Initial Public Offering (IPO): Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Q.E.P. Form S-1 Amendment #2 81 504K
2: EX-1.1 Underwriting Agreement 38 177K
3: EX-2.1 Form of Agreement and Plan of Merger 5 18K
4: EX-3.3 Form of Indemnification Agreement 8 37K
5: EX-4.1 Form of Certificate of Common Stock 2 11K
6: EX-4.1.1 Form of Representatives Warrant 14 80K
7: EX-5 Opinion of Berliner Zisser 2 11K
8: EX-9 Voting Trust Agreement 20 44K
9: EX-10.1 Employment Agreement: Lewis Gould 13 41K
10: EX-10.1.1 Omnibus Stock Plan 1996 14 40K
11: EX-23.2 Consent of Grant Thornton 1 6K
EXHIBIT 1.1
1,200,000 SHARES
Q.E.P. CO., INC.
COMMON STOCK
__________________
UNDERWRITING AGREEMENT
August __, 1996
Cruttenden Roth Incorporated
As the Representative of the Several Underwriters
Named in Schedule I Attached Hereto
18301 Von Karman, Suite 100
Irvine, California 92715-1099
Dear Sirs:
Q.E.P. Co., Inc., a Delaware corporation (the "Company"), proposes to
issue and sell an aggregate of 1,000,000 shares (the "Company Shares") of its
common stock, par value $.001 per share ("Common Stock"), and certain
stockholders of the Company (the "Selling Stockholders") propose to sell an
aggregate of 200,000 shares (the "Stockholder Shares") of Common Stock, each
Selling Stockholder selling the amount set forth opposite such Selling
Stockholder's name on Schedule II hereto, to Cruttenden Roth Incorporated (the
"Representative") and the several underwriters named in Schedule I hereto
(collectively with the Representative, the "Underwriters" and individually, an
"Underwriter," which terms shall also include any Underwriter substituted as
hereinafter provided in Section 12). The aforementioned 1,200,000 shares of
Common Stock to be issued and sold to the several Underwriters by the Company
and the Selling Stockholders are hereinafter referred to as the "Offered
Shares." The Company also proposes to sell to you individually, and not in
your capacity as representative of the several Underwriters, five-year warrants
(the "Representative's Warrants") to purchase up to 120,000 shares of Common
Stock of the Company (the "Representative's Warrant Stock"), which sale will be
consummated in accordance with the terms and conditions of the Representative's
Warrant Agreement (the "Representative's Warrant Agreement") filed as an
exhibit to the Registration Statement described below. The Offered Shares
shall be offered to the public at an offering price of $____ per Offered Share
(the "Offering Price").
In addition, the several Underwriters, in order to cover
over-allotments in the sale of the Offered Shares, may purchase from the
Company within 45 days after the Effective Date (as hereinafter defined), for
their own account for offering to the public at the Offering Price, up to
180,000 additional shares of Common Stock (the "Optional Shares"), upon the
terms and conditions set forth in Section 5 hereof. The Offered Shares and the
Optional Shares are
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hereinafter collectively referred to as the "Shares." The Company and the
Selling Stockholders, intending to be legally bound hereby, confirm this
agreement with each of the Underwriters as follows:
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to, and agrees with, the several Underwriters that:
(a) The Company has prepared in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"),
and the rules, regulations, releases and instructions (the
"Regulations") of the Securities and Exchange Commission (the "SEC")
under the Act in effect at all applicable times and has filed with the
SEC a registration statement on Form S-1 (File No. 333-7477) and one
or more amendments thereto registering the Shares under the Act. Any
preliminary prospectus included in such registration statement or
filed with the SEC pursuant to Rule 424(a) of the Regulations is
hereinafter called a "Preliminary Prospectus." The various parts of
such registration statement, including all exhibits thereto and the
information contained in any form of final prospectus filed with the
SEC pursuant to Rule 424(b) of the Regulations in accordance with
Section 6(a) of this Agreement and deemed by virtue of Rule 430A of
the Regulations to be part of such registration statement at the time
it was declared effective, each as amended at the time such
registration statement became effective, are hereinafter collectively
referred to as the "Registration Statement." The final prospectus in
the form included in the Registration Statement or first filed with
the SEC pursuant to Rule 424(b) of the Regulations and any amendments
or supplements thereto is hereinafter referred to as the "Prospectus."
(b) The Registration Statement has become effective under
the Act as of the Effective Date, and the SEC has not issued any stop
order suspending the effectiveness of the Registration Statement or
preventing or suspending the use of any Preliminary Prospectus nor has
the SEC instituted, threatened to institute or, to the Company's
knowledge, contemplated proceedings with respect to such an order.
The Company has not received any stop order suspending the sale of the
Shares in any jurisdiction designated by the Representative pursuant
to Section 6(f) hereof, and no proceedings for that purpose have been
instituted or to the Company's knowledge, are threatened or
contemplated. The Company has complied with any request of the SEC,
or any state securities commission in a state designated by the
Representative pursuant to Section 6(f) hereof, for additional
information to be included in the Registration Statement or Prospectus
or otherwise. Each Preliminary Prospectus conformed to the Act and
the Regulations as of its date and did not as of its date contain an
untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except the foregoing shall not apply to statements in or
omissions from any Preliminary Prospectus in reliance upon and in
conformity with information furnished to the Company in writing by or
on behalf of any Underwriter through the Representative expressly for
use therein. The Registration Statement on the date on which it was
declared effective by the SEC (the "Effective Date") conformed, and
any post-effective amendment thereof on the date it shall become
effective, and the Prospectus at the time it is filed with the SEC
pursuant to Rule 424(b) of the Regulations and on the Closing Date (as
defined in Section 4 hereof) and any Option Closing Date (as defined
in Section 5(b) hereof), will conform to the
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requirements of the Act and the Regulations, and neither the
Registration Statement, any post-effective amendment thereof nor the
Prospectus will, on any of such respective dates, contain 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 not misleading, except that this representation and warranty
does not apply to statements in or omissions from the Registration
Statement or the Prospectus made in reliance upon and in conformity
with information furnished to the Company in writing by or on behalf
of any Underwriter through the Representative expressly for use
therein. It is understood that the statements appearing in any
Preliminary Prospectus, the Prospectus or the Registration Statement
(A) on the inside front cover page with respect to stabilization, (B)
in the section entitled "Underwriting," and (C) in the section
entitled "Legal Matters" with respect to the identity of counsel for
the Underwriters constitute the only information furnished in writing
by or on behalf of any Underwriter for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement.
(c) The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, with all
necessary corporate power and authority, and all required licenses,
permits, certifications, registrations, approvals, consents and
franchises to own or lease and operate its properties and to conduct
its business as described in the Prospectus and to execute, deliver
and perform this Agreement. Each of the subsidiaries of the Company
(the "Subsidiaries") is a corporation duly organized and validly
existing 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 Prospectus. The Company and each Subsidiary is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on
the Company.
(d) Except as disclosed in the Registration Statement,
the Company does not own any stock or other equity interest in, or
control, directly or indirectly, any corporation, partnership or other
entity.
(e) The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations under this
Agreement and the Representative's Warrant Agreement.
(f) This Agreement and the Representative's Warrant
Agreement have been duly authorized, executed and delivered by the
Company and constitutes its valid and binding obligation, enforceable
against the Company in accordance with its terms, except as rights to
indemnity and contribution hereunder or thereunder may be limited by
federal or state securities laws or principles of public policy, and
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. This Agreement conforms to the description thereof in the
Prospectus.
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(g) The execution, delivery and performance of this
Agreement and the Representative's Warrant Agreement by the Company do
not and will not, with or without the giving of notice or the lapse of
time, or both, (A) conflict with any terms or provisions of the
Certificate of Incorporation or By-laws of the Company, as amended to
the date hereof and the Closing Date or Option Closing Date, as the
case may be; (B) result in a breach of, constitute a default under,
result in the termination or modification of or result in the creation
or imposition of any lien, security interest, charge or encumbrance
upon any of the properties of the Company pursuant to any indenture,
mortgage, deed of trust, contract, commitment or other agreement or
instrument to which the Company is a party or by which any of its
properties or assets are bound or affected, the effect of which would
have a material adverse effect on the business or properties of the
Company; (C) violate any law, rule, regulation, judgment, order or
decree of any government or governmental agency, instrumentality or
court, domestic or foreign, having jurisdiction over the Company or
any of its properties or businesses; or (D) result in a breach,
termination or lapse of the power and authority of the Company to own
or lease and operate its properties and conduct its business as
described in the Prospectus.
(h) The Company has authorized and outstanding capital
stock and, as of the date or dates indicated the Company had, the
capitalization set forth under the caption "Capitalization" in the
Prospectus and will have the as-adjusted capitalization set forth
under the caption "Capitalization" in the Prospectus on the Effective
Date. On the Effective Date, the Closing Date and any Option Closing
Date, there will be no options or warrants for the purchase of, other
outstanding rights to purchase, agreements or obligations to issue or
agreements or other rights to convert or exchange any obligation or
security into, capital stock of the Company or securities convertible
into or exchangeable for capital stock of the Company, except as
described in the Prospectus with respect to the outstanding options
that have been granted to employees, directors and others to purchase
150,000 shares of Common Stock (the "Employee Options") and the
Over-allotment Option (as hereinafter defined).
(i) The authorized capital stock of the Company,
including, without limitation, the outstanding Common Stock and the
Common Stock being issued on the Closing Date and Option Closing Date
(if any and to the extent applicable), conforms to the descriptions
thereof in the Prospectus, and such descriptions conform to the
descriptions thereof set forth in the instruments defining the same.
The information in the Prospectus insofar as it relates to the
Employee Options, the Warrants and other outstanding securities, in
each case as of the Effective Date, the Closing Date and any Option
Closing Date, is true, correct and complete in all material respects.
(j) The outstanding shares of Common Stock have been duly
authorized and are validly issued, fully paid and non-assessable. The
Employee Options have been duly authorized and validly issued and are
valid and binding obligations enforceable against the Company in
accordance with their terms, 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. The shares of Common Stock issuable
pursuant to the Employee Options and the Warrants, when issued in
accordance with the respective terms thereof, will be duly authorized,
validly issued, fully paid and non-assessable. None of such
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outstanding shares of Common Stock or Employee Options were issued or
granted in violation of any preemptive rights of any security holder
of the Company. The Company has reserved a sufficient number of
shares of Common Stock for issuance pursuant to the Employee Options.
The holders of the outstanding shares of Common Stock are not, and
will not be, subject to personal liability solely by reason of being
such holders, and the holders of shares of Common Stock issuable
pursuant to the Employee Options will not be subject to personal
liability solely by reason of being such holders. The offers and
sales of the outstanding shares of Common Stock and the Employee
Options were, and the issuance of the shares of Common Stock pursuant
to the Employee Options will be, made in conformity with applicable
registration requirements or exemptions therefrom under federal and
applicable state securities laws.
