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EXHIBIT 1.1
2,021,758 Shares of Common Stock
Sterling Construction Company, Inc.
UNDERWRITING AGREEMENT
January ___, 2006
D. A. DAVIDSON & CO.
MORGAN JOSEPH & CO., INC.
as Representatives of the Several Underwriters
c/o D. A. Davidson & Co.
8 Third Street North
The Davidson Building
Great Falls, Montana 59401
Ladies and Gentlemen:
Sterling Construction Company, Inc., a Delaware corporation
(the
"Company"), proposes to issue and sell to the several underwriters
named in
SCHEDULE I hereto (each an "Underwriter" and, collectively, the
"Underwriters"),
for which you are acting as representatives (the
"Representatives"), an
aggregate of 1,700,000 shares of the Company's common stock, par
value $0.01 per
share (the "Common Stock"), and the stockholders of the Company
named in
SCHEDULE II hereto (collectively, the "Selling Stockholders")
severally propose
to sell to the Underwriters an aggregate of 321,758 shares of
Common Stock. The
1,700,000 shares of Common Stock to be sold by the Company and the
321,758
shares of Common Stock to be sold by the Selling Stockholders are
collectively
called the "Firm Common Shares." In addition, the Company has
granted to the
Underwriters an option to purchase up to an additional 303,263
shares of Common
Stock (the "Optional Common Shares") as provided in Section 2
hereof. The Firm
Common Shares and, if and to the extent such option is exercised,
the Optional
Common Shares, are collectively called the "Common Shares."
The Company has prepared and filed with the Securities and
Exchange
Commission (the "Commission") a registration statement on Form S-1
(File No.
333-129780), which contains a prospectus subject to completion used
in
connection with the public offering and sale of the Common Shares.
Such
registration statement, as amended, at the time it was declared
effective by the
Commission under the Securities Act of 1933, as amended (the
"Act"), and the
rules and regulations promulgated thereunder (collectively, the
"Rules and
Regulations"), and, in the event of any amendment thereto after the
effective
date and before the Closing Date (as hereinafter defined), such
registration
statement as so amended (but only from and after the effectiveness
of such
amendment), including a registration statement (if any)
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filed pursuant to Rule 462(b) under the Act increasing the size of
the offering
registered under the Act and information (if any) deemed to be part
of the
registration statement at the time of effectiveness pursuant to
Rule 430A(b)
under the Act, is hereinafter called the "Registration Statement."
The
prospectus included in the Registration Statement at the time it
was declared
effective by the Commission is hereinafter called the "Prospectus,"
except that
if any prospectus differs from the prospectus on file at the time
the
Registration Statement was declared effective by the Commission,
the term
"Prospectus" shall refer to such differing prospectus from and
after the time
such prospectus is filed with the Commission pursuant to Rule
424(b) or from and
after the time it is first provided to the Underwriters by the
Company for such
use. The term "Preliminary Prospectus" as used herein means each
preliminary
prospectus included in the Registration Statement before it became
effective
under the Act and any prospectus subject to completion as described
in Rule 430A
under the Act contained in the Registration Statement. "Sale
Preliminary
Prospectus" as used herein means the preliminary prospectus dated
[-], 2006.
"Issuer Free Writing Prospectus" as used herein means any "issuer
free writing
prospectus" as defined in Rule 433 under the Act relating to the
Common Shares
identified on Schedule III hereto. "Disclosure Package" as used
herein means the
Sale Preliminary Prospectus and any Issuer Free Writing
Prospectuses. Reference
to the Registration Statement, the Prospectus, the Preliminary
Prospectus and
the Sale Preliminary Prospectus include all information
incorporated therein by
reference.
As part of the offering contemplated by this Agreement, D.A.
Davidson &
Co. has agreed to reserve out of the Common Shares set forth
opposite its name
on Schedule I to this Agreement up to 50,000 Common Shares, for
sale to parties
designated by the Company (collectively, "Participants"), as set
forth in the
Preliminary Prospectus and the Prospectus under the heading
"Underwriting--Directed Share Program." The Common Shares to be
sold by D.A.
Davidson & Co. pursuant to the Directed Share Program (the
"Directed Shares")
will be sold by D.A. Davidson & Co. pursuant to this Agreement
at the purchase
price set forth in Section 2(a) of this Agreement. Any Directed
Shares not
orally confirmed for purchase by any Participants by [the end of
the first
business day after the date on which this Agreement is executed]
will be offered
to the public by D.A. Davidson & Co. as set forth in the
Preliminary Prospectus
and the Prospectus.
For purposes of this Agreement, the term "Subsidiaries" refers to
the
entities listed in Exhibit 21 to the Registration Statement.
The Company and each of the Selling Stockholders hereby confirm
their
respective agreements with respect to the sale of the Common Shares
to the
Underwriters as follows:
1. Representations and Warranties.
A. Representations and Warranties of the Company. The Company
represents and
warrants to each Underwriter as follows:
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(a) The Registration Statement has been declared effective by
the
Commission under the Act. The Company has complied with all
requests of the
Commission for additional or supplemental information. If the
Company has
elected to rely upon Rule 430A under the Act, it will prepare and
file a
prospectus pursuant to Rule 424(b) that discloses the information
previously
omitted from the prospectus in reliance upon Rule 430A. Copies of
the
Registration Statement, each Preliminary Prospectus, and the
Prospectus, any
amendments or supplements thereto, and all documents incorporated
by reference
therein that were filed with the Commission on or prior to the date
of this
Agreement (including one executed copy of the Registration
Statement and of each
amendment thereto) have been delivered or made available to the
Representatives.
