<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 3, 1996
REGISTRATION NO. 333-11827
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONSEP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
OREGON 2879 93-0874480
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
213 S.W. COLUMBIA STREET
BEND, OREGON 97702
(541) 388-3688
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
VOLKER G. OAKEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CONSEP, INC.
213 S.W. COLUMBIA STREET
BEND, OREGON 97702
(541) 388-3688
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
MICHAEL W. SHACKELFORD, ESQ. BRUCE A. RICH, ESQ.
GREGORY E. STRUXNESS, ESQ. CATHERINE C. HOOD, ESQ.
ATER WYNNE HEWITT DODSON & SKERRITT, LLP REID & PRIEST LLP
222 S.W. COLUMBIA, SUITE 1800 40 WEST 57TH STREET
PORTLAND, OREGON 97201 NEW YORK, NEW YORK 10019
TELEPHONE: (503) 226-1191 TELEPHONE: (212) 603-6780
FACSIMILE: (503) 226-0079 FACSIMILE: (212) 603-2001
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the registration statement number of the earlier
effective registration statement for the same offering. / / ________.
If the Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
registration statement number of the earlier effective registration statement
for the same offering. / / ________.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value..................... 2,300,000(2) $3.78125 $8,696,875(2) $2,635.42
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value, issuable upon
exercise of Representative Warrant(3)........... 175,556 $4.5375 $ 796,585 $ 241.39
- ---------------------------------------------------------------------------------------------------------------------------
Total.................................... 2,475,556 Not Applicable $9,493,460 $2,876.81(4)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 based on the
average of the high and low prices reported on the Nasdaq National Market on
September 27, 1996.
(2) Includes 300,000 shares subject to the Underwriters' over-allotment option.
(3) Pursuant to Rule 416(a) under the Securities Act of 1933, there are also
being registered such additional securities as may be issued pursuant to the
antidilution provisions of the Representative Warrant.
(4) $2,255.39 previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, expected to be incurred by the
Registrant in connection with the offering described in this Registration
Statement. All amounts, except the SEC registration fee, the NASD filing fee and
the Nasdaq National Market listing fee are estimates.
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 2,877
NASD Filing Fee........................................................... 1,234
Nasdaq National Market Listing Fee........................................ 17,500
Printing and Engraving.................................................... 50,000
Accounting Fees and Expenses.............................................. 50,000
Legal Fees and Expenses................................................... 100,000
Blue Sky Expenses (including fees of Counsel)............................. 10,000
Transfer Agent and Registrar Fees......................................... 2,500
Miscellaneous............................................................. 33,389
------
Total................................................................ $267,500
======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As an Oregon corporation, the Company is subject to the Oregon Business
Corporation Act ("OBCA") and the exculpation from liability and indemnification
provisions contained therein. Pursuant to sec.60.047(2)(d) of the OBCA, Article
V of the Company's Third Restated Articles of Incorporation (the "Articles")
eliminates the liability of the Company's directors to the Company or its
shareholders, except from any liability related to a breach of the duty of
loyalty, actions not in good faith and certain other liabilities. The Articles
require the Company to indemnify its directors and officers to the fullest
extent not prohibited by law.
sec.60.387, et seq., of the OBCA allows corporations to indemnify their
directors and officers against liability where the director or officer has acted
in good faith and with a reasonable belief that actions taken were in the best
interests of the corporation or at least not adverse to the corporation's best
interests and, if in a criminal proceeding, the individual had no reasonable
cause to believe the conduct in question was unlawful. Under the OBCA,
corporations may not indemnify against liability in connection with a claim by
or in the right of the corporation in which the director or officer was adjudged
liable to the corporation, but may indemnify against the reasonable expenses
associated with such claims. Corporations may not indemnify against breaches of
the duty of loyalty. The OBCA mandates indemnification against all reasonable
expenses incurred in the successful defense of any claim made or threatened
whether or not such claim was by or in the right of the corporation. Finally, a
court may order indemnification if it determines that the director or officer is
fairly and reasonably entitled to indemnification in view of all the relevant
circumstances whether or not the director or officer met the good faith and
reasonable belief standards of conduct set out in the statute.
The OBCA also provides that the statutory indemnification provisions are
not deemed exclusive of any other rights to which directors or officers may be
entitles under a corporation's articles of incorporation or bylaws, any
agreement, general or specific action of the board of directors, vote of
shareholders or otherwise.
Effective November 1, 1993, the Company entered into indemnity agreements
with Gerard H. Langeler, Walter C. Babcock, Volker G. Oakey and Peter H.
Gleason, each of whom is a member of the Board of Directors (Mr. Oakey is also
an officer of the Company). In addition, effective as of November 1, 1993, the
Company entered into indemnity agreements with Richard M. Welch, Sr. and Fred F.
Nazem, each of whom was then a member of the Board of Directors, but
subsequently resigned from such position. Furthermore, effective as of November
1, 1993, the Company entered into indemnity agreements with Howard L. Allred,
II-1
<PAGE> 3
Janice M. Gillespie and William D. Raven, each of whom was then an officer of
the Company, but has subsequently terminated his or her employment with the
Company. Effective as of September 1, 1994, the Company also entered into an
indemnity agreement with Kenneth C. Rymer, an officer of the Company. In
addition, effective as of November 1, 1993 and September 1, 1994, the Company
entered into an indemnity agreement with Garrard L. Hargrove, who was then an
officer of the Company, but has subsequently terminated his employment with the
Company. Effective June 3, 1996, the Company entered into indemnity agreements
with Philip E. Barak, a member of the Board of Directors, and Larry Katz, an
officer of the Company. Effective September 6, 1996, the Company entered into an
indemnity agreement with Steven Hartneier, an officer of the Company. Each
agreement provides for indemnification of the indemnitee to the fullest extent
allowed by law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Within the last three years, the Company has sold securities without
registration under the Securities Act of 1933, as amended (the "Securities Act")
in the transactions described below. In the case of the exercise of stock
options pursuant to the Company's 1992 Stock Incentive Plan described in
paragraphs (b) through (e), and (g) through (j) below, these transactions were
effected in reliance on Rule 701 promulgated pursuant to authority granted under
Section 3(b) of the Securities Act. In the case of the stock issuances described
in paragraphs (a) and (f) below, these transactions were effected in reliance on
Section 4(2) of the Securities Act as not involving any public offering.
(a) On May 13, 1994, the Company issued 85,827 shares of Common Stock as
partial consideration for the purchase of Chemfree Environment Inc., a
Canadian-based manufacturer and distributor of non-toxic insect control products
("Chemfree"). The Common Stock issued in this transaction was valued at an
aggregate of $461,320 and was issued to the three shareholders of Chemfree.
(b) On June 21, 1994, Stephen Horn, a former employee of the Company,
exercised a previously issued Incentive Stock Option to purchase 600 shares of
Common Stock for an aggregate cash consideration of $1,050.
(c) On November 28, 1994, Alan Guggenheim, a former employee of the
Company, exercised a previously issued Nonqualified Stock Option to purchase
3,600 shares of Common Stock for an aggregate cash consideration of $1,800.
(d) On January 17 and May 10, 1995, William Raven, a former employee of the
Company, exercised previously issued Incentive Stock Options to purchase 20,000
and 10,000 shares of Common Stock, respectively, for an aggregate cash
consideration of $35,000 and $17,500, respectively.
(e) On January 18, 1995, Frank Lesniak, a former employee of the Company,
exercised a previously issued Incentive Stock Option to purchase 280 shares of
Common Stock for an aggregate cash consideration of $490.
(f) On February 6, 1995, the Company issued 171,671 shares of Common Stock
as partial consideration for the purchase of Farchan Laboratories, Inc., a
Florida-based specialty chemicals manufacturer ("Farchan"). The Common Stock
issued in this transaction was valued at an aggregate of $354,071 and was issued
to the four shareholders of Farchan.
(g) On June 9, 1995, Anthony Andersen, an employee of the Company,
exercised a previously issued Nonqualified Stock Option to purchase 1,600 shares
of Common Stock for an aggregate cash consideration of $400.
(h) On May 3 and May 30, 1996, Janice Gillespie, an employee of the
Company, exercised previously issued Incentive Stock Options to purchase 7,800
and 3,200 shares of Common Stock, respectively, for an aggregate cash
consideration of $13,650 and $5,600, respectively.
(i) On May 8, 1996, Mark Landers, an employee of the Company, exercised a
previously issued Nonqualified Stock Option to purchase 2,000 shares of Common
Stock for an aggregate cash consideration of $500.
II-2
<PAGE> 4
(j) On May 13, 1966, Howard Allred, an employee of the Company, exercised
previously issued Incentive Stock Options to purchase 28,000 shares of Common
Stock for an aggregate cash consideration of $49,000.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------------------
<S> <C>
1.0 Form of Underwriting Agreement
2.1 Share Purchase Agreement Respecting Chemfree Environment Inc. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, filed on August 12, 1994)
2.2 Agreement for Purchase and Sale of Stock of Richard Hunt, Inc. d.b.a. Sierra Ag
Chemical (Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, filed on August 12, 1994)
2.3 Agreement and Plan of Merger with Farchan Laboratories, Inc.**
3.1 Third Restated Articles of Incorporation of Consep, Inc.***
3.2 Amended provisions of Article II of Third Restated Articles of Incorporation of
Consep, Inc.****
3.3 Second Restated Bylaws of Consep, Inc.***
4.0 Form of Stock Certificate***
5.0 Opinion of Ater Wynne Hewitt Dodson & Skerritt as to the legality of the securities
being registered
10.1 Form of Indemnity Agreement between Consep, Inc. and each of its executive officers
and directors***
10.2 1992 Stock Incentive Plan***
10.3 1993 Stock Incentive Plan, as amended (Incorporated by reference to the Company's
Registration Statement on Form S-8 dated August 8, 1996, File No. 333-09759)
10.4 1993 Stock Option Plan for Nonemployee Directors***
10.5 Registration Rights Agreement, as amended***
10.6 License Agreement with Bend Research, Inc.***
10.7 Commercial Lease for Bend, Oregon facility****
10.8 Loan and Security Agreement with Silicon Valley Bank, as amended***
10.9 Fourth Amendment to Registration Rights Agreement***
10.10 Fifth Amendment to Registration Rights Agreement****
10.11 Master Equipment Lease Agreement with Financing for Science International, Inc.,
including Rental Schedule No. 1 and Schedules A and B thereto (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994, filed on November 14, 1994)
10.12 Amendment to License Agreement with Bend Research, Inc.**
10.13 Amendment No. 2 to License Agreement with Bend Research, Inc., including Paid-Up
License Schedule 1 thereto**
10.14 Loan Modification Agreement with Silicon Valley Bank**
10.15 Schedule to Loan and Security Agreement with Silicon Valley Bank**
10.16 Loan Modification Agreement with Silicon Valley Bank (Incorporated by reference to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995,
filed on August 14, 1995)
10.17 Schedule to Loan Modification Agreement with Silicon Valley Bank (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1995, filed on August 14, 1995)
10.18 Sixth Amendment to Registration Rights Agreement (Incorporated by reference to the
Company's Registration Statement on Form S-1 dated September 12, 1995, File No.
33-96002)
10.19 1995 Employee Stock Purchase Plan (Incorporated by reference to the Company's
Registration Statement on Form S-8 dated July 28, 1995, File No. 33-95130)
</TABLE>
II-3
<PAGE> 5
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------------------
<S> <C>
10.20 Amendment No. 3 to License Agreement with Bend Research, Inc.*
10.21 Seventh Amendment to Registration Rights Agreement*
10.22 Loan Modification Agreement with Silicon Valley Bank*
10.23 Amended and Restated Schedule to Loan Modification Agreement with Silicon Valley
Bank*
10.24 Form of Representative Warrant Agreement, including form of Representative Warrant
10.25 Eighth Amendment to Registration Rights Agreement
11.0 Statement re: Computation of Per Share Earnings
21.0 List of Subsidiaries of Consep, Inc. (Incorporated by reference to the Company's
Registration Statement on Form S-1 dated September 12, 1995, File No. 33-96002)
23.1 Consent of Ater Wynne Hewitt Dodson & Skerritt, LLP (included in legal opinion filed
as Exhibit 5.0)
23.2 Consent of KPMG Peat Marwick LLP*
24.0 Powers of Attorney*
</TABLE>
- ---------------
* Previously filed
** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, filed on March 30, 1995.
*** Incorporated by reference to the Company's Registration Statement on Form
S-1 dated February 3, 1994, File No. 33-71846.
**** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, filed on March 30, 1994.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule VIII -- Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referenced in Item 14 of the Registration
Statement, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
II-4
<PAGE> 6
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(4) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bend, State
of Oregon, on the 3rd day of October, 1996.
CONSEP, INC.
By: /s/ VOLKER G. OAKEY
------------------------------------
Volker G. Oakey, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been duly signed by the following persons on the
3rd day of October, 1996, in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ ------------------------------
<C> <S> <C>
/s/ VOLKER G. OAKEY President and Chief Executive
- ------------------------------------------ Officer (Principal Executive
Volker G. Oakey Officer), Director
LARRY KATZ* Vice President, Finance and
- ------------------------------------------ Chief Financial Officer
Larry Katz (Principal Financial and
Accounting Officer)
WALTER C. BABCOCK* Director
- ------------------------------------------
Walter C. Babcock
PETER H. GLEASON* Director
- ------------------------------------------
Peter H. Gleason
PHILIP E. BARAK* Director
- ------------------------------------------
Philip E. Barak
*By: /s/ VOLKER G. OAKEY
- ------------------------------------------
Volker G. Oakey
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S> <C>
1.0 Form of Underwriting Agreement............................................
2.1 Share Purchase Agreement Respecting Chemfree Environment Inc.
(Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, filed on August 12, 1994)............
2.2 Agreement for Purchase and Sale of Stock of Richard Hunt, Inc. d.b.a.
Sierra Ag Chemical (Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994, filed on August
12, 1994).................................................................
2.3 Agreement and Plan of Merger with Farchan Laboratories, Inc.**............
3.1 Third Restated Articles of Incorporation of Consep, Inc.***...............
3.2 Amended provisions of Article II of Third Restated Articles of
Incorporation of Consep, Inc.****.........................................
3.3 Second Restated Bylaws of Consep, Inc.***.................................
4.0 Form of Stock Certificate***..............................................
5.0 Opinion of Ater Wynne Hewitt Dodson & Skerritt as to the legality of the
securities being registered...............................................
</TABLE>
<TABLE>
<C> <S> <C>
10.1 Form of Indemnity Agreement between Consep, Inc. and each of its executive
officers and directors***.................................................
10.2 1992 Stock Incentive Plan***..............................................
10.3 1993 Stock Incentive Plan, as amended (Incorporated by reference to the
Company's Registration Statement on Form S-8 dated August 8, 1996, File
No. 333-09759)............................................................
10.4 1993 Stock Option Plan for Nonemployee Directors***.......................
10.5 Registration Rights Agreement, as amended***..............................
10.6 License Agreement with Bend Research, Inc.***.............................
10.7 Commercial Lease for Bend, Oregon facility****............................
10.8 Loan and Security Agreement with Silicon Valley Bank, as amended***.......
10.9 Fourth Amendment to Registration Rights Agreement***......................
10.10 Fifth Amendment to Registration Rights Agreement****......................
10.11 Master Equipment Lease Agreement with Financing for Science International,
Inc., including Rental Schedule No. 1 and Schedules A and B thereto
(Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994, filed on November 14, 1994).....
10.12 Amendment to License Agreement with Bend Research, Inc.**.................
10.13 Amendment No. 2 to License Agreement with Bend Research, Inc., including
Paid-Up License Schedule 1 thereto**......................................
10.14 Loan Modification Agreement with Silicon Valley Bank**....................
10.15 Schedule to Loan and Security Agreement with Silicon Valley Bank**........
10.16 Loan Modification Agreement with Silicon Valley Bank (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995, filed on August 14, 1995)............................
10.17 Schedule to Loan Modification Agreement with Silicon Valley Bank
(Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995, filed on August 14, 1995)............
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S> <C>
10.18 Sixth Amendment to Registration Rights Agreement (Incorporated by
reference to the Company's Registration Statement on Form S-1 dated
September 12, 1995, File No. 33- 96002)...................................
10.19 1995 Employee Stock Purchase Plan (Incorporated by reference to the
Company's Registration Statement on Form S-8 dated July 28, 1995, File No.
33-95130).................................................................
10.20 Amendment No. 3 to License Agreement with Bend Research, Inc.* ...........
10.21 Seventh Amendment to Registration Rights Agreement*.......................
10.22 Loan Modification Agreement with Silicon Valley Bank*.....................
10.23 Amended and Restated Schedule to Loan Modification Agreement with Silicon
Valley Bank*..............................................................
10.24 Form of Representative Warrant Agreement, including form of Representative
Warrant...................................................................
