Exhibit 1.1
1,100,000 SHARES
FRANKLIN CREDIT MANAGEMENT CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
June ___, 2005
Xxxx Xxxx & Co., Inc.
00 Xxxxxxxx Xxxxxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000
Dear Sirs:
Franklin Credit Management Corporation, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to Xxxx Xxxx & Co., Inc. ("XXXX XXXX")
(the "UNDERWRITER"), an aggregate of 1,100,000 shares (the "FIRM SHARES") of the
Common Stock, par value $0.01 per share (the "COMMON STOCK") of the Company. In
addition, for the sole purpose of covering over-allotments in connection with
the sale of the Firm Shares, the Company proposes to issue and sell to the
Underwriter, at the Underwriter's option and pursuant to Section 2(b) hereof, up
to an additional 165,000 shares of Common Stock (the "OPTION SHARES") as set
forth herein. The term "SHARES" as used herein, unless otherwise indicated,
shall mean the Firm Shares and the Option Shares, which are more fully described
in the Registration Statement and the Prospectus referred to below.
SECTION 1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents and warrants to, and agrees with, the Underwriter as of the
date hereof, and as of the First Closing Date (as defined in Section 3(a) below)
and the Option Closing Date (as defined in Section 3(b) below), if any, as
follows:
(a) The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, and an amendment or amendments thereto,
on Form S-1 (File No. 333-________) including any related preliminary prospectus
(the "PRELIMINARY PROSPECTUS") for the registration of the Shares under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), which registration
statement and amendment or amendments thereto have been prepared by the Company
in conformity with the requirements of the Securities Act and the rules and
regulations (the "RULES AND REGULATIONS") of the Commission under the Securities
Act. Copies of such registration statement and each of the amendments thereto
have been delivered by the Company to the Underwriter. As used in this
Agreement, "EFFECTIVE TIME" means the date and the time as of which such
Registration Statement, or the most recent post-effective amendment thereto, if
any, was declared effective by the Commission; "EFFECTIVE DATE" means the date
of the Effective Time; "PRELIMINARY PROSPECTUS" means each prospectus included
in such registration statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with the Commission
by the Company with the consent of the Underwriter pursuant to Rule 424 of the
Rules and Regulations; "REGISTRATION STATEMENT" means such Registration
Statement, as amended at the Effective Time, including all information contained
in the Final Prospectus filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations and deemed to be a part of the Registration Statement as
of the Effective Time pursuant to Rule 430A of the Rules and Regulations; "FINAL
PROSPECTUS" means the final prospectus in the form first used to confirm sales
of Shares, and "PROSPECTUS" means collectively the "Preliminary Prospectus" and
the "Final Prospectus." If the Company has filed an abbreviated Registration
Statement to register additional shares of Common Stock pursuant to Rule 462(b)
under the Securities Act (the "RULE 462(B) REGISTRATION STATEMENT"), then any
reference herein to the term "REGISTRATION STATEMENT" shall be deemed to include
such Rule 462(b) Registration Statement. Neither the Commission nor any state
regulatory authority has issued any order preventing or suspending the use of
any Preliminary Prospectus or the Registration Statement or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been instituted
or are pending, or to the Company's knowledge, threatened.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the Commission, as
the case may be, conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and do not and will not, as of the
applicable Effective Date (as to the Registration Statement and any amendment
thereto) and as of the applicable filing date (as to the Prospectus and any
amendment or supplement thereto) contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided that no representation or
warranty is made as to information contained in the Registration Statement or
the Prospectus in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion therein. The statements contained under the caption "Underwriting" in
the Prospectus constitute the only information furnished to the Company in
writing by the Underwriter expressly for use in the Registration Statement or
the Prospectus, and the Company has not relied upon the Underwriter or its
advisors for any legal, tax or accounting advice.
(c) The Company (i) has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware, (ii) is
duly qualified to do business and is in good standing as foreign corporation in
each jurisdiction in which its ownership or lease of property or conduct of
business requires such qualification and (iii) has all corporate power and
authority necessary to own or hold its properties and to conduct the business in
which it is engaged, except to the extent that the failure to be so authorized
or be in good standing would not have a material adverse effect on the
condition, financial or otherwise, or in the earnings, properties, business
affairs or business prospects of the Company and its subsidiaries, taken as a
whole (a "MATERIAL ADVERSE EFFECT"). The Company has no subsidiaries which would
constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X
other than Tribeca Lending Corporation ("Tribeca"). Tribeca and the other
subsidiaries of the Company listed on Schedule 21.1 of the Registration
Statement are each referred to as a Subsidiary and collectively as the
"SUBSIDIARIES".
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(d) Each of the Subsidiaries has been duly incorporated or formed and is
validly existing under the laws of the jurisdiction of its incorporation or
organization and each of the Subsidiaries has the respective power and authority
and foreign qualifications necessary to own, lease and operate its respective
properties and to conduct its businesses, except where the failure to have such
authority or qualifications would not have a Material Adverse Effect; all of the
issued and outstanding capital stock and/or membership interests of each
Subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company, directly or through a wholly- owned
subsidiary, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; and none of such shares or membership interests
was issued in violation of the preemptive rights of any member, stockholder or
warrant holder of any such Subsidiary.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and will
have the adjusted capitalization set forth therein on the Closing Date based
upon the assumptions set forth therein, and the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities, except
for this Agreement and as described in the Prospectus. The Shares and all other
shares of capital stock issued by the Company conform in all material respects
or, when issued and paid for, will conform in all material respects to the
description with respect thereto contained in the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and nonassessable; and none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company. The Shares
have been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof, will be validly issued, fully paid and nonassessable; the
issuance of the Shares will not violate the preemptive rights or similar
contractual or other rights of any person; the holders thereof will not be
subject to any liability solely by reason of being such holders; all corporate
action required to be taken for the authorization, issue and sale of the Shares
has been duly and validly taken; and the certificates representing the Shares
will be in due and proper form. Upon the issuance and delivery pursuant to the
terms hereof of the Shares hereunder, the Underwriter will acquire good and
marketable title to such Shares free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind whatsoever.
(f) This Agreement has been duly authorized, executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law), and except insofar as
the indemnification and contribution provisions hereof may be limited by
considerations of public policy.
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(g) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, including
issuance and sale of the Shares.
(h) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound or to which any of the property or assets of the
Company or any of its Subsidiaries is subject, nor will such actions result in
any violation of the provisions of (i) the certificate of incorporation (or
other equivalent organizational document) or by-laws (or other equivalent
organizational document) of the Company or any of its Subsidiaries or (ii) any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its Subsidiaries or any of
its respective properties or assets. Except for the registration of the Shares
under the Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), and applicable state or foreign
securities laws or by the National Association of Securities Dealers, Inc. (the
"NASD") in connection with the purchase and distribution of the Shares by the
Underwriter, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required for
the execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby.
