representative
for the Underwriters in the offering and sale of the Units in accordance with an
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company.
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (i) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representative containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, and (ii) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy or to which the
Representative shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.
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(b) The Company will advise the Representative promptly (i) when
the Registration Statement or any post-effective amendment thereto shall have
become effective, (ii) of receipt of any comments from the Commission, (iii) of
any request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representative in
endeavoring to qualify the Units for sale under the securities laws of such
jurisdictions as the Representative may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representative may reasonably request for distribution of the Units.
(d) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary Prospectus
as the Representative may reasonably request. The Company will deliver to, or
upon the order of, the Representative during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representative may
reasonably request. The Company will deliver to the Representative at or before
the Closing Date, two 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 the 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 amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
(f) The Company will make generally available to its security
holders, as soon as it
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is practicable to do so, but in any event not later than 15 months after the
effective date of the Registration Statement, an earnings statement (which need
not be audited) in reasonable detail, covering a period of at least 12
consecutive months beginning after the effective date of the Registration
Statement, which earnings statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representative copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
shareholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to the Representative similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and Regulations,
which are not consolidated in the Company's financial statements.
(h) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of Common
Stock (or agreement for such) will be made for a period of one year after the
date of this Agreement, directly or indirectly, by the Company otherwise than
hereunder or with the prior written consent of the Representative, which consent
will not be unreasonably withheld, other than pursuant to outstanding
convertible securities, stock option and warrants or pursuant to employee
benefit plans in effect as of the date hereof, in each case as disclosed in the
Prospectus.
(i) The Company will use its best efforts to list, subject to
notice of issuance, the Units, Common Stock and Warrants on The Nasdaq SmallCap
Market.
(j) The Company has caused each officer, director and holders of
5% or more of the Company's outstanding Common Stock prior to the Offering 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 Representative
("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 Common Stock or
derivatives of Common Stock owned by such person, or request the registration
for the offer or sale of any of the foregoing (or as to which such person has
the right to direct the disposition of) for a period of one year after the date
of this Agreement, directly or indirectly, except with the prior written consent
of ▇▇▇▇▇▇▇ Investment Company, Inc., which consent shall not be unreasonably
withheld. The Lockup Agreements shall also provide that, after the expiration of
the lockup period, each person shall give you prior notice with respect to any
offers to sell, sales, contracts to sell, short sales or other dispositions of
Common Stock pursuant to Rule 144 under the Act or any similar provisions
enacted subsequent to the date of this Agreement for a period of five years from
the date of this Agreement.
(k) The Company shall apply the net proceeds of its sale of the
Units as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Units
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and the application of the proceeds therefrom as may be required in accordance
with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Units in such a manner as would
require the Company or any of the subsidiaries to register as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
(m) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar, for the
Preferred Stock and Common Stock and a warrant agent for the Warrants.
(n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
5. Costs and Expenses.
(a) The Representative shall be entitled to receive from the
Company, for itself alone and not as the Representative of the Underwriters, a
nonaccountable expense allowance collectively equal to 3% of the aggregate
public offering price of Units sold to the Underwriters in connection with the
Offering. The Representative shall be entitled to withhold this allowance on the
Closing Date (less the $35,000 advance against such amount that has been
previously paid by the Company) with respect to Units delivered on the Closing
Date and to require the Company to make payment of this allowance on the Option
Closing Date with respect to Units delivered on the Option Closing Date.
