EXHIBIT 1.1
RUSHMORE FINANCIAL GROUP, INC.
Up to
1,250,000 Shares of Common Stock
UNDERWRITING AGREEMENT
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January __, 1998
First Southwest Company
Rushmore Securities Corporation
c/o First Southwest Company
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Gentlemen:
Rushmore Financial Group, Inc., a Texas corporation (the "Company"),
proposes to issue and sell up to 1,250,000 shares (the "Shares") of the
Company's Common Stock, $.01 par value ("Common Stock"). The Company hereby
appoints First Southwest Company and Rushmore Securities Corporation
(collectively, the "Underwriters") as its exclusive agents for the purpose of
finding purchasers for and selling the Shares, subject to the terms and
conditions of this Agreement on a "best efforts basis," with at least 750,000
Shares required to be sold if any are sold.
The term "Representative," as used herein, shall mean First Southwest
Company. Whether or not so expressed, all obligations of the Underwriters and of
the Company are several in accordance with their respective interests, and not
joint, and nothing herein contained shall constitute the Underwriters or the
Company partners of one another.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company.
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(a) The Company represents and warrants as follows:
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(i) The Company has carefully prepared and filed with the Securities
and Exchange Commission (the "Commission") a registration statement on Form
SB-2 (Registration No. 333-42225) with respect to the Shares in conformity
with the requirements of the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder (collectively referred
to as the "Act"). Copies of such registration statement, including any
amendments thereto, the preliminary prospectuses (meeting the requirements
of Rule 430A of the Act) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have heretofore
been delivered by the Company to you. Such registration statement, herein
collectively with the exhibits, schedules and financial statements,
referred to as the "Registration Statement," which shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below, has been declared effective
by the Commission under the Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement.
The form of prospectus first filed by the Company with the Commission
pursuant to its Rule 424(b) and Rule 430A is herein referred to as the
"Prospectus." Each preliminary prospectus included in the Registration
Statement prior to the time it becomes effective is herein referred to as a
"Preliminary Prospectus."
(ii) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Texas, with
power and authority to own or lease its properties and conduct its business
as described in the Registration Statement; the subsidiaries of the Company
listed in Exhibit 21 to the Registration Statement (collectively, and
including Rushmore Insurance Services, Inc., the "Subsidiaries") are the
only subsidiaries of the Company, each of which has been duly organized and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation; each of the Subsidiaries has the power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement; the Company and each of the
Subsidiaries are duly qualified to transact business in all jurisdictions
in which the conduct of their business requires such qualification; the
outstanding shares of capital stock of each of the Subsidiaries have been
duly authorized and validly issued, are fully paid and non-assessable and
are owned by the Company, another Subsidiary, or, in the case of Rushmore
Insurance Services, Inc., by X.X. Xxxxx, Xx., free and clear of all liens,
encumbrances and security interests; and no options, warrants or other
rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in the Subsidiaries are outstanding.
(iii) All of the outstanding shares of Common Stock of the Company
have been duly authorized and validly issued and are fully paid and non-
assessable and are free of any preemptive or similar rights; the Shares to
be issued and sold by the Company have been duly authorized and when issued
and paid for as contemplated herein will be validly issued, fully paid,
non-assessable and free of any lien, security interest or other
encumbrance; and no preemptive rights of shareholders exist with respect to
any of the Shares or the issue and sale thereof.
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(iv) The securities of the Company conform to all statements with
regard thereto contained in the Registration Statement, and the Company has
an authorized and outstanding capitalization as set forth in the
Prospectus.
(v) The Company and the transactions contemplated by this Agreement
meet the requirements for using Form SB-2 under the Act. The Commission
has not issued any order preventing or suspending the use of any
Preliminary Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement
contains and the Prospectus and any amendments or supplements thereto will
contain all statements which are required to be stated therein by, and in
all respects conform or will conform, as the case may be, to the
requirements of, the Act. Neither the Registration Statement nor any
amendment thereto, and neither the Prospectus nor any supplement thereto,
contains or will contain, as the case may be, any untrue statement of a
material fact or omits or will omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on
behalf of either Underwriter through the Representative specifically for
use in the preparation thereof.
(vi) The consolidated financial statements of the Company and the
Subsidiaries, and the consolidated financial statements of First Financial
Life Companies, Inc. and its subsidiary First Financial Life Insurance
Company, together with their respective related notes and schedules thereto
included or incorporated by reference to the Registration Statement and
the Prospectus (and any amendment or supplement thereto), present fairly
the financial positions and the results of operations of the Company and
the Subsidiaries consolidated and First Financial Life Insurance Company
and its subsidiary consolidated, respectively, as of the dates and for the
periods therein specified. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently
applied throughout the periods involved, and all adjustments necessary for
a fair presentation of results for such periods have been made. The
summary financial and statistical data included in the Registration
Statement and the Prospectus (any amendment or supplement thereto) present
fairly the information shown therein and have been compiled on a basis
consistent with the financial statements presented therein and the books
and records of the Company.
(vii) The pro forma financial information and the related notes
thereto included in the Registration Statement (and any amendment or
supplement thereto) have been prepared in accordance with the applicable
requirements of the Act, include all adjustments necessary to present
fairly the pro forma financial condition and results of operations at the
respective dates and for the respective periods indicated and are based
upon good faith estimates and assumptions believed by the Company to be
reasonable.
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(viii) The execution and delivery of, and the performance by the
Company of its obligations under this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as rights to indemnity and contribution hereunder
may be limited by federal or state securities laws.