10.25 Eighth Amendment to Registration Rights Agreement.........................
11.0 Statement re: Computation of Per Share Earnings...........................
21.0 List of Subsidiaries of Consep, Inc. (Incorporated by reference to the
Company's Registration Statement on Form S-1 dated September 12, 1995,
File No. 33-96002)........................................................
23.1 Consent of Ater Wynne Hewitt Dodson & Skerritt, LLP (included in legal
opinion filed as Exhibit 5.0).............................................
23.2 Consent of KPMG Peat Marwick LLP*.........................................
24.0 Powers of Attorney*.......................................................
</TABLE>
- ---------------
* Previously filed
** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, filed on March 30, 1995.
*** Incorporated by reference to the Company's Registration Statement on Form
S-1 dated February 3, 1994, File No. 33-71846.
**** Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, filed on March 30, 1994.
<PAGE> 1
EXHIBIT 1.0
CONSEP, INC.
2,000,000 SHARES OF COMMON STOCK, $.01 PAR VALUE
UNDERWRITING AGREEMENT
, 1996
To the Representatives named in
Schedule I hereto of the Under
writers named in Schedule II
hereto
Ladies and Gentlemen:
Consep, Inc., an Oregon corporation (the "Company"), proposes to issue and
sell to the several Underwriters (as defined in Section 15 hereof) 1,455,563
shares of its Common Stock, $.01 par value (the "Common Stock"), and Richard M.
Welch, Sr. and Maureen M. Welch (together, the "Selling Shareholder") propose to
sell to the several Underwriters 544,437 shares of the Company's Common Stock
(such 2,000,000 shares of the Company's Common Stock collectively, the "Firm
Shares"), in each case as indicated in Schedule II. The Company also proposes to
issue and sell to the several Underwriters not more than 300,000 additional
shares of its Common Stock (the "Additional Shares") if and to the extent that
the Representatives (as defined in Section 15 hereof) shall have determined to
exercise, on behalf of the Underwriters, the right to purchase such shares of
Common Stock granted to the Underwriters in Section 3 hereof. The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"Shares." The Company also proposes to issue and sell, pursuant to a
Representative Warrant Agreement (the "Warrant Agreement") to the
Representatives certain warrants (the "Warrants"), for the purchase of an
additional 175,556 shares of the Company's Common Stock. The Underwriters have
designated the Representatives to execute this Agreement on their behalf and to
act for them in the manner provided in this Agreement.
The Company and the Selling Shareholder confirm as follows their respective
agreements with the Representatives and the Underwriters.
1. Representations and Warranties of the Company. The Company represents,
warrants and agrees with the Underwriters that:
1.1 A registration statement on Form S-1 (Reg. No. 333-11827) relating
to the Shares, including a Preliminary Prospectus (as hereinafter defined),
and such amendments to such registration statement as may have been
required to the date of this Agreement have been filed by the Company with
the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), and the applicable rules
and regulations of the Commission thereunder (the "Rules and Regulations").
Copies of such registration statement and of each amendment heretofore
filed by the Company with the Commission have been delivered to the
Representatives for the Underwriters. After the execution of this
Agreement, the Company will file with the Commission either (a) if the
registration statement, as it may have been amended, has been declared by
the Commission to be effective under the Act, a prospectus in the form most
recently included in that registration statement (or, if an amendment
thereto shall have been filed, in such amendment), with such changes or
insertions as are required by Rule 430A under the Act or permitted by Rule
424(b) under the Act, or (b) if that registration statement, as it may have
been amended, has not been declared by the Commission to be effective under
the Act, an amendment to that registration statement, including a form of
prospectus. As used in this Agreement, the term "Registration Statement"
means that registration statement, as amended at the time it was or is
declared effective, and any amendment thereto that was or is thereafter
declared effective, including all financial schedules and exhibits thereto
and any information omitted
<PAGE> 2
therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined); the term "Preliminary Prospectus"
means each prospectus subject to completion filed with that registration
statement or any amendment thereto (including the prospectus subject to
completion, if any, included in the Registration Statement at the time it
was or is declared effective); and the term "Prospectus" means the
prospectus first filed with the Commission pursuant to Rule 424(b) under
the Act or, if no prospectus is so filed pursuant to Rule 424(b), the
prospectus included in the Registration Statement. The Company has caused
to be delivered to the Underwriter copies of each Preliminary Prospectus
and has consented to the use of those copies for the purposes permitted by
the Act.
1.2 Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus or instituted
proceedings for such purpose. When the Registration Statement was or is
declared effective, it (a) contained or will contain all statements
required to be stated therein in accordance with, and complied or will
comply with the requirements of, the Act and the Rules and Regulations of
the Commission thereunder in all material respects and (b) did not or will
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein not
misleading. When the Prospectus and each amendment or supplement thereto is
filed with the Commission pursuant to Rule 424(b) (or, if the Prospectus or
such amendment or supplement is not required so to be filed, when the
Registration Statement containing such Prospectus or amendment or
supplement thereto was or is declared effective) and on the Firm Closing
Date and any Option Closing Date (as each such term is hereinafter
defined), the Prospectus, as amended or supplemented at any such time, (i)
contained or will contain all statements required to be stated therein in
accordance with, and complied or will comply with the requirements of, the
Act and the Rules and Regulations in all material respects and (ii) did not
or will not include any untrue statement of a material fact or omit to
state any material fact necessary in order make the statements therein not
misleading. The foregoing provisions of this Section 1.2 do not apply to
statements or omissions made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement
thereto in reliance upon and in conformity with information furnished in
writing to the Company on behalf of the Underwriters by the Representatives
expressly for use therein. The Company has not distributed and will not
distribute any offering material in connection with the offering or sale of
the Shares other than the Registration Statement, any Preliminary
Prospectus or the Prospectus or other materials, if any, permitted by the
Act.
1.3 The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of Oregon and is
duly qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction where the ownership or leasing of its
property or the conduct of its business requires such qualification, except
where failure to qualify would not have a material adverse effect on the
Company's business, financial condition, results of operations or
prospects. The Company has all requisite corporate power and authority to
own or lease its property and conduct its business as described in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
1.4 The Company does not own, directly or indirectly, any capital
stock of any corporation, any interest in any partnership, joint venture or
limited liability company or any other equity interest or participation in
any other person, other than as described in Exhibit 21.0 as incorporated
in the Registration Statement (each, a "Subsidiary"). Each Subsidiary has
been duly organized and is validly existing in good standing under the laws
of the jurisdiction of its formation, and has all requisite corporate power
and authority to own or lease its property and conduct its business as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
Each Subsidiary is duly qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction where the
ownership or leasing of its property or the conduct of its business
requires such qualification, except where failure to qualify would not have
a material adverse effect on the business, financial condition, results of
operations or prospects of such Subsidiary or the Company. Complete and
correct copies of the articles of incorporation and the by-laws (or other
organizational documents) of the Company and each of its Subsidiaries, and
all amendments thereto, have been
2
<PAGE> 3
delivered to the Representatives, and no changes therein will be made
subsequent to the date hereof and prior to the Firm Closing Date or, if
later, any Option Closing Date.
1.5 The Company has all requisite corporate power and authority to
enter into and perform its obligations under this Agreement and the Warrant
Agreement. The execution and delivery of this Agreement and the Warrant
Agreement have been duly authorized by all necessary corporate action on
the part of the Company, and this Agreement and the Warrant Agreement have
been duly executed and delivered by the Company and are valid and binding
agreements of the Company, enforceable against the Company in accordance
with their terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and except
as rights to indemnity and contribution under this Agreement may be limited
by applicable law. The issuance, offering and sale by the Company to the
Underwriters of the Shares being sold by the Company pursuant to this
Agreement, the issuance of the Warrants to the Representatives pursuant to
the Warrant Agreement, the compliance by the Company with the provisions of
this Agreement and the consummation of the other transactions contemplated
in this Agreement do not (i) require the consent, order, approval,
authorization, registration, filing of any declaration with or
qualification of any shareholder of the Company or any court or
governmental or regulatory agency, authority or other body, except such as
have been obtained and such as may be required under state securities or
"blue sky" laws or the bylaws and rules of the National Association of
Securities Dealers, Inc. (the "NASD"), in connection with the purchase and
distribution of the Shares by the Underwriters and, if the registration
statement filed with respect to the Shares (as amended) is not effective
under the Act as of the time of execution hereof, such as may be required
(and shall be obtained as provided in this Agreement) under the Act, or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon any of the assets of the Company or any Subsidiaries
pursuant to the terms or provisions of, or conflict with or result in a
breach or violation of, or constitute a default under, any contract,
indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary or any of their respective
properties is bound or subject, or the articles of incorporation or by-laws
of the Company or the articles of incorporation or by-laws of any
Subsidiary, or any statute, rule, regulation, judgment, decree, or order of
any court or other governmental or regulatory authority or any arbitrator
applicable to the Company or any Subsidiary.
1.6 The capital stock of the Company and the Warrants conform in all
material respects to the descriptions thereof contained in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus). All of the issued shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive or similar rights. There are not outstanding
options, warrants or other rights granted by the Company to purchase shares
of its Common Stock or other securities or obligations convertible into
shares of its Common Stock or into debt securities other than as described
in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus). The Shares being sold by the Company
pursuant to this Agreement and the Warrants have been duly authorized by
all necessary corporate action on the part of the Company and, when issued
and delivered to and paid for by the Underwriters or, in the case of the
Warrants, the Representatives, pursuant to this Agreement and the Warrant
Agreement, will be validly issued, fully paid, nonassessable and free of
preemptive or similar rights, and the Warrants will constitute legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law).
The Common Stock issuable upon the exercise of the Warrants has been duly
authorized and reserved by the Company, and when issued, as provided for in
the Warrants, will be duly and validly issued, fully paid and
nonassessable. No holder of outstanding securities of the Company is
entitled as such to any preemptive or other right to subscribe for any of
the Shares or Warrants. Except as described in the Prospectus (or if the
Prospectus is not in existence, the most recent Preliminary Prospectus), no
holders of any securities of the Company or of any options, warrants or
other convertible or exchangeable securities of the Company have the right
to
3
<PAGE> 4
include any securities issued by the Company as part of the Registration
Statement or to require the Company to file a registration statement under
the Act and no person or entity holds any anti-dilution rights with respect
to any securities of the Company. No person or other entity has rights
(other than rights which have been validly waived) to the registration of
any securities of the Company because of the filing of the Registration
Statement. The Company has reserved an aggregate of 1,160,303 shares of
Common Stock for issuance upon exercise or conversion, as applicable, of
outstanding options, warrants and convertible securities, including the
Warrants and of other contingently issuable shares of Common Stock. The
Company has caused to be duly executed legally binding and enforceable
agreements pursuant to which all of its officers and directors and all
persons or entities that, directly or beneficially, own 5% or more of the
Company's Common Stock outstanding and/or other securities convertible into
or exchangeable for Common Stock of the Company (each a "Principal
Shareholder"), have agreed not to, directly or indirectly, offer, offer to
sell, contract to sell, sell, grant any option to purchase or otherwise
transfer, assign, pledge, hypothecate or otherwise encumber or dispose of
any shares of Common Stock of the Company or securities convertible into or
exercisable or exchangeable for such Common Stock (or announce any such
offer, contract, sale, grant, assignment, pledge or other disposition or
encumbrance) for a period from the date of this Agreement until 90 days
following the Firm Closing Date, without the prior written consent of Value
Investing Partners, Inc. (the "Lock-up Agreements"). Any sales by a holder
subject to the foregoing restriction during such period and permitted by
Value Investing Partners, Inc. must be effected through Value Investing
Partners, Inc. and be subject to its customary brokerage commissions. The
Company has caused the transfer agent for its Common Stock to place "stop
transfer" orders on the Company's stock ledger to give effect to the
Lock-up Agreements.
1.7 All issuances of equity and debt securities of the Company have
been effected pursuant to valid private offerings exempt from registration
under the Act or registered for offer and sale under the Act. Since January
1, 1995, no compensation was paid to or on behalf of any member of the
NASD, or any affiliate or employee thereof, in connection with any such
offering, other than to Pacific Crest Securities Inc. in connection with
the offering contemplated by registration statement (No. 33-96002).
1.8 The consolidated financial statements of the Company, together
with the related notes and schedules thereto, included in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) fairly present the consolidated
financial condition of the Company and its Subsidiaries as of the dates
indicated and the consolidated results of operations of the Company and its
Subsidiaries for the periods specified. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles, consistently applied throughout the periods involved. Financial
information set forth in the Registration Statement and the Prospectus (or
if the Prospectus is not in existence, the most recent Preliminary
Prospectus) under the headings "Prospectus Summary -- Summary Consolidated
Financial Information," "Capitalization," "Dilution," "Selected
Consolidated Financial Data," and Management's Discussion and Analysis of
Financial Condition and Results of Operations" fairly presents, on the
basis stated therein, the information set forth therein and has been
derived from or on a basis consistent with that of the audited financial
statements included therein. No other financial statements or schedules are
required to be in the Registration Statement or the Prospectus.
1.9 KPMG Peat Marwick LLP (the "Accountants"), which has certified
certain financial statements of the Company and delivered its report with
respect to the financial statements and schedules as specified and included
in the Registration Statement and the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), are independent
public accountants with respect to the Company as required by the Act and
the Rules and Regulations.
1.10 Since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), (i) except as
otherwise contemplated therein, there has been no material adverse change
in the business, properties, operations, condition (financial or
otherwise), results of operations or prospects of the Company and its
Subsidiaries, taken as a whole, whether or not arising in the ordinary
course of business, (ii) except as otherwise stated therein, there have
been no transactions entered into by the Company or
4
<PAGE> 5
its Subsidiaries and no commitments made by the Company or any Subsidiary
that, individually or in the aggregate, are material with respect to the
Company and its Subsidiaries, taken as a whole, (iii) except as otherwise
stated therein, there has not been any obligation, direct or contingent,
incurred by the Company or any Subsidiary, except obligations in the
ordinary course of business, (iv) except as otherwise stated therein, there
has not been any change in the capital stock or indebtedness of the Company
or any Subsidiary and (v) there has been no dividend or distribution of any
kind declared, paid or made by the Company or any Subsidiary in respect of
any class of its capital stock.
1.11 Except as set forth in the Registration Statement and the
Prospectus (or if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there are no actions, suits, proceedings or
investigations pending or threatened against or affecting the Company or
any of its Subsidiaries or any officers of the Company or its Subsidiaries,
in their capacity as such, before or by any federal or state court,
commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, wherein an unfavorable ruling, decision or
finding might materially and adversely affect the Company or any Subsidiary
or their respective businesses, properties, operations, condition
(financial or otherwise), results of operations or prospects.
1.12 Neither the Company nor any Subsidiary is (i) in violation of its
articles of incorporation or by-laws or (ii) in default in any material
respect in the performance or observance of any obligation, agreement,
covenant or condition contained in any material contract, indenture,
mortgage, deed of trust, loan agreement, note, debenture, lease or other
agreement or instrument to which the Company or any Subsidiary is a party
or by which any of them or any of their respective properties may be bound
or subject.
1.13 The Company and each Subsidiary owns or possesses adequate rights
to use all intellectual property, including all U.S. and foreign patents,
trademarks, service marks, trade names, copyrights, inventions, know-how,
trade secrets, proprietary technologies, processes and substances, or
applications or licenses therefor (collectively, the "Patents"), that are
described in the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), and any other rights or interests in
items of intellectual property as are necessary for the conduct of the
business now conducted or proposed to be conducted by it as described in
the Prospectus (or, such Preliminary Prospectus); and neither the Company
nor any Subsidiary is aware of the granting of any patent rights to, or the
filing of applications therefor by, others, nor is the Company nor any
Subsidiary aware of, nor has the Company nor any Subsidiary received notice
of, infringement of or conflict with, asserted rights of others with
respect to any of the foregoing. All such intellectual property rights and
interests are (i) valid and enforceable and (ii) to the knowledge of the
Company, not being infringed by any third parties in a manner that would
have a material adverse effect on the Company or any Subsidiary or their
respective businesses, properties, operations, condition (financial or
otherwise), results of operations or prospects.
1.14 Each of the Company and each Subsidiary possesses adequate
licenses, orders, authorizations, approvals, certificates, clearances or
permits issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct its business as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
and, except as disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there are no pending
or, to the knowledge of the Company, threatened, proceedings relating the
to revocation or modification of any such license, order, authorization,
approval, certificate, clearance or permit which would have a material
adverse effect on the Company or any Subsidiary or their respective
businesses, properties, prospects, operations, condition (financial or
otherwise) or results of operations.