(i) There are no contracts, agreements or understandings between the
Company and any person granting such person the right (other than rights which
have been waived or satisfied) to require the Company to file a registration
statement under the Securities Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration Statement
or in any securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act.
(j) The Company has not sold or issued any securities during the six-month
period preceding the date of the Preliminary Prospectus, including any sales
pursuant to Rule 144A under, or Regulations D or S of, the Securities Act other
than securities issued pursuant to employee benefit plans, stock option plans or
other employee compensation plans or pursuant to outstanding options, rights or
warrants, all of which are described in Item 15 of the Registration Statement.
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(k) Neither the Company nor any of its Subsidiaries has sustained, since
the date of the latest audited financial statements included in the Prospectus,
any material loss or interference with its respective businesses 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, otherwise
than as set forth or contemplated in the Prospectus; and, since such date, there
has not been any material change in the capital stock or long-term debt of the
Company on a consolidated basis or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, consolidated financial position, stockholders'
equity, results of operations, business or prospects of the Company and its
Subsidiaries taken as a whole, otherwise than as set forth or contemplated in
the Prospectus.
(l) The financial statements (including the related notes and supporting
schedules) filed as part of the Registration Statement or included in the
Prospectus present fairly the financial condition and results of operations of
the Company on a consolidated basis, at the dates and for the periods indicated,
and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved. The
other financial information and data filed as part of the Registration Statement
or included in the Prospectus is fairly presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company.
(m) Deloitte & Touche LLP, who have certified the financial statements of
the Company, whose report is contained in the Prospectus and who have delivered
the initial letter referred to in Section 7(f) hereof, are independent public
accountants as required by the Securities Act and the Rules and Regulations.
(n) Each of the Company and its Subsidiaries has good and marketable title
in fee simple to, or valid and enforceable leasehold estates in, all items of
real and personal property owned or leased by it, in each case free and clear of
all liens, charges, claims, encumbrances, pledges, security interests, defects
or other restrictions or equities of any kind whatsoever, except such as are
described in the Prospectus or such as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Company and its Subsidiaries.
(o) The Company and/or its Subsidiaries carries, or is covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of its respective businesses and the value of its respective properties and as
is customary for companies engaged in similar businesses in similar industries.
(p) The Company owns or possesses adequate rights to use all material
patents, patent applications, trademarks, service marks, trade names, trademark
registrations, service xxxx registrations, copyrights and licenses necessary for
the conduct of its business (the "INTELLECTUAL PROPERTY") and has no reason to
believe that the conduct of its business will conflict with, and has not
received any notice of any claim of conflict with, any such rights of others, in
each case except as could not reasonably be expected to have a Material Adverse
Effect. The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of its Intellectual Property and other
proprietary information in all material respects.
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(q) Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its Subsidiaries
is a party or of which any property or assets of the Company or any of its
Subsidiaries is the subject which, if determined adversely to the Company or any
of its Subsidiaries would reasonably be expected to have a Material Adverse
Effect; and, to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others.
(r) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Securities Act or by the Rules and Regulations which have not been
described in the Prospectus or filed as exhibits to the Registration Statement.
(s) No relationship, direct or indirect, exists between or among the
Company or any of its Subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand, which is
required to be described in the Prospectus which is not so described.
(t) No labor disturbance by the employees of the Company or any of its
Subsidiaries exists or, to the knowledge of the Company, is imminent, which
would reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Subsidiary is in violation of or has received notice of any
violation with respect to any federal or state law relating to discrimination in
the hiring, promotion or pay of any employees, nor any applicable federal or
state wages and hours law, nor any state law precluding the denial of credit due
to the neighborhood in which a property is situated, the violation of which
individually or in the aggregate could have a Material Adverse Effect.
(u) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any material liability; the Company has not incurred and does not
expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "CODE"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and,
to the Company's knowledge, nothing has occurred, whether by action or by
failure to act, which would cause the loss of such qualification.
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(v) The Company and each of its Subsidiaries has filed all federal, state
and local income and franchise tax returns required to be filed through the date
hereof (except where the failure to file would not reasonably be expected to
have a Material Adverse Effect), has paid all taxes due thereon and has
established adequate reserves for such taxes which are not yet due and payable,
and, to the Company's knowledge, does not have any tax deficiency or claims
outstanding, proposed or assessed against it which has had or would reasonably
be expected to have a Material Adverse Effect.
(w) Since the date as of which information is given in the Prospectus
through the date hereof, and except as may otherwise be disclosed in the
Prospectus, neither the Company nor any of its Subsidiaries has (i) issued or
granted any securities (other than shares of Common Stock issued upon the
exercise of options described in the Prospectus), (ii) incurred any material
liability or obligation, direct or contingent, other than liabilities and
obligations which were incurred in the ordinary course of business, (iii)
entered into any material transaction not in the ordinary course of business;
(iv) declared or paid any dividend on its capital stock; nor (v) suffered any
material adverse change in its condition (financial or otherwise), earnings,
business affairs, assets or business prospects, whether or not arising in the
ordinary course of business. Neither the Company nor any Subsidiary of the
Company has any material liability of any nature, contingent or otherwise,
except as set forth in the Prospectus.
(x) The Company (i) makes and keeps accurate books and records and (ii)
maintains internal accounting controls which provide reasonable assurance that
(A) transactions are executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its financial
statements and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management's authorization and (D)
the reported accountability for its assets is compared with existing assets at
reasonable intervals.
(y) The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-14 and 15d-14 under the Exchange
Act), which (i) are designed to ensure that material information relating to the
Company is made known to the Company's principal executive officer and its
principal financial officer by others within those entities, particularly during
the periods in which the periodic reports required under the Exchange Act are
being prepared; (ii) provide for the periodic evaluation of the effectiveness of
such disclosure controls and procedures as of the end of each of the Company's
quarterly and annual fiscal periods; and (iii), as of the end of the periods
covered by each periodic report filed under the Exchange Act and incorporated by
reference into the Prospectus, were effective in all material respects to
perform the functions for which they were established. Based on the evaluation
of its disclosure controls and procedures, the Company is not aware of (i) any
significant deficiency in the design or operation of internal controls which
could adversely affect the Company's ability to record, process, summarize and
report financial data or any material weaknesses in internal controls; or (ii)
any fraud, whether or not material, that involves management or other employees
who have a significant role in the Company's internal controls.
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(z) The Company is in compliance with all applicable provisions of the
Xxxxxxxx-Xxxxx Act of 2002 and all rules and regulations promulgated thereunder
or implementing the provisions thereof (the "Xxxxxxxx-Xxxxx Act") that are then
in effect and is actively taking steps to ensure that it will be in compliance
with other applicable provisions of the Xxxxxxxx-Xxxxx Act not currently in
effect upon and at all times after the effectiveness of such provisions.
