$3,000,000
-----------
10% Convertible Adjustable Secured Bonds Due 2000
ILX INCORPORATED
UNDERWRITING AGREEMENT
----------------------
Phoenix, Arizona
October __, 1995
BROOKSTREET SECURITIES CORPORATION
As representative of the several Underwriters
named in Schedule I hereto
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
ILX Incorporated, an Arizona corporation (the "Company"), confirms its
agreement with you and the other underwriters named in Schedule I hereto (the
"Underwriters"), with respect to the sale by the Company and the purchase by the
Underwriters of an aggregate $3,000,000 principal amount of the Company's 10%
Convertible Adjustable Secured Bonds due 2000 (the "Bonds") to be issued
pursuant to the provisions of an Indenture, dated as of the date hereof (the
"Indenture"), between the Company and U.S. Trust Company of Calfornia, N.A., as
trustee (the "Trustee"). Such $3,000,000 principal amount of Bonds are
hereinafter referred to as the "Firm Securities." Upon your request, as provided
in Section 2(b) of this Agreement, the Company shall also issue and sell to the
Underwriters up to an additional aggregate $450,000 principal amount of Bonds
for the purpose of covering overallotments, if any. Such $450,000 principal
amount of Bonds are hereinafter referred to as the "Option Securities." The Firm
Securities and the Option Securities are hereinafter referred to collectively as
the "Securities." The shares of the Company's common stock, no par value (the
"Common Stock"), issuable upon conversion of the Securities are hereinafter
referred to as the "Underlying Stock." The Company also proposes to grant to
Brookstreet Securities Corporation warrants (described in Section 5(d) hereof)
to purchase 100,000 shares of the Company's Common Stock (the "Warrants"). The
Securities, the Underlying Stock and the Warrants are more fully described in
the Registration Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with the Underwriters as of the date
hereof, and as of the Closing Date (as defined in Section 2(c) hereof) and each
Option Closing Date (as defined in Section 2(b) hereof) if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-2 (No. 33-_____), including any
related preliminary prospectus deemed by the Company to be in compliance with
and filed pursuant to Rule 430 (the most recent of which is hereinafter referred
to as the "Preliminary Prospectus"), for the registration of the Securities and
the Underlying Stock under the Securities Act of 1933, as amended (the "Act"),
which registration statement and amendment or amendments have been prepared by
the Company in conformity with the requirements of the Act and the rules and
regulations (the "Regulations") of the Commission under the Act. Subject to
Section 4(a), the Company will promptly file a further amendment to said
registration statement in the form heretofore delivered to the Underwriters.
Except as the context may otherwise require, said registration statement, as
amended, on file with the Commission at the time said registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated therein
(including, but not limited to those documents or information incorporated by
reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Regulations) is hereinafter
called the "Registration Statement," and the form of prospectus in the final
form filed with the Commission pursuant to Rule 424(b) of the Regulations,
including the documents incorporated by reference therein pursuant to Item 12 of
Form S-2, is hereinafter called the "Prospectus." For purposes hereof, "Rules
and Regulations" mean the rules and regulations adopted by the Commission under
the Act, or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of the Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of any
thereof, and no proceedings for a stop order suspending the effectiveness of the
Registration Statement, any of the Company's securities have been instituted or
are pending or threatened. Each of the Preliminary Prospectus, the Registration
Statement and the Prospectus conformed at the time of filing thereof with the
requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, the Registration Statement or the Prospectus at the time
of filing thereof contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein and necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that this representation and warranty does not apply to
statements made in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing
Date, if any, and during such longer period as the Prospectus may be required to
be delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus will contain all statements that are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules and
Regulations, and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with information furnished to the Company in writing by
or on behalf of any Underwriters expressly for use in such Registration
Statement, Prospectus, amendment or supplement.
(d) Each of the Company and its subsidiaries set forth on
Exhibit A attached hereto and incorporated herein by this reference
(collectively, the "Subsidiaries"), has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation. Except as set forth in the Registration Statement or the
Prospectus or listed on Exhibit A hereto, neither the Company nor any of the
Subsidiaries owns a material interest (defined for the purposes hereof as
meaning a ten percent or more interest) in any corporation, partnership, trust,
joint venture or other business entity. The Company is duly qualified and
licensed and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of any properties or the character of its
operations require such qualification or licensing. Each Subsidiary is duly
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification or licensing. Except as
set forth on Exhibit A hereto, the Company owns 100% of the outstanding capital
stock of each of its Subsidiaries, in each case free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever; and all outstanding shares of
capital stock of each of the Subsidiaries have been validly issued and are fully
paid and non-assessable and not issued in violation of any preemptive rights or
applicable securities laws. Each of the Company and the Subsidiaries has all
requisite power and authority (corporate and other), and has obtained any and
all necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and conduct
its business as described in the Prospectus; each of the Company and the
Subsidiaries is and has been doing business in compliance with all material
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal, foreign, state and local laws, rules and regulations,
or if a failure to so comply exists, such failure would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business affairs, position, prospects, value, operation, properties, business or
results of operations of the Company and the Subsidiaries taken as a whole; and
neither the Company nor any of the Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or permit which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the condition, financial or
otherwise, or the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company and the
Subsidiaries taken as a whole. The Company advises that the Arizona Department
of Real Estate has submitted to the Company a Consent Order, which includes a
fine of $2,000.00 payable by the Company, in connection with the Company's
Xxxx'x Ranch timeshare operation. The disclosures in the Registration Statement
concerning the effects of federal, state and local laws, rules and regulations
on each of the Company's and the Subsidiaries' businesses as currently conducted
and as contemplated are correct in all material respects and do not omit to
state a material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and will have the
adjusted capitalization set forth therein on the Closing Date and each Option
Closing Date, if any, based upon the assumptions set forth therein. Neither the
Company nor any of the Subsidiaries is a party to or bound by any material
instrument, agreement or other arrangement, including, but not limited to, any
voting trust agreement, stockholders' agreement or other agreement or
instrument, affecting the securities or options, warrants or rights or
obligations of security holders of the Company or any of the Subsidiaries or
providing for any of them to issue, sell, transfer or acquire any capital stock,
rights, warrants, options or other securities of the Company or any of the
Subsidiaries, except for this Agreement, the Indenture and as described or
referred to in the Registration Statement or the Prospectus. The Securities, the
Underlying Stock, the Warrants and all other securities issued or issuable by
each of the Company and the Subsidiaries conform or, when issued and paid for,
will conform in all material respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of each of the Company or any of the Subsidiaries have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto and are
not subject to personal liability for the Company's acts or omissions solely by
reason of being such holders; and none of such securities was issued in
violation of the preemptive rights of any security holder of the Company or any
of the Subsidiaries or similar contractual rights granted by the Company or any
of the Subsidiaries. The Bonds will be issued pursuant to the terms and
conditions of the Indenture, and the provisions of the Indenture described in
the Prospectus will conform to the description thereof contained in the
Prospectus but such description is qualified by reference to the actual terms of
the Indenture. The Bonds have been duly authorized and, when validly
authenticated, issued, delivered and paid for in the manner contemplated by the
Indenture, will be duly authorized, validly issued and outstanding obligations
of the Company entitled to the benefits of the Indenture. The shares of Common
Stock issuable upon conversion of the Bonds will, upon such issuance, be duly
authorized, validly issued, fully paid and nonassessable, and the Company has
duly authorized and reserved for issuance upon conversion of the Bonds the
shares of Common Stock issuable upon such conversion. The Securities and the
Underlying Stock are not and will not be subject to any preemptive or other
similar rights of any securityholder of the Company or any of the Subsidiaries;
the holders thereof will not be subject to any liability for the Company's acts
or omissions solely as such holders; all corporate action required to be taken
for the authorization, issue and sale of the Securities and the Underlying Stock
has been duly and validly taken; and the certificates representing the
Securities and the Underlying Stock will be in due and proper form. Upon the
issuance and delivery of the Bonds pursuant to the terms of this Agreement and
the Indenture, the Underwriters will acquire good and marketable title thereto
free and clear of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever resulting
from the affirmative act of the Company or from a judgment or nonconsensual lien
rendered against the Company.
(f) The consolidated financial statements of the Company and
the Subsidiaries together with the related notes thereto included in the
Registration Statement, the Preliminary Prospectus and the Prospectus fairly
present the financial position, income, change in stockholders' equity, cash
flow and the results of operations of the Company and the Subsidiaries at the
respective dates and for the respective periods to which they apply. There has
been no adverse change or development involving a material prospective change in
the condition, financial or otherwise, or in the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company or any of the Subsidiaries, whether or not arising in
the ordinary course of business, since the date of the financial statements
included in the Registration Statement and the Prospectus, except as set forth
in the Registration Statement and the Prospectus, and the outstanding debt, the
property, both tangible and intangible, and the businesses of each of the
Company and the Subsidiaries described in the Registration Statement and the
Prospectus conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings "SUMMARY INFORMATION,
RISK FACTORS AND RATIO OF EARNINGS TO FIXED CHARGES" and "SELECTED CONSOLIDATED
FINANCIAL DATA" fairly present, on the basis stated in the Prospectus, the
information set forth therein and have been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus.
(g) Each of the Company and the Subsidiaries (i) has paid all
federal, state and local taxes for which it is currently liable, including, but
not limited to, withholding taxes and amounts payable under Chapters 21 through
24 of the Internal Revenue Code of 1986, as amended (the "Code"), and has
furnished all information returns it is required to furnish pursuant to the
Code, (ii) has established adequate reserves for such taxes that are not due and
payable or are being contested in good faith by the Company and (iii) does not
have any material tax deficiency or claims outstanding, proposed or assessed
against its respective business or assets.
(h) No U.S. transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the issuance
by the Company of the Securities or the Underlying Stock, (ii) the purchase by
the Underwriters of the Securities, (iii) the consummation by the Company of any
of its obligations under this Agreement and the Indenture, or (iv) resales of
the Securities and the Underlying Stock by the Underwriters in connection with
the distribution contemplated hereby.
(i) Each of the Company and the Subsidiaries maintains
insurance policies, including, but not limited to, general liability, property
and product liability insurance and surety bonds which insures the Company and
the Subsidiaries and their respective professional staffs against such losses
and risks generally insured against by comparable businesses. Neither the
Company nor any of the Subsidiaries (A) has failed to give notice or present any
insurance claim with respect to any matter, including, but not limited to, the
Company's or any of the Subsidiaries' businesses, property or professional
staff, under any insurance policy or surety bond in a due and timely manner, (B)
has any disputes or claims against any underwriter of such insurance policies or
surety bonds or has failed to pay any premiums due and payable thereunder or (C)
has failed to comply with all conditions contained in such insurance policies
and surety bonds. The Company has not received notice of facts or circumstances
under any such insurance policy or surety bond which would relieve any insurer
of its obligation to satisfy in full any valid claim of the Company or any of
the Subsidiaries.
(j) There is no material action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or, to the best of the Company's
knowledge, threatened against, or involving the properties or businesses of, the
Company or any of the Subsidiaries which (i) questions the validity of the
capital stock of the Company or any of the Subsidiaries, this Agreement and the
Indenture or of any action taken or to be taken by the Company or any of the
Subsidiaries pursuant to or in connection with this Agreement or the Indenture,
(ii) is required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration Statement
are accurately summarized in all respects) or (iii) materially and adversely
affects the condition, financial or otherwise, or the earnings, business
affairs, position, prospects, stockholders' equity, value, operation,
properties, businesses or results of operations of the Company and the
Subsidiaries taken as a whole. For the purposes hereof, a material action shall
be an action resulting in liability to the Company in excess of five percent of
its net worth, as reflected on its most recent balance sheet.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, the Underlying Stock and the
Warrants, to enter into this Agreement and the Indenture and to consummate the
transactions provided for in such agreements; and this Agreement and Indenture
have each been duly and properly authorized, executed and delivered by the
Company. Each of the Agreement and the Indenture constitutes a legal, valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms, and none of the Company's issue and sale of the Securities, the
Underlying Stock and the Warrants, the execution or delivery of this Agreement
and the Indenture, its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein or the conduct by it and the
Subsidiaries of their businesses as described in the Registration Statement, the
Prospectus or any amendments or supplements thereto conflicts or will conflict
with or results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or results or
will result in the creation or imposition of any lien (other than the lien
created by the Indenture), charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever upon any
property or assets (tangible or intangible) of the Company or any of the
Subsidiaries pursuant to the terms of, (i) the certificate of incorporation or
by-laws of the Company or any of the Subsidiaries, (ii) any material license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note, loan or credit agreement or other agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which it is or may be bound or to which its properties or assets (tangible or
intangible) is or may be subject, or any indebtedness, or (iii) to the best of
the Company's knowledge, any statute, judgment, decree, order, rule or
regulation applicable to the Company or any of the Subsidiaries of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of the Subsidiaries or any of their
respective activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any domestic court, regulatory body, government agency or other
body is required for the issuance of the Securities pursuant to the Prospectus
and the Registration Statement, the performance of this Agreement and the
Indenture or the transactions contemplated hereby or thereby, including, without
limitation, any waiver of any preemptive, first refusal or other rights that any
entity or person may have for the issue and/or sale of any of the Securities,
except such as have been or may be required to be obtained under the Act, the
Exchange Act and the rules of the National Association of Securities Dealers,
Inc. or may be required under state securities or Blue Sky laws in connection
with the Underwriters' purchase and distribution of the Securities.
(m) Each of the Company and the Subsidiaries shall have duly
and validly authorized, executed and delivered each agreement, contract or other
document filed as an exhibit to the Registration Statement (or the original of
such agreement, contract or document if a copy thereof is filed as an exhibit to
the Registration Statement) to which it is a party or by which it may be bound
or to which its assets, properties or businesses may be subject, and each such
agreement, contract or other document constitutes its legal, valid and binding
agreement enforceable against it in accordance with its terms. The descriptions
in the Registration Statement of agreements, contracts and other documents are
accurate but such descriptions are qualified by reference to the actual terms of
such agreements, contracts and other documents. There are no contracts or other
documents which are required by the Act or the Rules and Regulations to be
described in the Registration Statement or filed as exhibits to the Registration
Statement which are not described or filed as required; and the exhibits which
have been filed are complete and correct copies of the documents of which they
purport to be copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, neither the Company
nor any of the Subsidiaries has (i) entered into any material transaction other
than in the ordinary course of business or (ii) declared or paid any dividend or
made any other distribution on or in respect of its capital stock of any class
and there has not been any material change in the capital stock, debt (long or
short term) or liabilities (except for (x) financing in connection with
acquisition of assets of the Company through purchase money financing and
financing related to timeshare sales which is secured by timeshare receivables,
(y) debt incurred to finance capital improvements to existing properties not to
exceed $3,000,000 outstanding and (z) debt for working capital not to exceed
$1,500,000 outstanding) or any material change in or affecting the general
affairs, management, financial operations, stockholders' equity or results of
operations of the Company or any of the Subsidiaries.
