1
EXHIBIT 1.1
1,600,000 SHARES
LORECOM TECHNOLOGIES, INC.
(an Oklahoma corporation)
(Par Value $0.01 Per Share)
UNDERWRITING AGREEMENT
August __, 1999
CAPITAL WEST SECURITIES, INC.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
One Leadership Square
Oklahoma City, Oklahoma 73102
Ladies/Gentlemen:
LORECOM Technologies, Inc., an Oklahoma corporation (the "Company"),
hereby confirms its agreement with Capital West Securities, Inc. ("Capital
West") as representative of the several underwriters named in Schedule A hereto
(herein collectively called the "Underwriters") as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
1,600,000 shares (the "Firm Shares") of its authorized and unissued common
stock, par value $0.01 per share (the "Common Stock") to the Underwriters upon
the terms and subject to the conditions set forth herein. The Company also
proposes to grant to the Underwriters an option to purchase, for the sole
purpose of covering over-allotments in connection with the sale of Firm Shares,
an aggregate of up to 240,000 additional shares ("Option Shares") of Common
Stock upon the terms and subject to the conditions set forth herein and as
provided in Section 7 hereof. As used in this Agreement, the term "Shares"
shall include the Firm Shares and the Option Shares. All shares of Common Stock
of the Company, including the Shares, are hereinafter referred to as "Common
Stock."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. Unless
otherwise indicated or the context otherwise requires, references to the
"Company" in this Section 2 are references to LORECOM Technologies, Inc., an
Oklahoma corporation. The Company represents and warrants to and agrees with
the Underwriters, as follows:
(a) A registration statement on Form SB-2 (File No. 333-76451) with
respect to the Shares, including a prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "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 subject to completion, as may hereafter be required. The Company
meets the requirements for use of a Registration Statement on Form SB-2. Copies
of such
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registration statement and any amendments and of each related prospectus
subject to completion have been delivered to you.
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. 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 after the effective date of the Registration
Statement if any revised prospectus shall be provided to the Underwriters by
the Company for use in connection with the offering of the Shares that differs
from the Prospectus on file with the Commission at the time the Registration
Statement became or becomes, as the case may be, effective (whether or not such
revised prospectus is required to be filed with the Commission pursuant to Rule
424(b)(3) of the Rules and Regulations), the term "Prospectus" shall refer to
such revised prospectus from and after the time it is first provided to the
Underwriters for such use.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus has conformed in all
material respects to the requirements of the 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; 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; provided, however, that none of the
representations and warranties contained in this subparagraph shall apply to
information contained in or omitted from the Registration
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Statement or the Prospectus or any such amendment or supplement in reliance
upon, and in conformity with, written information furnished to the Company by
any Underwriter specifically for inclusion therein.
(c) Each contract, agreement, instrument, lease, license or other
item required to be described in the Registration Statement or the Prospectuses
or filed as an exhibit to the Registration Statement has been so described or
filed, as the case may be.
(d) The Company and each of its Subsidiaries (as such term is
defined in Rule 405 under the Act) has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its organization, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement; each of the Company and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the ownership or leasing of its properties or the
conduct of its business requires such qualification except where the failure to
be so qualified or to be in good standing would not have a material adverse
effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its Subsidiaries considered
as a whole; each of the Company and its Subsidiaries is in possession of and
operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, Federal and other regulatory
authorities which are material to the conduct of its business, all of which are
valid and in full force and effect; neither the Company nor its Subsidiaries is
in violation of its charter or bylaws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material indenture, mortgage, deed of trust, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, or any
material lease, contract, joint venture, or other agreement or instrument to
which it is a party or by which its property is bound or in violation of any
law, order, rule, regulation, writ, injunction, judgment or decree of any
government, governmental agency or body or court, domestic or foreign, of which
it has knowledge except such failures to comply as would not, individually or
in the aggregate, have a material adverse effect on the Company and its
Subsidiaries considered as a whole.
(e) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement and the Warrant Agreement (the "Warrant Agreement") by and between
the Company and the Underwriters 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 Certificate of Incorporation and Bylaws of the Company, or (iii)
any law, order, rule, regulation, writ, injunction, judgment or decree of any
government or governmental agency or body
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or court, domestic or foreign, having jurisdiction over the Company or over the
properties of the Company, 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.
(f) Except as disclosed in the Registration Statement or the
Prospectus, there is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or its
Subsidiaries which (i) is required to be disclosed in the Registration
Statement or the Prospectus or which might result in any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its Subsidiaries considered as
one enterprise, or which might materially and adversely affect the properties
or assets thereof; or (ii) which might be expected to materially and adversely
affect the consummation of the transactions contemplated by this Agreement; all
pending legal or governmental proceedings to which the Company or its
Subsidiaries is a party or of which any of their respective properties or
assets is the subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the Company's business,
could not reasonably be expected to result in a material adverse change in the
condition, financial or otherwise, or the earnings, business affairs or
business properties of the Company and its Subsidiaries considered as one
enterprise; and there are no contracts or documents of the Company or its
Subsidiaries which are required to be described in the Registration Statement
or the Prospectus, or to be filed as exhibits thereto, by the Act or by the
Rules and Regulations which have not been accurately described in all material
respects and filed as exhibits to the Registration Statement. To the best of
the Company's knowledge, the contracts so described in the Prospectus are in
full force and effect on the date hereof, and neither the Company nor its
Subsidiaries is in breach of or default under, and to the Company's knowledge,
no other party is in material breach of or material default under, any of such
contracts.