(k) The issuance and sale of the Shares by the Company
have been duly authorized and, when the Shares have been duly
delivered against payment therefor as contemplated by this Agreement,
the Shares will be validly issued, fully paid and non-assessable, and
the holders thereof will not be subject to personal liability solely
by reason of being such holders. None of the Shares will be issued in
violation of any preemptive rights of any stockholder of the Company.
The certificates representing the Shares are in proper legal form
under, and conform to the requirements of, applicable Delaware law.
Neither the filing of the Registration Statement nor the offering or
sale of the Shares or the Representative's Warrant Stock as
contemplated by this Agreement and the Representative's Warrant
Agreement, respectively, gives any security holder of the Company any
rights, other than those which have been waived by passage of time
following due notice, for or relating to the registration of any
shares of Common Stock or other security of the Company.
(l) No consent, approval, authorization, order,
registration, license or permit of any court, government, governmental
agency, instrumentality or other regulatory body or official is
required for the valid authorization, issuance, sale and delivery by
the Company of any of the Shares, or for the execution, delivery or
performance by the Company of this Agreement and the Representative's
Warrant Agreement, except such as may be required for the registration
of the Shares under the Act, the Regulations and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which consent,
approval and authorization have been obtained, and for compliance with
the applicable state securities or Blue Sky laws, or the By-laws,
rules and other pronouncements of the National Association of
Securities Dealers, Inc. (the "NASD") and the approval of the Nasdaq
National Market (the "NMS"). Upon the effectiveness of the
Registration Statement, the Shares will be registered pursuant to
Section 12(g) of the Exchange Act, and will be included on the NMS.
The Company has taken no action designed, or likely, to have the
effect of terminating the registration of the Shares under Section
12(g) of the Exchange Act or the inclusion of the Shares on the NMS,
nor has the Company received any notification that the SEC or the NMS
is contemplating terminating such registration or inclusion.
(m) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of or references to
contracts, agreements or other documents, are accurate in all material
respects and present or summarize fairly, the information required to
be disclosed under the Act and the Regulations, and there are no
contracts,
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agreements or other documents required to be described or referred to
in the Registration Statement or Prospectus or to be filed or
incorporated by reference as exhibits to the Registration Statement
under the Act or the Regulations that have not been so described,
referred to, filed or incorporated by reference, as required.
(n) The financial statements (including the notes
thereto) filed as part of any Preliminary Prospectus, the Prospectus
and the Registration Statement present fairly the financial position
of the Company, as of the respective dates thereof, and the results of
operations and cash flows of the Company, for the periods indicated
therein, all in conformity with generally accepted accounting
principles consistently applied, except as may be otherwise stated
therein. The financial information included in the Prospectus under
the captions "Prospectus Summary" and "Selected Financial Data"
presents fairly the information shown therein and has been compiled on
a basis consistent with that of the audited financial statements
included in the Registration Statement.
(o) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has not been (A) any material adverse
change (including, whether or not insured against, any material loss
or damage to any assets), or development involving a prospective
material adverse change, in the general affairs, properties, assets,
management, condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company, (B) any
transaction entered into by the Company that is material to the
Company, (C) any dividend or distribution of any kind declared, paid
or made by the Company on its capital stock, (D) any liabilities or
obligations, direct or indirect, incurred by the Company that are
material to the Company except in the ordinary course of business, or
(E) any material change in the short-term debt or long-term debt of
the Company. The Company does not have any known (after due
investigation and inquiry) contingent liabilities or obligations that
are material and that are not disclosed in the Prospectus.
(p) The Company has not distributed and, prior to the
later to occur of the Closing Date, the Option Closing Date or the
completion of the distribution of the Shares, will not distribute any
offering material in connection with the offering or sale of the
Shares other than the Registration Statement, the Preliminary
Prospectus, the Prospectus and a blue sky survey, in any such case
only as permitted by the Act and the Regulations.
(q) The Company has filed with the appropriate federal,
state and local governmental agencies, and all foreign countries and
political subdivisions thereof, all tax returns that are required to
be filed, or has duly obtained extensions of time for the filing
thereof and has paid all taxes shown on such returns and all
assessments received by it to the extent that the same have become
due. The Company has not executed or filed with any taxing authority,
foreign or domestic, any agreement extending the period for assessment
or collection of any income taxes, is not a party to any known (after
due investigation and inquiry) pending action or proceeding by any
foreign or domestic governmental agencies for the assessment or
collection of taxes, and no claims for assessment or collection of
taxes have been asserted against the Company that might materially
adversely affect the general affairs, properties, assets,
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condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects of the Company.
(r) Grant Thornton LLP, which is certifying the financial
statements included in the Prospectus and forming a part of the
Registration Statement, is a firm of independent public accountants as
required by the Act and the Regulations and is a member of the SEC
Practice Section.
(s) The Company is not in violation of, or in default
under, any of the terms or provisions, of (A) its Certificate of
Incorporation or Bylaws, each as amended to the date hereof, the
Closing Date or the Option Closing Date, as the case may be, (B) any
indenture, mortgage, deed of trust, contract, loan or credit
agreement, commitment or other agreement or instrument to which the
Company is a party or by which it or any of its properties are bound
or affected, (C) any law, rule, regulation, judgment, order or decree
known (after due investigation and inquiry) to the Company of any
government or governmental agency, instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any of its
properties or businesses or (D) any license, permit, certification,
registration, approval, consent or franchise referred to in
subsections (b) or (c) of this Section 1, except where such violation
or default would not have a material adverse effect on the business or
properties of the Company.
(t) Except as disclosed in the Registration Statement,
there are no claims, actions, suits, proceedings, arbitrations
investigations, or inquiries pending before, or to the Company's
knowledge, threatened or contemplated by, any governmental agency,
instrumentality, court or tribunal, domestic or foreign, or before any
private arbitrational tribunal, relating to or affecting the Company
or its properties or businesses that (A) might affect the issuance or
validity of any of the Shares or the validity of any of the
outstanding shares of Common Stock, or (B) if determined adversely to
the Company, would, in any case or in the aggregate, result in any
material adverse change in the general affairs, properties, assets,
condition (financial or otherwise), results of operations,
stockholders' equity, business or prospects, of the Company, or (C)
are required to be described in the Registration Statement or the
Prospectus but are not described as required; nor, to the Company's
knowledge, is there any reasonable basis for any such claim, action,
suit, proceeding, arbitration, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court, governmental
agency, instrumentality or other tribunal known (after due
investigation and inquiry) to the Company enjoining the Company from,
or requiring the Company to take or refrain from taking any action, or
to which the Company, or any of its properties, assets or businesses
is bound or subject.
(u) Except as otherwise stated in the Prospectus, the
Company owns, or possesses adequate rights to use all patents, patent
applications, trademarks, trademark registrations, applications for
trademark registration, trade names, service marks, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential technology,
information, systems, design methodologies and devices or procedures
developed or derived from the Company's businesses), trade secrets,
confidential information, processes and formulations necessary for,
used in or proposed to be used in the conduct of its business as
described in the Prospectus (collectively, the "Intellectual
Property") that,
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if not so owned or possessed, would materially adversely affect the
general affairs, properties, condition (financial or otherwise),
results of operations, stockholders' equity, business or prospects of
the Company. The Company has not infringed, is not infringing or has
not received any notice of conflict with the asserted rights of others
with respect to the Intellectual Property, and no others have
infringed upon or are in conflict with the Intellectual Property.
(v) The Company has obtained all permits, licenses and
other authorizations that are required, to the extent required, under
all environmental laws, including but not limited to the Federal Water
Pollution Control Act (33 U.S.C. Section 1251 et seq.), Resource
Conservation & Recovery Act (42 U.S.C. Section 6901 et seq.), Safe
Drinking Water Act (21 U.S.C. Section 349, 42 U.S.C. Section Section
201, 300f), Toxic Substances Control Act (15 U.S.C. Section 2601 et
seq.), Clean Air Act (42 U.S.C. Section 7401 et seq.), Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.), other appropriate laws of jurisdictions in
which the Company's products have been used or located and any other
laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic
or hazardous substances or wastes into the environment (including,
without limitation, ambient air, surface water, ground water or land),
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or wastes under any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder (collectively, the "Environmental
Laws"), other than any permits, licenses or other authorizations
which, if not obtained, would not have a material adverse effect on
the business or properties of the Company. The Company is in
compliance in all material respects with all terms and conditions of
any required permits, licenses and authorizations, and is in
compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables contained in the Environmental Laws.
(w) There are no present or, to the Company's knowledge
(after due investigation and inquiry), past events, conditions,
circumstances, activities, practices, incidents, actions or plans
relating to the business as presently being conducted by the Company
that interfere with or prevent compliance with or continued compliance
with the Environmental Laws, the non-compliance with which would have
a material adverse effect on the Company, or which would be reasonably
likely to give rise to any material legal liability (whether statutory
or common law) or otherwise would be reasonably likely to form the
basis of any material claim, action, demand, suit, proceeding,
hearing, notice of violation, study, investigation, remediation, or
clean up based on or related to the generation, manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling, or the emission, discharge, release into the workplace,
community or environment of any pollutant, contaminant, chemical or
industrial, toxic, or hazardous substance or waste.
(x) The Company has good and marketable title to all
personal property (tangible and intangible) described in the
Prospectus as being owned by it, free and clear of all liens, security
interests, charges or encumbrances, except such as are described in
the Prospectus or which are not material to the business of the
Company.
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The Company has adequately insured the personal property of the
Company against loss or damage by fire or other casualty and
maintains, in adequate amounts, insurance against such other risks as
management of the Company deems appropriate. Except as described in
the Prospectus, the Company does not own any real property, and all
real property used or leased by the Company, as described in the
Prospectus (the "Premises"), is held by the Company under a valid,
subsisting and enforceable lease, 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. The Premises, and all
operations conducted thereon, are now and, since the Company began to
use such Premises, always have been, to the Company's knowledge (after
due investigation and inquiry), in compliance with the Environmental
Laws. Except as described in the Prospectus, the Company has no
knowledge (after due investigation and inquiry) of any use of the
Premises prior to when the Company began using the Premises that
constituted a violation of any Environmental Laws. There is no, and
the Company has not received notice of any, claim, demand,
investigation, regulatory action, suit or other action instituted or
threatened against the Company or the Premises relating to any of the
Environmental Laws. The Company has not received any notice of
material violation, citation, complaint, order, directive, request for
information or response thereto, notice letter, demand letter or
compliance schedule to or from any governmental or regulatory agency
arising out of or in connection with hazardous substances (as defined
by applicable Environmental Laws) on, about, beneath, arising from or
generated at the Premises.
(y) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization, (B) transactions are recorded as necessary in
order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain
accountability for assets, (C) access to assets is permitted only in
accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(z) No unregistered securities of the Company have been
sold by the Company or on behalf of the Company by any person or
persons controlling, controlled by or under common control with the
Company within the three years prior to the date hereof, except as
disclosed in the Registration Statement.
