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EXHIBIT 1.1
4,200,000 SHARES
TOWNE SERVICES, INC.
COMMON STOCK
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UNDERWRITING AGREEMENT
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WHEAT FIRST SECURITIES, INC.
X.X. XXXXXXXX & CO.
XXXXXXXX INC.
As Representatives (the "Representatives") of the Several Underwriters
c/o Wheat First Securities, Inc.
Riverfront Plaza
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000 ___________ __, 1998
Ladies and Gentlemen:
Towne Services, Inc., a Georgia corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
underwriters named in Schedule I hereto (the "Underwriters") 4,000,000 shares of
Common Stock, no par value per share ("Common Stock"), of the Company (the
"Company Shares"), and the shareholder of the Company named in Schedule II
hereto (the "Firm Selling Shareholder") proposes to sell to the Underwriters
200,000 shares of Common Stock (the "Selling Shareholder Shares"). The Company
Shares and the Selling Shareholder Shares are hereinafter referred to as
the "Firm Shares." The Firm Shares are to be sold to the Underwriters, acting
severally and not jointly, in such amounts as are set forth in Schedule I hereto
opposite the name of each Underwriter. Additionally, the shareholders of the
Company named in Schedule II hereto (the "Option Selling Shareholders") propose
to grant to the Underwriters an option to purchase up to 630,000 additional
shares of Common Stock (the "Optional Shares") as provided in Section 2 of this
Agreement solely for the purpose of covering over-allotments in connection with
the distribution and sale of the Firm Shares. The Firm Shares and the Optional
Shares, if any, that the Underwriters elect to purchase pursuant to Section 2
hereof are collectively called the "Shares,"
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and the Firm Selling Shareholder and the Option Selling Shareholders are
collectively referred to herein as the "Selling Shareholders" and individually
as a "Selling Shareholder."
1. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to, and agrees with, the
Underwriters that:
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File
No. 333-53341) under the Securities Act of 1933, as amended (the "Act"),
and as a part thereof a preliminary prospectus, in respect of the Shares,
and has filed one or more amendments thereto. Such registration statement,
as amended, has been declared effective by the Commission, and no stop
order suspending the effectiveness of such registration statement has been
issued and no proceeding for that purpose has been instituted or, to the
knowledge of the Company, threatened by the Commission. Copies of such
registration statement and any amendments, including any post-effective
amendments, and all forms of the related prospectuses contained therein and
any supplements thereto, have been delivered to you. Such registration
statement, together with any registration statement filed by the Company
pursuant to Rule 462(b) of the Act, including the prospectus, Part II, all
financial schedules and exhibits thereto, and all information deemed to be
a part of such registration statement pursuant to Rule 430A under the Act
at the time when it became effective, is herein referred to as the
"Registration Statement." The form of final prospectus that discloses all
the information that was omitted from the prospectus contained in the
Registration Statement on the effective date pursuant to Rule 430A of the
rules and regulations of the Commission under the Act and in the form filed
pursuant to Rule 424(b) under the Act is herein referred to as the
"Prospectus." The prospectus included in the Registration Statement, and
each prospectus included in any amendment thereto, prior to the effective
date of the Registration Statement, is referred to herein as a "Preliminary
Prospectus."