(g) All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable,
have been issued in compliance with all Federal and state securities laws, were
not issued in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities (other than such preemptive rights or
other rights to subscribe for or purchase securities as were fully complied
with or expressly waived or with respect to the violation of which the right to
make claim is barred by the applicable statute of limitations), and the
authorized and outstanding capital stock of the Company conforms in all
material respects to the statements relating thereto contained in the
Registration Statement and the Prospectus (and such statements correctly state
the substance of the instruments defining the capitalization of the Company);
the Firm Shares and the Option Shares to be purchased from the Company
hereunder have been duly authorized for issuance and sale to the Underwriters
pursuant to this Agreement and, when issued and delivered by
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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 (the "Underwriters'
Warrant") to be granted to the Underwriters under the Warrant Agreement 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 Firm 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.
(h) Deloitte & Touche 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 financial statements of the Company,
together with the related schedules and notes, and the unaudited financial
information (other than pro forma 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 financial statements, together with
the related schedules and notes, and the unaudited financial information (other
than pro forma 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 from the audited and unaudited
financial statements presented therein. No other financial statements or
schedules are required to be included in the Registration Statement.
(i) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein, (i) there has been no material adverse change in the business,
properties, operations, condition (financial or otherwise) or in the earnings,
business affairs or business prospects of the Company and its Subsidiaries,
whether or not arising in the ordinary course of business, (ii) there have been
no transactions entered into by the Company other than those in the ordinary
course of business, which are material with respect to the Company, (iii) there
has been no obligation that is material to the Company, direct or contingent,
incurred by the Company or any Subsidiary, except obligations incurred in the
ordinary course of business, (iv) there has been no change in the capital stock
of the Company, (v) except for amounts
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loaned by an affiliate of ▇▇▇▇▇ ▇▇▇▇▇▇ to the Company prior to the date of this
Agreement, there has been no change in the outstanding indebtedness of the
Company which is material to the Company, (vi) there has been no dividend or
distribution of any kind declared, paid or made by the Company on behalf of any
class of its respective capital stock, (vii) there has been no redemption,
purchase or acquisition or agreement to redeem, purchase or acquire shares of
Common Stock of the Company, or (viii) to the knowledge of the Company, there
has been no change in any Federal, state, or other laws, rules, or regulations
(or interpretations thereof) applicable to the business of the Company that
would have a material adverse effect on the Company, and, to the knowledge of
the Company, no such change is pending other than as described in the
Prospectus.
(j) Except as described in the Prospectus, (i) the Company and its
Subsidiaries have good title to all properties and assets described in the
Prospectus as owned by them, free and clear of all liens, charges, encumbrances
or restrictions of any kind, except those described in the Prospectus, or those
not material, singly or in the aggregate, to the business of the Company and
its Subsidiaries considered as a whole, (ii) the agreements to which the
Company is a party described in the Prospectus are valid agreements,
enforceable by the Company, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally or by general equitable principles,
and (iii) the Company has valid and enforceable leases for the properties
described in the Prospectus as leased by it except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
(k) All Federal, state, local and foreign tax returns required to
be filed by the Company or its Subsidiaries in any jurisdiction have been
filed, and all material taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges due or claimed to be due from
such entities have been paid other than those being contested in good faith and
for which adequate reserves have been provided or those currently payable
without penalty or interest; and adequate charges, accruals and reserves have
been provided for in the financial statements referred to in Section 2(g) above
in respect of all Federal, state, local and foreign taxes for all periods as to
which the tax liability of the Company or its Subsidiaries has not been finally
determined or remains open to examination by applicable taxing authorities.
(l) No labor dispute with the employees of the Company or its
Subsidiaries exists or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers, contractors or
customers which might be expected to result in any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise. No collective bargaining agreement exists with any of the Company's
employees and, to the Company's knowledge, no such agreement is imminent.
(m) The Company and its Subsidiaries own or possess, or can acquire
on reasonable terms, the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names presently employed by them in
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connection with the business now operated by them and neither the Company nor
its Subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to any
patent or proprietary rights or of any facts or circumstances which would
render any patent and proprietary rights invalid or inadequate to protect the
interest of the Company or its Subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy singly or in the aggregate, would result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise.
(n) Except as set forth in the Prospectus, the Company and its
Subsidiaries are in compliance in all material respects with all applicable
laws, statutes, ordinances, rules or regulations, the enforcement of which,
individually or in the aggregate, would be reasonably expected to have a
material adverse effect on the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise.
(o) The Common Stock has been approved for quotation on the
American Stock Exchange subject to official notice of issuance.
(p) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to
conduct, its affairs in such a manner as to ensure that it will not become an
"investment company" within the meaning of the 1940 Act and such rules and
regulations.
(q) Except as otherwise agreed by Capital West or as disclosed in
the Prospectus, 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.
(r) The Company has not at any time during the last five years (i)
made any unlawful contribution to any candidate for foreign office, or failed
to disclose fully any contribution in violation of law, or (ii) made any
payment to any Federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
(s) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares. The Company has not
effected any sales of securities required to be disclosed in Item 26 of Form
SB-2 under the Act, other than as disclosed in the Registration Statement.
(t) Each officer and director of the Company, shareholders
acquiring Common Stock in exchange for their stock in the interconnect partners
identified in the Registration Statement and each beneficial owner of at least
5% of the outstanding shares of Common Stock and options and warrants to
purchase Common Stock outstanding prior to the effective date of the
Registration
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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.
Messrs. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and each officer and director shall be
subject to a two (2) year lock-up.
(u) Except as described in the Registration Statement, (i) neither
the Company nor its Subsidiaries is in violation of any Federal, state, local
or foreign laws or regulations relating to pollution or protection of human
health, the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively,
"Environmental Materials") or to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Environmental
Materials (collectively, the "Environmental Laws"), except such violations as
would not, singly or in the aggregate, have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, and (ii) to the best of the Company's knowledge, there are no
events or circumstances that could form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or its
Subsidiaries relating to any Environmental Materials or the violation of any
Environmental Laws, which, singly or in the aggregate, could reasonably be
expected to have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise.