(aa) Each contract or other instrument (however
characterized or described) to which the Company is a party or by
which any of the properties or business of it is bound or affected and
to which reference has been made in the Prospectus or which has been
filed as an exhibit to the Registration Statement has been duly and
validly executed by the Company, and to the Company's best knowledge
(after due investigation and inquiry) by the other parties thereto.
Except as described in the Prospectus, each such contract or other
instrument is in full force and effect and is enforceable against the
parties thereto in accordance with its terms, and except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or
9
by general equitable principles, and neither the Company, nor any
other party is in default thereunder and no event has occurred that,
with the lapse of time or the giving of notice, or both, would
constitute a default thereunder.
(bb) Except for the Company's 401(k), disability,
supplemental executive retirement plan, health and life insurance
plans, if any, the Company has not had any employee benefit plan,
profit sharing plan, employee pension benefit plan or employee welfare
benefit plan or deferred compensation arrangements (collectively,
"Plans") that are subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended, or the rules and regulations
thereunder ("ERISA"). To the Company's knowledge, all Plans that are
subject to ERISA are, and have been at all times since their
establishment, in compliance with ERISA and, to the extent required by
the Internal Revenue Code of 1986, as amended (the "Code"), in
compliance with the Code. To the Company's knowledge, the Company has
not had any employee pension benefit plan that is subject to Part 3 of
Subtitle B of Title 1 of ERISA or any defined benefit plan or
multi-employer plan. To the Company's knowledge, the Company has not
maintained retiree life and retiree health insurance plans that are
employee welfare benefit plans providing for continuing benefit or
coverage for any employee or any beneficiary of any employee after
such employee's termination for employment, except as required by
Section 4980B of the Code. To the Company's knowledge, no fiduciary
or other party in interest with respect to any of the Plans has caused
any of such Plans to engage in a "prohibited action" as defined in
Section 406 of ERISA. As used in this subsection, the terms "defined
benefit plan," "employee benefit plan," "employee pension benefit
plan," "employee welfare benefit plan," "fiduciary" and
"multi-employer plan" shall have the respective meanings assigned to
such terms in Section 3 of ERISA.
(cc) No labor dispute exists with the employees of the
Company and to the Company's knowledge, no such labor dispute is
imminent. There is no existing or, to the Company's knowledge,
imminent labor disturbance by the employees of any of the Company's
principal suppliers, contractors or customers.
(dd) The Company has not incurred any liability for any
finder's fees or similar payments in connection with the transactions
contemplated herein.
(ee) Except as described in the Prospectus or as otherwise
disclosed to the Underwriters, the Company is not a party to, and is
not bound by, any agreement pursuant to which any material royalties,
honoraria or fees are payable by the Company to any person by reason
of the ownership or use of any Intellectual Property.
(ff) Except as disclosed in the Prospectus, there are no
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K.
(gg) The Company is familiar with 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 continue to conduct, its affairs in such a manner to
ensure that it will not become an "investment company" within the
meaning of the 1940 Act and such rules and regulations.
10
(hh) Neither the Company nor any director, officer, agent,
employee or other person associated with or acting on behalf of the
Company has, directly or indirectly, (A) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful
expenses relating to any political activity, (B) made any unlawful
payment to foreign or domestic governments or governmental officials
or employees or to foreign or domestic political parties or campaigns
from corporate funds, (C) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended or (D) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.
Any certificate signed by any officer of the Company in such capacity
and delivered to the Representative or to counsel for the Underwriters pursuant
to this Agreement shall be deemed a representation and warranty by the Company
to the several Underwriters as to the matters covered thereby.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS.
Each Selling Stockholder severally represents and warrants to, and agrees with,
the Company and the Underwriters that:
(a) Such Selling Stockholder has, and at the Closing Date will
have, valid marketable title to the Stockholder Shares proposed to be sold by
such Selling Stockholder hereunder on such date and full right, power and
authority to enter into this Agreement and to sell, assign, transfer and
deliver such Stockholder Shares hereunder, free and clear of all voting trust
arrangements, liens, encumbrances, equities, claims and community property
rights; and upon delivery of and payment for such Stockholder Shares hereunder,
the Underwriters will acquire valid marketable title thereto, free and clear of
all voting trust arrangements, liens, encumbrances, equities, claims and
community property rights.
(b) Such Selling Stockholder, (i) has no reason to believe that
the representations and warranties of the Company contained in Section 1 are
not true and correct, (ii) is familiar with the Registration Statement and
(iii) has no knowledge of any material fact, condition or information not
disclosed in the Prospectus or any supplement thereto which has adversely
affected or may adversely affect the business of the Company; and the sale of
Stockholder Shares by such Selling Stockholder pursuant hereto is not prompted
by any information concerning the Company which is not set forth in the
Prospectus or any supplement thereto.
(c) There is no action, suit, investigation or proceeding before
or by any government, governmental instrumentality or court, domestic or
foreign, or otherwise now pending or, to the knowledge of such Selling
Stockholder, threatened to which such Selling Stockholder is or would be a
party or of which the property of such Selling Stockholder is or may be
subject, that (i) seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the sale of Stockholder Shares by such Selling Stockholder
or any of the other transactions contemplated hereby, or (ii) questions the
legality or validity of any such transactions or seeks to recover damages or
obtain other relief in connection with any such transactions.
(d) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution and delivery by such
Selling Stockholder of the Custody Agreement (as defined below) or the
Power-of-Attorney (as defined below), the execution and delivery by or on
behalf of such Selling Stockholder of this Agreement and the
11
consummation by such Selling Stockholder of the transactions contemplated
herein, including the valid sale and delivery of the Stockholder Shares, except
such as may have been obtained under the Securities Act and such as may be
required under the "Blue Sky" laws of any jurisdiction in connection with the
purchase and distribution of the Common Stock by the Underwriters and such
other approvals as have been obtained.
(e) Neither the sale of the Stockholder Shares being sold by such
Selling Stockholder nor the consummation of any other of the transactions
herein contemplated by such Selling Stockholder or the fulfillment of the terms
hereof by such Selling Stockholder will conflict with, result in a breach of,
or constitute a default under the terms of any contract, indenture, mortgage,
deed of trust, loan or credit agreement, bond, debenture, note, lease or other
agreement or instrument to which such Selling Stockholder is a party or bound,
or any decree, judgment, order or regulation applicable to such Selling
Stockholder or its properties of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over such Selling
Stockholder or its properties.
(f) No such Selling Stockholder nor any of his or her affiliates
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or has any other association
with (within the meaning of Article I, Section 1(m) of the Bylaws of the NASD),
any member firm of the NASD.
(g) Such Selling Stockholder has not relied upon any
representation by the Underwriters with respect to any tax consequences
(federal, state or local) of the transactions contemplated hereby, or
otherwise. Such Selling Stockholder acknowledges that any tax liability that
might arise with respect to the Stockholder Shares to be sold by such Selling
Stockholder shall be solely the responsibility of such Selling Stockholder.
(h) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which might be reasonably
expected to cause or result, under the Exchange Act (as hereinafter defined) or
otherwise, in stabilization or manipulation of the price of the Shares or other
shares of Common Stock to facilitate the sale or resale of the Shares or other
shares of Common Stock.
(i) Such Selling Stockholder has executed and delivered a Selling
Stockholders' Power of Attorney ("Power of Attorney") between the Selling
Stockholder and Lewis Gould (the "Agent"), naming the Agent as such Selling
Stockholder's attorney-in-fact and, by the execution by the Agent of this
Agreement, the Agent hereby represents and warrants that he has been duly
appointed as Attorney-in-Fact by each Selling Stockholder pursuant to the Power
of Attorney for the purpose of entering into and carrying out this Agreement,
and the Power of Attorney has been duly executed by such Selling Stockholder
and a copy thereof has been delivered to you.
(j) Such Selling Stockholder has deposited in custody with the
custodian, pursuant to a Letter of Transmittal and Custody Agreement ("Custody
Agreement") with Berliner, Zisser, Walter & Gallegos, P.C. (the "Custodian"),
certificates in negotiable form for the Stockholder Shares to be sold hereunder
by such Selling Stockholder, for the purpose of further delivery pursuant to
this Agreement. Such Selling Stockholder agrees that the Stockholder Shares to
be sold by such Selling Stockholder on deposit with the Custodian are subject
to the interests of the Company, the Underwriters and the other Selling
Stockholders,
12
that the arrangements made for such deposit are to that extent irrevocable, and
that the obligations of such Selling Stockholder hereunder shall not be
terminated except as provided in this Agreement or in the Custody Agreement by
any act of such Selling Stockholder, by operation of law, whether, in the case
of an individual Selling Stockholder, by the death or incapacity of such
Selling Stockholder or, in the case of a trust or estate, by the death of the
trustee or trustees or the executor or executors or the termination of such
trust or estate, or, in the case of a partnership or corporation, by the
dissolution, winding-up or other event affecting the legal existence of such
entity, or by the occurrence of any other event. If any individual Selling
Stockholder, trustee or executor should die or become incapacitated, if any
such trust, estate, partnership or corporation should be terminated, or if any
other event should occur before the delivery of the Stockholder Shares to be
sold by such Selling Stockholder hereunder, the documents evidencing such
Stockholder Shares then on deposit with the Custodian shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement and of
the Custody Agreement as if such death, incapacity, termination or other event
had not occurred, regardless of whether or not the Custodian shall have
received notice thereof. Each Agent has been duly authorized by such Selling
Stockholder to execute and deliver this Agreement and the Custodian has been
authorized to receive and acknowledge receipt of the proceeds of sale of the
Stockholder Shares to be sold by such Selling Stockholder against delivery
thereof and otherwise act on behalf of such Selling Stockholder.
(k) Each Preliminary Prospectus as of its date has conformed in
all material respects with the requirements of the Act and, as of this date,
has not included any untrue statement of material fact or omitted to state a
material fact necessary to make the statements therein not misleading; and when
the Registration Statement became effective, and at all times subsequent
thereto, up to the Closing Date, (1) the Registration Statement and the
Prospectus and any amendments or supplements thereto will contain all
statements that are required to be stated therein in accordance with the Act
and the Regulations and will in all material respects conform to the
requirements of the Act and the Regulations, and (2) neither the Registration
Statement nor the Prospectus, nor any amendment or supplement 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
not misleading.
(l) Such Selling Stockholder will not sell, contract to sell or
otherwise dispose of any Common Stock for a period of nine months after this
Agreement becomes effective without the prior written consent of the Company
and the Representative.
(m) Except as disclosed in the Prospectus, such Selling
Stockholder is not a party to any formal or informal voting agreements,
understandings or arrangements with respect to the voting of the Common Stock.