(b) No order preventing or suspending the use of any
Preliminary
Prospectus or any Issuer Free Writing Prospectus has been issued to
the Company
by the Commission nor has the Company received notice that any
proceedings have
been instituted or, to the Company's knowledge, threatened for that
purpose.
(c) Each of the Sale Preliminary Prospectus and the
Registration
Statement conforms and the Prospectus and any amendments or
supplements to the
Registration Statement or the Prospectus will, when they become
effective or are
filed with the Commission, as the case may be, conform in all
respects to the
requirements of the Act and the Rules and Regulations and do not
and will not,
as of the applicable effective date (as to the Registration
Statement and any
amendment thereto), as of the applicable filing date (as to the
Prospectus and
any amendment or supplement thereto) and as of [5:00 p.m. [Eastern
Time] on the
date of this Agreement] (the "Initial Sale Time") (as to the Sale
Preliminary
Prospectus and any amendment or supplement thereto) contain an
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, in the light
of the
circumstances under which they were made, not misleading; as of the
Initial Sale
Time, the Disclosure Package will not contain an 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, in the light of the circumstances
under which
they were made, not misleading, and each Issuer Free Writing
Prospectus will not
conflict with the information contained in the Registration
Statement, the Sale
Preliminary Prospectus or the Prospectus; provided that no
representation or
warranty is made as to information contained in or omitted from the
Registration
Statement, the Prospectus, the Sale Preliminary Prospectus or any
Issuer Free
Writing Prospectus in reliance upon and in conformity with written
information
furnished to the Company by the Selling Stockholders or through
the
Representatives by or on behalf of any Underwriter specifically for
inclusion
therein as identified in Section 11 below.
(d) At the time of the filing of the Registration Statement the
Company
was not, and the Company currently is not, an "ineligible issuer,"
as defined in
Rule 405 under the Act. Other than written communications approved
in advance by
the Representatives or listed in Schedule III hereto, the Company
has not
prepared or
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used a free writing prospectus, as such term is defined in Rule 405
of the Rules
and Regulations (a "Free Writing Prospectus"), in connection with
the offering
and sale of the Common Shares.
(e) There are no contracts, agreements or other documents of
the
Company or any Subsidiary that are required to be described in the
Sale
Preliminary Prospectus and the Prospectus or filed as exhibits to
the
Registration Statement which have not been so described or filed as
required by
the Act and the Rules and Regulations.
(f) There are no business relationships or related-party
transactions
involving the Company or any Subsidiary or any other person
required to be
described in the Sale Preliminary Prospectus and the Prospectus
which have not
been described as required.
(g) The consolidated financial statements of the Company, together
with
the notes thereto, filed as part of the Registration Statement or
included in
the Sale Preliminary Prospectus or the Prospectus, comply in all
material
respects with the requirements of the Act and the Rules and
Regulations and
fairly present, in all material respects, the financial position of
the Company
and its Subsidiaries as of the dates indicated and the results of
operations and
changes in financial position for the periods therein specified;
and said
consolidated financial statements have been prepared in conformity
with
generally accepted accounting principles consistently applied
throughout the
periods involved (except as otherwise stated in the related notes
thereto). No
other financial statements or schedules are required to be filed as
part of the
Registration Statement or included in the Sale Preliminary
Prospectus or the
Prospectus. The financial information included in the Sale
Preliminary
Prospectus and Prospectus under the caption "Summary Historical
Financial and
Operating Data" and "Selected Historical Consolidated Financial and
Operating
Data" presents fairly the information set forth therein at the
dates and for the
periods indicated.
(h) Grant Thorton LLP, who has expressed its opinion with respect
to
certain of the financial statements and the related notes thereto
included in
the Sale Preliminary Prospectus and the Prospectus, are independent
registered
public accountants with respect to the Company as required by the
Act and the
Rules and Regulations.
(i) The Company and each Subsidiary maintains 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 generally
accepted
accounting principles and to maintain accountability for its
assets; (iii)
access to assets is permitted only in accordance with management's
general or
specific authorization; and (iv) the recorded accountability
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for assets is compared with existing assets at reasonable intervals
and
appropriate action is taken with respect to any differences.
(j) This Agreement has been duly authorized, executed and delivered
by
the Company and is a valid and binding obligation of the Company,
enforceable
against the Company in accordance with its terms, except as
enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or
similar laws
relating to or affecting the rights of creditors generally and by
equitable
principles, and except as obligations of the Company under the
indemnification
provisions hereof may be limited under federal or state securities
laws and
public policy relating thereto.
(k) The execution, delivery and performance by the Company of
this
Agreement and the consummation of the transactions contemplated
hereby,
including the issuance, sale and delivery of the Common Shares by
the Company,
will not (i) result in a breach or violation of any of the terms
and provisions
of, or constitute a default (or an event which with notice or lapse
of time, or
both, would constitute a default) under, or result in the creation
or imposition
of any lien, charge or encumbrance upon any property or assets of
the Company or
its Subsidiaries pursuant to, any indenture, mortgage, deed of
trust, loan
agreement, note, lease or other material agreement, instrument,
franchise,
license or permit to which the Company or any Subsidiary is a party
or by which
it is bound, or to which any of the property or assets of the
Company or any
Subsidiary is subject, or (ii) violate any judgment, decree, order,
statute,
rule or regulation of any court or any governmental or regulatory
agency or
body, or any arbitrator, having jurisdiction over the Company or
any of its
Subsidiaries or any of their respective properties or assets, which
breaches,
violations, defaults or liens would have a material adverse effect
upon the
financial condition, earnings, operations, management, properties,
business or
Business Prospects (as defined below) of the Company and its
Subsidiaries, taken
as a whole (a "Material Adverse Effect"); or (iii) violate or
conflict with any
provision of the articles or certificate of incorporation, charter,
bylaws or
other governing documents of the Company or any of its
Subsidiaries. No consent,
approval, authorization, order or decree of any court or
governmental or
regulatory agency or body, or any arbitrator having jurisdiction
over the
Company or its Subsidiaries or any of their respective properties
or assets is
required for the execution, delivery and performance of this
Agreement and the
consummation of the transactions contemplated hereby, except (i)
such as have
been made or obtained under the Act, (ii) as may be required under
state
securities or blue sky laws or (iii) such as may be required
pursuant to the
rules and regulations of the National Association of Securities
Dealers, Inc.
