3
Underwriting Agreement.
3,000,000 Shares
LinuxOne, Inc.
(a Nevada corporation)
(Par Value $.001 Per Share)
UNDERWRITING AGREEMENT
December , 1999
CAPITAL WEST SECURITIES, INC.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
One Leadership Square
Oklahoma City, Oklahoma 73102
Ladies/Gentlemen:
LinuxOne, Inc., a Nevada corporation (the "Company"), hereby confirms its
agreement with Capital West Securities, Inc. ("Capital West" or "you") as
representative of the several underwriters named in Schedule A hereto
(collectively, the "Underwriters") as follows:
1. Description of Shares.
The Company proposes to issue and sell approximately 3,000,000 shares
(the "Firm Shares") of its authorized and unissued common
stock, par value $.001 per share (the "Common Stock"), to the Underwriters upon
the terms and subject to the conditions set forth herein. The Company also
proposes to grant to the Underwriters an option to purchase, for the sole
purpose of covering over-allotments in connection with the sale of the Firm
Shares, an aggregate of up to 450,000 additional shares ("Option Shares") of
Common Stock upon the terms and subject to the conditions set forth herein and
as provided in Section 7 hereof. As used in this Agreement, the term "Shares"
shall include the Firm Shares and the Option Shares. All shares of Common Stock
of the Company, including the Shares, are hereinafter referred to as "Common
Stock."
2. Representations, Warranties and Agreements of the Company.
The Company represents and warrants to and agrees with the Underwriters,
as follows:
(a) A registration statement on Form S-1 (File No. 333-87533) (the
"Registration Statement") with respect to the Shares, including a prospectus
subject to completion, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the applicable rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act,
and has been filed with the Commission. Any amendments to such registration
statement and any amended prospectuses subject to completion, as may have been
required prior to the date hereof, have been similarly prepared and filed with
the Commission. The Company will file any additional amendments to the
Registration Statement and any amended prospectuses subject to completion, as
may hereafter be required. The Company meets the requirements for use of a
registration statement on Form S-1. Copies of the Registration Statement and any
amendments and copies of each related prospectus subject to completion have been
delivered to you.
If the Registration Statement has been declared effective under the Securities
Act by the Commission, the Company will prepare and promptly file with the
Commission the information omitted from the Registration Statement pursuant to
Rule 430A(a) of the Rules and Regulations or as part of a post-effective
amendment to the Registration Statement (including a final form of prospectus).
If the Registration Statement has not been declared effective under the
Securities Act by the Commission, the Company will prepare and promptly file a
further amendment to the Registration Statement, including a final form of
prospectus. The term "Registration Statement" as used in this Agreement shall
mean such Registration Statement, including financial statements, schedules and
exhibits, in the form in which it became or becomes, as the case may be,
effective (including, if the Company omitted information from the Registration
Statement pursuant to Rule 430A(a) of the Rules and Regulations, the information
deemed to be a part of the Registration Statement at the time it became
effective pursuant to Rule 430A(b) of the Rules and Regulations) and, in the
event of any amendment thereto after the effective date of such Registration
Statement, shall also mean (from and after the effectiveness of such amendment)
such Registration Statement as so amended. The term "Prospectus" as used in
this Agreement shall mean the prospectus relating to the Shares as included in
the Registration Statement at the time it becomes effective (including, if the
Company omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part of the
Registration Statement at the time it became effective pursuant to Rule 430A(b)
of the Rules and Regulations), except that if any revised prospectus shall be
provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the Prospectus on file with the
Commission at the time the Registration Statement became or becomes, as the case
may be, effective (whether or not such revised prospectus is required to be
filed with the Commission pursuant to Rule 424(b)(3) of the Rules and
Regulations), the term "Prospectus" shall refer to such revised prospectus from
and after the time it is first provided to the Underwriters for such use.
(b) The Commission has not issued any order preventing or suspending the use of
any preliminary prospectus or instituted proceedings for that purpose, and each
such preliminary prospectus has conformed in all material respects to the
requirements of the Securities Act and the Rules and Regulations and, as of its
date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and at the time the
Registration Statement became or becomes, as the case may be, effective and at
all times subsequent thereto up to and on the Closing Date (hereinafter defined)
and on any later date on which Option Shares are to be purchased, (i) the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Securities Act and the Rules and Regulations, and will
in all material respects conform to the requirements of the Securities Act and
the Rules and Regulations, and (ii) neither the Registration Statement nor the
Prospectus, nor any amendments or supplements thereto, will include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) Each contract, agreement, instrument, lease, license or other item required
to be described in the Registration Statement or the Prospectuses or filed as an
exhibit to the Registration Statement has been so described or filed, as the
case may be.
(d) The Company and each of its Subsidiaries (as such term is defined in Rule
405 under the Securities Act) has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
organization, with full corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
Statement; each of the Company and its Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the ownership or leasing of its properties or the conduct of its
business requires such qualification except where the failure to be so qualified
or to be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its Subsidiaries considered as a whole; each of the
Company and its Subsidiaries is in possession of and operating in compliance
with all authorizations, licenses, certificates, consents, orders and permits
from state, Federal and other regulatory authorities which are material to the
conduct of its business, all of which are valid and in full force and effect;
neither the Company nor its Subsidiaries is in violation of its charter or
bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, or any material lease, contract,
joint venture, or other agreement or instrument to which it is a party or by
which its property is bound or in violation of any law, order, rule, regulation,
writ, injunction, judgment or decree of any government, governmental agency or
body or court, domestic or foreign, of which it has knowledge except such
failures to comply as would not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries considered as a
whole.
(e) The Company has full legal right, power and authority to enter into this
Agreement and perform the transactions contemplated hereby. This Agreement and
the Warrant Agreement of even date herewith by and between the Company and the
Managing Underwriter (the "Warrant Agreement") have been duly authorized,
executed and delivered by the Company and are valid and binding agreements on
the part of the Company, enforceable in accordance with their respective terms,
except as rights to indemnification and contribution hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization moratorium or other similar laws relating
to or affecting creditors' rights generally, or by general equitable principles;
the performance of this Agreement and the Warrant Agreement and the consummation
of the transactions herein and therein contemplated will not result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, (i) any material indenture, mortgage, deed of trust, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, or any
material lease, contract, joint venture or other agreement or instrument to
which the Company is a party or by which the property of the Company is bound
including any licenses from third parties, or (ii) the charter and bylaws of the
Company or its subsidiaries, or (iii) any law, order, rule, regulation, writ,
injunction, judgment or decree of any government or governmental agency or body
or court, domestic or foreign, having jurisdiction over the Company or its
Subsidiaries or over the properties of the Company or its Subsidiaries, except
for breaches, violations or defaults that individually or in the aggregate,
would not have a material adverse effect on the Company; and no consent,
approval, authorization or order of any court or governmental agency or body is
required for the consummation of the transactions herein contemplated, except
such as may be required under the Securities Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or under state or other securities or
Blue Sky laws, all of which requirements have been satisfied in all material
respects.
(f) Except as disclosed in the Registration Statement or the Prospectus,
there is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending, or threatened, against or
affecting the Company or its Subsidiaries which (i) is required to be disclosed
in the Registration Statement or the Prospectus or which might result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, or which might materially and
adversely affect the properties or assets thereof; or (ii) which might be
expected to materially and adversely affect the consummation of the transactions
contemplated by this Agreement; all pending legal or governmental proceedings to
which the Company or its Subsidiaries is a party or of which any of their
respective properties or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation incidental to the
Company's business, could not reasonably be expected to result in a material
adverse change in the condition, financial or otherwise, or the earnings,
business affairs or business properties of the Company and its Subsidiaries
considered as one enterprise; and there are no contracts or documents of the
Company or its Subsidiaries which are required to be described in the
Registration Statement or the Prospectus, or to be filed as exhibits thereto, by
the Securities Act or by the Rules and Regulations which have not been
accurately described in all material respects and filed as exhibits to the
Registration Statement. The contracts so described in the Prospectus are in full
force and effect on the date hereof, and neither the Company nor its
Subsidiaries is in breach of or default under, and to the Company's knowledge,
no other party is in material breach of or material default under, any of such
contracts.