(ix) Except as disclosed in the Registration Statement and the
Prospectuses (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectuses (or any amendment or supplement thereto),
neither the Company nor any of the Subsidiaries has incurred any liability
or obligation, direct or contingent, or entered into any transaction, not
in the ordinary course of business, that is or, would be material to the
Company and the Subsidiaries taken as a whole, and there has not been any
change in the capital stock, or material increase in the short-term debt or
long-term debt, of the Company or any of the Subsidiaries, or any material
adverse change, or any development involving or which may reasonably be
expected to involve, a prospective material adverse change, in the
condition (financial or other), business, net worth or results of
operations of the Company and the Subsidiaries taken as a whole.
(x) Except as disclosed in the Prospectus, neither the Company nor
any of its Subsidiaries are in violation of any directive or order from or
agreement or understanding with any state or federal securities or
insurance department or commission, including but not limited to the
National Association of Securities Dealers, Inc. (the "NASD"), and the
Arizona Department of Insurance or any governmental authority to make any
material change in the method of conducting or that restricts their
respective businesses. There are no actions, suits or proceedings pending
or, to the knowledge of the Company, threatened against the Company or any
of the Subsidiaries, including but not limited to actions, suits or
proceedings at law or in equity before any court, regulatory body or
administrative agency, domestic or foreign, which might, individually or in
the aggregate, prevent or adversely affect the transactions contemplated by
this Agreement or result in any material adverse change in the business or
condition of the Company and of the Subsidiaries taken as a whole, except
as set forth in the Registration Statement.
(xi) There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened, against the Company or any of its
Subsidiaries, or to which the Company or any of the Subsidiaries, or to
which any of their respective properties is subject, that are required to
be described in the Registration Statement or the Prospectus but are not
described as required, and there are no agreements, contracts, indentures,
leases or other instruments that are required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to
the Registration Statement that are not described or filed as required by
the Act.
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(xii) The Company and the Subsidiaries have good and indefeasible
title to all of the properties and assets reflected in the financial
statements (or as described in the Registration Statement) hereinabove
described, subject to no lien, mortgage, pledge, charge or encumbrance of
any kind except those reflected in such financial statements (or as
described in the Registration Statement) or which are not material in
amount. The Company occupies all leased property under valid, subsisting
and enforceable leases.
(xiii) The Company and the Subsidiaries have filed all tax returns
which have been required to be filed, which returns are complete and
correct, and have paid all taxes indicated by said returns and all
assessments received by them or any of them to the extent that such taxes
have become due.
(xiv) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has
not been any material adverse change or any development involving a
prospective material adverse change in or affecting the condition,
financial or otherwise, of the Company and its Subsidiaries taken as a
whole or the earnings, business affairs, management or business prospects
of the Company and its Subsidiaries taken as a whole, whether or not
occurring in the ordinary course of business, and there has not been any
material transaction entered into by the Company or the Subsidiaries, other
than transactions in the ordinary course of business and changes and
transactions contemplated by the Registration Statement, as it may be
amended or supplemented. The Company and the Subsidiaries have no material
contingent obligations which are not disclosed in the Registration
Statement, as it may be amended or supplemented.
(xv) The Company has not distributed and, prior to the later to
occur of (i) the Closing Date or (ii) completion of the distribution of the
Shares, will not distribute any offering material in connection with the
offering and sale of the Shares other than the Registration Statement, the
Prepricing Prospectuses, the Prospectuses or other materials, if any,
permitted by the Act.
(xvi) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xvii) To the Company's knowledge, neither the Company nor any of the
Subsidiaries nor any employee or agent of the Company or any Subsidiary has
made any payment of funds of the Company or any Subsidiary or received or
retained any funds in violation of any law, rule or regulation, which
payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectuses.
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(xviii) No holder of any security of the Company has or, will have
any right to require registration of shares of Common Stock or any other
security of the Company because of the filing of the Registration Statement
or consummation of the transactions contemplated by this Agreement.
(xix) The Company and the Subsidiaries own or possess all patents,
trademarks, trademark registrations, service marks, service xxxx
registrations, trade names, copyrights, licenses, inventions, trade secrets
and rights described in the Prospectuses as being owned by them or any of
them or necessary for the conduct of their respective businesses, except
where the failure so to own or possess will not have, individually or in
the aggregate, a material adverse effect on the condition (financial or
other), business, properties, net worth or results of operations of the
Company and the Subsidiaries taken as a whole (a "Material Adverse
Effect"), and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company and the
Subsidiaries with respect to the foregoing, except as otherwise disclosed
in the Prospectuses and except such claims or challenges as will not have,
individually or in the aggregate, a Material Adverse Effect.
(xx) The Company is not now, and after sale of the Shares to be
sold by it hereunder and application of the net proceeds from such sale as
described in the Prospectuses under the caption "Use of Proceeds" will not
be, an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as
amended.
(xxi) The Company has complied with all provisions of Florida
Statutes, (S)517.075, relating to issuers doing business with Cuba.
(xxii) Neither the Company nor any of the Subsidiaries is in default
under any agreement, lease, contract, indenture or other instrument or
obligation to which it is a party or by which it or any of its properties
is bound and which default is of material significance in respect of the
business or financial condition of the Company and the Subsidiaries taken
as a whole. The execution and delivery of this Agreement, the Warrant
Agreement to be executed and delivered (the "Warrant Agreement"), the Stock
Purchase Warrant (the "Warrant") to be delivered pursuant to the Warrant
Agreement, the consummation of the transactions herein and therein
contemplated and the fulfillment of the terms hereof and thereof will not
conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any Subsidiary is a
party, or of the Articles of Incorporation, as amended, or bylaws of the
Company or any order, rule or regulation applicable to the Company or any
Subsidiary of any court or of any regulatory body or administrative agency
or other governmental body having jurisdiction.
(xxiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in
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connection with the execution and delivery by the Company of this Agreement
and the consummation of the transactions herein contemplated has been
obtained or made and is in full force and effect.
(xxiv) The Company and each of the Subsidiaries hold all licenses,
certificates and permits from governmental authorities that are necessary
to the ownership of properties and the conduct of their businesses as
described in the Registration Statement; and neither the Company nor any of
the Subsidiaries has infringed any patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business of
the Company and the Subsidiaries taken as a whole.
(xxv) Each of the Company and the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("Permits") as are necessary to own its respective properties
and to conduct its business in the manner described in the Prospectuses,
subject to such qualifications as may be set forth in the Prospectuses,
except where the failure to have such Permits would not have, individually
or in the aggregate, a Material Adverse Effect; the Company and each of the
Subsidiaries has fulfilled and performed all its material obligations with
respect to such Permits and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other revocation or termination thereof or results in any
other impairment of the rights of the holder of any such permit which might
have, individually or in the aggregate, a Material Adverse Effect, subject
in each case to such qualification as may be set forth in the Prospectuses;
and, except as described in the Prospectuses, none of such permits contains
any restriction that is materially burdensome to the Company or any of the
Subsidiaries.
(xxvi) Xxxxxxxx & Xxxxxx, L.L.P. and Coopers & Xxxxxxx, L.L.P.,
each of whom have rendered reports on certain of the financial statements
filed with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act.
(xxvii) The Company is conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, including but not limited to all applicable local,
state and federal securities and insurance laws and regulations and all
regulations, decisions, directives, orders and policies of the NASD and any
state or federal securities or insurance department or commission; except
where failure to be so in compliance would not materially adversely affect
the condition (financial or otherwise), business, results of operations or
prospects of the Company and the Subsidiaries taken as whole.
(xxviii) The Company has all requisite power and authority, and has
taken all necessary corporate action, to authorize, execute, deliver and
perform the Warrant Agreement, to execute, issue, sell and deliver the
Warrant and a certificate or certificates evidencing the Warrant, to
authorize and reserve for issuance and, upon payment from time to time of
the exercise price, to issue, sell and deliver, the shares of the Common
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Stock issuable upon exercise of the Warrant, and to perform all of its
obligations under the Warrant Agreement and the Warrant. The Warrant
Agreement has been duly executed and delivered by the Company and is a
legal, valid and binding agreement of the Company enforceable in accordance
with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally and by general principles of equity. No
authorization, approval, consent or other order of any governmental
authority is required for such authorization, issue or sale except to the
extent required by applicable federal and state securities laws.
(xxix) The Warrant, when delivered to the Underwriter, will be duly
authorized, executed and delivered and will be a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights
generally and by general principles of equity. The shares of Stock of the
Company, when issued upon exercise of the Warrant, will have been duly
authorized for issuance and, when issued in accordance with the terms of
the Warrant Agreement, will be validly issued and outstanding, fully paid
and nonassessable and free of statutory preemptive rights.
2. Purchase, Sale and Delivery of the Shares.
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(a) Subject to the terms and conditions herein set forth, the Company
hereby appoints the Underwriters as its exclusive agents for a period of 45 days
(which period may be extended up to 15 days by written agreement between the
Representative and the Company) commencing on the effective date under the Act
of the Registration Statement (the "Effective Date") for the purpose of offering
the Shares as provided in this Agreement on a "best efforts basis," with at
least 750,000 Shares required to be sold if any are sold. The Underwriters
agree to use their best efforts to sell the Shares as the Company's agent. It
is understood and agreed that there is no firm commitment on the Underwriters'
part to purchase any of the Shares.
The Underwriters will offer on behalf of the Company, the Shares
hereunder at a price of $5.50 per share. The Underwriters will be entitled to a
commission of 8% on each Share sold by the Underwriters on behalf of the
Company, such commission payable by the Company on the Closing Date from the
funds deposited in the special bank escrow account described in paragraph (b)
hereof. The Underwriters may, in their discretion, offer a part of the Shares
to dealers who are members of the NASD, selected by the Underwriters, at such
price less a concession not to exceed $______ per share and the Underwriters may
form and manage a selling group of such selected dealers.
(b) All funds received from subscribers of Shares will be deposited
by the Underwriters in a special noninterest bearing escrow account (or, if
invested, such investment will only be made in permissible investments under SEC
Rule 15c2-4) to be maintained by the Underwriters for the account of the Company
at Bank One Texas, N.A., Dallas, Texas. All funds, represented by check or
otherwise, shall be made payable to "Rushmore Financial Group, Inc. Escrow
Account." On the Closing Date, the Representative will distribute the funds then
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deposited in such special bank escrow account, as their interests may appear, to
the Company, selected dealers and to the Underwriters.
In the event this Agreement is terminated prior to the Closing Date
for any reason whatsoever, the Underwriters shall promptly refund to the
subscribers of the Shares all funds which have been received from them by the
Underwriters without interest.
All costs, expenses and charges incurred in connection with the
special bank escrow account shall be paid by the Company.
(c) It is understood and agreed that if at least 750,000 Shares are
not sold by the Underwriters pursuant to this Agreement during the offering,
this Agreement shall terminate and all funds deposited in the special bank
escrow account described in paragraph (b) hereof shall be promptly refunded in
full to the subscribers without interest or deduction. In such event neither
party hereto shall have any liability to the other hereunder except that the
Company shall pay to the Underwriters their non-accountable expense
reimbursement in connection with the offering of $75,000.00.