3. PURCHASE AND SALE OF OFFERED SHARES. On the basis of the
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company and the
Selling Stockholders shall sell the Offered Shares to the several Underwriters
at the Offering Price less the underwriting discount shown on the cover page of
the Prospectus (the "Underwriting Discount"), and the Underwriters, severally
and not jointly, shall purchase from the Company and the Selling Stockholders,
on a firm commitment basis, at the Offering Price less the Underwriting
Discount, the respective Offered Shares set forth opposite their names on
Schedule I hereto. In making this
13
Agreement, each Underwriter is contracting severally, and not jointly, and,
except as provided in Sections 5 and 12 hereof, the agreement of each
Underwriter is to purchase only that number of Offered Shares specified with
respect to that Underwriter in Schedule I hereto. The Underwriters shall offer
the Offered Shares to the public as set forth in the Prospectus.
4. PAYMENT AND DELIVERY. Payment for the Offered Shares shall be
made to the Company and the Selling Stockholders, as appropriate, by certified
or official bank check payable to the order of the Company in Los Angeles
Clearing House funds (next day funds), at the offices of Berliner Zisser Walter
& Gallegos, P.C., One Norwest Center, 1700 Lincoln Street, Suite 4700, Denver,
Colorado 80203-4547, or at such other location as shall be agreed upon by the
Company and the Representative, or in immediately available funds wired to such
account or accounts as the Company may specify (with all costs and expenses
incurred by the Underwriters in connection with such settlement in immediately
available funds (including, but not limited to, interest or cost of funds
expenses) to be borne by the Company), against delivery of the Offered Shares
to the Representative at the offices of Cruttenden Roth Incorporated, 18301 Von
Karman, Suite 100, Irvine, California 92715-1009 for the respective accounts of
the Underwriters. Such payments and delivery will be made at 10:00 A.M.,
California time, on the third business day after the date of this Agreement or
at such other time and date not later than three business days thereafter as
the Representative and the Company shall agree upon. Such time and date are
referred to herein as the "Closing Date." The certificates representing the
Offered Shares to be sold and delivered will be in such denominations and
registered in such names as the Representative requests not less than one full
business day prior to the Closing Date, and will be made available to the
Representative for inspection, checking and packaging at the office of the
Company's Transfer Agent, not less than one full business day prior to the
Closing Date.
5. OPTION TO PURCHASE OPTIONAL SHARES.
(a) For the purposes of covering any over-allotments in
connection with the distribution and sale of the Offered Shares as
contemplated by the Prospectus, subject to the terms and conditions
herein set forth, the several Underwriters are hereby granted an
option by the Company to purchase all or any part of the Optional
Shares from the Company (the "Over-allotment Option"). The purchase
price per share to be paid for the Optional Shares shall be the
Offering Price less the Underwriting Discount. The Over-allotment
Option granted hereby may be exercised by the Representative on behalf
of the several Underwriters as to all or any part of the Optional
Shares at any time (but not more than once) within 45 days after the
Effective Date. No Underwriter shall be under any obligation to
purchase any Optional Shares prior to an exercise of the
Over-allotment Option.
(b) The Over-allotment Option granted hereby may be
exercised by the Representative on behalf of the several Underwriters
by giving notice to the Company by a letter sent by registered or
certified mail, postage prepaid, telex, telegraph, telegram or
facsimile (such notice to be effective when sent), addressed as
provided in Section 14 hereof, setting forth the number of Optional
Shares to be purchased, the date and time for delivery of and payment
for the Optional Shares and stating that the Optional Shares referred
to therein are to be used for the purpose of covering over-allotments
in connection with the distribution and sale of the Offered Shares.
If such notice is given prior to the Closing Date, the date set forth
therein for such delivery and
14
payment shall not be earlier than either three full business days
thereafter or the Closing Date, whichever occurs later. If such
notice is given on or after the Closing Date, the date set forth
therein for such delivery and payment shall be a date selected by the
Representative that is not later than three full business days after
the exercise of the Over- allotment Option. The date and time set
forth in such a notice is referred to herein as the "Option Closing
Date," and a closing held pursuant to such a notice is referred to
herein as the "Option Closing." The number of Optional Shares to be
sold to each Underwriter pursuant to the exercise of the
Over-allotment Option shall be the number that bears the same ratio to
the aggregate number of Optional Shares being purchased through such
Over-allotment Option exercise as the number of Offered Shares
opposite the name of such Underwriter in Schedule I hereto bears to
the total number of all Offered Shares; subject, however, to such
adjustment as the Representative may approve to eliminate fractional
shares and subject to the provisions for the allocation of Optional
Shares purchased for the purpose of covering over-allotments set forth
in the Agreement Among Underwriters. Upon the exercise of the
Over-allotment Option, the Company shall become obligated and sell to
the Representative for the respective accounts of the Underwriters,
and on the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions
herein set forth, and the several Underwriters shall become severally,
but not jointly, obligated to purchase from the Company, the number of
Optional Shares specified in each notice of exercise of the
Over-allotment Option.
(c) Payment for the Optional Shares shall be made to the
Company by certified or official bank check payable to the order of
the Company in Los Angeles Clearing House funds (next day funds), at
the office of Berliner Zisser Walter & Gallegos, One Norwest Center,
1700 Lincoln Street, Denver, Colorado 80203-4547 or such other
location as shall be agreed upon by the Company and the
Representative, or in immediately available funds wired to such
account as the Company may specify (with all costs and expenses
incurred by the Underwriters in connection with such settlement in
immediately available funds (including, but not limited to, interest
or cost of funds expenses) to be borne by the Company), against
delivery of the Optional Shares to the Representative at the offices
of Cruttenden Roth Incorporated, 18301 Von Karman, Suite 100, Irvine,
California 92715, for the respective accounts of the Underwriters.
The certificates representing the Optional Shares to be issued and
delivered will be in such denominations and registered in such names
as the Representative requests not less than one full business day
prior to the Option Closing Date, and will be made available to the
Representative for inspection, checking and packaging at the office of
the Company's Transfer Agent not less than one full business day prior
to the Option Closing Date.
6. CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY. The Company
covenants and agrees with the several Underwriters as follows:
(a) If Rule 430A of the Regulations is employed, the
Company will timely file the Prospectus pursuant to and in compliance
with Rule 424(b) of the Regulations and will advise the Representative
of the time and manner of such filing.
(b) The Company will not at any time, whether before or
after the Registration Statement shall have become effective, during
such period as, in the
15
opinion of counsel for the Underwriters, the Prospectus is required by
law to be delivered in connection with sales by the Underwriters or a
dealer, file or publish any amendment or supplement to the
Registration Statement or Prospectus of which the Representative has
not been previously advised and furnished a copy, or which is not in
compliance with the Regulations, or, during the period before the
distribution of the Offered Shares and the Optional Shares is
completed, file or publish any amendment or supplement to the
Registration Statement or Prospectus to which the Representative
reasonably objects in writing.
(c) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to
become effective and will advise the Representative immediately, and
confirm such advice in writing, (i) when the Registration Statement,
or any post-effective amendment to the Registration Statement, is
filed with the SEC, (ii) of the receipt of any comments from the SEC,
(iii) when the Registration Statement has become effective and when
any post-effective amendment thereto becomes effective, or when any
supplement to the Prospectus or any amended Prospectus has been filed,
(iv) of any request of the SEC for amendment or supplementation of the
Registration Statement or Prospectus or for additional information,
(v) during the period when the Prospectus is required to be delivered
under the Act and Regulations, of the happening of any event which in
the Company's judgment makes any material statement in the
Registration Statement or the Prospectus untrue or which requires any
changes to be made in the Registration Statement or Prospectus in
order to make any material statements therein not misleading and (vi)
of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing
or suspending the use of any Preliminary Prospectus or the Prospectus,
the suspension of the qualification of any of the Shares for offering
or sale in any jurisdiction in which the Underwriters intend to make
such offers or sales, or of the initiation or threatening of any
proceedings for any such purposes. The Company will use its best
efforts to prevent the issuance of any such stop order or of any order
preventing or suspending such use and, if any such order is issued, to
obtain as soon as possible the lifting thereof.
(d) The Company has delivered to the Representative,
without charge, and will continue to deliver from time to time until
the Effective Date, as many copies of each Preliminary Prospectus as
the Representative may reasonably request. The Company will deliver
to the Representative, without charge, as soon as possible after the
Effective Date, and thereafter from time to time during the period
when delivery of the Prospectus is required under the Act, such number
of copies of the Prospectus (as supplemented or amended, if the
Company makes any supplements or amendments to the Prospectus) as the
Representative may reasonably request. The Company hereby consents to
the use of such copies of each Preliminary Prospectus and the
Prospectus for purposes permitted by the Act, the Regulations and the
securities or Blue Sky laws of the jurisdictions in which the Shares
are offered or sold by the several Underwriters and by all dealers to
whom Shares may be offered or sold, both in connection with the
offering and sale of the Shares and for such period of time thereafter
as the Prospectus is required by the Act to be delivered in connection
with sales by any Underwriter or dealer. The Company has furnished or
will furnish to the Representative two signed copies of the
Registration Statement as originally filed and of all amendments
thereto,
16
whether filed before or after the Effective Date, two copies of all
exhibits filed therewith and two signed copies of all consents and
certificates of experts, and will deliver to the Representative such
number of conformed copies of the Registration Statement, including
financial statements and exhibits, and all amendments thereto, as the
Representative may reasonably request.
(e) The Company will comply with the Act, the
Regulations, the Exchange Act and the rules and regulations thereunder
so as to permit the continuance of offers and sales of, and dealings
in, the Shares for as long as may be necessary to complete the
distribution of the Shares as contemplated hereby.
(f) The Company will furnish such information as may be
required and otherwise cooperate in the registration or qualification
of the Shares, or exemption therefrom, for offering and sale by the
several Underwriters and by dealers under the securities or Blue Sky
laws of such jurisdictions in which the Representative determines to
offer the Shares, after consultation with the Company, and will file
such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification;
provided, however, that no such qualification shall be required in any
jurisdiction where, solely as a result thereof, the Company would be
subject to taxation or qualification as a foreign corporation doing
business in such jurisdiction where it is not now so qualified or to
take any action which would subject it to service of process in suits,
other than those arising out of the offering or sale of the Shares, in
any jurisdiction where it is not now so subject. The Company will,
from time to time, prepare and file such statements and reports as are
or may be required to continue such qualification in effect for so
long a period as is required under the laws of such jurisdiction for
such offering and sale.