(g) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, have been
issued in compliance with all Federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities (other than such preemptive rights or other rights to
subscribe for or purchase securities as were fully complied with or expressly
waived or with respect to the violation of which the right to make claim is
barred by the applicable statute of limitations), and the authorized and
outstanding capital stock of the Company conforms in all material respects to
the statements relating thereto contained in the Registration Statement and the
Prospectus (and such statements correctly state the substance of the instruments
defining the capitalization of the Company); the Firm Shares and the Option
Shares to be purchased from the Company hereunder have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in accordance with
the terms of this Agreement, will be duly and validly issued and fully paid and
nonassessable; the [300,000] shares of Common Stock issuable under the warrants
to be granted to the Managing Underwriter under the Warrant Agreement (the
"Managing Underwriter's Warrants") have been duly authorized for issuance and
sale to the Managing Underwriter pursuant to this Agreement and, when issued and
delivered by the Company against payment therefor in accordance with the terms
of the Warrant Agreement, will be duly and validly issued and fully paid and
nonassessable; and no preemptive right, co-sale right, registration right, right
of first refusal or other similar right of stockholders exists with respect to
any of the Firm Shares, Option Shares or shares of Common Stock issuable under
the Managing Underwriter's Warrants or the issuance and sale thereof other than
those that have been expressly waived prior to the date hereof and those that
will automatically expire upon the consummation of the transactions contemplated
on the Closing Date. No further approval or authorization of any stockholder,
the Board of Directors or others is required for the issuance and sale or
transfer of the Shares except as may be required under the Securities Act, the
Exchange Act or under state or other securities or Blue Sky laws. Except as
disclosed in or contemplated by the Prospectus and the financial statements of
the Company (including the notes thereto) included in the Prospectus, the
Company has no outstanding options to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and fairly presents
the information required to be shown with respect to such plans, arrangements,
options and rights. The shares of Common Stock reserved for issuance upon
exercise of the Company's outstanding options and warrants have been duly and
validly authorized and are sufficient in number to meet the exercise
requirements of such options.
(h)▇▇▇▇ ▇▇▇▇▇▇ & Co., Ltd., which has examined the financial statements
(together with related schedules and notes) of the Company filed with the
Commission as a part of the Registration Statement and which are included in the
Prospectus, are independent accountants within the meaning of the Securities Act
and the Rules and Regulations; the audited and pro forma financial statements of
the Company, together with the related schedules and notes, and the unaudited
financial information, forming part of the Registration Statement and
Prospectus, fairly present the financial position and the results of operations
of the Company at the respective dates and for the respective periods to which
they apply; and all audited and pro forma financial statements, together with
the related schedules and notes, and the unaudited and pro forma financial
information, filed with the Commission as part of the Registration Statement,
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except as may be otherwise
stated therein. The selected and summary financial and statistical data included
in the Registration Statement present fairly the information shown therein and
have been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to be
included in the Registration Statement.
(i) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated therein,
(i) there has been no material adverse change in the business, properties,
operations, condition (financial or otherwise) or in the earnings, business
affairs or business prospects of the Company and its Subsidiaries, whether or
not arising in the ordinary course of business, (ii) there have been no
transactions entered into by the Company other than those in the ordinary course
of business, which are material with respect to the Company, (iii) there has
been no obligation that is material to the Company, direct or contingent,
incurred by the Company or any Subsidiary, except obligations incurred in the
ordinary course of business, (iv) there has been no change in the capital stock
of the Company, (v) there has been no change in the outstanding indebtedness of
the Company which is material to the Company, (vi) there has been no dividend or
distribution of any kind declared, paid or made by the Company on behalf of any
class of its respective capital stock, (vii) there has been no redemption,
purchase or acquisition or agreement to redeem, purchase or acquire shares of
Common Stock of the Company, or (viii) there has been no change in any Federal,
state, or other laws, rules, or regulations (or interpretations thereof)
applicable to the business of the Company that would have a material adverse
effect on the Company, and, to the knowledge of the Company, no such change is
proposed other than as described in the Prospectus.
(j) Except as described in the Prospectus, (i) the Company and its
Subsidiaries have good and marketable title to all properties and assets
described in the Prospectus as owned by them, free and clear of all liens,
charges, encumbrances or restrictions of any kind, except those described in the
Prospectus, or those not material, singly or in the aggregate, to the business
of the Company and its Subsidiaries considered as a whole, (ii) the agreements
to which the Company is a party described in the Prospectus are valid
agreements, enforceable by the Company, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally or by general equitable
principles, and (iii) the Company has valid and enforceable leases for the
properties described in the Prospectus as leased by it except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
(k) All Federal, state, local and foreign tax returns required to be filed by
the Company or its Subsidiaries in any jurisdiction have been filed, and all
material taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from such entities
have been paid other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without penalty
or interest; and adequate charges, accruals and reserves have been provided for
in the financial statements referred to in Section 2(g) above in respect of all
Federal, state, local and foreign taxes for all periods as to which the tax
liability of the Company or its Subsidiaries has not been finally determined or
remains open to examination by applicable taxing authorities.
(l) No labor dispute with the employees of the Company or its Subsidiaries
exists or, to the knowledge of the Company, is imminent; and the Company is not
aware of any existing or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers, contractors or customers which might be
expected to result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise. No collective
bargaining agreement exists with any of the Company's employees and, to the
Company's knowledge, no such agreement is imminent.
(m) The Company and its Subsidiaries own or possess, or can acquire on
reasonable terms, the patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names presently employed by them in connection with the
business now operated by them and neither the Company nor its Subsidiaries has
received any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any patent or proprietary rights
or of any facts or circumstances which would render any patent and proprietary
rights invalid or inadequate to protect the interest of the Company or its
Subsidiaries therein, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy singly or
in the aggregate, would result in any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its Subsidiaries considered as one enterprise.
(n) Except as set forth in the Prospectus, the Company and its Subsidiaries are
in compliance in all material respects with all applicable laws, statutes,
ordinances, rules or regulations, the enforcement of which, individually or in
the aggregate, would be reasonably expected to have a material adverse effect on
the condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise.
(o) The Common Stock has been approved for quotation on the Nasdaq National
Market, subject to official notice of issuance.
(p) The Company has been advised concerning the Investment Company Act of 1940,
as amended (the "1940 Act"), and the rules and regulations thereunder, and has
in the past conducted, and intends in the future to conduct, its affairs in such
a manner as to ensure that it will not become an "investment company" within the
meaning of the 1940 Act and such rules and regulations.
(q) The Company has not distributed and will not distribute prior to the
Closing Date or on any date on which Option Shares are to be purchased, as the
case may be, any offering material in connection with the offering and sale of
the Shares other than the Prospectus, the Registration Statement and other
materials permitted by the Securities Act.
(r) The Company has not at any time during the last five years (i) made any
unlawful contribution to any candidate for foreign office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
Federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
(s) The Company has not taken and will not take, directly or indirectly, any
action designed to or that might be reasonably expected to cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Shares. The Company has not effected any sales of
securities required to be disclosed in Item 15 of Form S-1 under the Securities
Act, other than as disclosed in the Registration Statement.
