EXHIBIT 1.1
XXXXXXXXX.XXX, INC.
3,500,000 SHARES
COMMON STOCK
UNDERWRITING AGREEMENT
March __, 2000
XXXX CAPITAL PARTNERS, INC.
- and -
PENNSYLVANIA MERCHANT GROUP
as Representatives of the several Underwriters
The undersigned, XXXXXXXXX.XXX, INC., a Texas corporation (the
"Company"), hereby addresses you as the representatives (the "Representatives")
of each of the persons, firms and corporations listed on Schedule I hereto
(collectively, the "Underwriters") and hereby confirms its Underwriting
Agreement (the "Agreement") with the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell to
the Underwriters an aggregate of 3,500,000 shares of the Company's Common Stock,
no par value (the "Company Shares"). Solely for the purpose of covering
over-allotments in the sale of the Company Shares, the Company further proposes
to grant to the Underwriters the right to purchase up to an additional 525,000
shares of its Common Stock (the "Option Shares"), as provided in Section 3 of
this Agreement. The Company Shares and the Option Shares are herein sometimes
referred to as the "Shares" and are more fully described in the Prospectus
hereinafter defined.
2. PURCHASE, SALE AND DELIVERY OF COMPANY SHARES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters the Company Shares, and each such Underwriter agrees, severally and
not jointly, (i) to purchase from the Company, at a purchase price of $___ per
share, the number of Company Shares set forth opposite the name of such
Underwriter in Schedule I hereto and (ii) to purchase from the Company any
additional number of Option Shares which such Underwriter may become obligated
to purchase pursuant to Section 3 hereof.
The Shares to be purchased by each Underwriter hereunder, in definitive
form, and in such authorized denominations and registered in such names as Xxxx
Capital Partners, Inc.
("Xxxx"), as one of the Representatives, may request upon at least forty-eight
hours' prior notice to the Company shall be delivered by or on behalf of the
Company to Xxxx, through the facilities of the Depository Trust Company ("DTC"),
for the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer of Clearinghouse
(next-day) funds to the account specified by the Company to Xxxx at least
forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Company Shares, 9:30 a.m., Eastern Standard Time, on _________ ___, 2000
or such other time and date as Xxxx and the Company may agree upon in writing,
and, with respect to the Option Shares, 9:30 a.m., Eastern Standard Time, on the
date specified by Xxxx in the written notice given by Xxxx of the Underwriters'
election to purchase such Option shares, or such other time and date as Xxxx and
the Company may agree upon in writing. Such time and date for delivery of the
Company Shares is herein called the "First Time of Delivery," such time and date
for delivery of the Option Shares, if not the First Time of Delivery, is herein
called the "Second Time of Delivery," and each such time and date for delivery
is herein called a "Time of Delivery."
The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 6 hereof, including the cross receipt
for the Shares, will be delivered at the offices of Xxxxxxxxx Xxxxxxx, LLP, 0000
Xxxxxx Xxxxxxxxx, Xxxxx 0000, XxXxxx, XX 00000 (the "Closing Location"), and the
Shares will be delivered at the Designated Office, all at such Time of Delivery.
A meeting will be held at the Closing Location at 3:00 p.m., Eastern Standard
Time, on the Business Day next preceding such Time of Delivery, at which meeting
the final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the purposes of
this Section 2, "Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to close.
3. PURCHASE, SALE AND DELIVERY OF THE OPTION SHARES. The Company
hereby grants an option to the Underwriters to purchase from it up to 15% of the
Company Shares sold to the public by the Company as Option Shares on the same
terms and conditions as the Company Shares; provided, however, that such option
may be exercised only for the purpose of covering any over-allotments which may
be made by the Underwriters in the sale of the Company Shares. No Option Shares
shall be sold or delivered unless all of the Company Shares previously have
been, or simultaneously are, sold and delivered.
The option is exercisable on behalf of the several Underwriters by Xxxx,
as one of the Representatives, at any time, and from time to time, before the
expiration of 45 days from the date of this Agreement, for the purchase of all
or part of the Option Shares covered thereby, by notice given by Xxxx to the
Company in the manner provided in Section 13 hereof (the "Option Notice"),
setting forth the number of Option Shares as to which the Underwriters are
exercising the option, and the date of delivery of said Option Shares, which
date shall not be less than two business days after such Option Notice unless
otherwise agreed to by the parties. Xxxx may
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terminate the option at any time, as to any unexercised portion thereof, by
giving written notice to the Company to such effect.
You, as Representatives, shall make such allocation of the Option Shares
among the Underwriters as may be required to eliminate purchases of fractional
Shares.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
(a) The Company represents and warrants to and agrees with
each Underwriter that:
(i) The Company meets the requirements for use of
Form S-1 under the Securities Act of 1933, as amended (the "Act"). A
registration statement on Form S-1 (Registration No. 333-94337) in respect to
the Shares, including a preliminary prospectus, and such amendments to such
registration statement as may have been required to the date of this Agreement,
have been prepared by the Company pursuant to and in conformity with the
requirements of the Act, and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
promulgated thereunder and has been filed with the Commission under the Act.
Copies of such registration statement, including any amendments thereto, each
related preliminary prospectus (meeting the requirements of Rule 430 or 430A of
the Rules and Regulations) contained therein, the exhibits, financial statements
and schedules have heretofore been delivered by the Company to Xxxx. If such
registration statement has not become effective under the Act, a further
amendment to such registration statement, including a form of final prospectus,
necessary to permit such registration statement to become effective will be
filed promptly by the Company with the Commission. If such registration
statement has become effective under the Act, a final prospectus containing
information permitted to be omitted at the time of effectiveness by Rule 430A of
the Rules and Regulations will be filed promptly by the Company with the
Commission in accordance with Rule 424(b) of the Rules and Regulations. The term
"Registration Statement" as used herein means the registration statement as
amended at the time it becomes or became effective under the Act (the "Effective
Date") and, in the event any post-effective amendment thereto becomes effective
prior to the First Time of Delivery, the registration statement as so amended,
including financial statements and all exhibits and all documents incorporated
by reference therein and, if applicable, the information deemed to be included
by Rule 430A of the Rules and Regulations. The term Prospectus as used herein
means the prospectus as first filed with the Commission pursuant to Rule 424(b)
of the Rules and Regulations or, if no such filing is required, the form of
final prospectus included in the Registration Statement at the Effective Date,
except that if the prospectus provided to the Underwriters by the Company for
use in connection with the offering of Shares differs from the Prospectus on
file with the Commission at the time the Registration Statement becomes
effective (whether or not the Company is required to file with the Commission
such revised Prospectus pursuant to Rule 424(b) of the Rules and Regulations),
the term Prospectus shall refer to such revised Prospectus from and after the
time it is first provided to the Underwriters for such use. The term Preliminary
Prospectus as used herein shall mean a preliminary prospectus as contemplated by
Rule 430 or 430A of the Rules and Regulations
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included at any time in the Registration Statement. All references in this
Agreement to financial statements and schedules and other information which is
contained, included, stated or described in the Registration Statement,
Preliminary Prospectus or the Prospectus shall be deemed to mean and include all
such financial statements and schedules and other information which is
incorporated by reference in, or deemed to be a part of, the Registration
Statement, Preliminary Prospectus or Prospectus, as the case may be.
(ii) The Commission has not issued, and is not to the
best knowledge of the Company threatening to issue, an order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus nor
instituted proceedings for that purpose. Each Preliminary Prospectus at its date
of issue, the Registration Statement and the Prospectus and any amendments or
supplements thereto contain or will contain, as the case may be, all statements
which are required to be stated therein by, and in all material respects conform
or will conform, as the case may be, to the requirements of, the Act and the
Rules and Regulations. Neither the Registration Statement nor any amendment
thereto, as of the applicable effective date, contains or will contain, as the
case may be, any untrue statement of a material fact or omits or will omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and neither the Prospectus nor any supplement
thereto contains or will contain, as the case may be, any untrue statement of a
material fact or omits or will omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no representation, warranty or agreement as to
information contained in or omitted from the Registration Statement, the
Preliminary Prospectus or the Prospectus, or any such amendment or supplement,
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of the Underwriters specifically for use in the
preparation of: (i) the statements therein regarding over-allotment,
stabilization or passive market making by the Underwriters, or (ii) the section
thereof under the caption Plan of Distribution.