(v) The Company and its Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles as in effect in the United States and to maintain asset
accountability; (iii) access to bank accounts is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(w) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus. Neither the Company nor any employee or agent of the Company has
made any payment or transfer of any funds or assets of the Company or conferred
any personal benefit by use of the Company's assets, or received any funds,
assets or personal benefit in violation of any law, rule or regulation.
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(x) On the Closing Date and upon delivery of the Option Shares, as
applicable, all transfer and other taxes (other than income taxes) that are
required to be paid in connection with the sale and transfer of the Shares to
the Underwriters will have been paid.
(y) The Company does not currently have and has never had any
pension plan subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA)
for which the Company would have any liability, the Company has not incurred
and does not expect to incur liability under (i) Title IV of ERISA with respect
to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412
or 4971 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability that is intended
to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification.
(z) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 517.075, Florida Statutes (Chapter
92-198, Laws of Florida) An Act Relating to Disclosure of Doing Business with
Cuba (the "Cuba Act"), and the Company further agrees that if it commences
engaging in business with the government of Cuba or with any person or
affiliate located in Cuba after the date the Registration Statement becomes or
has become effective with the Commission or the Florida Department of Banking
and Finance (the "Department"), whichever date is later, or if the information
reported or incorporated by reference in the Prospectus, if any, concerning the
Company's business in Cuba or with any person or affiliate located in Cuba
changes in any material way, the Company will provide the Department notice of
such business or change, as appropriate, in a form acceptable to the
Department.
(aa) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby.
(bb) Except as may be set forth in the Prospectus, the Company has
not incurred any liability for a fee, commission, or other compensation on
account of the employment of a broker or finder in connection with the
transactions contemplated by the Underwriting Agreement.
(cc) The Company and each subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the subsidiaries are engaged.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter,
severally and not jointly, and each Underwriter, severally and not jointly,
agrees to purchase from the Company, respectively, at a purchase price per
share of $[PRICE PER SHARE] per Share, the number of Shares set forth in
Schedule A hereto (subject to adjustment as provided in Section 10).
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Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made against
payment of the purchase price therefor by the Underwriters by certified or
official bank check in next day funds or by wire transfer, payable to the order
of the Company at the offices of Capital West Securities, Inc., ▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, One Leadership Square, Oklahoma City, Oklahoma 73102, or
at such other place as shall be agreed upon by the Underwriters and the
Company, at 9:30 a.m. on the fourth business day following the first day that
Shares are traded (or at such time and date to which payments and delivery
shall have been postponed pursuant to Section 10 hereof), such time and date of
payment and delivery being herein called the "Closing Date." The certificates
for the Firm Shares to be so delivered will be made available to you at such
office or at such other location as you may reasonably request for checking at
least one business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two business
days prior to the Closing Date. If the Underwriters so elect, delivery of the
Shares may be made by credit through full fast transfer to the accounts at
Depository Trust Company designated by the Underwriters.
It is understood that Capital West, individually and not as
representative of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by Capital West prior to the
Closing Date for the Firm Shares to be purchased by such Underwriter or
Underwriters. Any such payment by Capital West shall not relieve any such
Underwriter or Underwriters of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to offer the Firm Shares to the public as set forth in the
Prospectus.
The information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters) and under
"Underwriting" in any Preliminary Prospectus and in the final form of
Prospectus filed pursuant to Rule 424(b) constitutes the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement, and you, on behalf of
the Underwriters, represent and warrant to the Company that the statements made
therein do not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make such
statements, in the light of the circumstances in which they were made, not
misleading.
4. FURTHER COVENANTS OF THE COMPANY. The Company covenants with the
several Underwriters as follows:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; it will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement or any
subsequent amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed; if the Company omitted information
from the Registration Statement at the time it was originally declared
effective in reliance upon Rule 430A(a) of the Rules and Regulations, the
Company will provide evidence satisfactory to you that the Prospectus contains
such information and has been filed, within the time period prescribed, with
the Commission pursuant to
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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 you that the Prospectus contains such information and has been filed with
the Commission within the time period prescribed; it will notify you promptly
of any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; promptly
upon your 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 you of the
filing of, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or omissions, if,
at any time when a prospectus relating to the Shares is required to be
delivered under the 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 you a
reasonable time prior to the proposed filing thereof or to which you 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 you, promptly after it shall receive
notice or obtain knowledge thereof of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued.
(c) The Company will cooperate with the Underwriters and
Underwriters' counsel in connection with their efforts to qualify the Shares
for offering and sale under the securities laws of such jurisdictions as you
may designate and to continue such qualifications in effect for so long as may
be required for purposes of the distribution of the Shares, except that the
Company shall not be required in connection therewith or as a condition thereof
to qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction or to make any undertaking with respect to the
conduct of its business. In each jurisdiction in which the Shares shall have
been qualified as above provided, the Company will make and file such
statements and reports in each year as are or may be reasonably required by the
laws of such jurisdiction.
(d) The Company will furnish you, as soon as available, copies of
the Registration Statement (three of which will be signed and include all
exhibits), each Preliminary Prospectus, the Prospectus and any amendments or
supplements to such documents, including any prospectus
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prepared to permit compliance with Section 10(a)(3) of the Act, all in such
quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its stockholders
as soon as practicable, but in any event not later than the 45th day following
the end of the fiscal quarter first occurring after the first anniversary of
the effective date of the Registration Statement, an earnings statement (which
will be in reasonable detail but need not be audited) complying with the
provisions of Section 11(a) of the Act and covering a twelve-month period
beginning after the effective date of the Registration Statement.