(t) Each officer and director of the Company and each beneficial owner of at
least 5% of the outstanding shares of Common Stock and options and warrants to
purchase Common Stock outstanding prior to the effective date of the
Registration Statement have agreed in writing that such persons will not offer
to sell, contract to sell, sell short, or otherwise sell or dispose of any
shares of Common Stock of the Company, any options or warrants to purchase any
shares of Common Stock of the Company, or any securities convertible into or
exchangeable for shares of the Common Stock owned directly by such person or
with respect to which such person has the power of disposition otherwise than
(i) as a gift or gifts, provided the donee or donees thereof agree to be bound
by this restriction or (ii) with the prior written consent of Capital West, for
a period expiring two years after the effective date of the Registration
Statement
(u) Except as described in the Registration Statement, (i) neither the Company
nor its Subsidiaries is in violation of any Federal, state, local or foreign
laws or regulations relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened release
of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Environmental
Materials") or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Environmental Materials
(collectively, the "Environmental Laws"), except such violations as would not,
singly or in the aggregate, have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Company and its Subsidiaries considered as one enterprise, and (ii) to
the Company's knowledge, there are no events or circumstances that could form
the basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or
affecting the Company or its Subsidiaries relating to any Environmental
Materials or the violation of any Environmental Laws, which, singly or in the
aggregate, could reasonably be expected to have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its Subsidiaries considered as one enterprise.
(v) The Company and its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles as in
effect in the United States and to maintain asset accountability; (iii) access
to bank accounts 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.
(w) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus. Neither
the Company nor any employee or agent of the Company has made any payment or
transfer of any funds or assets of the Company or conferred any personal benefit
by use of the Company's assets, or received any funds, assets or personal
benefit in violation of any law, rule or regulation.
(x) On the Closing Date and upon delivery of the Option Shares, as applicable,
all transfer and other taxes (other than income taxes) that are required to be
paid in connection with the sale and transfer of the Shares to the Underwriters
will have been paid.
(y) The Company does not currently have and has never had any pension plan
subject to the 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) Sections 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.
(z) The Company confirms as of the date hereof that it is in compliance with all
provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of
Florida) An Act Relating to Disclosure of Doing Business with Cuba (the "Cuba
Act"), and the Company further agrees that if it commences engaging in business
with the government of Cuba or with any person or affiliate located in Cuba
after the date the Registration Statement becomes or has become effective with
the Commission or the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's
business in Cuba or with any person or affiliate located in Cuba changes in any
material way, the Company will provide the Department notice of such business or
change, as appropriate, in a form acceptable to the Department.
(aa) Any certificate signed by any officer of the Company and delivered to the
Underwriters or to counsel for the Underwriters shall be deemed a representation
and warranty by the Company to each Underwriter as to the matters covered
thereby.
(bb) Except as may be set forth in the Prospectus, the Company has not incurred
any liability for a fee, commission, or other compensation on account of the
employment of a broker or finder in connection with the transactions
contemplated by the Underwriting Agreement.
(cc) The Company and each subsidiary is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company and the
subsidiaries are engaged.
3. Purchase, Sale and Delivery of Shares. On the basis of the
------------------------------------------
representations and warranties herein contained and subject to the terms and
-----
conditions herein set forth, the Company agrees to sell to each Underwriter,
severally and not jointly, and each Underwriter, severally and not jointly,
agrees to purchase from the Company, respectively, at a purchase price of
[$8.00] per Share less an underwriting discount of 8.5%, the number of Shares
set forth in Schedule A hereto (subject to adjustment as provided in Section
-----------
10).
Delivery of definitive certificates for the Firm Shares to be purchased by the
Underwriters pursuant to this Section 3 shall be made against payment of the
purchase price therefor by the Underwriters by certified or official bank check
in next day funds, payable to the order of the Company at the offices of Capital
West Securities, Inc., ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, One Leadership Square,
Oklahoma City, Oklahoma 73102, or at such other place as shall be agreed upon by
the Underwriters and the Company, at 9:30 a.m. on the fourth business day
following the first day that Shares are traded (or at such time and date to
which payments and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"Closing Date." The certificates for the Firm Shares to be so delivered will be
made available to you at such office or at such other location as you may
reasonably request for checking at least one business day prior to the Closing
Date and will be in such names and denominations as you may request, such
request to be made at least two business days prior to the Closing Date. If the
Underwriters so elect, delivery of the Shares may be made by credit through full
fast transfer to the accounts at Depository Trust Company designated by the
Underwriters.
It is understood that Capital West, individually and not as representative of
the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by Capital West prior to the Closing Date
for the Firm Shares to be purchased by such Underwriter or Underwriters. Any
such payment by Capital West shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several Underwriters
intend to offer the Firm Shares to the public as set forth in the Prospectus.
The information set forth in the last paragraph on the front cover page (insofar
as such information relates to the Underwriters) and under "Underwriting" in any
Preliminary Prospectus and in the final form of Prospectus filed pursuant to
Rule 424(b) constitutes the only information furnished by the Underwriters to
the Company for inclusion in any Preliminary Prospectus, the Prospectus or the
Registration Statement, and you, on behalf of the Underwriters, represent and
warrant to the Company that the statements made therein do not include any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make such statements, in the light of the
circumstances in which they were made, not misleading.
4. Further Covenants of the Company. The Company covenants with the several
-------------------------------------
Underwriters as follows:
-
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; it will notify Capital West, promptly after
it shall receive notice thereof, of the time when the Registration Statement or
any subsequent amendment to the Registration Statement has become effective or
any supplement to the Prospectus has been filed; if the Company omitted
information from the Registration Statement at the time it was originally
declared effective in reliance upon Rule 430A(a) of the Rules and Regulations,
the Company will provide evidence satisfactory to Capital West that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of Rule
424(b) of the Rules and Regulations or as part of a post-effective amendment to
such Registration Statement as originally declared effective which is declared
effective by the Commission; if for any reason the filing of the final form of
Prospectus is required under Rule 424(b)(3) of the Rules and Regulations, it
will provide evidence satisfactory to Capital West that the Prospectus contains
such information and has been filed with the Commission within the time period
prescribed; it will notify Capital West promptly of any request by the
Commission for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; promptly upon request of Capital West,
it will prepare and file with the Commission any amendments or supplements to
the Registration Statement or Prospectus which, in the opinion of counsel for
the several Underwriters, may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters; it will promptly prepare and
file with the Commission, and promptly notify Capital West of the filing of, any
amendments or supplements to the Registration Statement or Prospectus which may
be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the
Securities Act, any event shall have occurred as a result of which the
Prospectus or any other prospectus relating to the Shares as then in effect
would include any untrue statement of a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; in case any Underwriter is required to deliver a
prospectus nine months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, it will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Securities Act; and it will file no amendment or supplement to the
Registration Statement or Prospectus which shall not previously have been
submitted to Capital West a reasonable time prior to the proposed filing thereof
or to which Capital West shall reasonably object in writing, subject, however,
to compliance with the Securities Act, the Rules and Regulations thereunder and
the provisions of this Agreement.
(b) The Company will advise Capital West, promptly after it shall receive notice
or obtain knowledge thereof of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will cooperate with the Underwriters and Underwriters' counsel
in connection with their efforts to qualify the Shares for offering and sale
under the securities laws of such jurisdictions as Capital West may designate as
to continue such qualifications in effect for so long as may be required for
purposes of the distribution of the Shares, except that the Company shall not be
required in connection therewith or as a condition thereof to qualify as a
foreign corporation or to execute a general consent to service of process in any
jurisdiction or to make any undertaking with respect to the conduct of its
business. In each jurisdiction in which the Shares shall have been qualified as
above provided, the Company will make and file such statements and reports in
each year as are or may be reasonably required by the laws of such jurisdiction.
(d) The Company will furnish Capital West, as soon as available, copies of the
Registration Statement (three of which will be signed and include all exhibits),
each Preliminary Prospectus, the Prospectus and any amendments or supplements to
such documents, including any prospectus prepared to permit compliance with
Section 10(a)(3) of the Securities Act, all in such quantities as you may from
time to time reasonably request.
(e) The Company will make generally available to its stockholders as soon as
practicable, but in any event not later than the 45th day following the end of
the fiscal quarter first occurring after the first anniversary of the effective
date of the Registration Statement, an earnings statement (which will be in
reasonable detail but need not be audited) complying with the provisions of
Section 11(a) of the Securities Act and covering a twelve-month period beginning
after the effective date of the Registration Statement.