(b) In addition to the payment described in Paragraph (a) of this
Section 5, the Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company; the cost
of electronic filing, printing and delivering to, or as requested by, the
Underwriters copies of the Registration Statement, Preliminary Prospectuses, the
Prospectus, this Agreement, the Underwriters' Selling Memorandum, the
Underwriters' Invitation Letter, the Listing Application, the Blue Sky Survey
and any supplements or amendments thereto; the filing fees of the Commission;
the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of
the Units; the Listing Fee of The Nasdaq SmallCap Market; the reasonable costs
of conducting a due diligence investigation of the principals of the Company by
a firm acceptable to the Representative, and the expenses, including the fees
and disbursements of counsel for the Underwriters, incurred in connection with
the qualification of the Units under State securities or Blue Sky laws. Any
transfer taxes imposed on the sale of the Units to the several Underwriters will
be paid by the Company. The Company agrees to pay all costs and expenses of the
Underwriters, including the fees and disbursements of counsel for the
Underwriters, incident to the offer and sale of Units by the Underwriters to
employees and persons having business relationships with the Company. The
Company shall not, however, be required to pay for any of the Underwriters'
expenses (other than those related to qualification under NASD regulation and
state
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securities or Blue Sky laws) except that, if this Agreement shall not be
consummated, then the Company shall reimburse the several Underwriters for
reasonable accountable out-of-pocket expenses, including fees and disbursements
of counsel, reasonably incurred in connection with investigating, marketing and
proposing to market the Units or in contemplation of performing their
obligations hereunder (less the $35,000 advance that has been paid by the
Company); but the Company shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Units. In the event this Agreement is not consummated, any
nonaccountable portion of the $35,000 advance shall be promptly returned to the
Company.
(c) In the event the Company elects to redeem the Warrants at any
time commencing one year after the date of this Agreement, the Company shall
retain ▇▇▇▇▇▇▇ Investment Company, Inc. as the Company's solicitation agent (the
"Warrant Solicitation Agent"). The Company shall pay to the Warrant Solicitation
Agent for its services a solicitation fee equal to 3% of the total amount paid
by the holders of the Warrants whom the Warrant Solicitation Agent solicits to
exercise the Warrants. The exercise will be presumed to be unsolicited unless
the customer states in writing that the transaction was solicited by the
Warrants Solicitation Agent and designates in writing the registered
representative of the Warrant Solicitation Agent entitled to receive
compensation for the exercise. The fee shall not be payable for the exercise of
any Warrant held by the Warrant Solicitation Agent in a discretionary account at
the time of exercise, unless the Warrant Solicitation Agent receives from the
customer prior specific written approval of such exercise.
6. Conditions of Obligations of the Underwriters.
The several obligations of the Underwriters to purchase the Firm
Units on the Closing Date and the Option Units, if any, on the Option Closing
Date are subject to the accuracy, as of the Closing Date or the Option Closing
Date, as the case may be, of the representations and warranties of the Company
contained herein, and to the performance by the Company of their covenants and
obligations hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representative and
complied with to its reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance of the Units.
(b) The Representative shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
& ▇▇▇▇▇▇ LLP, counsel for the Company, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters (and stating
that it may be relied upon by counsel to the Underwriters), substantially
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as follows:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
California, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement; the Company
is duly qualified to transact business in all jurisdictions in which the conduct
of its business requires such qualification, or in which the failure to qualify
would have a materially adverse effect upon the business of the Company.
(ii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
outstanding shares of the Company's Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable; all issued and outstanding
shares of the capital stock of the Company and all other securities issued and
sold or exchanged by the Company have been issued and sold or exchanged in
compliance in all material respects with applicable securities laws and
regulations; all of the securities of the Company conform to the description
thereof contained in the Prospectus; the certificates for the Units, Common
Stock and Warrants, assuming they are in the form filed with the Commission, are
in due and proper form; the shares of Common Stock to be sold by the Company
pursuant to this Agreement, including shares of Common Stock to be sold as a
part of the Option Units have been duly authorized and, upon issuance and
delivery thereof as contemplated in this Agreement and the Registration
Statement, will be validly issued, fully paid and nonassessable; no preemptive
rights of shareholders exist with respect to any of the Common Stock of the
Company or the issuance or sale thereof pursuant to any applicable statute or
the provisions of the Company's charter documents or, to such counsel's best
knowledge, pursuant to any contractual obligation. The Warrants and the
Representative's Warrants have been authorized for issuance to the purchasers of
Units or the Representative's Warrants, as the case may be, and will, when
issued, possess rights, privileges, and characteristics as represented in the
most recent form of Warrants or Representative's Warrants, as the case may be,
filed as an exhibit to the Registration Statement; the securities to be issued
upon exercise of the Warrants or the Representative's Warrants, as the case may
be, when issued and delivered against payment therefor in accordance with the
terms of the Warrants or the Representative's Warrants, as the case may be, will
be duly and validly issued, fully paid, nonassessable and free of preemptive
rights, and all corporate action required to be taken for the authorization and
issuance of the Warrants, the Representative's Warrants, and the securities to
be issued upon their exercise, has been validly and sufficiently taken.