(o) No material default exists in the due performance and
observance of any material term, covenant or condition of any license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit agreement,
purchase order, agreement or instrument evidencing an obligation for borrowed
money or other material agreement or instrument to which the Company or any of
the Subsidiaries is a party or by which the Company or any of the Subsidiaries
may be bound or to which the property or assets (tangible or intangible) of the
Company or any of the Subsidiaries is subject or affected. For the purposes
hereof, a material default shall be a default resulting in liability to the
Company in excess of five percent of its net worth, as reflected on its most
recent balance sheet.
(p) Each of the Company and the Subsidiaries is in material
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. Except as described in the Prospectus, the
Company has not received notice of any pending investigations involving the
Company or any of the Subsidiaries by the U.S. Department of Labor or any other
governmental agency responsible for the enforcement of such federal, state,
local or foreign laws and regulations. The Company has not received notice of
any unfair labor practice charge or complaint against the Company or any of the
Subsidiaries pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or any of the Subsidiaries, or any predecessor entity
of the Company or any of the Subsidiaries, and none has ever occurred. No
collective bargaining agreement or modification thereof is currently being
negotiated by the Company or any of the Subsidiaries. No material labor dispute
with the employees of the Company or any of the Subsidiaries exists or, to the
best of the Company's knowledge, is imminent.
(q) Except as described in the Registration Statement and
except for the ILX Profit Sharing Plan, dated December 31, 1994, neither the
Company nor any of the Subsidiaries maintains, sponsors or contributes to any
program or arrangement that is an "employee pension benefit plan," an "employee
welfare benefit plan" or a "multi-employer plan" ("ERISA Plans") as such terms
are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Neither the
Company nor any of the Subsidiaries maintains or contributes to, now or at any
time previously, a defined benefit plan as defined in Section 3(35) of ERISA. To
the best of the Company's knowledge, no ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code which could subject the Company
or any of the Subsidiaries to any tax penalty on prohibited transactions and
which has not adequately been corrected. To the best of the Company's knowledge,
each ERISA Plan is in compliance with all material reporting, disclosure and
other requirements of the Code and ERISA as they relate to such ERISA Plan.
Neither the Company nor any of the Subsidiaries has ever completely or partially
withdrawn from a "multi-employer plan" as so defined.
(r) Neither the Company or any of the Subsidiaries, nor any of
the directors, principal stockholders, executive officers or, to the best of the
Company's knowledge, employees, affiliates (within the meaning of the Rules and
Regulations) of any of the foregoing or Xxxx Xxxxxxx, a principal shareholder,
has taken or will take, directly or indirectly, any action designed to or which
has constituted or which might be expected to cause or result in, under the
Exchange Act or otherwise, stabilization or manipulation in violation of the
Exchange Act of the price of any security of the Company to facilitate the sale
or resale of the Securities, the Underlying Stock or otherwise.
(s) Each of the Company and the Subsidiaries (i) to the best
of the Company's knowledge, owns or possesses, or has a license or other right
to use, all copyrights, trademarks, service marks and trade names, together with
all applications for any of the foregoing, presently used or held for use by it
in connection with its businesses as described in the Registration Statement,
(ii) has not received any notice of infringement of or conflict with asserted
rights of others with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the condition, financial or otherwise, or the
business affairs, position, prospects, properties, results of operations or net
worth of the Company and the Subsidiaries, taken as a whole, and (iii) is not
obligated or under any liability whatsoever to make any material payments by way
of royalties, fees or otherwise to any owner or licensee of, or other claimant
to, any trademark, service mark, trade name or copyright or other intangible
asset with respect to the use thereof or in connection with the conduct of its
business or otherwise. None of the copyrights, trademarks, service marks and
trade names presently owned or used by the Company or any of the Subsidiaries
are in dispute or, to the best of the Company's knowledge, are in conflict with
the right of any other person or entity.
(t) Each of the Company and the Subsidiaries has good and
marketable title to, or valid and enforceable leasehold estates in, all material
items of real and personal property described in the Registration Statement to
be owned or leased by it, in each case free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects and other
restrictions and equities of any kind whatsoever, other than those referred to
in the Prospectus or the Registration Statement and liens for taxes not yet due
and payable.
(u) Deloitte & Touche, whose reports are filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(v) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuance with
respect to the Company, any of the Subsidiaries or any of their respective
officers, directors, stockholders, employees or affiliates that may affect the
Underwriters' compensation as determined by the National Association of
Securities Dealers, Inc. ("NASD").
(w) Neither the Company or any of the Subsidiaries nor any of
their respective executive officers, principal stockholders, or, to the best of
the Company's knowledge, employees or agents nor any other person acting on
behalf of the Company or any of the Subsidiaries nor Xxxx Xxxxxxx, a principal
shareholder, has, directly or indirectly, given or agreed to give any money,
gift or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or any official or employee of any governmental agency
(domestic or foreign), or any instrumentality of any government (domestic or
foreign), or any political party or candidate for office (domestic or foreign),
or any other person who was, is or may be in a position to help or hinder the
businesses of the Company or any of the Subsidiaries (or assist the Company or
any of the Subsidiaries in connection with any actual or proposed transaction)
which (i) might subject the Company or any of the Subsidiaries, or any of such
others to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign), (ii) if not given in the past,
might have had a materially adverse effect on the assets, businesses or
operations of the Company or any of the Subsidiaries or (iii) if not continued
in the future, might adversely affect the assets, businesses, operations or
prospects of the Company or any of the Subsidiaries. Each of the Company's and
the Subsidiaries' internal accounting controls are sufficient to cause the
Company and the Subsidiaries to comply with the Foreign Corrupt Practices Act of
1977, as amended.
(x) Except as set forth in the Prospectus, no officer,
director, principal stockholder or key employee of the Company or any of the
Subsidiaries, or any "affiliate" or "associate" (as these terms are defined in
Rule 405 promulgated under the Rules and Regulations) of any of the foregoing
persons or entities, has or has had, either directly or indirectly, (i) any
interest in any person or entity which furnishes or sells services or products
which are furnished or sold or are proposed to be furnished or sold by the
Company or any of the Subsidiaries or (ii) a material interest in any person or
entity which purchases from or sells or furnishes to the Company or any of the
Subsidiaries any goods or services or (iii) a beneficial interest in any
material contract or agreement to which the Company or any of the Subsidiaries
is a party or by which the Company or any of the Subsidiaries may be bound or
affected. Except as set forth in the Registration Statement or the Prospectus,
there are no existing material agreements, arrangements, understandings or
transactions, or proposed agreements, arrangements, understandings or
transactions, between or among the Company or any of the Subsidiaries and any
such officer, director, principal stockholder or key employee or any "affiliate"
or "associate."
(y) The minute books of each of the Company and the
Subsidiaries have been made available to the Underwriters, contain a complete
summary of all actions of the directors and stockholders of each of the Company
and the Subsidiaries since the time of their respective incorporation and
reflect all transactions referred to in such minutes accurately in all respects.
(z) No holders of any securities of the Company or any of the
Subsidiaries or of any options, warrants or other convertible or exchangeable
securities of the Company or any the Subsidiaries have the right to include any
securities issued by the Company or any of the Subsidiaries in the Registration
Statement and no person or entity holds any anti-dilution rights with respect to
any securities of the Company or any of the Subsidiaries that would be triggered
by the issuance of the Bonds, the Warrants or the Common Stock into which they
are convertible as described in the Registration Statement and the Prospectus.
(aa) Any certificate signed by any officer of the Company and
delivered to the Underwriters or Thelen, Xxxxxx, Xxxxxxx & Xxxxxxx
("Underwriters' Counsel") shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
(bb) To the best of the Company's knowledge, each of the
Company and the Subsidiaries is in compliance with all federal, foreign, state
and local laws, rules and regulations relating to environmental protection, and
neither the Company nor any of the Subsidiaries has been notified or is
otherwise aware that it is potentially liable, or is considered potentially
liable, under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or any similar law ("Environmental Laws").
Neither the Company nor any of the Subsidiaries is involved in or subject to any
action, suit, regulatory investigation or other proceeding, pending or (to the
best of the Company's knowledge) threatened, relating to environmental
protection or the Environmental Laws, nor does the Company or any of the
Subsidiaries believe any such action, suit, investigation or proceeding is
probable of assertion against the Company or any of the Subsidiaries, provided
that the Company has filed voluntarily for a Determination of Applicability from
the Arizona Department of Environmental Quality to determine the applicability
of either General or Individual Acquifier Protection Permit requirements to the
Company's Xxxx'x Ranch property in accordance with Arizona Revised Statutes
ss.49-241, et seq. To the best of the Company's knowledge, no disposal, release
or discharge of hazardous or toxic substances, pollutants or contaminants,
including petroleum and gas products, as any of such terms may be defined under
federal, state or local law, has occurred on, in, at or about any of the
facilities or properties of the Company or any of the Subsidiaries.
(cc) Neither the Company nor any of the Subsidiaries has ever
received a notice, orally or in writing, with respect to the denial of any
license the Company or any Subsidiary has sought to obtain under, and the
Company-approved operating procedures and practices of each of the Company and
the Subsidiaries are, to the best of the Company's knowledge, in material
compliance with, federal, state and local laws, rules and regulations, provided
that the Company's application to obtain a license to sell timeshare interests
in the State of California has not yet been approved.
(dd) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(ee) The Company makes no representation regarding compliance
with the laws of any foreign jurisdiction. The Company has relied on the
Underwriters offering the Securities for sale in any foreign jurisdiction as to
compliance with applicable laws, rules and regulations thereof.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriters, and Underwriters
agree to purchase from the Company the Firm Securities at a price equal to 91%
of the principal amount thereof, plus accrued interest, if any, from __________,
1995 to the Closing Date.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase all or any part of an additional $450,000 aggregate
principal amount of Bonds at a price of 91% of the principal amount thereof,
plus accrued interest from __________, 1995 to the applicable Option Closing
Date. The option granted hereby will expire 30 days after (i) the date the
Registration Statement becomes effective, if the Company has elected not to rely
on Rule 430A under the Rules and Regulations, or (ii) the date of this Agreement
if the Company has elected to rely upon Rule 430A under the Rules and
Regulations, and may be exercised in whole or in part from time to time only for
the purpose of covering overallotments which may be made in connection with the
offering and distribution of the Firm Securities upon notice by the Underwriters
to the Company setting forth the aggregate principal amount of Option Securities
as to which the Underwriters are then exercising the option and the time and
date of payment and delivery for any such Option Securities. Any such time and
date of delivery (an "Option Closing Date") shall be determined by the
Underwriters, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Date unless
otherwise agreed upon by the Underwriters and the Company. Nothing herein
contained shall obligate the Underwriters to make any overallotments. No Option
Securities shall be delivered unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of
Brookstreet Securities Corporation, 0000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxxxx 00000 or at such other place as shall be agreed upon by the
Underwriters and the Company. Such delivery and payment shall be made at 10:00
a.m. (New York City time) on ___________, 1995 or at such other time and date as
shall be agreed upon by the Underwriters and the Company, but not less than
seven nor more than ten full business days after the effective date of the
Registration Statement (such time and date of payment and delivery being herein
called the "Closing Date"). In addition, in the event that any or all of the
Option Securities are purchased by the Underwriters, payment of the purchase
price for, and delivery of certificates for, such Option Securities shall be
made at the above mentioned office of Brookstreet Securities Corporation or at
such other place as shall be agreed upon by the Underwriters and the Company on
each Option Closing Date as specified in the notice from the Underwriters to the
Company. Delivery of the certificates for the Firm Securities and the Option
Securities, if any, shall be made to the Underwriters against payment by the
Underwriters of the purchase price for the Firm Securities and the Option
Securities, if any, to the order of the Company in Los Angeles Clearing House
funds. Certificates for the Firm Securities and the Option Securities, if any,
shall be in definitive, fully registered form, shall bear no restrictive legends
and shall be in such denominations and registered in such names as the
Underwriters may request in writing at least two business days prior to the
Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the Firm Securities and the Option Securities, if any, shall be
made available to the Underwriters at such office or such other place as the
Underwriters may designate for inspection, checking and packaging no later than
9:30 a.m. on the last business day prior to Closing Date or the relevant Option
Closing Date, as the case may be.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective as the Underwriters deem advisable, the Underwriters
shall make a public offering of the Securities (other than to residents of or in
any jurisdiction in which qualification of the Securities is required and has
not become effective) at the price and upon the other terms set forth in the
Prospectus. The Underwriters may enter into one or more agreements as the
Underwriters, in their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public offering.
4. Covenants and Agreements of the Company. The Company covenants and
agrees with the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the
Securities by the Underwriters of which the Underwriters and Underwriters'
Counsel shall not previously have been advised and furnished with a copy, or to
which the Underwriters or Underwriters' Counsel shall have objected (except if
deemed necessary by counsel for the Company, in which case the Underwriters
shall have the right to terminate this Agreement upon prompt notice to the
Company), or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriters and as soon as practicable
confirm in writing, (i) when the Registration Statement, as amended, becomes
effective and, if the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A and when any post-effective amendment to the Registration Statement becomes
effective, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use of
the Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution of proceedings for that purpose, (iii) of the
issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose, (iv) of the receipt of any comments from the
Commission, and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information. If the Commission or any state securities commission
shall enter a stop order or suspend such qualification at any time, the Company
will make every effort to obtain promptly the lifting of such order or
suspension.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriters or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1), or, if applicable and if consented to by the Underwriters, pursuant
to Rule 424(b)(4)) on or before the date it is required to be filed under the
Act and the Rules and Regulations.
