1,000,000 Shares
ACCELR8 TECHNOLOGY CORPORATION
Common Stock
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UNDERWRITING AGREEMENT
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, 1996
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Janco Partners, Inc.
As the Representative of the Several Underwriters
Named in Schedule I Attached Hereto
5251 DTC Parkway, Suite 1010
Englewood, Colorado 80111
Dear Sirs:
Accelr8 Technology Corporation, a Colorado corporation (the "Company"),
proposes to issue and sell an aggregate of 1,000,000 shares of its Common Stock,
no par value (the "Firm Shares"), to Janco Partners, Inc. (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 Firm Shares shall be offered to the public at an offering price
of ________ per Firm Share (the "Offering Price"). The Company also proposes to
sell to you individually, and not in your capacity as representative of the
several Underwriters, warrants (the "Representative's Warrants") to purchase up
to 34,500 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.
In addition, the several Underwriters, in order to cover over-allotments in
the sale of the Firm Shares, may purchase from certain shareholders of the
Company (the "Selling Shareholders") 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 150,000 additional Common Shares (the "Optional Shares"),
upon the terms and conditions set forth in Section 5 hereof. The Firm Shares and
the Optional Shares are hereinafter collectively referred to as the "Shares."
The Company and the Selling Shareholders, 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 SB-2 (SEC File No. 333-______) 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, to the Company's knowledge, 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 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
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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 Colorado, 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. The Company
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) The Company has all necessary corporate power and authority to
issue and deliver the Common Shares to be issued and sold by it to the
Representative under the terms of this Agreement.
(e) This Agreement and the Representative's Warrant Agreement have
been duly authorized, executed and delivered by the Company and constitute
its valid and binding obligation, enforceable against the Company in
accordance with their respective 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.
(f) This Agreement conforms to the description thereof in the
Prospectus.
(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, (A) conflict with any
terms or provisions of the Articles 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 known 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) result in a breach, termination or lapse of
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the power and authority of the Company to own or lease and operate its
properties and conduct its business as described in the Prospectus, the
effect of which would have a material adverse effect on the business or
properties of the Company.
(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 (A) the outstanding options
that have been granted to employees, directors and others to purchase
____________ Common Shares (the "Employee Options"), (B) the outstanding
warrants to purchase ____________ Common Shares (the "Warrants") and (C)
the Over-allotment Option (as hereinafter defined).
(i) The authorized capital stock of the Company, including, without
limitation, the outstanding Common Shares and the Shares 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 Common Shares have been duly authorized and are
validly issued, fully paid and non-assessable. The Employee Options and the
Warrants have been duly authorized and validly issued and are valid and
binding obligations of the Company enforceable against it 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 Common Shares 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 outstanding Common Shares, Employee Options,
or Warrants 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 Common Shares for issuance pursuant to the Employee Options and
the Warrants. The holders of the outstanding Common Shares are not, and
will not be, subject to personal liability solely by reason of being such
holders, and the holders of the Common Shares issuable pursuant to the
Employee Options, and the Warrants will not be subject to personal
liability solely by reason of being such holders. The offers and sales of
the outstanding Common Shares, the Employee Options and the Warrants were,
and the issuance of the Common Shares pursuant to the Employee Options and
the Warrants will be, made in conformity with applicable registration
requirements or exemptions therefrom under federal and applicable state
securities laws.
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(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
Colorado law. Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives any
security holder of the Company any rights for or relating to the
registration of any Common Shares 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 or the
Representative's Warrant Agreement, except (A) such order as may be
required for the registration of the Shares under the Act, which order has
been obtained, (B) such consent, approval or authorization as may be
required for compliance with the applicable state securities or Blue Sky
laws, or (C) such consent approval or authorization as may be required
under the By-laws, rules and other pronouncements of the National
Association of Securities Dealers, Inc. (the "NASD") and the Nasdaq
National Market (the "NMS"). Upon the effectiveness of the Registration
Statement, the Common Shares will be registered pursuant to Section 12(b)
of the Securities Exchange Act of 1934 (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 Common Shares
under Section 12(b) of the Exchange Act or the inclusion of the Common
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, 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
5
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 and the Selling Shareholders 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,
condition (financial or otherwise), results of operations, stockholders'
equity, business or prospects of the Company.