(f) As long as the Company is a reporting company under the
Exchange Act, the Company will furnish to its stockholders, as soon as
practicable after the end of each respective period, annual reports (including
financial statements audited by independent certified public accountants) and
unaudited quarterly reports of operations for each of the first three quarters
of the fiscal year, and for a period of five years after the effective date of
the Registration Statement, the Company will furnish to the several
Underwriters hereunder, upon request (i) concurrently with furnishing such
reports to its stockholders, statements of operations of the Company for each
of the first three quarters in the form furnished to the Company's
stockholders; (ii) concurrently with furnishing to its stockholders, a balance
sheet of the Company as of the end of such fiscal year, together with
statements of operations, of stockholders' equity, and of cash flows of the
Company for such fiscal year, accompanied by a copy of the certificate or
report thereon of independent accountants; (iii) as soon as they are available,
copies of all reports and financial statements furnished to or filed with the
Commission, any securities exchange or the National Association of Securities
Dealers, Inc. ("NASD"); (v) every material press release and every material
news item or article in respect of the Company or its affairs which was
released or prepared by the Company (excluding, in each case customary
product-related press releases and articles); and (vi) any additional
information of a public nature concerning the Company, or its business which
you may reasonably request. During such five-year period, if the Company shall
have active subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the accounts of the Company and its
Subsidiaries are consolidated, and shall be accompanied by similar financial
statements for any significant subsidiary which is not so consolidated. For a
period of five years from the date of the Registration Statement, the Company
will furnish to you and, upon request, to each of the other Underwriters, as
soon as available, a copy of each report of the Company mailed to holders of
the Common Stock or publicly filed with the Commission or any automated
quotation system or national securities exchange on which any class of
securities of the Company is listed.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for its Common Stock.
(i) The Company shall comply with all provisions of all
undertakings contained in the Registration Statement.
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(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 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 your opinion the
market price of the Common Stock has been or is likely to be materially
affected (regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of, and disseminate a press
release or other public statement, reasonably satisfactory to you, responding
to or commenting on such rumor, publication or event.
(l) For a period of 180 days after the date of this Agreement,
without the prior written consent of Capital West, the Company shall not,
directly or indirectly, offer, sell, contract to sell, pledge, grant any option
to purchase or otherwise dispose (or announce any offer, sale, contract of sale
or other disposition of), any shares of Common Stock or any other shares of
capital stock of the Company, or any securities convertible into or exercisable
or exchangeable for, or warrants, options or rights to purchase or acquire,
shares of Common Stock or any other shares of capital stock of the Company, or
any interest in the Common Stock (including derivative interests) other than
the Company's issuance and sale of Shares in accordance with the Underwriting
Agreement, and the issuance of stock options under, or the issuance of Common
Stock upon the exercise of stock options granted under, any stock option plan
described in the Prospectuses.
(m) 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.
(n) On the Closing Date the Company will sell to you, 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 on one occasion, 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 must file a
registration statement only if the shares of Common Stock issuable under the
Underwriters' Warrants cannot be sold without registration under Rule 144
promulgated under the Act. The Company agrees to use its commercially
reasonable best efforts to
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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 such persons 30 days' notice of its intention to do so, and at their
written request given within 10 days of the receipt of such notice, will
include in such registration statement such number of such Shares as they may
specify, all at no cost to them (except for underwriting discounts and the fees
and expenses of counsel to such holders). In connection with any such
registration statement covering all or a part of such shares, the Company
agrees that it will covenant with the owners of such shares with respect to
such shares and the offering thereof, in customary form substantially to the
effect contained in this Section 4. If the offering pursuant to any
registration statement provided for herein is made through Underwriters, the
Company agrees to enter into an underwriting agreement in customary form with
such underwriters in which the Company and the underwriters and each person who
controls such underwriters within the meaning of the Act grant to each other
customary reciprocal indemnities against liabilities under the Act.
(o) As long as the Company is a reporting company under the
Exchange Act, the Company will 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.
(p) For the one (1) year period from the Closing Date, Capital West
shall have the right to designate an observer, who shall be entitled to attend
all meetings of the Board of Directors and receive all correspondence and
communications sent by the Company to the members of the Board of Directors.
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
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of the Shares hereunder to the Underwriters, including transfer taxes, if any,
and the cost of all certificates representing the Shares and transfer agents'
and registrars' fees; the fees and disbursements of counsel for the Company;
all fees and other charges of the Company's independent public accountants; the
cost of furnishing to the Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus and the Prospectus,
and any amendments or supplements to any of the foregoing; and all postage
costs incurred in connection with the qualification of the Shares under the
laws of such jurisdictions as you may designate; and all other expenses
directly incurred by the Company in connection with the performance of its
obligations hereunder.
(b) Capital West shall be entitled to receive from the Company, for
itself and not as representative of the Underwriters, a nonaccountable expense
allowance equal to two percent (2%) of the aggregate public offering price of
Shares sold to the Underwriters in connection with the Offering (out of which
the Capital West shall pay all filing fees, expenses and disbursements, except
for postage costs, incurred in connection with the qualification of the Shares
under the laws of such jurisdictions as you may designate including fees and
expenses of Underwriters' counsel), reduced by any amounts advanced by the
Company to Capital West pursuant to the terms of the Letter of Intent. Capital
West shall be entitled to withhold this 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
otherwise) shall have been complied with to the reasonable satisfaction of
counsel to the Underwriters. If the Company has elected to rely upon Rule 430A
of the Rules and Regulations, the price of the Shares and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission for
filing pursuant to Rule 424(b) of the Rules and Regulations within the
prescribed time period, and prior to the Closing Date the Company shall have
provided evidence satisfactory to the Underwriters of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A
of the Rules and Regulations. Qualification under the securities laws of such
states as you may deem necessary to the success of the underwriting of the
issue and sale of the Shares upon the terms and conditions set forth in this
Agreement or contemplated by this Agreement and containing no provisions
unacceptable to you will have been secured, and no stop order (or the
equivalent thereof) will be in effect denying or suspending effectiveness of
such qualification, nor will any stop order proceedings
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(or the equivalent thereof) with respect thereto be instituted or pending or
threatened under such laws.