(ii) The Company has not received and has no knowledge of any order
preventing or suspending the use of any Preliminary Prospectus and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects with the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain any 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 the light
of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Underwriters through
you expressly for use therein (it being understood that the only
information so provided is the information included under the caption
"Underwriting" in the Prospectus);
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(iii) The Registration Statement conforms, and the Prospectus and any
amendments or supplements thereto will conform, in all material respects to
the requirements of the Act and the rules and regulations of the Commission
thereunder 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 any 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 the light of the circumstances under which they were
made, in the case of the Prospectus and any amendments or supplements
thereto) not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by the Underwriters through you expressly for use therein (it being
understood that the only information so provided is the information
included under the caption "Underwriting" in the Prospectus);
(iv) The Company does not own more than 5% of the equity interests of
any other business entity;
(v) The Company has not sustained, since the date of the latest
audited financial statements included in the Prospectus, any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the outstanding capital stock
or long-term debt of the Company, or any issuance of options, warrants or
rights to purchase capital stock of the Company, or any material adverse
change, or any development involving a prospective material adverse change,
in or affecting the business, financial condition or results of operations
of the Company, otherwise than as set forth or contemplated in the
Prospectus;
(vi) The Company is a corporation in good standing under the laws of
the State of Georgia, with corporate power under such laws to own, lease
and operate its properties and conduct its business as described in the
Prospectus, and the Company has been qualified to transact business as a
foreign corporation in all states in which it is required to be so
qualified, except where the failure to so qualify would not result in a
material adverse effect on the business, financial condition or results of
operations of the Company;
(vii) The Company has good and marketable title in fee simple to all
real property and good and marketable title to all personal property owned
by it, free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect the
value of such property and do not interfere with the use made and proposed
to be made of such property by the Company; and any real property and
buildings held under lease by the Company are held by it under valid,
subsisting and enforceable leases with such exceptions as are not material
and do not
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interfere with the use made and proposed to be made of such property and
buildings by the Company;
(viii) The Company has authorized and issued capital stock as set
forth in the Prospectus; all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and nonassessable and conform to the description of the capital stock of
the Company contained in the Prospectus; except as described in the
Prospectus, there are no preemptive or other similar rights to subscribe
for or to purchase any securities of the Company; except as described in
the Prospectus, the Company has issued no warrants, options or other
similar rights to purchase any securities of the Company; and except as
disclosed in the Prospectus, neither the filing of the Registration
Statement nor the offering or sale of the Shares as contemplated by this
Agreement gives rise to any rights for or relating to the registration of
any securities of the Company with respect to such filing, offering or
sale;
(ix) The Shares have been duly and validly authorized and, when the
Firm Shares are issued and delivered against payment therefor as provided
herein, will be validly issued, fully paid and nonassessable and will
conform to the description of the Shares contained in the Prospectus;
(x) The Company has full legal right, power and authority to enter
into this Agreement and to issue, sell and deliver the Firm Shares to the
Underwriters as provided herein, and this Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as may be limited by bankruptcy and other
creditor rights laws and general principles of equity, including the
availability of the equitable remedy of specific performance. The issue and
sale of the Firm Shares by the Company and the performance of this
Agreement and the consummation by the Company of the transactions herein
contemplated will not conflict with or result in a breach or violation of
any terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company is a party or to which it or any of its properties or
assets is subject, nor will such action result in any violation of the
provisions of the Articles of Incorporation or bylaws of the Company (each
as amended to date the "Charter" and "Bylaws", respectively) or 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 properties or
assets, except for any such conflict, breach, violation or default which
would not have a material adverse effect on the business, financial
condition or results of operations of the Company; and no consent,
approval, authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the issue and
sale of the Firm Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Act and under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters;
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(xi) There are no legal or governmental proceedings pending to which
the Company is a party or of which any properties or assets of the Company
are the subject, other than as set forth or contemplated in the Prospectus,
which, if determined adversely to the Company, would individually or in the
aggregate have a material adverse effect on the business, financial
condition or results of operations of the Company, and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or by others;
(xii) Xxxxxx Xxxxxxxx LLP, who have certified certain financial
statements of the Company, are independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder;
(xiii) The Company has previously disclosed and delivered or made
available to the Underwriters or their representatives prior to the date
the Registration Statement was declared effective copies of all pension,
retirement, profit-sharing, deferred compensation, stock option, employee
stock ownership, severance pay, vacation, bonus or other incentive plans,
all other written employee programs, arrangements or agreements, all
medical, vision, dental or other health plans, all life insurance plans and
all other employee benefit plans or fringe benefit plans, including,
without limitation, "employee benefit plans" as that term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), adopted, maintained, sponsored in whole or in part or
contributed to by the Company for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries are eligible to
participate (collectively, the "Company Benefit Plans").
The Company has maintained all Company Benefit Plans (including
filing all reports and returns required to be filed with respect thereto)
in accordance with their terms and in compliance with the applicable terms
of ERISA, the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), and any other applicable federal and state laws the breach
or violation of which would have, individually or in the aggregate, a
material adverse effect on the business, financial condition or results of
operations of the Company. Each Company Benefit Plan which is intended to
be qualified under Section 401(a) of the Internal Revenue Code has either
received a favorable determination letter from the Internal Revenue Service
or timely requested such a letter and has at all times been maintained in
accordance with Section 401 of the Internal Revenue Code, except where any
failure to receive or seek such a favorable determination letter or so
maintain such Company Benefit Plan would not have, individually or in the
aggregate, a material adverse effect on the business, financial condition
or results of operations of the Company. The Company has not engaged in a
transaction with respect to any Company Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would
subject the Company to a tax or penalty imposed by either Section 4975 of
the Internal Revenue Code or Section 502(i) of ERISA in amounts which are
reasonably likely to
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have, individually or in the aggregate, a material adverse effect on the
business, financial condition or results of operations of the Company.