(r) Deloitte & Touche, 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 Articles 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
6
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 subsection (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 might affect the issuance or validity of any of the Shares
or the validity of any of the outstanding Common Shares, or that, 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;
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), processes and formulations used in or proposed to be
used in the conduct of its business as described in the Prospectus
(collectively, the "Intellectual Property") that, 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) To the best of the Company's knowledge after due investigation and
inquiry, the Company has obtained all permits, licenses and other
authorizations, if any, that are required under all environmental laws,
including but not limited to the Federal Water Pollution Control Act (33
U.S.C. ss.1251 et seq.), Resource Conservation & Recovery Act (42 U.S.C.
ss.6901 et seq.), Safe Drinking Water Act (21 U.S.C. ss.349, 42 U.S.C.
ss.ss.201, 300f), Toxic Substances Control Act (15 U.S.C. ss.2601 et seq.),
Clean Air Act (42 U.S.C. ss. 7401 et seq.), Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss.9601 et seq.), other
appropriate laws of jurisdictions in which the Company's products have been
7
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 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, except where the failure to so comply would not have a
material adverse effect on the Company.
(w) There are no present or, to the Company's knowledge, 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 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, which
claim, action, demand, suit, proceeding, hearing, notice of violation,
study, investigation, remediation, or clean up would have a material
adverse effect on the Company.
(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. 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. 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 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. The Company has no
knowledge 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,
8
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 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 plans and arrangements described in the
Prospectus, 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
9
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) To the Company's knowledge, no labor dispute exists with the
employees of the Company and 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-B.
(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.
(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.
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2. Representations and Warranties of the Selling Shareholders. Each Selling
Shareholder severally represents and warrants to, and agrees with, the Company
and the Underwriters that:
(a) As of the Option Closing Date (as defined in paragraph 5(b)
hereof), such Selling Shareholder will have valid marketable title to the
Optional Shares proposed to be sold by such Selling Shareholder hereunder
and full right, power and authority to sell, assign, transfer and deliver
such Optional 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 Optional 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 Shareholder 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 or otherwise, in stabilization
or manipulation of the price of the Common Stock to facilitate the sale or
resale of the Firm Shares, the Optional Shares or other shares of Common
Stock.
(c) Such Selling Shareholder has executed and delivered a Selling
Shareholders' Power of Attorney ("Power of Attorney") between the Selling
Shareholder and Thomas V. Geimer (the "Agent"), naming the Agent as such
Selling Shareholder's attorney-in-fact and, by the Agent's execution of
this Agreement, such Agent hereby represents and warrants that he has been
duly appointed as Attorney-in-Fact by each Selling Shareholder pursuant to
the Power of Attorney for the purpose of entering into and carrying out
this Agreement. The Power of Attorney has been duly executed by such
Selling Shareholder and a copy thereof has been delivered to you.
(d) Such Selling Shareholder 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 Optional Shares to be
sold hereunder by such Selling Shareholder, for the purpose of further
delivery pursuant to this Agreement. Such Selling Shareholder agrees that
the Optional Shares to be sold by such Selling Shareholder on deposit with
the Custodian are subject to the interests of the Company, the Underwriters
and the other Selling Shareholders, that the arrangements made for such
deposit are to that extent irrevocable, and that the obligations of such
Selling Shareholder hereunder shall not be terminated except as provided in
this Agreement or in the Custody Agreement. The Agent has been duly
authorized by such Selling Shareholder to execute and deliver this
Agreement and the Custodian has been authorized to receive and acknowledge
receipt of the proceeds of sale of the Firm Shares to be sold by such
Selling Shareholder against delivery thereof and otherwise act on behalf of
such Selling Shareholder.