(iii) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Texas, with full corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Registration Statement;
the Company is duly qualified to transact business as a foreign corporation in
good standing in each state or other jurisdiction in which its ownership or
leasing of property or conduct of business requires such qualification, except
where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the business, properties, financial
condition or results of operations of the Company (a "Material Adverse Effect").
The Company does not own or control, directly or indirectly, any corporation,
association or other entity. The Company has no subsidiaries (as defined in Rule
405 of the Rules and Regulations).
(iv) The Company has full right and corporate power
and authority to enter into this Agreement and to perform the transactions
contemplated hereby. The filing of the Registration Statement and the execution
and delivery of this Agreement have been duly authorized by the Board of
Directors of the Company. This Agreement constitutes a valid and legally binding
obligation of the Company enforceable in accordance with its terms (except to
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the extent the enforceability of the indemnification, exculpation and
contribution provisions of Section 7 hereof may be limited by applicable law,
and except as enforceability of this Agreement may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium and other laws
affecting creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law). The issuance and sale of the Shares by the Company and the
performance of this Agreement by the Company and the consummation of the
transactions herein contemplated will not result in a violation of the Company's
articles of incorporation or bylaws or result in a breach or violation of any of
the terms and provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any properties or
assets of the Company under, any statute which is applicable to it, or under any
indenture, mortgage, deed of trust, note, loan agreement, sale and leaseback
arrangement or other agreement or instrument to which the Company is a party or
by which they are bound or to which any of the properties or assets of the
Company is subject, or any order, rule or regulation applicable to the Company
of any court or public, regulatory or governmental agency or body having
jurisdiction over the Company or its properties, other than any such breach,
violation, default, lien, charge or encumbrance, as the case may be, which does
not individually or in the aggregate would have a Material Adverse Effect. No
consent, approval, authorization, order, registration or qualification of or
with any court or public, regulatory or governmental agency or body is required
for the consummation of the transactions herein contemplated, except such as may
be required by the National Association of Securities Dealers, Inc. (the "NASD")
or under the Act or the Rules and Regulations or any state securities laws.
(v) Except as described in the Prospectus, the
Company has not sustained since the date of the latest audited financial
statements included in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree. Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, the Company has not incurred any material liabilities or
material obligations, direct or contingent, other than in the ordinary course of
business, or entered into any material transactions not in the ordinary course
of business, and there has not been any material change in the capital stock or
long-term debt of the Company or any Material Adverse Effect. The Company has
filed all necessary federal, state and foreign income and franchise tax returns
and paid all taxes shown as due thereon, except as are being contested by the
Company in good faith. All tax liabilities, including those being contested by
the Company, are adequately provided for on the books of the Company. The
Company has made all necessary payroll tax payments and is current and
up-to-date as of the date of this Agreement to the extent necessary to avoid a
Material Adverse Effect. The Company has no knowledge of any tax proceeding or
action pending or threatened against the Company.
(vi) Except as described in the Prospectus, there is
no action, suit, arbitration, investigation or governmental proceeding, domestic
or foreign, pending or, to the best of the Company's knowledge, threatened or
involving the properties or business of the Company which challenges the
validity of this Agreement or any action taken or required to be taken by the
Company pursuant to or in connection with this Agreement or which could
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reasonably be expected to have a Material Adverse Effect. The Company is not a
party and is not subject to the provisions of any injunction, judgment, decree
or order of any court or any public, regulatory or governmental agency or body.
There are no contracts or documents to which the Company is a party which would
be required to be filed as exhibits to the Registration Statement by the Act or
by the Rules and Regulations which have not been filed as exhibits to the
Registration Statement; the contracts and documents to which the Company is a
party which are so described in the Registration Statement are in full force and
effect on the date hereof; and the Company does not have notice that any other
party is in breach of or default under any of such contracts to a material
extent.
(vii) The Company has duly and validly authorized
capital stock as described in the Prospectus. Except as disclosed in or
contemplated by the Prospectus, the Company does not have outstanding any
options to purchase or any preemptive rights or other rights to subscribe or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of outstanding
warrants to purchase Common Stock and the Company's stock option plans and the
options or other rights granted and exercised thereunder set forth in the
Prospectus accurately presents in all material respects the information required
to be shown with respect to such warrants, plans, options and rights. All
outstanding shares of Common Stock of the Company conform, and the Shares when
issued will conform, in all material respects to the description thereof in the
Registration Statement and the Prospectus and have been, or, when issued and
paid for will be, duly authorized, validly issued, fully paid and nonassessable,
issued in material compliance with all applicable Federal and state securities
laws and not issued in violation of or subject to any preemptive rights or other
rights to purchase or subscribe for securities of the Company. Except for the
holders of the Company's Series A Preferred Stock and convertible promissory
notes immediately prior to the effectiveness of the Registration Statement (the
"selling shareholders"), which holders are identified in the Registration
Statement, no shareholder of the Company has any right to require the Company to
register the sales of any shares or other securities owned by such shareholder
under the Act in the public offering contemplated by this Agreement. Upon
delivery of the Company Shares and full payment therefor pursuant to this
Agreement, good and valid title to such Shares, free and clear of all liens,
encumbrances, security interests, restrictions on transfer, equities or claims
whatsoever (other than any created directly by the Underwriters), will pass to
the Underwriters.
(viii) The Company owns no real property and the
Company has good and marketable title to personal property owned by it, subject
to no lien, charge, defect or encumbrances of any kind except as are described
in the Prospectus, and which do not materially interfere with the use made and
proposed to be made of such property by the Company. Except as disclosed in the
Prospectus, the Company owns or leases all such assets as are materially
necessary to its operations as now conducted.
(ix) Deloitte & Touche, LLP, the accounting firm
which has certified the financial statements filed with the Commission as a part
of the Registration Statement, is an independent public accounting firm within
the meaning of the Act and the Rules and Regulations.
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(x) The financial statements and schedules of the
Company, including the notes thereto, filed with and as a part of the
Registration Statement, are accurate in all material respects and present fairly
the financial position of the Company as of the respective dates thereof and the
results of operations and statements of cash flow for the respective periods
covered thereby, all in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved except as
otherwise disclosed in the Prospectus. The selected financial data included in
the Registration Statement and Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with that of the audited
financial statements included in the Registration Statement and Prospectus.
(xi) The Company is not in default with respect to
any contract or agreement to which it is a party; provided that this
representation shall not apply to defaults which in the aggregate could
reasonably be expected to have a Material Adverse Effect.
(xii) The Company is not in breach or violation of any
provision of its articles of incorporation or bylaws or any laws, ordinances or
governmental rules or regulations to which it is subject, and the Company has
not failed to obtain, maintain or comply with the terms of any of the licenses,
certificates, permits, franchises, easements, consents, or other governmental
authorizations necessary to the ownership, leasing and operation of its
properties or to the conduct of its business, which breach, violation or failure
could reasonably expected to have a Material Adverse Effect.
(xiii) Except as described in the Prospectus, the
Company has sufficient interests in all patents, trademarks, service marks,
trade names, domain names, copyrights, trade secrets, information, proprietary
rights and processes ("Intellectual Property") necessary for the conduct of the
business now conducted by it as described in the Prospectus, and, to the
Company's knowledge necessary in connection with the products and services under
development, without, to the Company's knowledge, any infringement of or the
interests of others, and has taken all steps reasonably necessary to secure
interests in such Intellectual Property from its contractors; except as set
forth in the Prospectus, the Company is not aware of outstanding options,
licenses or agreements of any kind relating to the Intellectual Property of the
Company which are required to be set forth in the Prospectus, and, except as set
forth in the Prospectus, the Company is not a party to or bound by any options,
licenses or agreements with respect to the Intellectual Property of any other
person or entity which are required to be set forth in the Prospectus; none of
the technology employed by the Company has been obtained or is being used by the
Company in violation of any contractual or fiduciary obligation binding on the
Company or to the knowledge of the Company any of its directors, officers or
employees or otherwise in violation of the rights of any persons; except as
disclosed in the Prospectus, the Company has not received any written or, to the
Company's knowledge, oral communications alleging that the Company has violated,
infringed or conflicted with, or by conducting its business as set forth in the
Prospectus, would violate, infringe or conflict with any of the Intellectual
Property of any other person or entity; and the Company has taken and will
maintain reasonable measures to prevent the unauthorized dissemination or
publication of its confidential information and, to the extent contractually
required to do so, the confidential information of third parties in its
possession.