("NASD"). As used herein, "Business Prospects" refers to (a)
projects included
in the Company's contract backlog as of the date hereof; and (b)
projects for
which the Company has submitted bids that are pending as of the
date hereof.
(l) The Common Shares have been duly authorized and, when issued
and
delivered pursuant to this Agreement against payment of the
consideration set
forth herein, will be validly issued and fully paid and
nonassessable; the
issuance of the Common Shares is not subject to preemptive or other
similar
rights and there are no
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persons with registration or other similar rights to have any
equity or debt
securities registered for sale under the Registration Statement or
included in
the offering contemplated by this Agreement, other than the Selling
Stockholders
with respect to the Common Shares included in the Registration
Statement, except
for such rights as have been duly waived.
(m) Other than as contemplated by this Agreement or described in
each
of the Sale Preliminary Prospectus and the Prospectus, the Company
has not
incurred any liability for any finder's or broker's fee or agent's
commission in
connection with the execution and delivery of this Agreement or the
consummation
of the transactions contemplated hereby.
(n) The Common Shares have been approved to be quoted on the
Nasdaq
National Market.
(o) There are no transfer taxes or other similar fees or charges
under
federal law or the laws of any state, or any political subdivision
thereof,
required to be paid in connection with the execution and delivery
of this
Agreement or the issuance and sale by the Company of the Common
Shares.
(p) The Company has been duly organized and is validly existing as
a
corporation under the laws of the State of Delaware, and is
qualified to do
business and is in good standing in Texas and in each other
jurisdiction in
which the ownership or leasing of properties or the conduct of its
business
requires such qualification, except where failure to be so
qualified would not
have a Material Adverse Effect. Each Subsidiary (other than Steel
City Products,
LLC) has been duly incorporated or organized and is in good
standing under the
laws of its jurisdiction of incorporation or organization and is
qualified to do
business and is in good standing in each jurisdiction in which the
ownership or
leasing of properties or the conduct of its business requires
such
qualification, except where failure to be so qualified would not
have a Material
Adverse Effect. The failure of Steel City Products, LLC to be
qualified to do
business as a foreign corporation in Pennsylvania will not have a
Material
Adverse Effect. The Company and its Subsidiaries have all requisite
power and
authority to own their respective properties and to conduct their
respective
businesses as currently being carried on and as described in the
Prospectus.
(q) The authorized, issued and outstanding capital stock of the
Company
is as set forth in each of the Sale Preliminary Prospectus and the
Prospectus
under the captions "Capitalization" and "Description of Capital
Stock" (other
than for subsequent issuances, if any, pursuant to employee benefit
plans
described in the Sale Preliminary Prospectus and the Prospectus or
upon exercise
of outstanding options pursuant to stock option plans or upon
exercise of
warrants described in the Sale Preliminary Prospectus and the
Prospectus). The
Common Stock conforms in all material respects to the description
thereof
contained in each of the Sale Preliminary Prospectus and the
Prospectus. All of
the issued and outstanding shares of Common Stock have been, and
the shares of
Common Stock to be sold by the Selling
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Stockholders pursuant hereto, when issued pursuant to exercise of
the applicable
option or warrant will be, duly authorized and validly issued, are
fully paid
and nonassessable and have been issued in compliance with federal
and state
securities laws. None of the outstanding shares of Common Stock
were issued in
violation of any preemptive rights, rights of first refusal or
other similar
rights to subscribe for or purchase securities of the Company.
There are no
authorized or outstanding options, warrants, preemptive rights,
rights of first
refusal or other rights to purchase, or equity or debt securities
convertible
into or exchangeable or exercisable for, any capital stock of the
Company or any
of its Subsidiaries other than those described in each of the Sale
Preliminary
Prospectus and the Prospectus. The description of the Company's
stock option,
stock bonus and other stock plans or arrangements, and the options
or other
rights granted thereunder, set forth in each of the Sale
Preliminary Prospectus
and the Prospectus accurately and fairly summarize, in all material
respects,
such plans, arrangements, options and rights.
(r) The Company does not own or control, directly or indirectly,
any
corporation, limited liability company, or other entity required to
be listed in
Exhibit 21 to the Registration Statement, that is not so
listed.
(s) All the outstanding shares of capital stock, membership or
partnership interests of each Subsidiary have been duly and validly
authorized
and issued and are fully paid and nonassessable, have been issued
in compliance
with all federal and state securities laws and were not issued in
violation of
any preemptive right, resale right, right of first refusal or
similar right; and
all outstanding shares of capital stock, membership interests or
partnership
interests of the Subsidiaries are owned by the Company either
directly or
through wholly-owned Subsidiaries free and clear of any security
interests,
claims, liens or encumbrances.
(t) Except for restrictions imposed by (i) applicable loan or
credit
facilities, (ii) any bonding facility or (iii) applicable law, no
Subsidiary is
currently restricted, directly or indirectly, from paying any
dividends to the
Company, from making any other distribution on such Subsidiary's
capital stock
or membership or partnership interests, or from repaying any loans
or advances
made by the Company to such Subsidiary, and no Subsidiary is
restricted from
transferring any of its property or assets to the Company.