(iii) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Units or the right to have any Common Stock or other
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securities of the Company included in the Registration Statement or the right,
as a result of the filing of the Registration Statement, to require registration
under the Act of any shares of Common Stock or other securities of the Company.
(iv) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act.
(v) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects with
the requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
therein).
(vi) The statements under the captions "Business - Licensing
Agreements," "Business - Legal Proceedings," "Certain Transactions" and
"Description of Securities" in the Prospectus and in Item 24 of the Registration
Statement, insofar as such statements constitute a summary of documents referred
to therein or matters of law, fairly summarize in all material respects the
information called for with respect to such documents and matters.
(vii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company, except as set forth in
the Registration Statement.
(ix) This Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution, and
delivery by the other parties thereto, is a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, except as
rights to indemnity and contribution may be limited by applicable securities
laws, and except as enforceability may be limited by application of bankruptcy,
insolvency, moratorium, or similar laws affecting the rights of creditors
generally or judicial limits upon the right of specific performance and except
that such counsel need express no opinion as to the enforceability of the venue
provisions under Section 14 of this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions herein contemplated do
not and will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of the Company, or any agreement or instrument known to such counsel to
which the Company is a party or by which the Company may be bound or to the
knowledge of such counsel any order or decree to which the Company is a party or
by which it is bound, or any California or federal law or regulation applicable
to the Company (other than state securities laws, as to which such counsel need
not opine).
(x) The Warrant Agreement has been duly authorized, executed
and delivered
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by the Company; and, assuming due authorization, execution, and delivery by the
other parties thereto, is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution may be limited by applicable securities laws, and
except as enforceability may be limited by application of bankruptcy,
insolvency, moratorium, or similar laws affecting the rights of creditors
generally or judicial limits upon the right of specific performance. The
execution and delivery of the Warrant Agreement and the consummation of the
transactions therein contemplated do not and will not conflict with or result in
a breach of any of the terms or provisions of, or constitute a default under,
the Articles of Incorporation or Bylaws of the Company, or any agreement or
instrument known to such counsel to which the Company is a party or by which the
Company may be bound or to the knowledge of such counsel any order or decree to
which the Company is a party or by which it is bound, or any California or
federal law or regulation applicable to the Company (other than state securities
laws, as to which such counsel need not opine).
(xi) The Representative's Warrants have been duly authorized,
executed, delivered and validly issued by the Company; the securities to be
issued on exercise of the Representative's Warrants will be, when issued in
accordance with the terms of the Representative's Warrants, duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights; the
holders thereof will not be subject to personal liability by reason of being
such holders; no governmental or regulatory approvals are required in connection
with the execution and delivery of the Representative's Warrants and the
issuance of the securities upon exercise thereof (other than such approvals as
may be required by the NASD, the SEC and applicable state securities
regulations); such SEC approval has been obtained in connection with the order
of effectiveness of the Registration Statement; and the execution, delivery and
exercise of the Representative's Warrants will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the Articles of
Incorporation or Bylaws of the Company, or any agreement or instrument known to
such counsel to which the Company is a party or by which the Company may be
bound or to the knowledge of such counsel any order or decree to which the
Company is a party or by which it is bound, or any California or federal law or
regulation applicable to the Company (other than state securities laws, as to
which such counsel need not opine);
(xii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD or as required by State securities
and Blue Sky laws as to which such counsel need express no opinion) except such
as have been obtained or made, specifying the same.