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(xiv) The Company maintains insurance of the types and
in the amounts generally deemed adequate for its business, including, but not
limited to, general liability insurance, business interruption insurance and
insurance covering personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
(xv) The Company has not taken and will not take,
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 the
Company's Common Stock, and the Company is not aware of any such action taken or
to be taken by any director, officer, employee, consultant, or shareholder of
the Company.
(xvi) The Company is not and, after giving effect to
the offering and sale of the Shares, will not be an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(xvii) The Common Stock of the Company is registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended,
and is approved for trading on the National Association of Securities Dealers
National Market System ("NASDNMS") under the symbol "PRTS." The Company has
taken no action that was designed to terminate, or that is likely to have the
affect of terminating, trading of its Common Stock on NASDNMS, nor has the
Company received any notification that the Commission or the NASDNMS is
contemplating terminating such trading.
(xviii) [Reserved].
(xix) Except as disclosed in the Registration
Statement and the Prospectus, no officer, director or beneficial owner of the
Company's capital stock is, directly or indirectly, associated with a NASD
member broker-dealer. The Company has no management or financial consulting
agreement with any third party.
(xx) No person is entitled, directly or indirectly,
to compensation from the Company for services as a finder in connection with the
transactions contemplated by this Agreement.
(xxi) [Reserved].
(xxii) Neither the Company nor any shareholder of the
Company whose shares are being registered in the public offering has engaged in
any discussions, formal or informal, in which you or persons associated with you
have participated regarding the potential for any arrangement to sell any of the
selling shareholders' shares. The Company understands and agrees that neither
you nor any of your direct or indirect affiliates will enter into, facilitate,
or otherwise participate in any type of payment transaction, sale, transfer,
assignment, or hypothecation with respect to the selling shareholders' shares.
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5. ADDITIONAL COVENANTS. The Company covenants and agrees with the
several Underwriters that:
(a) If the Registration Statement is not effective under the
Act, the Company will use its best efforts to cause the Registration Statement
to become effective as promptly as possible, and it will notify Xxxx, as one of
the Representatives, promptly after it shall receive notice thereof, of the time
when the Registration Statement has become effective. The Company (i) will
prepare and timely file with the Commission under Rule 424(b) of the Rules and
Regulations, if required, a Prospectus containing information previously omitted
at the time of effectiveness of the Registration Statement in reliance on Rule
430A of the Rules and Regulations or otherwise; (ii) will not file any amendment
to the Registration Statement or supplement to the Prospectus of which the
Underwriters shall not previously have been advised and furnished with a copy or
to which the Underwriters shall have reasonably objected in writing or which is
not in compliance in all material respects with the Rules and Regulations; and
(iii) will promptly notify Xxxx after it shall have received notice thereof of
the time when any amendment to the Registration Statement becomes effective or
when any supplement to the Prospectus has been filed.
(b) The Company will advise the Underwriters promptly, after
it has received notice or obtained knowledge thereof, of any comments of the
Commission with respect to the Registration Statement, of any request of the
Commission for amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information, or of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution or threat of any
proceedings for that purpose, and the Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Underwriters and
their counsel in endeavoring to qualify the Shares for sale under (or obtain
exemptions from the application of) the securities laws of such jurisdictions as
they may have designated and will make such applications, file such documents,
and furnish such information as may be reasonably necessary so as to permit the
continuance of sales and dealings therein for so long as may be necessary to
complete the distribution of the Shares, provided the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so qualified. The
Company will advise Xxxx promptly of the suspension of the qualification or
registration of (or any such exemption relating to) the Shares for offering,
sale or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance of any order
suspending such qualification, registration or exemption, the Company, with your
cooperation, will use its best efforts to obtain the withdrawal thereof.
(d) The Company will deliver to, or upon the order of, the
Underwriters, without charge from time to time, as many copies of any
Preliminary Prospectus (including all documents incorporated by reference
therein) as they may reasonably request. The Company will deliver to, or upon
the order of, the Underwriters without charge as many copies of the
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Prospectus (including all documents incorporated by reference therein), or as it
thereafter may be amended or supplemented, as they may from time to time
reasonably request. The Company consents to the use of such Prospectus by the
Underwriters and by all dealers to whom the Shares may be sold, in connection
with the offering or sale of the Shares and for such period of time thereafter
as the Prospectus is required by law to be delivered in connection therewith.
The Company will deliver to Xxxx at or before the First Time of Delivery two
signed copies of the Registration Statement and all amendments thereto,
including all exhibits filed therewith or incorporated by reference therein, and
all documents incorporated by reference in the Prospectus, and will deliver to
the Underwriters such number of copies of the Registration Statement, without
exhibits, and of all amendments thereto, as they may reasonably request.
(e) If, during the period in which a prospectus is required
by law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the reasonable judgment of the Company or in your reasonable
judgment or in the written opinion of counsel for the Underwriters, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, not misleading, or, if it is necessary at any time to
amend or supplement the Prospectus to comply with any law, the Company promptly
will prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with
applicable law.
(f) The Company will make generally available to its
shareholders, as soon as it is practicable to do so, but in any event not later
than 15 months after the effective date of the Registration Statement (the
"Effective Date"), an earnings statement in reasonable detail, covering a period
of at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earnings statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise the Underwriters in writing when such statement has been so made
available.
(g) The Company will, for a period of five years from the
Effective Date, deliver to the Underwriters at their principal executive offices
a reasonable number of copies of annual reports, quarterly reports, current
reports and copies of all other documents, reports and information furnished by
the Company to its shareholders or filed with any securities exchange or
national securities market pursuant to the requirements of such exchange or
market or with the Commission pursuant to the Act or the Securities Exchange Act
of 1934 (the "1934 Act"). Any report, document or other information required to
be furnished under this subsection (g) shall be furnished as soon as practicable
after such report, document or information becomes available.
(h) The Company will apply the proceeds from the sale of the
Shares as set forth in the description under the caption "Use of Proceeds" in
the Prospectus. Without limiting the generality of the foregoing, none of the
net proceeds of the public offering (through the repayment of debt or otherwise)
will be paid, in the aggregate, to NASD members, affiliates, associated persons,
or related persons. The Company will promptly advise Xxxx, and provide
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full particulars, if any 5% or greater shareholder of the Company is or becomes
an affiliate or associated person of an NASD member participating in the public
offering. Under no circumstances will Xxxxxx, Xxxxx Xxxxx, Incorporated,
GunnAllen Financial, Inc., or AM Xxxx & Company participate in the public
offering in any capacity.
(i) The Company will supply Xxxx with copies of all
correspondence to and from, and all documents issued to and by, the Commission
in connection with the registration of the Shares under the Act.
(j) Prior to each Time of Delivery, the Company will furnish
to Xxxx, as soon as they have been prepared, copies of any unaudited interim
consolidated financial statements of the Company for any periods subsequent to
the periods covered by the financial statements appearing in the Registration
Statement and the Prospectus.
(k) Prior to the 30th day after the last Time of Delivery,
the Company will not issue any press releases or other communications directly
or indirectly and will hold no press conferences with respect to the Company,
the financial condition, results of operations, business, properties, assets or
liabilities of the Company, or the offering of the Shares, without Xxxx'x prior
written consent except as otherwise required by law.
(l) The Company will use its best efforts to obtain approval
for, and maintain the listing of the Shares on, the NASDNMS.
