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EXHIBIT 1.1
1,200,000 UNITS
CONSISTING OF
1,200,000 SHARES OF COMMON STOCK
AND
1,200,000 WARRANTS
MULTI-LINK TELECOMMUNICATIONS, INC.
UNDERWRITING AGREEMENT
________, 1999
Schneider Securities, Inc.
1120 Lincoln Street
Suite 900
Denver, Colorado 80203
Dear Sirs:
Multi-Link Telecommunications, Inc., a Colorado corporation (the
"Company") hereby confirms its agreement with you (who are sometimes
hereinafter referred to as the "Representative") and with the other members of
the underwriting group (the "Underwriters") named on Schedule 1 hereto as
follows:
1. Introductory. Subject to the terms and conditions contained herein,
the Company proposes to issue and sell to the Underwriters 1,200,000 Units (the
"Units"), comprised of 1,200,000 shares of common stock (the "Common Stock")
and 1,200,000 redeemable warrants (the "Warrants"). The Common Stock and
Warrants shall be immediately separately transferable and the Units shall not
be listed for trading on the Nasdaq SmallCap Market. For the purpose of this
Agreement, references hereinafter to Common Stock and Warrants shall be deemed
to include, where appropriate, the Units. In addition, solely for the purpose
of covering over-allotments, the Company grants to the Representative the
option to purchase up to an additional 180,000 Units (the "Additional
Securities"), which option to purchase shall be exercisable, in whole or in
part, from time to time during the forty-five (45) day period commencing on the
date on which the Registration Statement (as hereinafter defined) is initially
declared effective (the "Effective Date") by the Securities and Exchange
Commission (the "Commission"). Unless otherwise noted, the Common Stock,
together with the additional 180,000 shares of Common Stock issuable on
exercise of the over-allotment option, is referred to hereinafter as the
"Common Stock" and the Warrants and the 180,000 Warrants issuable on exercise
of the over-allotment option are referred to hereinafter as the "Warrants".
Two Warrants will entitle the holder to purchase one share of Common
Stock (a "Warrant Share") at a price of $9.00 during the thirty-six (36) month
exercise period of the Warrants, subject to the Company's right
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of redemption. The Warrants may be redeemed by the Company commencing one year
from the Effective Date of the Registration Statement upon at least 30 days
prior written notice, in whole but not in part, at a price of $.05 per Warrant
provided the closing bid price for the Company's Common Stock is at least 125%
of the exercise price of the Warrant during each day of the twenty (20) trading
day period ending five days preceding the date of the written notice. During
the one year period commencing on the Effective Date, the Company shall not
lower the exercise price of the Warrants without the Representative's prior
consent, which will not be unreasonably withheld. The terms and provisions of
the Warrants shall be governed by a warrant agreement between the Company and
its transfer agent (the "Warrant Agreement"), which Warrant Agreement will
contain, among other provisions, anti-dilution protection for warrant holders
on terms acceptable to the Representative. The Common Stock, Warrants and
Additional Securities are more fully described in the Prospectus referred to
below. All references to the Company below shall be deemed to include, where
appropriate, the Company's subsidiaries, if any.
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters that:
a. The Company has filed with the Commission a registration
statement, and may have filed one or more amendments thereto, on Form
SB-2 (Registration No. 333-72889), including in such registration
statement and each such amendment a facing sheet, the information
called for by Part I, audited consolidated financial statements for
the past two fiscal years or such other period as may be appropriate,
the information called for by Part II, the undertakings to deliver
certificates, file reports and file post-effective amendments, the
required signatures, consents of experts, exhibits, a related
preliminary prospectus (a "Preliminary Prospectus") and any other
information or documents which are required for the registration of
the Units, Common Stock and Warrants, the Warrant Shares, the purchase
options referred to in Section 2(n) (the "Representative's Options"),
and the securities referred to in Section 2(n) underlying the
Representative's Options (the "Representative's Option Securities"),
under the Securities Act of 1933, as amended (the "Act"). As used in
this Agreement, the term "Registration Statement" means such
registration statement, including incorporated documents, all exhibits
and consolidated financial statements and schedules thereto, as
amended, when it becomes effective, and shall include the information
with respect to the Units, the Common Stock, the Warrants, the Warrant
Shares, the Representative's Options, and the Representative's Option
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A
of the General Rules and Regulations promulgated under the Act (the
"Regulations"), which information is deemed to be included therein
when it becomes effective as provided by Rule 430A; the term
"Preliminary Prospectus" means each prospectus included in the
Registration Statement, or any amendments thereto, before it becomes
effective under the Act and any prospectus filed by the Company with
the consent of the Representative pursuant to Rule 424(a) of the
Regulations; and the term
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"Prospectus" means the final prospectus included as part of the
Registration Statement, except that if the prospectus relating to the
securities covered by the Registration Statement in the form first
filed on behalf of the Company with the Commission pursuant to Rule
424(b) of the Regulations shall differ from such final prospectus, the
term "Prospectus" shall mean the prospectus as filed pursuant to Rule
424(b) from and after the date on which it shall have first been used.
b. When the Registration Statement becomes effective, and at
all times subsequent thereto, to and including the Closing Date (as
defined in Section 3) and each Additional Closing Date (as defined in
Section 3), and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the
Representative or any dealer, and during such longer period until any
post-effective amendment thereto shall become effective, the
Registration Statement (and any post-effective amendment thereto) and
the Prospectus (as amended or as supplemented if the Company shall
have filed with the Commission any amendment or supplement to the
Registration Statement or the Prospectus) will contain all statements
which are required to be stated therein in accordance with the Act and
the Regulations, will comply with the Act and the Regulations, and
will not 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, and no event will have
occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus which has
not then been set forth in such an amendment or supplement; and no
Preliminary Prospectus, as of the date filed with the Commission,
included any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading; except that no representation
or warranty is made in this Section 2(b) with respect to statements or
omissions made in reliance upon and in conformity with written
information furnished to the Company as stated in Section 8(b) with
respect to the Underwriters by or on behalf of the Underwriters
expressly for inclusion in any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or
supplement thereto.
c. Neither the Commission nor the "blue sky" or securities
authority of any jurisdiction have issued an order (a "Stop Order")
suspending the effectiveness of the Registration Statement, preventing
or suspending the use of any Preliminary Prospectus, the Prospectus,
the Registration Statement, or any amendment or supplement thereto,
refusing to permit the effectiveness of the Registration Statement, or
suspending the registration or qualification of the Units, the Common
Stock, the Warrants, the Warrant Shares, the Representative's Options,
or the Representative's Option Securities, nor has any of such
authorities instituted or threatened to institute any proceedings with
respect to a Stop Order.
d. Any contract, agreement, instrument, lease, or license
required to be described in the Registration Statement or the
Prospectus has been properly described therein. Any contract,
agreement, instrument, lease, or license required to be filed as an
exhibit to the Registration Statement has been filed
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with the Commission as an exhibit to or has been incorporated as an
exhibit by reference into the Registration Statement.
e. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Colorado, with full power and authority, and all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits
of and from, and declarations and filings with, all federal, state,
local, and other governmental authorities and all courts and other
tribunals, to own, lease, license, and use its properties and assets
and to carry on the business in the manner described in the
Prospectus. The Company is duly qualified to do business and is in
good standing in every jurisdiction in which its ownership, leasing,
licensing, or use of property and assets or the conduct of its
business makes such qualifications necessary. The Company has no
subsidiaries except as disclosed in the Prospectus.
f. The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, of which 1,691,542 shares of Common
Stock are issued and outstanding, 165,000 shares of Common Stock are
reserved for issuance upon the exercise of currently outstanding
options, 135,000 shares of Common Stock are reserved for issuance upon
the exercise of the remaining options authorized under the Company's
option plan and 283,500 shares of Common Stock are reserved for
issuance upon the exercise of outstanding warrants; and 5,000,000
shares of Preferred Stock, none of which are issued or outstanding. Of
the outstanding shares of Common Stock, 200,000 shares are subject to
a custody agreement, release under which will occur upon the earlier
of (i) the Company achieving designated financial performance criteria
as set forth in the custody agreement, or (ii) ________, 2006 (seven
years from the date of the Prospectus), all as more fully set forth in
a custody agreement (the "Custody Agreement") by and among Shawn B.