(g) Subject to subsection (b) of this Section 6, in case
of any event, at any time within the period during which, in the
opinion of counsel for the Underwriters, a prospectus is required to
be delivered under the Act and Regulations, as a result of which event
any Preliminary Prospectus or the Prospectus, as then amended or
supplemented, would contain, in the judgment of the Company or in the
opinion of counsel for the Underwriters, an untrue statement of a
material fact, or omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading, or, if it is necessary at any
time to amend any Preliminary Prospectus or the Prospectus to comply
with the Act and Regulations or any applicable securities or Blue Sky
laws, the Company promptly will prepare and file with the SEC, and any
applicable state securities commission, an amendment or supplement
that will correct such statement or omission or an amendment that will
effect such compliance and will furnish to the Representative such
number of copies of such amendment or amendments or supplement or
supplements to such Preliminary Prospectus or the Prospectus (in form
and substance satisfactory to the Representative and counsel for
Underwriters) as the Representative may reasonably request. For
purposes of this subsection, the Company will furnish such information
to the Representative, the Underwriters' counsel and counsel for the
Company as shall be necessary to enable such persons to consult with
the Company with respect to the need to amend or supplement any
Preliminary Prospectus or the Prospectus, and shall furnish to the
Representative and the Underwriters' counsel such further information
as each may from time to time
17
reasonably request. If the Company and the Representative agree that
any Preliminary Prospectus or the Prospectus should be amended or
supplemented, the Company, if requested by the Representative, will,
if and to the extent required by law, promptly issue a press release
announcing or disclosing the matters to be covered by the proposed
amendment or supplement.
(h) The Company will make generally available to its
security holders as soon as practicable and in any event not later
than 45 days after the end of the period covered thereby, an earnings
statement of the Company (which need not be audited unless required by
the Act, the Regulations, the Exchange Act or the rules or regulations
thereunder) that shall comply with Section 11(a) of the Act and cover
a period of at least 12 consecutive months beginning not later than
the first day of the Company's fiscal quarter next following the
Effective Date.
(i) For a period of five years from the Effective Date,
the Company will deliver to the Representative upon request: (A) a
copy of each report or document, including, without limitation,
reports on Forms 8-K, 10-K and 10-Q (or such similar forms as may be
designated by the SEC and be applicable to the Company ), registration
statements and any exhibits thereto, filed with or furnished to the
SEC or any securities exchange or the NASD, as soon as practicable
after the date each such report or document is so filed or furnished,
(B) as soon as practicable, copies of any reports or communications
(financial or other) of the Company mailed to its security holders and
(C) every material press release in respect of the Company or its
affairs that was released or prepared by the Company.
(j) During the course of the distribution of the Shares,
the Company has not taken, nor will it take, directly or indirectly,
any action designed to or that might, in the future, reasonably be
expected to cause or result in stabilization or manipulation of the
price of the Common Shares.
(k) The Company will cause each person listed on Schedule
II hereto (except as otherwise noted on such Schedule) to execute a
legally binding and enforceable agreement (a "lockup agreement") to,
for a period of nine months from the Effective Date, not sell, offer
to sell, contract to sell, grant any option for the sale of or
otherwise transfer or dispose of any Common Shares (except for the
sale of the Shares as contemplated by this Agreement), any options to
purchase Common Shares or any securities convertible into or
exchangeable for Common Shares (excluding the issuance of Common
Shares pursuant to the Employee Options) without the prior written
consent of the Representative, which lockup agreement shall be in form
and substance satisfactory to the Representative and the Underwriters'
counsel, and deliver such lockup agreement to the Representative prior
to the Effective Date. Appropriate stop transfer instructions will be
issued by the Company to the transfer agent for the securities
affected by the lockup agreements.
(l) The Company will not sell, issue, contract to sell,
offer to sell or otherwise dispose of any Common Shares, options to
purchase Common Shares or any other security convertible into or
exchangeable for Common Shares, from the date of the Effective Date
through the period ending nine months after the Effective Date,
without the prior written consent of the Representative, except for
the sale of the
18
Shares as contemplated by this Agreement, the granting of options, and
the issuance of Common Shares upon their exercise, under the Company's
stock option plans described in the Prospectus and the issuance of
Common Shares pursuant to the Employee Options and the Warrants.
(m) The Company will use all reasonable efforts to
maintain the inclusion of the Common Shares on the NMS.
(n) The Company shall, at its sole cost and expense,
supply and deliver to the Representative and the Underwriters' counsel
(in the form they require), within a reasonable period after the
Closing Date, three transaction binders, each of which shall include
the Registration Statement, as amended or supplemented, all exhibits
to the Registration Statement, each Preliminary Prospectus, the
Prospectus, the Preliminary Blue Sky Memorandum and any supplement
thereto and all underwriting and other closing documents.
(o) The Company will use the net proceeds from the sale
of the Shares to be sold by it hereunder substantially in accordance
with the description thereof set forth in the Prospectus.
7. PAYMENT OF EXPENSES.
(a) Whether or not the transactions contemplated by this
Agreement are consummated and regardless of the reason this Agreement
is terminated, the Company will pay or cause to be paid, and bear or
cause to be borne, all costs and expenses incident to the performance
of the obligations of the Company under this Agreement, including:
(i) the fees and expenses of the accountants and counsel for the
Company incurred in the preparation of the Registration Statement and
any post-effective amendments thereto (including financial statements
and exhibits), each Preliminary Prospectus and the Prospectus and any
amendments or supplements thereto; (ii) printing and mailing expenses
associated with the Registration Statement and any post-effective
amendments thereto, each Preliminary Prospectus, the Prospectus
(including any supplement thereto), this Agreement, the Agreement
Among Underwriters, the Underwriters' Questionnaire, the Power of
Attorney, the Selected Dealer Agreement and related documents and the
Preliminary Blue Sky Memorandum and any supplement thereto; (iii) the
costs incident to the authentication, issuance, delivery and transfer
of the Shares to the Underwriters; (iv) all taxes, if any, on the
issuance, delivery and transfer of the Shares to be sold by the
Company; (v) the fees, expenses and all other costs of qualifying the
Shares for the sale under the securities or Blue Sky laws of those
jurisdictions in which the Shares are to be offered or sold; (vi) the
fees, expenses and other costs of, or incident to, securing any review
or approvals by or from the NASD exclusive of fees of the
Underwriters' counsel; (vii) the filing fees of the SEC; (viii) the
cost of furnishing to the Underwriters copies of the Registration
Statement, each Preliminary Prospectus and the Prospectus (including
any supplement or amendment thereto) as herein provided; (ix) the
Company's travel expenses in connection with meetings with the
brokerage community and institutional investors and expenses
associated with hosting such meetings, including meeting rooms, meals,
facilities and ground transportation expenses; (x) the costs and
expenses associated with settlement in same day funds (including, but
not limited to, interest or cost of
19
funds expenses), if desired by the Company; (xi) the fees for
inclusion of the Shares on the NMS; (xii) the cost of printing and
engraving certificates for the Shares; (xiii) the cost and charges of
any transfer agent; (xiv) the cost of preparing bound volumes of
documents relating to the transactions contemplated by this Agreement
for the Representative and its counsel; and (xv) all other costs and
expenses reasonably incident to the performance of its obligations
hereunder that are not otherwise specifically provided for in this
Section 7, provided that, except as specifically set forth below and
in subsection (c) of this Section 7, the Underwriters shall be
responsible for their out-of-pocket expenses, including their lodging
and travel expenses associated with meetings with the brokerage
community and institutional investors, and the fees and expenses of
their counsel. In addition, the Company shall pay to Cruttenden Roth
Incorporated, individually and not in its capacity as a
Representative, a non-accountable expense allowance of 2 1/2% of the
aggregate Offering Price of the Company Shares and the Optional
Shares, but only upon payment therefor by the several Underwriters.
If the sale of the Offered Shares provided for herein is 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,
or because any other condition to the Underwriters' obligations
hereunder is not fulfilled, the Company shall pay for all reasonable
out-of-pocket accountable expenses (including fees and disbursements
of counsel) actually incurred by the Underwriters in connection with
the proposed sale of the Offered Shares. If this agreement is
terminated or if the sale of the Offered Shares provided for herein is
not consummated for any reason other than by reason of any failure,
refusal or inability on the part of the Company to perform any
agreement on its part to be performed or because any other condition
of the Underwriters' obligations hereunder is not fulfilled, the
Company shall pay the several Underwriters for all reasonable
out-of-pocket accountable expenses (including fees and disbursements
of counsel) actually incurred by the Underwriters in connection with
the proposed sale of the Offered Shares, up to a maximum of $100,000.
The Company shall not in any event be liable to any of the
Underwriters for the loss of anticipated profits from the transactions
covered by this Agreement. You acknowledge that $25,000 has already
been paid to you by the Company to be applied against such
non-accountable expense allowance or such reasonable out-of- pocket
accountable expenses if the sale of Offered Shares is not consummated
as provided in the preceding sentences, as the case may be. You agree
that any portion of such $25,000 that is not necessary to pay the
Underwriters for their reasonable out-of-pocket accountable expenses
actually incurred if the sale of Shares is not consummated for any
reason shall be returned to the Company.
(b) The Selling Stockholders shall pay to Cruttenden Roth
Incorporated, individually and not in its capacity as a
Representative, a non-accountable expense allowance of 2 1/2% of the
aggregate Offering Price of the Stockholder Shares, but only upon
payment therefor by the several Underwriters.
(c) The Company shall pay as due any registration,
qualification and filing fees and any accountable out-of- pocket
disbursements in connection with such registration, qualification or
filing in the jurisdictions in which the Representative determines,
after consultation with the Company, to offer or sell the Shares.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligation of
each Underwriter to purchase and pay for the Offered Shares that it has agreed
to purchase hereunder on the
20
Closing Date, and to purchase and pay for any Optional Shares as to which its
right to purchase under Section 5 has been exercised on an Option Closing Date,
is subject at the date hereof, the Closing Date and any Option Closing Date to
the continuing accuracy of the representations and warranties of the Company
and the Selling Stockholders set forth herein, to the performance by the
Company and the Selling Stockholders of their respective covenants, agreements
and obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become
effective not later than 5:30 P.M., Denver, Colorado time, on the date
of this Agreement, or at such later time or on such later date as the
Representative may agree to in writing; if required by the
Regulations, the Prospectus shall have been filed with the SEC
pursuant to Rule 424(b) of the Regulations within the applicable time
period prescribed for such filing by the Regulations and in accordance
with subsection (a) of Section 6 hereof; on or prior to the Closing
Date or any Option Closing Date, as the case may be, no stop order or
other order preventing or suspending the effectiveness of the
Registration Statement or the sale of any of the Shares shall have
been issued under the Act or any state securities law and no
proceedings for that purpose shall have been initiated or shall be
pending or, to the Representative's knowledge or the knowledge of the
Company, shall be contemplated by the SEC or any authority in any
jurisdiction designated by the Representative pursuant to subsection
(f) of Section 5 hereof and any request on the part of the SEC for
additional information shall have been complied with to the reasonable
satisfaction of counsel for the Underwriters.