(m) For a period of 180 days from the Effective Date, the
Company will not, and will cause its directors, officers and pre-Effective Date
securityholders (including, without limitation, holders of options, warrants or
other rights to acquire securities of the Company) to not (i) offer, pledge,
sell, hypothecate, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or (ii) enter into any hedge, swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is be settled by delivery of Common Stock or such other
securities, in cash or otherwise, without Xxxx'x prior written consent, except
for the Shares sold hereunder and except for sales by the Company of shares of
Common Stock to the Company's employees pursuant to the exercise of options
under the Company's stock option plan as described in the Prospectus. The
foregoing sentence shall not apply to the sale of any Shares to the Underwriters
pursuant to this Agreement.
(n) The Company will file with the Commission such
information on Form 10-Q or Form 10-K as may be required by Rule 463 under the
Act.
(o) The Company will maintain and keep accurate books and
records reflecting its assets and will maintain internal accounting controls
which provide reasonable assurance that (i) transactions are executed in
accordance with management's authorization, (ii) transactions are recorded as
necessary to permit the preparation of the Company's consolidated financial
statements and to maintain accountability for the assets of the Company, (iii)
access to
11
the assets of the Company is permitted only in accordance with management's
authorization, and (iv) the recorded accounts of the assets of the Company are
compared with existing assets at reasonable intervals.
(p) Prior to the Closing Date, the Company shall have issued
to the transfer agent for the Common Stock (the "Transfer Agent") a "stop
transfer" instruction with respect to all the shares of Common Stock issued and
outstanding immediately prior to the Effective Date (the "Pre-offering Shares"),
instructing the Transfer Agent to not honor any requests to transfer any
Pre-offering Shares prior to the expiration of the 180-day period described in
Section 5(m) of this Agreement without the Xxxx'x prior written consent, and
such stop transfer instruction shall be in full force and effect at each Time of
Delivery.
(q) The Company will make available its stock transfer
records to the Representatives upon the Xxxx'x request during the 12-month
period following the Effective Date.
(r) The Company will not, without the prior written consent
of Xxxx, directly or indirectly grant any options, warrants or rights to
purchase or acquire Common Stock for a price below the market price for the
Common Stock on the date of grant, for a period of 180 days commencing on the
Effective Date.
(s) The Company shall have become listed, within twenty
days after the Effective Date, and shall use its best efforts to maintain
such listing, for at least five years after the Effective Date in Standard
and Poor's Corporation Records Service and/or Xxxxx'x OTC Guide.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations
of the Underwriters to purchase and pay for the Shares being sold hereunder by
the Company to the Underwriters shall be subject to the accuracy in all material
respects, as of the date hereof and as of each Time of Delivery of the
representations and warranties of the Company contained herein, to the
performance in all material respects by the Company of its covenants and
obligations hereunder, and to the additional conditions set forth in this
Section 6.
(a) If the Company and the Underwriters have determined not
to proceed pursuant to Rule 430A, the Registration Statement shall have become
effective not later than 10:00 a.m., Eastern Standard Time, on the day following
the date of this Agreement or such later date as may be consented to in writing
by Xxxx. If the Company and the Underwriters have determined to proceed pursuant
to Rule 430A, all filings required by Rule 424 and Rule 430A of the Rules and
Regulations shall have been made. No stop order suspending the effectiveness of
the Registration Statement, as amended from time to time, shall have been issued
and no proceeding for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened or contemplated by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the reasonable satisfaction of the Underwriters.
(b) No person or entity shall have disclosed in writing to
the Company or the Underwriters on or prior to the relevant Time of Delivery,
that the Registration Statement or
12
Prospectus or any amendment or supplement thereto contains an untrue statement
of fact which, in the opinion of counsel to the Underwriters, is material, or
omits to state a fact which, in the opinion of such counsel, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) You shall have received an opinion of Jeffer, Mangles,
Xxxxxx & Xxxxxxx, LLP, counsel for the Company, addressed to you, as
Representatives of the several Underwriters, and dated such Time of Delivery to
the effect that:
(i) The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of the State of
Texas with corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Registration Statement.
(ii) The Company's authorized capital stock is as set
forth under the caption "Capitalization" in the Prospectus. The Common Stock of
the Company conforms in all material respects to the description thereof in the
Prospectus under the caption "Description of Capital Stock," and the statements
in the Prospectus under such caption fairly summarize in all material respects
the provisions referred to in the Company's articles of incorporation, bylaws
and the law of the State of Texas. The form of certificate used to evidence the
Common Stock filed as an exhibit to the Registration Statement has been approved
by the Company's Board of Directors, and complies as to form with the
requirements of such law. The outstanding shares of Common Stock have been duly
authorized and are validly issued, fully paid and non-assessable, were issued in
compliance with all applicable Federal and state securities laws and the laws of
the State of Texas, and were not issued in violation of or subject to any
preemptive rights or other rights to purchase or subscribe for securities of the
Company. The Shares have been duly authorized and, when delivered and fully paid
for in accordance with this Agreement, will be validly issued, fully paid and
non-assessable, and the shareholders of the Company have no preemptive rights
with respect to the Shares. The Representatives' Warrant to be issued by the
Company under the Warrant Agreement has been duly authorized and, when issued
for the consideration set forth in such Warrant Agreement, will be validly
issued. The shares of Common Stock to be sold by the Company upon the exercise
of the Representatives' Warrant have been duly authorized and, when delivered
and fully paid for in accordance with this Agreement, will be validly issued,
fully paid and non-assessable. To such counsel's knowledge, except as disclosed
or contemplated in the Prospectus, there are no outstanding options, warrants,
or other rights calling for the issuance of any shares of capital stock of the
Company or any security convertible into or exchangeable for capital stock of
the Company. Upon delivery of the Shares being sold by the Company and full
payment therefor pursuant to this Agreement and registration of the ownership of
such Shares by the transfer agent for such Shares, good and valid title to such
Shares free and clear of all liens, encumbrances, security interests,
restrictions on transfer, equities or claims whatsoever other than any created
or granted by this Agreement or by the Underwriters, will pass to the
Underwriters.
(iii) Such counsel has been advised by the staff of
the Commission that the Registration Statement has become effective under the
Act and, to the best knowledge of
13
such counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act; any required filing of
the Prospectus and any supplement thereto pursuant to Rule 424(b) of the Rules
and Regulations has been made in the manner and within the time period required
by such Rule 424(b).
(iv) The Registration Statement and the Prospectus,
and each amendment or supplement thereto, as of their respective effective or
issue dates, comply as to form in all material respects with the requirements of
Form S-1 under the Act and the applicable Rules and Regulations (except that
such counsel need express no opinion or belief as to numerical, financial and
statistical data, financial statements and notes and related schedules thereto).
(v) The descriptions in the Registration Statement
and Prospectus of contracts and other documents filed as exhibits to the
Registration Statement are accurate in all material respects.
(vi) No authorization, approval, consent, order,
registration or qualification of or with any court or public, regulatory or
governmental body, authority or agency is required with respect to the Company
in connection with the transactions contemplated by this Agreement, except such
as may be required under the Act, the Rules and Regulations or the 1934 Act or
by the NASD, the Nasdaq-Amex Market Group or under state securities laws in
connection with the purchase and distribution of the Shares by the Underwriters.
(vii) The Company has the corporate power and
authority to enter into this Agreement and to sell and deliver the Shares to be
sold by it to the several Underwriters. The filing of the Registration Statement
with the Commission has been duly authorized by the Board of Directors of the
Company. This Agreement has been duly authorized, executed and delivered by the
Company, and is a valid and legally binding obligation of the Company
enforceable in accordance with its terms (except to the extent the
enforceability of the indemnification, exculpation and contribution provisions
of Section 7 hereof may be limited by applicable law and except as
enforceability of this Agreement may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other laws affecting
creditors' rights generally and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law).
The making and performance of this Agreement by the Company and the consummation
of the transactions herein contemplated will not result in a violation of the
Company's articles of incorporation or bylaws or to the best knowledge of such
counsel result in a breach or violation of any of the terms and provisions of,
or constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any properties or assets of the Company under,
any applicable Federal or state statute, or under any indenture, mortgage, deed
of trust, note, loan agreement, lease, franchise, license, permit or any other
agreement or instrument to which the Company is a party or by which it is bound
or to which any of the properties or assets of the Company is subject, or any
order, rule or regulation known to such counsel of any court or public,
regulatory or governmental agency, authority or body having jurisdiction over
the Company or its properties,
14
except, in the case of any such violation, breach, default, creation or
imposition, to such extent as does not, individually or in the aggregate, have a
Material Adverse Effect.