(b) At the Closing Date and the Option Closing Date, if any,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Shares as contemplated herein and related proceedings
or in order to evidence the accuracy of any of the representations and
warranties, or the fulfillment of any of the conditions, herein contained; and
all proceedings taken by the Company in connection with the issuance and sale
of the Shares as herein contemplated shall be satisfactory in form and
substance to the Underwriters and counsel for the Underwriters.
(c) There shall not have been, since the date hereof or since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, any change in the condition (financial or otherwise),
earnings, operations, business affairs or business prospects of the Company and
its Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business which, in your sole judgment, is material and
adverse and that makes it, in your sole judgment, impracticable or inadvisable
to proceed with the public offering of the Shares as contemplated by the
Prospectus, and the Underwriters shall have received a certificate of the
President or Vice President of the Company and of the chief financial or chief
accounting officer of the Company, dated as of the Closing Date, to the effect
that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 2 hereof are true and correct with
the same force and effect as though expressly made at and as of the Closing
Date, (iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Closing
Date, and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or threatened by the Commission or any Blue Sky jurisdiction.
(d) At the Closing Date the Underwriters shall have received:
(1) The opinion, dated as of the Closing Date of McAfee & ▇▇▇▇,
counsel for the Company, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Oklahoma.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in
the Registration Statement and the Prospectus and to enter into and perform its
obligations under this Agreement and to issue, sell and deliver to the
Underwriters the Firm Shares or the Option Shares, as the case may be, to be
issued and sold by it hereunder.
(iii) The Company is duly qualified to do business as a foreign
corporation and is in good standing in the State of Oklahoma, and to the best
of its knowledge and based upon the representations of the officers of the
Company is not required to be qualified to do business as a foreign corporation
in any other jurisdiction.
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(iv) At the Closing Date, after giving effect to the sale of
the Firm Shares, the authorized capital stock of the Company is as set forth in
the Prospectus under the caption "Capitalization" as of the dates stated
therein; the issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable and have not
been issued in violation of any preemptive right contained in the Certificate
of Incorporation or Bylaws of the Company or, to such counsel's knowledge, any
co-sale right, registration right, right of first refusal or other similar
right (other than such preemptive rights or other rights to subscribe for or
purchase securities as were fully complied with or expressly waived or with
respect to the violation of which the right to make a claim is barred by the
applicable statute of limitation).
(v) The Firm Shares and the Option Shares, as the case may be,
to be purchased from the Company hereunder have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company pursuant to this Agreement against payment
therefor in accordance with the terms hereof, will be validly issued and fully
paid and nonassessable, and will not be issued in violation of any preemptive
right under the Certificate of Incorporation or Bylaws of the Company or, to
such counsel's knowledge, any co-sale right, right of first refusal or other
similar right and the stockholders of the Company have no preemptive right
under the Certificate of Incorporation or Bylaws of the Company or, to such
counsel's knowledge, 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 Certificate of Incorporation or Bylaws of
the Company or, to such counsel's knowledge, 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 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, to the best of their knowledge and information, otherwise.
(vii) Each Subsidiary has been duly incorporated and is validly
existing as a corporation and is in good standing under the laws of the
jurisdiction of its incorporation, has full corporate power and authority to
own, lease and operate its properties and to conduct it business as described
in the Registration Statement, and is duly qualified as a foreign corporation
to transact business and is in good standing in the State of Oklahoma, and to
the best of its knowledge and based upon the representations of the officers of
the Company any Subsidiary is not required to be qualified to do business as a
foreign corporation in any other jurisdiction; all of the issued and
outstanding capital stock of such Subsidiary have been duly authorized and
validly issued, is fully paid and nonassessable and, to the best of their
knowledge and information, is owned by the Company directly
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or through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity.
(viii) This Agreement and the Warrant Agreement have been duly
authorized by all necessary corporate action on the part of the Company and
have been duly executed and delivered by the Company and assuming due
authorization, execution and delivery by the Underwriters, are valid and
binding agreements of the Company, except insofar as indemnification and
contribution provisions may be limited by applicable law or equitable
principles, and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or any general equitable principles;
(ix) The Registration Statement has been declared effective
under the Act; any required filing of the Prospectus pursuant to Rule 424(b)
has been made in the manner and within the time period required by Rule 424(b)
and, to the best of their knowledge and information, 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 they constitute matters of law
or legal conclusions, has been reviewed by such counsel and accurately and
fairly summarizes in such counsel's opinion the matters described therein and
to the knowledge of such counsel, 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; in addition, the
forms of certificates evidencing the Company stock comply with Oklahoma law;
(xiii) To the best of their knowledge and information, except
as set forth in the Prospectus, there is not pending or threatened any action,
suit, proceeding, inquiry or investigation, to which the Company or its
Subsidiaries is a party, or to which the property of the Company or its
Subsidiaries is subject, before or brought by any court or government agency or
body, which might reasonably be expected to result in any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its Subsidiaries considered as
one enterprise, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of this
Agreement or the performance by the Company of its obligations hereunder; and
all pending legal or governmental proceedings to which the Company or its
Subsidiaries is a party or that affect any of their respective properties that
are not described in the Prospectus, including ordinary routine litigation
incidental to
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the business, could not reasonably be expected to result in a material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its Subsidiaries considered as
one enterprise.