Stickle, Nigel V. Alexander, American Securities Transfer & Trust,
Inc., the Company and the Representative. Each outstanding share of
Common Stock is validly authorized, validly issued, fully paid, and
nonassessable, without any personal liability attaching to the
ownership thereof, and has not been issued and is not owned or held in
violation of any preemptive rights of stockholders. There is no
commitment, plan, or arrangement to issue, and no outstanding option,
warrant, or other right calling for the issuance of, any share of
capital stock of the Company or any security or other instrument which
by its terms is convertible into, exercisable for, or exchangeable for
capital stock of the Company, except as set forth above, and as may be
properly described in the Prospectus.
g. The consolidated financial statements of the Company
included in the Registration Statement and the Prospectus fairly
present with respect to the Company the consolidated financial
position, the results of operations, and the other information
purported to be shown therein at the respective dates and for the
respective periods to which they apply. Such consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles, except to
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the extent that certain footnote disclosures regarding any stub period
may have been omitted in accordance with the applicable rules of the
Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), consistently applied throughout the periods involved,
are correct and complete, and are in accordance with the books and
records of the Company. The accountants whose reports on the audited
consolidated financial statements are filed with the Commission as a
part of the Registration Statement are, and during the periods covered
by their reports included in the Registration Statement and the
Prospectus were, independent certified public accountants with respect
to the Company within the meaning of the Act and the Regulations. No
other financial statements are required by Form SB-2 or otherwise to
be included in the Registration Statement or the Prospectus. There has
at no time been a material adverse change in the consolidated
financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of the Company from the
latest information set forth in the Registration Statement or the
Prospectus, except as may be properly described in the Prospectus.
h. There is no litigation, arbitration, claim, governmental
or other proceeding (formal or informal), or investigation pending,
or, to the knowledge of the Company, threatened, or in prospect with
respect to the Company or any of its operations, businesses,
properties, or assets, except as may be properly described in the
Prospectus or such as individually or in the aggregate do not now have
and will not in the future have a material adverse effect upon the
operations, business, properties, or assets of the Company. The
Company is not in violation of, or in default with respect to, any
law, rule, regulation, order, judgment, or decree except as may be
properly described in the Prospectus or such as in the aggregate do
not now have and will not in the future have a material adverse effect
upon the operations, business, properties, or assets of the Company;
nor is the Company required to take any action in order to avoid any
such violation or default.
i. The Company has good and marketable title in fee simple
absolute to all real properties and good title to all other properties
and assets which the Prospectus indicates are owned by it, free and
clear of all liens, security interests, pledges, charges,
encumbrances, and mortgages except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in
the future have a material adverse effect upon the operations,
business, properties, or assets of the Company. No real property
owned, leased, licensed, or used by the Company lies in an area which
is, or to the knowledge of the Company will be, subject to zoning,
use, or building code restrictions which would prohibit, and no state
of facts relating to the actions or inaction of another person or
entity or his or its ownership, leasing, licensing, or use of any real
or personal property exists or will exist which would prevent, the
continued effective ownership, leasing, licensing, or use of such real
property in the business of the Company as presently conducted or as
the Prospectus indicates it contemplates conducting, except as may be
properly described in the Prospectus or such as in the aggregate do
not now have and will not
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in the future have a material adverse effect upon the operations,
business, properties, or assets of the Company.
j. Neither the Company nor any other party is now or is
expected by the Company to be in violation or breach of, or in default
with respect to complying with, any material provision of any
contract, agreement, instrument, lease, license, arrangement, or
understanding which is material to the Company, and each such
contract, agreement, instrument, lease, license, arrangement, and
understanding is in full force and is the legal, valid, and binding
obligation of the parties thereto and is enforceable as to them in
accordance with its terms. The Company enjoys peaceful and undisturbed
possession under all leases and licenses under which it is operating.
The Company is not a party to or bound by any contract, agreement,
instrument, lease, license, arrangement, or understanding, or subject
to any charter or other restriction, which has had or may in the
future have a material adverse effect on the financial condition,
results of operations, business, properties, assets, liabilities, or
future prospects of the Company. The Company is not in violation or
breach of, or in default with respect to, any term of its Articles of
Incorporation (or other charter document) or by-laws.
k. All patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, franchises,
technology, know-how and other intangible properties and assets (all
of the foregoing being herein called "Intangibles") that the Company
owns or has pending, or under which it is licensed, are in good
standing and uncontested. Except as otherwise disclosed in the
Registration Statement, the Intangibles are owned by the Company, free
and clear of all liens, security interests, pledges, and encumbrances.
The Company has filed an application with the United States Patent and
Trademark Office to register "Multi-Link" as a registered servicemark
used by the Company to identify its services. There is no right under
any Intangible necessary to the business of the Company as presently
conducted or as the Prospectus indicates it contemplates conducting
(except as may be so designated in the Prospectus). The Company has
not infringed, is not infringing, and has not received notice of
infringement with respect to asserted Intangibles of others. To the
knowledge of the Company, there is no infringement by others of
Intangibles of the Company. To the knowledge of the Company, there is
no Intangible of others which has had or may in the future have a
materially adverse effect on the financial condition, results of
operations, business, properties, assets, liabilities, or future
prospects of the Company.
l. 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: used any corporate funds for
unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended
by the International Anti-Bribery Act of 1998; or made any
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bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment. The Company has not accepted any material advertising
allowances or marketing allowances from suppliers to the Company and,
to the extent any advertising allowance has been accepted, the Company
has provided proper documentation to the supplier with respect to
advertising as to which the advertising allowance has been granted.
m. The Company has all requisite power and authority to
execute and deliver, and to perform thereunder each of this Agreement,
the Warrants, the Representative's Options, the Warrant Exercise Fee
Agreement described in Section 5(ff) (the "Warrant Exercise Fee
Agreement") and the Custody Agreement. All necessary corporate
proceedings of the Company have been duly taken to authorize the
execution and delivery, and performance thereunder by the Company of
this Agreement, the Warrants, the Representative's Options, the
Warrant Exercise Fee Agreement and the Custody Agreement. This
Agreement has been duly authorized, executed, and delivered by the
Company, is a legal, valid, and binding obligation of the Company, and
is enforceable as to the Company in accordance with its terms. Each of
the Warrants, the Representative's Options, the Warrant Exercise Fee
Agreement and the Custody Agreement has been duly authorized by the
Company and, when executed and delivered by the Company, will each be
a legal, valid, and binding obligation of the Company, and will be
enforceable against the Company in accordance with its respective
terms. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any
federal, state, local, or other governmental authority or any court or
other tribunal is required by the Company for the execution and
delivery, or performance thereunder by the Company of this Agreement,
the Warrants or the Representative's Options except filings under the
Act which have been or will be made before the Closing Date and such
consents consisting only of consents under "blue sky" or securities
laws which are required in connection with the transactions
contemplated by this Agreement and which have been obtained at or
prior to the date of this Agreement. No consent of any party to any
contract, agreement, instrument, lease, license, arrangement, or
understanding to which the Company is a party, or to which any of its
properties or assets are subject, is required for the execution or
delivery, or performance thereunder of this Agreement, the Warrants,
the Representative's Options, the Warrant Exercise Fee Agreement or
the Custody Agreement; and the execution and delivery, and performance
thereunder of this Agreement, the Warrants, the Representative's
Options, the Warrant Exercise Fee Agreement and the Custody Agreement
will not violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under any such contract,
agreement, instrument, lease, license, arrangement, or understanding,
or violate or result in a breach of any term of the Articles of
Incorporation or by-laws of the Company, or violate, result in a
breach of, or conflict with any law, rule, regulation, order,
judgment, or decree binding on the Company or to which any of its
operations, businesses, properties, or assets are subject.
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n. The Common Stock, the Warrants, the Warrant Shares, the
Representative's Options and the Representative's Option Securities
are validly authorized and reserved for issuance. The Common Stock,
when issued and delivered in accordance with this Agreement, the
Warrant Shares, when issued and delivered upon exercise of the
Warrants, the Representative's Option Securities, when issued and
delivered upon exercise of the Representative's Options and the
Representative's Option Shares issuable on exercise of warrants
included in the Representative's Option Securities, upon payment of
the exercise price therefor, will be validly issued, fully paid, and
nonassessable, without any personal liability attaching to the
ownership thereof, and will not be issued in violation of any
preemptive rights of stockholders, and the Underwriters will receive
good title to the Common Stock and the Warrants purchased, the
Representative will receive good title to the Representative's Options
purchased and any purchaser of the Warrant Shares or Representative's
Option Securities will receive good title thereto, all such title free
and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts.
o. The Units, the Common Stock, the Warrants, the Warrant
Shares, the Representative's Options and the Representative's Option
Securities conform to all statements relating thereto contained in the
Registration Statement and the Prospectus.
p. Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except
as may otherwise be properly described in the Prospectus, the Company
has not (i) issued any securities or incurred any liability or
obligation, primary or contingent, for borrowed money, (ii) entered
into any transaction not in the ordinary course of business, or (iii)
declared or paid any dividend on its capital stock.
q. Neither the Company nor any of its officers, directors, or
affiliates (as defined in the Regulations), has taken or will take,
directly or indirectly, prior to the termination of the distribution
of securities contemplated by this Agreement, any action designed to
stabilize or manipulate the price of any security of the Company, or
which has caused or resulted in, or which might in the future
reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company, to
facilitate the sale or resale of the Units, Common Stock and Warrants.
r. The Company has not incurred any liability for a fee,
commission, or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by
this Agreement.