(d) Closing of the offering will take place at the offices of Glast,
Xxxxxxxx and Xxxxxx at 9:00 a.m., Central Time, on the earlier of (i) five days
from the date on which all of the Shares have been sold, or (ii) 45 days from
the Effective Date (which date may be extended up to 15 days from the Effective
Date by written Agreement between the Underwriters and the Company), said date
being herein called the "Closing Date." Certificates for the Shares registered
in such a manner and in such denominations as the Underwriters may request will
be delivered to the Underwriters so that the Underwriters may examine and
package such certificates for delivery no later than ten full business days
after the Closing Date.
3. Covenants of the Company. The Company covenants and agrees with the
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Underwriters that:
(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) of the Act a Prospectus containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance
on Rule 430A of the Act and (ii) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Underwriters shall not
previously have been advised and furnished with a copy and such reasonable
amount of time as is necessitated by the complexity of such amendment or
supplement or to which the Underwriters shall have reasonably objected or which
is not in compliance with the Act.
(b) The Company will furnish to the Underwriters and dealers selected
by the Underwriters as soon as possible after the Effective Date and thereafter
from time to time during the period of 90 days after the initial public offering
of the Shares (or for such longer period after the Effective Date as in the
opinion of the Underwriters' counsel, the Prospectus is required by law to be
delivered in connection with sales of the Shares by the Underwriters or a
dealer) as many copies of the Prospectus (and of any amended or supplemented
Prospectus) as the
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Underwriters may reasonably request. The Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Act and with the securities or Blue Sky laws of the
jurisdiction in which the Shares are offered and by all dealers to whom the
Shares may be sold, both in connection with the offering and sale of the Shares
and for such period of time thereafter as the Prospectus is required by the Act
to be delivered in connection with the sale of the Shares by you or any dealer.
If during such period any event occurs as a result of which, in the judgment of
the Company or in the opinion of counsel for the Underwriters, the Prospectus,
as then amended or supplemented, would include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading,
or it shall be necessary to amend or supplement the Prospectus to comply with
law or with the Act, the Company will promptly notify the Underwriters thereof
and on the Underwriters' request prepare and furnish to the Underwriters and
dealers selected by the Underwriters, in such quantity as the Underwriters and
such dealers may reasonably request, an amendment or supplement which will
correct such statement or omission or cause the Prospectus to comply with law
and with the Act, so that the Prospectus as so amended or supplemented will not,
in the light of the circumstances when it is so delivered, be misleading, or so
that the Prospectus will comply with any law. In the event that you and the
Company agree that the Prospectus should be amended or supplemented, the
Company, if requested by you, will promptly issue a press release announcing or
disclosing the matters to be covered by the proposed amendment or supplement.
(c) The Company will use its best efforts to cause the Registration
Statement to become effective and will promptly advise the Underwriters, and
will confirm such advice in writing, (i) when the Registration Statement or any
post effective amendment thereto shall have become effective, and when any
amendment of or supplement to the Prospectus is filed with the Commission; (ii)
when the Commission shall make a request or suggestion for any amendment to the
Registration Statement or for supplement to the Prospectus or for additional
information and the nature and substance thereof; (iii) the receipt of any
comments from the Commission or any state securities commission or regulatory
authority that relate to the Registration Statement or requests by any state
securities commission or regulatory authority for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for additional
information; (iv) as soon after the execution and delivery of this Agreement as
practicable and thereafter from time to time for such period as in the opinion
of counsel for the Underwriters a Prospectus is required by the Act to be
delivered in connection with the sale of the Shares, of any change in the
Company's condition (financial or other), business, prospects, properties, net
worth or results of operations, or of the happening of any event, which makes
any statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Act or the regulations thereunder to be stated therein or necessary in order
to make the statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Act or any other law; and (v) of the issuance by the Commission of a stop order
suspending the effectiveness of the Registration Statement or the suspension of
the qualification of the Shares for sale in any jurisdiction, or of the
initiation or threatening of any proceedings for that purpose, and will use
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its best efforts to prevent the issuance of such a stop order, or if such order
shall be issued, to obtain the withdrawal thereof at the earliest possible
moment.
(d) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by you and by dealers under the securities or Blue Sky
laws of such jurisdictions as you may designate and will file such consents to
service of process or other documents necessary or appropriate in order to
effect such registration or qualification and take all action necessary during
the period of twelve months after the Registration Statement becomes effective
to keep qualification of the Shares in good standing under such laws ; provided
that, in no event shall the Company be obligated to qualify to do business in
any jurisdiction where it is not now so qualified or to take any action which
would subject it to service of process in suits, other than those arising out of
the offering or sale of the Shares in any jurisdiction where it is not now so
subject. Said qualification of the Shares under the securities laws of the said
states shall be effected by the Underwriters' counsel and the Company shall pay
the legal fees therefor and all other expenses incident thereto.
(e) The Company will deliver to the Underwriters at or before the
Closing Date, three signed copies of the Registration Statement as originally
filed with the Commission and all amendments thereto including all financial
statements, exhibits and schedules filed therewith, and will deliver to the
Underwriters such number of conforming copies of the Registration Statement, but
without exhibits, and of all amendments thereto, as the Underwriters may
reasonably request.
(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, a consolidated
earnings statement (which need not be audited) in reasonable detail, covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, which earnings statement shall satisfy the
requirements of Section ll(a) of the Act and Rule 158 of the Act and will advise
the Underwriters in writing when such statement has been so made available.
(g) The Company will for a period of five years from the Closing
Date, deliver to the Underwriters copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
shareholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to the Underwriters similar reports with respect to
significant subsidiaries, as that term is defined in the Act, which are not
consolidated in the Company's financial statements.