(aa) Neither the Company nor any of its Subsidiaries (i) is in violation
of its certificate of incorporation (or other equivalent organizational
document) or by-laws (or other equivalent organizational document), (ii) is in
default, and no event has occurred which, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a party or
by which it is bound or to which any of its properties or assets is subject,
except for such defaults that would not result in a Material Adverse Effect or
(iii) is in violation in any respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be subject
or has not failed to obtain any license, permit, certificate, franchise or other
governmental authorization or permit necessary to the ownership of its property
or to the conduct of its business, except for such violations that would not
result in a Material Adverse Effect.
(bb) The minute books of each of the Company and its Subsidiaries have
been made available to the Underwriter and contain a summary, in all material
respects, of all meetings and actions of the directors, stockholders, members
and managers (as the case may be) of the Company and its Subsidiaries since the
date that the Company began filing reports with the Commission, and reflect all
transactions referred to in such minutes accurately in all material respects.
(cc) Neither the Company nor any director, officer, agent, employee or
other person associated with or acting on behalf of the Company, has used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(dd) The Company and its Subsidiaries are in compliance in all material
respects with all applicable federal, state and local laws and regulations
applicable to them, including, without limitation, the Fair Debt Collection
Practices Act, the Truth-In-Lending Act, the Fair Credit Billing Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act, the Xxxxx-Xxxxx-Xxxxxx
Act, and comparable statutes in states where consumers reside and/or where
credit grantors are located, and the respective rules and regulations
thereunder, the failure to comply with which would have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
agreement or memorandum of understanding with, or a party to any commitment
letter or similar undertaking to, or is subject to any order or directive by, or
is a recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of any of regulatory authority which restricts
materially the conduct of its business, nor has the Company or any of its
Subsidiaries been advised by any of the regulatory authorities that it is
contemplating issuing or requesting (or considering the appropriateness of
issuing or requesting) any of the foregoing.
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(ee) The Company is not and, after giving effect to the offer and sale of
the Shares, will not be an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(ff) The Common Stock to be offered hereby is authorized for listing on
the Nasdaq National Market.
(gg) Neither of the Company nor its Subsidiaries has taken or will take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation, under the Exchange Act or otherwise, of the price
of the Common Stock to facilitate the sale or the resale of the Common Stock
hereby.
(hh) The Company and its Subsidiaries possess such permits, licenses,
approvals, consents and other authorizations (collectively, "GOVERNMENTAL
LICENSES") issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by them,
except for such Governmental Licenses the absence of which would not cause a
Material Adverse Effect; the Company and its Subsidiaries are in compliance with
the terms and conditions of all such Governmental Licenses, except where the
failure so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full force and
effect, except when the invalidity of such Governmental Licenses or the failure
to such Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its Subsidiaries has
received any notice of proceedings relating to the revocation or modification of
any such Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(ii) The Company has not distributed, nor will it distribute prior to the
First Closing Date any offering material in connection with the offering and
sale of the Shares other than the Prospectus, the Registration Statement or any
other materials permitted by the Securities Act, if any.
(jj) Except as described in the Prospectus under "Underwriting," there are
no claims, payments, issuances, arrangement or understandings, whether oral or
written, for services in the nature of a finder's or origination fee with
respect to the sale of the Shares hereunder.
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(kk) Neither the Company nor any Subsidiary is or has been (by virtue of
any action, omission to act, contract to which it is a party or by which it is
bound, or any occurrence or state of facts whatsoever) in violation of any
applicable foreign, federal, state, municipal or local statutes, laws,
ordinances, rules, regulations and/or orders issued pursuant to foreign,
federal, state, municipal or local statutes, laws, ordinances, rules, or
regulations (including those relating to any aspect of securities registration
or issuance, banking, bank holding companies, consumer credit, truth-in-lending,
truth-in-savings, usury, currency transaction reporting, anti-money laudering
and customer identification regulations, environmental protection, occupational
safety and health and equal employment practices) heretofore or currently in
effect, except such violations that have been fully cured or satisfied without
recourse or that in the aggregate will have not have a Material Adverse Effect.
(ll) Neither the Company nor any Subsidiary has any agreement or
understanding with any person (A) concerning the future acquisition by the
Company of a controlling interest in any entity in the Company or (B) concerning
the future acquisition by any person of a controlling interest in the Company or
any Subsidiary, in either case that is required by the 1933 Act or the 1933 Act
Regulations to be disclosed by the Company that is not disclosed in the
Prospectus.
(mm) No forward-looking statement (within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act) contained in the
Prospectus has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.
(nn) There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of toxic
or other wastes or other hazardous substances by, due to, or caused by the
Company or any of its subsidiaries (or, to the best of the Company's knowledge,
any other entity for whose acts or omissions the Company or any of its
subsidiaries is or may be liable) upon any of the property now or previously
owned or leased by the Company or any of its subsidiaries, or upon any other
property, in violation of any statute or any ordinance, rule, regulation, order,
judgment, decree or permit or which would, under any statute or any ordinance,
rule (including rule of common law), regulation, order, judgment, decree or
permit, give rise to any liability, except for any violation or liability which
would not have, singularly or in the aggregate with all such violations and
liabilities, a Material Adverse Effect; there has been no disposal, discharge,
emission or other release of any kind onto such property or into the environment
surrounding such property of any toxic or other wastes or other hazardous
substances with respect to which the Company or any of its subsidiaries have
knowledge, except for any such disposal, discharge, emission, or other release
of any kind which would not have, singularly or in the aggregate with all such
discharges and other releases, a Material Adverse Effect.
Any certificate signed by any officer of the Company delivered to
Underwriter or to counsel for the Underwriter shall be deemed a representation
and warranty by the Company to the Underwriter as to the matters covered thereby
on the date of such certificate and, unless subsequently amended or
supplemented.
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SECTION 2. PURCHASE OF THE SHARES BY THE UNDERWRITER.
(a) On the basis of the representations and warranties contained in, and
subject to the terms and conditions of, this Agreement, (i) the Company agrees
to issue and sell to the Underwriter and should we use a "Price Determination
Agreement" the Underwriter agrees to buy from the Company the Firm Shares at the
price per Share set forth in the Price Determination Agreement (a form of which
is annexed as Exhibit B), at the place and time hereinafter specified.