s. The Company has obtained from each officer, director and
person or entity that beneficially owns 1% or more of the Company's
capital stock or derivative securities convertible into shares of the
Company's capital stock his, her or its enforceable written agreement
that for a period of 13 months from the Effective Date, he, she or it
will not, without the Representative's prior written consent, offer,
pledge, sell, contract to sell, grant any option for the sale of,
enter into any swap or other
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arrangement that transfers all or a portion of the economic
consequences associated with the ownership of the Company's capital
stock, or otherwise dispose of, directly or indirectly, any shares of
capital stock or any security or other instrument which by its terms
is convertible into, exercisable for, or exchangeable for shares of
Common Stock (except that, subject to compliance with applicable
securities laws, any such officer, director or stockholder may
transfer his or her stock in a nonpublic transaction that is exempt
from the registration requirements of the Act, provided that any such
transferee shall agree, as a condition to such transfer, to be bound
by the restrictions set forth in this Agreement and further provided
that the transferor, except in the case of the transferor's death,
shall continue to be deemed the beneficial owner of such shares in
accordance with Regulation 13d-(3) of the Exchange Act). The Company
has obtained from each person or entity that beneficially owns less
than 1% of the Company's capital stock or derivative securities
convertible into shares of the Company's capital stock his, her or its
enforceable written agreement that for a period of 12 months from the
Effective Date, he, she or it will not, without the Representative's
prior written consent, offer, pledge, sell, contract to sell, grant
any option for the sale of, enter into any swap or other arrangement
that transfers all or a portion of the economic consequences
associated with the ownership of the Company's capital stock, or
otherwise dispose of, directly or indirectly, any shares of capital
stock or any security or other instrument which by its terms is
convertible into, exercisable for, or exchangeable for shares of
Common Stock (except that, subject to compliance with applicable
securities laws, any such officer, director or stockholder may
transfer his or her stock in a nonpublic transaction that is exempt
from the registration requirements of the Act, provided that any such
transferee shall agree, as a condition to such transfer, to be bound
by the restrictions set forth in this Agreement and further provided
that the transferor, except in the case of the transferor's death,
shall continue to be deemed the beneficial owner of such shares in
accordance with Regulation 13d-(3) of the Exchange Act). For a period
of three (3) years, commencing 12 or 13 months from the Effective
Date, as the case may be, all public sales of the Company's securities
by officers, directors and stockholders of the Company shall be
effected through or with the Representative on an exclusive basis,
provided that the Representative offers the best price reasonably
available to the selling stockholders. In addition, for a period of
three years commencing 12 or 13 months, as the case may be, from the
Effective Date in the case of private transactions in the Company's
Common Stock, each such selling security holder specified above shall
offer the Representative the exclusive opportunity to purchase or sell
the securities on terms at least as favorable as the selling security
holder can obtain elsewhere. If the Representative fails to accept in
writing any such proposal for sale by the selling security holders
within three (3) business days after receipt of a notice containing
such proposal, then the Representative shall have no claim or right
with respect to any such sales contained in such notice. If,
thereafter, such proposal is modified in any material respect, the
selling security holders shall adopt the same procedure as with
respect to the original proposal. An appropriate legend shall be
marked on
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the face of the certificates representing all of such securities
restricting transfers which are not in compliance with this section.
Public or private sales of Common Stock by such persons shall not
include gifts, intra-family transfers or transfers for estate planning
purposes, which shall be exempt from the foregoing provisions. The
Company, on behalf of itself, and all officers, directors and holders
of five percent or more of the Common Stock of the Company, have
provided the Representative their enforceable written agreements not
to sell, transfer, or hypothecate capital stock or derivative
securities of the Company through a "Regulation S" transaction for a
minimum period of five years from the Effective Date without the prior
written consent of the Representative, and the Company has provided
the Representative with the Company's enforceable written agreement
not to sell capital stock or derivative securities of the Company
through a "Regulation D" transaction for a minimum period of 24 months
from the Effective Date.
t. Except as otherwise provided in the Registration
Statement, no person or entity has the right to require registration
of shares of Common Stock or other securities of the Company because
of the filing or effectiveness of the Registration Statement.
u. The Company is eligible to use Form SB-2 for registration
of the Units, the Common Stock, the Warrants, the Warrant Shares, the
Representative's Options and the Representative's Option Securities.
v. No unregistered securities of the Company, of an affiliate
of the Company or of a predecessor of the Company have been sold
within three years prior to the date hereof, except as described in
the Registration Statement.
w. Except as set forth in the Registration Statement, there
is and at the Closing Date there will be no action, suit or proceeding
before any court, arbitration tribunal or governmental agency,
authority or body pending or, to the knowledge of the Company,
threatened which might result in judgments against the Company not
adequately covered by insurance or which collectively might result in
any material adverse change in the condition (financial or otherwise),
the business or the prospects of the Company or would materially
affect the properties or assets of the Company.
x. The Company has filed all federal and state tax returns
which are required to be filed by it and has paid all taxes shown on
such returns and all assessments received by it to the extent such
taxes have become due. All taxes with respect to which the Company is
obligated have been paid or adequate accruals have been set up to
cover any such unpaid taxes.
y. Except as set forth in the Registration Statement:
i. The Company has obtained all permits, licenses
and other authorizations which are required under the
Environmental Laws for the ownership, use and operation of
each location operated or leased by the Company (the
"Property"), all such permits, licenses and authorizations,
if any, obtained are in effect, no appeal nor any other
action is pending to revoke
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any such permit, license or authorization, and the Company is
in full compliance with all terms and conditions of all such
permits, licenses and authorizations, if any, obtained by the
Company.
ii. To the best knowledge of the Company's executive
officers, the Company and the Property are in compliance with
all Environmental Laws including, without limitation, all
restrictions, conditions, standards, limitations,
prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained
in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
iii. The Company has not, and to the best knowledge
of the Company's executive officers, no other person has,
released, placed, stored, buried or dumped any Hazardous
Substances, Oils, Pollutants or Contaminants or any other
wastes produced by, or resulting from, any business,
commercial, or industrial activities, operations, or
processes, on, beneath, or adjacent to the Property or any
property formerly owned, operated or leased by the Company
except for inventories of such substances to be used, and
wastes generated therefrom, in the ordinary course of
business of the Company (which inventories and wastes, if
any, were and are stored or disposed of in accordance with
applicable laws and regulations and in a manner such that
there has been no release of any such substances into the
environment).
iv. Except as provided to the Representative, there
exists no written or tangible report, synopsis or summary of
any asbestos, toxic waste or Hazardous Substances, Oils,
Pollutants or Contaminants investigation made with respect to
all or any portion of the assets of the Company (whether or
not prepared by experts and whether or not in the possession
of the executive officers of the Company).
v. Definitions: As used herein:
(1) Environmental Laws means all federal,
state and local laws, regulations, rules and
ordinances relating to pollution or protection of
the environment, including, without limitation, laws
relating to Releases or threatened Releases of
Hazardous Substances, Oils, Pollutants or
Contaminants into the indoor or outdoor environment
(including, without limitation, ambient air, surface
water, groundwater, land, surface and subsurface
strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
Release, transport or handling of Hazardous
Substances, Oils, Pollutants or Contaminants.
(2) Hazardous Substances, Oils, Pollutants
or Contaminants means all substances defined as such
in the National Oil and Hazardous Substances
Pollutant Contingency Plan, 40 C.F.R. Section 300.6,
or defined as such under any Environmental Law.
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(3) Release means any release, spill,
emission, discharge, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environmental
(including, without limitation, ambient air, surface
water, groundwater, and surface or subsurface
strata) or into or out of any property, including
the movement of Hazardous Substances, Oils,
Pollutants or Contaminants through or in the air,
soil, surface water, groundwater or any property.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
3. Purchase, Sale, and Delivery of the Units. On the basis of the
representations, warranties, covenants, and agreements of the Company herein
contained, but subject to the terms and conditions herein set forth, the
Company agrees to sell to the Underwriters, severally and not jointly, and the
Underwriters, severally and not jointly, agree to purchase from the Company the
number of Units set forth opposite the Underwriters' names in Schedule 1
hereto.
The purchase price per Unit to be paid by the Underwriters shall be
$5.40. The initial public offering price of the Units shall be $6.00.
Payment for the Units by the Underwriters shall be made by certified
or official bank check in clearing house funds, payable to the order of the
Company at the offices of Schneider Securities, Inc., 1120 Lincoln Street,
Suite 900, Denver, Colorado 80203, or at such other place in Denver, Colorado
as the Representative shall determine and advise the Company by at least two
full days' notice in writing, upon delivery of the Units to the Representative.
Such delivery and payment shall be made at 10:00 a.m., Mountain Time, on the
third business day following the time of the initial public offering, as
defined in Section 10(a) hereof, unless the Commission declares the
Registration Statement effective after 4:30 p.m. Eastern time, in which event
delivery and payment shall be made on the fourth (4th) business day following
the time of the initial public offering. The time and date of such delivery and
payment are herein called the "Closing Date."
In addition, the Company hereby grants to the Representative the
option to purchase all or a portion of the Additional Securities as may be
necessary to cover over-allotments, at the same purchase price per Additional
Security as the price per Unit provided for in this Section 3. This option may
be exercised by the Representative on the basis of the representations,
warranties, covenants, and agreements of the Company herein contained, but
subject to the terms and conditions herein set forth, at any time and from time
to time on or before the 45th day following the Effective Date of the
Registration Statement, by written notice by the Representative to the Company.
Such notice shall set forth the aggregate number of Additional Securities as to
which the option is being exercised, and the time and date, as determined by
the Representative, when such Additional Securities are to be delivered (such
time and date are herein called an "Additional Closing Date"); provided,
however, that no Additional Closing Date shall be earlier than the Closing Date
nor earlier than the third business day after the date on which the notice of
the exercise of the option shall have been given nor later than the eighth
business
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day after the date on which such notice shall have been given; and further
provided, that not more than two Additional Closings shall be noticed and held
following purchase of Additional Securities by the Representative.
Payment for the Additional Securities shall be made by certified or
official bank check in clearing house funds payable to the order of the Company
at the offices of Schneider Securities, Inc., 1120 Lincoln Street, Suite 900,
Denver, Colorado, or at such other place in Denver, Colorado as you shall
determine and advise the Company by at least two full days' notice in writing,
upon delivery of certificates representing the Additional Securities to you.