(h) For one hundred eighty days after the Closing Date neither the
Company nor any of the officers, directors and significant shareholders of the
Company, will, without the Representative's prior written consent, sell or
otherwise dispose of any Common Stock of the Company except pursuant to a "Lock-
Up Agreement" acceptable to the Representative.
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(i) The Company will apply for and utilize the proceeds from the sale
of the Shares in the manner described in the Prospectus.
(j) The Company will apply for and use its best efforts to obtain
authorization for including the Shares in The Nasdaq SmallCap Market and will
register under Section 12(g) of the Securities Act of 1934, each as of the
earliest practicable time after completion of the Offering.
(k) The Company will, within one hundred and twenty days from
completion of the offering, apply for "listing" in national recognized corporate
reports or manuals conforming for trading under certain Blue-Sky laws and
maintain such "listing" on a current basis.
(l) The Company shall not have failed at or prior to the Closing Date
to have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
(m) Except as stated in this Agreement and in the Preliminary
Prospectus, the Company has not taken, nor will it take, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
4. Costs and Expenses. The Company will pay all costs, expenses and fees
------------------
incident to the performance of the obligations of the Company under this
Agreement, including, without limiting the generality of the foregoing, the
following: accounting fees of the Company; the fees and disbursements of counsel
for the Company; the cost of printing and delivering to, or as requested by, the
Underwriters copies of the Registration Statement, Preliminary Prospectuses, the
Prospectus, this Agreement, the Underwriters' Selling Memorandum, the Listing
Application, the Blue Sky Survey and any supplements or amendments thereto; the
filing fees of the Commission; the filing fees and expenses incident to securing
any required review by the NASD of the terms of the sale of the Shares; the
application fee of The Nasdaq SmallCap Market and the expenses, including but
not limited to the fees and disbursements of counsel for the Underwriters,
incurred in connection with the qualification of the Shares under state
securities or Blue Sky laws and an accountable expense allowance payable to the
Underwriters to cover the Underwriters' expenses incidental to the offering. The
cumulative total amount of all expenses which the Company shall reimburse to you
shall be $75,000.00 (exclusive of blue-sky registration and legal fees which
shall be paid by the Company) paid on a non-accountable basis. The Company will
pay the Underwriters the balance of this accountable expense allowance at the
closing. Except as otherwise provided above, the Company shall not be required
to pay for any of the Underwriters' expenses except that, if this Agreement
shall not be consummated because the conditions in Section 5 hereof are not
satisfied, or because this Agreement is terminated by the Representative
pursuant to Section 9 hereof, or by reason of any failure, refusal or inability
on the part of the Company to perform any undertaking or satisfy any condition
of this Agreement or to comply with any of the terms hereof on their part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of the Underwriters, then the Company
shall reimburse the Underwriters for reasonable out-of-pocket
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expenses, including but not limited to fees and disbursements of counsel,
reasonably incurred in connection with investigating, marketing and proposing to
market the Shares or in contemplation of performing their obligations hereunder,
but the Company shall not in any event be liable to any of the Underwriters for
damages on account of loss of anticipated profits from the sale by it of the
Shares.
5. Conditions of Obligations of the Underwriters. The obligations of
---------------------------------------------
the Underwriters are subject to the accuracy, as of the Closing Date, of the
representations and warranties of the Company contained herein, and to the
performance by the Company of its covenants and obligations hereunder and to the
following additional conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no
proceedings for that purpose shall have been taken or, to the knowledge of the
Company, shall be contemplated by the Commission.
(b) The Representative shall have received on the Closing Date the
opinion of Glast, Xxxxxxxx & Xxxxxx, counsel for the Company, dated the Closing
Date, addressed to the Underwriters to the effect that:
(i) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Texas, with
power and authority to own or lease its properties and conduct its business
as described in the Prospectus; each of the Subsidiaries, has been duly
organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, with power and authority
to own or lease its properties and conduct its business as described in the
Prospectus.
(ii) The Company and each of the Subsidiaries are duly qualified to
transact business in all jurisdictions in which the failure to qualify
would have a materially adverse effect upon the business of the Company and
the Subsidiaries taken as a whole; and the outstanding shares of capital
stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable and are owned by the Company,
another Subsidiary, or, in the case of Rushmore Insurance Services, Inc.,
by X.X. Xxxxx, Xx., free and clear of all liens, encumbrances and security
interests; and, to the best of such counsel's knowledge, the outstanding
shares of capital stock of the Subsidiaries are owned free and clear of all
liens, encumbrances and security interests, and no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into any shares of capital stock or of
ownership interests in the Subsidiaries are outstanding.
(iii) The execution and delivery of, and the performance by the
Company of its obligations under this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding
agreement of the Company, enforceable against the Company
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in accordance with its terms, except as rights to indemnity and
contribution hereunder may be limited by federal or state securities laws.
(iv) The Company has authorized and outstanding capital stock as set
forth under the caption "Description of Securities" in the Prospectus; the
authorized shares of its Common Stock have been duly authorized; the
outstanding shares of its Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable; all of the Shares
conform to the description thereof contained in the Prospectus; the
certificates for the Shares are in due and proper form; the shares of
Common Stock to be sold by the Company pursuant to this Agreement have been
duly authorized and will be validly issued, fully paid and non-assessable
when issued and paid for as contemplated by this Agreement; and no
preemptive rights of shareholders exist with respect to any of the Shares
or the issue and sale thereof.
(v) No holder of any security of the Company other than First
Southwest Company has or, will have any right to require registration of
shares of Common Stock or any other security of the Company because of the
filing of the Registration Statement or consummation of the transactions
contemplated by this Agreement.