(xiv) The information in the Prospectus under the captions
"Business - Legal Proceedings" and "- Property", "Certain Relationships and
Related Transactions" and "Description of Common 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 them and is correct in
all material respects, and there are no legal or governmental actions, suits or
proceedings pending or threatened against the Company or its Subsidiaries that
are required to be described in the Prospectus 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 in the Prospectus 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 to the best of counsel's knowledge and
information, the Company is not 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 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 (other than performance of the Company's indemnification
and contribution obligations hereunder, concerning which no opinion need be
expressed) will not, whether with or without the giving of notice or lapse of
time or both, conflict with or constitute a breach or violation of, or default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or its Subsidiaries
pursuant to any material contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which the Company has knowledge and to which the
Company or its Subsidiaries is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or its
Subsidiaries is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or Bylaws of the Company, or any
applicable law, administrative regulation or court decree, provided, however,
no opinion need be rendered concerning state securities or Blue Sky laws.
(xvii) To the best of such counsel's knowledge and information,
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
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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) To the best of such counsel's knowledge and information,
neither the Company nor its Subsidiaries are in violation of their charter or
by-laws.
In rendering such opinion, such counsel may rely as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. 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 addition to their opinion required by subsection (d)(1) of this
Section, McAfee & ▇▇▇▇ shall additionally state that nothing has come to their
attention that would lead them to believe that the Registration Statement, at
the time it became effective, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus, at the
effective date of the Registration Statement (unless the term "Prospectus"
refers to a prospectus which has been provided to the Underwriters by the
Company for use in connection with the offering of the Shares which differs
from the Prospectus declared effective by the Commission, in which case at the
time it is first provided to the Underwriters for such use) or at the Closing
Date, included an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. Such statement
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 ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, Inc., counsel for the Underwriters, in form and substance
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the Company
shall have furnished to such counsel such papers, opinions and information as
they request to enable them to pass upon such matters.
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(e) At the time of the execution of this Agreement, the
Underwriters shall have received from Deloitte & Touche 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, those companies identified in the Prospectus as having been audited by
them for the periods shown and their Subsidiaries 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 unaudited consolidated balance sheet of the Company and its
Subsidiaries included in the Registration Statement does not comply as to form
in all material respects with the applicable accounting requirements of the Act
and the Rules and Regulations or is not presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited financial statements included in the Registration
Statement, or (B) at a specified date not more than three days prior to the
date of this Agreement, there has been any change in the capital stock of the
Company or any increase in the combined long term debt of the Company and its
Subsidiaries or any decrease in combined net current assets or net assets as
compared with the amounts shown in the December 31, 1998 balance sheet included
in the Registration Statement or, during the period from December 31, 1998 to a
specified date not more than three days prior to the date of this Agreement,
there were any decreases, as compared with the corresponding period in the
preceding year, in combined revenues, net income or net income per share of the
Company and its Subsidiaries, except in all instances for changes, increases or
decreases which the Registration Statement and the Prospectus disclose have
occurred or may occur;
(4) in addition to the examination referred to in their opinion
and the limited procedures referred to in clause (3) above, they have carried
out certain specified procedures, not constituting an audit, with respect to
certain amounts, percentages and financial information which are included in
the Registration Statement and Prospectus and which are specified by the
Underwriters, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial and
other records of the Company, those companies identified in the Prospectus as
having been audited by them for the periods shown and its Subsidiaries
identified in such letter; and
(5) they have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-B and on the
basis of limited procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that caused them to believe
that this information does not conform in all material respects with the
disclosure requirements of Item 402 of Regulation S-B.
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(f) At the Closing Date, the Underwriters shall have received from
Deloitte & Touche 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 time of the execution of this Agreement, the
Underwriters shall have received from Saxon & ▇▇▇▇▇, P.C. 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
those companies identified in the Prospectus as having been audited by them for
the periods shown and any Subsidiaries 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 unaudited consolidated balance sheet of those companies
identified in the Prospectus as having been audited by them for the periods
shown 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 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 said
companies or any increase in the combined long term debt of said companies or
any decrease in combined net current assets or net assets as compared with the
amounts shown in the December 31, 1998 balance sheet included in the
Registration Statement or, during the period from December 31, 1998 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 tho
companies, except in all instances for changes, increases or decreases which
the Registration Statement and the Prospectus disclose have occurred or may
occur;
(4) in addition to the examination referred to in their opinion
and the limited procedures referred to in clause (3) above, they have carried
out certain specified procedures, not constituting an audit, with respect to
certain amounts, percentages and financial information which are included in
the Registration Statement and Prospectus and which are specified by the
Underwriters, and have found such amounts, percentages and financial
information to be in agreement
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with the relevant accounting, financial and other records of those companies
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 Item 402 of Regulation S-B.
(h) At the Closing Date, the Underwriters shall have received from
Saxon & ▇▇▇▇▇, P.C. 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).
(i) At the time of the execution of this Agreement, the
Underwriters shall have received from Hunter, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, PLC 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
Commercial Telecom Systems, Inc., and its Subsidiaries 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 unaudited consolidated balance sheet of Commercial Telecom
Systems, Inc. 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 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
Commercial Telecom Systems, Inc. or any increase in the combined long term debt
of Commercial Telecom Systems, Inc. or any decrease in combined net current
assets or net assets as compared with the amounts shown in the December 31,
1998 balance sheet included in the Registration Statement or, during the period
from December 31, 1998 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 Commercial Telecom Systems, Inc., except in all
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instances for changes, increases or decreases which the Registration Statement
and the Prospectus disclose have occurred or may occur;
(4) in addition to the examination referred to in their opinion
and the limited procedures referred to in clause (3) above, they have carried
out certain specified procedures, not constituting an audit, with respect to
certain amounts, percentages and financial information which are included in
the Registration Statement and Prospectus and which are specified by the
Underwriters, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial and
other records of Commercial Telecom Systems, Inc. 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 Item 402 of Regulation S-B.