The Company is not obligated to provide post-retirement medical
benefits or any other unfunded post-retirement welfare benefits (except
COBRA continuation coverage required to be provided by ERISA Section 601),
which such liabilities to the Company would have, individually or in the
aggregate, a material adverse effect on the business, financial condition
or results of operations of the Company. Neither the Company nor any member
of a group of trades or businesses under common control (as defined in
ERISA Sections 4001(a)(14) and 4001(b)(1)) with the Company has at any time
within the last six years sponsored, contributed to or been obligated under
Title I or IV of ERISA to contribute to a "defined benefit plan" (as
defined in ERISA Section 3(35)). Within the last six years, neither the
Company nor any member of a group of trades or businesses under common
control (as defined in ERISA Sections 4001(a)(14) and 4001(b)(1)) with
Company has had an "obligation to contribute" (as defined in ERISA Section
4212) to a "multiemployer plan" (as defined in ERISA Sections 4001(a)(3)
and 3(37)(A));
(xiv) The financial statements of the Company, together with the
related notes, as set forth in the Registration Statement present fairly
the financial position and the results of operations of the Company at the
indicated dates and for the indicated periods; such financial statements
have been prepared in accordance with generally accepted accounting
principles, consistently applied throughout the periods presented except as
noted in the notes thereon, and all adjustments necessary for a fair
presentation of results for such periods have been made; and the selected
financial information included in the Prospectus presents fairly the
information shown therein and has been compiled on a basis consistent with
the financial statements presented therein;
(xv) The Company has filed all federal, state and any foreign income
tax returns which have been required to be filed (or has received an
extension with respect thereto) and has paid, or made adequate reserves
for, all taxes indicated by said returns and all assessments received by it
to the extent that such taxes have become due and are not being contested
in good faith;
(xvi) The property, assets and operations of the Company comply in
all material respects with all applicable federal, state or local law,
common law, doctrine, rule, order, decree, judgment, injunction, license,
permit or regulation relating to environmental matters (the "Environmental
Laws"), except to the extent that failure to comply with such Environmental
Laws would not have a material adverse effect on the business, financial
condition or results of operations of the Company. To the knowledge of the
Company, none of the property, assets or operations of the Company is the
subject of any foreign, federal, state or local investigation evaluating
whether any remedial action is needed to respond to a release into the
environment of any substance regulated by, or form the basis of liability
under, any Environmental Laws (a "Hazardous Material") or is in
contravention
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of any Environmental Law that would have a material adverse effect on the
business, financial condition or results of operations of the Company. The
Company has not received any notice or claim, nor are there pending,
reasonably anticipated or, to the Company's knowledge, threatened lawsuits
against the Company with respect to violations of an Environmental Law or
in connection with the release of any Hazardous Material into the
environment. The Company has no material contingent liability in connection
with any release of Hazardous Material into the environment;
(xvii) No relationship, direct or indirect, exists between or among
the Company on the one hand and the directors, officers, shareholders,
customers or suppliers of the Company on the other hand that is required by
the Act or by the rules and regulations thereunder to be described in the
Registration Statement and the Prospectus that is not so described;
(xviii) The Company has not taken and will not take, directly or
indirectly, any action that is designed to or that has constituted or that
might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares;
(xix) The Company owns or possesses, or can acquire on reasonable
terms, adequate licenses, copyrights, trademarks, service marks and trade
names (collectively, "intellectual property") necessary to carry on its
business as presently operated by it, except where the failure to own or
possess or have the ability to acquire any such intellectual property would
not, individually or in the aggregate, have a material adverse effect on
the business, financial condition or results of operations of the Company,
and the Company has not received any notice and is not otherwise aware of
any infringement of or conflict with asserted rights of others with respect
to any intellectual property or of any facts which would render any
intellectual property invalid or inadequate to protect the interest of the
Company therein and which infringement or conflict could have a material
adverse effect on the business, financial condition or results of
operations of the Company;
(xx) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and adequate for the conduct of its business and the value of its
properties and is customary for companies engaged in similar industries;
and the Company does not have any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a comparable cost;
(xxi) The Shares have been approved for listing, subject to notice
of issuance, on the Nasdaq Stock Market's National Market;
(xxii) There are no contracts or other documents required by the Act
or by the rules and regulations of the Commission thereunder to be
described in the Registration
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Statement, any Preliminary Prospectus or the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or
filed as required;
(xxiii) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are