(vi) The Registration Statement and all post-effective amendments,
if any, have become effective under the Act, and no stop order suspending
the effectiveness of the Registration Statement, as amended from time to
time, shall have been issued and no proceedings with respect thereto have
been instituted or are pending or indicated by the Commission under the
Act. In addition, any required filing of the Prospectus pursuant to Rule
424(b) has been made.
(vii) The Company is not now, and after sale of the Shares to be sold
by it hereunder and application of the net proceeds from such sale as
described in the Prospectuses under the caption "Use of Proceeds" will not
be, an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as
amended.
(viii) The Registration Statement, all Preliminary Prospectuses, the
Prospectus and each amendment or supplement thereto comply as to form in
all material respects with the requirements of the Act (except that such
counsel need express no opinion as to the financial statements, schedules
and other financial information included therein).
(ix) The statements under the captions "Business", "Description of
Securities" and "Shares Eligible for Future Sale" in the Prospectus,
insofar as such statements constitute a summary of documents referred to
therein or matters of law, are accurate summaries and fairly and correctly
present the information called for with respect to such documents and
matters.
(x) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described
in the Registration Statement
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or the Prospectus which are not so filed or described as required, and such
contracts and documents as are summarized in the Registration Statement or
the Prospectus are fairly summarized in all material respects.
(xi) Except as disclosed in the Prospectus, neither the Company nor
any of its Subsidiaries are in violation of any directive or order from or
agreement or understanding with any state or federal securities or
insurance department or commission, including but not limited to the NASD
and the Arizona Department of Insurance, or any governmental authority to
make any material change in the method of conducting or that restricts
their respective businesses. Such counsel knows of no actions, suits or
proceedings pending or threatened against the Company or any of the
Subsidiaries, including but not limited to actions, suits or proceedings at
law or in equity before any court, regulatory body or administrative
agency, domestic or foreign, which might, individually or in the aggregate,
prevent or adversely affect the transactions contemplated by this Agreement
or result in any material adverse change in the business or condition of
the Company or the Subsidiaries taken as a whole, except as set forth in
the Registration Statement.
(xii) The execution and delivery of this Agreement, the Warrant
Agreement and the consummation of the transactions herein and therein
contemplated do not and will not conflict with or result in a breach of any
of the terms or provisions of, or constitute a default under, the Articles
of Incorporation, as amended, bylaws, or other organizational documents, of
the Company or any of its Subsidiaries, or any agreement or instrument
known to such counsel 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,
violate any law, statute, judgment, decree, order, rule or regulation of
any court or governmental body having jurisdiction over the Company or any
of its Subsidiaries or any of its or their property; there is no regulatory
cease and desist order or other order, memorandum of understanding or
agreement between the Company or any of its Subsidiaries and any state or
federal securities or insurance department or commission, including, but
not limited to, the NASD, that would govern, limit or prohibit the Company
from entering into and performing its obligations under this Agreement.
(xiii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body, including but not limited to any state or federal
securities or insurance department or commission, including, but not
limited to, the NASD, is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or as required by
State securities or Blue Sky laws as to which such counsel need express no
opinion) except such as have been obtained or made, specifying the same.
(xiv) Neither the Company nor any of the Subsidiaries is in violation
of its respective certificate or articles of incorporation or bylaws, or
other organizational documents.
-15-
(xv) The Company has not been advised, and has no reason to
believe, that either it or any of its Subsidiaries is not conducting
business in compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business, including, without
limitation, all applicable local, State and Federal environmental laws and
regulations and all regulations, decisions, directives, orders and policies
of applicable state or federal securities or insurance department or
commissions, including but not limited to the NASD and the Arizona
Department of Insurance; except where failure to be so in compliance would
not materially adversely affect the condition (financial or otherwise),
business, results of operations or prospects of the Company and the
Subsidiaries taken as whole.
(xvi) The Company has all requisite corporate power and authority,
and has taken all necessary corporate action, to authorize, execute,
deliver and perform the Warrant Agreement, to execute, issue, sell and
deliver the Warrant and a certificate or certificates evidencing the
Warrant, to authorize (and adopt resolutions that approve and adopt the
terms of the Warrant Agreement, including the obligation to reserve for
issuance the Shares issuable upon the Warrant) and, upon payment of the
exercise price, to issue, sell and deliver, the shares of the Stock
issuable upon exercise of the Warrant, and to perform all of its
obligations under the Warrant Agreement and the Warrant. The Warrant
Agreement has been duly executed and delivered by the Company and will be a
legal, valid and binding agreement of the Company enforceable in accordance
with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally, by general principles of equity. No
authorization, approval, consent or other order of any governmental
authority is required for such authorization, issue or sale except to the
extent required by applicable federal and state securities laws.
(xvii) The Warrant, when delivered to the Underwriter, will be duly
authorized, executed and delivered and will be a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights
generally, by general principles of equity. The shares of Common Stock of
the Company, when issued upon exercise of the Warrant, will have been duly
authorized for issuance and, when issued in accordance with the terms of
the Warrant Agreement, will be validly issued and outstanding, fully paid
and nonassessable and free of statutory preemptive rights.
(xviii) Such counsel has discussed the Registration Statement and the
Prospectus with the officers of the Company and has participated in the
preparation of the Registration Statement and the Prospectus, including
review and discussion of the contents thereof, and based thereon nothing
has come to the attention of such counsel that has caused him to believe
that the Registration Statement at the time the Registration Statement
became effective, or the Prospectus, as of its date and as of the Closing
Date, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that any amendment or
-16-
supplement to the Prospectus, as of its respective date, and as of the
Closing Date contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements
and the notes thereto and the schedules and other financial and statistical
data included in the Registration Statement or the Prospectus).