Certificates for the Common Stock and Warrants and any Additional
Securities purchased shall be registered in such name or names and in such
authorized denominations as you may request in writing at least two full
business days prior to the Closing Date or Additional Closing Date, as
applicable. The Company shall permit you to examine and package such
certificates for delivery at least one full business day prior to any such
closing with respect thereto.
If for any reason one or more Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 10 hereof) to purchase and pay for
the number of Units agreed to be purchased by such Underwriter, the Company
shall immediately give notice thereof to the Representative, and the
non-defaulting Underwriters shall have the right within 24 hours after the
receipt by the Representative of such notice, to purchase or procure one or
more other Underwriters to purchase, in such proportions as may be agreed upon
among the Representative and such purchasing Underwriter or Underwriters and
upon the terms herein set forth, the Units which such defaulting Underwriter or
Underwriters agreed to purchase. If the non-defaulting Underwriters fail so to
make such arrangements with respect to all such Units, the number of Units
which each non-defaulting Underwriter is otherwise obligated to purchase under
the Agreement shall be automatically increased pro rata to absorb the remaining
Units which the defaulting Underwriter or Underwriters agreed to purchase;
provided, however, that the non-defaulting Underwriters shall not be obligated
to purchase the Units which the defaulting Underwriter or Underwriters agreed
to purchase in excess of 10% of the total number of Units which such
non-defaulting Underwriter agreed to purchase hereunder, and provided further
that the non-defaulting Underwriters shall not be obligated to purchase any
Units which the defaulting Underwriter or Underwriters agreed to purchase if
such additional purchase would cause the Underwriter to be in violation of the
net capital rule of the Commission or other applicable law. If the total number
of Units which the defaulting Underwriter or Underwriters agreed to purchase
shall not be purchased or absorbed in accordance with the two preceding
sentences, the Company shall have the right, within 24 hours next succeeding
the 24-hour period above referred to, to make arrangements with other
underwriters or purchasers satisfactory to the Representative for the purchase
of such Units on the terms herein set forth. In any such case, either the
Representative or the Company shall have the right to postpone the Closing for
not more than seven business days after the date originally fixed as the
Closing in order that any necessary changes in the Registration Statement, the
Prospectus or any other documents or arrangements may be made. If neither the
non-
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defaulting Underwriters nor the Company shall make arrangements within the
24-hour periods stated above for the purchase of all the Units which the
defaulting Underwriter or Underwriters agreed to purchase hereunder, this
Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Underwriter, except
the Company shall be liable for actual expenses incurred by the Representative
as provided in Section 10 hereof, and without any liability on the part of any
non-defaulting Underwriter to the Company.
Nothing contained herein shall relieve any defaulting Underwriter of
its liability, if any, to the Company or to the remaining Underwriters for
damages occasioned by its default hereunder.
4. Offering. The Underwriters are to make a public offering of the
Units as soon, on or after the effective date of the Registration Statement, as
the Representative deems it advisable so to do. The Units are to be initially
offered to the public at the initial public offering price as provided for in
Section 3 (such price being herein called the "public offering price"). After
the initial public offering, you may from time to time increase or decrease the
prices of the Units, Common Stock and/or Warrants, in your sole discretion, by
reason of changes in general market conditions or otherwise.
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5. Covenants of the Company. The Company covenants that it will:
a. Use its best efforts to cause the Registration Statement
to become effective as promptly as possible. If the Registration
Statement has become or becomes effective with a form of Prospectus
omitting certain information pursuant to Rule 430A of the Regulations,
or filing of the Prospectus is otherwise required under Rule 424(b),
the Company will file the Prospectus, properly completed, pursuant to
Rule 424(b) within the time period prescribed and will provide
evidence satisfactory to you of such timely filing.
b. Notify you immediately, and confirm such notice in
writing, (i) when the Registration Statement and any post-effective
amendment thereto become effective, (ii) of the receipt of any
comments from the Commission or the "blue sky" or securities authority
of any jurisdiction regarding the Registration Statement, any
post-effective amendment thereto, the Prospectus, or any amendment or
supplement thereto, and (iii) of the receipt of any notification with
respect to a Stop Order or the initiation or threatening of any
proceeding with respect to a Stop Order. The Company will use its best
efforts to prevent the issuance of any Stop Order and, if any Stop
Order is issued, to obtain the lifting thereof as promptly as
possible.
c. During the time when a prospectus relating to the Units,
Common Stock and Warrants or the Additional Securities is required to
be delivered hereunder or under the Act or the Regulations, comply so
far as it is able with all requirements imposed upon it by the Act, as
now existing and as hereafter amended, and by the Regulations, as from
time to time in force, so far as necessary to permit the continuance
of sales of or dealings in the Common Stock and Warrants and
Additional Securities in accordance with the provisions hereof and the
Prospectus. If, at any time when a prospectus relating to the Units,
Common Stock and Warrants or Additional Securities is required to be
delivered hereunder or under the Act or the Regulations, any event
shall have occurred as a result of which, in the reasonable opinion of
counsel for the Company or counsel for the Representative, the
Registration Statement or the Prospectus, as then amended or
supplemented, contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or if, in the
opinion of either of such counsel, it is necessary at any time to
amend or supplement the Registration Statement or the Prospectus to
comply with the Act or the Regulations, the Company will immediately
notify you and promptly prepare and file with the Commission an
appropriate amendment or supplement (in form and substance
satisfactory to you) which will correct such statement or omission or
which will effect such compliance and will use its best efforts to
have any such amendment declared effective as soon as possible.
d. Deliver without charge to you such number of copies of
each Preliminary Prospectus as you may reasonably request and, as soon
as the Registration Statement or any amendment thereto becomes
effective or a supplement is filed, deliver without charge to you two
signed copies of the
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Registration Statement or such amendment thereto, as the case may be,
including exhibits, and two copies of any supplement thereto, and
deliver without charge to you such number of copies of the Prospectus,
the Registration Statement, and amendments and supplements thereto, if
any, without exhibits, as you may reasonably request for the purposes
contemplated by the Act.
e. Endeavor in good faith, in cooperation with you, at or
prior to the time the Registration Statement becomes effective, to
qualify the Units, Common Stock and Warrants and Additional Securities
for offering and sale under the "blue sky" or securities laws of such
jurisdictions as you may designate; provided, however, that no such
qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to service of general process or
to taxation as a foreign corporation doing business in such
jurisdiction to which it is not then subject. In each jurisdiction
where such qualification shall be effected, the Company will, unless
you agree in writing that such action is not at the time necessary or
advisable, file and make such statements or reports at such times as
are or may be required by the laws of such jurisdiction.
f. Make generally available (within the meaning of Section
11(a) of the Act and the Regulations) to its security holders as soon
as practicable, but not later than fifteen (15) months after the date
of the Prospectus, an earnings statement (which need not be certified
by independent certified public accountants unless required by the Act
or the Regulations, but which shall satisfy the provisions of Section
11(a) of the Act and the Regulations) covering a period of at least 12
months beginning after the effective date of the Registration
Statement.
g. For a period of 13 months after the date of the
Prospectus, not, without your prior written consent, offer, issue,
sell, contract to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any shares of Common Stock (or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for shares of Common Stock) except as
provided in Section 3 and except for (i) the issuance of Warrant
Shares issuable upon the exercise of Warrants or issuance of Common
Stock underlying options and warrants outstanding on the date hereof
which are properly described in the Prospectus, (ii) the issuance of
the Representative's Option Securities, or (iii) the grant of options
pursuant to the Company's existing stock option plan, or (iv) the
issuance of capital stock in connection with any acquisitions
undertaken by the Company.
h. For a period of five years after the Effective Date of the
registration statement, furnish you, without charge, the following:
i. Within 105 days after the end of each fiscal
year, three copies of consolidated financial statements
certified by independent certified public accountants,
including a balance sheet, statement of operations, and
statement of cash flows of the Company and its then existing
subsidiaries, with supporting schedules, prepared in
accordance with generally accepted accounting principles, at
the end of such fiscal year and for the 12 months then ended;
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ii. As soon as practicable after they have been sent
to stockholders of the Company or filed with the Commission,
three copies of each annual and interim financial and other
report or communication sent by the Company to its
stockholders or filed with the Commission;
iii. As soon as practicable, two copies of every
press release and every material news item and article in
respect of the Company or its affairs which was released by
the Company;
iv. Notice of any regular quarterly or special
meeting of the Company's Board of Directors concurrently with
the sending of such notice to the Company's directors; and
v. Such additional documents and information with
respect to the Company and its affairs and the affairs of any
of its subsidiaries as you may from time to time reasonably
request.
i. Designate an Audit Committee and a Compensation Committee,
the members of which shall be subject to your reasonable approval,
which will generally supervise the financial affairs of the Company
and review executive compensation, respectively.
j. Furnish to you as early as practicable prior to the
Closing Date and any Additional Closing Date, as the case may be, but
not less than two full business days prior thereto, a copy of the
latest available unaudited interim consolidated financial statements
of the Company which have been read by the Company's independent
certified public accountants, as stated in their letters to be
furnished pursuant to Section 7(e).
k. File no amendment or supplement to the Registration
Statement or Prospectus at any time, whether before or after the
Effective Date of the Registration Statement, unless such filing shall
comply with the Act and the Regulations and unless you shall
previously have been advised of such filing and furnished with a copy
thereof, and you and counsel for the Representative shall have
approved such filing in writing within a reasonable time of receipt
thereof.
l. Comply with all periodic reporting and proxy solicitation
requirements which may from time to time be applicable to the Company
as a result of the Company's registration under the Exchange Act on a
registration statement on Form 8-A .
m. Comply with all provisions of all undertakings contained
in the Registration Statement.
n. Prior to the Closing Date or any Additional Closing Date,
as the case may be, issue no press release or other communication,
directly or indirectly, and hold no press conference and grant no
interviews with respect to the Company, the financial condition,
results of operations, business, properties, assets, or liabilities of
the Company, or this offering, without your prior written consent.
o. Appoint American Securities Transfer & Trust, Inc. as its
transfer agent.