(xiii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
In rendering such opinion, such counsel may rely as to matters
governed by the laws of states other than California or Federal laws on local
counsel in such jurisdictions, provided that in each case such counsel shall
state that they believe that they and the Underwriters are justified in
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relying on such other counsel. In addition to the matters set forth above, the
opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP shall also include a statement to
the effect that nothing has come to the attention of such counsel that has
caused them to believe that (i) the Registration Statement, at the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements and statistical information therein).
(c) The Representative shall have received from ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, P.C., counsel for the Underwriters, an opinion dated the Closing
Date or the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (i), (iv) and (v) of Paragraph (b) of this Section 6.
In rendering such opinion, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P.C. may rely as to all matters
governed other than by the laws of the State of California or Federal laws on
the opinion of counsel referred to in Paragraph (b) of this Section 6. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
that has caused them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Prospectus, or any supplement thereto, on
the date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact, necessary in
order to make the statements, in the light of the circumstances under which they
are made, not misleading (except that such counsel need express no view as to
financial statements and statistical information therein). With respect to such
statement, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P.C. may state that their belief is based upon
the procedures set forth therein, but is without independent check and
verification.
(d) The Representative shall have received at or prior to the
Closing Date from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P.C. a memorandum or summary, in form
and substance satisfactory to the Representative, with respect to the
qualification for offering and sale by the Underwriters of the Units under the
State securities or Blue Sky laws of such jurisdictions as the Representative
may reasonably have designated to the Company.
(e) The Representative, on behalf of the several Underwriters,
shall have received, on each of the dates hereof, the Closing Date and the
Option Closing Date, as the case may be, a letter dated the date hereof, the
Closing Date or the Option Closing Date, as the case may be, in form and
substance satisfactory to the Representative, of Coopers & ▇▇▇▇▇▇▇ LLP
confirming that they are independent public accountants within the meaning of
the Act and the applicable published Rules
and Regulations thereunder and stating that in their opinion the financial
statements examined by them
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and included in the Registration Statement comply in form in all material
respects with the applicable accounting requirements of the Act and the related
published Rules and Regulations and containing such other statements and
information as are ordinarily included in accountants' "comfort letters" to
Underwriters with respect to the financial statements and certain financial and
statistical information contained in the Registration Statement and Prospectus.
(f) The Representative shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer or the President and the Chief Financial Officer of
the Company to the effect that, as of the Closing Date or the Option Closing
Date, as the case may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and
the Prospectus and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement were true and
correct, and such Registration Statement and Prospectus did not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been set forth
in a supplement to or an amendment of the Prospectus which has not been so set
forth in such supplement or amendment; and
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company,
whether or not arising in the ordinary course of business.
(g) The Company shall have furnished to the Representative such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representative may reasonably have requested.
(h) The Units, Common Stock and Warrants have been approved for
quotation upon notice of issuance on the Nasdaq SmallCap Market.
(i) The Lockup Agreements described in Section 4(j) are in full
force and effect.
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The opinions and certificates mentioned in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representative and to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, P.C., counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section
6 shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.
In such event, the Company and the Underwriters shall not be
under any obligation to each other (except to the extent provided in Sections 5
and 8 hereof).
7. Conditions of the Obligations of the Company.
The obligations of the Company to sell and deliver the portion of
the Units required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities to which
such Underwriter or any such controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Units, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the
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Company, each of its directors, each of its officers who have signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Act, against any losses, claims, damages or liabilities to
which the Company or any such director, officer or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or (ii) the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made; and will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or through
the Representative specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a) or (b). In case any such proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
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designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Units. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bears to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
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The Company and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 8(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above in this Section 8(d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Units purchased by such Underwriter, and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section 8(d)
to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Default by Underwriters.