(e) Each Preliminary Prospectus, insofar as it has related to such
Selling Shareholder and, to the knowledge of such Selling Shareholder in
all other respects, 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
11
Registration Statement became effective, and at all times subsequent
thereto, up to the Option Closing Date, (A) such parts of the Registration
Statement and the Prospectus and any amendments or supplements thereto as
relate to such Selling Shareholder, and the Registration Statement and the
Prospectus and any amendments or supplements thereto, to the knowledge of
such Selling Shareholder, in all other respects, 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 (B) neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, as it relates to such Selling Shareholder, and, to the knowledge
of such Selling Shareholder in all other respects, 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.
(f) Such Selling Shareholder will not sell, contract to sell or
otherwise dispose of any Common Stock for a period of 180 days after this
Agreement becomes effective without the prior written consent of the
Company and the Representative.
(g) Except as disclosed in the Prospectus, such Selling Shareholder 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 Firm Shares. On the basis of the representations,
warranties, covenants and agreements herein contained, and subject to the terms
and conditions herein set forth, the Company shall sell the Firm 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, on a
firm commitment basis, at the Offering Price less the Underwriting Discount, the
respective Firm Shares set forth opposite their names on Schedule I hereto. In
making this 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 Firm Shares specified with
respect to that Underwriter in Schedule I hereto. The Underwriters shall offer
the Firm Shares to the public as set forth in the Prospectus.
4. Payment and Delivery. Payment for the Firm Shares shall be made to the
Company by certified or official bank check payable to the order of the Company
in Clearing House funds (next day funds), at the offices of the Representative,
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 Firm Shares to the Representative at
the offices of the Representative for the respective accounts of the
Underwriters. Such payments and delivery will be made at 10:00 A.M., Denver
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 Firm 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.
12
5. Option to Purchase Optional Shares.
(a) For the purposes of covering any over-allotments in connection
with the distribution and sale of the Firm 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 Selling
Shareholders to purchase all or any part of the Optional Shares from the
Selling Shareholders (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 Agent 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 Firm Shares. If such notice is given prior to the Closing Date, the
date set forth therein for such delivery and payment shall not be earlier
than three full business days after the date of such notice 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 Firm Shares opposite the
name of such Underwriter in Schedule I hereto bears to the total number of
all Firm 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.
13
(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
Clearing House funds (next day funds), at the office of the Representative
or such other location as shall be agreed upon by the Agent and the
Representative, or in immediately available funds wired to such accounts as
the Agent 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 Selling Shareholders), against delivery of the Optional
Shares to the Representative at the offices of the Representative 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 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 Firm
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
14
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, 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.
15
(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 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 three 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-C,
10-KSB and 10-QSB (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.
16
(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 180
days 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 120
days after the Effective Date, without the prior written consent of the
Representative, except for the sale of the 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.
(p) On or prior to the Closing Date, the Company will sell to the
Representative for a total purchase price of $10.00, a Representative's
Warrant entitling the Representative or its assigns to purchase 34,500
shares of Common Stock at a price equal to 120% of the Offering Price, with
the terms of the Representative's Warrant, including exercise period,
anti-dilution provisions, exercise price, exercise provisions,
transferability, and registration rights, to be in the form filed as an
exhibit to the Registration Statement.
17
(q) For a period of three years from the date of the Prospectus, the
Company will not enter into an agreement for any public or private offering
for cash (other than to employees) of any debt or equity securities of the
Company to or through any person, firm or corporation other than the
Representative unless and until the Company shall have first negotiated for
the sale of the Company's securities with or offered to sell its securities
to the Representative. The Company shall notify the Representative in
writing of the Company's intention to offer its securities in such an
offering and the terms (including the price to the underwriter or other
method of determining the underwriting discount or fee) and conditions of
the proposed offering. The Representative shall then have thirty days from
the date it receives such written notice from the Company to decide whether
it wishes to participate as manager, co-manager, underwriter or otherwise.