(d) The Company will give the Underwriters notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus that the Company proposes for use
by the Underwriters in connection with the offering of the Securities that
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Underwriters with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Underwriters or Underwriters' Counsel shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Underwriters, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions identified on Exhibit C to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose, provided the
Company shall not be required to qualify as a foreign corporation or file a
general consent to service of process in any such jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will,
unless the Underwriters agree that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Underwriters promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its securityholders (including Bondholders), in the
manner specified in Rule 158(b) of the Rules and Regulations, and to the
Underwriters an earnings statement which will be in the detail required by, and
will otherwise comply with, the provisions of Section 11(a) of the Act and Rule
158(a) of the Rules and Regulations, which statement need not be audited unless
required by the Act, covering a period of at least 12 consecutive months after
the effective date of the Registration Statement.
(h) So long as any of the Bonds remain outstanding, the
Company will furnish to its Bondholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants), and
the other reports required to be delivered pursuant to the Indenture, and will
deliver to Brookstreet Securities Corporation, as representative for the
Underwriters:
(i) concurrently with furnishing such quarterly
reports to its securityholders, statements of income of the Company for each
quarter in the form furnished to the Company's securityholders and certified by
the Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports
to its securityholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations, stockholders'
equity and cash flows of the Company for such fiscal year, accompanied by a copy
of the report thereon of independent certified public accountants;
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, any
state securities commission, the NASD or any securities exchange;
(v) every press release and every material news item
or article of interest to the financial community in respect of each of the
Company and the Subsidiaries or their respective affairs which was released or
prepared by or on behalf of the Company or any of the Subsidiaries; and
(vi) any additional information of a public nature
concerning the Company or any of the Subsidiaries (and any future subsidiaries)
or their respective businesses which the Underwriters may request.
During such period, if the Company has active subsidiaries, the foregoing
financial statements will be on a consolidated basis to the extent that the
accounts of the Company and its subsidiaries are consolidated, and will be
accompanied by similar financial statements for any significant subsidiary which
is not so consolidated.
(i) The Company will maintain a transfer agent and, if
necessary under the laws of the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for the Common
Stock, and also for the Bonds.
(j) The Company will furnish to the Underwriters or on the
Underwriters' order, without charge, at such place as the Underwriters may
designate, copies of the Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such reasonable quantities as the Underwriters may
request.
(k) Neither the Company nor any of the Subsidiaries nor any of
their respective executive officers directors, principal stockholders or
affiliates (within the meaning of the Rules and Regulations) will take, directly
or indirectly, any action designed to, or which might in the future reasonably
be expected to cause or result in, stabilization or manipulation of the price of
any securities of the Company in violation of the Exchange Act.
(l) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"USE OF PROCEEDS" in the Prospectus. No portion of the net proceeds will be
used, directly or indirectly, to acquire or redeem any securities issued by the
Company, provided that this covenant shall not restrict the Company's ability to
redeem the Securities pursuant to their terms.
(m) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time under the
Act, the Exchange Act and the Rules and Regulations, and all such reports, forms
and documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act and the Rules and Regulations.
(n) The Company shall furnish to the Underwriters as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two full business days prior thereto, a
copy of the latest available unaudited interim consolidated financial statements
of the Company and the Subsidiaries (which in no event shall be as of a date
more than 30 days prior to the date of the Registration Statement) which have
been read by the Company's independent public accountants as stated in their
letters to be furnished pursuant to Section 6(i) hereof.
(o) The Company shall, as soon as practicable, but in no event
later than five business days before the effective date of the Registration
Statement, file a Form 8-A with the Commission providing for the registration
under the Exchange Act of the Securities and the Underlying Stock.
(p) Until the completion of the distribution of the
Securities, neither the Company nor any of the Subsidiaries shall, without the
prior written consent of the Underwriters and Underwriters' Counsel, issue,
directly or indirectly, any press release or other communication or hold any
press conference with respect to the Company, any of the Subsidiaries, their
respective activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent with
past practices with respect to the Company's operations.
(q) For any period during which any of the Bonds are
outstanding, the Company will not take any action or actions which may cause the
exemption from registration provided by Section 3(a) of the Act (or any
successor provision) to be unavailable for the conversion of the Bonds into
Common Stock.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the
Closing Date and each Option Closing Date (to the extent not paid at the Closing
Date) all expenses and fees (other than fees of Underwriters' Counsel) incident
to the performance of the obligations of the Company under this Agreement and
the Indenture including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses incurred in
connection with the preparation, duplication, printing (including mailing and
handling charges), filing, delivery and mailing (including the payment of
postage with respect thereto) of the Registration Statement and the Prospectus
and any amendments and supplements thereto and the printing, mailing (including
the payment of postage with respect thereto) and delivery of this Agreement, the
Agreement Among Underwriters, the Powers of Attorney and related documents,
including the cost of all copies thereof and of any Preliminary Prospectuses,
the Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters and such dealers as the Underwriters may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of the
Securities including, but not limited to, (x) the purchase by the Underwriters
of the Securities, (y) the consummation by the Company of any of its obligations
under this Agreement and the Indenture and (z) resale of the Securities by the
Underwriters in connection with the distribution contemplated hereby, (iv) the
qualification of the Securities and the Underlying Stock under state securities
or "Blue Sky" laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum" and the "Supplemental Blue Sky Memorandum," if any, and
disbursements and fees of counsel in connection therewith, (v) costs and
expenses of travel of personnel of the Company in connection with the "road
show," information meetings and presentations, (vi) fees and expenses of the
Trustee, transfer agent and registrar, and (vii) the fees payable to the
Commission and the NASD,
(b) The Underwriters acknowledge receipt of $50,000
from the Company to offset certain expenses of the Underwriters. If this
Agreement is terminated by the Underwriters in accordance with the provisions of
Section 4(a), Section 6, Section 10(a) or Section 12, the Underwriters shall
retain such funds as payment for all of their actual reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of Underwriters'
Counsel and shall have no additional recourse to the Company for expenses
incurred.
(c) The Company further agrees that, in addition to
the expenses payable pursuant to Section 5(a) hereof, it will pay to the
Underwriters on the Closing Date by certified or bank cashier's check or, at the
election of the Underwriters, by deduction from the proceeds of the offering
contemplated herein a non-accountable expense allowance equal to two percent of
the gross proceeds received by the Company from the sale of the Firm Securities
less the $50,000 paid pursuant to Section 5(b). In the event the Underwriters
elect to exercise the overallotment option described in Section 2(b) hereof, the
Company further agrees to pay to the Underwriters on each Option Closing Date,
if any, by certified or bank cashier's check or, at the election of the
Underwriters, by deduction from the proceeds of the offering contemplated herein
a non-accountable expense allowance equal to two percent of the gross proceeds
received by the Company from the sale of the Option Securities on such option
Closing Date.
(d) In addition to the sums payable to the
Underwriters, as provided elsewhere herein, Brookstreet Securities Corporation,
in its individual capacity and not as representative of the several
Underwriters, shall be entitled to receive, as partial compensation for its
services, warrants (the "Warrants") for the purchase of 100,000 shares of the
Company's Common Stock. The Warrants shall be issued pursuant to the
Underwriter's Warrant in the form of Exhibit B attached hereto and shall be
exercisable, in whole or in part, for a period of four years commencing one year
from the date of the completion of the Offering, at [$3.60 per share]. The
Warrants shall be non-exercisable for one year from the date of issuance of the
Warrants, and non-transferrable (whether by sale, transfer, assignment or
hypothecation) except for (i) transfers to officers of Brookstreet Securities
Corporation who are also shareholders of Brookstreet Securities Corporation, and
(ii) transfers occurring by operation of law.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date or each Option Closing Date, if
any, of the statements of officers of the Company made pursuant to the
provisions hereof; and the performance by the Company on and as of the Closing
Date and each Option Closing Date, if any, of its covenants and obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Underwriters, and, at
the Closing Date and each Option Closing Date, if any, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Underwriters of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Underwriters shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriters' reasonable opinion, is material,
or omits to state a fact which, in the Underwriters' reasonable opinion, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading, or that the Prospectus, or any supplement
thereto, contains an untrue statement of fact which, in the Underwriters'
reasonable opinion, is material, or omits to state a fact which, in the
Underwriters' reasonable opinion, 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) On or prior to the Closing Date, the Underwriters shall
have received from Underwriters' Counsel, such opinion or opinions with respect
to the organization of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and other related matters as the
Underwriters may request and Underwriters' Counsel shall have received such
papers and information as they request to enable them to pass upon such matters.
(d) At Closing Date, the Underwriters shall have received from
Colombo & Xxxxxxx, P.C., counsel to the Company, dated the Closing Date,
addressed to the Underwriters in the form attached hereto as Exhibit D. In
rendering such opinion, such counsel may rely: (A) as to matters involving the
application of laws other than the laws of the United States and jurisdictions
in which they are admitted, to the extent such counsel deems proper and to the
extent specified in such opinion, if at all, upon an opinion or opinions (in
form and substance satisfactory to Underwriters' Counsel) of other counsel
acceptable to Underwriters' Counsel, familiar with the applicable laws; and (B)
as to matters of fact, to the extent they deem proper, on certificates and
written statements of responsible officers of the Company and certificates or
other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company and the Subsidiaries, provided copies of any such statements or
certificates shall be delivered to Underwriters' Counsel if requested. The
opinion of such counsel for the Company shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and that the Underwriters
and they are justified in relying thereon. At each Option Closing Date, if any,
the Underwriters shall have received the favorable opinion of Xxxxxxx & Xxxxxxx,
P.C., counsel to the Company, dated such Option Closing Date, addressed to the
Underwriters and in form consistent with Exhibit D confirming as of such Option
Closing Date the statements made by Xxxxxxx & Xxxxxxx, P.C. in their opinion
delivered on the Closing Date.
(e) On or prior to each of the Closing Date and each Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6 or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company herein contained.
(f) Prior to each of Closing Date and each Option Closing
Date, if any: (i) there shall have been no materially adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company and the Subsidiaries taken as a whole, whether or not in the ordinary
course of business, from the latest dates as of which such condition is set
forth in the Registration Statement and Prospectus; (ii) there shall have been
no transaction, not in the ordinary course of business, entered into by the
Company or any of the Subsidiaries, from the latest date as of which the
financial condition of the Company and the Subsidiaries is set forth in the
Registration Statement and Prospectus which is adverse to the Company and the
Subsidiaries taken as a whole; (iii) neither the Company nor any of the
Subsidiaries shall be in material default under any provision of any instrument
relating to any outstanding indebtedness; (iv) neither the Company nor any of
the Subsidiaries shall have issued any securities (other than the Securities or
underlying common stock from the exercise of options or warrants) or declared or
paid any dividend or made any distribution in respect of its capital stock of
any class and there has not been any change in the capital stock, or any change
in the debt (long or short term) or liabilities or obligations (contingent or
otherwise) of the Company or any of the Subsidiaries, except (x) in connection
with the acquisition of assets of the Company through purchase money financing
and financing related to timeshare sales which is secured by timeshare
receivables, (y) for debt incurred to finance capital improvements to existing
properties not to exceed $3,000,000 outstanding and (z) for debt for working
capital not to exceed $1,500,000 outstanding; (v) no material amount of the
assets of the Company or any of the Subsidiaries shall have been pledged or
mortgaged other than in the ordinary course of the Company's business, except as
set forth in the Registration Statement and Prospectus and except (x) in
connection with the acquisition of assets of the Company through purchase money
financing and financing related to timeshare sales which is secured by timeshare
receivables, (y) for debt incurred to finance capital improvements to existing
properties not to exceed $3,000,000 outstanding and (z) for debt for working
capital not to exceed $1,500,000 outstanding; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or, to the best of the
Company's knowledge, threatened against the Company or any of the Subsidiaries,
or affecting any of their respective properties or businesses, before or by any
court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may materially
adversely affect the business, operations, prospects, financial condition or
income of the Company and the Subsidiaries taken as a whole, except as set forth
in the Registration Statement and Prospectus; and (vii) no stop order shall have
been issued under the Act and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission or any state regulatory authority.
(g) At each of the Closing Date and each Option Closing Date,
if any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has examined
the Registration Statement, the Prospectus, this Agreement and the Indenture,
and that:
(i) the representations and warranties of the Company
in this Agreement and the Indenture are true and correct, as if made on and as
of the Closing Date or such Option Closing Date, as the case may be, and the
Company has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement and the Indenture on its part to be
performed or satisfied at or prior to the Closing Date or such Option Closing
Date, as the case may be;
(ii) no stop order suspending the effectiveness of
the Registration Statement or any part thereof or the qualification of the
Trustee has been issued, and no proceedings for that purpose have been
instituted or are pending or, to the best of each of such person's knowledge
after due inquiry, are contemplated or threatened under the Act;
(iii) the Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all statements
and information required to be included therein, and none of the Registration
Statement, the Prospectus or any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and none of the Preliminary Prospectus or any supplement thereto included any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; and
(iv) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus: (a)
neither the Company nor any of the Subsidiaries has incurred up to and including
the Closing Date or the Option Closing Date, as the case may be, other than in
the ordinary course of its business, any material liabilities or obligations,
direct or contingent (except as otherwise contemplated in subclause (d) of this
clause (iv)); (b) neither the Company nor any of the Subsidiaries has paid or
declared any dividends or other distributions on its capital stock; (c) neither
the Company nor any of the Subsidiaries has entered into any material
transactions not in the ordinary course of business (except as otherwise
contemplated in subclause (d) of this clause (iv)); (d) there has not been any
material change in the capital stock or long-term debt or any increase in the
short-term borrowings (other than any increase in the short-term borrowings in
the ordinary course of business) of the Company or any of the Subsidiaries
(except for (x) financing in connection with the acquisition of assets of the
Company through purchase money financing and financing related to timeshare
sales which is secured by timeshare receivables, (y) debt incurred to finance
capital improvements to existing properties not to exceed $3,000,000 outstanding
and (z) debt for working capital not to exceed $1,500,000 outstanding); (e)
neither the Company nor any of the Subsidiaries has sustained any material loss
or damage to its property or assets, whether or not insured; (f) there is no
material litigation which is pending or, to the best of the Company's knowledge,
threatened against the Company, any of the Subsidiaries or any affiliated party
of any of the foregoing which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (g) there has occurred
no event required to be set forth in an amended or supplemented Prospectus which
has not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(h) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriters and Underwriters' Counsel, from Deloitte & Touche:
(i) confirming that they are independent certified
public accountants with respect to the Company within the meaning of the Act and
the Exchange Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the
consolidated financial statements and supporting schedules of the Company and
the Subsidiaries, as applicable, included in the Registration Statement comply
as to form in all material respects with the applicable accounting requirements
of the Act and the Exchange Act and the Rules and Regulations thereunder;
(iii) and stating that, on the basis of a limited
review which included a reading of the latest available unaudited interim
consolidated financial statements of the Company and the Subsidiaries, as
applicable, (with an indication of the date of the latest available unaudited
interim consolidated financial statements of the Company and the Subsidiaries,
as applicable), a reading of the latest available minutes of the stockholders
and board of directors and the various committees of the board of directors of
each of the Company and the Subsidiaries, consultations with officers and other
employees of each of the Company and the Subsidiaries responsible for financial
and accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
consolidated financial statements and supporting schedules of the Company and
the Subsidiaries, as applicable, included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the Rules and Regulations or
are not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the audited
consolidated financial statements and supporting schedules of the Company and
the Subsidiaries, as applicable, included in the Registration Statement, (B) at
a specified date not more than five days prior to the later of the date of this
Agreement or the effective date of the Registration Statement, there has been
any change in the capital stock or long-term debt of the Company or any of the
Subsidiaries, or any decrease in the stockholders' equity or net current assets
or net assets of the Company, as compared with amounts shown in the __________,
199_ balance sheet included in the Registration Statement other than as set
forth in or contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or decrease, and (C)
during the period from __________, 1995 to a specified date not more than five
days prior to the later of the date of this Agreement or the effective date of
the Registration Statement, there was any decrease in net revenues, net earnings
or net earnings per common share of the Company and its consolidated
Subsidiaries or any of the Company's unconsolidated Subsidiaries, in each case
as compared with the corresponding period beginning __________, 1994, other than
as set forth in or contemplated by the Registration Statement, or, if there was
any such decrease, setting forth the amount of such decrease;
(iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements
and/or other financial information pertaining to the Company and the
Subsidiaries set forth in the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may be derived from
the general accounting records, including work sheets, of the Company and/or the
Subsidiaries and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures need not constitute
an examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
(v) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriters may reasonably request.