(viii) To the best knowledge of such counsel, (i) there
are no legal, governmental or regulatory proceedings pending or threatened to
which the Company is a party or of which the business or properties of the
Company is the subject which (individually or in the aggregate) could reasonably
expected to have a Material Adverse Effect or on the ability of the Company to
consummate the transactions contemplated herein, and which are not disclosed in
the Registration Statement and Prospectus; (ii) there are no contracts or
documents of a character required to be described in the Registration Statement
or the Prospectus or to be filed as an exhibit to the Registration Statement
which are not described therein or filed as required; and (iii) the Company is
not a party or subject to the provisions of any injunction, judgment, decree or
order of any court or any public, regulatory or governmental agency, authority
or body which could reasonably expected to have a Material Adverse Effect or on
the ability of the Company to consummate the transactions contemplated herein.
(ix) To the best knowledge of such counsel, the
Company holds all licenses, certificates, permits, franchises, consents,
authorizations and approvals from all state and federal regulatory authorities
that are required for the Company to conduct its business as described in the
Prospectus, except in the case of any such license, certificate, permit,
franchise, consent, authorization or approval the loss of which or failure to
maintain could reasonably expected to have a Material Adverse Effect.
(x) The Company is not in violation of its articles
of incorporation and bylaws. To the best of counsel's knowledge, the Company is
not in breach of, or in default with respect to, any provisions of any
agreement, mortgage, deed of trust, lease, note, agreement, franchise, license,
indenture, permit or other instrument known to such counsel to which the Company
is a party or by which the Company or any of the properties thereof may be bound
or affected, which breach or default could reasonably expected to have a
Material Adverse Effect or on the Company's ability to consummate the
transactions contemplated herein, and the Company is in compliance with all
judgments, decrees and orders of any court to which the Company is subject,
except where noncompliance could reasonably expected to have a Material Adverse
Effect.
(xi) The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(xii) No holders of securities of the Company have
preemptive rights or, to the best knowledge of such counsel, other rights to
purchase or subscribe for shares of Common Stock or other securities of the
Company, nor any rights to require the Company to register any securities under
the Act in connection with the transactions contemplated hereby.
Such counsel shall confirm that during the preparation of the
Registration Statement and Prospectus, such counsel participated in conferences
with officers and other representatives of the Company, representatives of the
independent certified public accountants for the Company and Representatives of
the Underwriters and their counsel, at which time the contents of the
15
Registration Statement and Prospectus and related matters were discussed and
although such counsel is not opining with respect to and does not assume any
responsibility for the accuracy, truthfulness, completeness or fairness of
the statements contained in the Registration Statement or Prospectus, such
counsel confirms that no facts have come to their attention which have caused
them to believe that either (i) the Prospectus or any supplement thereto as
of its date (other than numerical, financial or statistical data, the
financial statements and notes or any related schedules thereto, as to which
such counsel need express no opinion or belief) contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (ii) the
Registration Statement or any amendment thereto at the time it became
effective (other than numerical, financial or statistical data, the financial
statements and notes or any related schedules thereto, as to which such
counsel need express no opinion or belief) contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. In rendering such
opinion, such counsel shall be entitled to set forth qualifications and
limitations reasonably acceptable to the Representatives and their counsel
and to rely on the opinion of qualified Texas counsel with respect to any
matters relating specifically to the laws of the State of Texas.
(d) You shall have received on such Time of Delivery, from
Xxxxxxxxx Traurig, LLP, counsel to the Underwriters, such opinion or opinions,
dated such Time of Delivery with respect to corporate existence and good
standing of the Company, the validity of the Shares, the Registration Statement,
the Prospectus and other related matters as you may reasonably require; the
Company shall have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to opine with respect to such matters.
(e) On the date of the Prospectus and on each Time of
Delivery, you shall have received from Deloitte & Touche, LLP, a letter or
letters, dated the date of the Prospectus and Time of Delivery, respectively, in
form and substance reasonably satisfactory to you, providing confirmation that
they are independent public accountants with respect to the Company within the
meaning of the Act and the published Rules and Regulations, and the answer to
Item 509 of Regulation S-K set forth in the Registration Statement is correct
insofar as it relates to them, and providing a statement similar in substance to
the one set forth in Schedule II hereto.
(f) Except as contemplated in the Prospectus, (i) the
Company shall not have sustained since the date of the latest audited financial
statements included in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree; and (ii) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company shall not
have incurred any liability or obligation, direct or contingent, or entered into
transactions, and there shall not have been any change in the capital stock or
long-term debt of the Company or any change in the financial condition, net
worth, business, management, or results of operations of the Company, the effect
of which, in any such case described in clause (i) or (ii), is in your
reasonable judgment so material or materially adverse as to make it
impracticable to proceed with the public offering or the delivery
16
of the Shares being delivered on such Time of Delivery on the terms and in the
manner contemplated in the Prospectus.
(g) There shall not have occurred any of the following: (i)
a suspension or material limitation in trading in securities generally on the
New York Stock Exchange or the American Stock Exchange or Nasdaq or establishing
on such exchanges or Nasdaq by the Commission or by such exchanges or Nasdaq of
minimum or maximum prices which are not in force and effect on the date hereof;
(ii) a general moratorium on commercial banking activities declared by either
federal or state authorities; or (iii) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a
national emergency or war, any calamity or crisis, material change in national,
international or world affairs, natural disaster, material change in the
international or domestic markets, or material change in the existing financial,
political or economic conditions in the United States or elsewhere, or the
enactment, publication, decree, or other promulgation of any federal or state
statute, regulation, rule, or order of any court or other governmental
authority, or the taking of any action by any federal, state or local government
or agency in respect of fiscal or monetary affairs, if the effect of any such
event specified in this clause (iii) is in your reasonable judgment so material
or materially adverse as to make it impracticable to proceed with the public
offering or the delivery of the Shares on the terms and in the manner
contemplated in the Prospectus.
(h) As a condition precedent to the several obligations of
the Underwriters to purchase and pay for the Shares being sold hereunder, you
shall have received a certificate or certificates, dated the Time of Delivery
and signed on behalf of the Company by the President and Chief Executive Officer
and the Chief Financial Officer of the Company stating that: (A) such party has
carefully examined the Registration Statement and the Prospectus as amended or
supplemented and all documents incorporated by reference therein and nothing has
come to such party's attention that would lead him to believe that either the
Registration Statement or the Prospectus, or any amendment or supplement thereto
or any documents incorporated by reference therein as of their respective
effective, issue or filing dates, contained, and the Prospectus as amended or
supplemented and all documents incorporated by reference therein and when read
together with the documents incorporated by reference therein, at such Time of
Delivery, contains any untrue statement of a material fact, or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that such party makes no representation,
warranty or agreement as to information contained in or omitted from the
Registration Statement, the Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of the Underwriters
specifically for use in the preparation of (i) the statements therein regarding
over-allotment, stabilization or passive market making by the Underwriters, or
(ii) the section thereof under the caption "Plan of Distribution"; (B) all
representations and warranties made herein by the Company are true and correct
in all material respects at such Time of Delivery, with the same effect as if
made on and as of such Time of Delivery, and all agreements herein required to
be performed by the Company on or prior to such Time of Delivery have been duly
performed in all material respects; and (C) such other matters as you may
reasonably request.
17
(i) As a condition precedent to the several obligations of
the Underwriters to purchase and pay for the Shares being sold hereunder, the
Company shall not have failed, refused, or been unable, on or by such Time of
Delivery to have performed in all material respects any agreement on its part
required to be performed by it or any of the conditions herein contained and
required to be performed or satisfied by it on or by such Time of Delivery.
(j) The Shares shall have been approved for trading or
quotation upon official notice of issuance on the NASDNMS under the symbol
"PRTS," and on the Time of Delivery the Shares shall be trading or quoted under
such symbol.