executed in accordance with management's general or specific authorization;
(b) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (c) access to assets
is permitted only in accordance with management's general or specific
authorization; (d) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences and (e) such controls would prevent or
detect errors or irregularities in amounts that would be material in
relation to the Company's financial statements. Neither the Company nor any
director, officer, agent, employee or other person acting, with the
Company's knowledge, on behalf of the Company has, directly or indirectly,
used any funds of the Company for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity,
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
funds of the Company, violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other payment, or received or retained any
funds, in violation of any law, rule or regulation;
(xxiv) The Company operates its business in each jurisdiction in
which it is doing business in conformity with all applicable statutes,
ordinances, decrees, orders, rules and regulations of all applicable
governmental bodies, including federal, state and local governing bodies in
the United States and all foreign governments in areas outside of the
United States. The Company has all material licenses, permits, approvals
and consents necessary to operate its business in all locations in which
such business is currently being operated, and the Company is not aware of
any existing or imminent matter which may adversely impact its operations
or business prospects other than as specifically disclosed in the
Prospectus. The Company has not engaged in any activity, whether alone or
in concert with one of its customers, creating exposure to civil or
criminal monetary liability or other material sanctions under federal or
state laws regulating consumer credit transactions, debt collection
practices or other violations of law;
(xxv) The Company has filed with or submitted to the applicable
regulatory authorities each statement, report, information or form required
by any applicable law, regulation or order; all such filings or submissions
were in compliance with applicable laws when filed and no deficiencies have
been asserted by any regulatory commission, agency or authority with
respect to such filings or submissions. The Company maintains in full force
and effect all licenses and permits necessary for the conduct of its
business and has not received any notification that any revocation or
limitation thereof is threatened or pending. To the knowledge of the
Company, there is not pending any change under any law, regulation, license
or permit which could have a material adverse effect on the
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business, financial condition or results of operations of the Company. The
Company has not received any notice of violation of or been threatened with
a charge of violating and, to the knowledge of the Company, is not under
investigation with respect to a possible violation of any provision of any
law, regulation or order;
(xxvi) No labor dispute exists with the Company's employees or is
imminent which could have a material adverse effect on the business,
financial condition or results of operations of the Company. The Company is
not aware of any existing or imminent labor disturbance by its employees
which could be expected to have a material adverse effect on the business,
financial condition or results of operations of the Company;
(xxvii) The Company is not, will not become as a result of the
transactions contemplated hereby, and does not intend to conduct its
business in a manner that would cause it to become, an "investment company"
or a company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "1940 Act");
(xxviii) The Company has not violated any applicable laws relating to
immigration and has employed only individuals authorized to work in the
United States and has never been the subject of any inspection or
investigation relating to its compliance with or violation of the
Immigration Reform and Control Act of 1986 and all Regulations promulgated
thereunder;
(xxix) Other than as set forth in the Prospectus, the Company's
internal systems and software and the network connections it maintains are
adequately programmed to address the Year 2000 issue;
(xxx) The Company has not received any communication (written or
oral) relating to the termination or modification or threatened termination
or modification of any of the agreements specifically named in the
Prospectus, nor has it received any communication (written or oral)
relating to any determination not to renew or extend any agreement
specifically named in the Prospectus at the end of the current term of any
such agreement, except where any such termination, modification,
non-renewal or non-extension would not have a material adverse effect on
the business, financial condition or results of operations of the Company;
and
(xxxi) Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each
Underwriter as to the matters covered thereby.
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(b) Each of the Selling Shareholders, severally and not jointly, represents
and warrants to, and agrees with, the Underwriters and the Company that:
(i) Such Selling Shareholder has duly executed and delivered a
Custody Agreement and Power of Attorney (the "Custody Agreement") in the
form previously delivered to the Representatives, appointing each of
______________ and _____________ as such Selling Shareholder's duly
authorized attorney-in-fact (the "Attorney-in-Fact") and First Union
National Bank as the duly authorized custodian (the "Custodian") of any
Shares to be sold by such Selling Shareholder. The Attorneys-in-Fact are
authorized to execute, deliver and perform this Agreement on behalf of such
Selling Shareholder, to deliver any Shares to be sold by such Selling
Shareholder hereunder, to accept payment therefor and otherwise to act on
behalf of such Selling Shareholder in connection with this Agreement.