(j) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from Deloitte & Touche a letter, dated as
of the Closing Date or such Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five days prior to the Closing Date or such Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of subsection (i) of this
Section 6 with respect to certain amounts, percentages and financial information
as specified by the Underwriters and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
(k) On each of the Closing Date and each Option Closing Date,
if any, there shall have been duly tendered to the Underwriters for the several
Underwriters' accounts the appropriate number of Securities.
(l) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriters pursuant to Section 4(e) hereof
shall have been issued on either the Closing Date or the relevant Option Closing
Date, if any, and no proceedings for that purpose shall have been instituted or
shall be contemplated.
If any condition to the Underwriters' obligations hereunder to
be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Underwriters may terminate
this Agreement or, if the Underwriters so elect, they may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment. In the event the Underwriters so elect to terminate, the
Underwriters shall have no recourse against the Company for expenses except to
retain the $50,000 paid to the Underwriters pursuant to Section 5(b) hereof.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this Section 7, "Underwriters" shall include
the officers, directors, partners, employees, agents and counsel of the
Underwriters), and each person, if any, who controls an Underwriters
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions, proceedings, suits and
litigation in respect thereof), whatsoever (including but not limited to any and
all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any action, suit, proceeding or litigation, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriters or any such controlling person may become subject, under the Act,
the Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained (i) in the Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
amended and supplemented), (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
the Company issued or issuable upon conversion of the Securities or (iii) in any
application or other document or written communication (in this Section 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Securities or such securities under the securities laws thereof or filed with
the Commission, any state regulatory authority, NASDAQ or any securities
exchange or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriters by or on behalf of the Underwriters
expressly for use in the Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment thereof or supplement thereto, or in any
application, as the case may be. The Company acknowledges that the statements
set forth under "UNDERWRITING" and the stabilization legend in the Preliminary
Prospectus and the Prospectus constitute the only written information furnished
to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in the Preliminary Prospectus, the Registration
Statement, the Prospectus or any application. The indemnity agreement in this
subsection (a) shall be in addition to and not duplicative of any liability
which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the Registration Statement, and each other person, if any, who controls the
Company within the meaning of the Act, to the same extent as the foregoing
indemnity from the Company to the Underwriters but only with respect to
statements or omissions, if any, made in the Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment thereof or supplement
thereto, or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to such
Underwriters by such Underwriters expressly for use in such Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment
thereof or supplement thereto, or in any such application, provided that such
written information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or the Prospectus. The Company
acknowledges that the statements set forth under "UNDERWRITING" and the
stabilization legend in the Preliminary Prospectus and the Prospectus constitute
the only information furnished in writing by or on behalf of any of the
Underwriters expressly for use in the Preliminary Prospectus, the Registration
Statement, the Prospectus or any application. The Underwriters shall also
indemnify the Company for any losses, damages, expenses or liabilities arising
from sales activities of the Underwriters in contravention of the Rules and
Regulations and the NASD rules. The indemnity agreement in this subsection (b)
shall be in addition to and not duplicative of any liability which the
Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in a material respect by such failure or from any liability
which it may have otherwise). In case any such action, suit or proceeding is
brought against any indemnified party, and it notifies an indemnifying party or
parties of the commencement thereof, the indemnifying party or parties will be
entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action at the
expense of the indemnifying party, (ii) the indemnifying parties shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such action within a reasonable time after notice of
commencement of the action or (iii) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent, provided that such
consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, suits, proceedings or litigation in respect thereof) (A) in such
proportion as is appropriate to reflect the relative benefits received by each
of the contributing parties, on the one hand, and the party to be indemnified on
the other hand, from the offering of the Securities or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified, on the other hand, in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is a contributing party
and an Underwriter is the indemnified party, the relative benefits received by
the Company, on the one hand, and such Underwriter, on the other, shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities (before deducting expenses) bear to the total underwriting
discounts received by such Underwriters hereunder, in each case as set forth in
the table on the Cover Page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by an
Underwriter, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions, suits, proceedings or
litigation in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating, preparing or defending any
such action, claim, suit, proceeding or litigation. An Underwriter shall not be
required to contribute any amount in excess of the underwriting discount
applicable to the securities purchased by such Underwriter hereunder. No person
guilty of fraudulent misrepresentation (within the meaning of Section 12(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 7, each person,
if any, who controls the Company within the meaning of the Act, each officer of
the Company who has signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subsection (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit, proceeding
or litigation against such party in respect to which a claim for contribution
may be made against another party or parties under this subsection (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subsection (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto
shall be deemed to be representations, warranties and agreements at the Closing
Date and each Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the respective indemnity agreements
contained in Section 7 hereof shall remain operative and in full force and
effect as of such dates, regardless of any investigation made by or on behalf of
the Underwriters, the Company, any of the Subsidiaries or any controlling
person, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriters.
9. Effective Date.
(a) This Agreement shall become effective at 10:00 a.m., New
York City time, on the next full business day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as the
Underwriters, in their discretion, shall release the Securities for the sale to
the public, provided that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Underwriters of telegrams to securities
dealers releasing the Securities for offering or the release by the Underwriters
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Underwriters shall have the right to terminate this Agreement (i) if any
domestic or international event or act or occurrence has or in the Underwriters'
reasonable opinion will in the immediate future have a material adverse effect
on the Company or the securities market in general or (ii) if trading on the New
York Stock Exchange, the American Stock Exchange or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities shall have been
required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or (iii) if
the United States shall have become involved in a war or major hostilities, or
there shall have been an escalation in an existing war or major hostilities, or
a national emergency shall have been declared in the United States; or (iv) if a
banking moratorium has been declared by a state or federal authority; or (v) if
a moratorium in foreign exchange trading has been declared; or (vi) if the
Company or any of the Subsidiaries shall have sustained a loss material or
substantial to the Company or any of the Subsidiaries by fire, flood, accident,
hurricane, earthquake, theft, sabotage or other calamity or malicious act which,
whether or not such loss shall have been insured, will, in the Underwriters'
reasonable opinion, make it inadvisable to proceed with the delivery of the
Securities; or (vii) if there shall have been such a material adverse change in
the conditions or prospects of the Company or any of the Subsidiaries, or such
material adverse change in the general market, political or economic conditions
in the United States or elsewhere, as in the Underwriters' judgment would make
it inadvisable to proceed with the offering, sale and/or delivery of the
Securities; or (viii) if Xxxxxx X. Xxxxxxx shall no longer serve the Company in
his present capacity.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 4(a), Section 10(a)(i), 10(a)(ii),
Section 10(a)(iii), Section 10(a)(iv), Section 10(a)(v), Section 10(a)(vi),
Section 10(a)(vii), Section 10(a)(viii) or Section 11 or if this Agreement shall
not be carried out within the time specified herein, or any extension thereof
granted to the Underwriters, by reason of any failure on the part of the Company
to perform any material undertaking or satisfy any material condition of this
Agreement by it to be performed or satisfied (including without limitation,
pursuant to Section 6, Section 10(a) or Section 11), then the Underwriters shall
be entitled to retain as sole recourse against the Company all amounts paid
under Section 5(b) hereof. In addition, the Company shall remain liable for all
reasonable Blue Sky counsel fees of the Company and expenses and Blue Sky filing
fees of the Company. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 6, 10 and 11 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
(c) In the event the Company has been advised by the SEC that
no further comments shall be forthcoming, the Underwriters may choose to
postpone the effective date for up to seven calendar days thereafter upon the
Company's consent.
11. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may, at the Underwriters' option, by notice from the Underwriters to the
Company, terminate the Underwriters' obligation to purchase Option Securities
from the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to Sections 5, 7 and 10 hereof. No
action taken pursuant to this Section 11 shall relieve the Company from
liability, if any, in respect of such default.
12. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be given in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Underwriters as follows:
Brookstreet Securities Corporation
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
Director of Investment Banking
With a copy to:
Xxxxxx, Xxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
Notices to the Company shall be directed to the Company as
follows:
ILX Incorporated
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.,
Chairman and Chief Executive Officer
With a copy to:
Xxxxxxx & Xxxxxxx, P.C.
0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
13. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from any Underwriters shall be deemed to be a successor
by reason merely of such purchase.
14. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without giving
effect to choice of law or conflict of laws principles.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
16. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing signed by the
Underwriters and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
ILX INCORPORATED
By _______________________________
Xxxxxx X. Xxxxxxx
Chairman of the Board
and Chief Executive Officer
Confirmed and accepted as of the date first above written.
BROOKSTREET SECURITIES CORPORATION
for itself and as Representative of the several
Underwriters named in Schedule I hereto.
By __________________________________
Xxxxxx X. Xxxxxxx,
Director of Investment Banking
SCHEDULE I
Total Aggregate
Total Aggregate Principal Amount of
Principal Amount of Option Securities
Firm Securities to be to be Purchased if
Underwriter Purchased Maximum Option Exercised
----------- --------------------- ------------------------
Brookstreet Securities
Corporation $__________ $__________
TOTAL $3,000,000 $450,000
========== ========
EXHIBIT A
Subsidiaries of ILX Incorporated
Percentage of Capital Stock
Name State in which Incorporated Owned by ILX Incorporated
---- --------------------------- ---------------------------
Corporate Entities:
Genesis Investment Group, Inc. Arizona 100%
Harbour Southwest Development, Inc.(1) Arizona 100%
Laveen Properties, Inc.(1) Arizona 100%
Pilot Service Corp.(1) Arizona 100%
Golden Eagle Realty, Inc. Colorado 100%
Golden Eagle Resort, Inc. Arizona 100%
ILX Florida, Inc. Arizona 100%
Southern Vacations, Inc.(2) Florida 100%
ILE Sedona Incorporated Arizona 100%
Red Rock Collection Incorporated Arizona 100%
Red Rock Worldwide Incorporated Arizona 100%
SXI Health Institute Incorporated Arizona 100%
Varsity Clubs of America Incorporated Arizona 100%
VCA Iowa Incorporated(3) Arizona 100%
VCA Management Incorporated(3) Arizona 100%
VCA South Bend Incorporated(3) Arizona 100%
VCA Tucson Incorporated(3) Arizona 100%
Syracuse Project Incorporated(1) Arizona 100%
Partnerships/Joint Ventures:
Los Abrigados Partners Limited Partnership Arizona (4)
Orangemen Club Limited Partnership New York (6)
Name State in which Incorporated
---- ---------------------------
Non-Profit Entities (5):
-----------------------
Golden Eagle Resort Condominium Colorado
Association, Inc.
Xxxx'x Ranch Owners Association Arizona
Sedona Vacation Club Incorporated Arizona
Varsity Clubs of America -- Iowa Arizona
Varsity Clubs of America -- Xxxxxx Arizona
Varsity Clubs of America -- South Bend Chapter Arizona
(1) Subsidiaries of Genesis Investment Group, Inc.
(2) Subsidiary of ILX Florida, Inc.
(3) Subsidiaries of Varsity Clubs of America Incorporated
(4) The general partner of the partnership is ILE Sedona Incorporated,
which has a 78.5% interest in the partnership, which is pledged to a
third party to secure financing. The limited partners, which include
controlling persons of ILX Incorporated, have a 21.5% interest in the
partnership.
(5) Non-profit entities without capital stock.
(6) The general partner is Syracuse Project Incorporated, which has an 80%
interest in the partnership.
EXHIBIT B
ILX INCORPORATED
(An Arizona Corporation)
Underwriter's Warrant ("Warrant") to Purchase
Shares of Common Stock
NEITHER THIS WARRANT NOR THE COMMON STOCK UNDERLYING THIS WARRANT HAVE BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE. CONSEQUENTLY, NEITHER THIS WARRANT NOR THE COMMON STOCK UNDERLYING THIS
WARRANT MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE APPLICABLE
SECURITY, OR AN EXEMPTION THEREFROM, ACCOMPANIED BY AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
1. Grant of Warrant. For value received in connection with the offering
(the "Offering") of its 10% Convertible Adjustable Secured Bonds due 2000 (the
"Bonds"), ILX Incorporated, an Arizona corporation ("ILX" or the "Company"),
hereby grants to Brookstreet Securities Corporation, a California corporation,
or its registered assigns ("Holder"), the right to purchase from the Company
("Warrant") 100,000 shares of ILX Common Stock (the "Shares"), no par value,
("Common Stock") upon the Closing Date (as defined in Section 2(c) of the
Underwriting Agreement, dated ______________, 1995, between the Company and
Brookstreet Securities Corporation, as representative of the several
Underwriters named in Schedule I thereto) of the Offering on the terms and
conditions set forth herein. The Exercise Price for such Warrant shall be [$3.60
per share]. The Exercise Price is subject to adjustment as provided in Section 5
below.
