Exhibit 1.1
1,000,000 Shares
TALISMAN ENTERPRISES INC.
(an Ontario, Canada corporation)
(No Par Value Per Share)
UNDERWRITING AGREEMENT
October __, 1999
CAPITAL WEST SECURITIES, INC.
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Ladies/Gentlemen:
Talisman Enterprises Inc., an Ontario, Canada corporation (the
"Company"), hereby confirms its agreement with Capital West Securities, Inc.
("Capital West") and additional underwriters (along with Capital West, each an
"Underwriter and, collectively, the "Underwriters") as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
1,000,000 shares of its authorized and unissued common stock, no par value, to
the several Underwriters. The Company also proposes to grant to the
Underwriters an option as provided in Section 7 hereof. As used in this
Agreement, the term "Shares" shall include the Shares, the Option Shares, as
defined in Section 7 and, if the Company has filed or is required pursuant to
the terms hereof to file a registration statement pursuant to Rule 462(b) under
the Act registering additional shares of common stock, no par value, such
shares of common stock. All shares of common stock of the Company, no par value
per share, including the Shares, shall hereinafter be referred to as "Common
Stock."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. Unless
otherwise indicated or the context otherwise requires, references to the
"Company" in this Section 2 are references to Talisman Enterprises Inc., an
Ontario, Canada corporation. The Company represents and warrants to and agrees
with each Underwriter, as follows:
(a) A registration statement on Form SB-2 (File No. 333-83123)
with respect to the Shares, including a prospectus subject to completion, has
been carefully and accurately prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
applicable rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Act and has been filed with
the Commission; such amendments to such registration statement and such amended
prospectuses subject to completion, as may have been required prior to the date
hereof have been similarly prepared and filed with the Commission; and the
Company will file such additional amendments to such registration statement and
such amended prospectuses
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subject to completion, as may hereafter be required. Copies of such registration
statement and any amendments and of each related prospectus subject to
completion have been delivered to the Company.
If requested by Capital West, the Company shall file a Rule 462(b)
Registration Statement with the Commission registering shares of Common Stock in
compliance with Rule 462(b) by 5:30 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
If the registration statement has been declared effective under the
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 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 and if the Company has filed or is required pursuant to the terms hereof
to file a registration statement pursuant to Rule 462(b) under the Act
registering additional shares of Common Stock (a "Rule 462(b) Registration
Statement"), then, unless otherwise specified, any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462(b)
Registration Statement. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Shares as included in such 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.
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(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 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, or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; if the Company is required to file a Rule 462(b)
Registration Statement after the effectiveness of this Agreement, such Rule
462(b) Registration Statement and any amendments thereto, when they become
effective (i) will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) will comply in all material respects
with the Act; 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 Act and the Rules and
Regulations and will in all material respects conform to the requirements of the
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 the light
of the circumstances under which they were made, not misleading.
(c) Each of the Company and Talisman International Inc., its sole
Subsidiary (as such term is defined in Rule 405 under the 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
Subsidiary 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 Subsidiary
considered as a whole; each of the Company and its Subsidiary is in possession
of and operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal, foreign 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 Subsidiary 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, except
such failures to comply as would not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiary considered as a whole.
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(d) 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 dated of even date herewith by and between
the Company and the Underwriters (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 Subsidiary, 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 Subsidiary or over the properties of the
Company or its Subsidiary, 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 Act, the
Securities and 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.
(e) 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 Subsidiary 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
Subsidiary 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 Subsidiary 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 Subsidiary
considered as one enterprise; and there are no contracts or documents of the
Company or its Subsidiary which are required to be described in the Registration
Statement or the Prospectus, or to be filed as exhibits thereto, by the Act or
by the Rules and Regulations which have not been accurately described in all
material respects and filed as exhibits to the Registration
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Statement. The contracts so described in the Prospectus are in full force and
effect on the date hereof, and neither the Company nor its Subsidiary 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.
(f) 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, state and
foreign 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 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 shares of Common Stock
issuable under the warrant to be granted to the Underwriters under the Warrant
Agreement (the "Underwriters' Warrant") 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 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 Shares, Option Shares or shares of Common Stock issuable under the
Underwriters' Warrant 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 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.
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(g) Ernst & Young LLP, 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 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.
(h) 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 condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company, whether or not arising in the ordinary course of
business, (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, or (vii)
there has been no change in any federal, state, foreign 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 pending other than as described in
the Prospectus.
(i) Except as described in the Prospectus, (i) the Company and its
Subsidiary 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 or those not material, singly or in the
aggregate, to the business of the Company and its Subsidiary 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
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other similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
(j) All federal, state, local and foreign tax returns required to be
filed by the Company or its Subsidiary 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 Subsidiary has not been finally determined or
remains open to examination by applicable taxing authorities.