(u) Neither the Company nor any Subsidiary is (i) in violation of
its
articles or certificate of incorporation, charter, bylaws or other
governing
documents, (ii) in violation of any judgment, decree, order,
statue, rule or
regulation of any court or any governmental or regulatory agency or
body, or any
arbitrator, having jurisdiction over the Company or any of its
Subsidiaries or
any of their respective properties or assets, except for violations
that,
individually or in the aggregate, would not have a Material Adverse
Effect, or
(iii) in violation, breach or default of any obligation, agreement,
covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement,
note, lease or other material agreement, instrument, franchise,
license or
permit to which the Company or any such Subsidiary is a party
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or by which it is bound, or to which any of the property or assets
of the
Company or any such Subsidiary is subject, where any such
violation, breach or
default would have, individually or in the aggregate, a Material
Adverse Effect.
(v) The Company and its Subsidiaries have good and marketable title
in
fee simple to all real property, and good and marketable title to
all items of
personal property, described as being owned by them in the Sale
Preliminary
Prospectus and the Prospectus that are material to the respective
businesses of
the Company and its Subsidiaries, in each case free and clear of
all liens,
encumbrances and defects, except as (i) do not materially interfere
with the
current or reasonably anticipated use of such properties; (ii)
described in each
of the Sale Preliminary Prospectus and the Prospectus (including
pursuant to any
credit or bonding facility, or document entered into in connection
therewith);
or (iii) would not reasonably be expected, individually or in the
aggregate, to
have a Material Adverse Effect; and any real and personal property
held under
leases by the Company and its Subsidiaries are held by them under
valid and
enforceable leases with such exceptions as are not material and do
not
materially interfere with the use of such properties by the Company
and its
Subsidiaries.
(w) Each of the Company and its Subsidiaries owns or possesses
adequate
licenses or other rights to use all patents, trademarks, service
marks, trade
names, copyrights and know-how necessary to conduct the businesses
now or
proposed to be operated by them as described in each of the Sale
Preliminary
Prospectus and the Prospectus. None of the Company or its
Subsidiaries has
received any notice of infringement of or conflict with (or knows
of any such
infringement of or conflict with) asserted rights of others with
respect to any
patents, trademarks, service marks, trade names, copyrights or
know-how that, if
such assertion of infringement or conflict were sustained, would
have a Material
Adverse Effect.
(x) Except to the extent that the Company is self-insured as
described
in the Sale Preliminary Prospectus and the Prospectus, the Company
and its
Subsidiaries have insurance coverage in such amounts and with such
deductibles
and covering such risks that the Company deems to be adequate to
protect the
Company and its Subsidiaries and their respective businesses and as
are
customary for their respective businesses including, policies
covering real and
personal property owned or leased by the Company and its
Subsidiaries against
theft, damage, destruction, acts of vandalism and earthquakes,
general liability
and directors' and officers' liability. The Company has no reason
to believe
that it or any Subsidiary will not be able (i) to renew its
existing insurance
coverage as and when such policies expire or (ii) to obtain
comparable coverage
from similar institutions as may be necessary or appropriate to
conduct its
business as now conducted and at a cost that would not have a
Material Adverse
Effect. Neither the Company nor any Subsidiary has been denied any
insurance
coverage which it has sought or for which it has applied during the
last five
years. There are no material claims by the Company or any of its
Subsidiaries
under any such policy or instrument as to which any insurance
company is denying
liability or defending under a reservation of rights clause. The
Company
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and its Subsidiaries have in effect performance and payment bonds
that the
Company deems to be adequate for the conduct of their respective
businesses as
currently conducted, and neither the Company nor any of its
Subsidiaries has
knowledge that it will not be able to renew its existing
performance and payment
bonds or obtain new bonds as may be necessary to continue its
business.
(y) The Company and its Subsidiaries have filed all federal,
state,
local, or foreign income, gross receipts, license, payroll,
employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental
(including taxes pursuant to the Internal Revenue Code of 1986, as
amended (the
"Code"), Section 59A), customs, duties, capital stock, franchise,
profits,
withholding, social security (or similar), unemployment,
disability, real
property, personal property, sales, use, transfer, registration,
value added,
alternative or add-on minimum, estimated or other tax (collectively
"Tax" or
"Taxes") returns, declarations, reports, claims for refund, or
information
return or statement relating to Taxes, including any schedule or
attachment
thereto, and including any amendment thereof (collectively, "Tax
Returns") and
have paid or made provision for the payment of all Taxes required
to be paid by
any of them (whether or not shown on any Tax Return) and, if due
and payable,
any related assessment, fine, penalty, or addition thereto, whether
disputed or
not, and including any obligations to indemnify or otherwise assume
or succeed
to the Tax liability of any other person other than those that, if
not paid
would not, individually or in the aggregate, have a Material
Adverse Effect. The
Company has made adequate charges, accruals and reserves in the
financial
statements referred to in Section 1(g) above in respect of all
Taxes for all
periods as to which the Tax liability or obligation of the Company
or any of its
Subsidiaries has not been finally determined. The Company has no
knowledge of
any Tax deficiency asserted or threatened against the Company that
would
reasonably be expected to have a Material Adverse Effect.
(z) The Company and each of its Subsidiaries have all consents,
approvals, authorizations, orders, registrations, qualifications,
certificates,
franchises, licenses and permits issued by the appropriate public,
regulatory or
governmental agencies and bodies, material to the ownership of
their respective
properties and conduct of their respective businesses as now being
conducted and
as described in each of the Sale Preliminary Prospectus and the
Prospectus. The
conduct of the business of the Company and each of the Subsidiaries
is in
compliance with all applicable federal, state, local and foreign
laws and
regulations, except where failure to be so in compliance would not
have a
Material Adverse Effect. Neither the Company nor any Subsidiary has
received any
notice of proceedings relating to the revocation or modification
of, or
non-compliance with, any such consents, approvals, authorizations,
orders,
registrations, qualifications, certificates, franchises, licenses
and permits
which, individually or in the aggregate, if the subject of an
unfavorable
decision, ruling or finding, would reasonably be expected to have a
Material
Adverse Effect.