2. Right and Manner of Exercise. This Warrant shall be exercisable at
any time from and after the first anniversary of the date hereof and ending at
5:00 P.M. California time on the fifth anniversary of the date hereof (the
"Exercise Period"). The Holder may elect to exercise this Warrant anytime during
the Exercise Period as to any or all of the Shares by delivering written notice,
or successive written notices, of exercise to the Company (as provided in
Section 11) in the form attached hereto as Exhibit A accompanied by payment of
an amount equal to the product of (i) the number of Shares being purchased and
(ii) the Exercise Price, as each may have been adjusted pursuant to the terms of
this Agreement.
3. Issuance of Shares and New Warrant. If the purchase rights evidenced
by this Warrant are exercised in whole or in part, one or more certificates for
the Shares so purchased shall be issued at the Company's expense as soon as
practicable thereafter to the Holder exercising such rights. Such Holder shall
also be issued at such time at the Company's expense a new Warrant on the same
terms and conditions as this Warrant, but representing the number of Shares (if
any) for which the purchase rights under this Warrant remain unexercised.
4. Privilege of Stock Ownership. The Holder shall for all purposes be
deemed to have become the holder of record of Shares issued upon an exercise of
this Warrant on, and the certificate evidencing such Shares shall be dated, the
date upon which the Holder presents to the Company each of notice of an intent
to exercise this Warrant pursuant to Section 2 and payment of the Exercise
Price. Holder shall receive good and marketable title to all Shares that Holder
purchases and the Company delivers upon the exercise of any or all of the
Warrants. Prior to exercise of this Warrant, the Holder shall not be entitled to
any rights as a shareholder of the Company, including (without limitation) the
right to vote, receive dividends or other distributions, exercise preemptive
rights or be notified of shareholder meetings, and such Holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company except as otherwise provided herein.
5. Reservation and Availability of Shares. The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued shares of Stock for the purpose of
enabling it to satisfy any obligation to issue Shares upon exercise of this
Warrant, the full number of Shares deliverable upon the exercise or conversion
of the entire outstanding amount of this Warrant. Before taking any action which
would cause an adjustment pursuant to Section 6 reducing the Exercise Price, the
Company will take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally issue fully paid
and non-assessable Shares at the Exercise Price as so adjusted. The Company
covenants that all Shares which may be issued upon exercise of this Warrant
will, upon issue, be fully paid and non-assessable, free and clear of all voting
and other trust arrangements, liens, encumbrances, equities and claims
whatsoever, and the Company shall have paid all taxes, if any, in respect of the
issuance thereof.
6. Adjustment of Exercise Price/Anti-Dilution. The Exercise Price and
the number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of the
events enumerated in this Section 6.
6.1. Stock Splits and Combinations. If the Company shall at
any time subdivide or combine its outstanding Common Stock, or fix a record date
for payment of a dividend in Common Stock or other securities of the Company
exercisable, convertible or exchangeable for Common Stock (in which latter event
the maximum number of shares of Common Stock issuable upon the exercise,
conversion or exchange of such securities shall be deemed to have been
distributed), after that subdivision, combination or dividend, the number of
Shares subject to purchase shall be adjusted to that number of Shares which is
determined by (A) multiplying the number of shares of Common Stock purchasable
immediately prior to such adjustment by the Exercise Price in effect immediately
prior to such adjustment, and then (B) dividing that product by the Exercise
Price in effect immediately after such adjustment. If the Company shall at any
time subdivide the outstanding shares of Common Stock or fix a record date for
payment of a dividend in Common Stock or other securities exercisable,
convertible or exchangeable into Common Stock, the Exercise Price then in effect
immediately before that subdivision or dividend shall be proportionately
decreased, and, if the Company shall at any time combine the outstanding shares
of Common Stock, then the Exercise Price in effect immediately before that
combination shall be proportionately increased. Any adjustment under this
Section 6.1 shall become effective at the close of business on the date the
subdivision or combination becomes effective or the dividend is distributed.
6.2 Reclassification, Exchange and Substitution. If the Shares
issuable upon exercise of the Warrant shall be changed into the same or a
different number of shares of any other class or classes of securities, whether
by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination or payment of dividend of securities provided for
above), the Holder of this Warrant shall, on its exercise, be entitled to
purchase for the same aggregate consideration, in lieu of the Shares which the
Holder would have become entitled to purchase but for such change, a number of
shares of such other class or classes of securities which such Holder would have
been entitled to receive as the holder of that number of Shares subject to
purchase by the Holder on exercise of this Warrant immediately before that
change.
6.3 Reorganizations, Mergers, Consolidations or Sales of
Assets. If at any time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, payment of dividend,
reclassification or exchange of Common Stock provided for above), or merger or
consolidation of the Company with or into another corporation, or the sale of
the Company's properties and assets as, or substantially as, an entirety to any
other person, then, as a part of such reorganization, merger, consolidation or
sale, lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Exercise Price then in
effect, the number of Shares or other securities or property of the Company, or
of the successor corporation resulting from such merger or consolidation, to
which a Holder of the Shares issuable upon exercise of this Warrant would have
been entitled in such capital reorganization, merger, or consolidation or sale
if this Warrant had been exercised immediately before that capital
reorganization, merger, consolidation, or sale. In any such case, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of the Holder of this Warrant after the
reorganization, merger, consolidation, or sale such that the provisions of this
Warrant (including adjustment of the Exercise Price then in effect and number
and kind of securities purchasable upon exercise of this Warrant) shall be
applicable after that event in relation to any securities purchasable after that
event upon exercise of this Warrant.
6.4 Minimum Exercise Price Adjustment. No adjustment in the
Exercise Price shall be required unless such adjustment would require in
increase or decrease of at least one-half of one percent (0.5%) or more of the
Exercise Price, provided, however, that any adjustments which by reason of this
Subsection 6.4 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section 6
shall be made to the nearest cent or to the nearest one-hundredth of a Share as
the case may be.
7. Notices to Holder. Upon any adjustment of the Exercise Price
pursuant to Section 6, the Company within 20 days thereafter shall cause to be
given to the Holder pursuant to Section 11 hereof written notice of such
adjustment, which notice shall set forth a brief statement of the facts
requiring such adjustment and setting forth the computation by which such
adjustment was made. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 7.
In the event of any of the following:
7.1 the Company shall authorize the issuance to its holders of
shares of Common Stock of rights or warrants to subscribe for or purchase shares
of Common Stock or of any other subscription rights or warrants; or
7.2 the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends not exceeding [$ ____] per share of Common Stock
payable during any three-month period or distributions or dividends payable in
shares of Common Stock); or
7.3 any consolidation or merger to which the Company is a
party and for which approval of any shareholder of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company as, or
substantially as, an entirety, or of any reclassification or change of
outstanding shares of Common Stock issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination); or
7.4 the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
7.5 the Company proposes to take any action (other than
actions of the character described in Subsection 6.1 except as required under
Subsection 7.3 above) which would require an adjustment of the Exercise Price
pursuant to Section 6;
then the Company shall cause to be given to the Holder, at least 20 days (or ten
days in any case specified in Subsections 7.1 or 7.2 above) prior to the
applicable record date hereinafter specified, a written notice stating (i) the
date as of which the holders of record of shares of Common Stock to be entitled
to receive any such rights, warrants, or distribution are to be determined, or
(ii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation, or winding up is expected to become effective, and the
date as of which it is that holders of record of shares of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation, or winding up. The failure to
give the notice required by this Section 7 or any defect therein shall not
affect the legality or validity of any distribution, right, warrant,
consolidation, merger, conveyance, merger, dissolution, liquidation, or winding
up, or the vote upon any such action.
8. Transfers. The Holder acknowledges and agrees that this Warrant and
the Common Stock underlying this Warrant may not be sold, pledged, assigned,
transferred or otherwise hypothecated without registration under the Act except
in certain limited circumstances where an exemption from registration exists,
supported by an opinion of counsel satisfactory to the Company and its counsel
that registration is not required thereunder. The Warrants are non-transferable
(whether by sale, transfer, assignment or hypothecation) except for (i)
transfers to officers of Brookstreet Securities Corporation who are also
shareholders of Brookstreet Securities Corporation, (ii) transfers occurring by
operation of law.
9. Fractional Shares. No fractional shares of Common Stock shall be
issued in connection with any exercise of this Warrant. In lieu of the issuance
of such fractional share, the Company shall make a cash payment equal to the
then fair market value of such fractional share as determined in good faith by
the Company's Board of Directors.
10. Successors and Assign. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon the Company and the Holder
hereof and their respective successors and assigns.
11. Notices. All notices, requests, demands and other communications
(collectively, "Notices") under this Warrant shall be in writing and shall be
deemed to have been duly given on the date of service if served personally on
the party to whom Notice is to be given, or on the third business day after the
date of mailing if mailed to the party to whom Notice is to be given, by first
class mail, registered to the Holder, at his address as shown in the Company
records; and if to the Company, at its principal office. Any party may change
its address for purposes of this Section by giving the other party written
Notice of the new address in the manner set forth above.
12. Registration Rights. The Holder shall have registration rights with
respect to the Shares as set forth in Appendix I attached hereto.
13. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Arizona without regard to principles of
conflicts of laws.
14. Loss or Mutilation of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company regarding the loss, theft, mutilation or destruction
of this Warrant and upon delivery of appropriate indemnification with respect
thereto or upon surrender or cancellation of the mutilated Warrant, the Company
will make and deliver to the Holder a new Warrant of like tenor.
ILX INCORPORATED
By_________________________________
, President
Attest:
__________________________________
, Secretary
ASSIGNMENT
FOR VALUE RECEIVED, __________________________________________________ hereby
sell(s), assign(s), and transfer(s) unto ____________________________________,
of _______________________, the right to purchase Shares evidenced by the within
Warrant, and does hereby irrevocable constitute and appoint
______________________________ to transfer such right on the books of the
Company, with full power of substitution.
DATED: ____________________, 199_
---------------------------------------------
SIGNATURE
-------------------------------------------------------------------------------
NOTICE:
This Warrant, or the Common Stock underlying the Warrant, have not been
registered under the Securities Act of 1933 (the "Act") or any states'
securities laws (the "laws") and may not be sold, pledged, transferred or
otherwise disposed of in the absence of an effective registration statement
covering these securities under the Act or laws, or an available exemption
therefrom, accompanied by an opinion of counsel satisfactory to the Company and
its counsel that registration is not required thereunder.
The signature to this Assignment must correspond with the name as written upon
the face of the within Warrant, in every particular, without alteration or
enlargement, or any change whatsoever.
EXHIBIT A
EXERCISE NOTICE
ILX INCORPORATED
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Gentlemen:
____________________________________________________(the "Undersigned")
(Type or Print Name)
hereby elects to purchase, pursuant to the provisions of the ILX Incorporated
Underwriter's Warrant dated _________, 1995 held by the undersigned, __________
shares of the Common Stock of ILX Incorporated.
As an inducement to your acceptance hereunder, the undersigned
certifies that the Common Stock is being purchased for the undersigned's own
account, for investment purposed, and not with a view toward a public
distribution in violation of the registration requirements of the Securities Act
of 1933, as amended.
Payment of the purchase price of $__________ per share of Common Stock
in U.S. funds required under such Warrant accompanies this subscription.
DATED: _________________________, 199_
Company: __________________________________
Signature: __________________________________
Address: __________________________________
__________________________________
Appendix I
Registration Rights
This Appendix I ("Appendix") is attached to an Underwriter's Warrant
("Warrant") of ILX Incorporated, an Arizona Corporation (the "Company"), issued
in favor of Brookstreet Securities Corporation, a California Corporation (the
"Holder").
1. Definitions. For purposes of this Appendix:
1.1 The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933, as
amended (the "1933 Act"), and the declaration or ordering of effectiveness of
such registration statement or document by the Securities and Exchange
Commission ("SEC");
1.2 The term "Registerable Securities" means any common stock
of the Company ("Common Stock") issued upon an exercise of the Warrant;
1.3 The number of shares of "Registerable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to any unexercised portion of the Warrant which are, Registerable
Securities;
1.4 The term "Holder" means any person owning or having the
right to Registerable Securities or any assignee thereof in accordance with the
provisions of Section 11 of this Appendix; and
1.5 The term "Applicable Form" means such registration form
under the 1933 Act as in effect on the date hereof or any registration form
under the Act subsequently adopted by the Securities and Exchange Commission
("SEC") that may be used by the Company for the registration of its securities.
1.6 The term "Offering" means any offering of Common Stock of
the Company pursuant to a registration statement filed with the SEC under the
1933 Act.
1.7 The term "Indenture" means that certain Indenture dated as
_______ __, 1995 between the Company and __________________________, as Trustee.
1.8 All other capitalized terms contained herein shall have
the meaning ascribed to them in the attached Warrant.
2. Registration of Registerable Securities.
2.1 If the Company intends to conduct an Offering on or before
the seventh anniversary of the date of the Indenture (including for the purpose
of a registration effected by the Company for shareholders other than the
Holder) of any of its Common Stock or other securities under the 1933 Act in
connection with the public offering of such securities solely for cash (other
than a registration relating either to (i) the sale of securities to
participants in a Company stock option, stock purchase or similar plan, or (ii)
a registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registerable Securities), the Company shall, at such
time, promptly give the Holder written notice of such proposed registration
pursuant to Section 11 of the Warrant. Upon the written request of Brookstreet
Securities Corporation only, regardless of whether it has assigned any portion
of the Warrants, given to the Company within 20 days after deemed receipt of
such notice from the Company, the Company shall, subject to the provisions of
Section 6 of this Appendix, cause to be registered under the 1933 Act not less
than all of the Registerable Securities. The Company shall be entitled to
postpone the inclusion of the Shares in the Registration Statement for a
reasonable time if the underwriter in the Offering reasonably determines that
registration of the Shares would render the Offering impracticable or
infeasible.
2.2 If (a) the Company has not conducted an Offering on or
before the seventh anniversary of the Indenture or (b) the Company has conducted
an Offering on or before the seventh anniversary of the Indenture but,
notwithstanding the request of the Holder in accordance with Section 2.1, the
Registerable Shares were not registered, then for a period of one (1) year from
such date, the Holder may, by written notice to the Company pursuant to Section
11 of the Warrant, demand that the Company file a registration statement
covering not less than all of the Holder's Registerable Securities on such form
as shall be appropriate under the 1933 Act for the sale of such Registerable
Securities. The Company shall file the applicable registration statement within
60 days of receipt of such notice (or such longer period as may be agreed to by
Holder).