(b) All corporate proceedings and other matters incident
to the authorization, form and validity of this Agreement and the
Shares and the form of the Registration Statement, each Preliminary
Prospectus and the Prospectus, and all amendments and supplements
thereto and all other legal matters relating to this Agreement and the
transactions contemplated hereby, shall be satisfactory in all
respects to counsel to the Underwriters; the Company shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters; and the
Representative shall have received from the Underwriters' counsel,
O'Melveny & Myers LLP, a favorable opinion, dated as of the Closing
Date and any Option Closing Date, as the case may be, and addressed to
the Representative individually and as the Representative of the
several Underwriters with respect to the due authorization, execution
and delivery of this Agreement, that the issuance and sale of the
Shares have been duly authorized by the Company, that when the Shares
have been duly delivered against payment therefor as contemplated by
this Agreement, they will be validly issued, fully paid and
non-assessable and that the Registration Statement has become
effective under the Act.
(c) The NASD shall have indicated that it has no
objection to the underwriting arrangements pertaining to the sale of
any of the Shares.
(d) The Representative shall have received copies of the
lockup agreements described in subsection (l) of Section 6 signed by
those persons set forth on Schedule II hereto.
(e) The Representative shall have received at or prior to
the Closing Date from the Company's counsel a memorandum or summary,
in form and substance
21
satisfactory to the Representative, with respect to the qualification
for offering and sale by the Underwriters of the Shares under the
securities or Blue Sky laws of such jurisdictions designated by the
Representative pursuant to subsection (f) of Section 6 hereof.
(f) You shall have received on the Closing Date and on
the Option Closing Date, if any, the following opinions of Berliner
Zisser Walter & Gallegos, P.C., counsel for the Company and the
Selling Stockholders, dated the Closing Date and the Option Closing
Date, if any, and addressed to the Underwriters and with reproduced
copies or signed counterparts thereof for each of the Underwriters:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation;
(ii) The Company has the corporate power and
authority to own, lease and operate its properties and to
conduct its business as described in the Registration
Statement and the Prospectus; and the Company 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 properties or the conduct of its business requires
such qualification, except where the failure so to qualify
taken in the aggregate would not have a material adverse
effect on the business, operations or financial condition of
the Company, and, except as set forth in the Prospectus, the
Company does not own or control, directly or indirectly, any
corporation, association or other entity;
(iii) Each Subsidiary is a corporation duly
organized and validly existing 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 and the Prospectus (and any amendment or supplement
thereto); and all the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned by the
Company directly, or indirectly through one of the other
Subsidiaries, free and clear of any perfected security
interest, or, to the best knowledge of such counsel after
reasonable inquiry, any other security interest, lien, adverse
claim, equity or other encumbrance;
(iv) The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" as of the dates stated
therein; the issued and outstanding shares of capital stock of
the Company have been duly and validly authorized and issued,
are fully paid and nonassessable, and to such counsel's
knowledge after reasonable inquiry, have not been issued in
violation of any preemptive right, or co-sale right,
registration right, right of first refusal or other similar
right;
(v) The Shares to be issued and sold by the
Company to the several Underwriters pursuant to the terms of
this Agreement will be, upon issuance and delivery against
payment therefor in accordance with the terms hereof, duly
22
authorized and validly issued and fully paid and
nonassessable; and the stockholders of the Company do not have
any preemptive rights, co-sale rights, rights of first refusal
or other similar rights, which rights have not previously been
waived, to purchase any of the Shares pursuant to the
Company's charter or bylaws, or to such counsel's knowledge
after reasonable inquiry, pursuant to any agreement to which
the Company is a party;
(vi) The Company has the corporate power and
authority to enter into this Agreement and to issue, sell and
deliver to the Underwriters the Shares to be issued, sold and
delivered by it hereunder;
(vii) This Agreement has been duly authorized by
all necessary corporate action on the part of the Company and
has been duly executed and delivered by the Company;
(viii) This Agreement when executed and delivered
shall have been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed
and delivered by the Company and, assuming due authorization,
execution and delivery by you, is the valid, legal and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except insofar as the
indemnification and contribution provisions may be limited by
applicable law and except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditor's rights generally or
by general equitable principles;
(ix) The Registration Statement and all
post-effective amendments, if any, have become effective under
the Act, and, to the best of such counsel's knowledge after
reasonable inquiry, no stop orders suspending the
effectiveness of the Registration Statement have been issued
and no proceedings for that purpose have been instituted or
are pending or threatened under the Act; and any required
filing of the Prospectus pursuant to Rule 424(b) of the Act
has been made in accordance with Rule 424(b);
(x) The Registration Statement and the
Prospectus, and each amendment or supplement thereto (other
than the financial statements, financial and statistical data
and supporting schedules included or incorporated by reference
in the Registration Statement and the Prospectus and each
amendment or supplement thereto, as to which such counsel need
express no opinion) as of the effective date of the
Registration Statement, complied as to form in all material
respects with the requirements of the Act and the 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 Registration Statement
and Prospectus, and the information in the Prospectus under
the caption "Description of Capital Stock" to the extent that
it constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is correct in all material
respects, and the form of certificate evidencing the Common
Stock complies with Delaware law;
23
(xii) The descriptions in the Registration
Statement and the Prospectus, insofar as they are descriptions
of contracts, agreements or legal conclusions, are accurate
and fairly present the information required to be shown;
(xiii) To such counsel's knowledge after reasonable
inquiry, there are no agreements, contracts, leases or
documents of a character required to be described or referred
to in the Registration Statement or Prospectus or to be filed
as an exhibit to the Registration Statement that are not
described or referred to therein and filed as required;
(xiv) Neither the offer, sale or delivery of the
Company Shares, the execution, delivery or performance of this
Agreement, nor the consummation of the transactions
contemplated hereby will result in any violation of the
Company's charter or bylaws, or, to such counsel's knowledge
after reasonable inquiry, result in a breach or violation of
any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement,
bond, debenture, note agreement or other evidence of
indebtedness, or any lease, contract or other agreement or
instrument which has been filed as an exhibit to the
Registration Statement, or any applicable statute, rule or
regulation known to such counsel after reasonable inquiry or,
to such counsel's knowledge after reasonable inquiry, any
order, writ or decree of any court or governmental agency or
body having jurisdiction over the Company, or over any of the
Company's properties or operations; provided, however, that no
opinion need be rendered concerning Blue Sky laws;
(xv) No authorization, approval or consent of any
governmental authority or agency is necessary in connection
with the consummation of the transactions herein contemplated,
except such as have been obtained under the Act or as may be
required by the NASD, the NMS or under state or other
securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters;
(xvi) To such counsel's knowledge after reasonable
inquiry, there are no legal or governmental proceedings
pending or threatened against the Company of a character that
are required to be disclosed in the Registration Statement or
the Prospectus, by the Act or the Regulations;
(xvii) To such counsel's knowledge after reasonable
inquiry, except as disclosed in the Registration Statement, no
holders of Common Stock or other securities of the Company
have registration rights with respect to securities of the
Company;
(xviii) The Company is not an "investment company" or
an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act of 1940;
(xix) Each Selling Stockholder has duly authorized,
executed and delivered a Power of Attorney and Custody
Agreement which constitute valid
24
and legally binding agreements of such Selling Stockholder in
accordance with their terms, except as enforceability of the
same may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors rights generally;
(xx) This Agreement has been duly and validly
executed and delivered by or on behalf of each Selling
Stockholder and constitutes the valid and legally binding
agreement of each Selling Stockholder enforceable against each
Selling Stockholder in accordance with its terms, except as
enforceability of the same may be limited by general equitable
principles, bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and except
as to those provisions relating to indemnity or contribution
for liability arising under federal or state securities laws
or under common law, as to which no opinion need be expressed;
(xxi) Upon delivery of the Shares pursuant to this
Agreement and payment therefor as contemplated herein, the
Underwriters will acquire good and marketable title to the
Shares, free and clear of any claim, lien, encumbrance,
security interest, or other restriction on transfer or other
defect in title;
(xxii) To the best knowledge of such counsel after
reasonable inquiry, all authorizations, orders and consents
necessary for the execution and delivery by each Selling
Stockholder of this Agreement, the Power of Attorney and the
Custody Agreement have been duly and validly given, and each
Selling Stockholder has full legal rights, power and authority
to enter into this Agreement, the Power of Attorney and the
Custody Agreement and to sell, assign, transfer and deliver to
the Underwriters the number of Shares to be sold by such
Selling Stockholder hereunder;
(xxiii) The performance of this Agreement and the
consummation of the transactions contemplated hereby and by
the Power of Attorney and the Custody Agreement will not
result in a breach or violation by such Selling Stockholder of
any of the terms or provisions of, or constitute a default by
such Selling Stockholder under, any indenture, mortgage, trust
(constructive or other), loan agreement or instrument known to
such counsel to which such Selling Stockholder is a party or
by which such Selling Stockholder is bound, any statute, or
any judgment, decree, order, rule or regulation known to such
counsel of any court or governmental agency or body applicable
to such Selling Stockholder;
(xxiv) Neither the Company nor any Subsidiary is in
violation of its respective certificate or articles of
incorporation or bylaws, or other organizational documents, or
to the best knowledge of such counsel after reasonable
inquiry, is in default in the performance of any material
obligation, agreement or condition contained in any bond,
debenture, note or other evidence of indebtedness, except as
may be disclosed in the Prospectus; and
25
(xxv) To the best knowledge of such counsel after
reasonable inquiry, neither the Company nor any Subsidiary is
in violation of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or
any Subsidiary or of any decree of any court or governmental
agency or body having jurisdiction over the Company or any
Subsidiary.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company, and you,
at which the contents of the Registration Statement and Prospectus and related
matters were discussed and, although such counsel is not passing upon, and does
not assume any responsibility for, the accuracy, completeness or fairness of
the statements contained in the Registration Statement and Prospectus and has
not made any independent check or verification thereof, on the basis of the
foregoing (relying as to materiality to a large extent upon the statements of
officers and other representatives of the Company), no facts have come to such
counsel's attention that lead them to believe that either the Registration
Statement (including the incorporated documents) at the time such Registration
Statement 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 the Prospectus (including the
incorporated documents) as of its date contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that such counsel need express no opinion with respect
to the financial statements, schedules and other financial and statistical data
included in the Registration Statement or Prospectus.
In giving their opinion, Berliner Zisser Walter & Gallegos, P.C. may
rely as to matters of law, other than the laws of the State of Delaware and the
Federal law of the United States, upon the opinions of counsel satisfactory to
you and as to matters of fact, to the extent Berliner Zisser & Gallegos, P.C.
deems appropriate, on certificates of responsible Company officers and public
officials.