(f) As long as the Company is a reporting company under the Exchange Act,
the Company will furnish to its stockholders, as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of operations for each of the first three quarters of the fiscal year,
and for a period of five years after the effective date of the Registration
Statement, the Company will furnish to the several Underwriters hereunder, upon
request (i) concurrently with furnishing such reports to its stockholders,
statements of operations of the Company for each of the first three quarters in
the form furnished to the Company's stockholders; (ii) concurrently with
furnishing to its stockholders, a balance sheet of the Company as of the end of
such fiscal year, together with statements of operations, of stockholders'
equity, and of cash flows of the Company for such fiscal year, accompanied by a
copy of the certificate or report thereon of independent accountants; (iii) as
soon as they are available, copies of all reports and financial statements
furnished to or filed with the Commission, any securities exchange or the
National Association of Securities Dealers, Inc. ("NASD"); (v) every material
press release and every material news item or article in respect of the Company
or its affairs which was released or prepared by the Company (excluding, in each
case customary product-related press releases and articles); and (vi) any
additional information of a public nature concerning the Company, or its
business which you may reasonably request. During such five-year period, if the
Company shall have active subsidiaries, the foregoing financial statements shall
be on a consolidated basis to the extent that the accounts of the Company and
its Subsidiaries are consolidated, and shall be accompanied by similar financial
statements for any significant subsidiary which is not so consolidated. For a
period of five years from the date of the Registration Statement, the Company
will furnish to Capital West and, upon request, to each of the other
Underwriters, as soon as available, a copy of each report of the Company mailed
to holders of the Common Stock or publicly filed with the Commission or any
automated quotation system or national securities exchange on which any class of
securities of the Company is listed.
(g) The Company will apply the net proceeds from the sale of the Shares
being sold by it in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar (which may be the same
entity as the transfer agent) for its Common Stock.
(i) The Company shall comply with all provisions of all undertakings contained
in the Registration Statement.
(j) If the transactions contemplated hereby are not consummated by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed hereunder or to fulfill any condition of
the Underwriters' obligations hereunder, or if Capital West shall terminate
this Agreement under Section 11(b), the Company will reimburse the several
Underwriters for all expenses (including fees and disbursements of counsel for
the several Underwriters) incurred by the Underwriters in investigating,
preparing to market or marketing the Shares.
(k) If at any time during the 90-day period after the Registration Statement
becomes effective, any rumor, publication or event relating to or affecting the
Company shall occur as a result of which in your opinion the market price of the
Common Stock has been or is likely to be materially affected (regardless of
whether such rumor, publication or event necessitates a supplement to or
amendment of the Prospectus), the Company will, after written notice from
Capital West advising the Company to the effect set forth above, forthwith
prepare, consult with Capital West concerning the substance of, and disseminate
a press release or other public statement, reasonably satisfactory to you,
responding to or commenting on such rumor, publication or event.
(l) On the Closing Date, the Company will sell to Capital West, for $.001
per share of Common Stock covered by each warrant, the Managing Underwriter's
Warrants to purchase one share of Common Stock of the Company for each ten
shares of the Company's Common Stock which have been sold (or purchased by the
Underwriters), excluding any over-allotment shares, as set forth in the
Prospectus. The Managing Underwriter's Warrants shall have the terms and be in
the form filed as an exhibit to the Registration Statement. At any time during
the period commencing twelve months and ending five years after the effective
date of the Offering and at the written request of the then holders of 51% of
the Managing Underwriter's Warrants and the Common Stock of the Company issued
upon the exercise of the Managing Underwriter's Warrants, the Company will file
with the Commission and process to effectiveness a registration statement
covering not less than 51% of the shares of the Common Stock of the Company
issuable and/or issued upon the exercise of the Managing Underwriter's Warrants.
The Company must file a registration statement only if the shares of Common
Stock issuable under the Managing Underwriter's Warrants cannot be sold without
registration under Rule 144 promulgated under the Securities Act. The Company
agrees to use its commercially reasonable best efforts to cause the filing to
become effective. The costs of the filing of such registration statement,
including but not limited to, legal (including legal fees relating to clearance
in the various states, limited however to such states as may be reasonably
requested), accounting and printing fees, shall be borne by the Company, but the
Company shall not be responsible for the cost of any separate counsel to review
the registration statement on behalf of or to advise the selling stockholders
and shall not be responsible for the payment of any underwriting discount or
commissions with respect to such sale. Such registration statement shall comply
with any undertaking applicable to such shares. If the Company otherwise than
upon the request of the owners of the Managing Underwriter's Warrants or the
shares of Common Stock issuable upon the exercise thereof files a registration
statement under the Securities Act with respect to any of its securities at any
time (other than on Form ▇-▇, ▇-▇, or any other form that does not provide for
resales by selling security holders), the Company will give such persons 30
days' notice of its intention to do so, and at their written request given
within ten days of the receipt of such notice, will include in such registration
statement such number of such Shares as they may specify, all at no cost to them
(except for underwriting discounts and the fees and expenses of counsel to such
holders). In connection with any such registration statement covering all or a
part of such shares, the Company agrees that it will covenant with the owners of
such shares with respect to such shares and the offering thereof, in customary
form substantially to the effect contained in this Section 4. If the offering
pursuant to any registration statement provided for herein is made through
Underwriters, the Company agrees to enter into an underwriting agreement in
customary form with such underwriters in which the Company and the underwriters
and each person who controls such underwriters within the meaning of the
Securities Act grant to each other customary reciprocal indemnities against
liabilities under the Securities Act.
(m) As long as the Company is a reporting company under the Exchange Act,
the Company will comply with the Securities Act, the Exchange Act, the rules and
regulations of the NASD and applicable state securities or Blue Sky laws so as
to permit the continuance of sales and dealings in the Common Stock under the
Securities Act, the Exchange Act, the rules and regulations of the NASD, and
applicable state securities or Blue Sky laws, including the filing with the NASD
and the Commission of all reports required to be filed pursuant to the
applicable provisions of the rules and regulations of the NASD, the Securities
Act, and the Exchange Act, and will deliver to the holders of the Common Stock
all reports required to be provided to such holders pursuant to the applicable
provisions of the rules and regulations of the NASD, the Securities Act, the
Exchange Act, and applicable state securities or Blue Sky
5. Expenses.
--------
(a) The Company agrees with each Underwriter that the Company will pay and
bear all costs and expenses in connection with the preparation, printing and
filing of the Registration Statement (including financial statements, schedules
and exhibits), Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the 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 Shares hereunder to the Underwriters, including
transfer taxes, if any, and the cost of all certificates representing the Shares
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 public
accountants; the cost of furnishing to the Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary Prospectus
and the Prospectus, and any amendments or supplements to any of the foregoing;
NASD filing fees (including filing fees, expenses and disbursements of counsel
to the Underwriters in connection with such NASD filings), and all postage costs
incurred in connection with the qualification of the Shares under the laws of
such jurisdictions as you may designate; and all other expenses directly
incurred by the Company in connection with the performance of its obligations
hereunder.
(b) Capital West shall be entitled to receive from the Company, for itself and
not as representative of the Underwriters, a nonaccountable expense allowance
equal to 3.0% of the aggregate public offering price of shares sold to the
Underwriters in connection with the Offering, reduced by any amounts advanced by
the Company to Capital West pursuant to the terms of the Letter of Intent dated
December 1, 1999.