1.15 The Company and each Subsidiary has good and marketable title to
all properties and assets described in the Prospectus (or, if the
Prospectus is not in existence,the most recent Preliminary Prospectus) as
owned by it, free and clear of all liens, charges, encumbrances or
restrictions except such as are described in the Prospectus (or such
Preliminary Prospectus) and which are not material in amount and do not
adversely affect the use made and proposed to be made of such properties
and assets
5
<PAGE> 6
by the Company and its Subsidiaries. Each of the Company and each
Subsidiary has valid, subsisting and enforceable leases for the properties
described in the Prospectus as leased by it.
1.16 There is no document or contract of a character required to be
described in the Registration Statement or the Prospectus (or if the
Prospectus is not in existence, the most recent Preliminary Prospectus), or
to be filed as an exhibit to the Registration Statement which is not
described or filed as required. All such contracts to which the Company or
any Subsidiary is a party have been duly authorized, executed and delivered
by the Company or such Subsidiary, constitute valid and binding agreements
of the Company or such Subsidiary and are enforceable against the Company
or such Subsidiary in accordance with the terms thereof.
1.17 Except as disclosed in or specifically contemplated by the
Prospectus, the Company and each Subsidiary is conducting business in
compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations, except where failure to be in compliance would not materially
adversely affect the Company or any Subsidiary or their respective
businesses, properties, prospects, operations, condition (financial or
otherwise) or results of operations.
1.18 None of the Company or any Subsidiary is an "investment company"
or an entity "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
1.19 Each of the Company and each Subsidiary is (i) in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) has received all permits,
clearances, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) is in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental laws, failure
to receive required permits, clearances, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
clearances, licenses or approvals would not, singly or in the aggregate,
have a material adverse effect on the Company or any Subsidiary or their
respective businesses, properties, operations, condition (financial or
otherwise), results of operations or prospects. In the ordinary course of
its business, the Company conducts a periodic review of the effect of
Environmental Laws on the business, properties, operations, condition
(financial and otherwise), results of operations and prospects of the
Company and each Subsidiary, in the course of which it identifies and
evaluates associated costs and liabilities (including, without limitation
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, clearance,
license or approval, any related constraints on operating activities and
any potential liabilities to third parties). On the basis of such review,
the Company has reasonably concluded that such associated costs and
liabilities would not, singly or in the aggregate have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, or their
businesses, properties, operations, condition (financial or otherwise),
results of operations or prospects.
1.20 No labor dispute with the employees of the Company or any
Subsidiary exists, or to the Company's knowledge, is threatened or imminent
that could result in a material adverse change in the condition (financial
or otherwise), business, prospects, operations, properties or results of
operations of the Company. No representation question exists respecting the
employees of the Company or any Subsidiary.
1.21 Except as described in the Prospectus (or if the Prospectus is
not in existence, the most recent Preliminary Prospectus), the Company does
not maintain, sponsor or contribute to any program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan" or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") (any of the foregoing, an "ERISA Plan"). The
Company does not maintain or contribute to a defined benefit plan, as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code that
6
<PAGE> 7
could subject the Company to any tax penalty on prohibited transactions and
that has not adequately been corrected. Each ERISA Plan is in compliance
with all material reporting, disclosure and other requirements of the Code
and ERISA as they relate to any such ERISA Plan. Determination letters have
been received from the Internal Revenue Service with respect to each ERISA
Plan which is intended to comply with Code Section 401(a), stating that
such ERISA Plan and the attendant trust are qualified thereunder.
1.22 The Company and each of its Subsidiaries has filed all necessary
federal, state, local and foreign income, franchise, sales, use, employee
withholding and other tax returns relating to the operations of the Company
and its Subsidiaries and all taxes shown as due thereon have been paid; and
the Company has no knowledge of any tax deficiency which has been or might
be asserted or threatened against the Company or any of its Subsidiaries
which could have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, or their businesses, properties, prospects,
operations, condition (financial or otherwise) or results of operations.
1.23 All material transactions between the Company and any Subsidiary,
on the one hand, and any of the Principal Shareholders, officers, directors
or key employees of the Company or any Subsidiary, on the other hand, have
been accurately and fully disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
1.24 Each of the Company and each Subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which it is
engaged; neither the Company nor any Subsidiary has been refused any
material insurance coverage sought or applied for, and the Company has no
reason to believe that it will not be able to renew its and each
Subsidiary's existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely
affect the condition (financial or otherwise), business, prospects,
properties, or operations or results of operations of the Company or any
Subsidiary, except as described in or contemplated by the Prospectus (and,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
1.25 The Company's Common Stock is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended ("the Exchange
Act"), and is quoted on the Nasdaq National Market. The Company has taken
no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or terminating the
listing of the Common Stock on the Nasdaq National Market, nor has the
Company received any notification that the Commission or the NASD is
contemplating terminating such registration or listing.
1.26 To the best of the Company's knowledge, neither the Company nor
any Subsidiary, nor any of their officers, employees, agents or any other
person acting on behalf of the Company or Subsidiary has, directly or
indirectly, given or agreed to give any money, gift or similar benefit
(other than legal price concessions to customers in the ordinary course of
business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business
of the Company (or assist the Company in connection with any actual or
proposed transaction) which might subject the Company or any other such
person to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign). The Company believes that
its internal accounting controls are sufficient to cause the Company and
its Subsidiaries to comply with the Foreign Corrupt Practices Act of 1977,
as amended.
1.27 Neither the Company nor any of its or its Subsidiaries' officers,
directors or controlling persons has taken, directly or indirectly, any
action designed to, or that might 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.
7
<PAGE> 8
1.28 The Company and its Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with United States
generally accepted accounting principles and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
1.29 No person has acted as a finder on behalf of the Company in
connection with the transactions contemplated herein and the Company will
indemnify the Underwriters with respect to any claim for finders' fees by
someone who was acting on behalf of the Company. The Company has no
management or financial consulting agreements with anyone. No promoter,
officer, director or holder of 5% or more of any class of securities of the
Company is, directly or indirectly, associated with an NASD member, except
as has been previously disclosed in writing to the Representatives.
1.30 No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required
by this Agreement to be delivered to the Underwriter was, or will be, when
made, inaccurate, untrue or incorrect in any material respect.
2. Representations and Warranties of the Selling Shareholder. The Selling
Shareholder represents, warrants and agrees with the Representatives and the
Underwriters that:
2.1 The Selling Shareholder now has, and at the time of delivery
thereof hereunder will have, (i) good and marketable title to the Firm
Shares to be sold by the Selling Shareholder hereunder, free and clear of
all liens, encumbrances and claims whatsoever, and (ii) full legal right
and power, and all authorizations and approvals required by law, to sell,
transfer and deliver such Firm Shares to the Underwriters hereunder. Upon
the delivery of and payment for such Firm Shares hereunder, the Selling
Shareholder will deliver good and marketable title thereto, free and clear
of all liens, encumbrances and claims whatsoever.
2.2 The performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets of the
Selling Shareholder pursuant to the terms or provisions of, or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the acceleration of any obligation of the
Selling Shareholder under, any contract or other agreement to which the
Selling Shareholder is a party or by which the Selling Shareholder or any
of its properties are bound or affected, or under any ruling, decree,
judgment, order, statute, rule or regulation of any court or governmental
agency or body having jurisdiction over the Selling Shareholder or its
properties.
2.3 No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for
the consummation by the Selling Shareholder of the transactions on its part
contemplated herein, except such as have been obtained under the Act or the
Rules and Regulations and such as may be required under state securities or
"blue sky" laws or the by-laws and rules of the NASD in connection with the
purchase and distribution by the Underwriters of the Firm Shares to be sold
by the Selling Shareholder.
2.4 All information with respect to the Selling Shareholder contained
in the Registration Statement and the Prospectus (or if the Prospectus is
not in existence, the most recent Preliminary Prospectus) furnished or to
be furnished in writing by the Selling Shareholder complied and will comply
with all applicable provisions of the Act and the Rules and Regulations,
contains and will contain all statements required to be stated therein in
accordance with the Act and the Rules and Regulations, and does not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading.
2.5 This Agreement and the Lock-Up Agreements and custodian agreements
between the Company and the Selling Shareholder have been duly executed by
the Selling Shareholder and are valid, binding and enforceable against the
Selling Shareholder in accordance with their terms.
8
<PAGE> 9
2.6 Other than as permitted by the Act and the Rules and Regulations,
the Selling Shareholder has not distributed and will not distribute any
Preliminary Prospectus, the Prospectus or any other offering material in
connection with the offering and sale of the Shares. The Selling
Shareholder has not taken, directly or indirectly, any action designed to,
or which might 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.
3. Purchase, Sale and Delivery of the Shares.
3.1 On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein
set forth, the Company and the Selling Shareholder, severally and not
jointly, agree to sell the Firm Shares to the respective Underwriters, and
the Underwriters, severally and not jointly, agree to purchase from the
Company and the Selling Shareholder the respective number of Firm Shares
set opposite their names in Schedule II hereto, in each case at a purchase
price (the "Purchase Price") of $ per Share (representing a
$ per Share underwriting discount from the public offering price
of $ per Share).
3.2 In addition, on the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters shall have the right from time to time
to purchase, severally and not jointly, up to 300,000 Additional Shares in
the aggregate, at the Purchase Price. Additional Shares may be purchased
hereunder solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Shares. Each day and time at which
payment and delivery for the Additional Securities are to be made is
hereinafter called an "Option Closing Date." If any Additional Shares are
to be purchased on an Option Closing Date, each Underwriter agrees,
severally and not jointly, to purchase the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Additional Shares to be purchased as the number of Firm Shares
set forth in Schedule II opposite the name of such Underwriter bears to the
total number of Firm Shares.
3.3 Payment for the Firm Shares shall be made to the Company and the
Selling Shareholder by bank check or checks or wire transfer, as requested
by the Company and the Selling Shareholder, payable in New York Clearing
House funds, at the offices of Reid & Priest LLP, 40 West 57th Street, New
York, New York, 10019 (or such other place or places of payment as shall be
agreed upon by the Company, the Selling Shareholder and the Representatives
in writing), upon the delivery of the Firm Shares at said offices (or such
other place or places of delivery as shall be agreed upon by the Company
and the Representatives in writing) to the Representatives for the
respective accounts of the Underwriters against receipt therefor signed by
the Representatives on behalf of themselves and as agent for the other
Underwriters. Such payment and delivery shall be made at 10:00 A.M., New
York time on , 1996 (or on such later business day as shall be
agreed upon by the Company and the Representatives in writing), unless
postponed in accordance with the provisions of Section 10 hereof. The day
and time at which payment and delivery for the Firm Securities are to be
made is herein called the "Firm Closing Date".
3.4 Payment for any Additional Shares shall also be made to the
Company by bank check or checks or wire transfer, as requested by the
Company, payable in New York Clearing House funds, at the offices of Reid &
Priest LLP, 40 West 57th Street, New York, New York 10019 (or such other
place or places of payment as shall be agreed upon by the Company and the
Representatives in writing), upon the delivery of such Additional Shares at
said offices (or such other place or places of delivery as shall be agreed
upon by the Company and the Representatives in writing) to the
Representatives for the respective accounts of the Underwriters against
receipt therefor as aforesaid at 10:00 A.M., New York time, on each Option
Closing Date (which may be the same as the Firm Closing Date but shall in
no event be earlier than the Firm Closing Date nor later than five business
days after the giving of the related notice hereinafter referred to) as
shall be designated in a written notice to the Company from the
Representatives of their determination, on behalf of the Underwriters, to
purchase a number, specified in
9
<PAGE> 10
said notice, of Additional Shares. Each notice of the determination to
exercise the option to purchase Additional Shares and the related Option
Closing Date shall be given at any time within 45 days after the date of
this Agreement.
3.5 Delivery of the Shares shall be made in definitive, fully
registered form registered in such names and in such denominations as the
Representatives may request in writing to the Company not later than two
full business days prior to the Firm Closing Date or Option Closing Date,
as the case may be, or if no such request is received, in the names of the
respective Underwriters for the respective number of Firm Shares set forth
opposite the name of each Underwriter in Schedule II, and in the case of
Additional Shares, for the respective number of shares determined in
accordance with Section 3.2 hereof.
3.6 The Company agrees to make the certificates for the Shares
available for inspection by the Underwriters at the offices of Value
Investing Partners, Inc. at least 24 hours prior to the Firm Closing Date,
or Option Closing Date, as the case may be, in definitive, fully registered
form, and as requested pursuant to Section 3.5 hereof.
3.7 The Company hereby agrees that, without the prior written consent
of Value Investing Partners, Inc., the Company will not, directly or
indirectly, offer, sell, offer to sell, contract to sell, grant any option
to purchase or otherwise dispose of (or announce any offer, sale, offer of
sale, contract of sale, grant of any option to purchase or other
disposition of) any shares of Common Stock or other equity security of the
Company or any long term debt of the Company or any securities convertible
into or exercisable or exchangeable for Common Stock or other equity
security or long term debt of the Company (other than the Shares, the
Warrants, shares of Common Stock to be issued upon exercise of options and
warrants outstanding on the date of this Agreement, or grants of options
under the Company's 1993 Stock Incentive Plan and rights granted under the
Company's 1995 Employee Stock Purchase Plan) during the period from the
date of this Agreement until 90 days after the Firm Closing Date. Any sales
or other dispositions subject to the foregoing restriction and permitted by
Value Investing Partners, Inc. during such 90 day period must be effected
through Value Investing Partners, Inc. and be subject to its customary
brokerage commissions.
3.8 The cost of original issue tax stamps, if any, in connection with
the issuance and delivery of the Shares by the Company and the Selling
Shareholder to the Underwriters shall be borne by the Company and the
Selling Shareholder (on a pro rata basis). The Company and the Selling
Shareholder will pay and save the Underwriters and any subsequent holders
of the Shares harmless from any failure or delay in paying state stamp and
other transfer taxes, if any, which may be payable or determined to be
payable in connection with the issuance or sale to the Underwriters of the
Shares.
3.9 On the Firm Closing Date, the Company shall issue and sell to the
Representatives the Warrants for a purchase price of $100.00. The Warrant
Agreement and the Warrants shall be satisfactory in form and substance to
the Representatives. Payment for the Warrants shall be made on the Firm
Closing Date.
4. Offering by the Underwriter. The Company is advised by the
Representatives that the Underwriters propose to make a public offering of their
respective portions of the Shares as soon after the Registration Statement and
this Agreement have become effective as the Representatives deem advisable. The
Company is further advised by the Representatives that the Shares are to be
offered to the public at $ a share (the public offering price) and to
certain dealers selected by the Representatives at a price that represents a
concession not in excess of $. a share under the public offering price,
and that any Underwriter may allow, and such dealers may allow, a concession,
not in excess of $. a share, to certain other dealers.
5. Covenants of the Company. The Company and the Selling Shareholder (only
as to Sections 5.13 and 5.15 in the case of the Selling Shareholder), covenant
and agree with the Representatives and the Underwriters that:
5.1 The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, to
become effective as promptly as possible. If required, the Company will
file the Prospectus and any amendment or supplement thereto with the
Commission in the
10
<PAGE> 11
manner and within the time period required by Rule 424(b) under the Act.
During any time when a prospectus relating to the Shares is required to be
delivered under the Act, the Company (i) will comply with all requirements
imposed upon it by the Act and the Rules and Regulations to the extent
necessary to permit the continuance of sales or of dealings in the Shares
in accordance with the provisions hereof and of the Prospectus, as then
amended or supplemented, and (ii) will not file with the Commission any
prospectus or amendment referred to in Section 1.1 hereof, any amendment or
supplement to such prospectus or any amendment to the Registration
Statement as to which the Representatives shall not previously have been
advised and furnished with a copy for a reasonable period of time prior to
the proposed filing as to which filing the Representatives shall not have
given their consent. The Company will prepare and file with the Commission,
in accordance with the Rules and Regulations, promptly upon request by the
Representatives or counsel to the Underwriters, any amendments to the
Registration Statement or amendments or supplements to the Prospectus that
may be necessary or advisable in connection with the distribution of the
Shares by the Underwriters, and will use its best efforts to cause any such
amendment to the Registration Statement to be declared effective by the
Commission as promptly as possible. The Company will advise the
Underwriter, promptly after receiving notice thereof, of the time when the
Registration Statement or any amendment thereto has been filed or declared
effective or the Prospectus or any amendment or supplement thereto has been
filed and will provide evidence satisfactory to the Underwriter of each
such filing or effectiveness.
5.2 The Company will advise the Representatives, promptly after
receiving notice or obtaining knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, (ii) the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, (iii) the institution, threat or
contemplation of any proceeding for any such purpose or (iv) any request
made by the Commission for amending the Registration Statement, for
amending or supplementing the Prospectus or for additional information. The
Company will use its best efforts to prevent the issuance of any such stop
order and, if any such stop order is issued, to obtain the withdrawal
thereof as promptly as possible.