(k) As a condition precedent to the several obligations of
the Underwriters to purchase and pay for the shares being sold hereunder, you
shall have received, at or prior to the first Time of Delivery:
(i) from each officer and each director of the
Company and each record holder of shares of Common Stock outstanding immediately
prior to the first Time of Delivery, an executed "lock-up" agreement
substantially in the form of Exhibit A hereto or an assignment by the Company of
the benefit of a substantially similar agreement previously executed; and
(ii) from the Transfer Agent an acknowledgment of the
Company's instruction's described in Section 5(p) of this Agreement.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Xxxxxxxxx Xxxxxxx, LLP, counsel for the several Underwriters. The
Company will furnish you with such conformed copies of such opinions,
certificates, letters and documents as you may reasonably request.
(l) On the Closing Date, the Company will grant, issue, and
assign to the Representatives or their designees, and the Representatives or its
designees shall accept, the Representative's Warrant to purchase up to 262,500
shares of Common Stock (or up to 301,875 shares of Common Stock if the
over-allotment option is exercised). The Representative's Warrant will be in the
form of, and in accordance with, the provisions of the Representative's Warrant
attached to a Warrant Agreement as an exhibit to the Registration Statement. Any
payment for the Representative's Warrant will be made to the Company by check or
checks payable to its order on the Closing Date against delivery of the
certificates representing the Representative's Warrant. The certificates
representing the Representative's Warrant will be in such denominations and in
such names as Xxxx may request at least two business days prior to the Closing
Date.
If any of the conditions specified above in this Section 6 shall not
have been satisfied at or prior to the Time of Delivery or waived by you in
writing, this Agreement may be terminated by Xxxx, as Representative of the
Underwriters, on written notice to the Company.
18
7. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless each
Underwriter and its officers and directors and each person, if any, who controls
any Underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter, officer, director or controlling person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, in any Preliminary Prospectus, in the Prospectus, or in any amendment
or supplement thereto, or in any Blue Sky application or other document executed
by the Company or based on any information furnished in writing by the Company
and filed in any jurisdiction in order to qualify any or all of the Shares under
(or obtain exemption from) the securities laws thereof (Blue Sky Application),
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and will reimburse each Underwriter and each such officer,
director and controlling person for any legal or other expenses reasonably
incurred by such Underwriter, officer, director or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent, but only to the extent, that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission that is: (i) contained
in the Registration Statement, such Preliminary Prospectus, the Prospectus, or
any such amendment or supplement thereto, or in such Blue Sky Application or
such other document and (ii) both relates to and was made in reliance upon and
in conformity with written information furnished to the Company by you or by any
Underwriter through you, specifically for use in the preparation of: (a) the
last paragraph of the cover page of the form of prospectus included in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto or (b) the statements therein regarding
over-allotment, stabilization or passive market making by the Underwriters or
(c) the section thereof under the caption Underwriting; and provided, further,
that if any Preliminary Prospectus or the Prospectus contained any alleged
untrue statement or allegedly omitted to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and such statement
or omission shall have been corrected in a revised Preliminary Prospectus or in
the Prospectus or in an amended or supplemented Prospectus, the Company shall
not be liable to any Underwriter, officer, director or controlling person under
this subsection (a) with respect to such alleged untrue statement or alleged
omission to the extent that any such loss, claim, damage or liability of such
Underwriter, officer, director or controlling person results from the fact that
such Underwriter sold Shares to a person or entity to whom there was not sent or
given, at or prior to the written confirmation of such sale, such revised
Preliminary Prospectus or Prospectus or amended or supplemented Prospectus.
(b) Each Underwriter will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of the Act, against any losses, claims,
19
damages or liabilities, joint or several, to which the Company or any such
director, officer, controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
any Preliminary Prospectus, the Prospectus, any amendment or supplement thereto,
or any Blue Sky Application or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission that is: (i) contained in the Registration
Statement, such Preliminary Prospectus, the Prospectus, or any such amendment or
supplement thereto, or in such Blue Sky Application or such other document and
(ii) both relates to and was made in reliance upon and in conformity with
written information furnished to the Company by you or by any Underwriter
through you, specifically for use in the preparation of: (a) the last paragraph
of the cover page of the form of prospectus included in the Registration
Statement, such Preliminary Prospectus or the Prospectus, or any such amendment
or supplement thereto or (b) the statements therein regarding over-allotment,
stabilization or passive market making by the Underwriters or (c) the section
thereof under the caption "Plan of Distribution"; and each Underwriter will
reimburse the Company and each such director, officer and controlling person for
any legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) Any party which proposes to assert the right to be
indemnified under this Section 7 shall, within ten days after receipt of notice
of commencement of any action, suit or proceeding against such party in respect
of which a claim is to be made against an indemnifying party under this Section
7 notify each such indemnifying party of the commencement of such action, suit
or proceeding, enclosing a copy of all papers served, but the omission so to
notify such indemnifying party of any such action, suit or proceeding shall not
relieve such indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Section 7. In case any such action,
suit or proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in, and, to the extent that it shall
wish, jointly with any other indemnifying party, similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its own counsel in any such
action, but the fees and expenses of such counsel shall be solely at the expense
of such indemnified party unless (i) the employment of counsel by such
indemnified party at the expense of the indemnifying party has been authorized
in writing by the indemnifying party, (ii) the indemnified party shall have been
advised by such counsel in a written opinion that there may be a conflict of
interest between the indemnifying party and the indemnified party in the conduct
of the defense, or certain aspects of the defense, of such action (in which case
the indemnifying party shall not have the right to direct
20
the defense of such action with respect to those matters or aspects of the
defense on which a conflict exists or may exist on behalf of the indemnified
party) or (iii) the indemnifying party shall not in fact have employed counsel
to assume the defense of such action, in any of which events the reasonable fees
and expenses of such party to the extent applicable shall be borne by the
indemnifying party. An indemnifying party shall not be liable for any settlement
of any action or claim effected without its prior written consent. Each
indemnified party, as a condition of such indemnity, shall furnish such
information concerning itself or the claim in question as an indemnifying party
may reasonably request in connection with the defense of such claim and shall
cooperate in good faith with the indemnifying party in the defense of any such
action or claim.
(d) If the indemnification provided for in this Section 7 is
for any reason, other than pursuant to the terms hereof, judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and upon the expiration of time to appeal or the denial of the last right to
appeal) to be unavailable to an indemnified party under paragraphs (a), (b) or
(c) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, 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 the relative benefits received by the parties from the offering of
the Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault, as applicable, of the Company and the Underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as other
relevant equitable considerations. The relative benefits received by, as
applicable, the parties shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company or the Selling Shareholders bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the parties and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph 4 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Subsection.
The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this paragraph (d), no Underwriter shall be required to contribute
any amount in excess of the aggregate underwriting discounts and commissions
21
applicable to the Shares purchased by such Underwriter. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this paragraph
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, and agreements of the Company contained in Sections
4, 5, 7, and 11, herein or in certificates delivered pursuant hereto, and the
agreements of the Underwriters contained in Sections 7 and 11 hereof, and the
liability of a defaulting Underwriter, if any, pursuant to Section 9 hereof,
shall remain operative and in full force and effect regardless of any
termination or cancellation of this Agreement or any investigation made by or on
behalf of any Underwriter or any controlling person thereof, the Company or any
of its officers, directors or any controlling person thereof, and shall survive
delivery of the Shares to the Underwriters hereunder.
