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EXHIBIT 1.1
600,000 SHARES OF COMMON STOCK
LET'S PLAY SPORTS, INC.
UNDERWRITING AGREEMENT
_____________, 2001
Schneider Securities, Inc.
1120 Lincoln Street
Suite 900
Denver, Colorado 80203
Dear Sirs:
Let's Play Sports, 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 herein contained, the
Company proposes to sell to the several Underwriters an aggregate of 600,000
shares (the "Firm Shares") of the Company's Common Stock, par value $.001 per
share (the "Common Stock"). The Company also proposes to sell to the several
Underwriters not more than 90,000 additional shares of Common Stock (15% of the
number of shares constituting the Firm Shares) if requested by the
Representative as provided in Section 3 of this Agreement. Any and all shares of
Common Stock to be purchased by the Underwriters pursuant to such option are
referred to herein as the "Additional Shares." The Firm Shares and any
Additional Shares are collectively referred to herein as the "Shares."
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 United States Securities and
Exchange Commission (the "Commission") a registration statement, and may
have filed one or more amendments thereto, on Form SB-2 (Registration No.
333-_____________), 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 Shares, and the warrants referred to in Section 5(p) (the
"Representative's Warrants") and the shares referred to in Section 5(p)
purchasable upon exercise of the Representative's
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Warrants (the "Representative's Warrant Shares"), 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 Shares, the Representative's
Warrants, and the Representative's Warrant Shares 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 "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
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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 has 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 Shares, the Representative's Warrants, and the
Representative's Warrant Shares, 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 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. Each of the Subsidiaries of the Company (the
"Subsidiaries") is a corporation duly organized and validly existing in
good standing under the laws of the jurisdiction of its organization, with
full corporate power and authority to own, lease, and operate its
properties and to conduct its business as described in the Prospectus. The
Company and each Subsidiary is duly qualified to do business and is in good
standing 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 15,000,000
shares of Common Stock, of which 1,785,101 shares of Common Stock are
issued and outstanding and 500,000 shares of Common Stock are reserved for
issuance upon the exercise of options authorized under the
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Company's option plan; and 2,000,000 shares of Preferred Stock, none of
which are issued or outstanding. 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 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 proposed with respect to the
Company or any of its Subsidiaries, 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 and each Subsidiary is not in
violation of, or in
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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 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 and each of the Subsidiaries 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.
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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 registered
its trademark, "Let's Play Sports" with the United States Patent and
Trademark Office. 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 of the Subsidiaries, 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 bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment. Each of the Company
and the Subsidiaries 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 and the
Representative's Warrants. 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 and the
Representative's Warrants. 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. The Representative's Warrants have been duly
authorized by the Company and, when executed
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and delivered by the Company, will be a legal, valid, and binding
obligation of the Company, and will be enforceable against the Company in
accordance with its 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 or the
Representative's Warrants 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 or the
Representative's Warrants; and the execution and delivery, and performance
thereunder of this Agreement and the Representative's Warrants 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.
n. The Shares, the Representative's Warrants and the Representative's
Warrant Shares are validly authorized and reserved for issuance. The
Shares, when issued and delivered in accordance with this Agreement and the
Representative's Warrant Shares, when issued and delivered upon exercise of
the Representative's Warrants, and 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 Shares purchased, the
Representative will receive good title to the Representative's Warrants
purchased and any purchaser of the Representative 's Warrant Shares 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 Shares, the Representative's Warrants and the Representative's
Warrant Shares conform to all statements relating thereto contained in the
Registration Statement and the Prospectus.
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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 Shares.
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 the Company's Common 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, sell or undertake any related action described in such
written agreement, the Company's Common Stock owned by such person prior to
the Effective Date. Any such sales will comply with applicable exemptions
from the registration requirements of the Act. 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 agrees not to sell its Common
Stock for 12 months from the Effective Date except (i) with the
Representative's prior written consent, (ii) in an underwritten public
offering, (iii) in connection with an acquisition, (iv) upon the exercise
of options granted pursuant to the Company's stock option plan, or (v) upon
exercise of the Representative's Warrants.
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
Shares, the Representative's Warrants and the Representative's Warrant
Shares.
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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 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
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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.