2.3 The registration rights granted pursuant to this Section 2
may not be exercised more than once (provided, however, that any request made
pursuant to this Section 2 which does not result in the declaration of
effectiveness of a registration statement covering the Registerable Securities
owned by the Holder, whether as a result of the withdrawal of the registration
statement by the Company, through other action or inaction of the Company, a
postponement by the underwriters in the Offering or otherwise, shall not
constitute the exercise of Holder's rights pursuant to this Section 2 and such
rights shall remain intact pursuant to Section 2.1 or Section 2.2, as
applicable).
3. Obligations of the Company. Whenever required under this Appendix to
effect the registration of any Registerable Securities, the Company shall, as
expeditiously as reasonably possible:
3.1 Prepare and file with the SEC a registration statement
with respect to such Registerable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for up to 120 days;
3.2 Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement;
3.3 Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as the Holder may
reasonably request in order to facilitate the disposition of Registerable
Securities owned by the Holder;
3.4 Use its best efforts to register and qualify the
securities covered by such registration statement (i) under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holder and (ii) with (or obtain the approval of) such other
governmental agencies or authorities as may be necessary by virtue of the nature
and business of the Company to enable the Holder or any underwriter to
consummate the disposition of Registerable Securities so registered; provided
that the Company shall not be required in connection with or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such state or jurisdictions;
3.5 In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering, including, but
not limited to, making such representations and warranties to such underwriter
and using best efforts to cause Company counsel to render such opinions to such
underwriter as such underwriter may reasonably request;
3.6 Notify the Holder of Registerable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an 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 the light of the circumstances then existing, and
promptly prepare and file with the SEC an appropriate amendment or supplement in
form satisfactory to the Holder;
3.7 Furnish, at the request of the Holder, if such Holder has
requested registration of Registerable Securities pursuant to this Appendix, on
the date that such Registerable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Appendix if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of counsel representing the Company for the purpose of such registration,
in form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holder
requesting registration of Registerable Securities, and (ii) a letter dated such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holder requesting registration of Registerable
Securities;
3.8 Promptly notify the Holder (i) when the registration
statement or any amendment to the registration statement or the prospectus used
in connection therewith may be filed, and with respect to the registration
statement and any post-effective amendment thereto, when the same has become
effective, (ii) of any request by the SEC for amendments or supplements to the
registration statement or prospectus or for additional information, (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or the prospectus or the initiation of any proceedings
for that purpose, and (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registerable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceedings for that purpose;
3.9 Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at the
earliest possible moment;
3.10 Furnish to counsel for the Holders of Registerable
Securities without charge, at least one copy of the registration statement and
any post-effective amendment thereto, including financial statements and
schedules and all documents incorporated therein by reference; and
3.11 Make generally available to Holder as soon as
practicable, but not later than the first day of the eighteenth full calendar
month following the effective date of the registration statement, an earnings
statement (which need not be certified by independent public or independent
certified public accountants unless required by the 1933 Act or the rules and
regulations promulgated thereunder, but which shall satisfy the provisions of
Section 11(a) of the 1933 Act) covering a period of at least twelve months
beginning after the effective date of the registration statement.
4. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Appendix with
respect to the Registerable Securities of the Holder that such Holder shall
furnish to the Company such information regarding itself, and the Registerable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of Holder's Registerable
Securities.
5. Expenses of Registration. The Company shall bear and pay expenses
incurred in connection with any registration, filing or qualification of
Registerable Securities with respect to registration pursuant to Section 2 or
Section 10 of this Appendix for the Holder (which right may be assigned as
provided in Section 11 of this Appendix), including (without limitation) all
registration, filing, and qualification fees (including those fees with respect
to filings required to be made with the NASD and fees and expenses of compliance
with state securities or blue sky laws), printers and accounting fees relating
or apportionable thereto, but excluding the fees and disbursements of counsel
for the Holder and underwriting discounts and commissions relating to
Registerable Securities.
6. Underwriting Requirements. In connection with any Offering pursuant
to Section 2.1 hereof, involving an underwriting of shares being issued by the
Company, the Company shall not be required under Section 2 of this Appendix to
include any of the Holders' Registerable Securities in such underwriting unless
the Holder accepts the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it, and then only in such quantity as
will not, in the opinion of the underwriters, jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registerable Securities, requested by Holders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registerable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling Holders according to the
total amount of securities entitled to be included therein owned by each selling
Holder or in such other proportion as shall mutually be agreed to by such
selling Holders). If all of the Holders' Registerable Securities have not been
registered for sale due to the provisions of this Section 6, the provisions of
Section 2.3 shall control.
7. Agreements by Holder. Whenever required under this Appendix to
effect the registration of any Registerable Securities, the Holder shall, as
expeditiously as reasonably possible:
7.1 Furnish the Company all material information requested by
the Company concerning Holder and Xxxxxx's holdings of securities of the Company
and the proposed method of sale or other disposition of the Registerable
Securities and such other information and undertakings as shall be reasonably
required in connection with the preparation and filing of any such registration
statement covering all or part of the Registerable Securities and in order to
ensure full compliance with the 1933 Act;
7.2 Cooperate in good faith with the Company and its
underwriters, if any, in connection with such registration, including performing
its obligations under any underwriting agreement and placing the Registerable
Securities to be included in such registrations statement in escrow or custody
to facilitate the sale and distribution thereof.
8. Indemnification. In the event any Registerable Securities are
included in a registration statement under this Appendix:
8.l To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, any underwriter (as defined in the 1933 Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "1934 Act"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the 1933 Act, the 1934
Act or other federal or state laws, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"); (i) any untrue statement of a material fact by the Company or
alleged untrue statement of a material fact contained in such registration
statement, including prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission by the
Company to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the 1933 Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the 1933 Act, the
1934 Act or any state securities law. The Company will pay as incurred to such
Holder, underwriter or controlling person, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 8.1 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld) nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Holder, underwriter or controlling person.
8.2 To the extent permitted by law, the Holder will indemnify
and hold harmless the Company, each of its directors, each officer who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the 1933 Act, any underwriter, any other holder selling
securities in such registration statement and any controlling person of any such
underwriter or other holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject
under the 1933 Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation in reliance upon and in conformity with
information furnished by the Holder expressly for use in connection with such
registration; and the Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 8.2 in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Section 8.2 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder (which consent shall not be unreasonably
withheld); provided, that in no event shall any indemnity under this Section 8.2
exceed the gross proceeds from the offering received by such Xxxxxx.
8.3 Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action (including any
governmental action), such indemnified party will if a claim in respect thereof
is to be made against any indemnifying party under this Section 8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties provided that an indemnified party shall have the
right to retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party other than under this Section 8.
8.4 If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liability or expenses referred to herein, then an indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Holder and any underwriter from
the offering at issue, or (ii) if the allocation by clause (i) above is not
permitted by law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, the Holder and any underwriter in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of the Company, the Holder and any underwriter shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, or with respect to the Holder or
any underwriter, information supplied by such person for inclusion in documents
relating to the offering and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 8.4, the Holder shall not be
obligated to contribute hereunder any amount which in the aggregate exceeds the
amount for which it would have been liable pursuant to Section 8.2 in respect of
such loss, claim, damage, liability or action had indemnification been available
under Section 8.2. The Company and the Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8.4 were determined by a
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to above in this Section 8.4.
The amount paid or payable by any party as a result of the losses, claims,
damages, liabilities and expenses referred to in this Section 8.4 shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
8.5 Any losses, claims, damages liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 shall remain
operative and in full force and effect regardless of (i) any investigation made
by or on behalf of any entity, (ii) acceptance of any securities and payment
therefor, and (iii) any termination of the provisions of this Appendix.
8.6 Notwithstanding any provisions in the Warrant or this
Appendix to the contrary, the benefits and obligations of this Section 8 shall
survive the termination of the Warrant and the termination of any registration
rights set forth in this Appendix.
9. Reports Under the 1934 Act. With a view to making available to the
Holder the benefits of Rule 144 promulgated under the 1933 Act ("Rule 144") and
any other rule or regulation of the SEC that may at any time permit the Holder
to sell securities of the Company to the public without registration or pursuant
to a registration on any Applicable Form, the Company agrees to:
9.1 make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after 90 days following the
closing by the Company of an Offering;
9.2 take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holder to utilize any applicable Form for the sale of Registerable Securities,
such action to be taken as soon as practicable after the end of the fiscal year
in which the Company closes an Offering;
9.3 file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
9.4 furnish to the Holder, so long as the Holder owns any
Registerable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after 90 days following the closing by the Company of an Offering), the
1933 Act and the 1934 Act (at any time after it has become subject to such
reporting requirements), or that it qualifies as a registrant whose securities
may be resold pursuant to the Applicable Form (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company filed with the SEC and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing the Holder of any rule or regulation of the SEC which permits the
selling of any securities without registration or pursuant to any Applicable
Form.
10. Assignment of Registration Rights. The rights to cause the Company
to register Registerable Securities pursuant to this Appendix may be assigned by
the Holder to a transferee or assignee of at least twenty-five percent (25%) of
the shares of such securities (appropriately adjusted to reflect any stock
dividend, distribution, stock split or combination, reclassification,
recapitalization or other similar event affecting the number of shares of Common
Stock after ________ __, 1995); provided the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; provided, further, that such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and the transfer otherwise complies with all applicable provisions
under applicable federal and state securities laws.
11. Amendment of Registration Rights. Any provision of this Appendix
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the Registerable
Securities then outstanding.
12. Termination of Registration Rights. No person shall be entitled to
exercise any right relating to registration provided for in this Appendix after
the seventh anniversary of the date of the Warrant.
BROOKSTREET SECURITIES CORPORATION
0000 XXXXXX XXXXX, XXXXX 000
XXXXXX, XXXXXXXXXX 00000
ILX Incorporated
10% Convertible Adjustable Secured Bonds Due 2000
--------------------
Agreement among Underwriters
_______________, 1995
To each of the Underwriters named in Schedule I
to the attached Underwriting Agreement
Ladies and Gentlemen:
This is to confirm that the Underwriters agree among themselves as
follows with reference to their proposed purchases severally of an aggregate of
$3,000,000 principal amount (the "Firm Securities"), and up to an aggregate of
$450,000 principal amount (the "Option Securities"), of 10% Convertible
Adjustable Secured Bonds due 2000 of ILX Incorporated (the "Company") (the Firm
Securities and the Option Securities being herein collectively called the
"Securities"):
1. Each Underwriter agrees that it will purchase, on the terms and
subject to the conditions of an underwriting agreement in substantially the form
attached hereto (the "Underwriting Agreement"), the principal amount of
Securities provided therein to be purchased by it (such principal amount of
Securities being herein referred to as the "underwriting obligation" of such
Underwriter). Each Underwriter authorizes us as its representatives to execute
and deliver the Underwriting Agreement and to exercise in our discretion all of
the authority vested in us by the Underwriting Agreement. We are also authorized
to take all action that we may believe desirable in carrying out the provisions
of the Underwriting Agreement and this Agreement, including authority to agree
to changes in those who are to be Underwriters and, with the consent of an
Underwriter, in the principal amount of Firm Securities and Option Securities to
be set forth opposite the name of such Underwriter in Schedule I to the
Underwriting Agreement, to exercise or decline to exercise, in whole or in part,
the option granted in Section 2(b) of the Underwriting Agreement, to agree to
any variation in the terms or performance of the Underwriting Agreement and this
Agreement which, in our judgment, will not have a material adverse effect upon
the interests of the Underwriters, and to extend, in our discretion, the date
and time specified in the Underwriting Agreement on, at or before which the
registration statement shall become effective and we shall receive notice
thereof, but (except with the consent of such of the Underwriters whose
underwriting obligations aggregate fifty percent or more of the Securities under
the Underwriting Agreement) to no later than 10:00 p.m., New York City time, on
the day preceding the fourth full business day after the date initially so
specified.
2. The Firm Securities shall be released for sale to the public at the
initial public offering price as soon after the registration statement becomes
effective as in our judgment is advisable, but (except with the consent of such
of the Underwriters whose underwriting obligations aggregate fifty percent or
more of the Firm Securities under the Underwriting Agreement) not later than the
seventh full business day after the registration statement becomes effective.
3. Each Underwriter authorizes us, for its account, to reserve for
sale, and to sell and deliver to securities dealers selected by us, who may
include any of the Underwriters, such amount as we may determine of the
Securities which such Underwriter agrees to purchase under the Underwriting
Agreement. Such sales shall be made for the respective accounts of the
Underwriters in the same proportions, as nearly as may be practicable and so
long as Securities of the respective Underwriters are available therefor, as the
respective principal amounts of Securities initially so reserved for such sales.
Such sales shall be made at the initial offering price, less a total concession
initially of not in excess of $90 per $1,000 principal amount of the Securities
with respect to the Securities so sold of which $50 will be the selling
concession to the other Underwriters. Underwriters and such dealers may allow a
portion of such concession (the "reallowance") initially of not in excess of $30
per $1,000 principal amount of the Securities so sold to any member of the
National Association of Securities Dealers, Inc. ("NASD"), acting as principal
or as xxxxx's agent, provided that such member agrees that the reallowance is to
be retained and not reallowed in whole or in part and also agrees in writing to
comply with Section 24 of Article III of the Rules of Fair Practice of the NASD.
Underwriters and such dealers may allow the reallowance to a foreign dealer not
eligible for membership in the NASD, acting as principal or buyer's agent,
provided that such foreign dealer agrees that the reallowance is to be retained
and not reallowed in whole or in part, agrees to comply with the Interpretation
with respect to Free-Riding and Withholding of the NASD in making sales to
purchasers outside the United States, and agrees in writing to comply with
Sections 8, 24, 25 (as such Section applies to foreign non-members) and 36 of
such Article.
Each Underwriter also authorizes us to reserve for sale, and
authorizes us or any Underwriter designated by us to sell and deliver for its
account to such retail purchasers as we may select, at the initial public
offering price, such amount as we may determine of the Securities which such
Underwriter agrees to purchase under the Underwriting Agreement. Such
reservations and sales to retail purchasers shall be made for the respective
accounts of the Underwriters in the same proportions, as nearly as may be
practicable and so long as Securities of the respective Underwriters are
available therefor, as the respective underwriting obligations of the
Underwriters.