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p. On or prior to the Closing Date, sell to the
Representative for a total purchase price of $100, Representative's
Options entitling the Representative or its assigns to purchase
120,000 Units at a price equal to 120% of the public offering price of
the Units, with the terms of the Representative's Options, 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.
q. Until expiration of the Representative's Options, keep
reserved sufficient Units, Common Stock and Warrants for issuance upon
exercise of the Representative's Options, and shares of Common Stock
for issuance upon exercise of the warrants contained in the
Representative's Options.
r. If the Representative, any employee of the Representative
or any company controlled by or under control with the Representative
acts as the introducing broker or finder during the five year period
commencing on the Effective Date with regard to (i) the sale of all or
substantially all of the assets and properties of the Company, (ii)
the merger or consolidation of the Company (other than a merger or
consolidation effected for the purpose of changing the Company's
domicile) or (iii) the acquisition by the Company of the assets or
stock of another business entity, which agreement or understanding is
thereafter consummated during such five-year period or within one year
of expiration of such five-year period, pay to the Representative or
such person(s) as the Representative may designate an amount equal to
5% of the first $1,000,000 or portion thereof in value or
consideration received or paid by the Company, 4% of the second
$1,000,000 or portion thereof in value or consideration received or
paid by the Company and 3% of such value or consideration received by
the Company in excess of the first $2,000,000 of such value or
consideration received or paid by the Company. The fee payable to the
Representative will be in the same form of consideration as that paid
by or to the Company, as the case may be, in any such transaction. It
is understood that the designation of the Representative to act as a
finder is not exclusive and that the Representative shall not be
entitled to the foregoing amounts unless it participates in the
introduction.
s. Within three months of the Closing Date, engage a
financial public relations firm to assist the Company in preparing
regular announcements and disseminating such information to the
financial community, such engagement to extend for a period of at
least one year from the date of retention of such firm.
t. Adopt procedures for the application of the net proceeds
it receives from the sale of the Units and apply the net proceeds from
the sale of the Units substantially in the manner set forth in the
Registration Statement, which does not contemplate repayment of debt
to officers, directors, stockholders or affiliates of the Company
(except to CS Capital, Inc.), unless any deviation from such
application is in accordance with the Registration Statement and
occurs only after approval by the Board of Directors of the Company
and then only after the Board of Directors has obtained the written
opinion of recognized legal counsel experienced in federal and state
securities laws as to the propriety of any such deviation.
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u. Within the time period which the Prospectus is required to
be delivered under the Act, comply, at its own expense, with all
requirements imposed upon it by the Act, as now or hereafter amended,
by the Rules and Regulations, as from time to time may be enforced,
and by any order of the Commission, so far as necessary to permit the
continuance of sales or dealing in the Units, Common Stock and
Warrants.
v. At the Closing, deliver to the Representative true and
correct copies of the Articles of Incorporation of the Company and all
amendments thereto, all such copies to be certified by the Secretary
of the Company; true and correct copies of the by-laws of the Company
and of the minutes of all meetings of the directors and stockholders
of the Company held prior to the Closing which in any way relate to
the subject matter of this Agreement or the Registration Statement.
w. Use all reasonable efforts to comply or cause to be
complied with the conditions precedent to the several obligations of
the Underwriters in Section 7 hereof.
x. File with the Commission all required information
concerning use of proceeds of the Public Offering in Forms 10-QSB and
10-KSB in accordance with the provisions of the Exchange Act and to
provide a copy of such reports to the Representative and its counsel.
y. Supply to the Representative and the Representative's
counsel at the Company's cost, two bound volumes each containing
material documents relating to the offering of the Units within a
reasonable time after the Closing, not to exceed 90 days.
z. As soon as possible prior to the Effective Date, and as a
condition of the Underwriter's obligations hereunder, (i) if requested
by the Representative, have the Company listed on an accelerated
basis, and to maintain such listing for not less than ten years from
the Closing Date, in Standard & Poor's Standard Corporation Records;
and (ii) have the Common Stock and Warrants quoted on The Nasdaq
SmallCap Market_ as of the Effective Date, on the Closing Date, on the
Additional Closing Date and thereafter for at least ten years provided
the Company is in compliance with The Nasdaq SmallCap Market_
maintenance requirements.
aa. At such time as the Company qualifies for listing on the
Nasdaq National Market, take all steps necessary to have the Company's
Common Stock and Warrants, to the extent eligible, listed on the
Nasdaq National Market.
bb. Continue, for a period of at least five years following
the Effective Date of the Registration Statement, to appoint such
auditors as are reasonably acceptable to the Representative, which
auditors shall (i) prepare consolidated financial statements in
accordance with Regulation S-B or, if applicable, Regulation S-X under
the General Rules and Regulations of the Act and (ii) examine (but not
audit) the Company's consolidated financial statements for each of the
first three (3) fiscal quarters prior to the announcement of quarterly
financial information, the filing of the Company's 10-QSB quarterly
report and the mailing of quarterly financial information to security
holders.
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cc. Within 90 days of the Effective Date of the Registration
Statement, obtain "key man" life insurance policies in the amount of
$1,000,000 each on the life of Nigel V. Alexander and on the life of
Shawn B. Stickle, with the Company designated as the beneficiary of
such policy, and pay the annual premiums thereon for a period of not
less than five years from the Effective Date of the Registration
Statement.
dd. Cause its transfer agent to furnish the Representative a
duplicate copy of the daily transfer sheets prepared by the transfer
agent during the six-month period commencing on the Effective Date of
the Registration Statement and instruct the transfer agent to timely
provide, upon the request of the Representative, duplicate copies of
such transfer sheets and/or a duplicate copy of a list of
stockholders, all at the Company's expense, for a period of 4 1/2
years after such six-month period.
ee. Refrain from filing a Form S-8 registration statement for
a period of 90 days from the Effective Date of the Registration
Statement without the Representative's prior written consent. If the
Company files a registration statement on Form S-8 at any time
thereafter through and until 13 months from the Effective Date, the
Company shall obtain an agreement from each holder of options to
acquire Common Stock of the Company on the Effective Date to not to
sell, transfer, hypothecate or convey any such shares of Common Stock
underlying the optionholder's option for the period through 13 months
from the Effective Date without the prior written consent of the
Company. After the registration statement on Form S-8 is declared
effective, the Company may permit the sale from time to time of Common
Stock issued on exercise of options by stockholders who are not
officers or directors, subject to the Company's agreement that such
sales shall not exceed an aggregate of 30,000 shares of Common Stock
of the Company during the period of 13 months from the Effective Date.
Any such sales of Common Stock issued upon exercise of stock options
within such 13 month period shall be made through the Representative.
The Company will obtain from each holder of options to acquire Common
Stock of the Company such person's written enforceable agreement not
to sell shares of Common Stock pursuant to the exemption afforded by
Rule 701 under the 1933 Act for a minimum period of 13 months from the
Effective Date without the prior written consent of the
Representative.
ff. On the Closing Date, enter into a Warrant Exercise Fee
Agreement with the Representative whereby the Company will agree to
pay the Representative a fee of 5% of the aggregate exercise price of
each Warrant exercised commencing one year after the Effective Date,
of which a portion may be allowed by the Representative to the dealer
who solicited the exercise (which may also be the Representative),
subject to applicable NASD guidelines.
gg. Afford the Representative the right, but not the
obligation, commencing on the Effective Date and surviving for a
period of five years, to designate an 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 meetings will
be held
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in person or by video conference each year. Any such designee will
receive reimbursement for all reasonable costs and expenses incurred
in attending meetings of the Board of Directors, including but not
limited to, food, lodging and transportation, together with such other
fee or compensation as is paid by the Company to other members of the
Board of Directors. Moreover, 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.
hh. Refrain from granting any options or warrants to any
member of the Board of Directors appointed by Spencer Edwards, Inc. or
make any cash or other payment to such member of the Board of
Directors for such person's service on the Board of Directors unless
the Company shall have secured the prior written approval of the
Representative and the Representative shall have confirmed with the
NASD that the payment of any such compensation shall not cause any
reduction in the allowable compensation to the Representative in
connection with any past, present or future transactions involving the
Company.