5.3 The Company will, in cooperation with counsel for the
Underwriters, arrange for the qualification of the Shares for offering and
sale under the securities or blue sky laws of such jurisdictions as the
Representatives may designate and will continue such qualifications in
effect for as long as may be necessary to complete the distribution of the
Shares; provided, however, that in connection therewith the Company shall
not be required to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction. In each jurisdiction in
which the Shares shall have been qualified or are exempt from such
qualification, the Company will make and file such statements and reports
in each year as are or may be required by the laws of such jurisdiction.
5.4 If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus, as then amended or supplemented, would include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any
other reason it is necessary at any time to amend or supplement the
Prospectus to comply with the Act or the Rules or Regulations, the Company
will promptly notify the Representatives thereof, and, subject to Section
5.1 hereof, will prepare and file with the Commission, at the Company's
expense, an amendment to the Registration Statement or an amendment or
supplement to the Prospectus that corrects such statement or omission or
effects such compliance.
5.5 The Company will, without charge, provide to the Underwriters and
to counsel for the Underwriters (i) as many signed copies of the
Registration Statement originally filed with respect to the Shares and each
amendment thereto (in each case including exhibits thereto) as the
Underwriters may reasonably request, (ii) copies of full and complete sets
of all comments of the Commission or its staff and all responses thereto
with respect to the Registration Statement, (iii) as many conformed copies
of such Registration Statement and each amendment thereto (in each case
without exhibits thereto) as the Underwriters may reasonably request and
(iv) so long as a prospectus relating to the Shares is required to
11
<PAGE> 12
be delivered under the Act, as many copies of each Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto as the
Underwriters may reasonably request.
5.6 The Company will apply the net proceeds from the sale of the
Shares being sold by it as set forth under "Use of Proceeds" in the
Prospectus.
5.7 If, at the time the Registration Statement becomes effective, any
information shall have been omitted therefrom in reliance upon Rule 430A
under the Act, then immediately following the execution of this Agreement,
the Company will prepare, and file or transmit for filing with the
Commission in accordance with such Rule 430A and Rule 424(b) under the Act,
copies of the Prospectus including the information omitted in reliance on
Rule 430A, or, if required by such Rule 430A, a post-effective amendment to
the Registration Statement (including an amended Prospectus), containing
all information so omitted.
5.8 The Company will cause the Shares to be listed on the Nasdaq
National Market under the symbol "CSEP," and agrees not to take any action
to delist its Common Stock (including the Shares) unless required to do so
by the NASD. The Company will file with the NASD all documents and notices
that are required, respectively, of companies with securities that are
quoted on the Nasdaq National Market.
5.9 During a period of five years commencing with the Firm Closing
Date, the Company will furnish to the Representatives, at the Company's
expense, copies of (i) all periodic and special reports furnished to
shareholders of the Company and (ii) all information, documents and reports
filed by the Company with the Commission.
5.10 The Company will make generally available to holders of its
securities as soon as may be practicable an earnings statement for a period
of 12 months commencing after the effective date of the registration
statement and ending not later than 15 months thereafter, and satisfying
the provisions of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations.
5.11 The Company will promptly file all reports and any definitive
proxy or information statements required to be filed with the Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act, subsequent to the
date of the Prospectus and for so long as the delivery of a prospectus is
required in connection with the offering or sale of the Shares.
5.12 If at any time after the Registration Statement becomes effective
until the date the Representatives advise the Company that the distribution
of the Shares has been completed (which in the absence of express notice
will be deemed to be the expiration of the over-allotment option exercise
period), any rumor in any financial market or any publication or event
shall occur, in each case relating to or affecting the Company, as a result
of which in the opinion of the Representatives the market price of the
Common Stock of the Company has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after
written notice from the Representatives advising the Company to the effect
set forth above, forthwith consult with the Representatives concerning the
substance of and advisability of disseminating a press release or other
public statement, reasonably satisfactory to the Representatives,
responding to or commenting on such rumor, publication or event.
5.13 During the period commencing on the date of this Agreement and
expiring 180 days hereafter, neither the Company nor the Selling
Shareholder will at any time, directly or indirectly, take any action
designed to, or that might reasonably be expected to, cause or result in,
the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Shares.
5.14 Prior to the 90th day after the Firm Closing Date, the Company
will provide the Representatives and their designees with five bound
volumes of the transaction documents relating to the Registration Statement
and the closing(s) hereunder, in form and substance reasonably satisfactory
to the Underwriter.
12
<PAGE> 13
5.15 The Selling Shareholder will deliver to the Representatives at
least three days prior to the Firm Closing Date a properly completed United
States Treasury Department Form W-9.
5.16 The Company grants to Value Investing Partners, Inc. a right of
first refusal, for a period of twelve months from the date of this
Agreement, to act as broker, dealer or underwriter for any sale of
securities (equity or debt) for cash to be made by the Company or any of
its present or future subsidiaries, excluding shares of Common Stock
underlying presently outstanding options or warrants or otherwise issued
pursuant to the Company's 1993 Stock Incentive Plan or 1995 Employee Stock
Purchase Plan. The specific role to be played by Value Investing Partners,
Inc. in such a transaction shall be as mutually agreed to between the
Company and Value Investing Partners, Inc. Value Investing Partners, Inc.
shall have a period of at least 30 days from its receipt of written notice
from the Company describing the covered transaction upon which to exercise
this right in respect of any proposed transaction or sale covered by this
right. The Company shall consult with Value Investing Partners, Inc. with
regard to any covered transaction or sale prior to consulting any other
prospective broker, dealer or underwriter, and shall offer to Value
Investing Partners, Inc. the opportunity to act on terms not less favorable
to the Company than the Company can secure elsewhere.
6. Expenses.
6.1 The Company shall pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated as contemplated by Section 7, 10 or 11 hereof, including all
costs and expenses incident to (i) the preparation, printing and filing or
other production of documents with respect to the transactions, including
any costs of printing the registration statement originally filed with
respect to the Shares and any amendment thereto, any Preliminary Prospectus
and the Prospectus and any amendment or supplement thereto, this Agreement,
any selling group or selected dealer agreement and any other agreements and
documents governing the underwriting arrangements, and any blue sky
memoranda, (ii) all reasonable and necessary arrangements relating to the
delivery to the Underwriters of copies of the foregoing documents, (iii)
the fees and disbursements of the counsel, the Accountants and any other
experts or advisors retained by the Company, (iv) the preparation, issuance
and delivery to the Underwriters of any certificates evidencing the Shares
and Warrants, including transfer agent's and registrar's fees or any
transfer or other taxes payable thereon, (v) the qualification of the
Shares and Warrants under state securities and blue sky laws, including
filing fees and fees and disbursements of counsel for the Underwriters
relating thereto and any fees and disbursements of local counsel, if any,
retained for such purpose, (vi) the filing fees of the Commission and the
NASD, (vii) the addition to listing of the Shares on the Nasdaq National
Market, and (viii) the placing of "tombstone advertisements" in reasonable
publications selected by the Representatives, all postage, mailing and
delivery expenses, any "road shows" or other meetings with prospective
investors in the Shares, including transportation, accommodation, meal,
conference room, audio-visual presentation and similar expenses of the
Underwriters or their representatives or designees (other than as shall
have been specifically approved by the Representatives to be paid for by
the Underwriters), such expenses related to "tombstones," postage and "road
shows" and such other meetings not to exceed $25,000. In addition to the
foregoing, the Company shall pay the Representatives for their expenses
incurred in connection with the offering of the Shares a non-accountable
expense allowance (the "Expense Allowance") in the amount of 1% of the
gross offering proceeds, $25,000 of which (the "Advance") has already been
paid by the Company to the Representatives. The Representatives hereby
acknowledge receipt of the Advance, which shall be credited against such
Expense Allowance, and agree to reimburse the Company to the extent the
expenses incurred by the Representatives are less than $25,000. The unpaid
portion of the Expense Allowance, based on the gross proceeds from the sale
of the Firm Shares, shall be deducted from the funds to be paid to the
Company for the Firm Shares pursuant to Section 3.3 hereof, on the Firm
Closing Date. To the extent any Additional Shares are sold, any remaining
non-accountable Expense Allowance based on the gross proceeds from the sale
of the Additional Shares shall be deducted from the funds to be paid to the
Company for the Additional Shares pursuant to Section 3.3 hereof, on the
related Option
13
<PAGE> 14
Closing Date. The Company warrants, represents and agrees that all such
payments and reimbursements will be promptly and fully made.
6.2 Notwithstanding any other provision of this Agreement, if the
Company or the Selling Shareholder determine not to proceed with the
offering of the Shares contemplated hereby for any reason, or the
Representatives elect to terminate this Agreement as contemplated by
Section 7 or 11 hereof, the Company agrees that, in addition to the Company
paying its own expenses and the other expenses as described in clauses (i)
through (viii) in Section 6.1 hereof, (a) the Company shall reimburse the
Representatives for all of their additional actual expenses, not to exceed
$25,000 (in addition to blue sky legal fees and expenses and the Advance),
in the event the sale of the Firm Shares is not completed because of the
Company's actions or failure to take necessary actions as are reasonably
required under this Agreement, (b) the Representatives shall be entitled to
retain the Advance paid by the Company pursuant to Section 6.1 hereof (to
the extent such expenses have been incurred) and (c) if the Company or the
Selling Shareholder determine not to proceed with the offering of the
Shares and prior to the expiration of the 120 day period following such
termination the Company consummates a sale of its securities in an offering
comparable to the proposed offering of the Shares, the Company shall pay
the Representatives a "break-up" fee of $150,000 upon the closing of such
other offering.
7. Conditions of the Underwriter's Obligations. The several obligations of
the Underwriters to purchase and pay for the Shares on the Firm Closing Date and
any Option Closing Date, if any, shall be subject, in the Underwriters' sole
discretion, to the accuracy of the representations and warranties of the Company
and the Selling Shareholder contained herein as of the date hereof and as of the
Firm Closing Date and such Option Closing Date, if any, as if made on and as of
the Firm Closing Date or Option Closing Date, as the case may be, to the
accuracy of the statements of the Company's officers made pursuant to the
provisions hereof, to the full and timely performance by the Company and the
Selling Shareholder of their covenants and agreements hereunder and to the
following additional conditions:
7.1 If the Registration Statement, as heretofore amended, has not been
declared effective as of the time of execution hereof, the Registration
Statement, as heretofore amended or as amended by an amendment thereto to
be filed prior to the Firm Closing Date, shall have been declared effective
not later than 5:00 p.m. New York City time, on the date hereof or such
later time and date as shall have been consented to in writing by the
Representatives; if required, the Prospectus and any amendment or
supplement thereto shall have been filed with the Commission in the manner
and within the time period required by Rule 424(b) and Rule 430A under the
Act; no stop order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceedings for that purpose shall
have been instituted or threatened or, to the knowledge of the Company or
the Representatives, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for
additional information to be included to the Registration Statement or the
Prospectus or otherwise.
7.2 The Underwriter shall have received an opinion, dated the Firm
Closing Date or Option Closing Date, as the case may be, of Ater Wynne
Hewitt Dodson & Skerritt, LLP, counsel to the Company, to the effect that:
(a) The Company has been duly incorporated and is validly existing
as a corporation under the laws of the State of Oregon. Each Subsidiary
is duly incorporated and is a validly existing corporations in good
standing under the laws of its respective jurisdiction of incorporation.
The Company and each Subsidiary is duly qualified to do business and is
in good standing in all jurisdictions where the ownership or leasing of
properties or the conduct of their respective businesses require such
qualification (except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the business,
financial condition, results of operations or prospects of the Company
or any Subsidiary), and has all requisite corporate power and authority
to own or lease its properties and conduct its respective businesses as
described in the Registration Statement and the Prospectus.
14
<PAGE> 15
(b) The Company has full power and authority to enter into this
Agreement and to carry out all the terms and provisions hereof to be
carried out by it. The execution and delivery of this Agreement have
been duly authorized by all necessary corporate action on the part of
the Company, and this Agreement has been duly executed and delivered by
the Company, and is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization
and other similar laws affecting creditors' rights generally and by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and except as rights to
indemnity and contribution under this Agreement may be limited by
applicable law.
(c) The authorized, issued and outstanding capital stock of the
Company conforms as to legal matters in all material respects to the
description thereof contained in the Registration Statement and the
Prospectus; and the statements set forth under the heading "Description
of Capital Stock," insofar as those statements purport to summarize the
terms of the Company's articles of incorporation, provides a fair
summary of such terms. All necessary corporate proceedings have been
taken in order to authorize validly such authorized capital stock of the
Company; all outstanding shares of capital stock (including the Firm
Shares and any Additional Shares when certificates therefor have been
delivered against payment therefor in accordance with the provisions of
this Agreement) have been duly authorized and validly issued, are fully
paid and nonassessable, have not been issued in violation of or subject
to any statutory preemptive rights or, to the knowledge of such counsel,
other rights to subscribe for or purchase any securities and conform to
the description thereof contained in the Prospectus. To such counsel's
knowledge, no holder of outstanding securities of the Company is
entitled as such to any preemptive or other right to subscribe for any
of the Shares; and to such counsel's knowledge, no person is entitled to
have securities registered by the Company under the Registration
Statement or otherwise under the Act other than as described in the
Prospectus. The Warrants have been duly authorized by all necessary
corporate action on the part of the Company and constitute legal, valid
and binding obligations of the Company enforceable in accordance with
their respective terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally or by general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law). The Common Stock issuable upon the exercise of the
Warrants has been duly authorized and reserved by the Company and, when
issued as provided for in the Warrants, will be duly and validly issued,
fully paid and nonassessable and will conform in all material respects
to the description thereof in the Prospectus.
(d) The certificates evidencing the Shares to be delivered
hereunder comply as to form with Oregon law.
(e) Except as disclosed in or specifically contemplated by the
Prospectus, to the knowledge of such counsel, there are no outstanding
options, warrants or other rights calling for the issuance of, and no
commitments, plans or arrangements to issue, any shares of capital stock
of the Company or any security convertible into or exchangeable for
capital stock of the Company.
(f) To the knowledge of such counsel, none of (i) the execution and
delivery of this Agreement, (ii) the issuance, offering and sale by the
Company to the Underwriter of the Shares pursuant to this Agreement, nor
(iii) the compliance by the Company with the other provisions of this
Agreement and the consummation of the transactions contemplated hereby,
(A) requires the consent, approval, order, authorization, registration,
filing of any declaration with or qualification of or with any
shareholder of the Company or any court or governmental authority,
agency, authority or other body, except such as have been obtained under
the Act and such as may be required under state securities or blue sky
laws or the by-laws and rules of the NASD in connection with the
distribution of the Shares by the Underwriters, or (B) conflicts with or
results in a breach or violation of, or constitutes a default under, any
contract, indenture, mortgage, deed of trust, loan agreement, note,
debenture, lease or other agreement or instrument to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary
or any of their respective properties
15
<PAGE> 16
is bound or subject, or the articles of incorporation or by-laws of the
Company or of any Subsidiary, or any statute or any judgment, decree,
order, rule or regulation of any court or other governmental or
regulatory authority known to such counsel which is applicable to the
Company or any Subsidiary.
(g) To the knowledge of such counsel, neither the Company nor any
of its Subsidiaries is in violation of their respective articles of
incorporation or bylaws or in breach of or default with respect to any
provision of any agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument known to such counsel to
which the Company or any of its Subsidiaries is a party or by which the
Company, any of its Subsidiaries or any of their respective properties
or assets (tangible or intangible) may be bound or affected, except
where such default would not materially adversely affect the Company or
any of its Subsidiaries; and to the knowledge of such counsel, the
Company and each of its Subsidiaries are in compliance with all laws,
rules, regulations, judgments, decrees, orders and statutes of any court
or jurisdiction to which they are subject, except where noncompliance
would not materially adversely affect the Company or any of its
Subsidiaries.
(h) To the knowledge of such counsel, no holders of securities of
the Company have rights which have not been waived to the registration
of shares of Common Stock or other securities of the Company because of
the filing of the Registration Statement by the Company or the offering
contemplated hereby.
(i) The statements in the Prospectus, insofar as those statements
constitute matters of law or legal conclusions, or summaries of the
instruments, contracts and agreements referred to therein, constitute a
fair summary of those matters, legal conclusions, instruments, contracts
and agreements and include all material terms thereof, as applicable. To
the knowledge of such counsel, no legal or governmental proceedings or
investigations, civil, administrative or criminal, are pending or
threatened to which the Company or any Subsidiary is a party or to which
the property of the Company or any Subsidiary is subject, and no
contract or other document known to such counsel is required to be
described in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement that is not described
therein or filed as required.