(j) At the Closing Date, the Underwriters shall have received from
Hunter, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, PLC 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).
(k) At the Closing Date, the Common Stock shall have been approved
for listing on the American Stock Exchange.
(l) In the event that the Underwriters exercise their option
provided in Section 7 hereof to purchase all or any portion of the Option
Shares, the representations and warranties of the Company contained herein and
the statements in any certificates furnished by the Company hereunder shall be
true and correct as of the Option Closing Date and, at the Option Closing Date,
the Underwriters shall have received:
(1) A certificate, dated the Option Closing Date, of the
President or a Vice President of the Company and of the Chief
Financial or Chief Accounting Officer of the Company confirming that
the certificate delivered at the Closing Date pursuant to Section 5(c)
hereof remains true and correct as of the Option Closing Date (except
that all references in such Section to "Closing Date" shall be deemed
to refer to the "Option Closing Date").
(2) The opinions of McAfee & ▇▇▇▇, 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
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Section 5(b)(1) hereof (except that all references in such Section to
"Closing Date" shall be deemed to refer to the "Option Closing Date").
(3) The opinion of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Inc., counsel for the
Underwriters, dated the Option Closing Date, relating to the Option
Shares to be purchased on the Option Closing Date and otherwise to the
same effect as the opinion required by Section 5(b)(2) hereof (except
that all references in such Section to "Closing Date" shall be deemed
to refer to the "Option Closing Date").
(4) A letter from Deloitte & Touche 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(l)(4) shall be a date not more than three days prior to the Option
Closing Date.
(5) A letter from Saxon & ▇▇▇▇▇, P.C. 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(g) hereof, except that the
"specified date" in the letter furnished pursuant to this Section
6(l)(5) shall be a date not more than three days prior to the Option
Closing Date.
(6) A letter from Hunter, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, PLC 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(i) hereof,
except that the "specified date" in the letter furnished pursuant to
this Section 6(l)(6) shall be a date not more than three days prior to
the Option Closing Date.
(m) 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.
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, as representative of the Underwriters, by notice to
the Company at any time at or prior to Closing Date, and such termination shall
be without liability of any party to any other party except as provided in
Section 4 and except that Sections 4(i) and 8 shall survive any such
termination and remain in full force and effect.
7. OPTION SHARES.
(a) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to the several Underwriters, for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm Shares
only, a non-transferable option to purchase up to an aggregate 240,000 Option
Shares at the purchase price per share for the Firm Shares set forth in Section
3 hereof. Such option may be exercised by Capital West on behalf of the several
Underwriters on one occasion in whole or in part during the period of 45
business days from and after the date on which the Firm Shares are initially
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offered to the public, by giving notice to the Company. The number of Option
Shares to be purchased by each Underwriter upon the exercise of such option
shall be the same proportion of the total number of Option Shares to be
purchased by the several Underwriters pursuant to the exercise of such option
as the number of Firm Shares purchased by such Underwriter (set forth in
Schedule A hereto) bears to the total number of Firm Shares purchased by the
several Underwriters (set forth in Schedule A hereto), adjusted by the
Underwriters in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in same day funds, payable to the order of the Company. Such
delivery and payment shall take place at the offices of Capital West
Securities, Inc., ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or
at such other place as may be agreed upon between the Underwriters and the
Company on the Closing Date, if written notice of the exercise of such option
is received by the Company not later than three full business days prior to the
Closing Date.
The certificates for the Options Shares so to be delivered will be
made available to you at such office or other location including, without
limitation, in Oklahoma City, as you may reasonably request for checking at
least two full business days prior to the date of payment and delivery and will
be in such names and denominations as you may request, such request to be made
at least three full days prior to such date of payment and delivery. If the
Underwriters so elect, delivery of the Shares may be made by credit through
full fast transfer to the accounts at Depository Trust Company by the
Underwriters.
It is understood that Capital West, individually, and not as the
representative of the Underwriters, may (but shall not be obligated to) make
payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by Capital West shall not relieve any
Underwriter of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a) hereof
the obligations of the Underwriters to purchase such Option Shares will be
subject (as of the date hereof and as of the date of payment for such Option
Shares) to the accuracy of and compliance with the representations and
warranties of the Company herein, to the accuracy of the statements of the
Company and officers of the Company made pursuant to the provisions hereof, to
the performance by the Company of their respective obligations hereunder, and
to the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be
satisfactory in form and substance to you and to Underwriters' counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may reasonably request in order to evidence the accuracy and completeness
of any of the representations, warranties or statements, the performance of any
of the covenants of the Company or the compliance with any of the conditions
herein contained.
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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 (iii) any untrue statement or alleged untrue
statement of a material fact contained (A) in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (B) in any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by
the Company filed in any state or other jurisdiction in order to qualify any or
all of the Shares under the securities laws thereof (any such application,
documents or information being hereinafter called a "Blue Sky Application"), or
(iv) the omission or alleged omission to state in the Registration Statement or
any amendment thereto a material fact required to be stated therein or
necessary to make the statements therein not misleading, or the omission or
alleged omission to state in any Preliminary Prospectus, the Prospectus or any
supplement thereto or in any Blue Sky Application a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and shall
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action, notwithstanding the possibility that payments for
such expenses might later be held to be improper, in which case the person
receiving them shall promptly refund them; except that the Company shall not be
liable in any such case to the extent, but only to the extent, that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, such Preliminary Prospectus or the Prospectus, or
any amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter
specifically for use in the preparation thereof and, provided further, that the
indemnity agreement provided in this Section 8(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any losses, claims, charges, liabilities or
litigation based upon any untrue statement or alleged untrue statement of
material fact or omission or alleged omission to state therein a material fact
purchased Shares, if a copy of the Prospectus in which such untrue statement or
alleged untrue statement or omission or alleged omission was corrected has not
been sent or given to such person within the time required by the Act and the
Rules and Regulations thereunder, unless such failure is the result of
noncompliance by the Company with Section 4(c) hereof.