If the Representative determines that it does not wish to participate in
the proposed offering, then it shall so notify the Company of its intention
in writing within such thirty day period. The Company may within a period
of sixty days from the date of receipt of such notice then enter into a
letter of intent for the public sale or, as appropriate, a contract for the
private sale, of any of its securities through any other person, firm or
corporation on the same general terms and conditions as those which were
tendered to the Representative. Provided, however, if a definitive
underwriting or placement agency agreement is not executed by the Company
with such third party on substantially the terms tendered to the
Representative within 180 days thereafter, all the rights of the
Representative hereunder shall be reinstated. The Company shall not be
required to consult with the underwriter concerning any borrowings from
banks and institutional lenders or concerning financing under any equipment
leasing or similar arrangements.
(r) For a period of three years from the Effective Date, the Company
shall permit the Representative to designate a non-voting observer to
attend meetings of the Board of Directors. The designee, if any, and the
Representative will receive notice of each meeting of the Board of
Directors in accordance with Colorado law, of which no less than four
in-person meetings will be held each year. The designee may attend all such
meetings at the Representative's expense. To the extent permitted by law,
the Representative and its designee shall be indemnified for the actions of
such designee as an observer to the Board of Directors and in the event the
Company maintains a liability insurance policy affording coverage for the
acts of its officers and/or directors, to the extent permitted under such
policy, each of the Representative and its designee shall be an insured
under such policy.
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
18
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 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; and (xiv) 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 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.
(b) The Company and the Selling Shareholders shall pay to the
Representative, individually and not in its capacity as a Representative, a
non-accountable expense allowance of 1% of the aggregate Offering Price of
the Firm Shares and the Optional Shares, but only upon payment therefor by
the several Underwriters. If the sale of the Firm 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 Firm Shares. If this agreement is terminated or if the
sale of the Firm 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 Firm Shares, up to a maximum of
$50,000. 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 $35,000 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 Firm Shares is not consummated as provided in the preceding
sentences, as the case may be. You agree that any portion of such $35,000
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.
19
(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 as may be made 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 Firm Shares that it has agreed to
purchase hereunder on the 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 set forth herein, to the performance by the Company of
its 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 paragraph 6(a) 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 paragraph
5(f) 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, Berliner Zisser Walter & Gallegos, P.C., 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.
20
(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 paragraph 6(l) 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 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 paragraph 6(f) hereof.
(f) You shall have received on the Closing Date and on the Option
Closing Date, if any, the following opinions of Schlueter & Associates,
counsel for the Company and the Selling Shareholders, 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 to own, lease and
operate its properties and to conduct its business as described in 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 to such counsel's knowledge the Company does not own or
control, directly or indirectly, any corporation, association or other
entity.
(iii) 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 have not been issued in violation of any
preemptive right, or co-sale right, registration right, right of first
refusal or other similar right;
(iv) 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 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, any agreement to which the
Company is a party;
21
(v) 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;
(vi) 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.