(b) In addition, subject to the terms and conditions of this Agreement,
and upon the basis of the representations, warranties and agreements herein
contained, the Company hereby grants an option to the Underwriter to purchase
all or any part of the Option Shares at the same price per Share as the
Underwriter shall pay for the Firm Shares being sold pursuant to the provisions
of subsection (a) of this Section 2. This option may be exercised within 30 days
after the effective date of the Registration Statement upon notice by the
Underwriter to the Company advising as to the amount of Option Shares as to
which the option is being exercised, the names and denominations in which the
certificates for such Option Shares are to be registered and the time and date
when such certificates are to be delivered. The option granted hereunder may be
exercised only to cover over-allotments in the sale by the Underwriter of Firm
Shares referred to in subsection (a) above. In the event the Company declares or
pays a dividend or distribution on its Common Stock, whether in the form of
cash, shares of Common Stock or any other consideration, following the First
Closing Date and prior to the Option Closing Date, such dividend or distribution
shall also be paid on the Option Shares on the Option Closing Date.
SECTION 3. DELIVERY AND PAYMENT.
(a) Delivery of the Firm Shares against payment therefor shall take place
at the offices of Xxxx Xxxx (or at such other place as may be designated by
agreement between the Underwriter and the Company) at 10:00 a.m. New York time,
on the third or fourth full business day after the Effective Date, in accordance
with Rule 15(c)6-1 of the Exchange Act. Such time and date of payment and
delivery for the Firm Shares being herein called the "First Closing Date."
(b) In addition, in the event the Underwriter exercises the option to
purchase from the Company all or any portion of the Option Shares pursuant to
the provisions of Section 2(b), then delivery of the Option Shares against
payment therefor shall take place at the offices of Xxxx Xxxx (or at such other
place as may be designated by agreement between the Underwriter and the Company)
at such time and date as shall be determined by the Underwriter but shall not be
earlier than two nor later than five full business days after the exercise of
said option, nor in any event prior to the First Closing Date. Such time and
date is referred to herein as the "Option Closing Date."
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(c) The Company will make the certificates for the securities comprising
the Shares to be purchased by the Underwriter hereunder available to you for
checking in electronic form or, if requested by the Underwriter in certificated
form, at least two full business days prior to the First Closing Date or the
Option Closing Date, as the case may be (which are collectively referred to
herein as the "CLOSING DATES"). The certificates shall be in such names and
denominations as the Underwriter may request, at least two full business days
prior to the applicable Closing Date. Time shall be of the essence and delivery
at the time and place specified in this Agreement is a further condition to the
obligations of the Underwriter.
(d) Payment for the Shares shall be made to or upon the order of the
Company by certified or bank cashier's checks payable in New York Clearing House
funds at the time and date of delivery of such Shares as required by the
provisions of subsections (a) and (b) above or by wire transfer in immediately
available funds to a bank account designated by the Company at least two
business days prior to the First Closing Date or the Option Closing Date, as the
case may be, against receipt of the definitive certificates in negotiable form
for such Shares by the Underwriter for the respective accounts of the
Underwriter registered in such names and in such denominations as the
Underwriter may request.
SECTION 4. OFFERING OF SHARES BY THE UNDERWRITER. It is understood that
the Underwriter proposes to make a public offering of the Shares at the price
and upon the other terms set forth in the Prospectus. The Underwriter may, at
its own expense, enter into one or more agreements, in their sole discretion, as
they deem advisable, with one or more broker-dealers who shall act as dealers in
connection with such public offering. The Underwriter may from time to time
change the public offering price after the closing of the public offering and
increase or decrease the concessions and discounts to dealers as it may
determine.
SECTION 5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
Underwriter:
(a) To prepare the Final Prospectus in a form approved by the Underwriter
and to file such Final Prospectus pursuant to Rule 424(b) under the Securities
Act not later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Securities Act; to
make no further amendment or any supplement to the Registration Statement or to
the Final Prospectus except as permitted herein; to advise the Underwriter,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to
the Final Prospectus or any amended Final Prospectus has been filed and to
furnish the Underwriter with copies thereof; to advise the Underwriter, promptly
after it receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus or the Final Prospectus, of the suspension of the qualification of
the Shares for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Final Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending the use of
any Preliminary Prospectus or the Final Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
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(b) To furnish promptly to the Underwriter and to counsel for the
Underwriter a signed copy of the Registration Statement as originally filed with
the Commission, and each amendment thereto filed with the Commission, including
all consents and exhibits filed therewith;
(c) To deliver promptly to the Underwriter such number of the following
documents as the Underwriter shall reasonably request: (i) conformed copies of
the Registration Statement as originally filed with the Commission and each
amendment thereto (in each case excluding exhibits) and (ii) each Preliminary
Prospectus, the Final Prospectus and any amended or supplemented Final
Prospectus; and, if the delivery of a prospectus is required at any time after
the Effective Time in connection with the offering or sale of the Shares or any
other securities relating thereto and if at such time any events shall have
occurred as a result of which the Final Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Final
Prospectus is delivered, not misleading, or, if for any other reason it shall be
necessary to amend or supplement the Final Prospectus in order to comply with
the Securities Act, to notify the Underwriter and, upon its request, to prepare
and furnish without charge to the Underwriter and to any dealer in securities as
many copies as the Underwriter may from time to time reasonably request of an
amended or supplemented Final Prospectus which will correct such statement or
omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the Registration
Statement or the Prospectus or any supplement to the Prospectus that may, in the
reasonable judgment of the Company or the Underwriter, be required by the
Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any amendment to the Registration
Statement or supplement to the Prospectus or any Prospectus pursuant to Rule 424
of the Rules and Regulations, to furnish a copy thereof to the Underwriter and
counsel for the Underwriter and obtain the consent of the Underwriter to the
filing, which consent shall not be unreasonably delayed or withheld;
(f) As soon as practicable after the Effective Date, to make generally
available to the Company's security holders and to deliver to the Underwriter an
earnings statement of the Company (which need not be audited) complying with
Section 1l(a) of the Securities Act and the Rules and Regulations (including, at
the option of the Company, Rule 158);
-13-
(g) Upon the request of the Underwriter, for a period of two (2) years
following the Effective Date, to furnish to the Underwriter copies of all
materials furnished by the Company to its stockholders generally and all public
reports and all reports and financial statements furnished by the Company to the
principal national securities exchange or market upon which the Common Stock may
be listed pursuant to requirements of or agreements with such exchange or market
or to the Commission pursuant to the Exchange Act or any rule or regulation of
the Commission thereunder (except for such materials, reports and statements as
are available on XXXXX);
(h) Promptly from time to time to take such action as the Underwriter may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as the Underwriter may request and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete the
distribution of the Shares; provided that in connection therewith, the Company
shall not be required to qualify as a foreign corporation, to submit to general
taxation or to file a general consent to service of process in any jurisdiction;
(i) For a period of 180 days from the date of the Prospectus (the "Lock-Up
Period"), not to, directly or indirectly, (1) offer for sale, sell, pledge or
otherwise dispose of (or enter into any transaction or device which is designed
to, or could be expected to, result in the disposition by any person at any time
in the future of) any shares of Common Stock or securities convertible into or
exchangeable for Common Stock (other than (x) the Shares, or (y) shares of
Common Stock issued pursuant to employee benefit plans, stock option plans or
other employee compensation plans existing on the date hereof or pursuant to
currently outstanding options, warrants or rights or upon conversion of shares
of Common Stock), or substantially similar securities, or sell or grant options,
rights or warrants with respect to up to 50,000 shares of Common Stock or
securities convertible into or exchangeable for Common Stock or substantially
similar securities (such 50,000 share cap shall not apply to the grant of
options pursuant to benefit plans existing on the date hereof), or (2) enter
into any swap or other derivatives transaction that transfers to another, in
whole or in part, any of the economic benefits or risks of ownership of such
shares of Common Stock, whether any such transaction described in clause (1) or
(2) above is to be settled by delivery of Common Stock or other securities, in
cash or otherwise, in each case without the prior written consent of Xxxx, Xxxx.