(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.
z. No authorization, approval, consent or order of, or filing with,
any Federal, state or local governmental body, authority, self regulatory
authority, agency or official (collectively, the "Governmental
Authorities") is necessary in connection with the issuance and sale of the
Shares and
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the consummation of the transactions contemplated hereby, except such as
may be required by the NASD or have been obtained under the applicable
laws, rules and regulations maintained and enforced by the Governmental
Authorities in their respective jurisdictions or under the Act, state
securities or Blue Sky laws or regulations.
aa. With respect to the physical facilities constructed by the Company
prior to the date hereto, (i) the Company and its respective Subsidiaries
(where applicable) retained licensed contractors to perform any
construction activity, which contractors warranted the work of their
subcontractors in accordance with applicable custom within the commercial
real estate construction business, (ii) to the Company's best knowledge,
such contractors and subcontractors obtained such inspections or approvals
as were required to be obtained from any Governmental Authority, (iii) in
each instance, following completion of construction, the Company was
furnished all certificates of inspection, use and occupancy permits or
licenses as were then required in order for the Company to assume the
occupancy and use of the respective facility, (iv) the Company has not been
notified by any Governmental Authority or third party, and is not aware
itself to the best knowledge of its officers, of any discrepancy between
specifications of an existing facility, on the one hand, and building
codes, regulations and ordinances (including any zoning, setback or other
locational requirements), (v) in the event the Company has withheld any
payment to any contractor or subcontractor due to the failure of such
contractor or subcontractor to perform any of its obligations, such
holdback has since been paid to the contractor or subcontractor, and there
are no material mechanics' or materialmen's liens with respect to any of
the facilities owned or leased by the Company that have not been satisfied
or removed, (vi) the Company has utilized the services of bonded and
insured contractors and subcontractors that maintained performance, labor
and material payment bonds in an amount reasonably satisfactory to the
Company and with respect to post-construction liability, the coverages
maintained by the contractors and subcontractors were in an amount
reasonably acceptable to the Company, and (vii) the Company complied or is
in compliance in all material respects with the terms, conditions,
covenants, representations and warranties imposed upon it pursuant to
applicable (x) construction loan agreements with the Company's construction
lenders, and (y) loan agreements with permanent financing lenders.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
3. Purchase, Sale, and Delivery of the Shares. On the basis of the
representations, warranties, covenants, and agreements of the Company
herein contained, but subject to the terms and
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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 Firm
Shares set forth opposite the Underwriters' names in Schedule 1 hereto.
The purchase price per Firm Share to be paid by the Underwriters shall
be $5.40. The initial public offering price of the Shares shall be $6.00.
Payment for the Firm Shares by the Underwriters shall be made by wire
transfer or 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 Shares 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 Shares as may be
necessary to cover over-allotments, at the same purchase price per
Additional Share as the price per Firm Share provided for in this Section
3. The Representative may purchase Additional Shares when exercising such
option, in its sole discretion. 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 Shares as to
which the option is being exercised, and the time and date, as determined
by the Representative, when such Additional Shares 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 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 Shares by the Representative.
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Payment for the Additional Shares shall be made by wire transfer or 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 Shares to you.
Certificates for the Shares 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 Firm Shares 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 Firm Shares 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 Firm Shares, the number of Firm Shares which each
non-defaulting Underwriter is otherwise obligated to purchase under the
Agreement shall be automatically increased pro rata to absorb the remaining
Firm Shares which the defaulting Underwriter or Underwriters agreed to
purchase; provided, however, that the non-defaulting Underwriters shall not
be obligated to purchase the Firm Shares which the defaulting Underwriter
or Underwriters agreed to purchase in excess of 10% of the total number of
Shares which such non-defaulting Underwriter agreed to purchase hereunder,
and provided further that the non-defaulting Underwriters shall not be
obligated to purchase any Firm Shares 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 Firm Shares 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
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<PAGE> 14
the Representative for the purchase of such Firm Shares 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-defaulting
Underwriters nor the Company shall make arrangements within the 24-hour
periods stated above for the purchase of all the Firm Shares 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
Shares as soon, on or after the effective date of the Registration
Statement, as the Representative deems it advisable so to do. The Shares
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 price of the Shares in your sole
discretion, by reason of changes in general market conditions or otherwise.
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
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<PAGE> 15
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 Shares 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 Shares and Representative's Warrant Shares
in accordance with the provisions hereof and the Prospectus. If, at any
time when a prospectus relating to the Shares or Representative's Warrant
Shares 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
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 Shares
and Representative's Warrant Shares 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
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<PAGE> 16
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 12 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 (i)
with the Representative's prior written consent, (ii) in an underwritten
public offering, (iii) in connection with an acquisition, (iv) upon the
exercise of options granted pursuant to the Company's stock option plan,
(v) upon exercise of the Representative's Warrants.
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 (if applicable),
prepared in accordance with generally accepted accounting principles,
at the end of such fiscal year and for the 12 months then ended;
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;
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<PAGE> 17
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 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. Prior to the Effective Date, and continuing for such period of time
that the Company's Common Stock is publicly traded, designate and maintain
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 ___________________________ as its transfer agent.