(g) At the Closing Date and any Option Closing Date: (A)
the Registration Statement and any post-effective amendment thereto
and the Prospectus and any amendments or supplements thereto shall
contain all statements that are required to be stated therein in
accordance with the Act and the Regulations and shall conform, in all
material respects, to the requirements of the Act and the Regulations,
and neither the Registration Statement nor any post-effective
amendment thereto nor the Prospectus and any amendments or supplements
thereto shall contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading, (B) since the respective dates
as of which information is given in the Registration Statement and any
post-effective amendment thereto and the Prospectus and any amendments
or supplements thereto, except as otherwise stated therein, there
shall have been no material adverse change in the properties,
condition (financial or otherwise), results of operations,
stockholders' equity, business or management of the Company, from that
set forth therein, whether or not arising in the ordinary course of
business, other than as referred to in the Registration Statement or
Prospectus, (C) since the respective dates as of which information is
given in the Registration Statement and any post-effective amendment
26
thereto and the Prospectus or any amendment or supplement thereto,
there shall have been no transaction, contract or agreement entered
into by the Company, other than in the ordinary course of business and
as set forth in the Registration Statement or Prospectus that has not
been, but would be required to be, set forth in the Registration
Statement or Prospectus; (D) no action, suit or proceeding at law or
in equity shall be pending or, to the knowledge of the Company,
threatened against the Company that would be required to be set forth
in Prospectus, other than as set forth therein, and no proceedings
shall be pending or, to the knowledge of the Company, threatened
against the Company before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable
decision, ruling or finding would materially adversely affect the
properties, condition (financial or otherwise), results of operations,
stockholders' equity or business of the Company, other than as set
forth in the Prospectus. The Representative shall have received at
the Closing Date and any Option Closing Date certificates of each of
the Chief Executive Officer and the Chief Financial Officer of the
Company dated as of the date of the Closing Date or Option Closing
Date, as the case may be, and addressed to the Representative,
individually and as the Representative of the several Underwriters, to
the effect, that the conditions set forth in this subsection have been
satisfied and as to the accuracy and performance, as of the Closing
Date or the Option Closing Date, as the case may be, of the
agreements, representations and warranties of the Company set forth
herein.
(h) At the time this Agreement is executed and at the
Closing Date and any Option Closing Date, the Representative shall
have received a letter addressed to the Representative, individually
and as the Representative of the several Underwriters, and in form and
substance satisfactory to the Representative in all respects
(including the nonmaterial nature of the changes or decreases, if any,
referred to in clause (iii) below) from Grant Thornton LLP dated as of
the date of this Agreement, the Closing Date or Option Closing Date,
as the case may be:
(i) confirming that they are independent public
accountants within the meaning of the Act and the Regulations,
that they are members of the SEC Practice Section, and stating
that the section of the Registration Statement under the
caption "Experts" is correct insofar as it relates to them;
(ii) stating that, in their opinion, the financial
statements of the Company audited by them and included in the
Registration Statement comply in form in all material respects
with the applicable accounting requirements of the Act and the
Regulations;
(iii) stating that, on the basis of specified
procedures, which included a reading of the latest available
unaudited interim financial statements of the Company (with an
indication of the date of the latest available unaudited
interim financial statements), a reading of the minutes of the
meetings of the stockholders and the Board of Directors of the
Company and audit and compensation committees of such Board,
if any, and inquiries to certain officers and other employees
of the Company who are responsible for financial and
accounting matters and other specified procedures and
inquiries, nothing has come to their attention that would
cause them to believe that (A) the unaudited financial
statements and related schedules of the Company included in
the
27
Registration Statement, if any, (I) do not comply in form in
all material respects with the applicable accounting
requirements of the Act and the Regulations or (II) were not
fairly presented in conformity with generally accepted
accounting principles on a basis substantially consistent with
that of the audited financial statements and related schedules
included in the Registration Statement or (B)(I) at a
specified date, not more than five business days prior to the
date of such letter there was any change in the capital stock
or short-term or long-term debt of the Company, or any
decrease (increase) in net current assets, total assets or
stockholders' equity as compared with the amounts shown in the
May 31, 1996 unaudited balance sheet of the Company included
in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement and Prospectus, and
(II) during the period from June 1, 1996 to a specified date
not more than five business days prior to the date of such
letter, there has been any decrease (increase), as compared
with the corresponding period in the preceding year, in
revenues, operating income or income before income taxes or in
total or per share amounts of net income of the Company or, if
there was any such change or decrease (increase), setting
forth the amount of such change or decrease (increase); and
(iv) stating that they have compared specific
dollar amounts, numbers of shares and other information
(including pro forma information) pertaining to the Company
set forth in the Registration Statement and Prospectus that
have been specified by the Representative prior to the date of
this Agreement, to the extent that such amounts, numbers,
percentages and information may be derived from the general
accounting or other records of the Company with the result
obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not
constitute an audit in accordance with generally accepted
auditing standards) set forth in the letter, and found them to
be in agreement.
(i) At the Closing Date and any Option Closing Date, the
Representative shall have been furnished such additional documents and
certificates as it shall reasonably request.
(j) No action shall have been taken by the NASD the
effect of which is to make it improper, at any time prior to the
Closing Date or any Option Closing Date, for members of the NASD to
execute transactions as principal or as agent in the Shares or to
trade or deal in the Shares, and no proceedings for the purpose of
taking such action shall have been instituted or shall be pending or,
to the Company's or the Representative's knowledge, shall be
contemplated by the NASD.
If any conditions to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or any Option Closing Date, as the
case may be, shall not have been fulfilled, the Representative may on behalf of
the several Underwriters terminate this Agreement or, if it so elects, waive
any such conditions which have not been fulfilled or extend the time for their
fulfillment.
9. INDEMNIFICATION.
28
(a) The Company and each Selling Stockholder, jointly and
severally, shall indemnify and hold harmless each Underwriter, and
each member of the selling group, and each person, if any, who
controls each Underwriter and each member of the selling group, within
the meaning of the Act or the Exchange Act, and each of their
officers, directors, partners, employees, agents and counsel, against
any and all loss, liability, claim, damage and expense whatsoever,
joint or several, as incurred, including, but not limited to,
attorneys' fees, any and all expense whatsoever incurred in
investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever or in connection with
any investigation or inquiry of, or action or proceeding that may be
brought against, the respective indemnified parties, arising out of or
based upon (i) any untrue statements or alleged untrue statements of a
material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or
supplement to the Preliminary Prospectus, Registration Statement or
the Prospectus or any application or other document, including, but
without limitation "Blue Sky" applications, documents or
correspondence (in this Section 9 collectively called "application")
executed by the Company and based upon written information furnished
by or on behalf of the Company filed in any jurisdiction in order to
qualify all or any part of the Shares under the securities laws
thereof or filed with the SEC or the NASD, (ii) the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (iii) any
breach of any representation, warranty, covenant or agreement of the
Company or any Selling Stockholder contained in this Agreement;
provided, however, that the foregoing indemnity shall not apply in
respect of and to the extent of any statement or omission made in
reliance upon and in conformity with written information furnished to
the Company or any Underwriter through the Representative expressly
for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof. It is understood
that the statements appearing in any Preliminary Prospectus, the
Prospectus or the Registration Statement (A) on the inside front
cover page with respect to stabilization and passive market making,
(B) in the section entitled "Underwriting," and (C) in the section
entitled "Legal Matters" with respect to the identity of counsel for
the Underwriters constitute the only information furnished in writing
by or on behalf of any Underwriter for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement. This
indemnity agreement will be in addition to any liability the Company
or any Selling Stockholder may otherwise have.
(b) The Underwriters, agree to indemnify and hold
harmless the Company, each of the directors of the Company, each of
the officers of the Company who shall have signed the Registration
Statement, each other person, if any, who controls the Company within
the meaning of the Act or the Exchange Act, the employees, agents and
counsel to the Company and each Selling Stockholder to the same extent
as the foregoing indemnities from the Company and the Selling
Stockholders to the several Underwriters, but only with respect to any
loss, liability, claim, damage or expense resulting from statements or
omissions, or alleged statements or omissions, if any, made in any
Preliminary Prospectus, Registration Statement or Prospectus or any
amendment or supplement thereof or any application in reliance upon,
and in conformity with, written information furnished to the Company
by any Underwriter through the Representative with respect to any
Underwriter by or on behalf of such
29
Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement
thereof or any application, as the case may be. This indemnity
agreement will be in addition to any liability such Underwriter may
otherwise have.
(c) If any action, inquiry, investigation or proceeding
is brought against any person in respect of which indemnity may be
sought pursuant to any of the two preceding paragraphs, such person
(hereinafter called the "indemnified party") shall, promptly after
formal notification of, or receipt of service of process for, such
action, inquiry, investigation or proceeding, notify in writing the
party or parties against whom indemnification is to be sought
(hereinafter called the "indemnifying party") of the institution of
such action, inquiry, investigation or proceeding and the indemnifying
party, upon the request of the indemnified party, shall assume the
defense of such action, inquiry, investigation or proceeding,
including the employment of counsel (reasonably satisfactory to such
indemnified party) and payment of expenses. No indemnification
provided for in this Section 9 shall be available to any indemnified
party who shall fail to give such notice if the indemnifying party
does not have knowledge of such action, inquiry, investigation or
proceeding and shall have been materially prejudiced by the failure to
give such notice, but the omission so to notify the indemnifying party
shall not relieve the indemnifying party otherwise than under this
Section 9. Such indemnified party or controlling person shall have
the right to employ its or their own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such
indemnified party unless the employment of such counsel shall have
been authorized in writing by the indemnifying party in connection
with the defense of such action or the indemnifying party shall not
have employed counsel to have charge of the defense of such action,
inquiry, investigation or proceeding or in the case of the
Underwriters, the Underwriters or any of them shall have been advised
by counsel that it is advisable that they or any of them be
represented by their own counsel, in any of which events the
reasonable fees and expenses of such counsel shall be borne by the
indemnifying party. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more
than one separate counsel (in addition to one local counsel in each
jurisdiction in which any proceeding may be brought) for all
indemnified parties. In the case of any such separate counsel for the
Underwriters, such firm shall be designated in writing by the
Representative. Expenses covered by the indemnification in this
subsection (c) of this Section 9 shall be paid by the indemnifying
party as they are incurred by the indemnified party. Anything in this
subsection to the contrary notwithstanding, the indemnifying party
shall not be liable for any settlement of any such claim effected
without its written consent. The indemnifying party shall promptly
notify the indemnified party of the commencement of any litigation,
inquiry, investigation or proceeding against the indemnifying party or
any of its officers or directors in connection with the issue and sale
of any of the Shares or in connection with such Preliminary
Prospectus, Registration Statement or Prospectus or any amendment or
supplement or any of the foregoing or any such application.