Notwithstanding the foregoing, for the purpose of allowing the Underwriter to
comply with NASD Rule 2711(f)(4), if (1) during the last 17 days of the Lock-Up
Period, the Company releases earnings results or publicly announces other
material news or a material event relating to the Company occurs or (2) prior to
the expiration of the Lock-Up Period, the Company announces that it will release
earnings results during the 16 day period beginning on the last day of the
Lock-Up Period, then in each case the Lock-Up Period will be extended until the
expiration of the 18 day period beginning on the date of release of the earnings
results or the public announcement regarding the material news or the occurrence
of the material event, as applicable, unless Xxxx, Xxxx waives, in writing, such
extension. The Company agrees not to accelerate the vesting of any option or
warrant or the lapse of any repurchase right prior to the expiration of the
Lock-Up Period;
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(j) To take such steps as shall be necessary to ensure that the Company
shall not become an "investment company" as defined in the Investment Company
Act of 1940, as amended, and the rules and regulations of the Commission
thereunder;
(k) During the period of 180 days from the date of the Prospectus, to
obtain an executed letter in the form of Exhibit A hereto from each new officer
and director who has not previously executed such a letter;
(l) The Company will apply the net proceeds received by it from the sale
of the Shares for the purposes set forth under "Use of Proceeds" in the
Prospectus;
(m) Prior to the First Closing Date, the Company will make all filings
required to list the Company Shares on the Nasdaq National Market, subject only
to official notice of issuance;
(n) The Company will maintain a Transfer Agent for its Common Stock; and
(o) Until the completion of the distribution of the Shares, and for 25
days thereafter, the Company shall not without the prior written consent of the
Underwriter and counsel for the Underwriter, issue, directly or indirectly, any
press release or other communication or hold any press conference with respect
to the Company or its activities or the offering contemplated hereby.
SECTION 6. EXPENSES.
(a) The Company agrees to pay: (i) all of the Underwriter's expenses and
fees, including the reasonable expenses and fees of counsel to the Underwriter,
(ii) the costs incident to the sale and delivery of the Shares and any taxes
payable in that connection; (iii) the costs incident to the preparation,
printing and filing under the Securities Act of the Registration Statement and
any amendments and exhibits thereto; (iv) the costs of distributing the
Registration Statement as originally filed and each amendment thereto and any
post-effective amendments thereof (including, in each case, exhibits), any
Preliminary Prospectus, the Final Prospectus and any amendment or supplement to
the Final Prospectus, all as provided in this Agreement; (v) the costs of
reproducing and distributing this Agreement and any other related documents in
connection with the offering, purchase, sale and delivery of the Shares; (vi)
the filing fees and expenses incident to securing the review by the NASD of the
terms of sale of the Shares (including related fees and expenses of counsel to
the Underwriter, which obligation shall be in addition to the obligation
referred to in subparagraph (i) above); (vii) any applicable listing or other
fees; (viii) the fees and expenses of preparing and distributing a Blue Sky
Memorandum (including related reasonable fees and expenses of counsel to the
Underwriter, which obligation shall be in addition to the obligation referred to
in subparagraph (i) above); (ix) costs and expenses related to "Tombstone"
advertisements; (x) the costs and expenses related to the production of up to
five bound volumes of the completed Registration Statement for each of the
Underwriter; and (xi) the costs and expenses relating to investor presentations
on any "road show" undertaken in connection with the marketing of the offering
of the Shares including, without limitation, expenses associated with the
production of road show slides and graphics, printing and advertising fees and
expenses, fees and expenses of any consultants engaged in connection with the
road show presentations, travel and lodging expenses of the Underwriter and
officers of the Company and any such consultants, and all other costs and
expenses incident to the performance of the obligations of the Company under
this Agreement, including all accounting and counsel fees and expenses incurred
by the Company in connection with the offering of the Shares hereunder.
Notwithstanding the foregoing, the fees and expenses referred to in subparagraph
(i) above shall not exceed (without the prior consent of the Company) $150,000
in the aggregate, payable in accordance with the engagement letter between the
Underwriter and the Company dated February 7, 2005 (the "Engagement Letter").
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(b) No person is entitled either directly or indirectly to compensation
from the Company, from the Underwriter or from any other person for services as
a finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Underwriter, against any losses, claims, damages
or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Underwriter may become
subject insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the claim of any person (other
than an employee of the party claiming indemnity) or entity that he or it is
entitled to a finder's fee in connection with the proposed offering by reason of
such person's or entity's influence or prior contact with the Company.
SECTION 7. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase and pay for the Shares it has agreed to purchase
hereunder on the respective Closing Dates are subject (x) to the accuracy when
made and as of the Closing Dates, of the representations and warranties of the
Company and, in the case of the First Closing Date only, contained herein, (y)
to the performance by the Company of its obligations hereunder and (z) to each
of the following additional terms and conditions:
(a) The Final Prospectus shall have been timely filed with the Commission
in accordance with Section 5(a); no stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus or otherwise shall
have been complied with.
(b) The Underwriter shall not have discovered and disclosed to the Company
on or prior to either of the Closing Dates that the Registration Statement or
the Final Prospectus or any amendment or supplement thereto contains an untrue
statement of a material fact or omits to state a material fact which is required
to be stated therein or is necessary to make the statements therein not
misleading.
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(c) Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP shall have furnished to the
Underwriter its written opinion, as counsel to the Company, addressed to the
Underwriter and dated the First Closing Date, in substantially the form attached
hereto as Exhibit C.
(d) _______________________ LLP shall have furnished to the Underwriter
its written opinion, as special regulatory counsel to the Company, addressed to
the Underwriter and dated the First Closing Date, in substantially the form
attached hereto as Exhibit D.