6. Conditions of Underwriters' Obligations. The obligations of the
------------------------------------------
Underwriters to purchase and pay for Shares as provided herein shall be subject
to the accuracy, as of the date hereof and the Closing Date and any later date
on which Option Shares are to be purchased (the "Option Closing Date"), as the
case may be, of the representations and warranties of the Company herein, to the
performance by the Company of its obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement shall have become effective not later than
5:30 p.m. on the date hereof, or with the consent of the Underwriters, at a
later time and date, not later, however, than 5:30 p.m. on the first business
day following the date hereof, or at such later time and date as may be approved
by a majority in interest of the Underwriters; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
Securities Act or proceedings therefor initiated or threatened by the Commission
and any request on the part 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 reasonable satisfaction of counsel to the
Underwriters. If the Company has elected to rely upon Rule 430A of the Rules and
Regulations, the price of the Shares and any price-related information
previously omitted from the effective Registration Statement pursuant to such
Rule 430A shall have been transmitted to the Commission for filing pursuant to
Rule 424(b) of the Rules and Regulations within the prescribed time period, and
prior to the Closing Date the Company shall have provided evidence satisfactory
to the Underwriters of such timely filing, or a post-effective amendment
providing such information shall have been promptly filed and declared effective
in accordance with the requirements of Rule 430A of the Rules and Regulations.
Qualification under the securities laws of such states as you may deem necessary
to the success of the underwriting of the issue and sale of the Shares upon the
terms and conditions set forth in this Agreement or contemplated by this
Agreement and containing no provisions unacceptable to you will have been
secured, and no stop order (or the equivalent thereof) will be in effect denying
or suspending effectiveness of such qualification, nor will any stop order
proceedings (or the equivalent thereof) with respect thereto be instituted or
pending or threatened under such laws.
(b) At the Closing Date and the Option Closing Date, if any, counsel for the
Underwriters shall have been furnished with such documents and opinions as they
may require for the purpose of enabling them to pass upon the issuance and sale
of the Shares as contemplated herein and related proceedings or in order to
evidence the accuracy of any of the representations and warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Shares as
herein contemplated shall be satisfactory in form and substance to the
Underwriters and counsel for the Underwriters.
(c) There shall not have been, since the date hereof or since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, any change in the condition (financial or otherwise), earnings,
operations, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business which, in your sole judgment, is material and
adverse and that makes it, in your sole judgment, impracticable or inadvisable
to proceed with the public offering of the Shares as contemplated by the
Prospectus, and the Underwriters shall have received a certificate of the
President or Vice President of the Company and of the chief financial or chief
accounting officer of the Company, dated as of the Closing Date, to the effect
that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 2 hereof are true and correct with the
same force and effect as though expressly made at and as of the Closing Date,
(iii) the Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to the Closing Date, and
(iv) no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been initiated or
threatened by the Commission or any Blue Sky jurisdiction.
(d) At the Closing Date the Underwriters shall have received:
(1) The opinion, dated as of the Closing Date, of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chtd., counsel for the Company, in form and substance satisfactory to counsel
for the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Nevada.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus and to enter into and perform its
obligations under this Agreement and to issue, sell and deliver to the
Underwriters the Firm Shares or the Option Shares, as the case may be, to be
issued and sold by it hereunder.
(iii) The Company is duly qualified to do business as a foreign corporation and
is in good standing in the jurisdictions where such qualification is required,
and is not required to be qualified to do business as a foreign corporation in
any other jurisdiction.
(iv) At the Closing Date, after giving effect to the sale of the Firm Shares,
the authorized 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 Common Stock have been duly authorized and validly
issued under Nevada corporate law and are fully paid and nonassessable and have
not been issued in violation of any preemptive right contained in the Articles
of Incorporation or By-laws of the Company or any co-sale right, registration
right, right of first refusal or other similar right (other than such preemptive
rights or other rights to subscribe for or purchase securities as were fully
complied with or expressly waived or with respect to the violation of which the
right to make a claim is barred by the applicable statute of limitation).
(v) The Firm Shares and the Option Shares, as the case may be, to be purchased
from the Company hereunder have been duly authorized for issuance and sale to
the Underwriters pursuant to this Agreement and, when issued and delivered by
the Company pursuant to this Agreement against payment therefor in accordance
with the terms hereof, will be validly issued and fully paid and nonassessable,
and will not be issued in violation of any preemptive right under the Articles
of Incorporation or By-laws of the Company or any co-sale right, right of first
refusal or other similar right and the stockholders of the Company have no
preemptive right under the Articles of Incorporation or By-laws of the Company
or other rights to purchase any of the Shares; the shares of Common Stock
reserved for issuance upon the exercise of the Managing Underwriter's Warrants
have been duly and validly authorized and are sufficient in number to meet the
exercise requirements thereof, and such shares of Common Stock, when issued upon
exercise, will be duly and validly issued, fully paid (assuming exercise in
accordance with the Warrant Agreement and receipt by the Company of the exercise
price thereof) and nonassessable; the stockholders of the Company have no
preemptive right under the Articles of Incorporation or By-laws of the Company
or other rights to purchase any of the Shares; and the shares of Common Stock
reserved for issuance upon the exercise of the Company's outstanding options
have been duly and validly authorized and are presently sufficient in number to
meet the exercise requirements of such options, and such shares of Common Stock,
when issued upon exercise, will be duly and validly issued, fully paid (assuming
exercise in accordance with the governing instruments therefor and receipt by
the Company of the exercise price thereof) and nonassessable.
(vi) The issuance of the Shares to be purchased hereunder is not subject to
preemptive or other similar rights arising by operation of law or otherwise.
(vii) Each Subsidiary has been duly incorporated and is validly existing as a
corporation and is in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own, lease and operate
its properties and to conduct it business as described in the Registration
Statement, and is duly qualified as a foreign corporation to transact business
and is in good standing in every jurisdiction in which the Company's business
requires such qualification and any Subsidiary is not required to be qualified
to do business as a foreign corporation in any other jurisdiction; all of the
issued and outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued, is fully paid and nonassessable and is owned by
the Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity.
(viii) This Agreement and the Warrant Agreement have been duly authorized by all
necessary corporate action on the part of the Company and have been duly
executed and delivered by the Company and, assuming due authorization, execution
and delivery by the Underwriters, are valid and binding agreements of the
Company, except insofar as indemnification and contribution provisions may be
limited by applicable law or equitable principles, and except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or any general equitable principles.
(ix) The Registration Statement has been declared effective under the Securities
Act; any required filing of the Prospectus pursuant to Rule 424(b) has been made
in the manner and within the time period required by Rule 424(b) and no stop
order suspending the effectiveness of the Registration Statement has been issued
under the Securities Act or proceedings therefor have been initiated or are
pending or threatened by the Commission.
(x) The Registration Statement, Prospectus and each amendment or supplement to
the Registration Statement and Prospectus, as of their respective effective or
issue dates (other than the financial statements and supporting schedules
included therein, as to which no opinion need be rendered) complied as to form
in all material respects with the requirements of the Securities Act and the
applicable Rules and Regulations.
(xi) The terms and provisions of the capital stock of the Company conform in all
material respects to the description thereof contained in the Prospectus under
the caption "Description of Securities."
(xii) The information in the Prospectus under the caption "Description of
Securities" to the extent that they constitute matters of law or legal
conclusions, has been reviewed by such counsel and accurately and fairly
summarizes in such counsel's opinion the matters described therein and there are
no outstanding options, warrants, convertible securities, or other rights to
acquire from the Company any capital stock, except as described in the
Registration Statement.
(xiii) Except as set forth in the Prospectus, there is not pending or threatened
any action, suit, proceeding, inquiry or investigation, to which the Company or
its Subsidiaries is a party, or to which the property of the Company or its
Subsidiaries is subject, before or brought by any court or government agency or
body, which might reasonably be expected to result in any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its Subsidiaries considered as
one enterprise, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of this
Agreement or the performance by the Company of its obligations hereunder; and
all pending legal or governmental proceedings to which the Company or its
Subsidiaries is a party or that affect any of their respective properties that
are not described in the Prospectus, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result in a
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise.
(xiv) The information in the Prospectus under the captions "Business - Legal
Proceedings", " - Governmental Regulation", "Certain Transactions" and
"Description of Capital Stock" in the Prospectus and Items 14 and 15 of Part II
of the Registration Statement, to the extent that such items constitute matter
of law, summaries of legal matters, documents or proceedings, or legal
conclusions, has been reviewed by them and is correct in all material respects,
and there are no legal or governmental actions, suits or proceedings pending or
threatened against the Company or its Subsidiaries that are required to be
described in the Prospectus but are not described as required by the Securities
Act or the applicable Rules and Regulations.
