400,000 Shares of Series A Cumulative Convertible Preferred Stock
and
1,200,000 Series A Redeemable Common Stock Purchase Warrants
WESTERN COUNTRY CLUBS, INC.
, 1997
UNDERWRITING AGREEMENT
NATIONAL SECURITIES CORPORATION
As Representative of the Several Underwriters
c/o National Securities Corporation
0000 Xxxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Dear Sirs:
Western Country Clubs, Inc., a Colorado corporation (the "Company"),
proposes to issue and sell to you and the other underwriters named in Schedule I
hereto (collectively, the "Underwriters"), for whom National Securities
Corporation is acting as the managing underwriter and representative (the
"Representative"), in the respective amounts set forth opposite each
Underwriter's name in Schedule I hereto an aggregate of 400,000 shares of Series
A Cumulative Convertible Preferred Stock, $.10 par value, of the Company (the
"Preferred Stock") and 1,200,000 Series A Redeemable Common Stock Purchase
Warrants (individually, a "Warrant"), which entitles the holder thereof to
purchase one share of common stock, $ .01 par value, (the "Common Stock") at a
price of $____ per share, subject to certain conditions. The shares of Preferred
Stock, the Warrants, and the shares of Common Stock issuable upon exercise of
such Warrants, are collectively referred to herein as the "Underwritten
Securities." In addition, (i) the Company proposes to grant to the Underwriters
an option (the "Underwriters' Option") to purchase up to an aggregate of 60,000
additional shares of Preferred Stock and 180,000 additional Warrants solely to
cover over-allotments in the sale of the Underwritten Securities (such
additional shares of Preferred Stock and Warrants and the shares of Common Stock
issuable upon exercise of such Warrants, are collectively referred to herein as
the "Option Securities") and (ii) the Company proposes to sell to the
Underwriters the Underwriters' Warrants (described in Section 7 hereof) to
purchase 40,000 additional shares of Preferred Stock and 100,000 additional
Warrants (such Underwriters' Warrants and additional shares of Preferred Stock
and Warrants and the shares of Common Stock issuable upon exercise of such
Warrants, are collectively referred to herein as the "Underwriters'
Securities"). The Underwritten Securities, the Option Securities and the
Underwriters' Securities are collectively referred to herein as the
"Securities."
The terms which follow, when used in this Agreement, shall have the
meanings indicated. "Effective Date" shall mean each date that the Registration
Statement (as defined below) and any post-effective amendment or amendments
thereto became or become effective. "Execution Time" shall mean the date and
time that this Agreement is executed and delivered by the parties hereto.
"Preliminary Prospectus" shall mean any preliminary prospectus referred to in
Section 1(a) below with respect to the offering of the Securities, and any
preliminary prospectus included in the Registration Statement at the Effective
Date that omits Rule 430A Information (as defined below). Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the most
recent Preliminary Prospectus which predates or coincides with the Execution
Time. "Prospectus" shall mean the final prospectus with respect to the offering
of the Securities that contains the Rule 430A Information (as defined below).
"Registration Statement" shall mean the registration statement referred to in
Section 1(a) below, including exhibits and financial statements, in the form in
which it has or shall become effective and, in the event any post-effective
amendment thereto becomes effective prior to the Closing Date (as hereinafter
defined) or any settlement date pursuant to Section 3(b) hereof, shall also mean
such Registration Statement as so amended on such date. Such term shall include
Rule 430A Information (as defined below) deemed to be included therein at the
Effective Date as provided by Rule 430A. "Rule 424"and "Rule 430A" refer to such
rules under the Securities Act of 1933, as amended (the "Act"). "Rule 430A
Information" means information with respect to the Securities and the offering
thereof permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each Underwriter that:
(a) The Company meets the requirements for the use of Form
SB-2 under the Act and has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement, including a related preliminary
prospectus ("Preliminary Prospectus"), on Form SB-2 (Commission File
No.333-21547) (the "Registration Statement") for the registration under the Act
of the Securities. The Company may have filed one or more amendments thereto,
including related Preliminary Prospectuses, each of which has previously been
furnished to you. The Company will next file with the Commission either, prior
to effectiveness of such Registration Statement, a further amendment thereto
(including the form of Prospectus) or, after effectiveness of such Registration
Statement, a Prospectus in accordance with Rules 430A and 424(b)(1) or (4). As
filed, such amendment and form of Prospectus, or such Prospectus, shall include
all Rule 430A Information and, except to the extent the Representative shall
agree in writing to a modification, shall be in all substantive respects in the
form furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific additional
information and other changes (beyond that contained in the latest Preliminary
Prospectus) as the Company has advised you in writing, prior to the Execution
Time, will be included or made therein.
(b) Each Preliminary Prospectus, at the time of filing
thereof, conformed in all material respects with the applicable requirements of
the Act and the rules and regulations thereunder and did not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. If the Effective Date is prior to or simultaneous with the Execution
Time, (i) on the Effective Date, the Registration Statement conformed in all
material respects to the requirements of the Act and the rules and regulations
thereunder and did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading and (ii) at the Execution Time,
the Registration Statement conforms, and at the time of filing of the Prospectus
pursuant to Rule 424(b), the Registration Statement and the Prospectus will
conform, in all material respects to the requirements of the Act and the rules
and regulations thereunder, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit, to
state a material fact required to be stated therein or necessary in order to
make the statements therein (and, in the case of the Prospectus, in the light of
the circumstances under which they were made) not misleading. If the Effective
Date is subsequent to the Execution Time, on the Effective Date, the
Registration Statement and the Prospectus will conform in all material respects
to the requirements of the Act and the rules and regulations thereunder, and
neither of such documents will contain any untrue statement of any material fact
or will omit to state any material fact required to be stated therein or
necessary to make the statements therein (and, in the case of the Prospectus, in
the light of the circumstances under which they were made) not misleading. The
two preceding sentences do not apply to statements in or omissions from the
Registration Statement or the Prospectus (or any supplements thereto) based upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Underwriter through the Representative specifically for use in
connection with the preparation of the Registration Statement or the Prospectus
(or any supplements thereto).
(c) Except as set forth in the Prospectus, the Company has no
subsidiaries, and as of the Effective Date, will have no subsidiaries.
(d) The Company has been duly organized and is validly
existing as a Colorado corporation in good standing with full corporate power
and corporate authority to own its properties and conduct its business as
described in the Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
it conducts its business or owns property and in which the failure, individually
or in the aggregate, to be so qualified would have a material adverse effect on
the properties, assets, operations, business or condition (financial or
otherwise) of the Company ("Material Adverse Effect").
(e) The Company does not own any shares of capital stock or
any other securities of any corporation or any equity interest in any firm,
partnership, association or other entity other than as described in the
Registration Statement.