(e) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus and other related matters
shall be reasonably satisfactory to or approved by Xxxxxxxxxx Xxxxxxx PC,
counsel to the Underwriter, and you shall have received from such counsel a
signed opinion, dated as of the First Closing Date, together with copies thereof
for each of the other Underwriter, in form and substance satisfactory to the
Underwriter. The Company and its Subsidiaries shall have furnished to counsel
for the Underwriter such documents as it may reasonably request for the purpose
of enabling it to render such opinion.
(f) At the time of execution of this Agreement, the Underwriter shall have
received from Deloitte & Touche LLP a letter, in form and substance satisfactory
to the Underwriter, addressed to the Underwriter and dated the date hereof (i)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission and (ii) stating, as of the date hereof (or, with respect to
matters involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date not
more than five days prior to the date hereof), the conclusions and findings of
such firm with respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to Underwriter in connection with
registered public offerings.
(g) With respect to the letters of Deloitte & Touche LLP referred to in
the preceding paragraph and delivered to the Underwriter concurrently with the
execution of this Agreement (each, an "INITIAL LETTER"), the Company shall have
furnished to the Underwriter a letter (the "BRING-DOWN LETTER") of such
accountants, addressed to the Underwriter and dated the First Closing Date (i)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (ii) stating, as of the date of the bring-down letter (or,
with respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Prospectus, as
of a date not more than five days prior to the date of the bring-down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii) confirming
the conclusions and findings set forth in the initial letter.
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(h) The Company shall have furnished to the Underwriter a certificate,
dated the First Closing Date, of its Chief Executive Officer and its Chief
Financial Officer stating that:
(i) The representations, warranties and agreements of the Company in
Section 1 are true and correct in all material respects as of the First
Closing Date; the Company has complied in all material respects with all
its agreements contained herein; and the conditions set forth in this
Section 8 have been fulfilled; and
(ii) They have carefully examined the Registration Statement and the
Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and the Prospectus did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and (B) since the Effective Date no event has occurred
which should have been set forth in a supplement or amendment to the
Registration Statement or the Prospectus which was not so set forth
therein.
(i) The Company shall have not sustained since the date of the latest
audited financial statements included in the Prospectus (i) any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus or (ii) since such date there shall not have been
any change in the capital stock or long-term debt of the Company and its
subsidiaries on a consolidated basis or any adverse change, or any development
involving a prospective adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (i) or (ii), is, in the
judgment of the Underwriter, so material and adverse as to make it impracticable
or inadvisable to proceed with the public offering or the delivery of the Shares
being delivered on the respective Closing Date on the terms and in the manner
contemplated in the Prospectus.
(j) Subsequent to the execution and delivery of this Agreement there shall
not have occurred any of the following: (i) trading in securities generally on
the New York Stock Exchange, the American Stock Exchange, the Nasdaq National
Market or in the over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market, shall have been
suspended or minimum prices shall have been established on any such exchange or
such market by the Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction, (ii) a banking moratorium shall
have been declared by Federal or state authorities, (iii) the United States
shall have become engaged in hostilities, there shall have been an escalation in
hostilities or acts of terrorism involving the United States or there shall have
been a declaration of a national emergency or war by the United States or (iv)
there shall have occurred such a material adverse change in general economic,
political or financial conditions (or the effect of international conditions on
the financial markets in the United States shall be such) as to make it, in the
judgment of the Underwriter, impracticable or inadvisable to proceed with the
public offering or delivery of the Shares being delivered on the respective
Closing Date on the terms and in the manner contemplated in the Prospectus.
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(k) The Shares shall be listed on the Nasdaq National Market.
(l) Prior to the First Closing Date, the Underwriter shall have received
the legally binding and enforceable agreements in the form of Exhibit A hereto
from the persons and entities listed on Schedule B hereto (such executed
agreements being referred to as the "LOCK-UP AGREEMENTS").
(m) No action shall have been taken by the Commission or the NASD, the
effect of which would make it improper, at any time prior to the respective
Closing Date, for members of the NASD to execute transactions (as principal or
agent) in the Shares and no proceedings for the taking of such action shall have
been instituted or shall be pending, or, to the knowledge of the Underwriter or
the Company, shall be contemplated by the Commission or the NASD. The Company
and the Underwriter represent that at the date hereof it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD. The
Company shall have advised the Underwriter of any NASD affiliation of any of its
officers, directors, stockholders or their affiliates.
(n) Upon exercise of the option provided for in Section 2(b) hereof, the
obligations of the Underwriter to purchase and pay for the Option Shares
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the Option
Closing Date, and no stop order suspending the effectiveness thereof shall have
been issued and no proceedings for that purpose shall have been instituted or
shall be pending, or, to the knowledge of the Underwriter or the Company, shall
be contemplated by the Commission, and any reasonable request on the part of the
Commission for additional information shall have been complied with to the
satisfaction of counsel to the Underwriter.
(ii) At the Option Closing Date, Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx
LLP, and ________________________ L.L.P. shall have furnished to the Underwriter
their written opinions as special counsel to the Company addressed to the
Underwriter, which opinions shall be dated the Option Closing Date and shall be
substantially the same in scope and substance as the opinions furnished to the
Underwriter at the First Closing Date pursuant to Sections 7(c) and (d),
respectively, except that such opinions, where appropriate, shall cover the
Option Shares.
(iii) At the Option Closing Date there shall have been delivered to
you a letter in form and substance satisfactory to you from Deloitte & Touche
LLP dated the Option Closing Date and addressed to the Underwriter confirming
the information in their letter referred to in Section 7(f) hereof and stating
that nothing has come to their attention during the period from the ending date
of their review referred to in said letters to a date not more than five
business days prior to the Option Closing Date, which would require any change
in said letter if it were required to be dated the Option Closing Date.
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(iv) At the Option Closing Date, the Company shall have furnished to
the Underwriter a certificate, dated the Option Closing Date, of its Chief
Executive Officer and the Chief Financial Officer, in form and substance
satisfactory to counsel for the Underwriter substantially the same in scope and
substance as the certificates furnished to you at the First Closing Date
pursuant to Section 7(h) hereof.
(v) All proceedings taken at or prior to the Option Closing Date in
connection with the sale and issuance of the Option Shares shall be satisfactory
in form and substance to the Underwriter and Xxxxxxxxxx Xxxxxxx PC, counsel to
the Underwriter and the Underwriter and its counsel shall have been furnished
with all such documents, certificates, and opinions as are reasonably requested
in connection with this transaction in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company or its compliance with any of the covenants or conditions herein.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
for the Underwriter.
SECTION 8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless the Underwriter, its
officers and employees, each of its directors, its affiliates, as defined in
Rule 405 under the Securities Act, and each person, if any, who controls any
Underwriter within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Shares), to which the Underwriter, director,
officer, employee, affiliate or controlling person may become subject, under the
Securities Act or any applicable federal or state law, or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the Final
Prospectus or in any amendment or supplement thereto, (ii) the omission or
alleged omission to state in any Preliminary Prospectus, the Registration
Statement or the Final Prospectus, or in any amendment or supplement thereto, or
in any Blue Sky application, any material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any act or
failure to act or any alleged act or failure to act by the Underwriter in
connection with, or relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall not be
liable under this clause (iii) to the extent that it is determined in a final,
non-appealable judgment by a court of competent jurisdiction that such loss,
claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by the Underwriter through its
gross negligence or willful misconduct), and shall reimburse the Underwriter and
each such director, officer, employee, affiliate or controlling person promptly
upon demand for any legal or other expenses reasonably incurred by the
Underwriter, director, officer, employee, affiliate or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Final Prospectus, or in any such amendment or supplement, solely in
reliance upon and in conformity with written information concerning the
Underwriter furnished to the Company by or on behalf of the Underwriter
specifically for inclusion therein; and provided further that as to any
Preliminary Prospectus, this indemnity agreement shall not inure to the benefit
of the Underwriter, its directors, officers, affiliates or employees, or any
person controlling the Underwriter, on account of any loss, claim, damage,
liability or action arising solely from the sale of the Shares to any person by
the Underwriter if the Underwriter failed to send or give a copy of the Final
Prospectus, as the same may be amended or supplemented, to that person within
the time required by the Securities Act, and the untrue statement or alleged
untrue statement of any material fact or omission or alleged omission to state a
material fact in such Preliminary Prospectus was corrected in the Final
Prospectus, unless such failure resulted from non-compliance by the Company with
Section 5(c). The foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to the Underwriter or to any officer,
director, affiliate, employee or controlling person of the Underwriter.
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(b) The Underwriter shall indemnify and hold harmless the Company, its
officers and employees, each of its directors, its affiliates, and each person,
if any, who controls the Company within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Prospectus, the Registration Statement or
the Final Prospectus or in any amendment or supplement thereto, or (B) in any
Blue Sky Application or (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement, the Final Prospectus, or in
any amendment or supplement thereto, or in any Blue Sky Application, any
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information concerning the
Underwriter furnished to the Company by or on behalf of the Underwriter
specifically for inclusion therein, and shall reimburse the Company and any such
director, officer, affiliate or controlling person for any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which the Underwriter may otherwise have to the Company or any such
director, officer, employee or controlling person.
-21-
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of any intention or threat to commence an action, suit or proceeding or
notice of the commencement of any action, suit or proceeding, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, promptly notify the indemnifying party
in writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
any 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
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party and in the
reasonable judgment of such counsel it is advisable for such indemnified party
to employ separate counsel or (iii) the indemnifying party has failed to assume
the defense of such action and employ counsel reasonably satisfactory to the
indemnified 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 on behalf of such indemnified party.
Each indemnified party shall have the right to choose in its sole discretion its
counsel in connection with the defense of any action, suit or proceeding whether
or not the fees and expenses of such counsel are being paid by the indemnifying
parties. No indemnifying party shall (i) without the prior written consent of
the indemnified parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise, consent or judgment includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding, or (ii) be liable for any settlement
of any such action effected without its written consent (which consent shall not
be unreasonably withheld), but if settled with the consent of the indemnifying
party or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
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(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the
Company, on one hand, and the Underwriter, on the other hand, from the offering
of the Shares 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 one hand, and the Underwriter, on the other hand, with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on one
hand, and the Underwriter, on the other hand, with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds (before
deducting expenses) from the offering of the Shares purchased under this
Agreement received by the Company and the total underwriting discounts and
commissions received by the Underwriter with respect to the Shares purchased
under this Agreement bear to the total gross proceeds from the offering of the
Shares under this Agreement, in each case as described on the cover page of the
Prospectus. The relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Underwriter, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriter agree that it would not be just and
equitable if contributions pursuant to this Section were to be determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section shall
be deemed to include, for purposes of this Section 8(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), the Company agrees that the Underwriter shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
was offered to the public exceeds the amount of any damages which the
Underwriter has otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 9(e) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
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(e) If multiple claims are brought with respect to at least one of which
indemnification is permitted under applicable law and provided for under this
Agreement, the indemnifying party agrees that any judgment award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the judgment award expressly
states that it, or any portion thereof, is based solely on a claim as to which
indemnification is not available.
SECTION 9. TERMINATION.
(a) The obligations of the Underwriter hereunder may be terminated by the
Underwriter by notice given to and received by the Company prior to delivery of
and payment for the Shares if, prior to the First Closing Date or the Option
Closing Date, any of the events described in Sections 7(i) or 7(j), shall have
occurred or if the Underwriter shall decline to purchase the Shares for any
reason permitted under this Agreement.
(b) Termination of this Agreement under this Section 9 or Section 7 after
the Shares have been purchased by the Underwriter hereunder shall be applicable
only to the Option Shares. Termination of this Agreement shall be without
liability of any party to any other party other than as provided in Sections 6,
8 and 11 hereof. Notwithstanding any such termination, the provisions of
Sections 6, 8 and 11 hereof shall remain in effect.
SECTION 10. DEFAULT BY THE COMPANY. If the Company shall fail at the
Closing Date or at any Option Closing Date, as applicable, to sell and deliver
the number of Shares which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Shares to be purchased on an Option Closing Date, the Underwriter may
at the Underwriter's option, by notice from the Underwriter to the Company,
terminate the Underwriter's obligation to purchase Option Shares from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to Section 6, Section 8, Section 9 and Section 11
hereof. No action taken pursuant to this Section shall relieve the Company from
liability, if any, in respect of such default.
SECTION 11. REIMBURSEMENT OF UNDERWRITER'S EXPENSES. If the Company shall
fail to tender the Shares for delivery to the Underwriter by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
Underwriter's obligations hereunder required to be fulfilled by the Company is
not fulfilled, the Company will, subject to the limitations set forth in Section
6, reimburse the Underwriter for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of counsel including those
necessary to collect such expenses) incurred by the Underwriter in connection
with this Agreement and the proposed purchase of the Shares (less the amounts
paid to the Underwriter through such date as set forth in Section 6(a)), and
upon demand, the Company shall pay the full amount thereof to the Underwriter.
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SECTION 12. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriter, shall be delivered or sent by mail, telex or
facsimile transmission to Xxxx Xxxx & Co., Inc., 00 Xxxxxxxx Xxxxxxxx, Xxxxxxx
Xxxx, Xxx Xxxxxx 00000, Attention: Xxxxxxxxxxx Xxxxxxx (Fax: 000.000.0000), with
a copy to Xxxxxx X. Xxxxxxxx, Esq., Xxxxxxxxxx Xxxxxxx PC, 00 Xxxxxxxxxx Xxxxxx,
Xxxxxxxxxx, Xxx Xxxxxx 00000 (Fax: 000.000.0000), and
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: ____________________, with a copy to
_______________________, Esq., Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP, 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (Fax: 000.000.0000). Any such
statements, requests, notices or agreements shall take effect at the time of
receipt thereof.