(vii) This Agreement and the Representative's Warrant Agreement,
when executed and delivered, shall have been duly authorized by all
necessary corporate action on the part of the Company and have been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, are the valid and
binding agreements of the Company, 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;
(viii) The Registration Statement has become effective under the
Act, and, to such counsel's knowledge, 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;
(ix) 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;
(x) 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 are correct in all material
respects, and the form of certificate evidencing the Common Stock
complies with Colorado law;
(xi) The descriptions in the Registration Statement and the
Prospectus of the articles of incorporation and bylaws of the Company
and of Colorado corporate law, if any, the Act, and the Regulations
are accurate and fairly present the information required to be
presented by the Act or the Regulations;
22
(xii) To such counsel's knowledge, 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;
(xiii) The performance of this Agreement and the Representative's
Warrant Agreement and the consummation of the transactions
contemplated will not result in any violation of the Company's charter
or bylaws, or, to such counsel's knowledge, result in a material
breach or violation of any of the terms or provisions of, or
constitute a material default under, any material indenture, mortgage,
deed of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, or any material lease, contract or
other agreement or instrument which has been filed as an exhibit to
the Registration Statement, or, to such counsel's knowledge, any
applicable statute, rule or regulation known to such counsel or, to
such counsel's knowledge, 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;
(xiv) 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 National
Association of Securities Dealers, Inc., 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;
(xv) To such counsel's knowledge, 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;
(xvi) To such counsel's knowledge, 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;
(xvii) 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;
(xviii) Each Selling Shareholder has duly authorized, executed
and delivered a Power of Attorney and Custody Agreement which
constitute valid and legally binding agreements of such Selling
Shareholder 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;
(xix) This Agreement has been duly and validly executed and
delivered by or on behalf of each Selling Shareholder and constitutes
the valid and legally binding agreement of each Selling Shareholder in
23
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;
(xx) Based solely upon representations which such counsel has
obtained from the Selling Shareholders (as to which nothing has come
to the attention of such counsel which has caused such counsel to
believe such representations are untrue) and the examination of the
certificates representing the Shares and, assuming that the
Underwriters are good faith purchasers of the Shares for value without
notice, the Underwriters will be the owners of such Shares, free and
clear of any claims, liens, encumbrances and security interests
whatsoever;
(xxi) To the best knowledge of such counsel, all authorizations,
orders and consents necessary for the execution and delivery by each
Selling Shareholder of this Agreement, the Power of Attorney and the
Custody Agreement have been duly and validly given, and each Selling
Shareholder 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 Shareholder hereunder; and
(xxii) 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 Shareholder of any of the terms or provisions of, or
constitute a default by such Selling Shareholder under, any indenture,
mortgage, trust (constructive or other), loan agreement or instrument
known to such counsel to which such Selling Shareholder is a party or
by which such Selling Shareholder 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
Shareholder.
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 the
Representative, 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.
24
In giving their opinion, Schlueter & Associates may rely as to matters of
law, other than the laws of the State of Colorado 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 Schlueter & Associates 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 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 Treasurer 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
25
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
Deloitte & Touche, L.L.P. 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 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 in net current assets, total assets or stockholders' equity
as compared with the amounts shown in the July 31, 1996 audited
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 August 1,
1996 to a specified date not more than five business days prior to the
date of such letter, there has been any material decrease 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, setting forth the amount of such change or
decrease; 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
26
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.
(a) The Company shall indemnify and hold harmless each Underwriter,
and each person, if any, who controls each Underwriter within the meaning
of the Act or the Exchange Act, and each of their officers, directors,
partners, employees, agents and counsel and each Selling Shareholder
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 contained in this Agreement; provided, however, that the foregoing
indemnity shall not apply in respect of and to the extent of any statement
27
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 may otherwise have.
(b) The Selling Shareholders shall indemnify and hold harmless the
Company, each Underwriter, and each person, if any, who controls the
Company and each Underwriter within the meaning of the Act or the Exchange
Act, and all officers, directors, employers, agents and counsel of the
Company and each Underwriter against any and all loss, liability, claim,
damage and expense whatsoever, including, but not limited to, attorneys'
fees and 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 any untrue statements or
alleged untrue statements of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
application or other document (in this Section 9 collectively called
"application") executed by the Selling Shareholders and based upon written
information furnished by or on behalf of the Selling Shareholders 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, or 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; provided,
however, that the foregoing indemnity shall not apply in respect of any
statement or omission made in reliance upon and in conformity with written
information furnished to the Selling Shareholders or any Underwriter
through the Representative expressly for use in any Preliminary Prospectus,
the Registration Statement or Prospectus, or any amendment or supplement
thereof. This indemnity agreement will be in addition to any liability the
Selling Shareholders may otherwise have.
(c) 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 Shareholder to the same extent as the foregoing indemnities from
the Company and the Selling Shareholders 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 Underwriter expressly for use in any
28
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.