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(aa) Since the date as of which information was given in the
Sale
Preliminary Prospectus through the date hereof, and except as
otherwise
disclosed in each of the Sale Preliminary Prospectus and the
Prospectus, (i)
there has been no change or development that could reasonably be
expected to
have a Material Adverse Effect (a "Material Adverse Change"); (ii)
there have
been no transactions entered into by the Company or its
Subsidiaries which would
materially affect the Company or its Subsidiaries, taken as a
whole; (iii) there
has been no dividend or distribution of any kind declared, paid or
made by the
Company on its equity securities; (iv) neither the Company nor any
Subsidiary
has incurred any material liabilities or obligations, indirect,
direct or
contingent; and (v) there has not been (A) any issuance of
warrants, convertible
securities or other rights to purchase equity securities of the
Company or the
capital stock or membership or other equity interests of any
Subsidiary, or (B)
any material increase in the short-term or long-term debt
(including capitalized
lease obligations) of the Company or any Subsidiary, other than
borrowings after
such dates under the credit facilities described in the Prospectus;
except, in
the case of each of clauses (ii) and (iv), pursuant to contracts
related to
construction projects awarded to the Company in the ordinary course
of business.
Neither the Company nor any of its Subsidiaries has any contingent
liabilities
which are not disclosed in each of the Sale Preliminary Prospectus
and
Prospectus that are material to the Company and its Subsidiaries,
taken as a
whole.
(bb) There is not pending or, to the knowledge of the Company,
threatened or contemplated, any investigation, action, suit or
proceeding to
which the Company or any Subsidiary is a party or to which any of
their assets
may be subject, before or by any court or governmental agency,
authority or
body, domestic or foreign, or any arbitrator, the disposition of
which,
individually or in the aggregate, would reasonably be expected to
(i) have a
Material Adverse Effect, or (ii) materially and adversely affect
the Company's
performance under this Agreement or the consummation of any of the
transactions
contemplated hereby; and there are no current or pending actions,
suits or
proceedings that are required under the Securities Act to be
described in the
Sale Preliminary Prospectus and in the Prospectus that are not so
described.
(cc) The Company has been advised of the rules and requirements
under
the Investment Company Act of 1940, as amended (the "Investment
Company Act").
None of the Company or any Subsidiary is, or after receipt of
payment for the
Common Shares will be, an "investment company" or an entity
"controlled" by an
"investment company" within the meaning of the Investment Company
Act.
(dd) Neither the Company nor any of its affiliates has taken,
directly
or indirectly, any action designed to cause or result in the
stabilization or
manipulation of the price of the Common Stock to facilitate the
sale of the
Common Shares.
(ee) Each of the Company and its Subsidiaries, and each
"employee
benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement
Income Security Act of 1974, as amended, including the regulations
and published
interpretations thereunder ("ERISA")) for which the Company and its
Subsidiaries
or
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<PAGE>
their "ERISA Affiliates" (as defined below) have any liability
(each, a "Plan"),
are in compliance in all material respects with all applicable
statutes, rules
and regulations, including ERISA and the Code. "ERISA Affiliate"
means, with
respect to the Company or a Subsidiary, any member of any group of
organizations
described in Sections 414(b), (c), (m) or (o) of the Code of which
the Company
or such Subsidiary is a member. With respect to each Plan subject
to Title IV of
ERISA, (a) no "reportable event" (as defined in ERISA) has occurred
or is
reasonably expected to occur, (b) no "accumulated funding
deficiency" (within
the meaning of Section 302 of ERISA or Section 412 of the Code),
whether or not
waived, has occurred or is reasonably expected to occur, (c) the
fair market
value of the assets under each Plan exceeds the present value of
all benefits
accrued under such Plan (determined based on those assumptions used
to fund such
Plan), and (d) neither the Company nor any ERISA Affiliate has
incurred, or
reasonably expects to incur, any liability under (i) Title IV of
ERISA (other
than contributions to the Plan or premiums to the Pension Benefit
Guaranty
Corporation in the ordinary course and without default) in respect
of a Plan
(including a "multiemployer plan" within the meaning of Section
4001(c)(3) of
ERISA), or (ii) Sections 412 or 4971 of the Code. Each Plan that is
intended to
be qualified under Section 401(a) of the Code is so qualified, and
nothing has
occurred or is expected to occur, whether by action or by failure
to act, which
would cause the loss of such qualification.
(ff) No hazardous substances, hazardous wastes, pollutants or
contaminants (i) have been released, deposited or disposed of in,
on or under
any properties during the period in which the Company or any
Subsidiary has
owned, leased, managed, controlled or operated such properties; or
(ii) have
been released, deposited or disposed of by or on behalf of the
Company in, on or
under any properties, in the case of each of clauses (i) and (ii)
in violation
of any applicable law, ordinance, rule, regulation, order,
judgment, decree or
permit or which would require remedial action under any applicable
law,
ordinance, rule, regulation, order, judgment, decree or permit,
except for any
release, violation or remedial action (other than remedial actions
of the type
routinely carried out at facilities of like character to those
operated by the
Company and its Subsidiaries) which would not have, or would not be
reasonably
expected to have, individually or in the aggregate with all such
releases,
violations or remedial actions, a Material Adverse Effect.
(gg) No labor disturbance by the employees of the Company or any of
its
Subsidiaries that would reasonably be expected to have a Material
Adverse Effect
exists or, to the knowledge of the Company, is contemplated or
threatened.