(b) Each Underwriter severally, but not jointly, shall indemnify
and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, as incurred, to which the Company may become
subject, under the 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
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be stated therein or necessary to make the statements therein not misleading,
or the omission or alleged omission to state in any Preliminary Prospectus, the
Prospectus or any supplement thereto or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
except that such indemnification shall be available in each such case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through the
Underwriters by or on behalf of such Underwriter specifically for use in the
preparation thereof; and shall reimburse any legal or other expenses reasonably
incurred by the Company in connection with investigation or defending against
any such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party in
writing of the claim or the commencement of that action; the failure to notify
the indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under such subsection. If any such
claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any
other similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party; provided, however, if
the defendants in any such action include both the indemnified parties and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. After notice from the indemnifying party to the indemnified party
of its election to assume the defense of such claim or action, the indemnifying
party shall not be liable to the indemnified party under such subsection for
any legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not
be liable for the expenses of more than one separate counsel (together with
appropriate local counsel) approved by the indemnifying party, representing all
the indemnified parties under Section 8(a) and 8(b) hereof who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the 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
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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 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)-(p)), or contained in certificates of officers of
the Company submitted pursuant hereto, and the indemnity and contribution
agreements contained in Section 8 hereof, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Company, or any of
its officers, controlling persons or directors and shall survive delivery of
the Shares to the several Underwriters hereunder or termination of this
Agreement.
10. SUBSTITUTION OF UNDERWRITER. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but
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failed to purchase does not exceed 10% of the Firm Shares, the remaining
Underwriters shall be obligated, severally in proportion to their respective
commitments hereunder, to take up and pay for the Firm Shares of such
defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four hours to allow the several Underwriters the privilege of
substituting within twenty-four hours (including non-business hours) another
underwriter or underwriters (which may include any non-defaulting Underwriter)
satisfactory to the Company. If no such underwriter or underwriters shall have
been substituted as aforesaid by such postponed Closing Date, the Closing Date
may, at the option of the Company, be postponed for a further twenty-four
hours, if necessary to allow the Company the privilege of finding another
underwriter or underwriters, satisfactory to you, to purchase the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If it shall be arranged for the remaining Underwriters or substituted
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section, (i) the Company shall have the right
to postpone the time of delivery for a period of not more than seven full
business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary, and (ii) the respective number of Firm Shares to
be purchased by the remaining Underwriters and substitute underwriters shall be
taken as the basis of their underwriting obligation. If the remaining
Underwriters shall not take up and pay for all such Firm Shares so agreed to be
purchased by the defaulting Underwriter or Underwriters or substitute another
underwriter or underwriters as aforesaid and the Company shall not find or
shall not elect to seek another underwriter or underwriters for such Firm
Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section, neither the Company shall be liable to any
Underwriter (except as provided in Sections 5 and 8 hereof )nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than
for some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the
extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section.
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11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the later of (i)
execution of this Agreement, or (ii) when notification of the effectiveness of
the Registration Statement has been released by the Commission.
(b) You 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 your sole judgment, is material and adverse,
or (ii) if trading on the New York Stock Exchange or the Nasdaq Stock Market
shall have been suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been
required on the New York Stock Exchange or the Nasdaq Stock Market, by the New
York Stock Exchange, the Nasdaq Stock Market or by order of the Commission or
any other governmental authority having jurisdiction, or if a banking
moratorium shall have been declared by Federal, New York or Oklahoma
authorities, or (iii) if on or prior to the Closing Date, or on or prior to any
later date on which Option Shares are to be purchased, as the case may be, the
Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as to interfere materially and
adversely with the conduct of the business and operations of the Company
regardless of whether or not such loss shall have been insured, or (iv) if
there shall have been a material adverse change in the general political or
economic conditions or financial markets in the United States as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if on or prior to the Closing
Date, or on or prior to any later date on which Option Shares are to be
purchased, as the case may be, there shall have been an outbreak or escalation
of hostilities or other international or domestic calamity, crises or material
adverse change in political, financial or economic conditions, the effect of
which on the financial markets of the United States is such as to make it in
your reasonable judgment, inadvisable to proceed with the marketing of the
Shares. In the event of termination pursuant to this Section 11(b), the Company
shall remain obligated to pay costs and expenses pursuant to Section 4(j), 5
and 8 hereof.
If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone or telecopy, in each case confirmed by letter.
If the Company shall elect to prevent this Agreement from becoming effective,
the Company shall promptly notify you by telephone or telecopy, in each case,
confirmed by letter.
12. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if mailed or transmitted by
any standard form of telecommunication. Notices to the Underwriters shall be
directed to the Underwriters in care of Capital West Securities, Inc., ▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, One Leadership Square, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; notices to the Company shall be directed to
it at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
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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 and the Pricing Agreement shall be
governed by and construed in accordance with the laws of the State of Oklahoma
applicable to agreements made and to be performed in said State. Specified
times of day refer to Central time.
15. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will constitute an original.
* * * * * * *
If the foregoing correctly sets forth your understanding of our
agreement, please sign in the space provided below for that purpose, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriter and the Company in accordance with its terms.
LORECOM TECHNOLOGIES, INC.
By:
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CONFIRMED AND ACCEPTED, as of the date first above written:
CAPITAL WEST SECURITIES, INC.
By:
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SCHEDULE A
UNDERWRITER SHARES PURCHASED
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Capital West Securities, Inc.
Total 1,600,000