At or before the time the Firm Securities are released for sale to
the public, we will advise each Underwriter as to the amount of Securities
initially reserved for sale for its account pursuant to this Section. Each
Underwriter authorizes us from time to time to add to the reserved Securities
any Securities of such Underwriter then remaining unsold and to release to it
any reserved Securities of such Underwriter then remaining unsold.
Each Underwriter authorizes us, on its behalf and as its
representatives, to take all such action as we may deem advisable in respect of
all matters pertaining to sales of reserved Securities to dealers and to retail
purchasers, including the right to make variations in the selling arrangements,
and, after the Securities are released for sale to the public, to vary from time
to time the offering price, concession to dealers, and other terms of sale
hereunder and under such selling arrangements.
4. Sales of Securities by Underwriters, except as otherwise set forth
herein, shall be on the terms specified under the selling arrangements then in
effect. Each Underwriter represents that in connection with the offering it has
conformed, and agrees that it will conform, with the provisions of Rule 10b-6
under the Securities Exchange Act of 1934, as amended, with regard, among other
things, to trading by underwriters.
5. We may, in our discretion, charge the account of any Underwriter
with an amount equal to the concession allowed to dealers in respect of the
Securities purchased under the Underwriting Agreement by such Underwriter and
not sold by us for its account (and the Securities which we believe has been
substituted therefor) which may be delivered against a purchase contract made by
us for the account of any Underwriter prior to the later of (a) the termination
of all of the provisions referred to in Section 10 hereof or (b) the covering by
Brookstreet Securities Corporation of any short position created by Brookstreet
Securities Corporation for the accounts of the Underwriters pursuant to Section
9 hereof, or in lieu of such charge, require such Underwriter to repurchase on
demand at the total cost thereof (including commissions), plus transfer taxes,
any such Securities so delivered.
6. Upon our request each Underwriter will deliver to Brookstreet
Securities Corporation payment for the Securities to be purchased by such
Underwriter under the Underwriting Agreement in an amount equal to the initial
public offering price for such Securities less the concession to dealers. Such
payment shall be made in such form and at such time and place as may be
specified in such request, and each Underwriter authorizes Brookstreet
Securities Corporation to make payment for such Securities against their
delivery for its account hereunder.
7. We shall remit to each Underwriter, as promptly as practicable, the
amounts received by us from retail purchasers and dealers as payment in respect
of Securities sold by us for the account of such Underwriter pursuant to the
provisions of Section 3 hereof for which payment has been received, less the
concession to dealers (a) in the case of amounts received from retail purchasers
and (b) in the case where amounts received from dealers are equal to the public
offering price. Securities purchased by each Underwriter under the Underwriting
Agreement and not reserved or sold by us for its account pursuant to the
provisions of Section 3 hereof shall be delivered to such Underwriter as
promptly as practicable after their receipt by us. Any Securities so purchased
by any Underwriter and so reserved which remain unsold at any time prior to the
settlement of accounts hereunder may, in our discretion, and shall, upon the
request of such Underwriter, be delivered to such Underwriter, but, until the
termination of all of the provisions referred to in Section 10 hereof, for
carrying purposes only.
Each Underwriter which is a member of The Depository Trust Company
authorizes us, in our discretion, to arrange for delivery of Securities to such
Underwriter and for payment therefor by and to such Underwriter through the
facilities of The Depository Trust Company.
Each Underwriter, however, authorizes Brookstreet Securities
Corporation, in its discretion, as agent for such Underwriter, to advance funds,
charging current interest rates, or arrange loans for such Underwriter's account
in connection with the purchase or carrying of its Securities held for its
account under this Agreement and for any other of the purposes of this
Agreement, to execute and deliver any notes or other instruments evidencing such
advances or loans, to hold or pledge as security therefor any or all of its
Securities and to give all instructions to the lenders with respect to any such
loans and the proceeds thereof, which instructions the lenders are hereby
authorized to accept. In the event of any such advance or loan, repayment
thereof shall, in the discretion of Brookstreet Securities Corporation, be
effected prior to the making of any remittance or delivery pursuant to this
Section.
Each Underwriter agrees that, from time to time prior to the
settlement of accounts hereunder, it will furnish to us such information as we
may request in order to determine the principal amount of Securities purchased
by it under the Underwriting Agreement which then remains unsold, and such
Underwriter will upon our request sell to us for the account of any Underwriter
as much of such unsold Securities as we may designate at the public offering
price, less all or any part of the concession to dealers as we may determine.
The provisions of Section 5 hereof shall not be applicable in respect of any
such sale.
8. In the event of failure of any Underwriter to tender payment for
Securities as provided under the Underwriting Agreement, we shall have the right
under the provisions thereof to arrange for other persons, who may include
ourselves and any other Underwriters, to purchase the Securities which such
defaulting Underwriter agreed to purchase, but without relieving such defaulting
Underwriter from liability for its default.
9. Each Underwriter authorizes Brookstreet Securities Corporation, in
their discretion and for the account of such Underwriter, to overallot Firm
Securities, and to purchase and sell Securities, for long or short account, in
such amounts, at such prices, on such terms and in such manner as Brookstreet
Securities Corporation may determine, provided that at no time (except as set
forth below in the event of default of an Underwriter in carrying out its
commitment under this Section) shall the net commitment of any Underwriter, for
either long or short account, resulting from such overallotments and such
purchases and sales, exceed fifteen percent of the principal amount of Firm
Securities which such Underwriter agrees to purchase under the Underwriting
Agreement; it being agreed that in determining such net commitment for short
account of any Underwriter there shall be subtracted the maximum principal
amount of Option Securities which such Underwriter is entitled to purchase under
the Underwriting Agreement. Each Underwriter authorizes Brookstreet Securities
Corporation, in its discretion and for the account of such Underwriter, to cover
any short position, or sell any long position, created by Brookstreet Securities
Corporation for the account of such Underwriter pursuant to this Section, in
such amounts, at such prices, on such terms and in such manner as Brookstreet
Securities Corporation may determine. Such purchases and sales, through
overallotments or otherwise, shall be for the respective accounts of the
Underwriters in the same proportions, as nearly as may be practicable, as the
respective underwriting obligations of the Underwriters, provided that, if any
Underwriter defaults in carrying out its commitment under this Section, the
other Underwriters not so defaulting shall assume its commitment in the same
proportions as the respective underwriting obligations of such other
Underwriters, without, however, relieving such defaulting Underwriter from its
liability therefor. Each Underwriter agrees that it will, upon the request of
Brookstreet Securities Corporation, take up at cost (but, in the discretion of
Brookstreet Securities Corporation, until the termination of all of the
provisions referred to in Section 10 hereof, for carrying purposes only)
Securities so purchased by Brookstreet Securities Corporation for the account of
such Underwriter, and deliver to Brookstreet Securities Corporation Securities
so sold for the account of such Underwriter, through overallotment or otherwise.
Brookstreet Securities Corporation shall have full discretionary power to pay
such commissions in connection with such purchases and sales as they may deem
proper and to charge such commissions on purchases and sales effected by them.
10. The provisions of the first paragraph of Section 4 hereof and of
the first sentence of Section 9 hereof will terminate at the close of business
on the 30th full business day after the Firm Securities are released by us for
sale to the public, unless any of such provisions are terminated at such earlier
time as we may determine by telegraphic notice to that effect sent to each
Underwriter.
11. We may charge against the account of each Underwriter any and all
expenses incurred by us on its behalf and as its representatives in connection
with the purchase and sale of the Securities or preparations therefor. All
expenses of a general nature incurred by us shall be borne by the Underwriters
in the same proportions as the respective underwriting obligations of the
Underwriters. In the event of the failure of any Underwriter to fulfill its
obligations hereunder, the expenses chargeable to such Underwriter pursuant to
this Agreement and not paid, as well as any additional expenses arising from
such default, may be charged against the other Underwriters not so defaulting in
the same proportions as the respective underwriting obligations of such other
Underwriters, without, however, relieving such defaulting Underwriter from its
liability therefor. Our ascertainment of all expenses and apportionment thereof
shall be conclusive.
We shall not be accountable for interest on funds of any of the
Underwriters at any time in our hands, and any such funds may be held by us
unsegregated from our general funds.
12. As compensation for our services to each of the Underwriters in
connection herewith, each Underwriter agrees to pay us an amount equal to (a)
$25 per $1,000 principal amount of Securities (representing 2.5% of the 9% total
concession) as a management fee and (b) $15 per $1,000 principal amount of the
Securities (representing 1.5% of the 9% total concession) as an underwriting
fee.
13. Each of the Underwriters acknowledges that it has received copies
of the documents stated in Section 1(a) of the Underwriting Agreement to have
been filed with the Commission prior to the date of the Underwriting Agreement
and delivered to us for it. The registration statement and prospectus may be
further amended or changed, but no such amendment or change not disapproved by
us shall release any Underwriter hereunder or under the Underwriting Agreement.
14. Each Underwriter which is a registered dealer or broker under the
Securities Exchange Act of 1934, as amended, represents that it is a member in
good standing of the NASD and that in making sales of Securities it will comply
with the Rules of Fair Practice of the NASD, including, without limitation,
Section 24 of Article III thereof. Each Underwriter which is not so registered
agrees that it will not offer or sell Securities in the United States except
through us and that in making sales of Securities outside the United States it
will comply with the requirements of the Interpretation with respect to
Free-Riding and Withholding of the NASD and with Sections 8, 24, 25 (insofar as
such Section applies to non-members) and 36 of such Article. We will file on
behalf of the several Underwriters with the NASD such required documents and
information, if any, which have been furnished to us for filing pursuant to
applicable rules, statements and interpretations of the NASD.
15. In taking all actions hereunder, except in the performance of our
own obligations hereunder and under the Underwriting Agreement, we shall act
only as representatives of each of the Underwriters. Nothing contained herein
shall constitute the Underwriters partners or render any of them liable to make
payments otherwise than as herein provided. If for Federal income tax purposes
the Underwriters should be deemed to constitute a partnership, then each
Underwriter elects to be excluded from the application of Subchapter K, Chapter
1, Subtitle A, of the Internal Revenue Code, as amended. Each Underwriter
authorizes Brookstreet Securities Corporation, in their discretion, on behalf of
such Underwriter, to execute such evidence of such election as may be required
by the Internal Revenue Service.
16. We shall be under no liability (except for our own want of good
faith and for obligations expressly assumed by us hereunder) for or in respect
of the validity or value of, or title to, any Securities; the form of, or the
statements contained in, or the validity of, the registration statement, any
preliminary prospectus, the prospectus, any amendment or supplement thereto, any
document which may be incorporated by reference therein, or any letters or
instruments executed by or on behalf of the Company or others; the form or
validity of the Underwriting Agreement or this Agreement; the delivery of the
Securities; the performance by the Company or orders of any agreement on its or
their part; the qualification of the Securities for sale under the laws of any
jurisdiction; or any matter in connection with any of the foregoing; provided,
however, that nothing in this Section shall be deemed to relieve us from any
liability imposed by the Securities Act of 1933, as amended (the "Act").
17. (a) Each Underwriter agrees to indemnify, hold harmless and
reimburse each other Underwriter and each person, if any, who controls such
other Underwriter within the meaning of Section 15 of the Act, to the extent,
and upon the terms, that such Underwriter agrees to indemnity, hold harmless and
reimburse the Company and certain other persons pursuant to the provisions of
Section 7 of the Underwriting Agreement. This indemnity agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
such other Underwriter or controlling person or any statement made to the
Commission as to the results thereof.
(b) Each Underwriter agrees to pay upon our request, as
contribution, its proportionate share, based upon the respective underwriting
obligations of the Underwriters, of any losses, claims, damages or liabilities,
joint or several, under the Act or otherwise, paid or incurred by any
Underwriter (including us, individually or as representatives of the
Underwriters) to any person other than an Underwriter (including amounts paid by
an Underwriter as contribution), arising out of or based upon (i) 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, any document which may be incorporated by
reference therein, or any other selling or advertising material used with the
consent of Brookstreet Securities Corporation by the Underwriters in connection
with the sale of the Securities, or arising out of or 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 not misleading and (ii) any act or
omission to act or any alleged act or omission to act by us, individually or as
representatives of the Underwriters, or by the Underwriters, as a group but not
individually, in connection with any transaction contemplated by this Agreement
or undertaken in preparing for the purchase, sale and delivery of the
Securities; and each Underwriter will pay such proportionate share of any legal
or other expenses reasonably incurred by us or with our consent in connection
with investigating or defending any such loss, claim, damage or liability, or
any action in respect thereof. In determining the amount of any Underwriter's
obligation under this paragraph, appropriate adjustment may be made by us to
reflect any amounts received by any one or more Underwriters, pursuant to
Section 7 of the Underwriting Agreement or otherwise, in respect of the claim
upon which such obligation is based. In respect of any claim there shall be
credited against the amount of any Underwriter's obligation under this paragraph
any loss, damage, liability or expense which is paid or incurred by such
Underwriter as a result of such claim being asserted against it, and, if such
loss, damage, liability or expense is paid or incurred by such Underwriter
subsequent to any payment by it pursuant to this paragraph, appropriate
provision shall be made to effect such credit, by refund or otherwise. If any
claim to which the provisions of this paragraph would be applicable is asserted,
we may take such action in connection therewith as we deem necessary or
desirable, including retention of counsel for the Underwriters, and in our
discretion separate counsel for any particular Underwriter or group of
Underwriters, and the fees and disbursements of any counsel so retained by us
shall be included in the amounts of the Underwriters' obligations under this
paragraph. At our discretion, we may consent to being named as the
representatives of a defendant class of underwriters. Any Underwriter may elect
to retain at its own expense its own counsel and, on advice of such counsel and
with our consent, may settle or consent to the settlement of any such claim. We
may settle or consent to the settlement of any such claim, on advice of counsel
retained by us, with the approval of a majority in interest of the Underwriters.
Whenever any Underwriter receives notice of the assertion of any claim to which
the provisions of this paragraph would be applicable, such Underwriter will give
prompt notice thereof to us. Whenever we receive notice of the assertion of any
such claim, we will give prompt notice thereof to each Underwriter. We also will
furnish each Underwriter with periodic reports, at such times as we deem
appropriate, as to the status of any such claim and the action taken by us in
connection therewith. In the event of the failure of any Underwriter to fulfill
its obligations under this paragraph, such obligations may be charged against
the other Underwriters not so defaulting in the same proportions as the
respective underwriting obligations of such other Underwriters, without,
however, relieving such defaulting Underwriter from its liability therefor. In
determining amounts payable pursuant to this paragraph, any loss, claim, damage,
liability or expense paid or incurred, and any amount received, by any person
controlling any Underwriter within the meaning of Section 15 of the Act which
has been paid or incurred or received by reason of such control relationship
shall be deemed to have been paid or incurred or received 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.