9. SUBSTITUTION OF UNDERWRITERS.
(a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder, in your
discretion you, or either of you, may purchase, or you may arrange for another
party or other parties reasonably satisfactory to the Company to purchase, such
Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not purchase or arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or parties reasonably
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you have
so purchased or arranged for the purchase of such Shares, or the Company
notifies you that it has so arranged for the purchase of such Shares, you or the
Company shall have the right to postpone the Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in the written
opinion of your counsel may thereby be made necessary. The term Underwriter as
used in this Agreement shall include any persons substituted under this Section
9 with like effect as if such person had originally been a party to this
Agreement with respect to such Shares and any such substituted person shall be
entitled to all of the benefits conferred hereby and shall be subject to all of
the obligations of an Underwriter hereunder as if such person had originally
been a party to this Agreement.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters made by you
or the Company as provided in subsection (a) above, the aggregate number of
Shares which remains unpurchased does not exceed one tenth of the total Shares
to be sold on the Time of Delivery, then the Company shall have the right to
require each non-defaulting Underwriter to purchase the Shares which such
Underwriter agreed to purchase hereunder and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase
22
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters made by you
or the Company as provided in subsection (a) above, the number of Shares which
remains unpurchased exceeds one tenth of the total Shares to be sold on the Time
of Delivery, or if the Company shall not exercise the right described in
subsection (b) above to require the non-defaulting Underwriters to purchase the
unpurchased Shares of the defaulting Underwriter or Underwriters, then this
Agreement shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 11 hereof and the
indemnity and contribution agreements in Section 7 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. EFFECTIVE DATE AND TERMINATION. This Agreement shall become
effective at 9 a.m., Eastern Standard Time, on the first business day following
the Effective Date of the Registration Statement, or at such earlier time after
the Effective Date of the Registration Statement as you in your discretion shall
first release the Shares for offering to the public; provided, however, that the
provisions of Section 7 and Section 11 shall at all times be effective. For the
purposes of this Section 10(a), the Shares shall be deemed to have been released
to the public upon release by you of the publication of a newspaper
advertisement relating to the Shares or upon release of telegrams, facsimile
transmissions or letters offering the Shares for sale to securities dealers,
whichever shall first occur.
(b) This Agreement may be terminated by Xxxx, as one of the
Representatives, at any time before it becomes effective in accordance with
Section 10(a) by notice to the Company; provided, however, that the provisions
of this Section 10(a) and of Section 7 and Section 11 hereof shall at all times
be effective. In the event of any termination of this Agreement pursuant to
Section 10(a) or this Section 10(b) hereof, the Company shall not then be under
any liability to any Underwriter except as provided in Section 7 or Section 11
hereof.
(c) This Agreement may be terminated by Xxxx, as one of the
Representatives, at any time at or prior to the First Time of Delivery by notice
to the Company if any condition specified in Section 6 hereof required to be
satisfied by the Company shall not have been satisfied by the Company in all
material respects on or prior to the First Time of Delivery. Any such
termination shall be without liability of any party to any other party except as
provided in Sections 7 and Section 11 hereof.
(d) This Agreement also may be terminated by Xxxx, as one of
the Representatives, by notice to the Company, as to any obligation of the
Underwriters to purchase the Option Shares, if any condition specified in
Section 6 hereof shall not have been satisfied by the Company in all material
respects at or prior to the Second Time of Delivery or as provided in Section 9
of this Agreement.
23
If Xxxx terminate this Agreement as provided in Sections 10(b), 10(c) or
10(d), Xxxx shall notify the Company in writing or by telephone or telegram,
confirmed by letter.
11. COSTS AND EXPENSES. The Company will bear and pay the costs,
fees and expenses incident to the registration of the Shares and public offering
thereof, including, without limitation, (a) the fees and expenses of the
Company's accountants and the fees and expenses of counsel for the Company, (b)
the preparation, printing, filing, delivery and shipping of the Registration
Statement, each Preliminary Prospectus, the Prospectus and any amendments or
supplements thereto and the printing, delivery and shipping of this Agreement,
the Agreement Among Underwriters, the Selected Dealer Agreement, Underwriters'
Questionnaires and Powers of Attorney and any Blue Sky Memoranda, to the
Underwriters, (c) the furnishing of copies of such documents, (d) the
registration or qualification (or obtaining exemption therefrom) of the Shares
for offering and sale under the securities laws of the various states, including
the reasonable fees and disbursements of Underwriters' counsel relating thereto,
(e) the fees payable to the NASD and the Commission in connection with their
review of the proposed offering of the Shares, (f) all printing and engraving
costs related to preparation of the certificates for the Shares, including
transfer agent and registrar fees, (g) all initial transfer taxes, if any, (h)
all fees and expenses relating to the authorization of the Shares for trading on
the NASDNMS, (i) all travel expenses, including air fare and accommodation
expenses, of representatives of the Company in connection with the offering of
the Shares, (j) the cost of "tombstone" advertisements, (k) the cost of bound
volumes for the Representatives and their counsel and (l) all of the other costs
and expenses incident to the performance by the Company of the registration and
offering of the Shares; provided, however, that the Underwriters will bear and
pay all of the fees and expenses of the Underwriters' counsel (other than fees
and disbursements relating to the registration or qualification of the Shares
for offering and sale under the securities laws of the various states), the
Underwriters' out-of-pocket expenses, and any advertising costs and expenses
incurred by the Underwriters incident to the public offering of the Shares.
In addition to the Company's payment of the foregoing expenses, upon the
consummation of the Public Offering herein contemplated, the Company shall pay
to the Representatives a non-accountable expense allowance equal to 2% of the
gross proceeds of the offering, including in the computation of such amount the
proceeds from any sale of Option Shares, of which $50,000 was paid by the
Company to you. The balance of the non-accountable expense allowance due shall
be paid on the First Time of Delivery and on the Second Time of Delivery, as
applicable.
If this Agreement is terminated by Xxxx in accordance with the
provisions of Section 10(c), the Company shall reimburse the Underwriters only
for all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel to the Underwriters.
12. NOTICES. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to the
Underwriters shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed c/o:
24
Xxxx Capital Partners, Inc.
00 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Syndicate Department
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxxxx Xxxxxxx, LLP
000 Xxxxxx Xxxxxxxxx, Xxxxx 0000
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsmile: (000) 000-0000
or if sent to the Company shall be mailed, delivered, sent by facsimile
transmission, or telegraphed and confirmed to the Company at:
XxxxxXxxx.xxx, Inc.
0000 X. Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Xx.
Facsimile: (000) 000-0000
With a copy to:
Jeffer, Mangels, Xxxxxx & Xxxxxxx, LLP
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
Notice to any Underwriter pursuant to Section 7 shall be mailed,
delivered, sent by facsimile transmission, or telegraphed and confirmed to such
Underwriter's address as it appears in any Underwriters' Questionnaire furnished
in connection with the offering of the Shares or as otherwise furnished to the
Company. Any party hereto may change such address or facsimile number for
notices by sending to the other parties to this Agreement written notice of a
new address or facsimile number for such purpose.
13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the Company, the Underwriters and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any person, corporation, partnership or other entity, other
than the parties hereto and their respective successors and assigns and the
controlling persons, officers and directors referred to in Section 7, any legal
or
25
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of the
parties hereto and their respective successors and assigns and said controlling
persons and said officers and directors, and for the benefit of no other person,
corporation, partnership or other entity. No purchaser of any of the Shares from
any Underwriter shall be construed a successor or assign hereunder by reason
merely of such purchase.
In all dealings with the Company under this Agreement Xxxx shall act on
behalf of each of the several Underwriters, and the Company shall be entitled to
act and rely upon any statement, instruction, demand, request, notice or
agreement on behalf of the Underwriters, made or given by Xxxx on behalf of the
Underwriters, as if the same shall have been made or given in writing by all of
the Underwriters.
14. COUNTERPARTS. This Agreement may be executed by any one or more
of the parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
15. PRONOUNS. Whenever a pronoun of any gender or number is used
herein, it shall, where appropriate, be deemed to include any other gender and
number.
16. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of
any section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other section, paragraph or provision hereof.
17. GENERAL. This Agreement constitutes the entire agreement of the
parties to this Agreement and supersedes all prior written and oral agreements
and all contemporaneous oral agreements, undertakings and negotiations with
respect to the subject matter hereof. The section headings in this Agreement are
for the convenience of the parties only and will not affect the construction or
interpretation of this Agreement. This Agreement may be amended or modified, and
the observance of any term of this Agreement may be waived, only by a writing
signed by the Company, and by you or, in the case of a waiver, by the party
waiving compliance.
18. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without giving
effect to the provisions thereof regarding the choice of law.
26
If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for such purpose, whereupon this letter
shall constitute a binding agreement among the Company and the Underwriters.