(hh) The Company has obtained for the benefit of the Underwriters
the
agreement (a "Lock-Up Agreement"), in the form requested by the
Underwriters, of
those individuals set forth on EXHIBIT A hereto.
(ii) The Company has established and maintains and evaluates
"disclosure controls and procedures" (as such term is defined in
Rule 13a-15 (e)
under the Exchange Act of 1934, as amended (the "Exchange Act");
such disclosure
controls and
11
<PAGE>
procedures are designed to ensure that material information
relating to the
Company, and its Subsidiaries, required to be disclosed by the
Company in the
reports that it files or submits under the Exchange Act is made
known to the
Company's Chief Executive Officer and its Chief Financial Officer
by others
within those entities, and such disclosure controls and procedures
are effective
in providing reasonable assurance that material information
relating to the
Company and its Subsidiaries is made known to such persons,
including during the
period when the Company prepares its periodic reports to be filed
with or
furnished to the Commission. The Company does not have knowledge of
(a) any
material weaknesses in its internal controls over financial
reporting or (b) any
fraud, whether or not material, that involves management or other
employees who
have a significant role in the Company's internal controls.
(jj) All statistical or market-related data included in the
Sale
Preliminary Prospectus or the Prospectus are based on or derived
from sources
that the Company believes to be reliable and accurate, and the
Company has
obtained the written consent to the use of such data from such
sources to the
extent required.
(kk) To the Company's knowledge, there are no affiliations or
associations between any member of the National Association of
Securities
Dealers, Inc. (the "NASD") and any of the Company's officers,
directors or 5% or
greater securityholders that are required to be described in the
Sale
Preliminary Prospectus and the Prospectus and that are not so
described as
required.
(ll) Neither the Company nor any of its Subsidiaries nor, to
the
knowledge of the Company, any director, officer, agent, employee or
other person
associated with or acting on behalf of the Company or any of its
Subsidiaries
has (i) used any corporate funds for any unlawful contribution,
gift,
entertainment or other unlawful expense relating to political
activity; (ii)
made any direct or indirect unlawful payment to any government
official or
employee from corporate funds; (iii) made any bribe, rebate,
payoff, influence
payment, kickback or other unlawful payment; or (iv) offered or
caused the
Underwriters to offer any of the Common Shares to any person
pursuant to the
Directed Share Program with the specific intent to unlawfully
influence a
customer or supplier of the Company to alter such customer's or
supplier's level
or type of business with the Company or a trade journalist or
publication to
write or publish favorable information about the Company or its
services.
B. Representations and Warranties of the Selling Stockholders. Each
Selling
Stockholder represents and warrants, as to itself only, to each
Underwriter as
follows:
(a) This Agreement has been duly executed and delivered and,
with
respect to any entity, duly authorized by such Selling Stockholder
and is a
valid and binding obligation of such Selling Stockholder,
enforceable against
such Selling Stockholder in accordance with its terms, except as
enforceability
thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent
transfer, fraudulent conveyance or similar laws relating to or
affecting the
rights of creditors generally
12
<PAGE>
and by equitable principles, and except as obligations of such
Selling
Stockholder under the indemnification provisions hereof may be
limited under
federal or state securities laws and public policy relating
thereto.
(b) The Power of Attorney and Custody Agreement signed by such
Selling
Stockholder (other than Mr. Davies) and American Stock Transfer
& Trust Company,
as custodian (the "Custodian"), relating to the deposit of the
Common Shares to
be sold by such Selling Stockholder and appointing certain
individuals named
therein as such Selling Stockholder's attorneys-in-fact (each,
an
"Attorney-in-Fact") to the extent set forth therein relating to the
transactions
contemplated hereby and by the Prospectus, and, in the case of Mr.
Davies, his
Power of Attorney, has been duly authorized, executed and delivered
by such
Selling Stockholder and is a valid and binding agreement of such
Selling
Stockholder, enforceable against such Selling Stockholder in
accordance with its
terms, except as enforceability thereof may be limited by
bankruptcy,
insolvency, reorganization, fraudulent transfer, fraudulent
conveyance or
similar laws relating to or affecting the rights of creditors
generally and by
equitable principles, and except as obligations of such Selling
Stockholder
under the indemnification provisions thereof may be limited under
federal or
state securities laws and public policy relating thereto.
(c) Upon valid exercise of the options or warrants owned by
each
Selling Stockholder, as the case may be, pursuant to the terms of
the respective
grant instruments relating to such options or warrants, and subject
to payment
of the exercise price to the Company out of the proceeds of this
offering, such
Selling Stockholder will be, on the Closing Date, the record and
beneficial
owner of all of the Common Shares to be sold by such Selling
Stockholder
pursuant to this Agreement on such date free and clear of all
liens,
encumbrances or adverse claims, and the legal right, power and
authority and all
authorizations and approvals required by law and under its charter
or by-laws,
or other organizational documents, as applicable, to enter into
this Agreement
and its Power of Attorney and Custody Agreement, to sell, transfer
and deliver
the Common Shares to be sold by such Selling Stockholder pursuant
to this
Agreement, and to comply with its other obligations hereunder and
thereunder.