6. Payment of Expenses. The Company hereby agrees to pay all expenses
(subject to the last sentence of this Section 6) in connection with the
offering, including but not limited to (a) the preparation, printing, filing,
distribution, and mailing of the Registration Statement and the Prospectus,
including NASD, SEC,
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Nasdaq filing and/or application fees, and the printing, filing, distribution,
and mailing of this Agreement, any Agreement Among Underwriters, Selected
Dealers Agreement, preliminary and final Blue Sky Memorandums, material to be
circulated to the Underwriters by you and other incidental or related
documents, including the cost of all copies thereof and of the Preliminary
Prospectuses and of the Prospectus, and any amendments or supplements thereto,
supplied to the Representative in quantities as herein above stated, (b) the
issuance, sale, transfer, and delivery of the Common Stock and Warrants, the
Additional Securities, the Warrant Shares, the Representative's Options and the
Representative's Option Securities, including, without limitation, any original
issue, transfer or other taxes payable thereon and the costs of preparation,
printing and delivery of certificates representing such securities, as
applicable, (c) the qualification of the Units, Common Stock and Warrants,
Additional Securities, Representative's Options, Representative's Option
Securities, and Warrant Shares under state or foreign "blue sky" or securities
laws, which qualification shall be undertaken by counsel to the Representative
at the Company's expense, (d) the fees and disbursements of counsel for the
Company and the accountants for the Company, (e) the listing of the Common
Stock and Warrants on The Nasdaq SmallCap Market, and (f) the Representative's
non-accountable expense allowance equal to 3% of the aggregate gross proceeds
from the sale of the Units and the Additional Securities. Prior to or
immediately following the Closing Date, the Company shall bear the costs of
tombstone announcements not to exceed $3,000, if requested to do so by the
Representative. The Company and the Representative shall pay their own expenses
incurred in connection with any road shows.
The Company has previously remitted to the Representative the sum of
$45,000, which sum has been credited as a partial payment in advance of the
non-accountable expense allowance provided for in Section 6(f) above.
7. Conditions of Underwriters' Obligations. The Underwriters'
obligation to purchase and pay for the Units and the Additional Securities, as
provided herein, shall be subject to the continuing accuracy of the
representations and warranties of the Company contained herein and in each
certificate and document contemplated under this Agreement to be delivered to
you, as of the date hereof and as of the Closing Date (or the Additional
Closing Date, as the case may be), to the performance by the Company of its
obligations hereunder, and to the following conditions:
a. The Registration Statement shall have become effective not
later than 5:00 p.m., Mountain time, on the date of this Agreement or
such later date and time as shall be consented to in writing by you.
b. At the Closing Date and any Additional Closing Date, you
shall have received the favorable opinion of Smith McCullough, P.C.,
counsel for the Company, dated the date of delivery, addressed to you,
and in form and scope satisfactory to your counsel, to the effect
that:
i. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Colorado, with full power and authority, and counsel
has
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no knowledge that the Company does not have all necessary
consents, authorizations, approvals, orders, certificates,
and permits of and from, and declarations and filings with,
all federal, state, local, and other governmental authorities
and all courts and other tribunals, to own, lease, license,
and use its properties and assets and to conduct its business
in the manner described in the Prospectus. The Company is
duly qualified to do business and is in good standing in
every jurisdiction in which its ownership, leasing,
licensing, or use of property and assets or the conduct of
its business makes such qualification necessary;
ii. The authorized capital stock of the Company as
of the date of this Agreement consisted of 20,000,000 shares
of Common Stock, of which 1,691,542 shares of Common Stock
are issued and outstanding, 448,500 shares of Common Stock
are reserved for issuance upon the exercise of outstanding
options and warrants and 135,000 shares of Common Stock are
reserved for issuance upon the exercise of the remaining
options authorized under the Company's option plan; and
5,000,000 shares of Preferred Stock, none of which are issued
and outstanding; and there have been no changes in the
authorized and outstanding capital stock of the Company since
the date of this Agreement, except as contemplated by the
Registration Statement and the Prospectus. Each outstanding
share of capital stock is validly authorized, validly issued,
fully paid, and nonassessable, with no personal liability
attaching to the ownership thereof, has not been issued and
is not owned or held in violation of any preemptive right of
stockholders. There is no commitment, plan, or arrangement to
issue, and no outstanding option, warrant, or other right
calling for the issuance of, any share of capital stock of
the Company or any security or other instrument which by its
terms is convertible into, exercisable for, or exchangeable
for capital stock of the Company, except as set forth above,
and except as is properly described in the Prospectus. There
is outstanding no security or other instrument which by its
terms is convertible into or exchangeable for capital stock
of the Company, except as described in the Prospectus;
iii. To the knowledge of counsel, there is no
litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending,
threatened, or in prospect (or any basis therefor) with
respect to the Company or any of its respective operations,
businesses, properties, or assets, except as may be properly
described in the Prospectus or such as individually or in the
aggregate do not now have and will not in the future have a
material adverse effect upon the operations, business,
properties, or assets of the Company. To the knowledge of
counsel, the Company is not in violation of, or in default
with respect to, any law, rule, regulation, order, judgment,
or decree, except as may be properly described in the
Prospectus or such as in the aggregate have been disclosed to
the Representative and do not now have and will not in the
future have a material adverse effect
-23-
24
upon the operations, business, properties, or assets of the
Company; nor is the Company required to take any action in
order to avoid any such violation or default;
iv. Based upon the certificates received from the
Company's officers, neither the Company nor any other party
is now or is expected by the Company to be in violation or
breach of, or in default with respect to, complying with any
material provision of any contract, agreement, instrument,
lease, license, arrangement, or understanding which is
material to the Company;
v. The Company is not in violation or breach of, or
in default with respect to, any term of its Articles of
Incorporation or by-laws;
vi. The Company has all requisite power and
authority to execute and deliver and to perform thereunder
this Agreement, the Warrants, the Representative's Options,
the Warrant Exercise Fee Agreement and the Custody Agreement.
All necessary corporate proceedings of the Company have been
taken to authorize the execution and delivery and performance
thereunder by the Company of this Agreement, the Warrants,
the Representative's Options, the Warrant Exercise Fee
Agreement and the Custody Agreement. Each of this Agreement,
the Warrants, the Representative's Options, the Warrant
Exercise Fee Agreement and the Custody Agreement have been
duly authorized, executed and delivered by the Company, and
is a legal, valid, and binding obligation of the Company, and
(subject to applicable bankruptcy, insolvency, and other laws
affecting the enforceability of creditors' rights generally)
enforceable as to the Company in accordance with its
respective terms. No consent, authorization, approval, order,
license, certificate, or permit of or from, or declaration or
filing with, any federal, state, local, or other governmental
authority or any court or other tribunal is required by the
Company for the execution or delivery, or performance
thereunder by the Company of this Agreement, the Warrants,
the Representative's Options, the Warrant Exercise Fee
Agreement and the Custody Agreement (except filings under the
Act which have been made prior to the Closing Date and
consents consisting only of consents under "blue sky" or
securities laws which are required in connection with the
transactions contemplated by this Agreement, and which
counsel has been advised by counsel to the underwriters have
been obtained on or prior to the date the Registration
Statement becomes effective under the Act). No consent of any
party to any contract, agreement, instrument, lease, license,
arrangement, or understanding to which the Company is a
party, or to which any of its properties or assets are
subject, is required for the execution or delivery, or
performance thereunder of this Agreement, the Warrants, the
Representative's Options, the Warrant Exercise Fee Agreement
or the Custody Agreement; and the execution and delivery and
performance thereunder of this Agreement, the Warrants, the
Representative's Options, the Warrant Exercise Fee Agreement
and the Custody Agreement will
-24-
25
not violate, result in a breach of, conflict with, or (with
or without the giving of notice or the passage of time or
both) entitle any party to terminate or call a default under
any such contract, agreement, instrument, lease, license,
arrangement, or understanding, or violate or result in a
breach of any term of the Articles of Incorporation or
by-laws of the Company, or violate, result in a breach of, or
conflict with any law, rule, regulation, order, judgment, or
decree binding on the Company or to which any of its
operations, businesses, properties, or assets are subject;
vii. The shares of Common Stock are, the shares of
Common Stock issuable on exercise of the Warrants will be
upon exercise of the Warrants, the shares of Common Stock
underlying the Representative's Options will be upon exercise
of the Representative's Options, and the Representative's
Option Shares will be upon exercise of the Warrants
underlying the Representative's Options, validly authorized,
validly issued, fully paid, and nonassessable and will not
have been issued in violation of any preemptive rights of
stockholders, and the Underwriters have received good title
to the Units and Additional Securities purchased by them from
the Company, free and clear of all liens, security interests,
pledges, charges, encumbrances, stockholders' agreements, and
voting trusts; upon payment for the Warrant Shares and the
Representative's Option Securities, the holders thereof will
receive good title to such securities, free and clear of all
liens, security interests, pledges, charges, encumbrances,
stockholders' agreement and voting trusts. The Units, the
Common Stock, the Warrants, the Warrant Shares, the
Representative's Options and the Representative's Option
Securities conform in all material respects to all statements
relating thereto contained in the Registration Statement or
the Prospectus;
viii. The Warrant Shares have been duly and validly
reserved for issuance pursuant to the terms of the Warrant
Agreement between the Company and its transfer agent, and the
Representative's Option Securities have been duly and validly
reserved for issuance pursuant to the terms of the
Representative's Options or the Warrant Agreement, as the
case may be;
ix. All contracts, agreements, instruments, leases,
and licenses known to counsel that are required to be
described in the Registration Statement or the Prospectus
have been properly described therein. All contracts,
agreements, instruments, leases, or licenses known to counsel
required to be filed as an exhibit to the Registration
Statement have been filed with the Commission as an exhibit
to or have been incorporated as an exhibit by reference into
the Registration Statement;
x. Insofar as statements in the Prospectus purport
to summarize the status of litigation or the provisions of
laws, rules, regulations, orders, judgments, decrees,
contracts, agreements, instruments, leases, or licenses, such
statements have been prepared or reviewed
-25-
26
by such counsel and accurately reflect the status of such
litigation and provisions purported to be summarized and are
correct in all material respects;
xi. Except as provided in the Registration
Statement, no person or entity has the right to require
registration of shares of Common Stock or other securities of
the Company because of the filing or effectiveness of the
Registration Statement;
xii. The Registration Statement has become effective
under the Act. No Stop Order has been issued and no
proceedings for that purpose have been instituted or
threatened;
xiii. The Registration Statement and the Prospectus,
and any amendment or supplement thereto, comply as to form in
all material respects with the requirements of the Act and
the Regulations;
xiv. Such counsel has no reason to believe that
either the Registration Statement or the Prospectus, or any
amendment or supplement thereto, contains any untrue
statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading (except that no opinion
need be expressed as to the consolidated financial statements
and other financial data and schedules which are or should be
contained therein);
xv. Counsel has no knowledge of any event which has
occurred since the Effective Date which should have been set
forth in an amendment or supplement to the Registration
Statement or the Prospectus that has not been set forth in
such an amendment or supplement;
xvi. The Company is not currently offering any
securities for sale except as described in the Registration
Statement;
xvii. Such counsel has no knowledge of any
promoters, affiliates, parents or subsidiaries of the Company
except as are described in the Registration Statement;
xviii. Counsel has no knowledge that the Company
does not own or possess, free and clear of all liens or
encumbrances and rights thereto or therein by third parties,
the requisite licenses or other rights to use all trademarks,
copyrights, service marks, service names, trade names and
licenses necessary to conduct its business (including without
limitation, any such licenses or rights described in the
Registration Statement as being owned or possessed by the
Company or any subsidiary) (all of which are collectively
referred to herein as the "Intellectual Property"); counsel
has no knowledge of any actual or, to the knowledge of
counsel, pending, or threatened claim, proceeding or action
by any person pertaining to or which challenges the exclusive
rights of the Company with respect to any of the Company's
Intellectual Property; based on a review of all the Company's
products, proposed products and Intellectual Property,
counsel has no knowledge that such products, proposed
products or Intellectual Property
-26-
27
infringe on any trademarks, copyrights, service marks,
service names, trade names or valid patents or patents
pending held by third parties known to the Company and such
counsel;
xix. The Company is not a party to any agreement
giving rise to any obligation by the Company or any
subsidiary to pay any third-party royalties or fees of any
kind whatsoever with respect to any technology developed,
employed, used or licensed by the Company or any subsidiary,
other than is disclosed in the Prospectus; and
xx. The Common Stock and Warrants are eligible for
quotation on The Nasdaq SmallCap Market.