(j) All descriptions in the Prospectus of laws, statutes, licenses,
rules, regulations and legal and governmental proceedings are accurate
in all material respects and fairly present the information required to
be shown in all material respects, and, to such counsel's knowledge,
there is no law, statute, license, rule or regulation required to be
described in the Registration Statement and the Prospectus which is not
accurately described in all material respects. To the knowledge of such
counsel, the Company and each Subsidiary possesses adequate licenses,
orders, authorizations, approvals, clearances, certificates or permits
issued by the appropriate federal, state or local regulatory agencies or
bodies necessary to conduct its business in the manner presently being
conducted as described in the Registration Statement and the Prospectus,
and, to such counsel's knowledge, there are no pending or threatened
proceedings relating to the revocation or modification of any such
license, order, authorization, approval, clearance, certificate or
permit, except as disclosed in the Registration Statement and the
Prospectus.
(k) The Registration Statement is effective under the Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made
in the manner and within the time period required by Rule 424(b); and no
stop order suspending the effectiveness of the Registration Statement or
any amendment thereto has been issued, and to such counsel's knowledge,
no proceedings for that purpose have been instituted or threatened or,
are contemplated by the Commission.
(l) The Registration Statement originally filed with respect to the
Shares and each amendment thereto and the Prospectus (in each case,
other than the financial statements and schedules and other financial
and statistical information contained therein, as to which such counsel
need express no opinion) comply as to form in all material respects with
the applicable requirements of the Act and Rules and Regulations.
16
<PAGE> 17
(m) None of the Company or its Subsidiaries is an "investment
company" or an entity "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
In addition, such counsel shall state that counsel has participated in the
preparation of the Registration Statement and Prospectus and has participated in
conferences with officials and other representatives of the Company, the
Underwriters, counsel to the Underwriters and the independent certified public
accounts of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified, and do not assume responsibility for, the
accuracy or completeness of the statements contained in the Registration
Statement or the Prospectus (except to the extent stated in paragraphs (c), (i)
and (j) above), nothing has come to the attention of such counsel which leads
them to believe that, the Registration Statement, at the time it became
effective under the Act, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus on its issue
date or as of the date of such opinion, (except as aforesaid) contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need not express any opinion with respect to the financial statements
and the notes thereto and the schedules and other financial and statistical data
derived therefrom included in the Registration Statement or the Prospectus).
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials, copies of which certificates will
be provided to the Representatives.
References to the Registration Statement and the Prospectus in this Section
7.2 shall include any amendment or supplement thereto at the date of such
opinion.
7.3 The Underwriter shall have received an opinion of Chernoff,
Vilhauer, McClung & Stenzel, patent counsel for the Company, dated the Firm
Closing Date, or Option Closing Date, as the case may be, to the effect
that:
(a) The United States patent applications of the Company prepared
by such counsel have been properly prepared as to form and filed with
the United States Patent and Trademark Office (the "Patent Office") and
the Company has instructed such counsel to pursue such applications; and
each of the United States patents of the Company listed on an exhibit to
such opinion (the "Patents") has been properly filed by or assigned to
the Company by an assignment in proper form recorded in the Patent
Office executed by the named inventors or the prior recorded assignee.
(b) Such counsel is not aware of any action, claim or proceeding
pending or threatened against the Company or any Subsidiary alleging
that the Company or any Subsidiary is infringing or otherwise violating
any patents or trade secrets owned by others; other than as described in
the Registration Statement and Prospectus, such counsel is not aware of
any contractual rights granted by the Company or any Subsidiary to third
parties in respect to any of the Patents; such counsel has not been
consulted by the Company regarding any infringement by any third parties
of any of the Patents; and such counsel is not aware of any pending or
threatened action, claim or proceeding challenging the validity or scope
of the Patents.
(c) The descriptions under the captions "Risk Factors -- Reliance
Upon Proprietary Rights" and "Business -- Products [Chart of Checkmate
Products]" and " -- Proprietary Rights" in the Registration Statement or
Prospectus to the extent that they constitute matters of law or legal
conclusions, have been reviewed by such counsel, are correct in all
material respects and fairly present the patent situation of the
Company.
In addition, such counsel shall state that although they have not verified
the accuracy or completeness of the statements contained in the Prospectus,
nothing has come to the attention of such counsel that caused them to believe
that, at the time the Registration Statement became effective, or at the date of
such opinion, the descriptions under the captions "Risk Factors -- Reliance Upon
Proprietary Rights" and "Business --
17
<PAGE> 18
Products [Chart of Checkmate Products]" and "-- Proprietary Rights" in the
Prospectus contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.
References to the Registration Statement and the Prospectus in this Section
7.3 shall include any amendment or supplement thereto at the date of such
opinion.
7.4 The Underwriter shall have received an opinion, dated the Firm
Closing Date or Option Closing Date, as the case may be, of Fox,
Rothschild, O'Brien & Frankel, counsel to the Selling Shareholder, to the
effect that:
(a) The Selling Shareholder has (i) good and marketable title to
the Firm Shares to be sold by the Selling Shareholder hereunder, free
and clear of all liens, encumbrances and claims whatsoever, and (ii)
full legal right and power, and all authorizations and approvals
required by law, to sell, transfer and deliver such Firm Shares to the
Underwriters hereunder. Upon the delivery of and payment for such Firm
Shares pursuant to this Agreement, the Selling Shareholder will have
delivered good and marketable title thereof, free and clear of all
liens, encumbrances and claims whatsoever.
(b) The performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets of
the Selling Shareholder pursuant to the terms or provisions of, or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the acceleration of any
obligation of the Selling Shareholder under, any contract or other
agreement to which the Selling Shareholder is a party or by which the
Selling Shareholder or any of its properties are bound or affected, or
under any ruling, decree, judgment, order, statute, rule or regulation
of any court or governmental agency or body having jurisdiction over the
Selling Shareholder or its properties.
(c) All information with respect to the Selling Shareholder
contained in the Registration Statement and Prospectus complies with all
applicable provisions of the Act and their Rules and Regulations, does
not contain an untrue statement of a material fact and does not omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading.
References to the Registration Statement and the Prospectus in this Section
7.4 shall include any amendment or supplement thereto at the date of such
opinion.
7.5 The Representatives shall have received from the Accountants a
letter dated the date the Registration Statement is declared effective and
a letter dated the Firm Closing Date, or Option Closing Date, as the case
may be, in form and substance satisfactory to the Representatives, to the
effect that: (a) they are independent public accountants with respect to
the Company within the meaning of the Act and the applicable Rules and
Regulations; (b) in their opinion, the financial statements examined by
them and included in the Registration Statement and the Prospectus comply
as to form in all material respects with the applicable accounting
requirements of the Act and the applicable Rules and Regulations; and (c)
covering, as of a date not more than five business days prior to the date
of such letter, such other matters as the Representatives request.
References to the Registration and the Prospectus in this Section 7.5 with
respect to the letters referred to above shall include any amendment or
supplement thereto at the date of any such letter.
7.6 The Representatives shall have received on the Firm Closing Date
or Option Closing Date, as the case may be, a certificate of the Company,
dated such date, signed by the Chief Executive Officer and Chief Financial
Officer of the Company, to the effect that:
(a) The representations and warranties of the Company in this
Agreement are true and correct in all material respects, as if made on
and as of the date of such certificate, and the Company has
18
<PAGE> 19
complied in all material respects with all the agreements and covenants
and satisfied all the conditions on its part to be performed or
satisfied at or prior to such date.
(b) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or to the Company's knowledge are pending or threatened under
the Act.
(c) When the Registration Statement became effective the
Registration Statement contained all material information required to be
included therein by the Act and the Rules and Regulations and conformed
in all material respects to the requirements of the Act and the Rules
and Regulations, and the Registration Statement, and any amendment or
supplement thereto to the date of such certificate, did not and does not
include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; the Prospectus, as amended or
supplemented as of the date of such certificate does not include any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; since the
effective date of the Registration Statement, there has occurred no
event as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein not misleading or
untrue in any material respect, except that no representation need be
made with respect to information provided by or on behalf of the
Underwriters for inclusion in the Prospectus or Registration Statement.
(d) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been (i) any
material adverse change in the condition (financial or otherwise),
operations, properties, business, prospects or results of operations of
the Company and its Subsidiaries, taken as a whole, (ii) any transaction
that is materially adverse to the Company and its Subsidiaries, (iii)
any obligation, direct or contingent, that is material to the Company
and its Subsidiaries, taken as a whole, incurred by the Company or its
Subsidiaries, except (A) obligations incurred in the ordinary course of
business or (B) as disclosed in or contemplated by the Registration
Statement and the Prospectus, (iv) any change in the capital stock or
the outstanding indebtedness of the Company or any of its Subsidiaries
that is not material to the Company and its Subsidiaries, taken as a
whole, or (v) any dividend or distribution of any kind declared, paid or
made on the capital stock of the Company or any of its Subsidiaries.
7.7 The Representatives shall have received on the Firm Closing Date a
certificate of the Selling Shareholder to the effect that the
representations and warranties of the Selling Shareholder in this Agreement
are true and correct in all material respects as if made on and as of the
date of such certificate, and the Selling Shareholder has complied in all
material respects with all the agreements and covenants and satisfied all
the conditions on its part to be performed or satisfied at or prior to such
date.
7.8 The Shares shall be qualified in such jurisdictions as the
Representatives may reasonably request pursuant to Section 5.3 hereof, and
each such qualification shall be in effect and not subject to any stop
order or other proceeding.
7.9 A Notification Form for Listing of Additional Shares shall have
been filed with the Nasdaq National Market with respect to the Shares.
7.10 On or before the Firm Closing Date or Option Closing Date, as the
case may be, the Representatives and counsel for the Representatives shall
have received such further certificates, documents or other information as
they may have reasonably requested from the Company and all proceedings
contemplated by this Agreement shall be reasonably satisfactory to the
Representatives and their counsel.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Representatives.
19
<PAGE> 20
8. Indemnification and Contribution
8.1 The Company agrees to indemnify and hold harmless the Underwriters
and each person, if any, who controls the Underwriters within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act from and against
any losses, claims, damages, amounts paid in settlement or liabilities,
joint or several, to which the Underwriters or such controlling person may
become subject under the Act, the Exchange Act or otherwise, insofar as
such losses, claims, damages, amounts paid in settlement or liabilities (or
actions in respect thereof) arise out of or are based upon:
(a) any breach of any representation or warranty of the Company
contained in Section 1 of this Agreement;
(b) any untrue statement or alleged untrue statement of any
material fact contained in (i) the registration statement originally
filed with respect to the Shares or any amendment thereto, the
Registration Statement, any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto or (ii) any application or other
document, or any amendment or supplement thereto, executed by the
Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the Shares
under the securities or blue sky laws thereof or filed with the
Commission or any securities association or securities exchange (each an
"Application"); or
(c) the omission or alleged omission to state in such registration
statement or any amendment thereto, the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and will reimburse, as incurred, the Underwriters and each such
controlling person for any legal or other expenses reasonably incurred
by the Underwriters or such controlling persons in connection with
investigating, defending against or appearing as a third-party witness
in connection with any loss, claim, damage, liability, action,
investigation, litigation or proceeding; provided however that the
Company will not be liable to the Underwriters or any controlling person
of any Underwriter in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission
made in (i) the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto or any Application in
reliance upon and in conformity with written information furnished to
the Company by, or through the Representatives on behalf of, any
Underwriter specifically for use therein and this indemnity is subject
to the condition that, insofar as it relates to any untrue statement or
omission, or any alleged untrue statement or omission, made in a
Preliminary Prospectus but eliminated or remedied in the Prospectus, it
shall not inure to the benefit of any Underwriter (or any person
controlling such Underwriter) from whom the person asserting the claim
purchased the Shares (or to the benefit of any person who controls such
Underwriter) if a copy of the Prospectus was not sent or given to such
person at or prior to the time required by the Act and the Company has
provided the Underwriter with such Prospectus by such time and the
receipt of the Prospectus by such person would have constituted the sole
defense to the claim asserted by such person. This indemnity agreement
will be in addition to any liability which the Company may otherwise
have. The Company will not, without the prior written consent of the
Underwriters, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or
not any Underwriter or person who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a
party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of
the Underwriters and each such controlling person from all liability
arising out of such claim, action, suit or proceeding.
8.2 The Selling Shareholder agrees to indemnify and hold harmless the
Underwriters and each person, if any, who controls the Underwriters within
the meaning of Section 15 of the Act or Section 20
20
<PAGE> 21
of the Exchange Act from and against any losses, claims, damages, amounts
paid in settlement or liabilities, joint or several, to which the
Underwriters or such controlling person may become subject under the Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages,
amounts paid in settlement or liabilities (or actions in respect thereof)
arise out of or are based upon:
(a) any breach of any representation or warranty of the Selling
Shareholder contained in Section 2 of this Agreement;
(b) any untrue statement or alleged untrue statement of any
material fact relating to the Selling Shareholder contained in (i) the
registration statement originally filed with respect to the Shares or
any amendment thereto, the Registration Statement, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto or
(ii) any Application, executed by or based upon written information
furnished by or on behalf of the Selling Shareholder; or
(c) the omission or alleged omission to state in such registration
statement or any amendment thereto, the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application a material fact relating to the Selling
Shareholder required to be stated therein or necessary to make the
statements therein not misleading;
and will reimburse, as incurred, the Underwriters and each such
controlling person for any legal or other expenses reasonably incurred
by the Underwriters or such controlling persons in connection with any
loss, claim, damage, liability, action, investigation, litigation or
proceeding. This indemnity agreement will be in addition to any
liability which the Selling Shareholder may otherwise have. The Selling
Shareholder will not, without the prior written consent of the
Underwriters, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or
not any Underwriter or person who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a
party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of
the Underwriters and each such controlling person from all liability
arising out of such claim, action, suit or proceeding. Notwithstanding
anything in this Section 8.2 to the contrary, the Selling Shareholder's
obligations under this Section 8.2 shall not exceed the Proceeds to
Selling Shareholder (as set forth on the cover page of the Prospectus)
from the sale by the Selling Shareholder of its Firm Shares pursuant to
this Agreement.
8.3 Each Underwriter severally and not jointly agrees to indemnify and
hold harmless each of the Selling Shareholder and the Company, each of its
directors, each of its officers who signed the Registration Statement and
each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act from and against any
losses, claims, damages or liabilities to which the Selling Shareholder,
the Company or any such director, officer or controlling person may become
subject under the Act, the Exchange Act or otherwise, but only insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (a) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application, or (b) the omission or the alleged omission to
state therein a material fact required to be stated in the Registration
Statement, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or any Application, or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter specifically for
use therein; and, subject to the limitation set forth immediately preceding
this clause, will reimburse, as incurred, any legal or other expenses
reasonably incurred by the Selling Shareholder, Company or any such
director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or any action in respect
thereof. This indemnity agreement will be in addition to any liability
which any Underwriter may otherwise have.
21
<PAGE> 22
8.4 Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnifying
party shall not have the right to direct the defense of such action on
behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such
action on behalf of such indemnified party or parties. After notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof and approval by such indemnified party of
counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 8 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (a) the indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding sentence or (b)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. After such
notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the
consent of the indemnifying party.
8.5 In circumstances in which the indemnity agreement provided for in
the preceding sections of this Section 8 is unavailable or insufficient to
hold harmless an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof), each indemnifying
party, in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect (i) the
relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the offering of the Shares
or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party or parties on the other in connection with the statements
or omissions or alleged statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof as
well as other equitable considerations). The relative benefits received by
the Company and the Selling Shareholder on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as
the total proceeds from the offering (before deducting expenses) received
by the Company and the Selling Shareholder bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault
of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company, the Selling Shareholder or the
Underwriters, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company, the Selling Shareholder 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 or by any other method
of allocation that does not take into account the equitable considerations
referred to in the first sentence of this Section 8.5. Notwithstanding any
other provision of this Section 8.5, (i) the Selling Shareholder's
obligations to make contributions hereunder shall be limited to an amount
that does not exceed the Proceeds to Selling Shareholder (as set forth on
the cover page of the Prospectus) from the sale of its Firm Shares pursuant
to this Agreement, (ii) no Underwriter shall be obligated to make
contributions hereunder that in the aggregate exceed the total public
offering price of the Shares
22
<PAGE> 23
purchased by such Underwriter under this Agreement, less the aggregate
amount of any damages that such Underwriter has otherwise been required to
pay in respect of the same or any substantially similar claim, and (iii) no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8.5, each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act of Section 20 of the Exchange Act
shall have the same rights to contribution as such Underwriter, and each
director of the Company and 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 or Section 20 of the Exchange
Act, shall have the same rights to contribution as the Company.
9. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, any of its officers
or directors and the Underwriters set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Company, any of its officers or directors, the Underwriters or any
controlling person referred to in Section 8 hereof or (ii) delivery of and
payment for the Shares. The respective agreements, covenants, indemnities and
other statements set forth in Sections 6 and 8 hereof shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement.