(d) On the Closing Date, such Selling Stockholder will deliver or
cause
to be delivered the Common Shares to be sold by such Selling
Stockholder to The
Depository Trust Company ("DTC") and will, on the Closing Date,
have a security
entitlement (within the meaning of Section 8-102(a)(17) of the
Uniform
Commercial Code as in effect in the State of New York (the "UCC"))
to the Common
Shares to be sold by such Selling Stockholder hereunder maintained
in a
securities account (within the meaning of Section 8-501 of the UCC)
on the books
of DTC or its nominee free and clear of any action that may be
asserted based on
an adverse claim (within the meaning of Section 8-105 of the UCC),
with respect
to such security entitlement, and assuming that each Underwriter
acquires its
interest in the Common Shares it has purchased without notice of
any adverse
claim, upon the crediting of such Common Shares to the securities
account of
such Underwriter maintained with DTC and
13
<PAGE>
payment therefor by such Underwriter, as provided herein, such
Underwriter will
have acquired a security entitlement to such Common Shares, and no
action based
on any adverse claim may be asserted against such Underwriter with
respect to
such security entitlement.
(e) The execution and delivery by such Selling Stockholder of, and
the
performance by such Selling Stockholder of its obligations under,
this Agreement
and the Power of Attorney and Custody Agreement will not conflict
with, result
in a breach of, or constitute a default under, or require the
consent of any
other party to, (i) the charter or by-laws, or other organizational
documents,
of such Selling Stockholder, as applicable, or any other agreement
or instrument
to which such Selling Stockholder is a party or by which it is
bound or under
which it is entitled to any right or benefit, (ii) any provision of
applicable
law or (iii) any judgment, order, decree or regulation applicable
to such
Selling Stockholder of any court, regulatory body, administrative
agency,
governmental body or arbitrator having jurisdiction over such
Selling
Stockholder. No consent, approval, authorization or other order of,
or
registration or filing with, any court or other governmental
authority or agency
is required for the consummation by such Selling Stockholder of the
transactions
contemplated in this Agreement, except (i) such as have been
obtained or made
under the Act, (ii) such as may be required under state securities
or blue sky
laws and (iii) such as may be required pursuant to the rules and
regulations of
the NASD.
(f) Except for the (i) consent of such Selling Stockholder to
the
respective number of Common Shares to be sold by all of the Selling
Stockholders
pursuant to this Agreement and (ii) waiver by certain other holders
of warrants
to purchase Common Stock of certain registration rights pursuant
thereto, no
consent, approval or waiver is required under any instrument or
agreement to
which such Selling Stockholder is a party or by which it is bound
or under which
it is entitled to any right or benefit in connection with the
offering, sale or
purchase by the Underwriters of any of the Common Shares which may
be sold by
such Selling Stockholder under this Agreement or the consummation
by such
Selling Stockholder of any of the other transactions contemplated
hereby.
(g) The information with respect to such Selling Stockholder
contained
in the Registration Statement, the Prospectus or the Sale
Preliminary Prospectus
(as amended, supplemented or superceded by the Prospectus), as of
the applicable
date set forth in each of the Prospectus and the Sale Preliminary
Prospectus,
that is in reliance upon and in conformity with information
furnished to the
Company by or on behalf of such Selling Stockholder in writing
(which
information is set forth on SCHEDULE 1(B)(g) hereto) does not
contain 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, in the
light of the
circumstances under which they were made, not misleading.
(h) Such Selling Stockholder has not taken and will not take,
directly
or indirectly, any action designed to cause or result in
stabilization or
manipulation of the price of the Common Stock to facilitate the
sale of the
Common Shares.
14
<PAGE>
(i) Such Selling Stockholder does not have any registration or
other
similar rights to have any equity or debt securities registered for
sale by the
Company under the Registration Statement or included in the
offering
contemplated by this Agreement, except for such rights that have
been waived or
exercised.
(j) Such Selling Stockholder is not prompted to sell shares of
Common
Stock by any information concerning the Company which is not set
forth in the
Registration Statement, the Sale Preliminary Prospectus and the
Prospectus.
2. Purchase, Sale and Delivery of Common Stock.
(a) On the basis of the representations, warranties and
agreements
herein contained, and on the terms but subject to the conditions
herein set
forth, (i) the Company agrees to issue and sell to the several
Underwriters an
aggregate of 1,700,000 Common Shares and (ii) each Selling
Stockholder agrees to
sell to the several Underwriters the number of Common Shares set
forth opposite
such Selling Stockholder's name on SCHEDULE II, for an aggregate of
321,758
Common Shares. Each of the Underwriters agrees, severally and not
jointly, to
purchase from the Company and the Selling Stockholders, the number
of Firm
Common Shares set forth opposite its name on SCHEDULE I hereto. The
purchase
price per share of Common Stock to be paid by the several
Underwriters to the
Company and the Selling Stockholders shall be [$______]. Each
Selling
Stockholder authorizes the Representatives to, and the
Representatives agree
that they will, deduct from the per share purchase price payable to
such Selling
Stockholder the per share exercise price of such Selling
Stockholder's options
or warrant, as the case may be, as set forth on Schedule II, and
pay the
aggregate exercise price to the Company on behalf of such Selling
Stockholder.
(b) Delivery of the Firm Shares to be purchased by the
Underwriters
against payment therefor shall be made as provided in Sections 2(d)
and 2(e)
below at 7:00 a.m. Pacific time on [__________], 2006 or at such
other time and
date not later than [__________], 2006 as the Representatives shall
designate by
notice to the Company (or at such time and date to which payment
and delivery
shall have been postponed pursuant to Section 11 hereof), such time
and date of
payment and delivery being herein called the "Closing Date." If one
or more of
the Selling Stockholders shall fail to sell and deliver to the
Underwriters the
Common Shares to be sold and delivered by such Selling Stockholders
pursuant to
this Agreement at the Closing Date, then the Underwriters shall
have the right,
by written notice from the Representatives to the Company and the
Selling
Stockholders, to postpone the Closing Date, but in no event for
longer than
seven days in order that the required changes, if any, to the
Registration
Statement and the Prospectus or any other documents or arrangements
may be
effected.