(k) No labor dispute with the employees of the Company or its
Subsidiary exists or 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 Subsidiary 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.
(l) The Company and its Subsidiary 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 Subsidiary 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
Subsidiary 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 Subsidiary considered as one enterprise.
(m) Except as set forth in the Prospectus, the Company and its
Subsidiary 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
Subsidiary considered as one enterprise.
(n) The Common Stock has been approved for quotation on the Nasdaq
SmallCap Market.
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(o) 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.
(p) 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 Act.
(q) 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 foreign, 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.
(r) 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 26 of Form SB-2 under the
Act, other than as disclosed in the Registration Statement.
(s) Each officer and director of the Company, 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, for a
period expiring 12 months after the effective date of the Registration
Statement, 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.
(t) Except as described in the Registration Statement, (i) neither
the Company nor its Subsidiary 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
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material adverse effect on the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and its
Subsidiary considered as one enterprise, and (ii) 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 Subsidiary 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 Subsidiary
considered as one enterprise.
(u) The Company and its Subsidiary 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 assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(v) 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.
(w) 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.
(x) 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 and/or the equivalent of such legislation in Canada ("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.
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(y) 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.
(z) 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.
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 per share
of [$_____] per Share, the number of Shares set forth in SCHEDULE A hereto
(subject to adjustment as provided in Section 10).
Delivery of definitive certificates for the Shares to be purchased by
the Underwriters pursuant to this Section 3 shall be made against payment of the
purchase price therefor by the several 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., ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, 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 Shares to be so delivered will be made
available to Capital West at such office or at such other location as Capital
West may reasonably request for checking at least one business day prior to the
Closing Date and will be in such names and denominations as Capital West may
request. 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 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.
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After the Registration Statement becomes effective, the several
Underwriters intend to offer the 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 Capital West, on behalf of the
respective 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 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 (other than any Rule 462(b) Registration Statement to be filed by the
Company, which if filed after the effectiveness of this Agreement will become
effective no later than 5:30 P.M., New York City time, on the date of this
Agreement); 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 and if the Company is required to file a Rule 462(b)
Registration Statement after the effectiveness of this Agreement, when the Rule
462(b) Registration Statement has become effective; 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 Capital West request, 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
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to correct any statements or omissions, if, at any time when a prospectus
relating to the Shares is required to be delivered under the 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 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 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 use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as Capital
West may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares. 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 which
will 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 Act, all in such quantities as
Capital West 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 Act and covering a twelve-month period beginning after
the effective date of the Registration Statement.
(f) 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
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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"); (iv) 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 (v) any additional information of a public
nature concerning the Company, or its business which Capital West 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 Subsidiary 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.
Regardless of whether the Company is a reporting company under the Exchange Act,
the Company shall in a timely manner file reports with the Commission pursuant
to and as required by the Exchange Act as if the Company is a reporting company
under the Exchange Act, including without limitation the filing as appropriate
of Form 10-K's, Form 10-Q's, Form 8-K's, Form 4's, and Form 3's.
(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 will file Form SR in conformity with the requirements
of the Act and the Rules and Regulations.
(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 the Company shall
terminate this Agreement under Section 11(a), the Company will reimburse the
several Underwriters for all out-of-pocket accountable expenses (including fees
and disbursements
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of counsel for the several Underwriters) actually 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 Capital West's 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 Capital West, responding to or commenting on such rumor, publication or
event.
(l) During a period of 90 days from the effective date of the
Registration Statement, the Company will not file a registration statement
registering shares under any employee benefit plan.
(m) On the Closing Date, the Company will sell to Capital West, for
$.001 per share of Common Stock covered by each warrant, the Underwriters'
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 Underwriters' 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 12 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
Underwriters' Warrants and the Common Stock of the Company issued upon the
exercise of the Underwriters' Warrants, and 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 Underwriters' Warrants. 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 Underwriters' Warrants or the shares of
Common Stock issuable upon the exercise thereof, files a registration statement
under the 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 Capital West 30 days' notice of its
intention to do so, and at Capital West's written request given within 10 days
of the receipt of such notice, will include in such registration statement such
number of such Shares as Capital West may specify, all at no cost to Capital
West or the other Underwriters. In connection with any such
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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 Act grant to each other customary
reciprocal indemnities against liabilities under the Act.
(n) The Company will, as if the Company were a reporting company
under the Exchange Act, comply with the 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
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 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 Act, the Exchange Act, and applicable state
securities or Blue Sky laws.