10. Substitution of the Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 7 or 11 hereof) to purchase the
Shares which it or they are obligated to purchase on the Firm Closing Date or
any Option Closing Date under this Agreement (the "Defaulted Securities"), the
Representatives shall have the right, within 24 hours thereafter, to make
arrangements satisfactory to the Company for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth. If the Representatives do not propose any alternative
arrangements as contemplated in the preceding sentence, the Company shall have
the right, within 24 hours thereafter, to make arrangements satisfactory to the
Representatives for an underwriter to purchase all, but not less than all, of
the Defaulted Securities. If, however, no such arrangements have been completed
within such 48-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Shares to be purchased on such date, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear
to the underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Shares on such date, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination of
this Agreement, the Representatives shall have the right to postpone the Firm
Closing Date or any Option Closing Date, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements.
11. Termination.
11.1 This Agreement may be terminated with respect to the Firm Shares
or any Additional Shares in the sole discretion of the Representatives by
notice to the Company given at or prior to the Firm Closing Date or the
related Option Closing Date, respectively, in the event that:
(a) there shall have been any material adverse change, or any
development involving a prospective material adverse change (including,
without limitation, a change in management or control of the Company),
in the business, properties, operations, condition (financial or
otherwise), prospects or results of operations of the Company and the
Subsidiaries, taken as a whole, whether or
23
<PAGE> 24
not arising from transactions in the ordinary course of business, except
in each case as described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto);
(b) any action, suit, investigation or proceeding, shall be
threatened or pending, at law or equity against the Company (or any of
its Subsidiaries), or by any federal, state, or other commission, board
or agency or by any person or entity wherein any unfavorable result or
decision would materially adversely affect the business, prospects,
properties, condition (financial or otherwise) or results of operations
of the Company and its Subsidiaries, taken as a whole;
(c) the Company or any Subsidiary sustains a material loss by
reason of explosion, strike, fire, flood, accident or other calamity,
which, in the opinion of the Representatives, substantially affects the
value of the properties of the Company and its Subsidiaries, taken as a
whole, or which materially interferes with the operation of the business
of the Company and its Subsidiaries, taken as a whole, regardless of
whether such loss shall have been insured;
(d) additional material governmental restrictions not in force and
effect on the date hereof shall have been generally established by a
registered securities exchange, the Commission, the NASD or other
applicable regulatory authority, or trading in securities generally on
any such exchange, the Nasdaq National Market, or otherwise, shall have
been suspended, or a general moratorium on securities trading shall have
been established by federal or state authorities, or trading of the
Shares or other securities of the Company in any over-the-counter market
shall have been suspended for any reason;
(e) a banking moratorium shall have been declared by New York or
United States authorities;
(f) there shall have occurred an outbreak or material escalation of
hostilities or any material adverse disruption in the financial markets
or any other calamity or crisis or material adverse change in financial,
political or economic conditions, having an effect on the financial
markets which in the sole judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Firm Shares or the Additional Shares as contemplated by
the Registration Statement and the Prospectus (exclusive of any
amendment or supplement thereto); or
(g) there shall have been a material disruption in the market
stabilization of the Shares or any other reason deemed by the
Representatives to impair their ability to market the Firm Shares.
11.2 Termination of this Agreement pursuant to this Section 11 shall
be without liability of party to any other party except as provided in
Sections 6 and 8 hereof.
12. Information Supplied by the Underwriter. The statements set forth on,
the second page of the Prospectus concerning over-allotments and stabilization,
and in the third and seventh paragraphs under the heading "Underwriting" in the
Registration Statement, the Preliminary Prospectus and the Prospectus (to the
extent such statements relate to the Underwriters) constitute the only
information furnished by the Underwriters to the Company for the purposes of
Sections 1.2 and 8 hereof. The Underwriters confirm that such statements (to
such extent) are correct.
13. Notices. All communications hereunder shall be in writing and, if sent
to the Underwriters, shall be mailed or delivered or telecopied or faxed
(confirmed by letter and telephone call) as follows: if to the Underwriters or
the Representatives, to the Representatives at the address or number, as
appropriate, designated in Schedule I hereto; and if sent to the Company, shall
be mailed, delivered or telecopied (confirmed by letter and telephone call) to
the Company at 213 S.W. Columbia Street, Bend, Oregon 97702, Attention: Volker
G. Oakey, President; Telecopy: (541) 388-3705, Telephone: (541) 388-3688, with a
copy to Michael W. Shackelford, Ater Wynne Hewitt Dodson & Skerritt, LLP, 222 SW
Columbia, Portland, Oregon 97201; Telecopy: (503) 226-0079, Telephone: (503)
226-1191. Any such notice shall be effective only upon receipt.
14. Successors. This Agreement shall inure to the benefit of and shall be
binding upon the Underwriters, the Company, the Selling Shareholder and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person
24
<PAGE> 25
(including any purchaser of Shares) any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provisions herein contained,
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnities of the Selling Shareholder and
the Company contained in Section 8 of this Agreement shall also be for the
benefit of any person or persons who control any Underwriter within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Underwriters contained in Section 8 of this Agreement shall
also be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement and any person or persons who
control the Company within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act. No purchaser of Shares from the Underwriters shall be deemed a
successor or assign because of such purchase.
15. Definition of Certain Terms: The term "Underwriters", as used herein,
shall be deemed to mean the several persons, firms or corporations, named in
Schedule II hereto (including the Representatives herein mentioned, if so
named), and the term "Representatives", as used herein, shall be deemed to mean
the representative or representatives designated by, or in the manner authorized
by, the Underwriters in Schedule I hereto. All obligations of the Underwriters
hereunder are several and not joint. If there shall be only one person, firm or
corporation named in Schedule I and Schedule II hereto, the term "Underwriters"
and the term "Representatives", as used herein, shall mean such person, firm or
corporation. If the firm or firms listed in Schedule I hereto are the same as
the firm or firms listed in Schedule II hereto, then the terms "Underwriters"
and "Representatives", as used herein, shall each be deemed to refer to such
firm or firms.
16. Applicable Law. The validity and interpretation of this Agreement, and
the terms and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
provisions relating to conflicts of laws.
17. Interpretation. In case any provision in this Agreement shall be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
This Agreement sets forth the entire agreement between the parties hereto as to
the subject matter herein, and cannot be amended or modified except by a writing
executed by the parties hereto.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
25
<PAGE> 26
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company and the
Underwriters.
Very truly yours,
CONSEP, INC.
By:
--------------------------------------
Name:
Title:
RICHARD M. WELCH, SR.
By:
--------------------------------------
Attorney-in-fact
MAUREEN M. WELCH
By:
--------------------------------------
Attorney-in-fact
The foregoing agreement is hereby confirmed and accepted as of the date
first above written.
VALUE INVESTING PARTNERS
[others]
As Representatives
By: Value Investing Partners, Inc.
By:
- --------------------------------------
Name:
Title:
26
<PAGE> 27
SCHEDULE I
Value Investing Partners, Inc.
[Others]
c/o Value Investing Partners, Inc.
1859 Post Road East
Westport, CT 06880
Telecopy: (203) 256-9316
27
<PAGE> 28
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF FIRM
NUMBER OF FIRM SHARES TO BE TOTAL
SHARES TO BE PURCHASED NUMBER OF FIRM
PURCHASED FROM FROM SELLING SHARES TO BE
UNDERWRITERS THE COMPANY SHAREHOLDER PURCHASED
- ------------- --------------- --------------- ---------------
<S> <C> <C> <C>
</TABLE>
28
<PAGE> 1
EXHIBIT 5.0
ATER WYNNE HEWITT DODSON & SKERRITT, LLP
222 S.W. Columbia
Suite 1800
Portland, Oregon 97201
October 2, 1996
Board of Directors
Consep, Inc.
213 SW Columbia Street
Bend, Oregon 97702
Gentlemen:
In connection with the public offering of 2,000,000 shares of common
stock, $.01 par value per share (the "Common Stock"), of Consep, Inc., an Oregon
corporation (the "Company"), under the registration statement on Form S-1, File
No. 33-11827, and the proposed sale of the Common Stock pursuant to the terms of
an underwriting agreement (the "Underwriting Agreement") to be entered into by
the Company and Value Investing Partners, Inc., as representative of the several
underwriters, we have examined such corporate records, certificates of public
officials and officers of the Company and other documents as we have considered
necessary or proper for the purpose of this opinion.
Based on the foregoing and having regard to legal issues which we deem
relevant, it is our opinion that the shares of Common Stock to be sold pursuant
to the Underwriting Agreement, when such shares have been delivered against
payment therefor as contemplated by the Underwriting Agreement, will be validly
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
above-mentioned registration statement and to the reference to this firm under
the caption "Legal Matters" in the prospectus constituting a part of the
registration statement. This consent shall not be construed to cause us to be in
the category of persons whose consent is required to be filed pursuant to
Section 7 of the Securities Act of 1933, as amended, or the rules thereunder.
Very truly yours,
/s/ Ater Wynne Hewitt Dodson & Skerritt, LLP
ATER WYNNE HEWITT DODSON & SKERRITT, LLP
<PAGE> 1
EXHIBIT 10.24
REPRESENTATIVE WARRANT AGREEMENT
REPRESENTATIVE WARRANT AGREEMENT dated as of , 1996, between
CONSEP, INC., an Oregon corporation (the "Company"), and VALUE INVESTING
PARTNERS, INC., a Delaware corporation ("VIP").
W I T N E S S E T H
WHEREAS, in connection with a public offering (the "Offering") of up to
2,300,000 shares of Common Stock, $.01 par value (the "Common Stock") of the
Company pursuant to a registration statement (the "Registration Statement") on
Form S-1 (File No. 333-11827), the Company desires to issue to VIP
Representative Warrants (the "Representative Warrants") to purchase an aggregate
of 175,556 shares (the "Shares") of Common Stock.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Company and VIP hereby agree as follows:
1. Issuance of Warrants: Form of Warrants; Execution of Warrants. The
Company shall issue, sell and deliver the Representative Warrants to VIP or, at
VIP's direction, to its bona fide officers or designees, for $100 concurrently
with the Firm Shares closing date (the "Closing") under the underwriting
agreement, dated , 1996, among the Company, Richard M. Welch, Sr.,
Maureen M. Welch, VIP and certain other parties (the "Underwriting Agreement")
relating to the Offering. The Representative Warrants shall be executed on
behalf of the Company by the manual or facsimile signature of its present or any
future Chairman or President, under its corporate seal affixed or in facsimile,
and attested by the manual or facsimile signature of its Secretary or Assistant
Secretary.
2. Registration. The Representative Warrants shall be numbered and shall
be registered in a warrant register as they are issued. The Company shall be
entitled to treat the registered holder of any Representative Warrant (the
"Holder") as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Representative
Warrants on the part of any other Person (as hereinafter defined), and shall not
be liable for any registration or transfer of Representative Warrants that are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer or with
such knowledge of such facts that its participation therein amounts to bad
faith. The Representative Warrants shall be registered initially in the name of
"Value Investing Partners, Inc." in such denominations as VIP may request in
writing to the Company; provided, however, that prior to the Closing, VIP may
designate that the Representative Warrants be issued in varying amounts directly
to its bona fide officers or designees and not to VIP. Such designation will
only be made by VIP if it determines such issuances would not violate the
interpretation of the Board of Governors of the National Association of
Securities Dealers, Inc. (the "NASD") relating to the review of corporate
financing arrangements.
3. Transfer of Warrants
3.1 The Representative Warrants may not be sold, assigned,
transferred, pledged or hypothecated (collectively, "transferred") for a
period of one year after the effective date of the Registration Statement,
except to bona fide officers of VIP. Subsequent to such one year period the
Representative Warrants may be transferred to any persons subject to
compliance with the provisions of Section 10 hereof. The Representative
Warrants shall be transferable only on the books of the Company maintained
at its principal executive office (the "Company Office") upon delivery
thereof duly indorsed by the Holder or by the Holder's duly authorized
attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer
by an attorney, the original power of attorney, duly approved, or a copy
thereof, duly certified, shall be deposited and remain with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Company
in its discretion.
<PAGE> 2
3.2 Upon any registration of transfer, the Company shall deliver a new
Representative Warrant or Representative Warrants to the Persons entitled
thereto. The Representative Warrants may be exchanged, at the option of the
Holder thereof, for other Representative Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Shares upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Representative Warrants to be transferred on its books
to any Person, unless the Holder or Holders thereof shall furnish to the
Company evidence of compliance with the Securities Act of 1933, as amended
(the "Act"), in accordance with the provisions of Section 10 of this
Agreement.
4. Exercise of Warrants; Terms of Warrants
4.1 Each Representative Warrant shall entitle the Holder thereof to
purchase from the Company one share of Common Stock at a purchase price of
$ per Share, payable in full at the time of exercise of the
Representative Warrant. Except as the context otherwise requires, the term
"Exercise Price" as used in this Agreement shall mean the purchase price of
one share. Each Representative Warrant may be exercised for a four-year
period commencing on the first anniversary of the effective date of the
Registration Statement. The term "Expiration Date" as used in this
Agreement shall mean the latest time and date at which the Representative
Warrants may be exercised. After the Expiration Date, any unexercised
Representative Warrants shall be void and all rights of Holders with
respect thereto shall cease.
4.2 During the period specified in and subject to the provisions of
this Section 4, Representative Warrants may be exercised by their surrender
at the Company Office with the election-to-purchase form set forth on (or
attached to) the Representative Warrant duly completed and executed,
accompanied by payment in full to the Company of the aggregate Exercise
Price for each Share with respect to which Representative Warrants are
being exercised, which amounts shall be paid in full, either in United
States currency, by a bank cashier's check or money order payable to the
order of the Company or by wire transfer to an account designated by the
Company or pursuant to Section 4.3 hereof. Within three (3) business days
after the exercise of any Representative Warrants, the Company shall issue
a certificate or certificates for the number of full Shares to which the
Holder is entitled, registered in accordance with the instructions set
forth in the election-to-purchase form. All Shares shall be duly
authorized, validly issued, fully paid, nonassessable and free from all
taxes, liens and charges. Certificates representing such Shares shall be
delivered by the Company in such names and denominations as are required
for delivery to, or in accordance with the instructions of, the Holder.
4.3 In lieu of a monetary payment of the Exercise Price, a Holder may
elect to receive, without the payment of any additional consideration,
Shares equal to the value of his Representative Warrants or portion thereof
by the surrender of such Representative Warrants to the Company with the
net issuance election marked in the election-to-purchase form. Thereupon,
the Company shall issue to the Holder, such number of fully paid and
nonassessable Shares as is computed using the following formula:
X = Y(A-B)
A
where X = the number of Shares to be issued to the Holder pursuant to this
Section 4.3.
Y = the number of Shares covered by his Representative Warrants in
respect of which the net issuance election is made pursuant to
this Section 4.3.
A = the fair market value of one share of Common Stock, as defined
below, as at the time the net issuance election is made pursuant
to this Section 4.3.
B = the Exercise Price in effect under this Representative Warrant
at the time the net issuance election is made pursuant to this
Section 4.3.
The fair market value of a share of Common Stock shall be the per share
last sale price for the Common Stock on the trading day immediately
preceding the day the Company receives the duly completed
2
<PAGE> 3
election-to-purchase form as quoted on the Nasdaq National Market or such
other quotation system or a national securities exchange on which the
Common Stock is then principally traded.
4.4 Each Person in whose name any such certificate for Shares is
issued shall for all purposes be deemed to have become the holder of record
of the Shares represented thereby on the date upon which such
Representative Warrants were surrendered for exercise, accompanied by
payment of the Exercise Price, irrespective of the date of issuance or
delivery of such certificate for Shares; provided, however, that if, at the
date of the surrender of such Representative Warrants and payment of the
Exercise Price, the transfer books for the Shares purchasable upon the
exercise of such Representative Warrants shall be closed, the certificates
for the Shares shall be issuable as of the date on which such books shall
next be opened (whether before or after the Expiration Date) and, until
such date, the Company shall be under no duty to deliver any certificate
for such Shares; provided further, that the transfer books of record,
unless otherwise required by law, shall not be closed at any one time for a
period longer than twenty (20) days.
4.5 The Representative Warrants shall be exercisable, at the election
of the Holders thereof, in full or from time to time in part and, in the
event that less than all of the surrendered Representative Warrants are
exercised, the Company shall execute and mail, by first-class mail, within
ten (10) days of the date upon which the Representative Warrants were
exercised, to the Holder of such Representative Warrants or such other
Person (as defined herein) as shall be designated in the election to
purchase, a new Representative Warrant representing the number of full
Representative Warrants not exercised. No fractional Shares shall be
issued; all issuances upon exercise would be rounded to the nearest whole
Share.