(c) In addition, on the basis of the representations, warranties
and
agreements herein contained, and upon the terms but subject to the
conditions
herein
15
<PAGE>
set forth, the Company hereby grants an option to the several
Underwriters to
purchase, severally and not jointly, the Optional Common Shares
from the Company
at the purchase price per share to be paid by the Underwriters for
the Firm
Common Shares. The option granted hereunder is for use by the
Underwriters
solely in covering any over-allotments in connection with the sale
and
distribution of the Firm Common Shares. The option granted
hereunder may be
exercised at any time or from time to time upon notice by the
Representatives to
the Company, which notice may be given at any time within 30 days
from the date
of this Agreement. The time and date of delivery of the Optional
Common Shares,
if subsequent to the Closing Date, is referred to herein as the
"Option Closing
Date" and shall be determined by the Representatives and shall not
be earlier
than three nor later than five full business days after delivery of
such notice
of exercise. If any Optional Common Shares are to be purchased,
each Underwriter
agrees, severally and not jointly, to purchase the number of
Optional Common
Shares (subject to such adjustments to eliminate fractional shares
as the
Representatives may determine) that bears the same proportion to
the total
number of Optional Common Shares to be purchased as the percentage
set forth on
SCHEDULE I opposite the name of such Underwriter, and the Company
agrees to sell
such number of Optional Common Shares to each such Underwriter.
The
Representatives may cancel the option at any time prior to its
expiration by
giving written notice of such cancellation to the Company.
(d) Payment for the Common Shares to be sold by the Company shall
be
made at the Closing Date (and, if applicable, at the Option Closing
Date) by
wire transfer of immediately available funds to the order of the
Company.
Payment for the Common Shares (subject to the deduction and payment
to the
Company as set forth in the last sentence of Section 2(a) above) to
be sold by
the Selling Stockholders shall be made on the Closing Date by wire
transfer of
immediately available funds to the order of each Selling
Stockholder. It is
understood that the Representatives have been authorized, for their
own account
and the accounts of the several Underwriters, to accept delivery of
and receipt
for, and make payment of the purchase price for, the Firm Common
Shares and any
Optional Common Shares the Underwriters have agreed to purchase. D.
A. Davidson
& Co., individually and not as a Representative of the
Underwriters, may (but
shall not be obligated to) make payment for any shares of Common
Stock to be
purchased by any Underwriter whose funds shall not have been
received by the
Representatives by the Closing Date or the Option Closing Date, as
the case may
be, for the account of such Underwriter, but any such payment shall
not relieve
such Underwriter from any of its obligations under this
Agreement.
(e) Each Selling Stockholder hereby agrees that he or it will pay
all
stock transfer taxes, stamp duties and other similar taxes, if any,
payable upon
the sale or delivery of the Common Shares to be sold by such
Selling Stockholder
to the several Underwriters, or otherwise in connection with the
performance of
such Selling Stockholder's obligations hereunder.
(f) The Company and the Selling Stockholders shall deliver, or
cause to
be delivered, a credit representing the Firm Common Shares to an
account or
16
<PAGE>
accounts at DTC, as designated by the Representatives for the
accounts of the
Representatives and the several Underwriters at the Closing Date,
against the
irrevocable release of a wire transfer of immediately available
funds for the
amount of the purchase price therefor. The Company also shall
deliver, or cause
to be delivered, a credit representing the Optional Common Shares
that the
Underwriters have agreed to purchase at the Closing Date (or the
Option Closing
Date, as the case may be), to an account or accounts at DTC as
designated by the
Representatives for the accounts of the Representatives and the
several
Underwriters, against the irrevocable release of a wire transfer of
immediately
available funds for the amount of the purchase price therefor. Time
shall be of
the essence, and delivery at the time and place specified in this
Agreement is a
further condition to the obligations of each Underwriter
hereunder.
(g) Not later than 12:00 noon on the second business day following
the
date the shares of Common Stock are released by the Underwriters
for sale to the
public, the Company shall deliver or cause to be delivered copies
of the
Prospectus in such quantities and at such places as the
Representatives shall
reasonably request.
3. Offering by the Underwriters.
The Representatives hereby advise the Company and the Selling
Stockholders that the Underwriters intend to offer for sale to the
public, as
described in the Prospectus, their respective portions of the Firm
Common Shares
(and Optional Common Shares, as the case may be) as soon after this
Agreement
has been executed and the Registration Statement has been declared
effective as
the Representatives, in their sole judgment, have determined is
advisable and
practicable.
4. Covenants.
A. Covenants of the Company.
The Company covenants and agrees with the several Underwriters
as
follows:
(a) The Company will notify the Representatives promptly (i) of
the
time when the Registration Statement or any post-effective
amendment to the
Registration Statement has become effective; (ii) any supplement to
the
Prospectus or the Sale Preliminary Prospectus has been filed; (iii)
of the
receipt of any comments from the Commission; and (iv) of any
request by the
Commission for any amendment or supplement to the Registration
Statement,
Prospectus or the Sale Preliminary Prospectus or additional
information. If the
Company has elected to rely on Rule 430A of the Rules and
Regulations, the
Company will prepare and file a Prospectus containing the
information omitted
therefrom pursuant to Rule 430A with the Commission within the time
period
required by, and otherwise in accordance with the provisions of,
Rules 424(b)
and 430A, if applicable. If the Company has elected to rely upon
Rule 462(b) of
the Rules and Regulations to increase the size of the offering
registered under
the Act, the Company will prepare and file a registration
17
<PAGE>
statement with respect to such increase with the Commission within
the time
period required by, and otherwise in accordance with the provisions
of, Rule
462(b). The Company will not file any amendment or supplement to
the
Registration Statement, Prospectus or the Sale Preliminary
Prospe