(xv) All descriptions in the Prospectus of contracts and other documents are
accurate in all material respects; to the best of their knowledge and
information, there are no agreements, no contracts, indentures, mortgages, loan
agreements, notes, leases or other instrument required to be described or
referred to in the Registration Statement or to be filed as exhibits thereto
other than those described or referred to therein or filed as exhibits thereto,
the descriptions thereof or references thereto are correct in all material
respects, and the Company is not in default, and no other party is in default in
the due performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument so described, referred to or filed as
exhibits thereto.
(xvi) No authorization, approval, consent or order of any court or governmental
authority or agency (other than under the Securities Act or the Rules and
Regulations, which have been obtained, or as may be required under the
securities or Blue Sky laws of the various states or foreign jurisdiction) is
required in connection with the due authorization, execution and delivery of
this Agreement or for the offering, issuance or sale of the Shares to the
Underwriters; and the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein and compliance by the
Company with its obligations hereunder will not, whether with or without the
giving of notice or lapse of time or both, conflict with or constitute a breach
or violation of, or default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company or
its Subsidiaries pursuant to any material contract, indenture, mortgage, loan
agreement, note, lease or other instrument (A) which is an exhibit to the
Registration Statement and (B) to which the Company or its Subsidiaries is a
party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or its Subsidiaries is subject, nor will such
action result in any violation of the provisions of the Articles of
Incorporation or Bylaws of the Company, or any applicable law, administrative
regulation or court decree, provided, however, no opinion need be rendered
concerning state securities or Blue Sky laws.
(xvii) With the exception of the Managing Underwriter's Warrants, no holder of
any security of the Company has any right to require registration of any shares
of Common Stock or any other security of the Company and, except as set forth in
the Registration Statement and Prospectus, all holders of securities of the
Company having rights to registration of such shares 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 such
rights.
(xviii) The Company is not an "investment company" or an entity "controlled" by
an "investment company" as such terms are defined in the 1940 Act.
(xix) Neither the Company nor its Subsidiaries are in violation of their charter
or by-laws.
In rendering such opinion, such counsel may rely as to matters of fact (but
not as to legal conclusions) to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. All references in the
above opinions to "such counsel's knowledge" or "known to us" or similar phrases
mean the conscious awareness of facts or other information by the lawyer who
signs this opinion and other lawyers at our firm who have active involvement in
representing the Company after reasonable inquiry. Such opinion shall not state
that it is to be governed or qualified by, or that it is otherwise subject to,
any treatise, written policy or other document relating to legal opinions,
including with limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
In giving their opinion required by subsection (d)(1) of this Section, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, Chtd. shall additionally state that nothing has come to their
attention that would lead them to believe that the Registration Statement, at
the time it became effective, 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 or that the Prospectus, at the
effective date of the Registration Statement (unless the term "Prospectus"
refers to a prospectus which has been provided to the Underwriters by the
Company for use in connection with the offering of the Shares which differs from
the Prospectus declared effective by the Commission, in which case at the time
it is first provided to the Underwriters for such use) or at the Closing Date,
included an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Such opinion may state
that such counsel does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and the Prospectus except as otherwise expressly provided in such
opinion, and such counsel need express no opinion or belief as to the financial
statements, schedules, and other financial or statistical data included in the
Registration Statement or Prospectus.
(2) The opinion, dated as of Closing Date, of McAfee & ▇▇▇▇ A Professional
Corporation, counsel for the Underwriters, 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 papers, opinions and information as they request to enable
them to pass upon such matters.
(e) At the time of the execution of this Agreement, the Underwriters shall
have received from ▇▇▇▇ ▇▇▇▇▇▇ & Co., Ltd. a letter dated such date, in form and
substance satisfactory to the Underwriters, to the effect that:
(1) they are independent public accountants with respect to the Company and
its Subsidiaries within the meaning of the Securities Act and the Rules and
Regulations;
(2) it is their opinion that the consolidated balance sheet included in the
Registration Statement and covered by their opinion therein complies as to form
in all material respects with the applicable accounting requirements of the
Securities Act and the Rules and Regulations;
(3) based upon limited procedures set forth in detail in such letter, nothing
has come to their attention which causes them to believe that, at a specified
date not more than three days prior to the date of this Agreement, (A) the
unaudited consolidated balance sheet of the Company and its Subsidiaries
included in the Registration Statement does not comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act and the Rules and Regulations or is not presented in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Registration Statement, or (B) at a specified date not more than three days
prior to the date of this Agreement, there has been any change in the capital
stock of the Company or any increase in the combined long term debt of the
Company and its Subsidiaries or any decrease in combined net current assets or
net assets as compared with the amounts shown in the September 30, 1999 balance
sheet included in the Registration Statement or, during the period from
September 30, 1999, to a specified date not more than three days prior to the
date of this Agreement, there were any decreases, as compared with the
corresponding period in the preceding year, in combined revenues, net income or
net income per share of the Company and its Subsidiaries, except in all
instances for changes, increases or decreases which the Registration Statement
and the Prospectus disclose have occurred or may occur;
(4) in addition to the examination referred to in their opinion and the limited
procedures referred to in clause (3) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are included in the
Registration Statement and Prospectus and which are specified by the
Underwriters, and have found such amounts, percentages and financial information
to be in agreement with the relevant accounting, financial and other records of
the Company and its Subsidiaries identified in such letter; and
(5) they have compared the information in the Prospectus under selected captions
with the disclosure requirements of Regulation S-B and on the basis of limited
procedures specified in such letter nothing came to their attention as a result
of the foregoing procedures that caused them to believe that this information
does not conform in all material respects with the disclosure requirements of
Regulation S-B.
(f) At the Closing Date, the Underwriters shall have received from ▇▇▇▇
▇▇▇▇▇▇ & Co., Ltd. a letter, dated as of the Closing Date, to the effect that
they reaffirm the statements made in the letter furnished pursuant to subsection
(e) of this Section 6, except that the specified date referred to shall be a
date not more than three days prior to the Closing Date and, if the Company has
elected to rely on Rule 430A of the 1933 Act Regulations, to the further effect
that they have carried out procedures as specified in clause (4) of subsection
(e) of this Section 6 with respect to certain amounts, percentages and financial
information specified by the Underwriters and deemed to be a part of the
Registration Statement pursuant to Rule 430(A)(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (4).
(g) At the Closing Date, the Common Stock shall have been approved for listing
on the Nasdaq National Market.
(h) In the event that the Underwriters exercise their option provided in
Section 7 hereof to purchase all or any portion of the Option Shares, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company hereunder shall be true
and correct as of the Option Closing Date and, at the Option Closing Date, the
Underwriters shall have received:
(1) A certificate, dated the Option Closing Date, of the President or a
Vice President of the Company and of the Chief Financial or Chief Accounting
Officer of the Company confirming that the certificate delivered at the Closing
Date pursuant to Section 5(c) hereof remains true and correct as of the Option
Closing Date (except that all references in such Section to "Closing Date" shall
be deemed to refer to the "Option Closing Date").
(2) The opinions of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chtd., counsel for the Company, in
form and substance satisfactory to counsel for the Underwriters, dated the
Option Closing Date, relating to the Option Shares and otherwise to the same
effect as the opinion required by Section 5(b)(1) hereof (except that all
references in such Section to "Closing Date" shall be deemed to refer to the
"Option Closing Date").
(3) The opinion of McAfee & ▇▇▇▇ A Professional Corporation, counsel for the
Underwriters, dated the Option Closing Date, relating to the Option Shares to be
purchased on the Option Closing Date and otherwise to the same effect as the
opinion required by Section 5(b)(2) hereof (except that all references in such
Section to "Closing Date" shall be deemed to refer to the "Option Closing
Date").