5. Payment of Taxes. The Company shall promptly pay all documentary stamp
taxes attributable to the issuance of Shares upon the exercise of any
Representative Warrants, but any transfer taxes that may be payable in
connection with the issuance of Representative Warrants or certificates for
Shares in any name other than that of the Holder of the Representative Warrants
surrendered shall be paid by such Holder.
6. Mutilated or Missing Representative Warrants. In case any of the
Representative Warrants shall be mutilated, lost, stolen or destroyed, the
Company shall issue and deliver in exchange and substitution for and upon
cancellation of the mutilated Representative Warrant, or in lieu of and
substitution for the lost, stolen or destroyed Representative Warrant, a new
Representative Warrant of like tenor and representing an equivalent right or
interest; but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Representative Warrant.
Applicants for such substitute Representative Warrants shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
7. Reservation of Shares. The Company shall at times reserve and keep
available for issuance upon the exercise of Representative Warrants a number of
Shares that will be sufficient to permit the exercise in full of all outstanding
Representative Warrants. Chase Mellon Shareholder Services (the "Transfer
Agent") and every subsequent transfer agent for the Company's Common Stock, or
other securities issuable upon exercise of Representative Warrants, shall be
irrevocably authorized and directed at all times to reserve such number of
Shares as shall be required for such purpose. The Company will keep a copy of
this Agreement on file with the Transfer Agent and with every subsequent
transfer agent for any of the Company's Shares or other securities issuable upon
the exercise of Representative Warrants. The Company shall supply the Transfer
Agent (and any such subsequent transfer agent) with duly executed certificates
for such purpose. All Representative Warrants surrendered upon the exercise
thereof shall be canceled and such canceled Representative Warrants shall
constitute sufficient evidence of the number of Shares that have been issued
upon the exercise of the Representative Warrants. After the Expiration Date, no
Shares shall be subject to reservation in respect of any unexercised
Representative Warrant.
3
<PAGE> 4
8. Adjustments.
The Exercise Price and the number and kind of Shares shall be subject to
adjustment from time to time upon the happening of certain events as provided in
this Section 8.
8.1 If at any time prior to the full exercise of Representative
Warrants the Company shall (a) pay a dividend or make a distribution on its
shares of Common Stock in shares of Common Stock (other than cash dividends
or distributions out of surplus or earnings), (b) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares
or (c) combine, reclassify or recapitalize its outstanding Common Stock
into a smaller number of shares, the Exercise Price in effect at the time
of the record date of such subdivision, combination, reclassification or
recapitalization shall be proportionately adjusted so that the Holder shall
be entitled to receive the aggregate number and kind of shares which, if
this Warrant had been exercised in full immediately prior to such time, he
would have owned upon such exercise and been entitled to receive upon such
dividend, subdivision, combination, reclassification or recapitalization.
Such adjustment shall be made successively whenever any event listed in
this Section 8.1 shall occur.
8.2 If the Company shall hereafter issue rights, options or warrants
to all holders of its outstanding Common Stock, without charge to such
holders, entitling them to subscribe for or purchase shares of Common Stock
(or Common Stock equivalents) at a price (or having a conversion price per
share) less than the lower of the Exercise Price or the current market
price of the Common Stock (as determined pursuant to Section 8.5 hereof) on
the record date described below, the Exercise Price then in effect shall be
adjusted so that the Exercise Price shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the date of
such sale or issuance (which date in the event of distribution to
shareholders shall be deemed to be the record date set by the Company to
determine shareholders entitled to participate in such distribution) by a
fraction, the numerator of which shall be (i) the number of shares of
Common Stock outstanding on the date of such sale or issuance, plus (ii)
the number of additional shares of Common Stock which the aggregate
consideration received by the Company upon such issuance or sale (plus the
aggregate of any additional amount to be received by the Company upon the
exercise of such rights or warrants) would purchase at such current market
price per share of the Common Stock; and the denominator of which shall be
(i) the number of shares of Common Stock outstanding on the date of such
issuance or sale, plus (ii) the number of additional shares of Common Stock
offered for subscription or purchase (or into which the Common Stock
equivalents so offered are convertible). Such adjustments shall be made
successively whenever such warrants or rights are issued. To the extent
that shares of Common Stock are not delivered (or Common Stock equivalents
are not delivered) after the expiration of such rights or warrants, the
Exercise Price shall be readjusted to the Exercise Price which would then
be in effect had the adjustments been made upon the issuance of such rights
or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or Common Stock equivalents) actually delivered.
8.3 In case the Company shall hereafter fix a record date for making a
distribution to the holders of Common Stock of assets or evidences of its
indebtedness (excluding cash dividends or distributions out of earnings and
dividends or distributions referred to in Section 8.1 hereof) or Common
Stock subscription rights, options or warrants for Common Stock or Common
Stock equivalents (excluding those referred to in Section 8.2 hereof), then
in each such case the Exercise Price in effect after such record date shall
be adjusted to the price determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied
by the current market price per share of Common Stock (as defined in
Section 8.5 hereof), less the fair market value (as determined by the
Company's Board of Directors) of said assets or evidences of indebtedness
so distributed or of such Common Stock subscription rights, options and
warrants or of such Common Stock equivalents applicable to one share of
Common Stock, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such current market price
per share of Common Stock. Such adjustment shall be made successively
whenever the record date for such distribution is fixed and shall become
effective immediately after such record date.
4
<PAGE> 5
8.4 Whenever the Exercise Price payable upon exercise of each
Representative Warrant is adjusted pursuant to Section 8.1, 8.2 or 8.3
hereof, the Shares shall simultaneously be adjusted by multiplying the
number of Shares initially issuable upon exercise of each Warrant by the
Exercise Price in effect on the date thereof and dividing the product so
obtained by the Exercise Price, as adjusted.
8.5 For the purpose of any computation under this Section 8, the
current market price per share of Common Stock at any date shall be deemed
to be the average of the daily closing price for five (5) consecutive
trading days immediately preceding such date. The closing sale or price for
each day shall be the last sale price regular way or, in case no such
reported sales take place on such day, the average of the last reported bid
and asked prices regular way, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on such exchange, the
representative closing sale or bid price as reported by Nasdaq, or other
similar organization if Nasdaq is no longer reporting such information, or
if not so available, the fair market price as determined by the Board of
Directors.
8.6 No adjustments in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents
($.05) in such price; provided, however, that any adjustments which by
reason of this Section 8.6 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section 8 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be.
8.7 In the event that at any time, as a result of any adjustment made
pursuant to Section 8.1 hereof, the Holder thereafter shall become entitled
to receive any shares of the Company, other than Common Stock, thereafter
the number of such other shares so receivable upon exercise of any
Representative Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock contained in this Section 8.
9. Consolidation, Merger, Sale of Assets, Reorganization, etc. General
Provisions
9.1 In case the Company, after the Effective Date, (a) shall
consolidate with or merge into any other Person (as defined below) and
shall not be the continuing or surviving Person of such consolidation or
merger, (b) shall permit any other Person to consolidate with or merge into
the Company and the Company shall be the continuing or surviving person
but, in connection with such consolidation or merger, Common Stock or other
securities shall be changed into or exchanged for cash, stock, or other
securities of any other Person or any other property, (c) shall transfer,
directly or indirectly through transactions involving any of or all of its
subsidiaries all or substantially all its properties and assets to any
other Person or (d) shall effect a capital reorganization or
reclassification of Common Stock or other securities, then, and in the case
or each such transaction, the Company shall make proper provision such that
the Holder of a Representative Warrant, upon the exercise thereof at any
time after the consummation of each such transaction, shall be entitled to
receive, at the Exercise Price in effect immediately prior to such
consummation, the highest amount of cash, securities or other property to
which such Holder would actually have been entitled as a shareholder of
Common Stock upon such consummation if such Holder had exercised this
Representative Warrant immediately prior thereto, subject to adjustments
subsequent to such consummation as nearly equivalent as possible to the
adjustments provided for in this Section 9; provided, however, that if
prior to the consummation of such transaction, a purchase tender or
exchange offer shall have been made to and accepted by the holders of more
than 50% of the outstanding shares of Common Stock, and if the Holder of
the Representative Warrants, by written notice to the Company signed on or
before the date immediately preceding the date of expiration of such
purchase, tender or exchange offer, declares an intention to exercise his
Warrants in whole or in part, such Holder shall be entitled, upon
consummation of such offer, to receive upon exercise the highest amount of
cash, securities or other property to which such Holder would actually have
been entitled as a holder of the Shares under the Representative Warrants
if such Holder had exercised his Warrants prior to the expiration of such
purchase, tender, or exchange offer, and if all Shares which such Holder
would have owned as a result of such exercise had been purchased pursuant
to such purchase,
5
<PAGE> 6
tender or exchange offer. "Person" shall mean an individual, a corporation,
a partnership, a trust, an unincorporated organization or a government or
any agency or political subdivision thereof.
9.2 Assumption of Obligations. Notwithstanding anything contained in
this Agreement to the contrary, the Company shall not effect any of the
transactions described in subdivisions (a) through (d) of Section 9.1
unless prior to the consummation thereof, each Person (other than the
Company) that may be required to deliver any cash, stock or other
securities or other property upon the exercise of Representative Warrants
as provided herein shall assume, by written instrument delivered to the
Holders of the Representative Warrants, and reasonably satisfactory to VIP
or Holders of a majority in interest of the Representative Warrants (i) the
obligations of the Company under this Agreement and the Representative
Warrants (and if the Company shall survive the consummation of any such
transaction, such assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the Company under this
Agreement and the Representative Warrants) and (ii) the obligation to
deliver to such Holder such cash, stock or other securities or other
property as such Holder may be entitled to receive in accordance with the
provisions of this Section 9.
9.3 Other Dilutive Events. The Board of Directors of the Company
shall have an ongoing obligation to determine in good faith whether any
event has occurred as to which the provisions of Section 8 or this Section
9 shall not be strictly applicable, but with respect to which the failure
to make any adjustment to the Exercise Price or the Shares would not fairly
protect the purchase rights represented by the Representative Warrant in
accordance with the intent and principles of this Agreement. In each case
in which such determination shall be made, the Company shall appoint a firm
of independent public accountants, reasonably acceptable to VIP or the
Holders of a majority-in-interest of the Representative Warrants, which
shall give its opinion upon the adjustments, if any, consistent with the
intent and principles established in this Agreement necessary to preserve
without dilution the purchase rights represented by this Agreement and the
Representative Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holders and shall make the adjustments
described therein.
9.4 No Dilution or Impairment. The Company shall not, by amendment of
its Articles of Incorporation or By-Laws or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue, sale, grant
or assumption of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Agreement
or the Representative Warrants, but will at all times, whether or not
requested to do so, in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holders against dilution
or other impairment. Without limiting the generality of the foregoing, the
Company shall take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Shares upon the exercise of all Representative Warrants from
time to time outstanding.
9.5 Notice Evidence of Adjustments. Whenever any adjustment is made
pursuant to this Agreement, the Company shall promptly cause a notice
setting forth the details of the adjustment to be mailed to the Holders, at
their last addresses appearing in the Warrant register, and shall cause a
certified copy thereof to be mailed to the Transfer Agent. The Company
shall retain a firm of independent public accountants of recognized
standing selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by
such adjustment and a certificate signed by such firm shall accompany said
notice and shall be conclusive evidence of the correctness of such
adjustment.
10. Restrictions of Dispositions. The Shares have been registered under
the Act pursuant to the Registration Statement. VIP represents and warrants to
the Company that it understands that (a) the Shares may not be transferred
except pursuant to (i) a post-effective amendment to the effective Registration
Statement, (ii) another effective registration statement under the Act relating
thereto, or (iii) any available exemption from registration under the Act
permitting such disposition of securities and an opinion of counsel, reasonably
satisfactory to counsel for the Company, that an exemption from such
registration is available and
6
<PAGE> 7
(b) the Representative Warrants may not be transferred except in accordance with
the provisions of Section 3 hereof, pursuant to an effective registration
statement under the Act relating thereto or pursuant to any available exemption
from registration under the Act permitting such disposition of securities and an
opinion of counsel, reasonably satisfactory to counsel for the Company, that an
exemption from such registration is available.
11. Certificates to Bear Legends. The Representative Warrants shall be
subject to a stop-transfer order and the certificate or certificates therefor
shall bear the following legend:
NEITHER THE REPRESENTATIVE WARRANTS NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF MAY BE SOLD OR TRANSFERRED PRIOR TO 1997 (SUBJECT
TO CERTAIN LIMITED EXCEPTIONS), SUCH SECURITIES MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO THE REGISTRATION
STATEMENT, (ii) ANOTHER EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") RELATING THERETO OR (iii) AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES AND AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL
FOR THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE, AND THE REPRESENTATIVE WARRANTS MAY NOT BE TRANSFERRED EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 3 OF THE REPRESENTATIVE WARRANT
AGREEMENT BETWEEN CONSEP, INC. AND VALUE INVESTING PARTNERS, INC. PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT RELATING THERETO OR
PURSUANT TO ANY AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT
PERMITTING SUCH DISPOSITION OF SECURITIES AND AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
The Shares upon exercise of the Representative Warrants shall be subject to
a stop-transfer order and the certificate or certificates evidencing any such
Shares shall bear a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") PURSUANT TO A REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. HOWEVER, SUCH SHARES MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO
THE REGISTRATION STATEMENT, (ii) ANOTHER EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT RELATING THERETO OR (iii) AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES AND
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY,
THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
12. Registration Rights.
12.1 Demand Registration Rights. Upon written request of the then
Holder(s) of at least a majority of the Representative Warrants or Shares,
if issued, made at any time within the period commencing one (1) year and
ending five (5) years after the effective date of the Registration
Statement, the Company shall file within a reasonable period of time and,
in any event, within sixty (60) days after receipt of such written request,
at its sole expense, on no more than one occasion, a post-effective
amendment to the present Registration Statement or a new registration
statement under the Act registering the Shares for sale to the public and
either must be declared effective. Within fifteen (15) days after receiving
any such notice, the Company shall give notice to the other Holders of the
Representative Warrants and/or Shares acquired upon exercise of the
Representative Warrants advising that the Company is proceeding with such
post-effective amendment or registration statement, and offering to include
therein the Shares of such other Holders. The Company shall not be
obligated to so include the Shares of any such other Holder unless such
other Holder shall accept such offer by notice in
7
<PAGE> 8
writing to the Company within ten (10) days after receipt of such notice
from the Company. The Company shall use its best efforts, through its
officers, directors, auditors and counsel in all matters necessary or
advisable, to file and cause to become effective such post-effective
amendment or registration statement as promptly as practicable and for a
period of ninety (90) days thereafter to reflect in the post-effective
amendment or registration statement financial statements that are prepared
in accordance with Section 10(a)(3) of the Act and any facts or events
arising that, individually or in the aggregate, represent a fundamental
and/or material change in the information set forth in the post-effective
amendment or registration statement to enable any Holders of Representative
Warrants to exercise Representative Warrants and/or sell Shares during said
ninety-day period. If the initiating Holders intend to distribute the
Shares covered by their request by means of an underwriting they shall so
advise the Company as part of their request made pursuant to this Section
12.1 and the Company shall include such information in the written notice
referred to in this Section 12.1. In such event, the right of any Holder to
include its Shares in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such
Holder's Shares in such registration (unless otherwise mutually agreed upon
by a majority in interest of the initiating Holders and such Holder) to the
extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall, together with the Company,
enter into an underwriting agreement in customary form with the underwriter
or underwriters selected for such underwriting by a majority in interest of
the initiating Holders, which underwriter shall be reasonably acceptable to
the Company. Notwithstanding any other provision of this Section 12.1, if
the underwriter advises the initiating Holders and the Company in writing
that marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders of Shares which
would otherwise be underwritten pursuant hereto, and the number of Shares
that may be included in the underwriting shall be allocated among all
Holders thereof, including the initiating Holders, on a pro rata basis
according to the number of Shares held by such Holders. Notwithstanding the
foregoing, (i) the Company shall not be obligated to effect a registration
pursuant to this Section 12.1 during the period starting with the date 60
days prior to the Company's good faith estimated date of filing of, and
ending on a date 180 days following the effective date of, a registration
statement pertaining to an underwritten public offering of securities for
the account of the Company, provided that the Company is at all times
during such period diligently pursuing such registration and, (ii) if the
Company shall furnish to the initiating Holders requesting a registration
pursuant to this Section 12.1, a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors
of the Company, it would be seriously detrimental to the Company and its
stockholders for such registration statement to be filed and it is therefor
essential to defer the filing of such registration statement, the Company
shall have the right to defer such filing for a period of not more than 120
days after receipt of the request of the initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twenty-four month period.