(f) The Company's equity capitalization is as set forth in the
Prospectus; the capital stock of the Company conforms in all material respects
to the description thereof contained in the Prospectus; all outstanding shares
of Common Stock, and the shares of Preferred Stock to be issued and sold
hereunder have been duly and validly authorized and issued and are, or will be
fully paid and nonassessable, and the certificates therefor are in valid and
sufficient form in accordance with the laws of the State of Colorado and the
Company's Bylaws; and, on the Closing Date (as defined in Section 3(a) hereof)
and any settlement date pursuant to Section 3(b) hereof, there will be, no
classes of stock outstanding except the Preferred Stock and Common Stock; all
outstanding options to purchase shares of Common Stock have been duly and
validly authorized and issued; except as described in the Prospectus, there are,
and, on the Closing Date and any settlement date pursuant to Section 3(b)
hereof, there will be, no options, warrants or rights to acquire, or debt
instruments convertible into or exchangeable for, or other agreements or
understandings to which the Company is a party, outstanding or in existence,
entitling any person to purchase or otherwise acquire shares of capital stock of
the Company; the issuance and sale of the Securities have been duly and validly
authorized and, when issued, delivered and paid for in accordance with the terms
hereof, the Securities will be fully paid and nonassessable and free from
preemptive rights, and will conform in all respects to the description thereof
contained in the Prospectus; the Warrants and Underwriters' Warrants will, when
issued, constitute valid and binding obligations of the Company enforceable in
accordance with their terms and the Company has reserved a sufficient number of
shares of Common Stock for issuance upon exercise thereof (including the
Warrants included in the Underwriters' Warrants); the Warrants and Underwriters'
Warrants will, when issued, possess the rights, privileges and characteristics
as represented in the exhibits to the Registration Statement and as described in
the Prospectus; and the Securities (other than the Underwriters' Warrants) have
been approved for listing on the Nasdaq Small Cap Market upon notice of issuance
thereof. Each offer and sale of securities of the Company referred to in Item 26
of Part II of the Registration Statement was effected in compliance with the Act
and the rules and regulations thereunder, and with all applicable state
securities and blue sky ("Blue Sky") laws.
(g) Other than as described in the Prospectus, there is no
pending or, to the best knowledge of the Company, threatened action, suit or
proceeding before any court or governmental agency, authority or body, domestic
or foreign, or any arbitrator involving the Company of a character required to
be disclosed in the Registration Statement or the Prospectus. There is no
contract or other document of a character required to be described in the
Registration Statement or Prospectus or to be filed as an exhibit that is not
described or filed as required.
(h) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as rights of indemnity and contribution hereunder may be limited by
public policy and except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and general principles of equity.
(i) The Company has full corporate power and authority to
enter into and perform its obligations under this Agreement and to issue, sell
and deliver the Securities in the manner provided in this Agreement. The Company
has taken all necessary corporate action to authorize the execution and delivery
of, and the performance of its obligations under, this Agreement.
(j) Neither the execution, delivery and performance of this
Agreement by the Company, the offering, issue and sale of the Securities, nor
the consummation of any other of the transactions contemplated herein, nor the
fulfillment of the terms hereof, will conflict with or result in a breach or
violation of, or constitute a default (or an event that with notice or lapse of
time, or both, would constitute a default) under, or result in the imposition of
a lien on any properties of the Company or an acceleration of indebtedness
pursuant to, the Articles of Incorporation or Bylaws of the Company, or any of
the terms of any indenture or other agreement or instrument to which the Company
is a party or by which the Company or any of its properties are bound, or any
federal, state or local law, rule, regulation of any court, governmental or
regulatory body, stock exchange or arbitrator having jurisdiction over the
Company or any of its assets. The Company is not (A) in violation of its
Articles of Incorporation or Bylaws or (B) in breach of or default under any of
the terms of any indenture or other agreement or instrument to which it is a
party or by which it or its properties are bound, which breach or default
described in this clause (B) would, individually or in the aggregate, have a
Material Adverse Effect.
(k) Except as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company to issue to it any shares
of capital stock in consequence of the issue and sale of the Securities, nor
does any person have preemptive rights, or rights of first refusal or other
rights to purchase any of the Securities. Except as referred to in the
Prospectus, no person holds a right to require or participate in a registration
under the Act of Common Stock or any other equity securities of the Company.
(l) The Company has not (i) taken and will not take, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to cause or result in, under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale or the Securities or (ii) effected any
sales of shares or securities that are required to be disclosed in response to
Item 26 of Part II of the Registration Statement (other than transactions
disclosed in response to Item 26 of Part II of the Registration Statement or the
Prospectus).
(m) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or body is required
to be obtained or filed by or on behalf of the Company in connection with the
transactions contemplated herein, except such as may have been obtained or made
and registration of the Securities under the Act, and such as may be required
under the Blue Sky laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters.
(n) The accountants who have certified the financial
statements filed or to be filed with the Commission as part of the Registration
Statement are independent accountants as required by the Act.
(o) No stop order preventing or suspending the use of any
Preliminary Prospectus has been issued, and no proceedings for that purpose are
pending or, to the best knowledge of the Company, threatened or contemplated by
the Commission; no stop order suspending the sale of the Securities in any
jurisdiction has been issued and no proceedings for that purpose have been
instituted or, to the best knowledge of the Company, threatened or are
contemplated; and any request of the Commission for additional information (to
be included in the Registration Statement or the Prospectus or otherwise) has
been complied with.
(p) The Company has not sustained since March 31, 1997 any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, and, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, there have not been any material changes in the capital stock or
short-or long-term debt of the Company, or any material adverse change, or a
development known to the Company that could reasonably be expected to cause or
result in a material adverse change, in the general affairs, management,
financial position, stockholders' equity, results of operations or prospects of
the Company, other than as set forth in the Prospectus. Except as set forth in
the Prospectus, there exists no present condition or state of facts or
circumstances known to the Company (A) affecting its reserves or (B) involving
its business which the Company can now reasonably foresee would have a Material
Adverse Effect on the business of the Company, or which would prevent the
Company from conducting its business as described in the Prospectus in
essentially the same manner in which it has heretofore been conducted.
(q) The financial statements and the related notes of the
Company included in the Registration Statement and the Prospectus present fairly
the financial position, results of operations, cash flow and changes in
stockholders' equity of the Company at the dates and for the periods indicated,
subject in the case of the financial statements for interim periods, to normal
and recurring year-end adjustments. The financial Statement schedules included
in the Registration Statement present fairly the information required to be
stated therein. Such financial statements and schedules were prepared in
conformity with the Commission's rules and regulations and in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as stated therein. The financial
information of the Company set forth in the Prospectus under the caption
"Management's Discussion and Analysis or Plan of Operations" fairly present, on
the basis stated in the Prospectus, the information included therein.
(r) The Company owns or possesses, or has the right to use
pursuant to licenses, sublicenses, agreements, permissions or otherwise,
adequate patents, copyrights, trade names, trademarks, service marks, licenses
and other intellectual property rights necessary to carry on its business as
described in the Prospectus, and, except as set forth in the Prospectus, the
Company has not received any notice of either (i) default under any of the
foregoing or (ii) infringement of or conflict with asserted rights of others
with respect to, or challenge to the validity of, any of the foregoing which, in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
could have a Material Adverse Effect, and the Company knows of no fact or
existing circumstance which could reasonably be anticipated to serve as the
basis for any such notice or any such default, infringement or conflict.
(s) The Company has filed all applications and has obtained
all permits, approvals, licenses, franchises, certificates and authorizations of
all federal, state, local or foreign governmental authorities ("Permits") as are
necessary to own its respective property and to conduct its business in the
manner now being conducted and as described in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus, except where the lack of
ownership or possession of such Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company; the Company has
fulfilled and performed all of 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 would result in any other
material impairment of the rights of the holder of any such Permit, subject in
each case to such qualification as may be set forth in the Prospectus, except
where such revocations, terminations or other impairments thereof would not,
individually or in the aggregate, have a Material Adverse Effect on the Company;
and, except as described in the Prospectus, none of such Permits contains any
restriction that is materially burdensome to the Company.