(4) A letter from ▇▇▇▇ ▇▇▇▇▇▇ & Co., Ltd. in form and substance satisfactory to
the Underwriters and dated the Option Closing Date, substantially the same in
form and substance as the letter furnished to the Underwriters pursuant to
Section 5(e) hereof, except that the "specified date" in the letter furnished
pursuant to this Section 6(h)(4) shall be a date not more than three days prior
to the Option Closing Date.
(i) The Company and the Underwriters shall have entered into the Warrant
Agreement and the Company shall have sold to the Managing Underwriter the
Managing Underwriter's Warrants, which shall be in the form attached as an
exhibit to the Warrant Agreement.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by
Capital West by notice to the Company at any time at or prior to Closing Date,
and such termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 4(i) and 8 shall
survive any such termination and remain in full force and effect.
7. Option Shares.
--------------
(a) On the basis of the representations and warranties herein contained,
but subject to the terms and conditions herein set forth, the Company hereby
grants to the several Underwriters, for the purpose of covering over-allotments
in connection with the distribution and sale of the Firm Shares only, a
non-transferable option to purchase up to an aggregate 450,000 Option Shares at
the purchase price per share for the Firm Shares set forth in Section 3 hereof.
Such option may be exercised by Capital West on behalf of the several
Underwriters on one occasion in whole or in part during the period of 45
business days from and after the date on which the Firm Shares are initially
offered to the public, by giving notice to the Company. At the discretion of
Capital West, the number of Option Shares to be purchased by each Underwriter
upon the exercise of such option shall be the same proportion of the total
number of Option Shares to be purchased by the several Underwriters pursuant to
the exercise of such option as the number of Firm Shares purchased by such
Underwriter (set forth in Schedule A hereto) bears to the total number of Firm
----------
Shares purchased by the several Underwriters (set forth in Schedule A hereto),
----------
adjusted by the Underwriters in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be purchased by the
several Underwriters pursuant to the exercise of the option granted by this
Section 7 shall be made against payment of the purchase price therefor by the
several Underwriters by certified or official bank check or checks drawn in same
day funds, payable to the order of the Company. Such delivery and payment shall
take place at the offices of Capital West Securities, Inc., ▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at such other place as may be agreed
upon between the Underwriters and the Company on the Closing Date, if written
notice of the exercise of such option is received by the Company not later than
three full business days prior to the Closing Date.
The certificates for the Options Shares so to be delivered will be made
available to you at such office or other location including, without limitation,
in Oklahoma City, as you may reasonably request for checking at least two full
business days prior to the date of payment and delivery and will be in such
names and denominations as you may request, such request to be made at least
three full days prior to such date of payment and delivery. If the Underwriters
so elect, delivery of the Shares may be made by credit through full fast
transfer to the accounts at Depository Trust Company by the Underwriters.
It is understood that Capital West, individually, and not as the representative
of the Underwriters, may (but shall not be obligated to) make payment of the
purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the date of payment and
delivery for the Option Shares to be purchased by such Underwriter or
Underwriters. Any such payment by Capital West shall not relieve any Underwriter
of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a) hereof the
obligations of the Underwriters to purchase such Option Shares will be subject
(as of the date hereof and as of the date of payment for such Option Shares) to
the accuracy of and compliance with the representations and warranties of the
Company herein, to the accuracy of the statements of the Company and officers of
the Company made pursuant to the provisions hereof, to the performance by the
Company of their respective obligations hereunder, and to the condition that all
proceedings taken at or prior to the payment date in connection with the sale
and transfer of such Option Shares shall be satisfactory in form and substance
to you and to Underwriters' counsel, and you shall have been furnished with all
such documents, certificates and opinions as you may reasonably request in order
to evidence the accuracy and completeness of any of the representations,
warranties or statements, the performance of any of the covenants of the Company
or the compliance with any of the conditions herein contained.
8. Indemnification and Contribution.
-----------------------------------
(a) The Company agrees to indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, as
incurred, to which such Underwriter may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any breach of any
representation, warranty, agreement or covenant of the Company herein contained,
or (ii) any untrue statement or alleged untrue statement made by the Company in
Section 2 hereof, or (iii) any untrue statement or alleged untrue statement of a
material fact contained (A) in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (B) in any
blue sky application or other document executed by the Company specifically for
that purpose or based upon written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the Shares
under the securities laws thereof (any such application, documents or
information being hereinafter called a "Blue Sky Application"), or (iv) the
omission or alleged omission to state in the Registration Statement or any
amendment thereto a material fact required to be stated therein or necessary to
make the statements therein not misleading, or the omission or alleged omission
to state in any Preliminary Prospectus, the Prospectus or any supplement thereto
or in any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and shall reimburse each Underwriter
for any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action,
notwithstanding the possibility that payments for such expenses might later be
held to be improper, in which case the person receiving them shall promptly
refund them; except that the Company shall not be liable in any such case to the
extent, but only 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, such
Preliminary Prospectus or the Prospectus, or any amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter specifically for use in the
preparation thereof and, provided further, that the indemnity agreement provided
in this Section 8(a) with respect to any Preliminary Prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any losses,
claims, charges, liabilities or litigation based upon any untrue statement or
alleged untrue statement of material fact or omission or alleged omission to
state therein a material fact purchased Shares, if a copy of the Prospectus in
which such untrue statement or alleged untrue statement or omission or alleged
omission was corrected has not been sent or given to such person within the time
required by the Securities Act and the Rules and Regulations thereunder, unless
such failure is the result of noncompliance by the Company with Section 4(d)
hereof.
(b) Each Underwriter severally, but not jointly, shall indemnify and hold
harmless the Company against any losses, claims, damages or liabilities, joint
or several, as incurred, to which the Company may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained
(A) in the Registration Statement, Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (B) in any Blue Sky Application, or (ii) the
omission or alleged omission to state in the Registration Statement or any
amendment thereto a material fact required to be stated therein or necessary to
make the statements therein not misleading, or the omission or alleged omission
to state in any Preliminary Prospectus, the Prospectus or any supplement thereto
or in any Blue Sky Application a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; except that such indemnification
shall be available in each such case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company through the Underwriters by or on behalf of such
Underwriter specifically for use in the preparation thereof; and shall reimburse
any legal or other expenses reasonably incurred by the Company in connection
with investigation or defending against any such loss, claim, damage, liability
or action.
(c) Promptly after receipt by an indemnified party under subsection (a) or (b)
above of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the claim or the commencement of that action; the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under such subsection. If any such claim
or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party; provided, however, if
the defendants in any such action include both the indemnified parties and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, 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. After notice from the indemnifying party to the indemnified party of
its election to assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under such subsection for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel (together with
appropriate local counsel) approved by the indemnifying party, representing all
the indemnified parties under Section 8(a) and 8(b) hereof who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the claim or action, or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event shall
any indemnifying party be liable in respect of any amounts paid in settlement of
any action unless the indemnifying party shall have approved the terms of such
settlement; provided, however, that such consent shall not be unreasonably
withheld.
(d) In order to provide for just and equitable contribution in any action in
which a claim for indemnification is made pursuant to this Section 8 for which
it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters are
responsible pro rata for the portion represented by the percentage that the
underwriting discount bears to the initial public offering price, and the
Company is responsible for the remaining portion; provided, however, that (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter,
and (ii) no person guilty of a fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to a contribution from
any person who is not guilty of such fraudulent misrepresentation. This
subsection (d) shall not be operative as to any Underwriter to the extent that
the Company has received indemnity under this Section 8.
(e) The obligations of the Company under this Section 8 shall be in addition to
any liability which the Company may otherwise have, and shall extend, upon the
same terms and conditions, to each officer and director of each Underwriter and
to each person, if any, who controls any Underwriter within the meaning of the
Securities Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability that the respective Underwriters may
otherwise have, and shall extend, upon the same terms and conditions, to each
director of the Company (including any person who, with his consent, is named in
the Registration Statement as about to become a director of the Company), to
each officer of the Company who has signed the Registration Statement and to
each person, if any, who controls the Company within the meaning of the
Securities Act, in either case, whether or not such person is a party to any
action or proceeding.