(o) The Company has and will, with respect to the Selling
Shareholders as defined in the Registration Statement, instruct the Company's
transfer agent to issue to the Selling Shareholders three (3) stock certificates
for the shares of common stock of the Company held by such Selling Shareholder
as follows: (i) 25% of such shares shall contain no restrictive legend and shall
be tradeable in the manner described in the Propectus; (ii) an additional 25% of
such shares shall contain the following restrictive legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE RESTRICTED UNDER THE TERMS OF
THAT CERTAIN LOCK-UP DESCRIBED IN THE PROSPECTUS DATED [ ], AS MAY BE
AMENDED FROM TIME TO TIME, THE PROVISIONS OF WHICH ARE HEREIN INCORPORATED
BY REFERENCE. SUCH PROSPECTUS PROVIDES, AMONG OTHER THINGS, THAT THE SHARES
EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED UNTIL
[ ]. A COPY OF THE PROSPECTUS IS ON FILE AT THE PRINCIPAL OFFICE
OF THE COMPANY. UPON THE WRITTEN REQUEST OF THE HOLDER HEREOF, THE
COMPANY SHALL FURNISH A COPY WITHOUT CHARGE.
and (iii) an additional 50% of such shares shall contain the following
restrictive legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE RESTRICTED UNDER THE TERMS OF
THAT CERTAIN LOCK-UP DESCRIBED IN THE PROSPECTUS DATED [ ], AS MAY BE
AMENDED FROM TIME TO TIME, THE PROVISIONS OF WHICH ARE HEREIN INCORPORATED
BY REFERENCE. SUCH PROSPECTUS PROVIDES, AMONG OTHER THINGS, THAT THE SHARES
EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED UNTIL
[ ]. A COPY OF THE PROSPECTUS IS ON FILE AT THE PRINCIPAL OFFICE
OF THE COMPANY. UPON THE WRITTEN REQUEST OF THE HOLDER HEREOF, THE
COMPANY SHALL FURNISH A COPY WITHOUT CHARGE.
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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 several 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 several
Underwriters copies of the Registration Statement (including appropriate
exhibits), preliminary prospectus and the Prospectus, and any amendments or
supplements to any of the foregoing; 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 Capital West 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 three percent 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 June 1, 1999. The Company shall pay
to Capital West the balance of the nonaccountable expense allowance on the
Closing Date.
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 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
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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 Capital West 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 Capital West 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 Subsidiary considered as one enterprise, whether or not arising in the
ordinary course of business which, in Capital West's sole judgment, is material
and adverse and that makes it, in Capital West's 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:
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(1) The opinion, dated as of the Closing Date of Sichenzia,
Ross & ▇▇▇▇▇▇▇▇, LLP, 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
Province of Ontario, Canada.
(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 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
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 and are fully paid and nonassessable and have not been issued in
violation of any preemptive right contained in the charter or bylaws 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 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 charter or bylaws 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 charter or bylaws 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 Underwriters' 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 charter or bylaws 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 sufficient in number to meet the exercise requirements of such
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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) The 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 the 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 such Subsidiary
have been duly authorized and validly issued, is fully paid and nonassessable
and is owned by the Company directly 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 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 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 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 it constitutes matters of law or
legal conclusions, has been reviewed by
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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 Subsidiary is a party, or to which the property of the
Company or its Subsidiary 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
Subsidiary 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 Subsidiary 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 Subsidiary considered as one enterprise.
(xiv) The information in the Prospectus under the captions
["Business and Properties - Legal Proceedings," "- Governmental Regulation" and
"- Properties," "Certain Transactions" and "Description of Capital Stock" in the
Prospectus and Items 24 and 26 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 such
counsel 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 Subsidiary that are required to be described in the Prospectus
are not described as required by the 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 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) is required in connection
with the due authorization, execution and delivery of this Agreement or for
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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 Subsidiary
pursuant to any material contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which the Company or its Subsidiary 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 Subsidiary is subject, nor will such action result
in any violation of the provisions of the charter or bylaws of the Company, or
any applicable law, administrative regulation or court decree.
(xvii) With the exception of the Underwriters' 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 Subsidiary are in violation of
their charter or bylaws.
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. 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 its opinion required by subsection (d)(1) of this Section,
Sichenzia, Ross & ▇▇▇▇▇▇▇▇, LLP, 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
-21-
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 Day, Edwards,
Federman, Propester & ▇▇▇▇▇▇▇▇▇▇▇, P.C., counsel for the Underwriters, in form
and substance satisfactory to Capital West, with respect to the sufficiency of
all such corporate proceedings and other legal matters relating to this
Agreement and the transactions contemplated hereby as Capital West 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 Ernst & Young LLP 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 Subsidiary within the meaning of the 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 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 audited consolidated balance sheet of the Company and its
Subsidiary included in the Registration Statement does not comply as to form in
all material respects with the applicable accounting requirements of the 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 other 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 Subsidiary
or any decrease in combined net current assets or net assets as compared with
the amounts shown in the August 31, 1999 balance sheet included in the
Registration Statement or, during the period from August 31, 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 Subsidiary, except in all instances for changes,
-22-
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 Subsidiary 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
Ernst & Young LLP 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 SmallCap 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 6(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").