18. As promptly as may be practicable after termination of all of the
provisions referred to in Section 10 hereof and completion of the transactions
under Section 9 hereof, any Securities held by us for the account of any
Underwriter shall be delivered by us to such Underwriter, and the net credit or
debit balance of each Underwriter shall be paid to it or collected from it by
us, but we may establish such reserves as we may deem advisable against any
expenses or claims not then ascertained. Any Securities which are held by us for
the account of any Underwater by reason of a default by a dealer or other
purchaser in respect of the purchase thereof pursuant to a sale under Section 3
hereof shall, in our discretion, be purchased from time to time by the
Underwriters in the same proportions, as nearly as may be practicable, as the
respective Securities theretofore contracted for sale thereunder to dealers or
other purchasers, as the case may be, for the respective accounts of the
Underwriters, at the net price at which such Securities were contracted for sale
to such dealer or other purchaser, and we are authorized to make appropriate
charges and credits to the respective accounts of the Underwriters for this
purpose. Notwithstanding any distribution and settlement of accounts hereunder,
each Underwriter shall remain liable for its proper proportion of any transfer
tax or any other liability which may be asserted against us or any one or more
of the Underwriters in respect of this Agreement or the Underwriting Agreement
based upon the claim that the Underwriters constitute a partnership, an
association, an unincorporated business or other separate entity.
19. Any notice to any Underwriter shall be deemed to have been duly
given if mailed, telegraphed or delivered in person to such Underwriter at the
address set forth in its Underwriters' Questionnaire addressed to the Company.
20. This Agreement shall be construed in accordance with the laws of
the State of California.
21. This Agreement may be signed in any principal amount of
counterparts, each of which shall be deemed an original, which taken together
shall constitute one and the same instrument.
Please confirm that the foregoing is in accordance with your
understanding by signing a counterpart hereof as indicated below.
Very truly yours,
Confirmed as of the date hereof: (Brookstreet Securities Corporation)
Attorney-in-fact for each of the several
Underwriters named in Schedule I to the
attached Underwriting Agreement
BROOKSTREET SECURITIES CORPORATION
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
MASTER SELECTED DEALER AGREEMENT
_______________, 1995
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Gentlemen:
In connection with public offerings of securities underwritten by
Brookstreet Securities Corporation ("Brookstreet"), or by a group of
Underwriters represented by Brookstreet, you and other securities dealers
(collectively, the "Dealers") may be offered from time to time the opportunity
to purchase a portion of such securities, as principals, at a discount from the
public offering price representing a selling concession or re-allowance granted
as consideration for services rendered in the distribution of such securities.
The Appendix hereto set forth the general terms, conditions and
representations applicable to any such purchase where Brookstreet is responsible
for reservations of securities for sale to Dealers unless Brookstreet expressly
informs you that such terms, conditions and representations shall not be
applicable to any such purchase. Acceptance of any reservation of any such
securities by you, as a Dealer, shall constitute acceptance of and agreement to
such terms, conditions and representations, together with and subject to any
additional or supplementary terms, conditions and representations communicated
to you in connection with any specific offering.
As used herein and the Appendix hereto, the term "Agreement" shall mean
this Agreement, including the Appendix attached hereto and incorporated herein
by reference, and, after receipt by you of written notice thereof, any amendment
or supplement hereto, plus any additional or supplementary terms, conditions and
representations communicated to you by Brookstreet in connection with any
offering of securities. This Agreement shall constitute a binding agreement
between you and Brookstreet, individually, or as representative of the several
Underwriters of such securities.
This Agreement supersedes any prior understanding you have with
Brookstreet with respect to the subject matter hereof'. If the foregoing,
including the general terms, conditions and representations of the Appendix
incorporated herein by reference, is acceptable to you, please sign and retain
the enclosed copy of this Agreement.
Very truly yours,
Brookstreet Securities Corporation
By
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Name
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Title
----------------------------
The foregoing Agreement is hereby
acknowledged and accepted
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(Name of Dealer)
By
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Name
-----------------------
Title
-----------------------
Dated
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APPENDIX
General Terms, Conditions and Representations Applicable in Underwritten
Public Offerings of Securities Managed by Brookstreet Securities Corporation
1. In connection with public offerings of securities ("Securities")
underwritten by underwriters ("Underwriters") represented by Brookstreet
Securities Corporation ("Brookstreet") alone or in conjunction with other firms
(the "Representatives"), the Underwriters may severally offer to one or more
securities dealers ("Dealers") the right to purchase, as principals, from the
Underwriters a portion of the Securities, subject to the receipt and acceptance
thereof by the Underwriters and subject to the terms, conditions and
representations set forth (a) herein, (b) in the prospectus relating to the
offering of the securities and (c) in any letter and/or telegram sent by
Brookstreet to Dealers in connection with an offer to Dealers expressly
informing such Dealers that such terms, conditions and representations shall be
applicable. Any such offer to Dealers will be extended only on behalf of such
Underwriters as may lawfully sell the Securities in said Dealer's State.
2. Dealers to whom an offer is to be made will be notified by telegram
or telecopier of the method and terms of offering, the time of the release of
the Securities for sale to the public, the initial public offering price, the
selling concession, the portion of the selling concession allowable to certain
dealers (the "reallowance"), the time at which books will be opened, the amount,
if any, of Securities reserved for purchase by Dealers, and the period of such
reservation. Subscriptions may be closed at any time without notice, and the
right is reserved to reject any subscription in whole or in part, but
notification of allotments against and rejections of subscriptions will be made
as promptly as practicable.
3. Immediately upon receipt of the telegram or letter referred to in
clause (c) of Paragraph 1 hereof, Dealers may reoffer the Securities purchased
by them hereunder, subject to receipt and acceptance of the Securities by the
Underwriters, and upon the other terms, conditions and representations set forth
herein and in the prospectus relating to such Securities. Securities purchased
hereunder or pursuant to the following sentence are to be offered to the public
at the initial pubic offering price, except that a re-allowance may be allowed
to any member of the National Association of Securities Dealers, Inc. (the
"NASD") (or to foreign dealers who are not eligible for such membership but who
agree to abide by the conditions with respect to foreign dealers set forth in
this Paragraph, including the Rules of Fair Practice of the NASD), acting as
principal or as buyer's agent, if such allowance is to be retained and not
re-allowed in whole or in part, and if such dealer agrees to comply with the
Rules of Fair Practice of the NASD, including, without limitation, Section 24 of
Article III thereof, or if such dealer is a foreign dealer not eligible for
membership in the NASD, such dealer agrees to comply with Sections 8, 24, 25 (as
such Section applies to foreign non-members) and 36 of such Article. With the
consent of the Representatives or after the books in respect of the offering to
Dealers have been closed, Dealers and Underwriters may deal in Securities with
each other at the public offering price less an amount not exceeding the
concession to Dealers. After the Securities are released for sale to the public,
the Representatives are authorized to vary the offering price, concession,
reallowance and other selling terms of the Securities.
4. The Securities confirmed to Dealers are to be paid for at the public
offering price less the concession to Dealers prior to 10:00 a.m., New York
time, on the Closing Date, as defined in the agreement for the purchase of the
Securities by the Underwriters (the "Underwriting Agreement"). Such payment is
to be made at such place as Brookstreet may advise, by certified or bank
cashier's check payable in Los Angeles Clearing House funds (or such other funds
as Brookstreet may advise), to the order of Brookstreet against delivery of such
Securities. Delivery of any Securities purchased by Dealers shall be made
through the facilities of The Depository Trust Company if Dealers are members
thereof, unless Brookstreet otherwise notifies Dealers in its discretion. If a
Dealer is not a member of The Depository Trust Company, such delivery shall be
made through a correspondent who is such a member, and such Dealer should advise
Brookstreet immediately of the name of such bank or correspondent.
5. In the event that, prior to the later of (a) the completion of the
distribution of the Securities covered by this Agreement or (b) the covering by
Brookstreet, acting as a Representative of the Underwriters, of any short
position created by the Representatives for the accounts of the Underwriters,
Brookstreet purchases in the open market or otherwise any of the Securities
delivered to any Dealer, the Dealer agrees to repay to Brookstreet for the
account of the Underwriters the amount of the selling concession allowed to such
Dealer plus brokerage commissions and any transfer taxes paid in connection with
such purchase.
6. Dealers agree in reoffering the Securities to comply with all
applicable requirements of the federal securities laws and all applicable rules
and regulations promulgated thereunder. If any Dealer fails to pay for the
Securities confirmed to such Dealer or fails to perform any of such Dealer's
other obligations hereunder, the Representatives may, in the Representatives'
discretion and without demand, notice or legal proceedings, and in addition to
any and all remedies otherwise available to the Representatives and to the other
several Underwriters, (a) terminate any right or interest on such Dealer's part
and (b) at any time, and from time to time sell without notice to such Dealer,
any of the Securities then held for such Dealer's account at public or private
sale at such price or prices and upon such terms and conditions as the
Representatives may deem fair, and apply the net proceeds so realized, as
determined by the Representatives, toward payment of any obligations in respect
of which such Dealer is in default, and, notwithstanding any action taken under
(a) or (b) above, or both, such Dealer shall remain liable to the Underwriters,
severally, to the extent of the Dealers' respective interest, or at the
Representatives' election, to the Representatives for the respective accounts of
the several Underwriters to a like extent, for all loss and expense resulting
from such Dealer's fault. At any such sale or sales, any of the Underwriters may
for such Underwriter's own account or for the account of any other person become
the purchaser of any Securities so sold, free from any right or interest on any
Dealer's part in such Securities. A default by one or more Dealers shall not
release any other Dealer from any obligation hereunder.
7. Dealers agree to advise the Representatives, upon request, as to the
number of the Securities confirmed to such Dealer in any particular offering of
Securities which then remain unsold; and Dealers further agree, upon request of
the Representatives, to sell to the Representatives for the account of one or
more of the Underwriters such number of such unsold Securities as the
Representatives may specify (in order to enable the Representatives to deliver
the Securities sold by or for the account of one or more of the several
Underwriters) at the public offering price less an amount determined by
Brookstreet not in excess of the concession to Dealers.
8. Dealers are not authorized (a) by the issuer or by any of the
Underwriters to give any information or to make any representations in
connection with the offering or sale of the Securities other than those
contained in the prospectus relating to such Securities or (b) to act as agent
for the issuer or for any of the Underwriters when offering the Securities to
the public or otherwise. Nothing contained herein shall constitute the Dealers
as an association or partnership with the Underwriters, the Representatives,
Brookstreet or each other, or as an unincorporated business or other separate
entity.
9. The Representatives will advise Dealers, on request, of the
jurisdictions where counsel for the Underwriters has advised the Underwriters
that the Securities have been qualified for public offering and sale, or are
exempt from qualification under applicable Blue Sky or state securities laws.
The Representatives shall, however, be under no responsibility whatsoever to any
Dealer with respect to the right of such Dealer to sell the Securities in any
jurisdiction.
10. The Representatives undertake in any offering of Securities to mail
copies of prospectuses upon receipt of written request by Dealers to the
addresses stated in such requests and as otherwise required by federal
securities laws and regulations. Each Dealer undertakes to do the same with
regard to the delivery of such copies to persons associated with such Dealer and
to other persons as required by federal securities laws and regulations.
11. Neither the Representatives nor any Underwriter shall be under any
liability (except for their own want of good faith) for or in respect of the
validity or value of or title to, any of the Securities; the form of or the
statements contained in, or the validity of the prospectuses or any amendment or
supplement thereto, any document incorporated by reference therein or any other
instruments executed by or on behalf of the issuer or seller of the Securities
or other; the form or validity of the Underwriting Agreement or this Agreement;
the delivery of the Securities, the performance by the issuer or seller of the
Securities or other of any agreement on its or their part; the qualifications of
the Securities for sale or the legality of the Securities for investment under
the laws of any jurisdiction; or any matter in connection with any of the
foregoing, provided that nothing in this Paragraph shall be deemed to relieve
Brookstreet, the Representatives or any Underwriter from any liability imposed
by federal securities laws.
12. Each Dealer confirms that such Dealer is familiar with the
Interpretation of the Board of Governors of the NASD with respect to Free-Riding
and Withholding, and each Dealer agrees to comply with such Interpretation in
offering and selling Securities to the public. Each Dealer, by its participation
in an offering of Securities, further represents that neither such Dealer nor
any of its directors, officers, partners or "persons associated with" such
Dealer (as defined in the By-Laws of the NASD), nor, to such Dealer's knowledge
any "related person" (as defined by the NASD in its Interpretation with respect
to Review of Corporate Financing) have participated or intend to participate in
any transaction or dealing as to which documents or information are required to
be filed with the NASD pursuant to such Interpretation.
13. All communications from Dealers should be addressed to Brookstreet
Securities Corporation, 0000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxx X. Xxxxxxx, Director of Investment Banking. Any notice from the
Representatives to a Dealer shall be deemed to have been duly authorized by the
Underwriters and to have been duly given if mailed or telegraphed to such Dealer
at the address first appearing in this Agreement.
14. This Agreement may be supplemented or amended by Brookstreet by
written notice thereof to you, and any such supplement or amendment to this
Agreement shall be effective with respect to any offering of Securities to which
this Agreement applies after the date of such supplement or amendment. This
Agreement shall continue in full force and effect until terminated by either
party by five days' written notice to the other, provided that if this Agreement
has become effective with respect to any offering of Securities, this Agreement
shall remain in full force and effect as to such offering and shall terminate as
otherwise provided in this Paragraph. Provisions of Paragraph 3 hereof shall
terminate in respect of any offering of Securities at the close of business on
the 15th full business day after the Securities are released by the
Representatives for sale to the public, unless extended by the Representatives
to not later than the close of business on the 15th full business day
thereafter, but may be terminated by the Representatives at any time by
telegraphic notice sent to Dealers. Notwithstanding any distribution and
settlement of accounts, Dealers shall be liable for the proper proportion of any
transfer tax or other liability which may be asserted against the
Representatives or any of the Underwriters or Dealers based upon the claim that
the Dealers, or any of them, constitute a partnership, an association, an
unincorporated business or other separate entity.
15. This Agreement shall be governed by the laws of the State of
California.