Shares of Common Stock, in suitable form for transfer, representing the
Shares to be sold by such Selling Shareholder hereunder have been deposited
with the Custodian pursuant to the Custody Agreement for the purpose of
delivery pursuant to this Agreement. Such Selling Shareholder agrees that
its Shares on deposit with the Custodian are subject to the interest of the
Underwriters hereunder, that the arrangements made for such custody and the
appointment of the Attorneys-in-Fact are to that extent irrevocable, and
that the obligations of such Selling Shareholder hereunder shall not be
terminated by any act or deed of the Selling Shareholder (or by any other
person, firm or corporation, including the Company or the Custodian)
without the prior written consent of the Underwriters or by operation of
law (including the death of the Selling Shareholder) or by the occurrence
of any other event or events, except as provided in this Agreement and the
Custody Agreement. If such Selling Shareholder should die or become
incapacitated or if any other event should occur before the delivery of any
Shares to be sold by such Selling Shareholder hereunder which renders such
Selling Shareholder incapable of acting on its own behalf, to the fullest
extent provided by law the Selling Shareholder's obligations hereunder
shall continue and any Shares deposited with the Custodian shall be
delivered by the Custodian in accordance with the terms and conditions of
this Agreement as if such death, incapacity, or other event had not
occurred, regardless of whether or not the Custodian or the
Attorneys-in-Fact shall have received notice thereof;
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(ii) Such Selling Shareholder, acting individually or through the
Attorneys-in-Fact, has duly executed and delivered this Agreement. Each of
this Agreement and the Custody Agreement constitutes a legal, valid and
binding obligation of such Selling Shareholder, enforceable against such
Selling Shareholder in accordance with its terms, except as may be limited
by bankruptcy and other creditor rights laws and general principles of
equity, including the availability of the equitable remedy of specific
performance. All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Shareholder of this
Agreement and the Custody Agreement and for the sale and delivery of any
Shares to be sold by such Selling Shareholder hereunder have been obtained,
except such as may be required under the Act or state securities or Blue
Sky laws in connection with any purchase and distribution of Shares by the
Underwriters; and such Selling Shareholder has full right, power and
authority to enter into this Agreement and to sell, assign, transfer and
deliver any Shares to be sold by such Selling Shareholder hereunder;
(iii) Any sale of Shares to be sold by such Selling Shareholder
hereunder and the performance of this Agreement and the Custody Agreement
and the consummation by such Selling Shareholder of the transactions herein
and therein contemplated will not conflict with or result in a breach or
violation of any terms or provisions of, or constitute a default under, any
statute, any indenture, mortgage, deed of trust, loan agreement, guarantee
or other agreement or instrument to which such Selling Shareholder is a
party or by which such Selling Shareholder is subject, or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over such Selling Shareholder or the property of such Selling
Shareholder;
(iv) Immediately prior to the First Delivery Date or the Second
Delivery Date (as hereinafter defined), as applicable, such Selling
Shareholder will have good and marketable title to the Shares to be sold by
such Selling Shareholder hereunder, free and clear of all liens,
encumbrances, equities or claims; and, upon delivery of such Shares and
payment therefor pursuant hereto, good and marketable title to all of such
Optional Shares, free and clear of all liens, encumbrances, equities or
claims, will pass to the Underwriters;
(v) Such Selling Shareholder agrees that for a period beginning on
the date of the Prospectus and ending 180 days thereafter, such Selling
Shareholder will not, except pursuant to this Agreement, directly or
indirectly (x) make, agree to or cause any offer, sale (including short
sale), loan, pledge, or other disposition of, or grant any options, rights
or warrants to purchase with respect to, or otherwise transfer or reduce
any risk of ownership of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
Common Stock or other capital stock of the Company or (y) enter into any
swap or other arrangement that transfers all or a portion of the economic
consequences associated with the ownership of the Common Stock (regardless
of whether any of the transactions described in clause (x) or (y) is to be
settled by the delivery of Common Stock, or such other securities, in cash
or otherwise),
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nor will such Selling Shareholder make any demand for or exercise any right
with respect to the registration of Common Stock or any securities
convertible into or exchangeable or exercisable for Common Stock, without
the prior written consent of Wheat First Securities, Inc., which shall not
be unreasonably withheld, conditioned or delayed; provided, however, that
nothing contained herein shall prohibit (i) the exercise of stock options
or other purchases of Common Stock under stock option plans or other
incentive compensation arrangements for employees or directors previously
approved by the Company's Board of Directors or (ii) the gift, pledge or
assignment of any such securities without the prior consent of Wheat First
Securities, Inc. if the donee, pledgee or assignee agrees, in writing
delivered to Wheat First Securities, Inc. within five days after such gift,
pledge or assignment, to be bound by the terms of this letter.
(vi) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares;
(vii) Such Selling Shareholder is familiar with the Registration
Statement and the Prospectus and verifies that the information set forth
therein respecting it is true and complete;
(viii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982, as amended, with respect to the transactions
herein contemplated, such Selling Shareholder agrees to deliver to you
prior to or at the First Delivery Date or the Second Delivery Date (as
hereinafter defined), as applicable, a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof);
(ix) Such Selling Shareholder specifically agrees that the Shares to
be sold by such Selling Shareholder are subject to the interests of the
Underwriters hereunder. Such Selling Shareholder agrees that its
obligations hereunder shall not be terminated by operation of law, whether
by death or incapacity or by the occurrence of any other event that is not
by the terms of this Agreement a condition to such Selling Shareholder's
obligations hereunder;
(x) Each Selling Shareholder that is a director or an officer of
the Company or that is controlled by (within the meaning of the rules and
regulations of the Commission) a director or an officer of the Company
represents and agrees that the Registration Statement and the Prospectus 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 (in the light of the circumstances under which they were made, in
the case of the Prospectus and any amendments or supplements thereto) not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in
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reliance upon and in conformity with information furnished in writing to
the Company by the Underwriters through you expressly for use therein;
(xi) Such Selling Shareholder has no knowledge that any of the
representations and warranties of the Company contained in Section 1(a)
hereof are not true and correct in all material respects; and
(xii) Any certificate signed by or on behalf of such Selling
Shareholder as such and delivered to the Representatives or counsel for the
Underwriters shall be deemed to be a representation and warranty by such
Selling Shareholder to each Underwriter as to the matters covered thereby.
2. PURCHASE AND SALE.
Subject to the terms and conditions herein set forth, (a) the Company
agrees to sell 4,000,000 Firm Shares and the Firm Selling Shareholder agrees to
sell 200,000 Firm Shares to the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company and the Firm
Selling Shareholders, at a purchase price per share of $_____, the number of
Firm Shares to be purchased by such Underwriter as set forth opposite the name
of such Underwriter in Schedule I hereto and (b) in the event and to the extent
that the Underwriters shall exercise the election to purchase Optional Shares as
provided below, the Option Selling Shareholders listed on Schedule II hereto
agree, severally and not jointly, to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from the
Option Selling Shareholders, at the purchase price set forth in clause (a) of
this Section 2, that portion of the number of Optional Shares as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional securities) determined by multiplying such number of Optional Shares
by a fraction, the numerator of which is the maximum number of Optional Shares
that such Underwriter is entitled to purchase as set forth opposite the name of
such Underwriter in Schedule I hereto, and the denominator of which is the
maximum number of the Optional Shares that all of the Underwriters are entitled
to purchase.
Each Option Selling Shareholder listed on Schedule II hereto hereby grants
to the Underwriters an option to purchase at their election up to the number of
Optional Shares set forth on Schedule II opposite the name of such Option
Selling Shareholder, at the purchase price per share set forth in the paragraph
above, for the sole purpose of covering over-allotments in the sale of the Firm
Shares. Any such election to purchase Optional Shares may be exercised no more
than once by written notice from you to the Option Selling Shareholders listed
on Schedule II hereto, given within a period of 30 days after the date of this
Agreement, setting forth the aggregate amount of Optional Shares to be purchased
and the date on which such Optional Shares are to be delivered, as determined by
you but in no event earlier than the Second Delivery Date (as defined in Section
4 hereof) or, unless you otherwise agree in writing, earlier than two or later
than 10 business days after the date of such notice.
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3. OFFERING BY THE UNDERWRITERS.
Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale to the public
upon the terms and conditions set forth in the Prospectus.
4. DELIVERY AND PAYMENT.
Certificates in definitive form for the Shares to be purchased by each
Underwriter hereunder, and in such denominations and registered in such names as
Wheat First Securities, Inc. may request upon at least two business days' prior
notice to the Company or the Selling Shareholders, as applicable, shall be
delivered by or on behalf of the Company or the Selling Shareholders, as
applicable, to or upon the order of Wheat First Securities, Inc., for the
account of each Underwriter, against payment by such Underwriter or on its
behalf of the purchase price therefor. Payment of the purchase price for the
Shares shall be made by wire transfer of immediately available funds. The time
and date of such delivery and payment shall be, with respect to the Firm Shares,
9:00 a.m., Richmond, Virginia time, on _______ __, 1998 or at such other time
and date as you and the Company may agree upon in writing, and, with respect to
the Optional Shares, 9:00 a.m., Richmond, Virginia time, on the date specified
by you in the written notice given by you of the Underwriters' election to
purchase such Optional Shares, or at such other time and date as you and the
Company may agree upon in writing. Such time and date for delivery of the Firm
Shares is herein called the "First Delivery Date," such time and date for
delivery of the Optional Shares, if not the First Delivery Date, is herein
called the "Second Delivery Date," and each such time and date for delivery is
herein called a "Delivery Date." Such certificates will be made available for
checking and packaging at least 24 hours prior to each Delivery Date at the
offices of Wheat First Securities, Inc. at the address set forth in Section 13
hereof or such other location designated by Wheat First Securities, Inc. to the
Company and the Selling Shareholders, as applicable.
5. AGREEMENTS OF THE COMPANY.
The Company agrees with the Underwriters:
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(a) To prepare the Prospectus in a form reasonably approved by you and to
file such Prospectus pursuant to Rule 424(b) under the 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 Act; to make no amendment or
supplement to the Registration Statement or Prospectus prior to any Delivery
Date which is disapproved by you promptly after reasonable notice thereof; to
advise you, 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 Prospectus or any amended Prospectus has been filed and to
furnish you with copies thereof; to file promptly all reports and any definitive
proxy or information statements required to be filed by the Company with the
Commission subsequent to the date of the Prospectus and for so long as the
delivery of a Prospectus is required in connection with the offering or sale of
the Shares; to advise you, 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 the Preliminary Prospectus or the 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, of any request by the Commission for the amending or supplementing of
the Registration Statement or 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 the Preliminary Prospectus or the Prospectus or suspending
any such qualification, to use promptly its best efforts to obtain its
withdrawal;
(b) Promptly from time to time to take such actions as you may reasonably
request to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as you 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, however, that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Registration Statement
and the Prospectus in such quantities as you may from time to time reasonably
request during such period following the date hereof that a prospectus is
required to be delivered in connection with offers or sales of the Shares, and,
if the delivery of a prospectus is required during this period and if at such
time any event shall have occurred as a result of which the 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
Prospectus is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus to comply
with the Act, to notify you and upon your request to file such document and to
prepare and furnish without charge to you and to any dealer in securities as
many copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such statement
or omission or effect such compliance;
(d) To make generally available to its shareholders and to deliver to you
an earnings statement of the Company, conforming with the requirements of
Section 11(a) of the Act and
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Rule 158 under the Act, covering a period of at least 12 months beginning after
the effective date of the Registration Statement;
(e) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to shareholders and deliver to you
(i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission, the Nasdaq Stock Market or
any national securities exchange on which any class of securities of the Company
is then listed; and (ii) such additional information concerning the business and
financial condition of the Company as you may from time to time reasonably
request;
(f) To apply the net proceeds from the sale of the Company Shares for the
purposes set forth in the Prospectus and report the use of such proceeds in
accordance with Rule 463 under the Act;
(g) The Company will, from time to time, after the effective date of the
Registration Statement file with the Commission such reports as are required by
the Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations of the Commission thereunder, and shall also file
with state securities commissions in states where the Shares have been sold by
you (as you shall have advised us in writing) any such reports as are required
to be filed by the securities acts and the regulations of those states;
(h) If at any time during the 25 day period after the Registration
Statement is declared effective, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which, in your opinion, the
market price for the Common Stock has been or is likely to be materially
affected (regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising it to do so, prepare, consult with you concerning the
substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event;
(i) Neither the Company nor any of its officers, directors or affiliates
will take, directly or indirectly, any action designed to cause or result in, or
which might constitute or be expected to constitute, stabilization or
manipulation of the price of the Common Stock;
(j) The Company will cause the Shares to be listed on the Nasdaq Stock
Market's National Market (or such other trading market as shall be approved by
you) at each Delivery Date and will use its best efforts to cause the Shares to
be so listed for at least one year from the date hereof;
(k) The Company will not invest or otherwise use the proceeds received by
the Company from its sale of the Company Shares in such a manner as would
require the Company to register as an investment company under the 1940 Act;
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(l) The Company will maintain a transfer agent and, if necessary under the
laws of the State of Georgia, a registrar for the Common Stock; and
(m) On the First Delivery Date, the Company will sell to Wheat First
Securities, Inc., for $500 in cash, a warrant to purchase 30,000 shares of
Common Stock and will sell to X.X. Xxxxxxxx & Co., for $500 in cash, a warrant
to purchase 20,000 shares of Common Stock, such warrants to be substantially in
the form set forth in Exhibit A hereto.