(d) 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 three 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 to 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 (d) 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.
(e) If the indemnification provided for in this Section 9 is
unavailable to or is insufficient to hold harmless an indemnified party
under subsections (a), (b) and (c) of this Section 9, then each
indemnifying party shall contribute to the amount paid or 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), (b) or (c) or this
29
Section 9 in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Shareholders 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 Shareholders 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 Shareholders
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 Shareholders
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 Shareholders
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 and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this section (e) 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 (e) 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 (e) 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 (e)
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 (e) of this Section 9 to
contribute are several in proportion to their respective underwriting
obligations and not joint.
The obligations of the Company under this Section 9 shall be in
addition to any liability which the Company may otherwise have, and shall
extend, upon the same terms and conditions to each officer, director,
employee, agent or counsel of each Underwriter and to each person, if any,
30
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 and the Company,
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 the following have occurred: (i) since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or
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
31
course of business; (ii) 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; (iii) suspension of trading generally
in securities on the New York Stock Exchange, the American Stock Exchange,
the NMS or the over-the-counter market 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
or the over-the-counter market; (iv) the decrease in either the Dow Jones
Industrial Average 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; (v) 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; (vi) declaration of a
banking moratorium by either federal or state authorities; (vii) 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; (viii) declaration of a moratorium in foreign
exchange trading by major international banks or other institutions; (ix)
trading in any securities of the Company shall have been suspended or
halted by the NASD or the SEC; (x) the Company has failed or refused, at or
prior to the Closing Date, to perform any material agreement on its part
hereunder; or (xi) any other condition to the Underwriters hereunder is not
fulfilled.
(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 Firm Shares or Optional Shares hereunder, and if the
Firm Shares or Optional Shares with respect to which such default relates
do not exceed the aggregate of 10 percent of the number of Firm Shares or
Optional Shares, as the case may be, that all Underwriters have agreed to
purchase hereunder, then such Firm 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.
(b) If such default relates to more than 10 percent of the Firm 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 Firm 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 Firm Shares
32
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 Firm 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 Firm 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), (b) and (c) of Section 10 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 Janco Partners, Inc., 5251 DTC Parkway, Suite
1010, Englewood, Colorado 80111, with a copy to Berliner Zisser Walter &
Gallegos, P.C., 1700 Lincoln Street, Suite 4700, Denver, Colorado 80203,
Attention: David C. Roos; and if sent to the Company or the Agent shall be
mailed, delivered, telexed, telegrammed, telegraphed or telecopied and confirmed
to Accelr8 Technology Corporation, 303 East 17th Avenue, Suite 108, Denver,
Colorado 80203, Attention: Thomas V. Geimer, with a copy to Schlueter &
Associates, 1050 17th Street, Suite 1700, Denver, Colorado 80202, Attention:
Henry F. Schlueter.
15. Parties. This Agreement shall inure solely to the benefit of, and shall
be binding upon, the several Underwriters, the Company, 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.
33
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 Colorado applicable to agreements made
and performed entirely within such State.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
34
If the foregoing correctly sets forth the understanding among the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement by and
among the Underwriters and the Company.
Very truly yours,
ACCELR8 TECHNOLOGY CORPORATION
By: /S/ THOMAS V. GEIMER
---------------------------------
Thomas V. Geimer, President
The foregoing Underwriting Agreement Each of the Selling Shareholders
is hereby confirmed and accepted as
of the date first above written.
By:
----------------------------------
Attorney-in-fact
JANCO PARTNERS, INC.
By: /S/ JAN E. HELEN
-----------------------------
Jan E. Helen, President
Acting on behalf of itself and
the several Underwriters named in
Schedule I hereto
35
SCHEDULE I
Underwriters
Number of Shares
Underwriter To Be Purchased
----------- ---------------
Janco Partners, Inc. . . . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . 1,000,000
=========
SCHEDULE II
Persons Subject to Lockup Agreements
Shares Subject to
Name Lock-up Agreement
---- -----------------