(t) Subject to such exceptions as are not material (A) the Company owns
all properties and assets described in the Registration Statement and the
Prospectus as being owned by it and (B) the Company has good title to all
properties and assets owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except as otherwise disclosed in the Prospectus,
and except for (i) liens for taxes not yet due, (ii) mortgages and liens
securing debt reflected on the financial statements included in the Prospectus,
(iii) materialmen's, workmen's, vendor's and other similar liens incurred in the
ordinary course of business that are not delinquent and, individually or in the
aggregate, do not have a material adverse effect on the value of such properties
or assets to the Company, or on the use of such properties or assets by the
Company, in its respective businesses, and (iv) any other liens that,
individually or in the aggregate, are not likely to result in a Material Adverse
Effect. All leases to which the Company is a party and which are material to the
conduct of the business of the Company are valid and binding and no material
default by the Company has occurred and is continuing thereunder; and the
Company enjoys peaceful and undisturbed possession under all such material
leases to which it is a party as lessee.
(u) The books, records and accounts of the Company accurately
and fairly reflect, in reasonable detail, the transactions in and dispositions
of the assets of the Company. The system of internal accounting controls
maintained by the Company is 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
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(v) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, the Company has not incurred any liabilities or obligations,
direct or contingent, or entered into any transactions, in each case, which are
likely to result in a Material Adverse Effect, and there has not been any
payment of or declaration to pay any dividends or any other distribution with
respect to the shares of the capital stock of the Company.
(w) The Company has obtained and delivered to the
Representative the written agreements, in substantially the form of Exhibit A
attached hereto, of each of the persons listed in Schedule III attached hereto,
restricting dispositions of shares of capital stock of the Company in accordance
with the provisions of Section 6 hereof and the terms contained in the Exhibit A
form applicable thereto.
(x) The Company is in compliance in all material respects with
all applicable laws, rules and regulations, including, without limitation,
employment and employment practices, immigration, terms and conditions of
employment, health and safety of workers, customs and wages and hours, and is
not engaged in any unfair labor practice. No property of the Company has been
seized by any governmental agency or authority as a result of any violation by
the Company or any independent contractor of the Company of any provision of
law. There is no pending unfair labor practice complaint or charge filed with
any governmental agency against the Company. There is no labor strike, material
dispute, slow down or work stoppage actually pending or, to the best knowledge
of the Company, threatened against or affecting the Company; no grievance or
arbitration arising out of or under any collective bargaining agreement is
pending against the Company; no collective bargaining agreement which is binding
on the Company restricts the Company from relocating or closing any of its
operations; and the Company has not experienced any work stoppage or other labor
dispute at any time.
(y) The Company has accurately, properly and timely (giving
effect to any valid extensions of time) filed all federal, state , local and
foreign tax returns (including all schedules thereto) that are required to be
filed, and has paid all taxes and assessments shown thereon. All tax
deficiencies asserted or assessed against the Company by the Internal Revenue
Service ("IRS") or any other foreign or domestic taxing authority have been paid
or finally settled with no remaining amounts owed. Neither the IRS nor any other
foreign or domestic taxing authority has examined any tax returns of the
Company. The charges, accruals and reserves shown in the financial statements
included in the Prospectus in respect of taxes for all fiscal periods to date
are adequate, and nothing has occurred subsequent to the date of such financial
statements that makes such charges, accruals or reserves inadequate. The Company
is not aware of any proposal (whether oral or written) by any taxing authority
to adjust any tax return filed by the Company.
(z) Except as set forth in the Prospectus, there are no
outstanding loans, advances or guaranties of indebtedness by the Company to or
for the benefit of its affiliates, or any of its officers or directors, or any
of the members of the families of any of them, which are required to be
disclosed in the Registration Statement or the Prospectus.
(aa) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(bb) The Company has insurance of the types and in the amounts
that it reasonably believes is adequate for its business, including, but not
limited to, casualty and general liability insurance covering all real and
personal property owned or leased by the Company, as applicable, against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against.
(cc) The Company has not at any time (i) made any
contributions to any candidate for political office, or failed to disclose fully
any such contribution, in violation of law; (ii) made any payment to any state,
federal or foreign governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
allowed by all applicable laws; or (iii) violated, nor is it in violation of,
any provision of the Foreign Corrupt Practices Act of 1977.
(dd) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on behalf of the
Company, and the Registration Statement has been duly executed pursuant to such
authorization by and on behalf of the Company.
(ee) All documents delivered or to be delivered by the Company
or any of its directors or officers to the Underwriters, the Commission or any
state securities law administrator in connection with the issuance and sale of
the Securities were, on the dates on which they were delivered, and will be, on
the dates on which they are to be delivered, true, complete and correct in all
material respects.
(ff) With such exceptions as are not likely to result in a
Material Adverse Effect, the Company is in compliance with all federal, state,
foreign and local laws and regulations relating to pollution or protection of
human health or the environment ("Environmental Laws"), and the Company has not
received any notice or other communication alleging a currently pending
violation of any Environmental Laws. With such exceptions as are not likely to
result in a Material Adverse Effect, other than as set forth in the Prospectus,
to the Company's best knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge or disposal of any chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products, that may result in the imposition of liability on the Company or any
claim against the Company or, to the Company's best knowledge, against any
person or entity whose liability for any claim the Company has or may have
assumed either contractually or by operation of law, and the Company has not
received any notice or other communication concerning any such claim against the
Company or such person or entity.
(gg) Except as described in the Prospectus, the Company does
not maintain, nor does any other person maintain on behalf of the Company, any
retirement, pension (whether deferred or non-deferred, defined contribution or
defined benefit) or money purchase plan or trust. There are no unfunded
liabilities of the Company with respect to any such plans or trusts that are not
accrued or otherwise reserved for on the Company's financial statements included
in the Registration Statement and the Prospectus.
(hh) Any certificates signed by an officer of the Company and
delivered to the Representative or the Underwriters shall also be deemed a
representation and warranty of the Company to the Underwriters as to the matters
covered thereby.
2. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to issue and
sell to the Underwriters an aggregate of 400,000 shares of Preferred Stock and
1,000,000 Warrants. Each of the Underwriters agrees, severally and not jointly,
to purchase from the Company the number of shares of Preferred Stock and
Warrants set forth opposite its name in Schedule I hereto. The purchase price
for the Securities to be paid by the several Underwriters to the Company shall
be $____ per share of Preferred Stock and $____ per Warrant.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option (the "Underwriters' Option") to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of 60,000 shares of Preferred
Stock and 150,000 Warrants at the purchase price of $____ per share of Preferred
Stock and $____ per Warrant for use solely in covering any over-allotments made
by the Representative for the account of the Underwriters in the sale and
distribution of the Underwritten Securities. The Underwriters' Option may be
exercised in whole or in part at any time on or before the 45th day after the
Effective Date upon written or telegraphic notice by the Representative to the
Company setting forth the number of shares of Preferred Stock and Warrants which
the several Underwriters are electing to purchase pursuant to the Underwriters'
Option and the settlement date and instructions as to the names and
denominations in which the Securities to be issued pursuant to the Underwriters'
Option are to be registered. Delivery of certificates for such shares of
Preferred Stock by the Company, and payment therefor to the Company, shall be
made as provided in Section 3 hereof. The number of shares of Preferred Stock
and Warrants to be so purchased by each Underwriter pursuant to the
Underwriters' Option shall be determined by multiplying the number of shares of
Preferred Stock and Warrants to be sold by the Company pursuant to the
Underwriters' Option, as exercised, by a fraction, the numerator of which is the
number of shares of Preferred Stock and Warrants to be purchased by such
Underwriter as set forth opposite its name in Schedule I and the denominator of
which is the total number of shares of Preferred Stock and Warrants to be
purchased by all of the Underwriters as set forth on Schedule I (subject to such
adjustments to eliminate any fractional shares of Preferred Stock and Warrants
purchases as the Representative in their discretion may make).