Such opinion shall be governed by, and shall be interpreted
in accordance with, the Legal Opinion Accord (the "Accord") of the ABA
Section of Business Law (1991) and shall be subject to the
qualifications, exceptions, definitions, limitations on coverage and
other limitations set forth therein and in such opinion.
Qualifications in such opinion as to knowledge or the absence of
knowledge shall be based upon and limited to the "Actual Knowledge"
(as defined in the Accord) of the "Primary Lawyer Group" (as
identified in such opinion). In rendering such opinion, such legal
counsel shall be entitled to rely upon Public Authority Documents and
upon information provided by client officials in written Certificates
provided that copies of such Public Authority Documents and
Certificates are attached as exhibits to the written opinion of legal
counsel. The term "Public Authority Documents" shall have the meaning
ascribed to it in the Legal Opinion Accord of the ABA Section of
Business Law (1991).
c. On or prior to the Closing Date and any Additional Closing
Date, as the case may be, you shall have been furnished such
information, documents, certificates, and opinions as you may
reasonably require for the purpose of enabling you to review the
matters referred to in Sections 7(b) and (c), and in order to evidence
the accuracy, completeness, or satisfaction of any of the
representations, warranties, covenants, agreements, or conditions
herein contained, or as you may reasonably request.
d. At the Closing Date and any Additional Closing Date, as
the case may be, you shall have received a certificate of the chief
executive officer and of the chief financial officer of the Company,
dated the Closing Date or such Additional Closing Date, as the case
may be, to the effect that the conditions set forth in Section 7(a)
have been satisfied, that as of the date of this Agreement and as of
the Closing Date or such Additional Closing Date, as the case may be,
the representations and warranties of the Company contained herein
were and are accurate, and that as of the Closing Date or such
Additional Closing Date, as the case may be, the obligations to be
performed by the Company hereunder on or prior thereto have been fully
performed.
e. At the time this Agreement is executed and at the Closing
Date and any Additional Closing Date, as the case may be, you shall
have received letters from HEIN + ASSOCIATES, LLP and James E.
Scheifley & Associates, Inc., Certified Public Accountants, addressed
to you and dated the date
-27-
28
of delivery but covering a period within three business days of such
date, in form and substance satisfactory to you.
f. All proceedings taken in connection with the issuance,
sale, transfer, and delivery of the Units and the Additional
Securities shall be satisfactory in form and substance to you and to
counsel for the Representative, and you shall have received a
favorable opinion from counsel to the Company, dated as of the Closing
Date or the Additional Closing Date, as the case may be, with respect
to such of the matters set forth under Sections 7(b) and 7(c),
respectively, and with respect to such other related matters, as you
may reasonably request.
g. The NASD, upon review of the terms of the public offering
of the Units and the Additional Securities, shall not have objected to
your participation in such offering.
h. The Company shall have received notice that the Common
Stock and Warrants will be quoted on The Nasdaq SmallCap Market_ as of
the Effective Date.
Any certificate or other document signed by any officer of the Company
and delivered to you or to counsel for the Representative shall be deemed a
representation and warranty by such officer individually and by the Company
hereunder to the Representative as to the statements made therein. If any
condition to your obligations hereunder to be fulfilled prior to or at the
Closing Date or any Additional Closing Date, as the case may be, is not so
fulfilled, you may terminate this Agreement or, if you so elect, in writing
waive any such conditions which have not been fulfilled or extend the time for
their fulfillment.
8. Indemnification and Contribution.
a. Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless the Underwriters, the
Representative, and each of their officers, directors, partners,
employees, agents, and counsel, and each person, if any, who controls
the Representative or any one of the Underwriters within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any and all loss, liability, claim, damage, and expense whatsoever
(which shall include, for all purposes of this Section 8, but not be
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 and any
and all amounts paid in settlement of any claim or litigation) as and
when incurred arising out of, based upon, or in connection with (i)
any untrue statement or alleged untrue statement of a material fact
contained (A) in any Preliminary Prospectus, the Registration
Statement, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or (B) in any
application or other document or communication (in this Section 8
collectively called an "application") in any jurisdiction in order to
qualify the Units and Additional Securities under the "blue sky" or
securities laws thereof or filed with the Commission or any securities
exchange; or any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any breach of any representation,
warranty, covenant, or
-28-
29
agreement of the Company contained in this Agreement. The foregoing
agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this
Agreement; however, the Company shall have no liability under this
Section 8 if such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company as
stated in Section 8(b) with respect to the Underwriters by or on
behalf of the Underwriters expressly for inclusion in any Preliminary
Prospectus, the Registration Statement, or the Prospectus, or any
amendment or supplement thereto, or in any application, as the case
may be.
If any action is brought against the Underwriters, the
Representative or any of their officers, directors, partners,
employees, agents, or counsel, or any controlling persons of an
Underwriter or the Representative (an "indemnified party") in respect
of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, such indemnified party or parties shall promptly
notify the Company in writing of the institution of such action (but
the failure so to notify shall not relieve the Company from any
liability it may have other than pursuant to this Section 8(a)) and
the Company shall promptly assume the defense of such action,
including the employment of counsel (satisfactory to such indemnified
party or parties) and payment of expenses. Such indemnified party or
parties 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 or parties unless the employment of
such counsel shall have been authorized in writing by the Company in
connection with the defense of such action or the Company shall not
have promptly employed counsel satisfactory to such indemnified party
or parties to have charge of the defense of such action or such
indemnified party or parties shall have reasonably concluded that
there may be one or more legal defenses available to it or them or to
other indemnified parties which are different from or additional to
those available to the Company, in any of which events such fees and
expenses shall be borne by the Company. Anything in this paragraph to
the contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written
consent. The Company agrees promptly to notify the Underwriters and
the Representative of the commencement of any litigation or
proceedings against the Company or against any of its officers or
directors in connection with the sale of the Units or the Additional
Securities, any Preliminary Prospectus, the Registration Statement, or
the Prospectus, or any amendment or supplement thereto, or any
application.
b. The Underwriters agree to indemnify and hold harmless the
Company, the Company's counsel, each director of the Company, each
officer of the Company who shall have signed the Registration
Statement, each other person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to
the Underwriters in Section 8(a), but only with respect to statements
or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement, or the Prospectus (as from time
-29-
30
to time amended and supplemented), or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity
with written information furnished to the Company as stated in this
Section 8(b) with respect to the Underwriters by or on behalf of the
Underwriters expressly for inclusion in any Preliminary Prospectus,
the Registration Statement, or the Prospectus, or any amendment or
supplement thereto, or in any application, as the case may be;
provided, however, that the obligation of the Underwriters to provide
indemnity under the provisions of this Section 8(b) shall be limited
to the amount which represents the product of the number of Units and
Additional Securities sold hereunder and the initial public offering
price per Unit set forth on the cover page of the Prospectus. For all
purposes of this Agreement, the amounts of the selling concession and
reallowance set forth in the Prospectus, the information under
"Underwriting" and the identification of counsel to the Representative
under "Legal Matters" constitute the only information furnished in
writing by or on behalf of the Underwriters expressly for inclusion in
any Preliminary Prospectus, the Registration Statement, or the
Prospectus (as from time to time amended or supplemented), or any
amendment or supplement thereto, or in any application, as the case
may be. If any action shall be brought against the Company or any
other person so indemnified based on any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or
supplement thereto, or any application, and in respect of which
indemnity may be sought against the Underwriters pursuant to this
Section 8(b), the Underwriters shall have the rights and duties given
to the Company, and the Company and each other person so indemnified
shall have the rights and duties given to the indemnified parties, by
the provisions of Section 8(a).