SECTION 13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Underwriter and the Company, and
their respective assigns and successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(A) the representations, warranties, indemnities and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of
directors, officers and employees of any Underwriter, and the person or persons,
if any, who control any Underwriter within the meaning of Section 15 of the
Securities Act and (B) the indemnity agreement of the Underwriter contained in
Section 8(b) of this Agreement shall be deemed to be for the benefit of
directors, officers and employees of the Company, and any person controlling the
Company within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 13 any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
SECTION 14. SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriter contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Shares and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any of them or any one controlling any of them.
SECTION 15. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY". For
purposes of this Agreement, (a) "business day" means each Monday, Tuesday,
Wednesday, Thursday or Friday which is not a day on which banking institutions
in New York are generally authorized or obligated by law or executive order to
close and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules
and Regulations.
-25-
SECTION 16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of New Jersey. Any dispute hereunder shall
be brought in a federal or state court in the State of New Jersey.
SECTION 17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
SECTION 18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
SECTION 19. ENTIRE AGREEMENT; MODIFICATION. This Agreement (together with
Engagement Letter) contains the entire understanding between the parties hereto
with respect to the subject matter hereof and may not be modified or amended
except by a writing duly signed by the party against whom enforcement of the
modification or amendment is sought.
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If the foregoing correctly sets forth the agreement between the Company
and the Underwriter, please indicate your acceptance in the space provided for
that purpose below.
Very truly yours,
FRANKLIN CREDIT MANAGEMENT CORPORATION
By:_________________________________
Name:
Title:
Underwriter:
XXXX XXXX & CO., INC.
By:_________________________________
Name:
Title:
-27-
SCHEDULE B
Persons and Entities Executing Lock-Up Agreements
EXHIBIT A
LOCK-UP AGREEMENT
Xxxx, Xxxx & Co., Inc.
00 Xxxxxxxx Xxxxxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000-0000
RE: Franklin Credit Management Corporation
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock ("Common Stock") of Franklin Credit Management Corporation (the
"Company") or securities convertible into or exchangeable or exercisable for
Common Stock of the Company. The Company proposes to carry out a public offering
of Common Stock of the Company (the "Offering") for which you will act as
underwriter. The undersigned recognizes that the Offering will be of benefit to
the undersigned and will benefit the Company by, among other things, raising
additional capital for its operations. The undersigned acknowledges that you are
relying on the representations and agreements of the undersigned contained in
this letter in carrying out the Offering and in entering into underwriting
agreements with the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant (each a "Disposition") any rights with respect to any
shares of Common Stock, any options or warrants to purchase any shares of Common
Stock or any securities convertible into or exchangeable for shares of Common
Stock (collectively, "Securities") now owned or hereafter acquired directly by
such person or with respect to which such person has or hereafter acquires the
power of disposition, otherwise than (i) as a bona fide gift or gifts, provided
the donee or donees thereof agree in writing to be bound by this restriction,
(ii) for grants of employee stock options pursuant to the terms of a plan in
effect on the date hereof, issuances of Common Stock pursuant to the exercise of
such options or the exercise of any other employee stock options outstanding on
the date hereof, or (iii) with the prior written consent of Xxxx Xxxx & Co.,
Inc., for a period commencing on the date hereof and continuing to a date to be
agreed upon by you and the Company and set forth under "Underwriting" in the
final prospectus used in connection with the Offering, which date shall not be
more than 180 days after the date that the offering has been closed (the
"Lock-up Period"). The foregoing restriction has been expressly agreed to
preclude the undersigned holder of the Securities from engaging in any hedging
or other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than the holder. Such
prohibited hedging or other transactions would include, without limitation, any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with respect
to any Securities or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its composition or value from Securities. The undersigned also agrees
and consents to the entry of stop transfer instructions with the Company's
transfer agent and registrar against the transfer of shares of Common Stock or
Securities held by the undersigned except in compliance with the foregoing
restrictions.
This agreement is irrevocable and will be binding on the undersigned and
the respective successors, heirs, personal representatives, and assigns of the
undersigned. This letter agreement shall terminate and be of no further force
and effect upon a decision by Xxxx Xxxx & Co., Inc. or the Company not to
proceed with the Offering.
Dated: ___________________________
------------------------------------
[Signature]
-----------------------------------
Printed Name of Person Signing
2
EXHIBIT B
FRANKLIN CREDIT MANAGEMENT CORPORATION
(A DELAWARE CORPORATION)
1,100,000 SHARES OF COMMON STOCK
PRICE DETERMINATION AGREEMENT
______________________, 2005
Xxxx Xxxx & Co., Inc.
00 Xxxxxxxx Xxxxxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000-0000
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated _________________, 2005
(the "Underwriting Agreement"), among Franklin Credit Management Corporation, a
Delaware corporation (the "Company"), and Xxxx Xxxx & Co., Inc., (the
"Underwriter"). The Underwriting Agreement provides for the purchase by the
Underwriter from the Company, subject to the terms and conditions set forth
therein, of 1,100,000 shares of Common Stock of the Company ("Securities"),
subject to the Underwriter's option to purchase up to an additional 165,000
Securities (to cover overallotments, if any). This Agreement is the Price
Determination Agreement referred to in the Underwriting Agreement.
Pursuant to Section 2 of the Underwriting Agreement, the Company agrees with the
Underwriter as follows:
1. The public offering price per Security shall be $____________.
2. The purchase price for the Securities to be paid by the
Underwriter shall be $__________________ per Security.
The Company represents and warrants to the Underwriter that the representations
and warranties of the Company set forth in Section 1 of the Underwriting
Agreement are accurate as though expressly made at and as of the date hereof.
The Agreement shall be governed by the laws of the State of New Jersey.
3
If the foregoing is in accordance with the understanding of the Underwriter of
the agreement between the Underwriter and the Company, please sign and return to
the Company a counterpart hereof, whereupon this instrument, along with all
counterparts and together with the Underwriting Agreement, shall be a binding
agreement between the Underwriter and the Company in accordance with its terms
and the terms of the Underwriting Agreement.
Very truly yours,
FRANKLIN CREDIT MANAGEMENT CORPORATION
By:
-----------------------------------------------
, Chief Executive Officer
Confirmed and accepted as of the date first above written:
XXXX XXXX & CO., INC.
By:
------------------------
Name:
Title:
4
EXHIBITS C AND D
Forms of Opinion
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