12.2 Other Registration Rights. The Holders of the Representative
Warrants shall be entitled to the registration rights set forth in that
Registration Rights Agreement dated as of May 5, 1992, as amended, among
the Company, VIP and certain other parties with respect to the Shares.
12.3 Action to be Taken by the Company. In connection with the
registration of Shares in accordance with Section 12.1 hereof, the Company
shall:
(a) bear the expenses of any registration under Section 12.1
hereof, including but not limited to legal, accounting and printing
fees; provided, however, that in no event shall the Company be obligated
to pay (i) any fees and disbursements of legal counsel retained by
Holders of Representative Warrants and/or Shares, or (ii) any
underwriters' discount or commission payable in respect of such Shares,
payment of which shall, in each case, be the sole responsibility of the
Holders of the Shares;
(b) use its best efforts to register or qualify the Shares for
offer or sale under state securities or blue sky laws of such
jurisdictions in which the participating Holders propose to offer
Shares, and to do any and all other acts and things that may be
necessary or advisable to enable the Holders to consummate the proposed
sale, transfer or other disposition of such securities in any
jurisdiction; and
8
<PAGE> 9
(c) enter into a cross-indemnity agreement, in customary form, with
each underwriter, if any, and each Holder of Shares included in such
Registration Statement provided that, if so requested by the
underwriter, such Holders shall provide the underwriters with several
indemnity agreements as to information regarding such Holders.
12.4 Information by Holders. Each Holder shall provide, upon
reasonable request by the Company, information for inclusion in such
Registration Statement as may be required by the applicable rules and
regulations of the Act.
13. Notices to Holders.
13.1 Nothing contained in this Agreement or in any of the
Representative Warrants shall be construed as to confer upon the Holders
thereof the right to vote or to receive dividends or to consent to receive
notice as shareholders in respect of the meetings of shareholders or the
election of directors of the Company or any other matter, or any rights
whatsoever as shareholders of the Company; provided, however, that in the
event that a meeting of shareholders shall be called to consider and take
action on a proposal for the voluntary dissolution of the Company, other
than in connection with a consolidation, merger, or sale of all, or
substantially all, of its property, assets, business and good will as an
entirety, then and in that event the Company shall cause a notice thereof
to be sent by first-class mail, postage prepaid, at least twenty (20) days
prior to the date fixed as a record date or the date of closing the
transfer books in relation to such meeting, to each registered Holder of
Registration Warrants at such Holder's address appearing on the Warrant
register; but failure to mail or receive such notice or any defect therein
or in the mailing thereof shall not affect the validity of any action taken
in connection with such voluntary dissolution. If such notice shall have
been so given and if such a voluntary dissolution shall be authorized at
such meeting or any adjournment thereof, then from and after the date on
which such voluntary dissolution shall have been duly authorized by the
shareholders, the purchase rights represented by the Representative
Warrants and all other rights with respect thereto shall cease and
terminate.
13.2 In the event the Company intends to make any distribution on or
to shareholders of its Common Stock, including, without limitation, any
dividend or distribution from earned surplus, any dividend or distribution
of stock, assets or evidences of indebtedness, any distribution to be made
in connection with a consolidation or merger in which the Company is the
surviving corporation or any distribution of shares of stock of any
corporation at least a majority of whose outstanding stock is owed by the
Company, then the Company shall cause a notice of its intention to make
such distribution to be sent by first-class mail, postage prepaid, at least
twenty (20) days prior to the date fixed as a record date or the date of
closing the transfer books in relation to such distribution, to each
registered Holder of Representative Warrants at such Holder's address
appearing on the Warrant register, but failure to mail or to receive such
notice or any defect therein or in the mailing thereof shall not affect the
validity of any action taken in connection with such distribution or
issuance.
14. Notices. Any notice or demand required by this Agreement to be given
or made by the Holder to or on the Company shall be sufficiently given or made
if in writing and sent by first-class or registered mail, postage prepaid,
addressed as follows:
CONSEP, INC.
213 S.W. Columbia Street
Bend, Oregon 97702
Attn: President
with a copy to:
Ater Wynne Hewitt Dodson & Skerrit
222 S.W. Columbia, Suite 1800
Portland, Oregon 97201
Attn: Michael W. Shackelford, Esq.
9
<PAGE> 10
Any notice or demand required by this Agreement to be given or made by the
Company to or on the Holder of any Representative Warrant shall be sufficiently
given or made, whether or not such Holder receives the notice, if sent by
first-class or registered mail, postage prepaid, addressed to such Holder at his
last address as shown on the books of the Company.
15. Governing Law. The validity, interpretation and performance of this
Agreement of each Representative Warrant issued hereunder and of the respective
terms and provisions thereof shall be governed by the law of the State of
Oregon.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts shall together constitute but one and the same instrument.
CONSEP, INC.
By:
--------------------------------------
Name:
Title:
VALUE INVESTING PARTNERS, INC.
By:
--------------------------------------
Name:
Title:
10
<PAGE> 11
EXHIBIT A
(FORM OF REPRESENTATIVE WARRANT CERTIFICATE)
NEITHER THE REPRESENTATIVE WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF MAY BE SOLD OR TRANSFERRED PRIOR TO 1997 (SUBJECT TO CERTAIN
LIMITED EXCEPTIONS), SUCH SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO (i) A POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT, (ii) ANOTHER
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ("THE ACT")
RELATING THERETO OR (iii) AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES AND AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT AN EXEMPTION FROM REGISTRATION
UNDER THE ACT IS AVAILABLE AND THE REPRESENTATIVE WARRANT MAY NOT BE TRANSFERRED
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3 OF THE WARRANT AGREEMENT
BETWEEN CONSEP INC. AND VALUE INVESTING PARTNERS, INC., PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT RELATING THERETO OR PURSUANT TO ANY
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT PERMITTING SUCH DISPOSITION
OF SECURITIES AND AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR
THE COMPANY, THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
NO. REPRESENTATIVE WARRANTS
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
ON , 2001
CONSEP, INC.
REPRESENTATION WARRANT CERTIFICATE
THIS CERTIFIES THAT for the value received, VALUE INVESTING PARTNERS, INC.,
or registered assigns, is the registered holder of the number of Representative
Warrants set forth above, each of which entitles the owner thereof to purchase
at any time from , 1997 until 5:00 p.m., New York City time on
, 2001 (the "Expiration Date"), one share (the "Share") of Common
Stock, $.01 par value, of CONSEP, INC., an Oregon corporation (the "Company"),
at a purchase price per Share (the "Exercise Price") equal to $ upon
presentation and surrender of this Representative Warrant Certificate with the
Form of Election to Purchase duly executed. The number of Representative
Warrants evidenced by this Representative Warrant Certificate (and the number of
Shares that may be purchased upon exercise thereof) set forth above, and the
Exercise Price set forth above, are the number and Exercise Price as of the date
of original issuance of the Representative Warrant, based on the shares of
Common Stock of the Company as constituted at such date.
This Representative Warrant Certificate is subject to, and entitled to the
benefits of, all of the terms, provisions and conditions of an agreement dated
as of , 1996 (the "Representative Warrant Agreement") between the
Company and Value Investing Partners, Inc., which Representative Warrant
Agreement is hereby incorporated herein by reference and made a part hereof and
to which Representative Warrant Agreement reference is hereby made for full
description of the rights, limitations of rights, duties and immunities
hereunder of the Company and the holders of the Representative Warrant
Certificates. Copies of the Representative Warrant Agreement are on file at the
principal office of the Company.
This Representative Warrant Certificate, with or without other
Representative Warrant Certificates, upon surrender at the principal office of
the Company, may be exchanged for another Representative Warrant
11
<PAGE> 12
Certificate or Certificates of like tenor and date evidencing Representative
Warrants entitling the holder to purchase a like aggregate number of Shares as
the Representative Warrant evidenced by the Representative Warrant Certificate.
If the Representative Warrant evidenced by this Representative Warrant
Certificate shall be exercised in part, the holder hereof shall be entitled to
receive upon surrender hereof another Representative Warrant Certificate or
Certificates for the number of whole Representative Warrants not exercised.
No holder of this Representative Warrant Certificate shall be entitled to
vote or to receive dividends or to consent or to receive notice as a shareholder
at the meetings of shareholders for the election of directors of the Company or
any other matter, or to any rights whatsoever as shareholder of the Company.
If this Representative Warrant Certificate shall be surrendered for
exercise within any period during which the transfer books for the Company's
Common Stock are closed for any purpose, the Company shall not be required to
make delivery of certificates for the Shares purchasable upon such exercise
until the date of the reopening of said transfer books.
IN WITNESS WHEREOF, Consep, Inc. has caused the signature (or facsimile
signature) of its Chairman and Secretary to be printed hereon and its corporate
seal (or facsimile) to be printed hereon.
Dated: , 1996
CONSEP, INC.
By:
--------------------------------------
Name:
Title:
[Corporate Seal]
Attest:
- ---------------------------------------------------------
12
<PAGE> 13
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Representation Warrant Certificates).
TO CONSEP, INC.
FOR VALUE RECEIVED hereby sells, assigns and
transfers unto this Representative Warrant Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint , to transfer the within Representative
Warrant Certificate on the books of the within-named Company, with full power of
substitution.
DATED: , 19
Signature
--------------------------------------
Signature Guaranteed:
NOTICE
The signature of the foregoing assignment must correspond to the name as
written upon the face of this Representative Warrant Certificate in every
particular, without alteration or enlargement or any change whatsoever.
13
<PAGE> 14
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Representative Warrant
Certificates).
TO CONSEP, INC.
The undersigned hereby irrevocably elects to exercise Representative
Warrants represented by this Representative Warrant Certificate to purchase
Shares issuable upon the exercise of such Representative Warrants and
requests that certificates for such Shares be issued in the name of:
Please insert social security or other identifying number
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
(Please print name and address)
The undersigned elects to pay the Exercise Price for the Shares being
purchased by [check one]:
/ / Delivery of a check, money order or wire transfer pursuant to
Section 4.2 of the Representative Warrant Agreement
/ / Net cashless exercise pursuant to Section 4.3 of the Representative
Warrant Agreement.
If such number of Representative Warrants shall not be all the Representative
Warrants evidenced by this Representative Warrant Certificate, a new
Representative Warrant Certificate for the balance remaining of such
Representative Warrants shall be registered in the name of and delivered to:
Please insert social security or other identifying number
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
(Please print name and address)
Dated: , 19
- ---------------------------------------------------------
Signature
(Signature must conform in all aspects to name of holder as specified on the
face of this Representative Warrant Certificate)
Signature Guaranteed:
14
<PAGE> 1
EXHIBIT 10.25
EIGHTH AMENDMENT TO
REGISTRATION RIGHTS AGREEMENT
This Eighth Amendment to Registration Rights Agreement is made and
entered into as of the 30th day of September, 1996, by and among Consep, Inc.,
an Oregon corporation (the "Company"), the undersigned holders of outstanding
shares of the Company's Common Stock (the "Holders") and Value Investing
Partners, Inc. ("VIP").
R E C I T A L S
A. The Company, the Holders and certain other parties entered into that
certain Registration Rights Agreement dated May 5, 1992, providing for certain
registration rights with respect to Outstanding Registrable Securities, as
defined in the Registration Rights Agreement, which Registration Rights
Agreement was amended pursuant to a First Amendment of Registration Rights
Agreement dated July 16, 1992, a Second Amendment of Registration Rights
Agreement dated August 28, 1992, a Third Amendment to Registration Rights
Agreement dated October 7, 1993, a Fourth Amendment to Registration Rights
Agreement dated December 20, 1993, a Fifth Amendment to Registration Rights
Agreement dated February 15, 1994, a Sixth Amendment to Registration Rights
Agreement dated August 1, 1995, and a Seventh Amendment to Registration Rights
Agreement dated September 6, 1996. The Registration Rights Agreement dated May
5, 1992, as amended by the above-referenced Amendments is referred to herein as
the Registration Rights Agreement.
B. The Company and Holders desire to amend the Registration Rights
Agreement to (i) expand the definition of "Registrable Securities" and
"Outstanding Registrable Securities" to include the shares of the Company's
Common Stock (the "Warrant Shares") which may be issued upon the exercise of
certain Common Stock Purchase Warrants (the "Warrants") to be issued to VIP
pursuant to that certain underwriting agreement between Company and VIP entered
into in connection with the Company's 1996 Public Offering, and (ii) add VIP as
a party to the Registration Rights Agreement.
C. Approval by the Company, the holders of at least sixty percent (60%)
of the outstanding shares of the Company's Common Stock acquired upon conversion
of Series F Preferred Stock (including at least three such holders) and by the
holders of
1 - EIGHTH AMENDMENT TO REGISTRATION
RIGHTS AGREEMENT
<PAGE> 2
at least a majority of the Outstanding Registrable Securities is required to
amend the Registration Rights Agreement. It is intended that a sufficient number
of such holders are executing this Eighth Amendment to the Registration Rights
Agreement (the "Eighth Amendment") to satisfy the foregoing conditions and by
their execution are consenting to and approving this Eighth Amendment.
A G R E E M E N T
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto agree as follows:
1. Amendment of the Registration Rights Agreement. Effective upon
issuance of the Warrants, (i) the defined terms "Registrable Securities" and
"Outstanding Registrable Securities" set forth in Section 2.9 of the
Registration Rights Agreement shall be amended to include the Warrant Shares and
the Warrants, respectively, and the Warrant Shares and the Warrants shall be
considered "Registrable Securities" and "Outstanding Registrable Securities,"
respectively, for all purposes under the Registration Rights Agreement, (ii) VIP
shall become a party to the Registration Rights Agreement and be considered a
"Holder" and "Senior Holder" for all purposes under the Registration Rights
Agreement and (iii) Schedule 1.1 to the Registration Rights Agreement shall be
amended to include VIP as a "Senior Holder" with respect to the Warrant and the
Warrant Shares.
2. Counterparts/Governing Law. This Eighth Amendment may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. This Eighth Amendment shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Oregon.
[SIGNATURE PAGES FOLLOW]
2 - EIGHTH AMENDMENT TO REGISTRATION
RIGHTS AGREEMENT
<PAGE> 3
IN WITNESS WHEREOF, this Eighth Amendment has been executed by the
parties hereto as of the date and year first above written.
COMPANY:
CONSEP, INC.
By: /s/ Volker G. Oakey
-------------------
Title: President
----------------
HOLDERS:
Nazem & Company III, L.P.
By: Nazem & Associates, III, L.P.,
Its General Partner
By: /s/ Fred F. Nazem
--------------------------
A General Partner
/s/ Fred F. Nazem
- ----------------------------
Fred F. Nazem
J.P. Morgan Investment Corporation
By: /s/ Peter H. Gleason
-------------------------
Title: Managing Director
----------------------
[ADDITIONAL SIGNATURE PAGE FOLLOWS]
3 - EIGHTH AMENDMENT TO REGISTRATION
RIGHTS AGREEMENT
<PAGE> 4
/s/ Richard M. Welch, Sr.
- ------------------------------
Richard M. Welch, Sr.
/s/ Maureen M. Welch
- ------------------------------
Maureen M. Welch
/s/ Volker G. Oakey
- ------------------------------
Volker G. Oakey
/s/ Walter C. Babcock
- ------------------------------
Walter C. Babcock
Bend Research, Inc.
By: /s/ Walter C. Babcock
-------------------------
Title: President
----------------------
Value Investing Partners, Inc.
By: /s/ Kevin R. Greene
-------------------
Title: Chairman and Chief Executive Officer
-----------------------------------
4 - EIGHTH AMENDMENT TO REGISTRATION
RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 11.0
CONSEP, INC.
Calculation of Net Income (Loss) and Pro Forma Net Loss Per
Common and Common Equivalent Share
Years Ended December 31, 1995 and 1994 and
Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------------------- ------------------------------
1996 1995 1995 1994
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss) $ 460,489 $ 435,373 $(1,286,479) $(5,849,835)
========== ========== =========== ===========
Weighted average number of
common shares outstanding 7,599,282 6,421,652 6,761,623 5,595,218
Effect of stock options and
warrants outstanding after
application of the treasury stock
method pursuant to Staff Accounting
Bulletin No. 83 -- -- -- 8,126
Weighted average number of dilutive
common equivalent shares assumed
to be outstanding pursuant to the
application of the treasury stock
method set forth in APB No. 15 225,040 205,342 -- --
Effect of assumed conversions of
preferred stock upon closing of
the Company's initial public offering
of its common stock -- -- -- 398,519
---------- ---------- ----------- -----------
7,824,322 6,626,994 6,761,623 6,001,863
========== ========== =========== ===========
Pro forma net loss per common and
common equivalent share $ (0.97)
===========
Net income (loss) per common and
common equivalent share $ 0.06 $ 0.07 $ (0.19)
=========== ========== ===========
</TABLE>