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(2) The opinions of Sichenzia, Ross & ▇▇▇▇▇▇▇▇ LLP, 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 6(d)(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 Day, Edwards, Federman, Propester &
▇▇▇▇▇▇▇▇▇▇▇, P.C., 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 6(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 Ernst & Young LLP, 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 6(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 Underwriters the
Underwriters' Warrants, which shall be in the form attached as an exhibit to the
Warrant Agreement.
(j) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 5:30 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
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(j) 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 Underwriters, for the purpose of covering over-allotments
in connection with the distribution and sale of the Shares only, a
non-transferable option to purchase up to an aggregate 150,000 option shares at
the purchase price per share for the Shares set forth in Section 3 hereof (the
"Option Shares"). Such option may be exercised by the Underwriters on behalf of
the several Underwriters on one occasion in whole or
-24-
in part during the period of 45 days from and after the date on which the 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 Shares purchased by
such Underwriter (set forth in SCHEDULE A hereto) bears to the total number of
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 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 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, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 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 Capital West at such office or other location including,
without limitation, in Oklahoma City, as Capital West 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 Capital West may
request, such request to be made at least three full days prior to such date of
payment and delivery. If Capital West so elects, 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 Capital West 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 Underwriters 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 Capital West and to Underwriters' counsel,
and Capital West shall have been furnished with all such documents, certificates
and opinions as Capital West may reasonably request in order to evidence the
accuracy and completeness of any of the
-25-
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 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 (iv) 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 (iii) 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
on a monthly basis for any legal or other reasonable expenses as 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 Act and the Rules and
Regulations thereunder, unless such failure is the result of noncompliance by
the Company with Section 4(c) hereof.
-26-
(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 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
-27-
represent the indemnified party within a reasonable time after notice of
commencement of the 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 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 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 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
-28-
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)-(l)), 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 UNDERWRITERS. If any Underwriter or Underwriters shall
fail to take up and pay for the number of Shares agreed by such Underwriter or
Underwriters to be purchased hereunder upon tender of such Shares in accordance
with the terms hereof, and if the aggregate number of Shares which such
defaulting Underwriter or Underwriters so agreed but failed to purchase does not
exceed 10% of the Shares, the remaining Underwriters shall be obligated,
severally in proportion to their respective commitments hereunder, to take up
and pay for the Shares of such defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate number of
Shares which such defaulting Underwriter or Underwriters agreed but failed to
take up and pay for exceeds 10% of the 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 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 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
nondefaulting 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 Capital West, to
purchase the 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 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 Shares to be purchased by the
remaining Underwriters and substitute underwriters shall be taken as the basis
-29-
of their underwriting obligation. If the remaining Underwriters shall not take
up and pay for all such 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 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 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.
-30-
(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 Capital West's sole judgment, is material and
adverse, or (ii) if trading on the New York Stock Exchange or the Nasdaq Stock
Market or the Nasdaq Stock Market SmallCap 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 New York Stock Exchange or
the Nasdaq Stock Market or the Nasdaq Stock Market SmallCap, by the New York
Stock Exchange, the Nasdaq Stock Market, or the Nasdaq Stock Market SmallCap or
by order of the Commission or any other governmental authority having
jurisdiction, or if a banking moratorium shall have been declared by federal,
Canadian, provincial, 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 Capital West's 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 Capital West's 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 Capital West elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 11, Capital
West 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 Capital West 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., ▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; notices to the Company shall be directed to it
at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, attention of
Chief Executive Officer.
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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, without regard to conflict of laws
principles. Specified times of day refer to Central Daylight 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 (3) 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 for arbitration is served fails to select an arbitrator within twenty
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 twenty 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
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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
among the several Underwriters and the Company in accordance with its terms.
Very truly yours,
TALISMAN ENTERPRISES INC.
By:_______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
CONFIRMED AND ACCEPTED, as of the date first above written:
CAPITAL WEST SECURITIES, INC.
as Representative of the several Underwriters
By:___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman
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SCHEDULE A
UNDERWRITER SHARES PURCHASED
----------- ----------------
Capital West Securities, Inc. ---------------
[ ] ---------------
[ ] ---------------
Total 1,000,000