XxxxxXxxx.xxx, Inc.
By: ________________________________
Name: _____________________________
Title: _____________________________
Accepted in Newport Beach, California, as
of the date first above written, on behalf of
ourselves and each of the several
Underwriters named in Schedule I hereto.
XXXX CAPITAL PARTNERS, INC.,
as one of the Representatives for the Several Underwriters
By: ________________________________
Name: _____________________________
Title: _____________________________
PENNSYLVANIA MERCHANT GROUP,
as one of the Representatives for the Several Underwriters
By: ________________________________
Name: _____________________________
Title: _____________________________
27
SCHEDULE I
NAME NUMBER OF SHARES
---- ----------------
Xxxx Capital Partners, Inc.
Pennsylvania Merchant Group
-------------------------------
Total 3,500,000
28
SCHEDULE II
Pursuant to Section 6(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
19. They are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable Rules and
Regulations thereunder.
20. In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, prospective financial
statements and/or pro forma financial information) examined by them and included
in the Prospectus or the Registration Statement comply as to form with the
applicable accounting requirements of the Act and the Rules and Regulations with
respect to registration statements on Form S-1; and, if applicable, they have
made a review in accordance with standards established by the American Institute
of Certified Public Accountants of the interim financial statements, selected
financial data, pro forma financial information, prospective financial
statements and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter, as indicated
in their reports thereon, copies of which have been furnished to the
Representatives of the Underwriters (the "Representatives").
21. The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
fiscal years included in the Prospectus agrees with the corresponding amounts
(after restatements where applicable) in the audited consolidated financial
statements for such years which were included in the Prospectus.
22. They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on the
basis of limited procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that cause them to believe
that this information does not conform in all material respects with the
disclosure requirements of Items 301, 302, 402 and 503(d), respectively, of
Regulation S-K
23. On the basis of a reading of the unaudited financial statements,
pro forma financial statements, if any, and other information contained in the
Prospectus, a reading of the latest available interim financial statements of
the Company, inspection of the minute books of the Company since the date of the
latest audited financial statements included in the Prospectus, inquiries of
officials of the Company responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(a) any of the above unaudited financial statements or other
information contained in the Prospectus do not comply as to form with the
accounting requirements of the Rules and Regulations or that such unaudited
financial statements are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
the audited financial statements;
29
(b) as of a specified date not more than two days prior to
the date of such letter, there have been any changes in the capital stock or any
increase in the indebtedness of the Company, or any increases or decreases in
net current assets or net assets or any changes in any other items specified by
the Representatives, in each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; or
(c) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred to in
clause (B) above there were any decreases in revenues or the total or per share
amounts of net income, or any other changes in any items specified by the
Representatives, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length specified by
the Representatives, except in each case for changes or decreases which the
Prospectus discloses have occurred or may occur or which are described in such
letter.
In addition to the audit referred to in their report(s) included in the
Prospectus and the limited procedures, inspection of minute books, inquiries and
other procedures referred to in Section 23 above, they have carried out certain
specified procedures, not constituting an audit in accordance with generally
accepted auditing standards, with respect to certain amounts, percentages and
financial information specified by the Representatives, which are derived from
the general accounting records of the Company for the periods covered by their
reports and any interim or other periods since the latest period covered by
their reports, which appear in the Prospectus, or in Part II of, or in exhibits
and schedules to, the Registration Statement specified by the Representatives,
and have compared certain of such amounts, percentages and financial information
with the accounting records of the Company and have found them to be in
agreement.
30
EXHIBIT A
Form of Lock-up Agreement
March ___, 2000
Xxxx Capital Partners, Inc.
- and -
Pennsylvania Merchant Group,
as Representatives of the Several Underwriters
Re: Lock-up Agreement Affecting Stock of XxxxxXxxx.xxx, Inc.
Ladies and Gentlemen:
The undersigned officer, director, and/or shareholder (the
"Shareholder") of XxxxxXxxx.xxx, Inc., a Texas corporation (the "Company"),
wishes to facilitate the initial public offering (the "Offering") of shares of
common stock of the Company. The Shareholder recognizes that the Offering will
be of benefit to the Company and the Shareholder.
To induce you, as the representatives (the "Representatives") of the
underwriters (the "Underwriters") of the Offering, to enter into an underwriting
agreement with the Company (the "Underwriting Agreement") relating to the
Offering and to induce you and the Underwriters to complete the purchase of the
shares of common stock pursuant to such Underwriting Agreement, the Shareholder
hereby agrees with the Underwriters as follows:
1. During the term of this Agreement, as specified in paragraph
3 of the Underwriting Agreement, the Shareholder will not, directly or
indirectly, offer, sell, contract to sell, pledge, hypothecate or otherwise
dispose of any shares of the Company's common stock or any securities
convertible into or exercisable or exchangeable for, or any rights to
purchase or acquire, shares of the Company's common stock or the beneficial
ownership thereof, whether now owned or hereinafter acquired other than
shares acquired in the public market on or after the date of the Company's
initial public offering (collectively the "Subject Securities"), without your
prior written consent as Representatives of the Underwriters. Without
limiting the generality of the foregoing, the Shareholder has engaged in no
discussions, formal or informal, in which the Representatives or persons
associated with the Representatives have participated regarding the potential
for any arrangement to sell any of the Shareholder's shares being registered
in the Offering, and the Shareholder understands and agrees that neither the
Representatives nor any of the Representatives' direct or indirect affiliates
will enter into, facilitate, or otherwise participate in any type of payment
transaction, sale, transfer, assignment, or hypothecation with respect to the
Shareholder's shares being registered in the Offering.
2. Any purported transfer of any Subject Securities in violation of
paragraph 1 hereof (an "Unauthorized Transfer") will be null and void. The
Company will not be required to register, recognize or give effect to any
Unauthorized Transfer and the purported transferee of any Subject Securities or
any interest therein pursuant to an Unauthorized Transfer will not acquire any
rights in such Subject Securities during the term of this Agreement as specified
in
31
paragraph 3 hereof. The Company may issue stop transfer or similar instructions
to the transfer agent for its common stock covering all Subject Securities, but
shall not be required to do so.
3. This Agreement shall become effective upon the execution hereof
by the Shareholder. This Agreement shall terminate without any prior notice upon
the earlier of (i) the date which is one hundred and eighty (180) days after the
Effective Date of the Registration Statement filed by the Company with the
Securities and Exchange Commission (SEC Registration No. 333-94337) in
connection with the Offering, or (ii) the termination or cancellation of the
Underwriting Agreement for any reason prior to the sale of the common stock to
the Underwriters. Notwithstanding the foregoing, this Agreement shall terminate
immediately upon the abandonment of the Registration Statement.
4. This Agreement shall be construed and enforced in accordance
with the laws of the State of California. The Underwriters shall be entitled to
all legal and equitable remedies in enforcing this Agreement, including without
limitation an injunction against any sale of shares of the common stock in
contravention of this Agreement. If at any time subsequent to the date of this
Agreement any provision hereof shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect, but the illegality or unenforceability of such provision shall
have no effect upon, and shall not impair the legality or enforceability of, any
other provision of this Agreement.
5. This Agreement may be executed in one or more counterparts, each
of which shall be an original, but all of which taken together shall constitute
one and the same instrument.
6. All of the terms and provisions of this Agreement shall inure to
the benefit of and be binding upon the respective heirs, successors, personal
representatives and permitted assigns of the parties hereto.
If the foregoing correctly sets forth the agreement between the
undersigned and the Underwriters, please indicate your acceptance in the space
provided below for that purpose.
Very truly yours,
________________________________
(Signature)
Print Name: ____________________
Date: __________________________
32
Accepted in Newport Beach, California, as
of the date first above written, on behalf of
ourselves and each of the several
Underwriters named in the Underwriting
Agreement
XXXX CAPITAL PARTNERS, INC.,
as one of the Representatives for the Several Underwriters
By: ________________________________
Name: _____________________________
Title: _____________________________
PENNSYLVANIA MERCHANT GROUP,
as one of the Representatives for the Several Underwriters
By: ________________________________
Name: _____________________________
Title: _____________________________
33