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<PAGE> 18
p. On or prior to the Closing Date, sell to the Representative for a
total purchase price of $10, Representative's Warrants entitling the
Representative or its assigns to purchase 60,000 shares of Common Stock at
a price equal to 133% of the public offering price of the Shares, with the
terms of the Representative's Warrants, 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 Warrants, keep reserved
sufficient shares of Common Stock for issuance as Representative's Warrant
Shares upon full exercise of the Representative's Warrants.
r. Adopt procedures for the application of the net proceeds it
receives from the sale of the Shares and apply the net proceeds from the
sale of the Shares substantially in the manner set forth in the
Registration Statement, 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.
s. 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 Shares.
t. 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.
u. 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.
v. File with the Commission all required information concerning use of
proceeds of the Public Offering in Forms 10-Q and 10-K in accordance with
the provisions of the Exchange Act and to provide a copy of such reports to
the Representative and its counsel.
w. 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 Shares within a reasonable time after the
Closing, not to exceed 90 days.
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<PAGE> 19
x. 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 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. At such time as the Common Stock becomes
eligible for listing on the Nasdaq National Market, the Company shall
promptly file a "step-up" application and seek to have the Common Stock
traded on the Nasdaq National Market.
y. 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
under the General Rules and Regulations of the Act and (ii) review (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.
z. Within 90 days of the Effective Date of the Registration Statement,
obtain a "key man" life insurance policies in the amount of $1,000,000 on
the life of Thomas W. Higginson, 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.
aa. 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.
bb. Refrain from filing a Form S-8 registration statement for a period
of 12 months from the Effective Date of the Registration Statement without
the Representative's prior written consent.
cc. 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. Any such
designee will receive reimbursement for all reasonable costs and expenses
incurred in attending meetings of the Board of
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<PAGE> 20
Directors, including but not limited to, food, lodging and
transportation, together with such other fee or compensation (but
excluding options or securities) as is paid by the Company to the
independent member of the Board of Directors who is paid the highest
fee or compensation among any of the independent 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.
dd. Comply in all material respects with the Marketplace Rules of
The Nasdaq Stock Market, Inc., including without limitation, the
corporate governance rules.
ee. With respect to the physical facilities constructed by the
Company subsequent to the date hereto, the Company and its respective
Subsidiaries (where applicable) will: (i) retain licensed contractors
to perform any construction activity, which contractors will warrant
the work of their subcontractors in accordance with applicable custom
within the commercial real estate construction business, (ii) obtain
such inspections or approvals as are required to be obtained from any
Governmental Authority, (iii) secure all certificates of inspection,
use and occupancy permits or licenses as are required in order for the
Company to assume the occupancy and use of the respective facility,
(iv) require its contractors and subcontractors to comply with all
building codes, regulations and ordinances (including any zoning,
setback or other locational requirements), (v) utilize the services of
bonded and insured contractors and subcontractors that maintained
performance, labor and material payment bonds in an amount reasonably
satisfactory to the Company and, with respect to post-construction
liability, the coverages maintained by the contractors and
subcontractors will be in an amount reasonably acceptable to the
Company, and (vii) will comply in all material respects with the
terms, conditions, covenants, representations and warranties imposed
upon it pursuant to applicable (x) construction loan agreements with
the Company's construction lenders, and (y) loan agreements with
permanent financing lenders.
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, 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
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<PAGE> 21
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 Firm Shares,
Additional Shares, the Representative's Warrants and the Representative's
Warrant Shares, 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 Firm Shares, Additional Shares, the
Representative's Warrants and the Representative's 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 Shares 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
Shares. Prior to or immediately following the Closing Date, the Company
shall bear the costs of tombstone announcements if requested to do so by
the Representative.