(f) The parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof including without limitation the provisions of
this Section 8, and are fully informed regarding said provisions. They further
acknowledge that the provisions of this Section 8 fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement and Prospectus as required by the Securities Act and the Exchange Act.
The parties are advised that Federal or state public policy, as interpreted by
the courts in certain jurisdictions, may be contrary to certain of the
provisions of this Section 8, and the parties hereto hereby expressly waive and
relinquish any right or ability to assert such public policy as a defense to a
claim under this Section 8 and further agree not to attempt to assert any such
defense.
9. Representations, Warranties and Agreements to Survive Delivery. All
-------------------------------------------------------------------
representations, warranties, covenants and agreements of the Company contained
in this Agreement (including, without limitation, the agreements of the Company
set forth in Sections 4(i)-(k)), or contained in certificates of officers of the
Company submitted pursuant hereto, and the indemnity and contribution agreements
contained in Section 8 hereof, shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or controlling person, or by or on behalf of the Company, or any of its
officers, controlling persons or directors and shall survive delivery of the
Shares to the several Underwriters hereunder or termination of this Agreement.
10. Substitution of Underwriter. If any Underwriter or Underwriters shall fail
----------------------------
to take up and pay for the number of Firm Shares agreed by such Underwriter or
Underwriters to be purchased hereunder upon tender of such Firm Shares in
accordance with the terms hereof, and if the aggregate number of Firm Shares
which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters agreed but failed to
take up and pay for exceeds 10% of the Firm Shares, the remaining Underwriters
shall have the right, but shall not be obligated, to take up and pay for (in
such proportions as may be agreed upon among them) the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If such
remaining Underwriters do not, at the Closing Date, take up and pay for the Firm
Shares which the defaulting Underwriter or Underwriters so agreed but failed to
purchase, the Closing Date shall be postponed for twenty-four hours to allow the
several Underwriters the privilege of substituting within twenty-four hours
(including non-business hours) another underwriter or underwriters (which may
include any non-defaulting Underwriter) satisfactory to the Company. If no such
underwriter or underwriters shall have been substituted as aforesaid by such
postponed Closing Date, the Closing Date may, at the option of the Company, be
postponed for a further twenty-four hours, if necessary to allow the Company the
privilege of finding another underwriter or underwriters, satisfactory to you,
to purchase the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If it shall be arranged for the remaining
Underwriters or substituted underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven full business days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus, or in
any other documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary, and (ii) the respective number of Firm Shares to
be purchased by the remaining Underwriters and substitute underwriters shall be
taken as the basis of their underwriting obligation. If the remaining
Underwriters shall not take up and pay for all such Firm Shares so agreed to be
purchased by the defaulting Underwriter or Underwriters or substitute another
underwriter or underwriters as aforesaid and the Company shall not find or shall
not elect to seek another underwriter or underwriters for such Firm Shares as
aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the preceding
paragraph of this Section, neither the Company shall be liable to any
Underwriter (except as provided in Sections 5 and 8 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person substituted
for an Underwriter under this Section.
11. Effective Date of this Agreement and Termination.
-------------------------------------------------------
(a) This Agreement shall become effective at the later of (i) execution of
this Agreement, or (ii) when notification of the effectiveness of the
Registration Statement has been released by the Commission.
(b) Capital West 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 by the Company is
not fulfilled including, without limitation, any change in the financial
condition, earnings, operations, business, management, technical staff, or
business prospects of the Company from that set forth in the Registration
Statement or Prospectus which, in the sole judgment of Capital West, is material
and adverse, or (ii) if trading on the Nasdaq National Market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the Nasdaq
National Market by the Nasdaq National Market or by order of the Commission or
any other governmental authority having jurisdiction, or if a banking moratorium
shall have been declared by Federal, New York or Oklahoma authorities, or (iii)
if on or prior to the Closing Date, or on or prior to any later date on which
Option Shares are to be purchased, as the case may be, the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially and adversely with the conduct of
the business and operations of the Company regardless of whether or not such
loss 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 in the United States as in your reasonable judgment makes it inadvisable
or impracticable to proceed with the offering, sale and delivery of the Shares,
or (v) if on or prior to the Closing Date, or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, there shall have
been an outbreak or escalation of hostilities or other international or domestic
calamity, crises or material adverse change in political, financial or economic
conditions, the effect of which on the financial markets of the United States is
such as to make it in your reasonable judgment, inadvisable to proceed with the
marketing of the Shares. In the event of termination pursuant to this Section
11(b), the Company shall remain obligated to pay costs and expenses pursuant to
Section 4(j), 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to terminate
this Agreement as provided in this Section 11, you shall promptly notify the
Company by telephone or telecopy, 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 or telecopy, in each case,
confirmed by letter.
12. Notices. All notices and other communications hereunder shall be in
--------
writing and shall be deemed to have been given if mailed or transmitted by any
standard form of telecommunication. Notices to the Underwriters shall be
directed to the Underwriters in care of Capital West Securities, Inc., ▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, One Leadership Square, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; notices to the Company shall be directed to it
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇ ▇.
▇▇▇▇▇, ▇▇
13. Parties. This Agreement shall inure to the benefit of and be binding upon
--------
the several Underwriters and the Company and their respective executors,
administrators, successors, and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or corporation,
other than the parties hereto and their respective executors, administrators,
successors, and assigns and the controlling persons and officers and directors
referred to in Section 8 hereof any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provisions herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the parties hereto and their respective executors,
administrators, successors, and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or corporation.
No purchaser of the Shares from any Underwriter shall be construed to be a
successor by reason merely of such purchase.
14. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of Oklahoma applicable to agreements made
----
and to be performed in said State. Specified times of day refer to Central
time.
15. Counterparts. This Agreement may be signed in several counterparts, each of
-------------
which will constitute an original.
16. Binding Arbitration. Each party to this Agreement agrees that any dispute or
--------------------
controversy arising between any of the parties to this agreement, or any person
or entity in privity therewith, out of the transactions effected and
relationships created pursuant to this Agreement and each other agreement
created in connection herewith, including any dispute or controversy regarding
the formation, terms, or construction of this Agreement, regardless of kind or
character, must be resolved through binding arbitration. Each party to this
Agreement agrees to submit such dispute or controversy to arbitration before the
American Arbitration Association (the "Association") in Oklahoma City, Oklahoma,
and further agrees to be bound by the determination of an arbitration panel
consisting of three persons. If demand for arbitration is made, each party will
have the right to select one independent arbitrator. If the party upon whom the
demand of arbitration is served fails to select an arbitrator within 20 days,
then the Association may select a second arbitrator upon application by either
party. The two arbitrators shall select a third arbitrator. If the two
arbitrators fail to select a third arbitrator within 20 days, the third
arbitrator may be selected and appointed by the Association upon application by
either party. The arbitrators' decision concerning the claim, controversy or
dispute, including allocation among the parties of costs and expenses associated
with the arbitration, shall be final and binding on the parties and judgment on
the award may be entered in any court of competent jurisdiction. Any party to
this Agreement may bring an action, including a summary or expedited proceeding,
to compel arbitration of any such dispute or controversy in a court of competent
jurisdiction and, further, may seek provisional or ancillary remedies including
temporary or injunctive relief in connection with such dispute or controversy in
a court of competent jurisdiction, provided that the dispute or controversy is
ultimately resolved through binding arbitration conducted in accordance with the
terms and conditions of this section.
If the foregoing correctly sets forth your understanding of our agreement,
please sign in the space provided below for that purpose, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriters and the Company in accordance with its terms.
*******
LinuxOne, Inc.
By:
CONFIRMED AND ACCEPTED, as of the date first above written:
CAPITAL WEST SECURITIES, INC.
By:
SCHEDULE A
Underwriter Shares Purchased
----------- -----------------
Capital West Securities, Inc.
Total number of shares: