EXHIBIT 1.1
GATEWAY FINANCIAL HOLDINGS, INC.
(a North Carolina corporation)
________ Shares of Common Stock
UNDERWRITING AGREEMENT
This Underwriting Agreement is made and entered into this ____ day of ______,
2004 by and between Gateway Financial Holdings, Inc., a North Carolina
corporation (the "Company") and Xxxx Xxxx & Co, Inc. (the "Underwriter"). The
Company hereby confirms its agreement with the Underwriter with respect to the
issue and sale by the Company and the purchase by the Underwriter of ______
shares (the "Initial Securities") of the Company's no par value common stock
("Common Stock"). The Company also proposes to issue and sell to the
Underwriter, at the Underwriter's option, up to an additional ______ shares of
Common Stock (the "Option Securities") as set forth herein. The term
"Securities" as used herein, unless indicated otherwise, shall mean the Initial
Securities and the Option Securities.
The initial public offering price for the Securities, the purchase price to be
paid by the Underwriter for the Securities, and the number of Securities to be
sold to the Underwriter by the Company shall be agreed upon by the Company and
the Underwriter, and such agreement shall be set forth in a separate written
instrument substantially in the form of EXHIBIT A hereto (the "Price
Determination Agreement"). The Price Determination Agreement may take the form
of an exchange of any standard form of written telecommunication between the
Company and the Underwriter and shall specify such applicable information as is
indicated in EXHIBIT A hereto. The offering of the Securities will be governed
by this Agreement, as supplemented by the Price Determination Agreement. From
and after the date of the execution and delivery of the Price Determination
Agreement, this Agreement shall be deemed to incorporate, and all references
herein to "this Agreement" shall be deemed to include, the Price Determination
Agreement.
The Company has prepared and filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form SB-2 (File No. 333-_______)
covering the registration of the Securities under the Securities Act of 1933, as
amended (the "1933 Act"), including the related preliminary prospectus, and, if
such registration statement has not become effective, the Company will prepare
and file, prior to the effective date of such registration statement, an
amendment to such registration statement, including a final prospectus. Each
prospectus used before the time such registration statement becomes effective is
herein called a "preliminary prospectus." Such registration statement, at the
time it becomes effective, is herein called the "Registration Statement," and
the prospectus, included in the Registration Statement at the time it becomes
effective is herein called the "Prospectus," except that, if any revised
prospectus provided to the Underwriter by the Company for use in connection with
the offering of the Securities differs from the prospectus included in the
Registration Statement at the time it becomes effective (whether or not such
prospectus is required to be filed pursuant to Rule 424(b) under the
1933 Act ("Rule 424(b)"), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first furnished to the Underwriter for
such use.
The Company understands that the Underwriter proposes to make a public offering
of the Securities (the "Offering") as soon as possible after the Registration
Statement becomes effective. The Underwriter may assemble and manage a selling
group of broker-dealers that are members of the National Association of
Securities Dealers, Inc. ("NASD") to participate in the solicitation of purchase
orders for the Securities.
Section 1. Representations and Warranties.
(a) The Company represents and warrants to and agrees with the
Underwriter that:
(i) The Company meets the requirements for use of Form SB-2 under
the 1933 Act and, when the Registration Statement on such form shall
become effective and at all times subsequent thereto up to the Closing
Time referred to below (and, with respect to the Option Securities, up to
the "Option Closing Time" referred to below), (A) the Registration
Statement and any amendments and supplements thereto will comply in all
material respects with the requirements of the 1933 Act and the rules and
regulations of the Commission under the 1933 Act (the "1933 Act
Regulations"); (B) neither the Registration Statement nor any amendment or
supplement thereto will 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, in light of the circumstances under which
they were made, not misleading; and (C) neither the Prospectus nor any
amendment or supplement thereto will include an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading, except that this representation and warranty
does not apply to statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by the
Underwriter expressly for use in the Registration Statement or the
Prospectus. 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.
(ii) Documents previously filed either with the Commission, or, if
filed by Gateway Bank & Trust Co. (the "Bank"), with the Federal Deposit
Insurance Corporation (the "FDIC"), as predecessor filer to the Company,
complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the rules and
regulations of the Commission thereunder (the "1934 Act Regulations") as
adopted by the appropriate federal banking regulator and, when read
together and with the other information in the Prospectus, at the time the
Registration Statement becomes effective and at all times subsequent
thereto up to the Closing Time (and with respect to the Option Securities,
up to the "Option Closing Time" referred to below), will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, in each case after excluding any statement that
does not constitute a part of the Registration
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Statement or the Prospectus pursuant to Rule 412 of the 1933 Act
Regulations.
(iii) Xxxxx Xxxxxx PLLC ("Xxxxx Xxxxxx"), who is reporting upon the
audited financial statements included or incorporated by reference in the
Registration Statement, has advised the Company that it is an independent
certified public accountant as required by the 1933 Act and the 1933 Act
Regulations and within the meaning of the Code of Ethics of the American
Institute of Certified Public Accountants ("AICPA"), and Xxxxx Xxxxxx is,
with respect to the Company and each of its subsidiaries, independent
certified public accountants.
(iv) The consolidated financial statements, audited and, if any,
unaudited (including the notes thereto), included or incorporated by
reference in the Registration Statement present fairly the consolidated
financial position of the Company and its subsidiaries as of the dates
indicated and the consolidated results of operations and cash flows of the
Company and its subsidiaries for the periods specified. Such financial
statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, except as otherwise stated therein. The financial statement
schedules, if any, included in the Registration Statement present fairly
the information required to be stated therein. The selected financial, pro
forma and statistical data included in the Prospectus are accurate in all
material respects and present fairly the information shown therein and
have been compiled on a basis consistent with that of the audited and, if
any, unaudited consolidated financial statements included or incorporated
by reference in the Registration Statement.
(v) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of North Carolina with
corporate power and authority under such laws to own, lease and operate
its properties and conduct its business as described in the Prospectus.
Each direct and indirect subsidiary of the Company is an entity duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization with corporate power and authority
under such laws to own, lease and operate its properties and conduct its
business. The Company and each of its direct and indirect subsidiaries is
duly qualified to transact business as a foreign corporation and is in
good standing in each other jurisdiction in which it owns or leases
property of a nature, or transacts business of a type, that would make
such qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse effect on
the condition (financial or otherwise), earnings, business affairs, assets
or business prospects of the Company and its subsidiaries, considered as
one enterprise.
(vi) The Company is duly registered with the Board of Governors of
the Federal Reserve System as a financial holding company under the Bank
Holding Company Act of 1956, as amended. The Bank is a North
Carolina-chartered commercial bank subsidiary of the Company; and the
deposit accounts of the Bank are insured by the Bank Insurance Fund of the
FDIC up to the maximum allowable limits thereof. The Company has all such
power, authority, authorization, approvals and orders as may be required
to enter into this Agreement to carry out the provisions and conditions
hereof and thereof and to issue and sell the Securities.
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(vii) All of the outstanding shares of capital stock of the Bank and
each of the Company's other subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable (except to the extent
set forth in N.C.G.S. 53-42 as to the Bank) and are owned by the Company
directly or indirectly, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind.
(viii) Except for the Bank, Gateway Insurance Services, Inc.,
Gateway Investment Services, Inc., Gateway Capital Statutory Trust I and
Gateway Capital Statutory Trust II, the Company does not have any
"significant subsidiaries" as defined in Rule 1-02 of Regulation S-X of
the Commission.
(ix) The Company had at the date indicated a duly authorized and
outstanding capitalization as set forth in the Prospectus under the
caption "Description of Capital Stock." The capital stock, subordinated
debentures and associated trust preferred securities and other securities
of the Company conform in all material respects to the description thereof
contained or incorporated by reference in the Prospectus and such
description conforms to the rights set forth in the instruments defining
the same.
(x) This Agreement has been duly authorized, executed and delivered
by the Company and, when duly executed by the Underwriter, will constitute
the valid and binding agreements of the Company enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
(xi) The Securities have been duly and validly authorized by the
Company for issuance and sale to the Underwriter pursuant to this
Agreement and, when issued and delivered by the Company to the Underwriter
pursuant to this Agreement against payment of the consideration set forth
herein, will be validly issued, fully paid and non-assessable and will
constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms. The Securities conform in all
material respects to the description thereof in the Prospectus, and such
description conforms in all material respects to the rights set forth in
the instruments defining the same; the holders of the Securities will be
entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the North
Carolina Business Corporation Act; and the issuance of the Securities is
not subject to any preemptive or other similar rights.
(xii) Except for information provided in writing to the Company by
the Underwriter about the Underwriter for use in the Prospectus, the
Company has not relied upon the Underwriter or its legal or other advisors
for any legal, tax or accounting advice.
(xiii) The issuance and sale of the Securities by the Company, the
compliance by the Company with all of the provisions of this Agreement and
the consummation of the transactions herein contemplated will not conflict
with or result in a breach of any of the terms or provisions of, or
constitute a default under, any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over the
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Company or any of its properties; and no consent, approval, authorization,
order, license, certificate, permit, registration or qualification of or
with any such court or other governmental agency or body is required to be
obtained by the Company for the issue and sale of the Securities by the
Company, or the consummation by the Company of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations, licenses, certificates, permits, registrations or
qualifications as have already been obtained, or as may be required under
the 1933 Act or the 1933 Act Regulations, the 1934 Act or the 1934 Act
Regulations, or state securities laws.
(xiv) Each person who is an executive officer or director of the
Company or a director of the Bank has agreed to sign an agreement
substantially in the form attached hereto as EXHIBIT B (the "Lock-up
Agreements"). The Company has provided to counsel for the Underwriter
true, accurate and complete copies of all of the Lock-up Agreements
presently in effect or effected hereby. The Company hereby represents and
warrants that it will not release any of its officers, directors or other
shareholders from any Lock-up Agreements currently existing or hereafter
effected without the prior written consent of the Underwriter.
(xv) The Company has not engaged in any activity that would result
in the Company being, and after giving effect to the offering and sale of
the Securities, the Company will not be, an "investment company," or an
entity "controlled" by an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended (the "Investment Company
Act").
(xvi) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and
non-assessable, and are not subject to the preemptive rights of any
stockholder of the Company.
(xvii) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
stated therein, there has not been (A) any material adverse change in the
condition (financial or otherwise), earnings, business affairs, assets or
business prospects of the Company and its subsidiaries, considered as one
enterprise, whether or not arising in the ordinary course of business, (B)
any transaction entered into by the Company or any subsidiary thereof,
other than in the ordinary course of business, that is material to the
Company and its subsidiaries, considered as one enterprise, or (C) any
dividend or distribution of any kind declared, paid or made by the Company
on its capital stock. Neither the Company, the Bank nor any other
subsidiary of the Company has any material liability of any nature,
contingent or otherwise, except as set forth in the Prospectus.
(xviii) Neither the Company, the Bank nor any other direct or
indirect subsidiary of the Company is in violation of any provision of its
articles of incorporation, charter, certificate of trust, trust agreement
or bylaws, as applicable, or in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which it is a party or by which it may be bound
or to which any of its respective properties may be subject, except for
such defaults that, individually or in the
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aggregate, would not have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs, assets or business
prospects of the Company and its subsidiaries, considered as one
enterprise.
(xix) Except as disclosed in the Prospectus, there is no action,
suit or proceeding before or by any government, governmental
instrumentality or court, domestic or foreign, now pending or, to the
knowledge of the Company, threatened against the Company, the Bank or any
other subsidiary that is required to be disclosed in the Prospectus or
that could reasonably be expected to result in any material adverse change
in the condition (financial or otherwise), earnings, business affairs,
assets or business prospects of the Company and its subsidiaries,
considered as one enterprise, or that could reasonably be expected
materially and adversely to affect the properties or assets of the Company
and its subsidiaries, considered as one enterprise, or that could
reasonably be expected materially and adversely to affect the consummation
of the transactions contemplated in this Agreement; all pending legal or
governmental proceedings to which the Company, the Bank or any other
subsidiary is a party that are not described in the Prospectus, including
ordinary routine litigation incidental to its business, if decided in a
manner adverse to the Company, would not have a material adverse effect on
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as one
enterprise.
(xx) There are no material contracts or documents of a character
required to be described in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement that are not
described and filed as required.
(xxi) Each of the Company and its direct and indirect subsidiaries,
including the Bank, has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all
liens, charges, encumbrances or restrictions, except such as (A) are
described in the Prospectus or (B) are neither material in amount nor
materially significant in relation to the business of the Company and its
subsidiaries, considered as one enterprise; all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise are in full force and effect, and neither the
Company, the Bank nor any other subsidiary has any notice of any material
claim that has been asserted by anyone adverse to the rights of the
Company, the Bank or any other subsidiary under any such lease or sublease
or affecting or questioning the rights of such corporation to the
continued possession of the leased or subleased premises under any such
lease or sublease.
(xxii) Each of the Company and its direct and indirect subsidiaries,
owns, possesses or has obtained all material governmental licenses,
permits, certificates, consents, orders, approvals and other
authorizations necessary to own or lease, as the case may be, and to
operate its properties and to carry on its business as presently
conducted, and neither the Company, the Bank nor any other subsidiary has
received any notice of any restriction upon, or any notice of proceedings
relating to revocation or modification of, any such licenses, permits,
certificates, consents, orders, approvals or authorizations.
(xxiii) No labor problem with the employees of the Company, the Bank
or any
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other subsidiary exists or, to the best knowledge of the Company, is
imminent such that it could materially adversely affect the condition
(financial or otherwise), earnings, business affairs or business prospects
of the Company and its subsidiaries, considered as one enterprise, and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its, the Bank's or any other subsidiary's principal
suppliers, contractors or customers that could reasonably be expected to
materially adversely affect the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise.
(xxiv) Except as disclosed in the Prospectus, there are no persons
with registration or other similar rights to have any securities of the
Company registered pursuant to the Registration Statement or otherwise
registered by the Company under the 1933 Act.
(xxv) Except as disclosed in the Prospectus, the Company and its
direct and indirect subsidiaries, including the Bank, own or possess all
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets or other unpatented and/or unpatentable
proprietary or confidential information systems or procedures),
trademarks, service marks and trade names (collectively, "Patent and
Proprietary Rights") currently employed by them in connection with the
business now operated by them except where the failure to own, possess or
acquire such Patent and Proprietary Rights would not have a material
adverse effect on the condition (financial or otherwise), earnings,
business affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise. Neither the Company, the Bank
nor any other subsidiary has received any notice or is otherwise aware of
any infringement of or conflict with asserted rights of others with
respect to any Patent and Proprietary Rights, and which infringement or
conflict (if the subject of any unfavorable decision, rule and refinement,
singly or in the aggregate) could reasonably be expected to result in any
material adverse change in the condition (financial or otherwise),
earnings, business affairs, assets or business prospects of the Company
and its subsidiaries, considered as one enterprise.
(xxvi) The Company and each subsidiary of the Company have filed all
federal, state and local income, franchise or other tax returns required
to be filed and have made timely payments of all taxes due and payable in
respect of such returns, and no material deficiency has been asserted with
respect thereto by any taxing authority.
(xxvii) The Company has filed with the NASD all documents and
notices required by the NASD of companies that have issued securities that
are traded in the over-the-counter market and quotations for which are
reported by the Nasdaq SmallCap Market or, if applicable, the NASDAQ
National Market.
(xxviii) Neither the Company, the Bank nor any other subsidiary of
the Company 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 1934 Act or otherwise, of the price of the Securities or the
Common Stock.
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(xxix) Neither the Company, the Bank nor any other 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
laundering 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
not have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs, assets or business prospects of
the Company and its subsidiaries, considered as one enterprise.
(xxx) Neither the Company, the Bank nor any other subsidiary has any
agreement or understanding with any person (A) concerning the future
acquisition by the Company or the Bank of a controlling interest in any
entity or (B) concerning the future acquisition by any person of a
controlling interest in the Company, the Bank or any other 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.
(b) Any certificate signed by any authorized officer of the Company
or the Bank and delivered to the Underwriter or to counsel for the Underwriter
pursuant to this Agreement shall be deemed a representation and warranty by the
Company to the Underwriter as to the matters covered thereby.
(c) The Underwriter represents and warrants to and agrees with the
Company that:
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(i) The Underwriter is registered as a broker-dealer with the
Commission and is a member of the NASD.
(ii) The Underwriter is validly existing and in good standing as a
corporation under the laws of the State of New Jersey with corporate power
and authority to provide the services to be furnished to the Company
hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated have been duly and
validly authorized by all necessary corporate action on the part of the
Underwriter, and this Agreement is a legal, valid and binding obligation
of the Underwriter, enforceable in accordance with its terms, except as
limited under applicable law and subject to bankruptcy, insolvency,
reorganization or other laws relating to or affecting the enforcement of
creditor's rights generally and equitable principles limiting the right to
obtain specific enforcement or similar equitable relief.
(iv) The Underwriter and, to the Underwriter's knowledge, its
employees, and agents who shall perform any of the services required
hereunder to be performed by the Underwriter shall be duly authorized and
shall have all licenses, approvals and permits necessary to perform such
services.
(v) The execution and delivery of this Agreement by the Underwriter,
the fulfillment of the terms set forth herein and the consummation of the
transactions herein contemplated shall not violate or conflict with the
corporate charter or bylaws of the Underwriter or violate, conflict with
or constitute a breach of, or default (or any event which, with notice or
lapse of time, or both, would constitute a default) under, any material
agreement, indenture or other instrument by which the Underwriter is bound
or under any governmental license or permit or any law, administrative
regulation, authorization, approval or order or court decree, injunction
or order applicable to it.
(vi) There is not now pending or, to the Underwriter's knowledge,
threatened against the Underwriter any material action or proceeding
before the Commission, the NASD, any state securities commission or any
state or federal court concerning the Underwriter's activities as a
broker-dealer.
Section 2. Sale and Delivery to the Underwriter; Closing.
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to sell to the Underwriter, and the Underwriter agrees to purchase from
the Company, the number of Initial Securities set forth at the purchase price
and terms set forth herein and in the Price Determination Agreement.
In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the Underwriter to purchase all or a portion
of the Option Securities in accordance with the terms set forth herein and in
the Price Determination Agreement. The option hereby granted will expire at
9
5:00 p.m. on the 30th day after the date the Registration Statement is
declared effective by the Commission (or at 5:00 p.m. on the next business day
following the 30th day if such 30th day is not a business day) and may be
exercised, solely for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Initial Securities upon
notice by the Underwriter to the Company setting forth the number of Option
Securities as to which the Underwriter is exercising the option and the time,
date and place of payment and delivery for the Option Securities. Such time and
date of delivery (the "Option Closing Date") shall be determined by the
Underwriter but shall not be later than five full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined, nor earlier than the second business day after the date on
which the notice of the exercise of the option shall have been given.
(b) Payment of the purchase price for, and delivery of certificates
for, the Common Stock issuable in connection with the Initial Securities shall
be made at such place as shall be agreed upon by the Company and the
Underwriter, at 9:30 a.m. on the third full business day after the effective
date of the Registration Statement, or at such other time not earlier than three
or more than ten full business days thereafter as the Underwriter and the
Company shall determine (such date and time of payment and delivery being herein
called the "Closing Time"). In addition, in the event that any or all of the
Option Securities are purchased by the Underwriter, payment of the purchase
price for, and delivery of certificates for, such Option Securities shall be
made at such place as shall be agreed upon by the Company and the Underwriter,
on the Option Closing Date as specified in the notice from the Underwriter to
the Company. Payment for the Initial Securities and the Option Securities, if
any, shall be made to the Company by wire transfer of immediately available
funds, against delivery of the Common Stock which comprises the Initial
Securities and Option Securities, as the case may be, to the Underwriter.
(c) The Common Stock which comprises the Initial Securities and
Option Securities, as the case may be, shall be registered in such name or names
as the Underwriter may request in writing at least two business days prior to
the Closing Time or the Option Closing Time, as the case may be.
Section 3. Certain Covenants of the Company. The Company covenants
with the Underwriter as follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective and will notify the Underwriter immediately, and
confirm the notice in writing, (i) when the Registration Statement, or any
post-effective amendment to the Registration Statement, shall have become
effective, or any supplement to the Prospectus or any amended Prospectus shall
have been filed, (ii) of the receipt of any comments from the Commission, (iii)
of any request of the Commission to amend the Registration Statement or amend or
supplement the Prospectus or for additional information and (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the institution or
threatening of any proceedings for any of such purposes. The Company will use
every reasonable effort to prevent the issuance of any such stop order or of any
order preventing or suspending such use and, if any such order is issued, to
obtain the lifting thereof at the earliest possible moment.
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(b) The Company will not at any time file or make any amendment to
the Registration Statement or, if the Company has elected to rely upon Rule 430A
of the 1933 Act Regulations ("Rule 430A"), any amendment or supplement to the
Prospectus (including documents incorporated by reference into the Registration
Statement or the Prospectus) of which the Underwriter shall not previously have
been advised and furnished a copy, or to which the Underwriter or counsel for
the Underwriter shall reasonably object.
(c) The Company has furnished or will furnish to the Underwriter as
many signed and conformed copies of the Registration Statement as originally
filed and of each amendment thereto, whether filed before or after the
Registration Statement becomes effective, copies of all exhibits and documents
filed therewith and signed copies of all consents and certificates of experts as
the Underwriter may reasonably request.
(d) The Company will deliver or cause to be delivered to the
Underwriter, without charge, from time to time until the effective date of the
Registration Statement, as many copies of each preliminary prospectus as the
Underwriter may reasonably request, and the Company hereby consents to the use
of such copies for purposes permitted by the 1933 Act. The Company will deliver
or cause to be delivered to the Underwriter, without charge, as soon as the
Registration Statement shall have become effective (or, if the Company has
elected to rely upon Rule 430A, as soon as practicable after the Price
Determination Agreement has been executed and delivered) and thereafter from
time to time as requested by the Underwriter during the period when the
Prospectus is required to be delivered under the 1933 Act, such number of copies
of the Prospectus (as supplemented or amended) as the Underwriter may reasonably
request.
(e) The Company will comply to the best of its ability with the 1933
Act and the 1933 Act Regulations, and the 1934 Act and the 1934 Act Regulations,
so as to permit the completion of the distribution of the Securities as
contemplated in this Agreement and in the Prospectus. If, at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales
of the Securities, any event shall occur or condition exist as a result of which
it is necessary, in the reasonable opinion of counsel for the Underwriter or
counsel for the Company, to amend the Registration Statement or amend or
supplement the Prospectus in order that the Prospectus will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading, in light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the reasonable opinion of either such counsel, at any
such time to amend the Registration Statement or amend or supplement the
Prospectus in order to comply with the requirements of the 1933 Act or the 1933
Act Regulations, the Company will promptly prepare and file with the Commission,
subject to Section 3(b) hereof, such amendment or supplement as may be necessary
to correct such untrue statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements.
(f) The Company will use its best efforts, in cooperation with the
Underwriter, to qualify the Securities for offering and sale under the
applicable securities laws of such states and other jurisdictions as the
Underwriter may designate and to maintain such qualifications in effect for a
period of not less than one year from the effective date of the Registration
Statement; provided, however, that the Company shall not be obligated to file
any general consent to service of process or to qualify as a foreign corporation
or as a dealer in
11
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. The Company will file such statements and reports
as may be required by the laws of each jurisdiction in which Securities have
been qualified as above provided.
(g) The Company will make generally available, within the meaning of
Rule 158 of the 1933 Act Regulations ("Rule 158"), to the holders of the
Securities and the Underwriter as soon as practicable, but not later than 90
days after the close of the period covered thereby, an earnings statement of the
Company and its subsidiaries (in form complying with the provisions of Rule 158)
covering a period of at least 12 months beginning after the effective date of
the Registration Statement but not later than the first day of the Company's
fiscal quarter next following such effective date.
(h) The Company will use the net proceeds received by it from the
sale of the Securities in the manner specified in the Prospectus under the
caption "Use of Proceeds."
(i) The Company, during the period when a prospectus is required by
the 1933 Act to be delivered in connection with the sales of Common Stock, will
use its best efforts to cause a registration statement for the Common Stock to
be effective and will file promptly all documents required to be filed with the
Commission pursuant to Section 13 or 14 of the 1934 Act subsequent to the time
the Registration Statement becomes effective.
(j) For a period of five years after the Closing Time, the Company
will furnish to the Underwriter copies of all annual reports, quarterly reports
and current reports filed by the Company with the Commission, such other
documents, reports, proxy statements and information as shall be furnished by
the Company to its stockholders generally, and such other public information
concerning the Bank or the Company as the Underwriter may reasonably request.
(k) The Company will provide to the holders of the Common Stock
annual reports containing financial statements audited by the Company's
independent auditors and, upon written request, the Company's annual reports on
Form 10-K or Form 10-KSB, as applicable.
(l) The Company will file with the NASD all documents and notices
required by the NASD of companies that have issued securities that are traded in
the Nasdaq Stock Market.
(m) The Company shall cause to be prepared by its counsel one or
more "blue sky" surveys (each, a "Blue Sky Survey") for use in connection with
the offering of the Securities as contemplated by the Prospectus and a copy of
each Blue Sky Survey or surveys shall be delivered to each of the Company and
the Underwriter. Furthermore, the Underwriter may, in its discretion, require
the Company to cause any Blue Sky Survey prepared in connection with any prior
public offering of the Company's securities to be updated by counsel for the
Company through and as of the date hereof.
(n) If, at the time the Registration Statement becomes effective,
any information shall have been omitted therefrom in reliance upon Rule 430A,
then the Company
12
will prepare, and file or transmit for filing with the Commission in accordance
with Rule 430A and Rule 424(b), copies of an amended Prospectus or, if required
by Rule 430A, a post-effective amendment to the Registration Statement
(including an amended Prospectus) containing all information so omitted.
(o) The Company will, at its expense, subsequent to the issuance of
the Securities, prepare and distribute to the Underwriter and counsel to the
Underwriter a bound volume containing copies of the documents used in connection
with the issuance of the Securities.
(p) The Company will not, prior to the Option Closing Date or thirty
(30) days after the date of this Agreement, whichever occurs first, incur any
material liability or obligation, direct or contingent, or enter into any
material transaction, other than in the ordinary course of business, or any
transaction with a related party which is required to be disclosed in the
Prospectus pursuant to Item 404 of Regulation S-K (or Regulation S-B, as
applicable) of the Commission, except as contemplated by the Prospectus.
(q) The Company will not sell or issue, contract to sell or issue,
or otherwise dispose of, for a period of 180 days after the Closing Time,
without the prior written consent of the Underwriter, any shares of, or any
securities convertible into or exercisable for shares of, Common Stock other
than in connection with any plan or arrangement described in the Prospectus.
Section 4. Payment of Expenses.
(a) Whether or not the sale of the Securities by the Company is
consummated, the Company agrees to pay all expenses incident to the performance
of the obligations of the Company under this Agreement, including the following:
(i) the preparation, printing, issuance and delivery of the certificates or
entries evidencing the shares of Common Stock comprising the Securities; (ii)
the fees and disbursements of the Company's counsel, accountants and other
advisors; (iii) the qualification or exemption from qualification of the
Securities under all applicable securities or "blue sky" laws, including filing
fees and the reasonable fees and disbursements of counsel in connection
therewith and in connection with the preparation of the Blue Sky Survey
concerning such jurisdictions as the Underwriter may reasonably designate; (iv)
the printing and delivery to the Underwriter, in such quantities as the
Underwriter shall reasonably request, copies of the Prospectus, and all other
documents in connection with this Agreement; (v) the filing fees and the fees
and disbursements of counsel incurred in connection with the review of the
Offering by the NASD; (vi) the fees for listing the Common Stock comprising the
Securities on the Nasdaq SmallCap Market or the NASDAQ National Market, as
applicable; (vii) the fees and expenses relating to advertising expenses,
investor meeting expenses and other miscellaneous expenses relating to the
marketing by the Underwriter of the Securities; and (viii) the fees and charges
of any transfer agent, registrar or other agent. In the event that the
Underwriter incurs any such expenses on behalf of the Company, the Company will
pay or reimburse the Underwriter for such expenses regardless of whether the
Offering is successfully completed, and such reimbursements will not be included
in the expense limitations set forth in the following paragraph.
13
(b) In addition, the Company will reimburse the Underwriter for all
reasonable out-of- pocket expenses, including legal fees and expenses of
Underwriter's counsel, incurred by the Underwriter in connection with the
services provided by the Underwriter to the Company pursuant to this Agreement.
Such legal fees shall not exceed (i) $60,000 with regard to the Offering
(excluding the out-of-pocket expenses of counsel and any "blue sky" fees and
expenses), (ii) and $10,000 with regard to the Underwriter's other out-of-pocket
expenses without the approval of the Company. The Underwriter will provide a
detailed accounting of the out-of-pocket expenses referred to in this paragraph,
which will be paid by the Company on the Closing Time. The parties hereto
acknowledge that the expense limitations set forth in this paragraph may be
exceeded in the event of a material delay in the Offering that requires an
update of financial or other information contained in the Prospectus.
(c) If (i) the Closing Time does not occur on or before _____, 2004,
(ii) the Company abandons or terminates the Offering, or (iii) this Agreement is
terminated by the Underwriter in accordance with the provisions of Section 5 or
9(a), the Company shall reimburse the Underwriter for its reasonable
out-of-pocket expenses, as set forth in this Section 4, including the reasonable
fees and disbursements of counsel for the Underwriter.
Section 5. Conditions of Underwriter's Obligations. The obligations
of the Underwriter to purchase and pay for the Securities that it has agreed to
purchase pursuant to this Agreement are subject, in the discretion of the
Underwriter, to the accuracy of the representations and warranties of the
Company contained herein or in certificates of the officers of the Company or
any subsidiary delivered pursuant to the provisions hereof, to the execution of
the Price Determination Agreement no later than 5:30 p.m. on the first business
day following the date hereof, or at such later time as the Underwriter may
agree in writing (in the Underwriter's sole discretion), to the performance by
the Company of its obligations hereunder and to the following further
conditions:
(a) The Registration Statement shall have become effective no later
than 4:00 p.m. on the first business day following the date hereof, or at such
later time or on such later date as the Underwriter may agree to in writing; at
the Closing Time, no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act and no proceedings for that
purpose shall be pending or, to the Underwriter's knowledge or the knowledge of
the Company, shall be contemplated by the Commission, and any request on the
part of the Commission for additional information shall have been complied with
to the satisfaction of counsel for the Underwriter. If the Company has elected
to rely upon Rule 430A, a prospectus containing the information required by Rule
430A shall have been filed with the Commission in accordance with Rule 424(b)
(or a post-effective amendment providing such information shall have been filed
and declared effective in accordance with the requirements of Rule 430A).
(b) At the Closing Time, the Underwriter shall have received:
(i) The favorable opinion, dated as of the Closing Time, of Xxxxxx
Xxxxxx, P.A. ("Xxxxxx Xxxxxx"), counsel for the Company, in form and
substance reasonably satisfactory to counsel for the Underwriter,
substantially in the form set forth in EXHIBIT C.
14
(ii) The favorable opinion, dated as of the Closing Time, of Xxxxx &
Associates, P.A. ("Xxxxx & Associates") counsel for the Underwriter, in
form and substance satisfactory to the Underwriter.
In rendering their opinion, counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
governmental officials, certificates or opinions of other counsel reasonably
satisfactory to the Underwriter and, as to matters of fact, officers'
certificates. The opinion of such counsel need refer only to matters of North
Carolina and federal law and may add other qualifications and explanations of
the basis of their opinion as may be reasonably acceptable to the Underwriter.
(c) At the Closing Time and again at the Option Closing Date, (i)
the Registration Statement and the Prospectus, as they may then be amended or
supplemented, shall contain all statements that are required to be stated
therein under the 1933 Act and the 1933 Act Regulations and shall conform in all
material respects to the requirements of the 1933 Act and the 1933 Act
Regulations, the Company shall have complied in all material respects with Rule
430A (if it shall have elected to rely thereon), and neither the Registration
Statement nor the Prospectus, as they may then be amended or supplemented, shall
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; (ii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement, any material adverse
change in the condition (financial or otherwise), earnings, business affairs,
assets or business prospects of the Company and its subsidiaries, considered as
one enterprise, whether or not arising in the ordinary course of business; (iii)
no action, suit or proceeding at law or in equity shall be pending or, to the
knowledge of the Company, threatened against the Company or its subsidiaries
that would be required to be set forth in the Prospectus that is not set forth
therein, and no proceedings shall be pending or, to the knowledge of the
Company, threatened against either of the Company or any subsidiary of the
Company before or by any federal, state or other commission, board or
administrative agency wherein an unfavorable decision, ruling or finding would
materially adversely affect the condition (financial or otherwise), earnings,
business affairs, assets or business prospects of the Company and its
subsidiaries, considered as one enterprise, other than as set forth in the
Prospectus; (iv) the Company shall have complied, in all material respects, with
all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Time or Option Closing Date, as applicable;
(v) the other representations and warranties of the Company set forth in Section
l(a) hereof shall be accurate in all material respects as though expressly made
at and as of the Closing Time or Option Closing Date, as applicable; and (vi) no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceeding for that purpose been initiated or, to the best
knowledge of the Company, threatened by the Commission. At the Closing Time, the
Underwriter shall have received a certificate of the President and the Chief
Financial Officer of the Company, dated as of the Closing Time, to such effect.
(d) At the time that this Agreement is executed by the Company, the
Underwriter shall have received from Xxxxx Xxxxxx a letter or letters, dated
such date, in form and substance satisfactory to the Underwriter, confirming
that they are independent certified public accountants with respect to the
Company within the meaning of the 1933 Act and the 1933 Act Regulations, and
stating in effect that, with respect to the Company:
15
(i) in their opinion, the consolidated financial statements as of
December 31, 2003 and 2002, and for each of the years in the three year
period ended December 31, 2003 and the related financial statement
schedules, if any, included or incorporated by reference in the
Registration Statement and the Prospectus and covered by their opinions
included therein comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the 1933 Act
Regulations;
(ii) on the basis of procedures (but not an audit in accordance with
generally accepted accounting standards) specified by the AICPA for a
review of interim financial information as described in SAS No. 100,
Interim Financial Information, including a reading of the latest available
interim consolidated financial statements of the Company, a reading of the
minutes of all meetings of the Board of Directors of the Company and the
Bank and of the Audit and Executive Committees of the Board of Directors
of the Bank since June 30, 2004, inquiries of certain officials of the
Company and its subsidiaries responsible for financial and accounting
matters, and such other inquiries and procedures as may be specified in
such letter, nothing came to their attention that caused them to believe
that:
(A) the unaudited interim consolidated financial information
included or incorporated by reference in the Prospectus, if any, do
not comply as to form in all material respects with applicable
accounting requirements of the 1933 Act, or are not presented in
conformity with generally accepted accounting principles applied on
a basis consistent with that of the audited financial statements
included in the Prospectus;
(B) at a specified date not more than three days prior to the
date of this Agreement, there was any increase in total borrowings,
real estate owned or Federal Home Loan Bank advances of the Company
and its consolidated subsidiaries or any decrease in total assets,
total deposits or stockholders' equity of the Company and its
consolidated subsidiaries, any increase in the number of outstanding
shares of capital stock of the Company and its consolidated
subsidiaries or any increase or decrease in loan loss allowance of
the Company and its consolidated subsidiaries, in each case as
compared with amounts shown in the financial statements at June 30,
2004 included in the Registration Statement, except in all cases for
changes, increases or decreases that the Registration Statement
discloses have occurred or may occur; or
(C) for the period from June 30, 2004 to a specified date not
more than three days prior to the date of this Agreement, there was
any decrease in consolidated net interest income, non-interest
income, net income or net income per share or any increase in the
consolidated provision for loan losses, in each case as compared
with a period of comparable length in the preceding year, except in
all cases for changes, increases or decreases that the Registration
Statement discloses have occurred or may occur; and
(iii) in addition to the procedures referred to in clause (ii)
above, they have performed other specified procedures, not constituting an
audit, with respect to certain
16
amounts, percentages, numerical data and financial information appearing
in the Registration Statement (including the Selected Consolidated
Financial Data) (having compared such items with, and having found such
items to be in agreement with, the financial statements of the Company or
general accounting records of the Company, as applicable, which are
subject to the Company's internal accounting controls or other data and
schedules prepared by the Company from such records); and
(iv) on the basis of a review of schedules provided to them by the
Company, nothing came to their attention that caused them to believe that
the pro forma information set forth in the Prospectus under the heading
"Capitalization" had not been correctly calculated on the basis described
therein.
(e) At the Closing Time, the Underwriter shall have received from
Xxxxx Xxxxxx a letter, in form and substance satisfactory to the Underwriter and
dated as of the Closing Time, reaffirming the statements made in the letter(s)
furnished pursuant to Section 5(d) hereof, except that the inquiries specified
in Section 5(d) hereof shall be made based upon the latest available unaudited
interim consolidated financial statements and the specified date referred to
shall be a date not more than five days prior to the Closing Time.
(f) At the Closing Time, counsel for the Underwriter shall have been
furnished with all such documents, certificates and opinions as they may
reasonably request for the purpose of enabling them to pass upon the issuance
and sale of the Securities as contemplated in this Agreement and the matters
referred to in Section 5(c) hereof and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company, the performance of any of the covenants of the Company or the
fulfillment of any of the conditions herein contained; and all proceedings taken
by the Company at or prior to the Closing Time in connection with the
authorization, issuance and sale of the Securities as contemplated in this
Agreement shall be satisfactory in form and substance to the Underwriter and to
counsel for the Underwriter.
(g) The Company shall have paid, or made arrangements satisfactory
to the Underwriter for the payment of, all such expenses as may be required by
Section 4 hereof.
(h) In the event the Underwriter exercises its option provided in
Section 2 hereof to purchase all or any portion of the Option Securities, the
obligations of the Underwriter to purchase the Option Securities that it has
agreed to purchase shall be subject to the receipt by the Underwriter on the
Option Closing Date of:
(i) A certificate, dated the Option Closing Date, of the President
and the Chief Financial Officer of the Company confirming that the
certificate delivered at the Closing Time pursuant to Section 5(c) hereof
remains true as of the Option Closing Date;
(ii) The favorable opinion of Xxxxxx Xxxxxx, counsel for the
Company, addressed to the Underwriter and dated the Option Closing Date,
in form satisfactory to Xxxxx & Associates, counsel to the Underwriter,
relating to the Option Securities and otherwise to the same effect as the
opinion required by Section 5(b)(i) hereof;
(iii) The favorable opinion of Xxxxx & Associates, counsel to the
Underwriter,
17
dated the Option Closing Date, relating to the Option Securities and
otherwise to the same effect as the opinion required by Section 5(b)(ii)
hereof; and
(iv) A letter from Xxxxx Xxxxxx addressed to the Underwriter and
dated the Option Closing Date, in form and substance satisfactory to the
Underwriter and substantially the same in form and substance as the
letter(s) furnished to the Underwriter pursuant to Section 5(e) hereof.
(i) The Common Stock comprising the Securities shall have been
qualified or registered for sale, or subject to an available exemption from such
qualification or registration, under the "blue sky" or securities laws of such
jurisdictions as shall have been reasonably specified by the Underwriter, and
the Offering contemplated by this Agreement shall have been cleared by the NASD.
(j) The Lock-Up Agreements shall have been delivered to the
Underwriter.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement, this Agreement may be
terminated by the Underwriter on notice to the Company at any time at or prior
to the Closing Time, and such termination shall be without liability of any
party to any other party, except as provided in Section 4 of this Agreement.
Notwithstanding any such termination, the provisions of Sections 4, 6, 7, 10 and
12 of this Agreement shall remain in effect.
Section 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriter, each officer, director, employee, agent and legal counsel of the
Underwriter, and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act, against
any loss, liability, claim, damage and expense whatsoever (which shall include,
but not be limited to, amounts incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim or investigation
whatsoever and any and all amounts paid in settlement of any claim or
litigation, provided such settlement is entered into with the consent of the
Company as provided herein), as and when incurred, arising out of, based upon or
in connection with (i) any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, contained in (A) any preliminary prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented), or
any amendment or supplement thereto or in any document incorporated by reference
therein or required to be delivered with any preliminary prospectus or the
Prospectus or (B) in any application or other document or communication
(collectively called an "application") executed by or on behalf of the Company
or based upon written information furnished by or on behalf of the Company filed
in any jurisdiction in order to qualify the Securities under the "blue sky" or
securities laws thereof or filed with the Commission, the NASD or any securities
exchange, unless such statement or omission or alleged statement or omission was
made in reliance upon and in conformity with written information concerning the
Underwriter, this Agreement or the compensation of the Underwriter furnished to
the Company by or on behalf of the Underwriter expressly for inclusion in any
preliminary prospectus, the
18
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or in any application, as the case may be, or (ii) any breach of any
representation, warranty, covenant or agreement of the Company contained in this
Agreement. For purposes of this section, the term "expense" shall include, but
not be limited to, counsel fees and costs, court costs, out-of-pocket costs and
compensation for the time spent by any of the Underwriter's directors, officers,
employees and counsel according to his or her normal hourly billing rates. The
indemnification provisions shall also extend to all directors, officers,
employees, agents, legal counsel and controlling persons of each affiliate of
the Underwriter.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, its directors, each officer who signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20(a) of the 1934 Act, against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) above, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in any preliminary
prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or any application in reliance upon and in conformity with
written information about the Underwriter, this Agreement or the compensation of
the Underwriter, furnished to the Company by the Underwriter expressly for
inclusion in such preliminary prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or in any application.
(c) An indemnified party shall give prompt notice to each
indemnifying party if any action, suit, proceeding or investigation is commenced
in respect of which indemnity may be sought hereunder, but failure to notify an
indemnifying party shall not relieve the indemnifying party from its obligations
to indemnify hereunder, except to the extent that the indemnifying party has
been prejudiced in any material respect by such failure. If it so elects within
a reasonable time after receipt of such notice, an indemnifying party may assume
the defense of such action, including the employment of counsel satisfactory to
the indemnified parties and the payment of all expenses of the indemnified party
in connection with such action. Such indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the indemnifying party in connection with the defense of such action
or the indemnifying party shall not have promptly employed counsel satisfactory
to such indemnified party or parties or such indemnified party or parties shall
have reasonably concluded that there may be one or more legal defenses available
to it or them or to other indemnified parties that are different from or
additional to those available to one or more of the indemnifying parties, in any
of which events such fees and expenses shall be borne by the indemnifying party
and the indemnifying party shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties. The Company shall be
liable for any settlement of any claim against the Underwriter (or any of its
directors, officers, employees, agents, legal counsel or controlling persons)
made with the Company's written consent, which consent shall not be unreasonably
withheld. The Company shall not, without the written consent of the Underwriter,
settle or compromise any claim against the Underwriter (or any of its directors,
officers, employees, agents, legal counsel or controlling persons) based upon
circumstances giving rise to an indemnification claim against the Company
hereunder unless such settlement or compromise provides that the Underwriter and
the other indemnified parties shall be unconditionally and irrevocably released
from all liability
19
in respect to such claim.
(d) In order to provide for just and equitable contribution, if a
claim for indemnification pursuant to these indemnification provisions is made
but it is found in a final judgment by a court that such indemnification may not
be enforced in such case, even though the express provisions hereof provide for
indemnification in such case, then the Company, on the one hand, and the
Underwriter, on the other hand, shall contribute to the amount paid or payable
by such indemnified persons as a result of such loss, liability, claim, damage
and expense (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriter, on the
other hand, from the underwriting, or (ii) if the allocation provided by clause
(i) is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company, on the one hand, and the Underwriter, on the
other hand, in connection with the statements, acts or omissions which resulted
in such loss, liability, claim, damage and expense, and any other relevant
equitable considerations. No person found liable for a fraudulent
misrepresentation or omission shall be entitled to contribution from any person
who is not also found liable for such fraudulent misrepresentation or omission.
Notwithstanding the foregoing, the Underwriter shall not be obligated to
contribute any amount hereunder that exceeds the amount of the underwriting
discount retained by it.
(e) The indemnity and contribution agreements contained herein are
in addition to any liability which the Company may otherwise have to the
Underwriter.
(f) Neither termination nor completion of the engagement of the
Underwriter nor any investigation made by or on behalf of the Underwriter shall
affect the indemnification obligations of the Company or the Underwriter
hereunder, which shall remain and continue to be operative and in full force and
effect.
Section 7. Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities, agreements and other
statements of the Company or its officers set forth in or made pursuant to this
Agreement will remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriter or any controlling person
of the Underwriter and will survive termination of this Agreement and receipt or
delivery of and payment for the Securities.
Section 8. Offering by the Underwriter. The Company is advised by
the Underwriter that the Underwriter proposes to make a public offering of the
Securities, on the terms and conditions set forth in the Registration Statement
from time to time as and when the Underwriter deems advisable after the
Registration Statement becomes effective.
Section 9. Termination of Agreement.
(a) The Underwriter may terminate this Agreement, by notice to the
Company, at any time at or prior to the Closing Time (i) if there has been,
since the time of execution of this Agreement or since the respective dates as
of which information is given in the Registration Statement, any material
adverse change in the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company and its subsidiaries, considered
20
as one enterprise, whether or not arising in the ordinary course of business; or
(ii) if there has occurred any material adverse change in the financial markets
of the United States, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Underwriter, impracticable or inadvisable to market the Securities or enforce
contracts for the sale of the Securities; or (iii) if trading in any securities
of the Company has been suspended or materially limited by the Commission or the
NASD, or if trading generally on The New York Stock Exchange, Nasdaq National
Market, Nasdaq SmallCap market or in the over-the-counter market has been
suspended or materially limited, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been required, by
such exchange or system or by order of the Commission, the NASD or any other
governmental authority with appropriate jurisdiction over such matters, or a
material disruption has occurred in commercial banking or securities settlement
or clearance services in the United States; or (iv) if a banking moratorium has
been declared by any federal, North Carolina, New York or New Jersey authority;
or (v) if there shall have been such material and substantial change in the
market for securities in general or in political, financial or economic
conditions as in the Underwriter's judgment makes it inadvisable to proceed with
the offering, sale and delivery of the Securities on the terms contemplated by
the Prospectus; or (vi) if the Underwriter reasonably determines (which
determination shall be in good faith) that there has not been satisfactory
disclosure of all relevant financial information relating to the Company in the
Company's disclosure documents and that the sale of the Securities is
inadvisable given such disclosures; or (vii) if the Price Determination
Agreement has not been executed by all the parties hereto prior to 5:30 p.m. on
the first business day following the date of this Agreement.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4 hereof. Notwithstanding any such
termination, the provisions of Sections 4, 6, 7, 10 and 12 hereof shall remain
in effect.
Section 10. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices shall be addressed as follows:
If to the Underwriter:
Xxxx Xxxx & Co., Inc.
00 Xxxxxxxx Xxxxxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Managing Director
with a copy to:
Xxxxx & Associates, P.A.
0000 Xxxxx xx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx, Xx., Esq.
21
If to the Company:
Gateway Financial Holdings, Inc.
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxx Xxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: D. Xxx Xxxxx, President & Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxx, P.A.
3200 Beechleaf Court
Xxxxxxxxx Xxxxx Xxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Section 11. Parties. This Agreement is made solely for the benefit
of the Underwriter, and the officers, directors, employees, agents and legal
counsel of the Underwriter specified in Section 6 hereof, the Company and, to
the extent expressed, any person controlling the Company or the Underwriter, and
the directors of the Company, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not include any
purchaser, as such purchaser, from the Underwriter of the Securities.
Section 12. WAIVER OF TRIAL BY JURY. THE UNDERWRITER AND THE COMPANY
HEREBY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) RELATED TO OR
ARISING OUT OF THIS AGREEMENT.
Section 13. Governing Law and Time. This Agreement shall be governed
by the laws of the State of New Jersey. Specified times of the day refer to New
York City time.
Section 14.Counterparts. This Agreement may be executed in one or
more counterparts, and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
Section 15. Miscellaneous. This Agreement, including all Exhibits
hereto, constitutes the entire understanding of the parties and supercedes any
and all prior negotiations of the parties with respect to this subject matter.
This Agreement may be amended only in writing signed by each of the parties. In
the event that any term, provision or covenant herein or the application thereof
to any circumstances or situation shall be invalid or unenforceable, in whole or
in part, the remainder hereof and the application of said term, provision or
covenant to any other circumstance or situation shall not be affected thereby,
and each term, provision or covenant herein shall be valid and enforceable to
the full extent permitted by law. The failure or
22
delay by the Underwriter or the Bank in exercising any right, power or privilege
hereunder shall not operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder. If the Public Offering is
consummated, the Underwriter may, at its option and expense, place an
announcement in such newspapers and periodicals as the Underwriter may choose
stating that the Underwriter has so acted, and the capacity in which it has
acted.
[The remainder of this page has been left blank intentionally.]
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement and have
declared it effective as of the date written above.
GATEWAY FINANCIAL HOLDINGS, INC.
By: _____________________________
D. Xxx Xxxxx
President, Chief Executive Officer
Chairman of the Board of Directors
XXXX XXXX & CO., INC.
By: _______________________________
Xxxxx X. Xxxxx
Managing Director
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EXHIBIT A
PRICE DETERMINATION AGREEMENT
25
EXHIBIT B
LOCK-UP AGREEMENT
26
EXHIBIT C
FORM OF OPINION OF COUNSEL FOR THE COMPANY
27