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 Firm Shares and Additional Shares,
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 Dorsey & Whitney LLP 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 the Company has 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
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<PAGE> 22
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. Each Subsidiary is a corporation duly organized and
validly existing in good standing under the laws of the
jurisdiction of its organization, with full corporate power and
authority to own, lease, and operate its properties and to
conduct its business as described in the Registration Statement
and the Prospectus (and any amendment or supplement thereto); and
all the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, and are owned by the Company
directly, or indirectly through one of the other Subsidiaries,
free and clear of any perfected security interest, or, to the
best knowledge of such counsel after reasonable inquiry, any
other security interest, lien, adverse claim, equity or other
encumbrance;
iii. The authorized capital stock of the Company as of the
date of this Agreement consisted of 15,000,000 shares of Common
Stock, of which 1,785,101 shares of Common Stock are issued and
outstanding, and 500,000 shares of Common Stock are reserved for
issuance upon the exercise of options authorized under the
Company's option plan; and 2,000,000 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;
iv. To the knowledge of counsel, there is no litigation,
arbitration, claim, governmental or other proceeding (formal or
informal), or investigation pending, threatened, or proposed (or
any basis therefor) with respect to the Company or any of its
respective
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<PAGE> 23
operations, businesses, properties, or assets, except as is
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 and
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;
v. 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;
vi. Neither the Company nor any Subsidiary is in violation
or breach of, or in default with respect to, any term of its
Articles of Incorporation or by-laws;
vii. The Company has all requisite power and authority to
execute and deliver and to perform thereunder this Agreement and
the Representative's Warrants. 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 and the Representative's Warrants. Each of this
Agreement and the Representative's Warrants 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 or the Representative's Warrants (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
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<PAGE> 24
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 or the
Representative's Warrants; and the execution and delivery and
performance thereunder of this Agreement and the Representative's
Warrants 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;
viii. The Shares are, and the Representative's Warrant
Shares will be upon exercise of the Representative's Warrants,
validly authorized, validly issued, fully paid, and nonassessable
and are not issued in violation of any preemptive rights of
shareholders, and the Underwriters will have received good title
to the Shares purchased by them from the Company upon payment
therefor, free and clear of all liens, security interests,
pledges, charges, encumbrances, shareholders' agreements, and
voting trusts. The Representative's Warrant Shares have been duly
and validly reserved for issuance pursuant to the terms of the
Representative's Warrants. The Shares, the Representative's
Warrants and the Representative's Warrant Shares conform to all
statements relating thereto contained in the Registration
Statement or the Prospectus;
ix. To the knowledge of counsel, all contracts, agreements,
instruments, leases, and licenses 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 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 by such counsel and to the knowledge of
such counsel accurately reflect the status of such litigation and
provisions purported to be summarized and are correct in all
material respects;
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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 knowledge 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. Such 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. To such counsel's knowledge, the Company and its
Subsidiaries 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 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"); there is no actual or, to
counsel's knowledge, 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;
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
25
<PAGE> 26
whatsoever with respect to any technology developed, employed,
used or licensed by the Company or any Subsidiary, other than is
disclosed in the Prospectus;
xx. The Shares are eligible for quotation on The Nasdaq
SmallCap Market; and
xxi. The issued and outstanding shares of Common Stock and
all other securities issued and sold or exchanged by the Company
were not required to be registered under any applicable federal
securities laws and regulations when issued and sold or exchanged
and were issued and sold or exchanged in compliance with
applicable exemptions from registration under federal securities
laws.
In rendering such opinion, counsel may exclude therefrom any matters
pertaining to any and all gaming laws, rules and regulations. 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 this Section 7, 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.
26
<PAGE> 27
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 Ehrhardt Keefe Steiner & Hottman PC, Certified
Public Accountants, addressed to you and dated the date 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 Firm Shares and the Additional Shares
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 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 Firm Shares and the Additional Shares shall not have objected to
your participation in such offering.
h. The Company shall have received notice that the Common Stock
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, expert witness 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
27
<PAGE> 28
communication (in this Section 8 collectively called an "application")
in any jurisdiction in order to qualify the Common Stock 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 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 Shares, any
28
<PAGE> 29
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 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 Firm
Shares and Additional Shares sold hereunder and the initial public
offering price per Share 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
29
<PAGE> 30
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 Firm Shares and Additional Shares
(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 aggregate exceeds the total public offering
price of the Firm Shares and Additional Shares 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 Firm Shares and Additional Shares 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
30
<PAGE> 31
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 Shares, 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 Shares or the time, after the Registration
Statement becomes effective, when the Shares 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.
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 Firm Shares and Additional Shares, 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 Shares, as the
case may be, on the terms contemplated by the Prospectus due to the
impaired investment quality of the Shares; or if the Dow Jones
Industrial Average or the Nasdaq Composite Index 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
31
<PAGE> 32
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 April 30, 2001 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 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 $60,000, 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,
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<PAGE> 33
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
Let's Play Sports, Inc., 9606 Aero Drive, Suite 1300, San Diego, California
92123, Attention: Thomas W. Higginson, Chief Executive Officer, with a copy
to Thomas S. Smith, Esq. , Dorsey & Whitney LLP, 370 17th Street, Suite
4400, Denver, Colorado 80202. 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 Firm Shares and
Additional Shares) 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.
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,
LET'S PLAY SPORTS, INC.
By:
--------------------------------------------
Thomas W. Higginson, Chief Executive Officer
Accepted as of the date first above written.
Denver, Colorado
SCHNEIDER SECURITIES, INC.
for itself and any other Underwriters:
By:
--------------------------------------------
Thomas W. Higginson, Chief Executive Officer
33
<PAGE> 34
LET'S PLAY SPORTS, 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 Shares to be sold by the Company.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Schneider Securities, Inc.
-------
Total 600,000
=======
</TABLE>