3. Delivery and Payment.
(a) Delivery of the certificates for the shares of Preferred
Stock and Warrants described in Sections 2(a) and, if the Underwriters' Option
described in Section 2(b) hereof is exercised on or before the third business
day prior to the Closing Date (as defined below), 2(b) hereof shall be made by
the Company through the facilities of the Depository Trust Company ("DTC"), and
payment therefor, shall be made at the office of the Company at 11:00 a.m.
Dallas, Texas time, on such date, not earlier than the fourth full business day
following the Effective Date of the Registration Statement, but not later than
twelve business days after such Effective Date, as you shall designate by at
least 48 hours' prior notice to the Company (such date, time of delivery and
payment for such Securities being herein called the Closing Date). Delivery of
the certificates for such Securities to be purchased on the Closing Date shall
be made as provided in the preceding sentence for the respective accounts of the
several Underwriters against payment by the several Underwriters through the
Representative of the aggregate purchase price of such Securities being sold by
the Company, to or upon the order of the Company, by certified or official bank
check or checks drawn on or by a New York Clearing House bank and payable in
next day funds. Certificates for such Securities shall be registered in such
names and in such denominations as the Representative may request not less than
three full business days in advance of the Closing Date. The Company agrees to
have the certificates for the Securities to be purchased on the Closing Date
available at the office of the DTC, not later than 9:00 a.m. Dallas, Texas time
at least one business day prior to the Closing Date.
(b) If the Underwriters' Option is exercised after the third
business day prior to the Closing Date, the Company will deliver (at the expense
of the Company) on the date specified by the Representative (which shall not be
less than three business days after exercise of the Underwriters' Option),
certificates for the Securities described in Section 2(b) hereof in such names
and denominations as the Representative shall have requested against payment at
the office of the Company of the purchase price therefor, by certified or
official bank check or checks drawn on or by a New York Clearing House bank and
payable in next day funds. If settlement for such Securities occurs after the
Closing Date, the Company will deliver to the Representative on the settlement
date for such Securities, and the obligation of the Underwriters to purchase
such Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof. The
Company agrees to have the certificates for the Securities to be purchased after
the Closing Date available at the office of the DTC, not later than 9:00 a.m.
Dallas, Texas time at least one business day prior to the settlement date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements of the Company. The Company agrees with the several
Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the Execution Time, to
become effective as promptly as possible. If the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the Prospectus
is otherwise required under Rule 424(b), the Company will file the Prospectus,
properly completed, pursuant to Rule 424(b) within the time period prescribed
and will provide evidence satisfactory to the Representative of such timely
filing. The Company will promptly advise the Representative (i) when the
Registration Statement shall have become effective, (ii) when any post-effective
amendment thereto shall have become effective, (iii) of any request by the
Commission for any amendment or supplement of the Registration Statement or the
Prospectus or for any additional information with respect thereto, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the receipt by the Company of any notification with
respect to the institution or threatening of any proceeding for that purpose,
and (v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose. The Company
will use its best efforts to prevent the issuance of any such stop order or
suspension and, if issued, to obtain as soon as possible the withdrawal thereof.
The Company will not file any amendment to the Registration Statement or
supplement to the Prospectus without the prior consent of the Representative.
The Company will prepare and file with the Commission, promptly upon your
request, any amendment to the Registration Statement or supplement to the
Prospectus that you reasonably determine to be necessary or advisable in
connection with the distribution of the Securities by you, and will use its best
efforts to cause the same to become effective as promptly as possible. The
Company, at the Company's expense, shall keep the Registration Statement
effective and the information contained therein (including information contained
in the Prospectus) current during the conversion period of the Preferred Stock
and the term of the Warrants in accordance with the Act and the rules and
regulations thereunder. Without limiting the effect of the preceding sentence,
in the event any Underwriter is required to deliver a Prospectus in connection
with sales of any of the Securities at any time nine months or more after the
Effective Date, upon the written request of the Representative and at the
expense of the Company, the Company will prepare, file with the Commission and
deliver to such Underwriter as many copies as the Representative may request of
an amended or supplemented Prospectus complying with Section 10(a)(3) of the
Act.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it otherwise shall be necessary to supplement the
Prospectus to comply with the Act or the rules or regulations thereunder, the
Company will promptly notify the Representative and prepare and file with the
Commission, subject to Section 5(a) hereof, a supplement that will correct such
statement or omission or a supplement that will effect such compliance.
(c) As soon as practicable (but not later than ____1998), the Company
will make generally available to its security holders and to the Representative
an earnings statement or statements (which need not be audited) of the Company
covering a period of at least twelve months after the Effective Date (but in no
event commencing later than 90 days after such date), which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder.
(d) The Company will furnish to each of you and counsel for the
Underwriters, without charge, three signed copies of the Registration Statement
and any amendments thereto (including exhibits thereto) and to each other
Underwriter a conformed copy of the Registration Statement and any amendments
thereto (without exhibits thereto) and, so long as delivery of a prospectus by
an Underwriter or dealer may be required by the Act, as many copies of the
Prospectus and each Preliminary Prospectus and any supplements thereto as the
Representative may reasonably request. The Company will furnish or cause to be
furnished to the Representative copies of all reports on Form SR required by
Rule 463 under the Act.
(e) The Company will take all actions necessary for the registration or
qualification of the Securities for sale under the laws of such jurisdictions
within the United State s and its territories as the Representative may
designate, will maintain such qualifications in effect so long as required for
the distribution of the Securities and will pay the fee of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with its
review of the offering, provided that the Company shall not be required to
qualify as a foreign corporation or to consent to service of process under the
laws of any such jurisdiction (except service of process with respect to the
offering and sale of the Securities).
(f) The Company will apply the net proceeds from the offering received
by it in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(g) The Company will (i) cause the Securities (other than the
Underwriters' Warrants) to be listed on the Nasdaq Small Cap Market, and (ii)
comply with all registration, filing and reporting requirements of the Exchange
Act and the Nasdaq Small Cap Market which may from time to time be applicable to
the Company, and (iii) file a report of sales and use of proceeds on Form SR as
required to be filed pursuant to Rule 463 under the Act from time to time.
(h) The Company will file promptly all documents required to be filed
with the Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act
subsequent to the Effective Date and during any period in which the Prospectus
is required to be delivered.
(i) During the five year period commencing on the date hereof, the
Company will furnish to its stockholders, as soon as practicable after the end
of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of earnings and will furnish to you and, upon request, to the other
Underwriters hereunder (i) concurrent with furnishing such annual and quarterly
reports to its stockholders, copies of such reports; (ii) as soon as they are
available, copies of all reports and financial statements furnished to or filed
with the Commission, the NASD, the Nasdaq Small Cap Market, or any other
securities exchange; (iii) every press release and every material news item or
article in respect of the Company or its affairs which was released or prepared
by the Company; and (iv) any additional information of a public nature
concerning the Company or its business that you may reasonably request. During
such five year period, if the Company shall have active subsidiaries, the
foregoing financial statements shall be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and
shall be accompanied by similar financial statements for any significant
subsidiary that is not so consolidated.
(j) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for the Securities.
(k) The Company will not, for a period of one year following the
Effective Date, without the prior written consent of the Representative, issue,
sell, contract to sell (including, without limitation, any short sale),
transfer, assign, pledge, encumber, hypothecate or grant any option to purchase
or otherwise dispose of, any capital stock, or any options, rights or warrants
to purchase any capital stock of the Company, or any securities or indebtedness
convertible into or exchangeable for shares of capital stock of the Company,
except for (i) sales of the Securities as contemplated by this Agreement, and
(ii) sales of Common Stock upon conversion of the Preferred Stock or upon the
Warrants or outstanding options described in the Prospectus.
(l) The Company has reserved and shall continue to reserve a sufficient
number of shares of Common Stock for issuance upon conversion of the Preferred
Stock and exercise of the Warrants (including the Warrants included in the
Underwriters' Warrants).
(m) The Company will not 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 the shares of Preferred Stock, the
Warrants, or the Common Stock to facilitate the sale or resale of such
Securities or that otherwise might reasonably be expected to violate the
provisions of Rule 10b-18 under the Exchange Act.
6. Conditions to the Obligations of the Underwriters. The obligations of the
Underwriters to purchase the shares of Preferred Stock and the Warrants
described in Sections 2(a) and 2(b) hereof shall be subject to (i) the accuracy
in all material respects of the representations and warranties on the part of
the Company contained herein as of the Execution Time, the Closing Date (except
that each of the representations and warranties of the Company, the breach or
violation of which is not qualified as to materiality, shall be true in all
respects) and (in the case of any shares of Preferred Stock and the Warrants
delivered after the Closing Date) any settlement date pursuant to Section 3(b)
hereof, (ii) the accuracy of the statements of the Company made in any
certificates delivered pursuant to the provisions hereof, (iii) the performance
in all material respects by the Company of their respective obligations
hereunder (except that each of the obligations of the Company, the violation of
which is not qualified as to materiality, shall be performed in all respects),
and (iv) the following additional conditions:
(a) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A under the
Act, such post-effective amendment shall become effective) not later than 5:00
p.m. Dallas, Texas time, on the execution date hereof or at such later date and
time as you may approve in writing and, at the Closing Date (and any settlement
date pursuant to Section 3(b) hereof), no stop order suspending the
effectiveness of the Registration Statement or any qualification in any
jurisdiction shall have been issued and no proceedings for that purpose shall
have been instituted or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or Prospectus or
otherwise) shall have been complied with to the Representative's reasonable
satisfaction.
The Company shall have furnished to the Representative the opinion of Xxxxxxx,
Xxxxxxxx & Xxxxxxxxx, P. C., Counsel for the Company, or other counsel
acceptable to the Underwriters addressed to the Underwriters and dated the
Closing Date (and any settlement date pursuant to Section 3(b) hereof), to the
effect that:
(i) The Registration Statement has become effective under the
Act; any required filing of the Prospectus or any supplements thereto pursuant
to Rule 424(b) has been made in the manner and within the time period required
by Rule 424(b); to the best knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement or any qualification in any
jurisdiction has been issued and no proceedings for that purpose have been
instituted or threatened; the Registration Statement and the Prospectus (and any
amendments or supplements thereto) comply as to form in all material respects
with the applicable requirements of the Act and the rules and regulations
thereunder (other than the financial statements and related schedules, as to
which such counsel need make no statement).
(ii) Except as set forth in the Prospectus, the Company has
no subsidiaries.
(iii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Colorado, with requisite corporate power and authority to own its properties and
conduct its business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
jurisdiction in which it conducts its business or owns property and in which the
failure, individually or in the aggregate, to be so qualified would have a
Material Adverse Effect. The Company has all necessary and material
authorizations, approvals, orders, licenses, certificates and permits of and
from all government regulatory officials and bodies, to own its properties and
conduct its business as described in the Prospectus, except where failure to
obtain such authorizations, approvals, orders, licenses, certificates or permits
would not have a Material Adverse Effect.
(iv) The Company does not own any shares of capital stock or
any other equity securities of any corporation or any equity interest in any
firm, partnership, association or other entity, other than as described in the
Prospectus.
(v) The Company has authorized and outstanding share
capitalization as set forth in the Prospectus; the capital stock of the Company
conforms in all material respects to the description thereof contained in the
Prospectus; all outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable and the certificates
therefor are in valid and sufficient form in accordance with the laws of the
State of Colorado and the Company's Bylaws; the Preferred Stock and the Warrants
have been duly and validly authorized and when issued will be fully paid and
nonassessable and the certificates therefor are in valid and sufficient form in
accordance with the laws of the State of Colorado and the Company's Bylaws;
there are no other classes of stock outstanding except Common Stock as described
in the Prospectus; all outstanding options to purchase shares of Common Stock
have been duly and validly authorized and issued; except as described in the
Prospectus, there are no options, warrants or rights to acquire, or debt
instruments convertible into or exchangeable for, or other agreements or
understandings to which the Company is a party, outstanding or in existence,
entitling any person to purchase or otherwise acquire any shares of capital
stock of the Company; the issuance and sale of the Securities have been duly and
validly authorized and, when issued and delivered and paid for in accordance
with the terms of this Agreement, the Securities will be fully paid and
nonassessable and free from preemptive rights, and will conform in all respects
to the description thereof contained in the Prospectus; the Preferred Stock,
Warrants and Underwriters' Warrants constitute valid and binding obligations of
the Company enforceable in accordance with their terms (subject to customary
bankruptcy and equitable remedy exceptions) and the Company has reserved a
sufficient number of shares of Common Stock for issuance upon exercise thereof
(including the Warrants included in the Underwriters' Warrants); the Preferred
Stock, Warrants and Underwriters' Warrants possess the rights, privileges and
characteristics as represented in the forms filed as exhibits to the
Registration Statement and as described in the Prospectus; and the Securities
(other than the Underwriters' Warrants) have been approved for listing on the
Nasdaq Small Cap Market upon notice of issuance thereof. Each offer and sale of
securities of the Company referred to in Item 26 of Part II of the Registration
Statement was effected in compliance with the Act and the rules and regulations
thereunder, and with all applicable state securities and blue sky ("Blue Sky")
laws.
(vi) Other than as described in the Prospectus, there is no
pending or, to the knowledge of such counsel, threatened action, suit or
proceeding before any court or governmental agency, authority or body, domestic
or foreign, or any arbitrator involving the Company of a character required to
be disclosed in the Registration Statement or the Prospectus that is not
adequately disclosed in the Prospectus, and, to the knowledge of such counsel,
there is no contract or other document of a character required to be described
in the Registration Statement or the Prospectus, or to be filed as an exhibit,
which is not described or filed as required.
(vii) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding agreement
and obligation of the Company enforceable against it in accordance with its
terms (subject to customary bankruptcy and equitable remedy exceptions, and
limitations under the Act as to the enforceability of indemnification
provisions).
(viii) The Company has requisite corporate power and authority
to enter into and perform its obligations under this Agreement and to issue,
sell and deliver the Securities to be sold by it in the manner provided in this
Agreement. The Company has taken all necessary corporate action to authorize the
execution and delivery of, and the performance of its obligations under, this
Agreement.
(ix) Neither the execution, delivery and performance of this
Agreement by the Company, the offering, issue and sale of the Securities, nor
the consummation of any other of the transactions contemplated herein, nor the
fulfillment of the terms hereof, will conflict with or result in a breach or
violation of, or constitute a default (or an event that with notice or lapse of
time, or both, would constitute a default) under, or result in the imposition of
a lien on any properties of the Company or an acceleration of indebtedness
pursuant to, the Articles of Incorporation or Bylaws of the Company, or any of
the terms of any indenture or other agreement or instrument to which the Company
is a party or by which the Company or any of its properties are bound, or any
federal, state or local law, rule, regulation of any court, governmental or
regulatory body, stock exchange or arbitrator having jurisdiction over the
Company or any of its assets. The Company is not (A) in violation of its
Articles of Incorporation or Bylaws or (B) in breach of or default under any of
the terms of any indenture or other agreement or instrument to which it is a
party or by which it or its properties are bound, which breach or default
described in this clause (B) would, individually or in the aggregate, have a
Material Adverse Effect. Neither the offering, issue and sale of the Securities
nor the consummation of any other of the transactions contemplated herein, nor
the fulfillment of the terms hereof, will conflict with or result in a breach or
violation of, or constitute a default (or an event that with notice or lapse of
time, or both, would constitute a default) under, or result in the imposition of
a lien on any properties of the Company, or an acceleration of indebtedness
pursuant to, the Articles of Incorporation or Bylaws of the Company, or any of
the terms of any indenture or other agreement or instrument to which the Company
is a party or by which any of their respective properties are bound, or any law,
rule, regulation, court decree, judgment or other order of any court,
governmental or regulatory body, stock exchange or arbitrator having
jurisdiction over the Company or any of its assets. The Company is not (A) in
violation of its Articles of Incorporation or Bylaws or (B) in breach of or
default under any of the terms of any indenture or other agreement or instrument
to which it is a party or by which it or its properties are bound, which breach
or default described in this clause (B) would, individually or in the aggregate,
have a Material Adverse Effect.
(x) Except as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company to issue to it any shares
of capital stock in consequence of the issue and sale of the Securities to be
sold by the Company hereunder nor does any person have preemptive rights, or
rights of first refusal or other rights to purchase any of the Securities.
Except as referred to in the Prospectus, no person holds a right to require or
participate in a registration under the Act of Common Stock or any other equity
securities of the Company.
(xi) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or body is required
to be obtained or filed by or on behalf of the Company in connection with the
transactions contemplated herein, except such as may have been obtained or made
and registration of the Securities under the Act, and such as may be required
under the Blue Sky laws of any jurisdiction.
(xii) The Company is not in violation of or default under any
judgment, ruling, decree or order or any statute, rule or regulation of any
court or other United States governmental agency or body, including any
applicable laws respecting employment, immigration and wages and hours, in each
case, where such violation or default could have a Material Adverse Effect. The
Company is not involved in any labor dispute nor, to the best knowledge of such
counsel, is any labor dispute threatened.
(xiii) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(xiv) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on behalf of the
Company and the Registration Statement has been duly executed pursuant to such
authorization by and on behalf of the Company.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the independent public accountants of the Company
and representatives of the Underwriters at which the contents of the
Registration Statement and Prospectus were discussed and, although such counsel
is not passing upon and does not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus (except as and to the extent stated in the first three
clauses of subparagraph (v) above), on the basis of the foregoing and on such
counsel's participation in the preparation of the Registration Statement and the
Prospectus, nothing has come to the attention of such counsel that causes such
counsel to believe that the Registration Statement, at the Effective Date and at
the Closing Date (and any settlement date pursuant to Section 3(b) hereof),
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or that the Prospectus, at the date of such Prospectus or
at the Closing Date (or any settlement date pursuant to Section 3(b) hereof), or
any amendment or supplement to the Prospectus, as of its respective date or as
of the Closing Date (or any settlement date pursuant to Section 3(b) hereof)
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
comment with respect to the financial statements and schedules and other
financial or statistical data included in the Registration Statement or
Prospectus).
References to the Prospectus in this Section 6(b) shall include any
amendments or supplements thereto.
(c) The Representative shall have received from Xxxxxxx X. Xxxxx,
L.L.C., counsel for the Underwriters, an opinion dated the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), with respect to the issuance
and sale of the Securities, and with respect to the Registration Statement, the
Prospectus and other related matters as the Representative may reasonably
require, and the Company shall have furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(d) The Company shall have furnished to the Representative a
certificate of the Company, signed by its President and Chief Executive Officer,
dated the Closing Date (and any settlement date pursuant to Section 3(b)
hereof), to the effect that each has carefully examined the Registration
Statement, the Prospectus (and any supplements thereto) and this Agreement, and,
after due inquiry, that:
(i) As of the Closing Date (and any settlement date pursuant
to Section 3(b) hereof), the statements made in the Registration Statement and
the Prospectus are true and correct and the Registration Statement and the
Prospectus do not contain any untrue statements 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.
(ii) No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities under the
securities or Blue Sky laws of any jurisdiction is in effect and no proceeding
for such purpose is pending before or, to the knowledge of such officers,
threatened or contemplated by the Commission or the authorities of any such
jurisdiction; and any request for additional information with respect to the
Registration Statement or the Prospectus on the part of the staff of the
Commission or any such authorities brought to the attention of such officers has
been complied with to the satisfaction of the staff of the Commission or such
authorities.
(iii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (x) there has not been
any change in the capital stock or short- or long-term debt of the Company,
except as set forth in or contemplated by the Registration Statement and the
Prospectus, (y) there has not been any material adverse change in the business,
prospects, properties, management, results of operations or condition (financial
or otherwise) of the Company, whether or not arising from transactions in the
ordinary course of business, in each case, other than as set forth in or
contemplated by the Registration Statement and the Prospectus, and (z) the
Company has not sustained any material interference with its business or
properties from fire, explosion, flood or other casualty, whether or not covered
by insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not set forth in the Registration
Statement and the Prospectus.
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has been no
litigation instituted against the Company or any of its respective officers or
directors, and since such dates there has been no proceeding instituted or, to
the best knowledge of such officers, threatened against the Company or any of
its officers or directors before any federal, state or county court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, in which litigation or proceeding an unfavorable ruling, decision or
finding could have a Material Adverse Effect.
(v) Each of the representations and warranties of the Company
in this Agreement is true and correct in all material respects on and as of the
Execution Time and the Closing Date (and any settlement date pursuant to Section
3(b) hereof) with the same effect as if made on and as of the Closing Date (and
any settlement date pursuant to Section 3(b) hereof).
(vi) Each of the covenants required in this Agreement to be
performed by the Company on or prior to the Closing Date (and any settlement
date pursuant to Section 3(b) hereof) has been duly, timely and fully performed
in all material respects, and each condition required herein to be complied with
by the Company on or prior to the Closing Date (and any settlement date pursuant
to Section 3(b) hereof) has been duly, timely and fully complied with in all
material respects.
(e) At the Execution Time and on the Closing Date (and any settlement
date pursuant to Section 3(b) hereof) Gross, Xxxxxxx + Xxxxx, P.C. shall have
furnished to the Representative letters, dated as of such dates, in form and
substance satisfactory to the Representative, confirming that they are
independent accountants within the meaning of the Act and the applicable rules
and regulations thereunder and stating in effect that:
(i) In their opinion, the audited financial statements of the
Company for the fiscal years ended December 31, 1995 and 1996, and the interim
unaudited statements for the three months ended March 31, 1997, compiled by the
Company and the notes to the financial statements and financial statement
schedules for those periods included in the Registration Statement and the
Prospectus, comply in form in all material respects with the applicable
accounting requirements of the Act and the applicable rules and regulations
thereunder.
(ii) On the basis of a reading of the latest unaudited
financial statements made available by the Company, carrying out certain
specified procedures (but not an examination in accordance with generally
accepted auditing standards), a reading of the minutes of the meetings of the
stockholders, directors and committees of the Company, and inquiries of certain
officials of the Company who have responsibility for financial and accounting
matters of the Company, nothing came to their attention that caused them to
believe that with respect to the period subsequent to March 31, 1997, at a
specified date not more than five business days prior to the date of the letter,
(y) there were any changes in the short- or long-term debt or capital stock of
the Company, or decreases in net current assets, net assets or stockholders'
equity of the Company as compared with the amounts shown on the March 31, 1997
balance sheet included in the Registration Statement and the Prospectus, or (z)
there were any decreases in reserves, sales, net income or income from
operations, of the Company, as compared with the corresponding period in the
preceding year, except for changes or decreases which the Registration Statement
discloses have occurred or may occur and except for changes or decreases, set
forth in such letter, in which case (A) the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless said
explanation is not deemed necessary by the Representative and (B) such changes
or decreases and the explanation thereof shall be acceptable to the
Representative, in its sole discretion.
(iii) They have performed certain other specified procedures
as a result of which they determined that all information of an accounting,
financial or statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Company) set forth in the Registration Statement and the Prospectus and
specified by you prior to the Execution Time, agrees with the accounting records
of the Company.
(iv) On the basis of a reading of the balance sheet as of
December 31, 1996 and the related unaudited balance sheet and statements of
operations for the three months ended March 31, 1997, and the procedures
specified by you prior to the Execution Time, nothing came to their attention
that caused them to believe that the above described balance sheet and
statements of operations had not been properly compiled on the bases described
in the notes thereto.
References to the Prospectus in this Section 6(e) shall
include any amendments or supplements thereto.
The Representative shall have also received from Gross,
Xxxxxxx & Xxxxx, P.C. a letter to the Company stating that the Company's system
of internal accounting controls taken as a whole are sufficient to meet the
broad objectives of internal accounting control insofar as those objectives
pertain to the prevention or detection of errors or irregularities in amounts
that would be material to the financial statements of the Company.
(f) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall not have been (i)
any changes or decreases from those specified in the letters referred to in
Section 6(e) hereof which have been accepted by the Representative pursuant
thereto or (ii) any change in the properties, assets, results of operations,
business, capitalization, net worth, prospects, general affairs or condition
(financial or otherwise) of the Company the effect of which is, in the sole
judgment of the Representative, so material and adverse as to make it
impractical or inadvisable to proceed with the public offering or delivery of
the Securities as contemplated by the Registration Statement and the Prospectus.
(g) On or prior to the Effective Date, the Securities shall have been
approved for listing on the Nasdaq Small Cap Market.
(h) The Company shall not have sustained any uninsured substantial loss
as a result of fire, flood, accident or other calamity.
(i) The Company shall have furnished to the Representative a
certificate of the Secretary of the Company certifying as to certain information
and other matters as the Representative may reasonably request.
(j) The Company shall have furnished to the Representative such further
information, certificates and documents as the Representative may reasonably
request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in any respect when and as provided in this Agreement, or if any
of the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all respects reasonably satisfactory in form and substance to
the Representative and its counsel, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date (or any settlement date, pursuant to Section 3(b) hereof), by the
Representative. Notice of such cancellation shall be given to the Company in
writing or by telephone, facsimile or telegraph confirmed in writing.
7. Fees and Expenses and Underwriters' Warrants. The Company agrees to pay
or cause to be paid the following:
(a) The fees, disbursements and expenses of its own counsel and
accountants in connection with the registration of the Securities under the Act
and all other expenses in connection with the preparation, printing and filing
of the Registration Statement, any Preliminary Prospectus, any Prospectus, and
any drafts thereof, and amendments and supplements thereto, and the mailing and
delivery of copies thereof to the Underwriters and dealers;
(b) All expenses in connection with the qualification of the Securities
for offering under state securities laws, including the fees and disbursements
of counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky Memorandum;
(c) All filing and other fees in connection with filing with the
NASD, and complying with applicable review requirements thereof;
(d) The cost of preparing and printing certificates for the
Securities;
(e) All expenses, taxes, fees and commissions, including, without
limitation, any and all fixed transfer duties, sellers' and buyers' stamp taxes
or duties on the purchase and sale of the Securities and stock exchange
brokerage and transaction levies with respect to the purchase and, if
applicable, the sale of the Securities (the latter to the extent paid and not
reimbursed) (i) incident to the sale and delivery by the Company of the
Securities to the Underwriters, and (ii) incident to the sale and delivery of
the Securities by the Underwriters to the initial purchasers thereof;
(f) The costs and charges of any transfer agent and registrar;
(g) The fees and expenses in connection with the registration of the
Securities under the Securities Exchange Act and the qualification of the
Securities for listing on the Nasdaq Small Cap Market;
(h) The cost of printing, producing and distributing this Agreement,
the Agreement among Underwriters, the Selected Dealers Agreement, the related
syndication materials and the Preliminary and Final Blue Sky Memoranda;
(i) All travel expenses (including without limitation airfare and
hotel) of the Company's officers, directors and other representatives in
connection with the road show;
(j) A nonaccountable expense allowance of 3.0% of the gross proceeds
from the offering (including the Shares of Preferred Stock and the Warrants
described in Section 2(b) hereof) payable to the Representative, provided,
however, in the event that the offering is not consummated, the Representative
will be reimbursed only for its actual out of pocket expenses; and
(k) All other costs and expenses incident to the performance of the
Company's obligations hereunder.
In addition to the sums payable to the Representative as provided
elsewhere herein and in addition to the Underwriters' Option, the Underwriters
shall be entitled to receive, as partial compensation for their services,
warrants for the purchase of 40,000 Shares of Preferred Stock and 100,000
Warrants (the "Underwriters' Warrants"). The Underwriters' Warrants shall be
issued pursuant to the Warrant and Registration Rights Agreement (the
"Underwriters' Warrant Agreement") 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 Prospectus, at 120% of the public offering price
of the Shares of Preferred Stock and the Warrants set forth on the cover page of
the Prospectus. The Underwriters' Warrants, including the Warrants issuable upon
exercise thereof, shall be non-transferable for one year from the date of
issuance of the Underwriters' Warrants, except as provided in the Underwriters'
Warrant Agreement. The terms of the shares of Preferred Stock and the Warrants
subject to the Underwriters' Warrants shall be the same as the shares of
Preferred Stock and the Warrants sold to the public.