If on the Closing Date or the Option Closing Date, as the case
may be, any Underwriter shall fail to purchase and pay for the portion of the
Units which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), you, as
the Representative of the Underwriters, shall use your reasonable efforts to
procure within 36 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and upon
the terms set forth herein, the Firm Units or Option Units, as the case may be,
which the defaulting Underwriter or Underwriters failed
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to purchase. If during such 36 hours you, as such Representative, shall not have
procured such other Underwriters, or any others, to purchase the Firm Units or
Option Units, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of Units with
respect to which such default shall occur does not exceed 10% of the Firm Units
or Option Units, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion to the respective numbers of Firm
Units or Option Units, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Units or Option Units, as the case may be, which
such defaulting Underwriter or Underwriters failed to purchase, or (b) if the
aggregate number of Firm Units or Option Units, as the case may be, with respect
to which such default shall occur equals or exceeds 10% of the Firm Units or
Option Units, as the case may be, covered hereby, the Company or you as the
Representative of the Underwriters will have the right, by written notice given
within the next 36-hour period to the parties to this Agreement, to terminate
this Agreement without liability on the part of the non-defaulting Underwriters
or of the Company except to the extent provided in Section 8 hereof. In the
event of a default by any Underwriter or Underwriters, as set forth in this
Section 9, the Closing Date or Option Closing Date, as the case may be, may be
postponed for such period, not exceeding seven days, as you, as the
Representative, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. Notices.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to ▇▇▇▇▇▇▇ Investment Company,
Inc., ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇; with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇; if
to the Company, to Legacy Brands, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇; with a copy to Resch,
Polster, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
11. Termination.
This Agreement may be terminated by you by notice to the Company
as follows:
(a) at any time prior to the earlier of (i) the time the Units
are released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following
has occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change or
any development involving a prospective material adverse change in or affecting
the condition, financial or otherwise, of the Company, taken as a whole or the
earnings, business, management, properties, assets, rights, operations,
condition (financial or
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otherwise) or prospects of the Company and its subsidiaries taken as a whole,
whether or not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or other
national or international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, escalation, declaration, emergency,
calamity, crisis or change on the financial markets of the United States would,
in your reasonable judgment, make it impracticable to market the Units or to
enforce contracts for the sale of the Units, (iii) the Dow ▇▇▇▇▇ Industrial
Average shall have fallen by 15 percent or more from its closing price on the
day immediately preceding the date that the Registration Statement is declared
effective by the Commission, (iv) suspension of trading in securities generally
on the New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (v) the enactment, publication, decree or
other promulgation of any statute, regulation, rule or order of any court or
other governmental authority which in your opinion materially and adversely
affects or may materially and adversely affect the business or operations of the
Company, (vi) declaration of a banking moratorium by United States or New York
State authorities, (vii) any downgrading in the rating of the Company's debt
securities by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Exchange Act); (viii) the
suspension of trading of the Preferred Stock by the Commission on the Nasdaq
SmallCap Market or (ix) the taking of any action by any governmental body or
agency in respect of its monetary or fiscal affairs which in your reasonable
opinion has a material adverse effect on the securities markets in the United
States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Units from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. Information Provided by Underwriters.
The Company and the Underwriters acknowledge and agree that the
only information furnished or to be furnished by any Underwriter to the Company
for inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-B under the Act and the information under the caption
"Underwriting" in the Prospectus.
14. Miscellaneous.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by
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or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Company or its directors or officers and (c) delivery of and
payment for the Units under this Agreement.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Oregon. All disputes relating to this
Underwriting Agreement shall be adjudicated before a court located in Multnomah
County, Oregon to the exclusion of all other courts that might have
jurisdiction.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
LEGACY BRANDS, INC.
By: ___________________________________
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
▇▇▇▇▇▇▇ INVESTMENT COMPANY, INC.
As Representative of the several
Underwriters listed on Schedule I
By: _____________________________
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SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Units
Underwriter to be Purchased
----------- ---------------
▇▇▇▇▇▇▇ Investment Company, Inc.
---------
Total 1,500,000
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