(xix) To the best knowledge of such counsel, neither the Company nor
any of the Subsidiaries is in default in the performance of any material
obligation, agreement or condition contained in any bond, debenture, note,
line of credit or other evidence of indebtedness, or in any contract,
agreement, lease or other instrument to which the Company or any of the
Subsidiaries is a party, or by which any of them or any of their respective
properties is bound that is an exhibit to the Registration Statement or to
any document incorporated by reference, or is known to such counsel after
reasonable inquiry, or will result in the creation or imposition of any
lien, charge or incumbrance upon any property or assets of the Company or
any of the Subsidiaries, except as may be disclosed in the Prospectus, and
except for such defaults as would not have, individually or in the
aggregate, a Material Adverse Effect.
In rendering such opinion Glast, Xxxxxxxx & Xxxxxx may rely as
to matters governed by the laws of states other than Texas or Federal laws on
local counsel in such jurisdictions, provided that in each case Glast, Xxxxxxxx
& Xxxxxx shall state that they believe that they and the Underwriter are
justified in relying on such other counsel. In addition to the matters set forth
above, such opinion shall also include a statement to the effect that nothing
has come to the attention of such counsel which leads them to believe that the
Registration Statement, as of the time it became effective under the Act, the
Prospectus or any amendment or supplement thereto, on the date it was filed
pursuant to Rule 424(b) and the Registration Statement and the Prospectus, or
any amendment or supplement thereto, as of the Closing Date, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading
(except that such counsel need express no view as to financial statements,
schedules and other financial information included therein). With respect to
such statement, Glast, Xxxxxxxx & Xxxxxx may state that their belief is based
upon the procedures set forth therein, but is without independent check and
verification.
(c) The Representatives shall have received on the Closing Date the
opinion of Xxxxxxxx & Knight, P.C., counsel for the Underwriters, dated the
Closing Date, addressed to the Underwriters substantially to the effect
specified in subparagraphs (i), (iii), (vi) and (xvii) of Paragraph (b) of this
Section 5, and such other related matters as you may request.
(d) The Company and Representative shall have received at or prior
to the Closing Date from Xxxxxxxx & Xxxxxx, P.C. a memorandum or summary, in
form and substance satisfactory to the Representative, with respect to the
qualification for offering and sale by the Underwriters of the Shares under the
state securities or Blue Sky laws of such jurisdictions as the Representative
may reasonably have designated to the Company.
-17-
(e) The Representative shall have received on the Closing Date a
signed letter from Xxxxxxxx & Xxxxxx, L.L.P. and Coopers & Xxxxxxx, L.L.P. dated
the date hereof and the Closing Date substantially in form and substance
satisfactory to the Representatives.
(f) The Representatives shall have received on the Closing Date a
certificate or certificates of the Chief Executive Officer and the Chief
Financial Officer of the Company to the effect that, as of the Closing Date,
each of them severally represents as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been
taken or are, to his knowledge, contemplated by the Commission.
(ii) He does not know of any litigation instituted or threatened
against the Company of a character required to be disclosed in the
Registration Statement which is not so disclosed; he does not know of any
material contract required to be filed as an exhibit to the Registration
Statement which is not so filed; and the representations and warranties of
the Company contained in Section 1 hereof are true and correct as of the
Closing Date.
(iii) He has carefully examined the Registration Statement and the
Prospectus and, in his opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and
Prospectus did not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading
and, in his opinion, since the effective date of the Registration
Statement, no event has occurred which should have been set forth in a
supplement to or an amendment of the Prospectus which has not been so set
forth in such supplement or amendment.
(g) The Company shall have furnished to the Representative such
further certificates and documents confirming the representations and warranties
contained herein and related matters as the Representative may reasonably have
requested.
(h) The Shares have been approved for designation upon notice of
issuance on The Nasdaq SmallCap Market.
(i) The Company shall have executed and delivered to the
Representative the Warrant pursuant to and in the form of the Warrant Agreement.
(j) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company nor any material
increase in the short-term or long-term debt of the Company (other than in the
ordinary course of business) from that set forth or contemplated in the
Registration Statement or the
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Prospectus (or any amendment or supplement thereto); (iii) there shall not have
been, since the respective dates as of which information is given in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any material adverse change
in the condition (financial or other), business, prospects, properties, net
worth or results of operations of the Company and the Subsidiaries taken as a
whole; (iv) the Company and the Subsidiaries shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Company and the Subsidiaries, taken as a
whole, other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date, and signed by the chief executive officer
and the chief financial officer of the Company (or such other officers as are
acceptable to you), to the effect set forth in this Section 5(f) and in Section
5(g) hereof.
(k) The Company shall not have failed at or prior to the Closing Date
to have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
(l) Each condition to the closing of the Common Stock offering shall
have been satisfied or, with the Underwriters' specific approval, waived. On
the Closing Date, the closing of the Common Stock offering shall have been
consummated on terms that conform in all material respects to the description
thereof in the Registration Statement and Prospectus and the Underwriters shall
have received evidence satisfactory to the Underwriters of the consummation
thereof.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representative and to Xxxxxxxx & Xxxxxx,
P.C., counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 5
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date. In such event, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 4 and 7 hereof).
6. Conditions of the Obligations of the Company. The obligations of the
--------------------------------------------
Company to sell and deliver the portion of the Shares required to be delivered
as and when specified in this Agreement are subject to the conditions that at
the Closing Date no stop order suspending the effectiveness of the Registration
Statement shall have been issued and in effect or proceedings therefor initiated
or threatened.