(d) If the indemnification provided for in this Section 9
is unavailable to or is insufficient to hold harmless an indemnified
party under subsections (a) and (b) of this Section 9, then each
indemnifying party shall contribute to the amount paid or
30
payable by such indemnified party as a result of such losses,
liabilities, claims, damages or expenses (or actions, inquiries,
investigations or proceedings in respect thereof) referred to in
subsections (a) or (b) of this Section 9 in such proportion as is
appropriate to reflect the relative benefits received by the Company
and the Selling Stockholders on the one hand and the Underwriters on
the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and the Selling
Stockholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such
losses, liabilities, claims or expenses (or actions, inquiries,
investigations or proceedings in respect thereof), as well as any
other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative faults shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company and the Selling Stockholders on the one hand or the
Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, the Selling Stockholders and the Underwriters
agree that it would not be just and equitable if contributions
pursuant to this section (d) of this Section 9 were determined by pro
rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any method or allocation that does not take
account of the equitable considerations referred to above in this
subsection (d) of this Section 9. The amount paid or payable by an
indemnified party as a result of the losses, liabilities, claims,
damages or expenses (or actions, inquiries, investigations or
proceedings in respect thereof) referred to above in this subsection
(d) of this Section 9 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d) of this Section
9, (i) the provisions of the Agreement Among Underwriters shall govern
contribution among Underwriters, (ii) no Underwriter (except as
provided in the Agreement Among Underwriters) or controlling person of
such Underwriter shall be required to contribute any amount in excess
of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter less the aggregate amount of any damages
which such Underwriter and its controlling persons have otherwise been
required to pay in respect of the same or any substantially similar
claims and (iii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligation in this subsection
(d) of this Section 9 to contribute are several in proportion to their
respective underwriting obligations and not joint.
31
The obligations of the Company and the Selling Stockholders
under this Section 9 shall be in addition to any liability which the
Company or any Selling Stockholder may otherwise have, and shall
extend, upon the same terms and conditions to each officer, director,
employee, agent or counsel 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 9 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 of the officers and directors of the Company who have signed
the Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act and to each employee, agent
and counsel to the Company, in either case, whether or not such person
is a party to any action or proceeding.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as
the context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and any Option Closing Date; and such
representations, warranties and agreements of the Underwriters, the Company and
the Selling Stockholders, including without limitation the indemnity and
contribution agreements contained in Section 9 hereof and the agreements
contained in Sections 7, 10, 11 and 14 hereof, shall remain operative and in
full force and effect for a period of the applicable federal and state statutes
of limitations regardless of any investigation made by or on behalf of any
Underwriter or any controlling person, and shall survive delivery of the Shares
and termination of this Agreement, whether before or after the Closing Date or
any Option Closing Date.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) This Agreement shall become effective immediately as
to Sections 7, 9, 10, 11 and 14 and, as to all other provisions, (i)
if at the time of execution and delivery of this Agreement the
Registration Statement has not become effective, at 9:30 A.M., Denver,
Colorado time, on the first business day following the Effective Date,
or (ii) if at the time of execution and delivery of this Agreement the
Registration Statement has been declared effective, at 9:30 A.M.,
Denver, Colorado time, on the date of execution of this Agreement; but
this Agreement shall nevertheless become effective at such earlier
time after the Registration Statement becomes effective as the
Representative may determine by notice to the Company or by release of
any of the Shares for sale to the public. For the purposes of this
Section 11, the Shares shall be deemed to have been so released upon
the release for publication of any newspaper advertisement relating to
the Shares or upon the release by the Representative of telegrams (i)
advising the Underwriters that the Shares are released for public
offering or (ii) offering the Shares for sale to securities dealers,
whichever may occur first. The Representative may prevent the
provisions of this Agreement (other than those contained in Sections
7, 9, 10, 11 and 14) hereof from becoming effective without liability
of any party to any other party, except as noted below, by giving the
notice indicated in subsection (c) of this Section 11 before the time
the other provisions of this Agreement become effective.
(b) The Representative shall have the right to terminate
this Agreement at any time prior to the Closing Date as provided in
Sections 8 and 12 hereof or if any of
32
the following have occurred: (i) the Company has failed, refused or
been unable, at or prior to the Closing Date, to perform any agreement
on its part to be performed hereunder; (ii) any other condition to the
obligations of the Underwriters hereunder is not fulfilled; (iii)
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change
or any development involving a prospective material adverse change in
or materially affecting the condition or obligations, financial or
otherwise, of the Company, or the revenues, earnings, business
affairs, management or business prospects of the Company, whether or
not arising in the ordinary course of business; (iv) any outbreak of
hostilities or other national or international calamity or crisis or
change in economic, political or financial market conditions if such
outbreak, calamity, crisis or change would, in the Representative's
reasonable judgment, have a material adverse effect on the Company,
the financial markets of the United States or the offering or delivery
of the Shares; (v) suspension of trading generally in securities on
the New York Stock Exchange, the American Stock Exchange, the NMS or
the over-the-counter market generally or limitation on prices (other
than limitations on hours or numbers of days of trading) for
securities or the promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority
which in the Representative's reasonable opinion materially and
adversely affects trading on any Exchange, the NMS or the
over-the-counter market; (vi) the decrease in either the Dow Jones
Industrial Exchange or the Nasdaq Composite Index of 15% or more from
their respective closings on the day immediately preceding the date
the Registration Statement becomes effective; (vii) the enactment,
publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental
authority which in the Representative's reasonable opinion materially
and adversely affects or will within the following twelve month period
materially and adversely affect the business or operations of the
Company; (viii) declaration of a banking moratorium by either federal
or state authorities; (ix) the taking of any action by any federal,
state or local government or agency in respect of its monetary or
fiscal affairs which in the Representative's reasonable opinion has a
material adverse effect on the securities markets in the United
States; (x) declaration of a moratorium in foreign exchange trading by
major international banks or other institutions; or (xi) trading in
any securities of the Company shall have been suspended or halted by
the NASD or the SEC.
(c) If the Representative elects to prevent this
Agreement from becoming effective or to terminate this Agreement as
provided in this Section 11, the Representative shall notify the
Company thereof promptly by telephone, telex, telegraph or facsimile,
confirmed by letter.
12. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in
its or their obligation to purchase Offered Shares or Optional Shares
hereunder, and if the Offered Shares or Optional Shares with respect
to which such default relates do not exceed the aggregate of 10
percent of the number of Offered Shares or Optional Shares, as the
case may be, that all Underwriters have agreed to purchase hereunder,
then such Offered Shares or Optional Shares to which the default
relates shall be purchased severally by the non-defaulting
Underwriters in proportion to their respective commitments hereunder.
33
(b) If such default relates to more than 10 percent of
the Offered Shares or Optional Shares, as the case may be, the
Representative may in its discretion arrange for another party or
parties (including a non-defaulting Underwriter) to purchase such
Offered Shares or Optional Shares to which such default relates, on
the terms contained herein. In the event that the Representative does
not arrange for the purchase of the Offered Shares or Optional Shares
to which a default relates as provided in this Section 12, this
Agreement may be terminated by the Representative or by the Company
without liability on the part of the several Underwriters (except as
provided in Section 9 hereof) or the Company (except as provided in
Sections 7 and 9 hereof), but nothing herein shall relieve a
defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default
hereunder.
(c) If the Offered Shares or Optional Shares to which the
default relates are to be purchased by the non- defaulting
Underwriters, or are to be purchased by another party or parties as
aforesaid, the Representative or the Company shall have the right to
postpone the Closing Date or any Option Closing Date, as the case may
be, for a reasonable period but not in any event exceeding seven days,
in order to effect whatever changes may thereby be made necessary in
the Registration Statement or the Prospectus or in any other documents
and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or supplement to the
Prospectus which in the opinion of counsel for the Underwriters may
thereby be made necessary. The terms "Underwriters" and "Underwriter"
as used in this Agreement shall include any party substituted under
this Section 12 with like effect as if it had originally been a party
to this Agreement with respect to such Offered Shares or Optional
Shares.
13. INFORMATION FURNISHED BY UNDERWRITERS. The statements
appearing in any Preliminary Prospectus, the Prospectus or the Registration
Statement (a) on the inside front cover page with respect to stabilization and
passive market-making, (b) in the section entitled "Underwriting," and (c) in
the section entitled "Legal Matters" with respect to the identity of counsel
for the Underwriters constitute the only information furnished in writing by or
on behalf of any Underwriter for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement referred to in subsection (b) of
Section 1 hereof and subsections (a) and (b) of Section 9 hereof.
14. NOTICES. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, telexed, telegrammed, telegraphed or
telecopied and confirmed to such Underwriter, c/o Cruttenden Roth Incorporated,
18301 Von Karman, Suite 100, Irvine, California 72715, Attention: President,
with a copy to O'Melveny & Myers LLP, 610 Newport Center Drive, Suite 1700,
Newport Beach, California 92660-6429, Attention: J. Jay Herron, Esq.; if sent
to the Company or the Selling Stockholders shall be mailed, delivered, telexed,
telegrammed, telegraphed or telecopied and confirmed to Q.E.P. Co., Inc., 990
South Rogers Circle, Boca Raton, Florida 33487 Attention: Lewis Gould, with a
copy to Berliner Zisser Walter & Gallegos, P.C., One Norwest Center, 1700
Lincoln Street, Suite 4700, Denver, Colorado 80203-4557, Attention: Robert W.
Walter, Esq.
34
15. PARTIES. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the several Underwriters, the Company, the Selling
Stockholders, and the controlling persons, directors, officers, employees,
agents and counsel referred to in Section 9 hereof, and their respective
successors, assigns, heirs and legal representatives, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained. The term "successors" and "assigns" shall not include any purchaser
of the Shares merely because of such purchase.
16. DEFINITION OF BUSINESS DAY. For purposes of this Agreement,
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
18. CONSTRUCTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
agreements made and performed entirely within such State.
If the foregoing correctly sets forth the understanding among the
Underwriters, the Company and the Selling Stockholders, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement by and among the Underwriters, the Company and
the Selling Stockholders.
Very truly yours,
Q.E.P. CO., INC.,
a Delaware corporation
By:
----------------------------------
Name:
Title:
The foregoing Underwriting Agreement Each of the Selling Stockholders
is hereby confirmed and accepted as
of the date first above written.
By:
----------------------------------
Lewis Gould, Attorney-in-fact
CRUTTENDEN ROTH INCORPORATED
By:
----------------------------------
Name:
Title:
Acting severally on behalf of itself and the
several Underwriters named in Schedule I hereto
35
SCHEDULE I
UNDERWRITERS
NUMBER OF SHARES
UNDERWRITER TO BE PURCHASED
----------- ----------------
Cruttenden Roth Incorporated . . . . . . . . . .
---------
Total . . . . . . . . . . . . . . . . . . . . 1,200,000
=========
SCHEDULE II
SELLING STOCKHOLDERS
Number of
Shares to be
Selling Stockholders Sold
-------------------- ------------
Lewis Gould . . . . . . . . . . . . . . 100,000
Susan Gould . . . . . . . . . . . . . . 100,000
-------
Total . . . . . . . . . . . . 200,000
=======
SCHEDULE III
PERSONS SUBJECT TO LOCKUP AGREEMENTS
SHARES SUBJECT TO
NAME LOCK-UP AGREEMENT
---- -----------------
Lewis Gould
Susan Gould
Leonard Gould
_______ Gould
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘S-1/A’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| Filed on: | | 8/5/96 | | | | | | | None on these Dates |
| | 6/1/96 | | 28 |
| | 5/31/96 | | 28 |
| List all Filings |
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