c. In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this
Section 8 is for any reason held to be unavailable to the Underwriters
or the Company, then the Company shall contribute to the damages paid
by the several Underwriters, and the several Underwriters shall
contribute to the damages paid by the Company; provided, however, that
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. In
determining the amount of contribution to which the respective parties
are entitled, there shall be considered the relative benefits received
by each party from the sale of the Units and Additional Securities
(taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Underwriters agree that it would
not be equitable if the amount of such contribution were determined by
pro rata or per capita allocation (even if the Underwriters were
treated as one entity for such purpose). No Underwriter or person
controlling such Underwriter shall be obligated to make contribution
hereunder which in the
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31
aggregate exceeds the total public offering price of the Units and
Additional Securities purchased by such Underwriter under this
Agreement, 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 claim. The
Underwriters' obligations to contribute hereunder are several in
proportion to their respective underwriting obligations and not joint.
For purposes of this Section, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act shall have the
same rights to contribution as such Underwriter, and each director of
the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act, shall have the same rights to
contribution as the Company. Anything in this Section 8(c) to the
contrary notwithstanding, no party shall be liable for contribution
with respect to the settlement of any claim or action effected without
its written consent. This Section 8(c) is intended to supersede any
right to contribution under the Act, the Exchange Act, or otherwise.
9. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties, covenants, and agreements of the Underwriters and
the Company, including the indemnity and contribution agreements contained in
Section 8, shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Representative, the Underwriters
or any indemnified person, or by or on behalf of the Company or any person or
entity which is entitled to be indemnified under Section 8(b), and shall
survive termination of this Agreement or the delivery of the Units and the
Additional Securities to the Underwriters for a period equal to the statute of
limitations for claims related hereto, but not to exceed an aggregate of five
years from the date hereof. In addition, the provisions of Sections 5(a), 6, 8,
9, 10, and 12 shall survive termination of this Agreement, whether such
termination occurs before or after the Closing Date or any Additional Closing
Date.
10. Effective Date of This Agreement and Termination Thereof.
a. This Agreement shall be executed within 24 hours of the
Effective Date of the Registration Statement and shall become
effective on the Effective Date or at the time of the initial public
offering of the Units, whichever is earlier. The time of the initial
public offering shall mean the time, after the Registration Statement
becomes effective, of the release by the Representative for
publication of the first newspaper advertisement which is subsequently
published relating to the Units or the time, after the Registration
Statement becomes effective, when the Units are first released by the
Representative for offering by dealers by letter or telegram,
whichever shall first occur. The Representative or the Company may
prevent this Agreement from becoming effective without liability of
any party to any other party, except as noted below in this Section
10, by giving the notice indicated in Section 10(c) before the time
this Agreement becomes effective.
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b. The Representative shall have the right to terminate this
Agreement at any time prior to the Closing Date or any Additional
Closing Date, as the case may be, by giving notice to the Company if
there shall have been a general suspension of, or a general limitation
on prices for, trading in securities on the New York Stock Exchange or
the American Stock Exchange or in the over-the-counter market; or if
there shall have been an outbreak of major hostilities or other
national or international calamity; or if a banking moratorium has
been declared by a state or federal authority; or if a moratorium in
foreign exchange trading by major international banks or persons has
been declared; or if there shall have been a material interruption in
the mail service or other means of communication within the United
States; or if the Company shall have sustained a material or
substantial loss by fire, flood, accident, hurricane, earthquake,
theft, sabotage, or other calamity or malicious act which, whether or
not such loss shall have been insured, will, in the Representative's
opinion, make it inadvisable to proceed with the offering, sale, or
delivery of the Units or the Additional Securities, as the case may
be; or if there shall have been such material and adverse change in
the market for securities in general so as to make it inadvisable to
proceed with the offering, sale, and delivery of the Units or the
Additional Securities, as the case may be, on the terms contemplated
by the Prospectus due to the impaired investment quality of the Units
or the Additional Securities; or if the Dow Jones Industrial Average
shall have fallen by 15% or more from its closing price on the day
immediately preceding the date that the Registration Statement is
declared effective by the Commission.
c. If the Representative elects to prevent this Agreement
from becoming effective as provided in this Section 10, or to
terminate this Agreement, it shall notify the Company promptly by
telephone, telex, or telegram, confirmed by letter. If, as so
provided, the Company elects to prevent this Agreement from becoming
effective, the Company shall notify the Representative promptly by
telephone, telex, or telegram, confirmed by letter.
d. Anything in this Agreement to the contrary notwithstanding
other than Section 10(e), if this Agreement shall not become effective
by reason of an election pursuant to this Section 10 or if this
Agreement shall terminate or shall otherwise not be carried out prior
to May 31, 1999 because (i) of any reason solely within the control of
the Company or its stockholders and not due to the breach of any
representation, warranty or covenant or bad faith of the
Representative, (ii) the Company unilaterally withdraws the proposed
Public Offering from the Representative in favor of another
underwriter, (iii) the Company does not permit the Registration
Statement to become effective, (iv) of any material discrepancy in any
representation by the Company and/or its officers, directors,
stockholders, agents, advisers or representatives, made in writing,
including but not limited to the Registration Statement, to the
Representative, (v) the Company is, directly and/or indirectly,
negotiating with other persons or entities of whatsoever nature
relating to a possible Public Offering of its securities, or (vi) of
any failure on the part of the Company to perform any covenant or
agreement or satisfy any condition of this Agreement
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by it to be performed or satisfied, then, in any of such events, the
Company shall be obligated to reimburse the Representative for its
out-of-pocket expenses on an accountable basis. Should the
Representative be required to account for "out-of-pocket" expenses,
any expense incurred by the Representative shall be deemed to be
reasonable and unobjectionable upon a reasonable showing by the
Representative that such expenses were incurred, directly or
indirectly, in connection with the proposed transaction and/or
relationship of the parties hereto, as described herein. In no event
will the Representative be entitled to reimbursement of accountable
expenses exceeding $45,000, inclusive of the $45,000 advanced against
the non-accountable expense allowance. The Representative will return
to the Company any portion of the $45,000 payment previously received
that is not used in the payment of accountable expenses if the Public
Offering is not completed.
e. Notwithstanding any election hereunder or any termination
of this Agreement, and whether or not this Agreement is otherwise
carried out, the provisions of Sections 5(a), 6, 8, 9, and 10 shall
not be in any way affected by such election or termination or failure
to carry out the terms of this Agreement or any part hereof.
11. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the
Representative, shall be mailed, delivered, or sent by facsimile transmission
and confirmed by original letter, to Schneider Securities, Inc., 1120 Lincoln
Street, Suite 900, Denver, Colorado 80203, Attention: Keith Koch, with a copy
to Robert W. Walter, Esq., Berliner Zisser Walter & Gallegos, P.C., 1700
Lincoln Street, Suite 4700, Denver, Colorado 80203; or if sent to the Company
shall be mailed, delivered, or telexed or telegraphed and confirmed by letter,
to Multi-Link Telecommunications, Inc., 811 Lincoln Street, 5th Floor, Denver,
Colorado 80203, Attention: Nigel V. Alexander and Shawn B. Stickle, with a copy
to Thomas S. Smith, Esq. , Smith McCullough, P.C., 4643 South Ulster Street,
Suite 900, Denver, Colorado 80237. All notices hereunder shall be effective
upon receipt by the party to which it is addressed.
12. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriters, the Company, and the persons and
entities referred to in Section 8 who are entitled to indemnification or
contribution, and their respective successors, legal representatives, and
assigns (which shall not include any buyer, as such, of the Units, Common Stock
and Warrants or the Additional Securities) 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.
13. Construction. This Agreement shall be construed in accordance with
the laws of the State of Colorado, without giving effect to conflict of laws.
Time is of the essence in this Agreement. The parties acknowledge that this
Agreement was initially prepared by the Representative, and that all parties
have read and negotiated the language used in this Agreement. The parties agree
that, because all parties participated in negotiating and drafting this
Agreement, no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting this Agreement.
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If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement between us.
Very truly yours,
MULTI-LINK TELECOMMUNICATIONS, INC.
By:
-----------------------------------------
Nigel V. Alexander, Chief Executive Officer
By:
-----------------------------------------
Shawn B. Stickle, President and Chief
Operating Officer
Accepted as of the date first above written.
Denver, Colorado
SCHNEIDER SECURITIES, INC.
for itself and any other Underwriters:
By:
------------------------------------------
Thomas Schneider, Chief Executive Officer
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MULTI-LINK TELECOMMUNICATIONS, INC.
(A COLORADO CORPORATION)
SCHEDULE 1
This Schedule sets forth the name of each Underwriter referred to in
the Underwriting Agreement and the number of Units to be sold by the Company.
NUMBER OF
NAME UNITS
---- -----
Schneider Securities, Inc.
---------
Total 1,200,000
=========