-19-
7. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter, its agents, directors, officers and each person, if any, who
controls such Underwriter within the meaning of the Act against any losses,
claims, damages or liabilities to which such Underwriter or controlling person
may become subject under the act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) 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
will reimburse each Underwriter and each such controlling person for any legal
or other expenses reasonably incurred by such Underwriter or such controlling
person in connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that (i) the Company
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Underwriters specifically
for use in the preparation thereof and (ii) such indemnity with respect to any
related Preliminary Prospectus shall not inure to the benefit of any Underwriter
(or any person controlling the Underwriter) from whom the person asserting any
such loss, claim, damage or liability purchases Common Stock if such person did
not receive a copy of the Prospectus at or prior to the confirmation of the sale
of such Common Stock to such person in any case where such delivery is required
by the Act and the untrue statement or omission of material fact contained in
the related Preliminary Prospectus was corrected in the Prospectus, unless such
failure to deliver the Prospectus was a result of the Company's failure to
deliver the Prospectus to the Underwriters in requisite quantity on a timely
basis to permit such delivery or sending. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Each Underwriter will jointly and severally indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made; and will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement
-20-
or omission or alleged omission has been made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Underwriters specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(c) In case any proceeding (including but not limited to any
governmental investigation) shall be instituted involving any person in respect
of which indemnity may be sought pursuant to this Section 7, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 7(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 7(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was prejudiced by the failure to give such notice,
but the failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of the provisions of Section 7(a)
or (b). In case any such proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the indemnifying party shall pay as incurred the
fees and expenses of the counsel retained by the indemnified party in the event
(i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel or (ii) the named parties to any such
proceeding (including but not limited to any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm for all such indemnified parties. Such firm shall be designated
in writing by you in the case of parties indemnified pursuant to Section 7(a)
and by the Company and the Selling Shareholders in the case of parties
indemnified pursuant to Section 7(b). The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits
-21-
received by the Company on the one hand and the Underwriter on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under Section 7(c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company on the one
hand and the Underwriter on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriter, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue 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 on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 7(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (with in the meaning of Section ll(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriter's obligations in this Section 7(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 7 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
8. Notices. All communications hereunder shall be in writing and, except
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as otherwise provided herein, will be mailed, delivered or telegraphed and
confirmed as follows: if to the Underwriters, to First Southwest Company, 0000
Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx,
-00-
Xxxxx 00000, Attention: Xxxxxxx Xxxxxx; if to the Company, to Rushmore Financial
Group, Inc., 00000 Xxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, Attention: X.X.
Xxxxx, Xx.
9. Termination. This Agreement may be terminated by you by notice to the
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Company as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement.
(b) at any time prior to the Closing Date if any of the following has
occurred (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole or the earnings, business affairs, management or business prospects of
the Company and its Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, (ii) any outbreak of hostilities or other national
or international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, calamity, crisis or change on the
financial markets of the United States would, in your reasonable judgment, make
the offering or delivery of the Shares impracticable, (iii) suspension of
trading in securities on the New York Stock Exchange or the American Stock
Exchange or limitation on prices (other than limitations on hours or numbers of
days of trading) for securities on either such exchange, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your reasonable opinion materially and adversely affects or will materially or
adversely affect the business or operations of the Company, (v) declaration of a
banking moratorium by either federal or New York state authorities, or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affaire which in your reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(c) as provided in Section 5 of this Agreement.
10. Qualified Independent Underwriter. The Company hereby confirms that
---------------------------------
at its request First Southwest Company has without compensation acted as a
"qualified independent underwriter" (in such capacity, the "QIU") within the
meaning of Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. in connection with the offering of the Shares. The
Company will indemnify and hold harmless the QUI, and its agents, officers,
directors and each person, if any, who controls such QUI within the meaning of
the Act against any losses, claims, damages or liabilities, joint or several, to
which the QIU may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon the QUI's acting (or alleged failing to act) as such
"qualified independent underwriter" and will reimburse the QUI for any legal or
other expenses reasonably incurred by the QUI in connection with investigating
or defending any such loss, claim, damage, liability or action as such expenses
are incurred.
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11. Survival of Indemnities, Representations and Warranties. All
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representations, warranties, agreements, covenants and indemnities contained
herein of the Company and of the Underwriters remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
Underwriter or the Company or any of their respective officers, directors,
partners or any controlling person and shall survive the delivery of and payment
for the Shares or termination of this Agreement pursuant to Section 9 hereof.
12. Parties in Interest. This Agreement shall inure to the benefit of and
-------------------
be binding upon the Company and the Underwriters, the officers, directors and
partners of such parties, each controlling person of the Company and the
Underwriters, and their respective successors and assigns. Nothing in this
Agreement is intended or shall be construed to give to any person, firm or
corporation, other than the parties hereto and their respective successors and
assigns and the controlling persons and officers and directors of the Company
and the Underwriters, any legal right, remedy or claim under or in respect to
this Agreement or any provision herein contained; this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective successors and
assigns, and such controlling persons, directors and officers, and for the
benefit of no other person or corporation.
The term "successor" as used in this Agreement shall not include any
purchaser, as such purchaser, of any shares from the Underwriter or any selected
dealer.
This Agreement constitutes the entire agreement among the parties
concerning the subject matter hereof, and supersedes any letter of intent
previously entered into.
13. Miscellaneous. The reimbursement, indemnification and contribution
-------------
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its directors or officers and (c) delivery of and payment for the
Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Texas.
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If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and you in
accordance with its terms.
Very truly yours,
RUSHMORE FINANCIAL GROUP, INC.
By:
____________________________________
X.X. Xxxxx, Xx.
Chairman and Chief Executive Officer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
FIRST SOUTHWEST COMPANY
RUSHMORE SECURITIES CORPORATION
By: FIRST SOUTHWEST COMPANY
By:___________________________________
Authorized Officer
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