Without limiting in any respect the foregoing obligations of the
Company, which obligations shall survive any termination of this Agreement, if
the sale of the Securities provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth in Section 6 hereof
is not satisfied, because of any termination pursuant to Section 10 hereof, or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply in all material respects with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company agrees to reimburse the Underwriters, upon demand, for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the proposed purchase
and sale of the Securities to the extent the amounts paid pursuant to Section
7(j) hereof are insufficient therefor.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter and each
person who controls any Underwriter within the meaning of the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in (i) Section 1 of
this Agreement, the Registration Statement, any Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or (ii) any
application or other document, or any amendment or supplement thereto, executed
by the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the Securities under
the securities or Blue Sky laws thereof or filed with the Commission or any
securities association or securities exchange, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that 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 any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representative
specifically for use in the Registration Statement or Prospectus; provided
further, that with respect to any untrue statement or omission, or any alleged
untrue statement or omission, made in any Preliminary Prospectus, the indemnity
agreement contained in this Section 8 shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling any such Underwriter)
from whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Securities concerned to the extent that such untrue
statement or omission, or alleged untrue statement or omission, has been
corrected in the Prospectus and the failure to deliver the Prospectus was not a
result of the Company's failure to comply with its obligations under Sections
5(b) and 5(d) hereof. The indemnity agreement contained in this Section 8 will
be in addition to any liability which the Company may otherwise have. The
Company will not, without the prior written consent of each Underwriter, settle
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
may be sought hereunder (whether or not such Underwriter or any person who
controls such Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act is a party to such claim, action, suit or proceeding),
unless the settlement or compromise or consent includes an unconditional release
of such Underwriter and each such controlling person from all liability arising
out of such claim, action, suit or proceeding, satisfactory in form and
substance to the Representative.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signs the Registration
Statement, and each person who controls the Company within the meaning of the
Act or the Exchange Act to the same extent as the foregoing indemnity from the
Company to each Underwriter, but only with reference to written information
relating to such Underwriter furnished to the Company by or on behalf of such
Underwriter through the Representative specifically for use in the Registration
Statement or Prospectus. The Company acknowledges that the corporate names of
the Underwriters and the information under the heading "Underwriting" in the
Prospectus and in any Preliminary Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters. The
obligations of each Underwriter under this subsection (b) shall be in addition
to any liability which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, suit or proceeding, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all expenses; but the omission so to notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party, unless such omission results in the forfeiture of
substantive rights or defenses by the indemnifying party. All such expenses
shall be paid by the indemnifying party as incurred by an indemnified party. Any
such indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses or (ii) the
indemnifying party shall have failed promptly after notice by such indemnified
party to assume the defense of such action or proceeding and employ counsel
reasonably satisfactory to the indemnified party in any such action, suit or
proceeding or (iii) the named parties in any such action or proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by
counsel that there is a conflict of interest on the part of counsel employed by
the indemnifying party to represent such indemnified party or there may be one
or more legal defenses available to such indemnified party which are different
from or additional to those available to the indemnifying party (in which case,
if such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
or proceeding on behalf of the indemnified party or parties, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for all such indemnified parties, which firm shall be
designated in writing to the indemnifying party). Any such fees and expenses
payable by the indemnifying party shall be paid to or on behalf of the
indemnified party entitled thereto as incurred. An indemnifying party shall not
be liable for any settlement of any action or claim effected without its
consent, which shall not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in Section 8(a) or 8(b) is applicable in
accordance with its terms but is for any reason held by a court to be
unavailable from the indemnifying party on grounds of policy or otherwise, the
Company and the Underwriters shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending same) to which the Company and one
or more of the Underwriters may be subject (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the Shares of
Preferred Stock and the Warrants or (ii) if the allocation provided by clause
(i) 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 the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions that
resulted in such losses, claims, damages and liabilities, as well as any other
relevant equitable considerations; provided, however, that (x) in no case shall
any Underwriter (except as may be provided in the Agreement Among Underwriters
relating to the offering of the Securities) be responsible for any amount in
excess of the underwriting discount applicable to the Shares of Preferred Stock
and the Warrants to be purchased by such Underwriter hereunder pursuant to this
Section 8 and (y) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The 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 of the Shares of Preferred Stock and the Warrants (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commission received by the Underwriters by reason of the sale of
Shares of Preferred Stock and the Warrants by the Company, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of 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
by the Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. For purposes of this Section 8, each person who controls
an Underwriter within the meaning of the Act shall have the same rights to
contribution as such Underwriter, and each person who controls the Company
within the meaning of the Act, each officer of the Company who shall have 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 clause (y) of
this Section 8(d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section 8, 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 other obligation it or they may have hereunder or otherwise.
9. Default by an Underwriter. If any one or more Underwriters shall fail to
purchase and pay for any of the shares of Preferred Stock or Warrants agreed to
be purchased by such Underwriter or Underwriters hereunder and such failure to
purchase shall constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which the number
of shares of Preferred Stock and Warrants set forth opposite their names in
Schedule I hereto bears to the aggregate number of shares of Preferred Stock and
Warrants set forth opposite the names of all the remaining Underwriters) the
shares of Preferred Stock and Warrants which the defaulting Underwriter or
Underwriters agreed but failed to purchase; provided, however, that if the
aggregate number of shares of Preferred Stock and Warrants which the defaulting
Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of
the aggregate number of shares of Preferred Stock and Warrants set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of such shares of
Preferred Stock and Warrants, and if such nondefaulting Underwriters do not
purchase all of such shares of Preferred Stock and Warrants, this Agreement will
terminate without liability to any non-defaulting Underwriter or the Company
except as otherwise provided in Section 7. In the event of a default by any
Underwriter as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding seven days, as the Representative shall determine
in order that the required changes in the Registration Statement and the
Prospectus or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Underwriter of its
liability, if any, to the Company or any nondefaulting Underwriter for damages
occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in the absolute
discretion of the Representative, by notice given to the Company prior to
delivery of and payment for the Securities, if prior to such time (a) a
suspension or material limitation in trading in securities generally on the New
York or Nasdaq Small Cap Market, the Nasdaq National Market, or a fall in the
Dow Xxxxx Industrial Average of ten percent (10%) or more, (b) a banking
moratorium shall have been declared by federal, New York or Texas state
authorities, or (c) the United States shall have engaged in hostilities which
shall have resulted in the declaration, on or after the date hereof, of a
national emergency or war, or (d) a change in national or international
political, financial or economic conditions or national or international equity
markets shall have occurred, and with respect to events specified in clause (c)
or (d) hereof, if the effect of any such event is, in the reasonable judgment of
the Representative, so material and adverse to the issuer as to make it
impractical or inadvisable to proceed with the public offering or delivery of
the Securities due to the materially impaired investment quality of the
Securities as contemplated by the Registration Statement and the Prospectus.
11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company,
its officers, and the Underwriters set forth in, referred to in, or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of any Underwriter, the Company, or any
of the officers, directors or controlling persons referred to in Section 8
hereof, and will survive delivery of and payment for the Securities. The
provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and will be mailed, delivered, telegraphed or sent
by facsimile transmission and confirmed:
to the Representative at:
National Securities Corporation
0000 Xxxxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx, III
Facsimile No. (000) 000-0000
to the Company at:
Western Country Clubs, Inc.
0000 X. X. Xxxxxxxxxx Xxxxx 0000
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Facsimile No. (000) 000-0000
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
14. Counterparts. This Agreement may be signed in one or more counterparts,
each of which shall be an original, with the same effect as if the signatures
thereon and hereon were on the same instrument.
15. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas, without reference to conflict of
laws or principles thereunder. All disputes relating to this Underwriting
Agreement shall be tried before a court of Texas located in Dallas County, Texas
to the exclusion of all other courts that might have jurisdiction.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Underwriters.
Very truly yours,
Western Country Clubs, Inc.
By:
Xxxxx X. Xxxxxxxxx, President The foregoing Agreement is hereby
confirmed and accepted as of the date first above written.
National Securities Corporation
By:
Name:________________________________
Title:_________________________________
For themselves and the other several Underwriters in Schedule I to the foregoing
Agreement.