6. PAYMENT OF EXPENSES.
The Company and the Selling Shareholders agree with the Underwriters that
(a) whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company will pay all fees and
expenses incident to the performance of the obligations of the Company and the
Selling Shareholders, including, but not limited to, (i) the Commission's
registration fee, (ii) the expenses of printing (or reproducing) and
distributing the Registration Statement (including the financial statements
therein and all amendments and exhibits thereto), each Preliminary Prospectus,
the Prospectus, any amendments or supplements thereto, and this Agreement and
other underwriting documents, including Underwriter's Questionnaires,
Underwriter's Powers of Attorney, Blue Sky Memoranda, Agreements Among
Underwriters and Selected Dealers Agreements, (iii) fees and expenses of
accountants and counsel for the Company and the Selling Shareholders, (iv)
expenses of registration or qualification of the Shares under state securities
or Blue Sky laws, including the reasonable fees and disbursements of counsel to
the Underwriters in connection therewith, (v) filing fees paid or incurred by
the Underwriters and related reasonable fees and expenses of counsel to the
Underwriters in connection with filings with the National Association of
Securities Dealers, Inc. (the "NASD"), (vi) expenses of listing the Shares on
the Nasdaq Stock Market's National Market, (vii) any expenses for travel,
lodging and meals incurred by the Company in connection with marketing, dealer
and other meetings attended by the Company and the Underwriters in marketing the
Shares, (viii) the costs and charges of the Company's transfer agent and
registrar and the cost of preparing the certificates for the Common Stock, and
(ix) all other costs and expenses incident to the performance of its obligations
hereunder not otherwise provided for in this Section; and (b) all out-of-pocket
expenses, including counsel fees, disbursements and expenses, incurred by the
Underwriters in connection with investigating, preparing to market and marketing
the Shares and proposing to purchase and purchasing the Shares under this
Agreement will be borne and paid by the Company if the sale of the Shares
provided for herein is not consummated by reason of the termination of this
Agreement by the Representatives pursuant to Sections 7(g)(i) or 10 or otherwise
because of any failure or refusal on the part of the Company or the Selling
Shareholders to comply with the terms in all material respects or fulfill in all
material respects any of the conditions of this Agreement. To the extent, if at
all, that any Shareholders engage special legal counsel to represent them in
connection with the transactions contemplated by this Agreement, the fees and
expenses of such counsel shall be borne by such Selling Shareholders. Any
transfer taxes imposed on the sale of the Shares to the several Underwriters
will be paid by the Company and the Selling Shareholders pro rata. The Company
and the Selling Shareholders have agreed between themselves with regard to the
sharing of fees and expenses. It is understood, however, that
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except as provided in this Section 6 and Sections 8 and 10, the Underwriters
will pay all of their own costs and expenses, including the fees of their
counsel and any advertising expenses in connection with any offers they may
make.
7. CONDITIONS TO OBLIGATIONS OF UNDERWRITERS.
The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Delivery Date, shall be subject, in their discretion, to the
condition that all representations and warranties and other statements of the
Company and the Selling Shareholders herein are, at and as of such Delivery
Date, true and correct, the condition that the Company and the Selling
Shareholders shall have performed all of their respective obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Registration Statement and all post-effective amendments thereto
shall have become effective not later than 4:00 p.m., Washington, D.C. time, on
the date of this Agreement, or such later time and date as shall have been
consented to by the Representatives, and all filings required by Rule 424, Rule
430A, Rule 434 or Rule 462(b), if applicable, of the rules and regulations of
the Commission shall have been made; no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission; and all
requests for additional information on the part of the Commission shall have
been complied with to your reasonable satisfaction; and no Underwriter shall
have advised the Company that the Registration Statement or any amendment
thereto contains an untrue statement of fact which, in your judgment, is
material or omits to state a fact which, in your judgment, is material and is
required to be stated therein or necessary to make the statements therein not
misleading, or that any Preliminary Prospectus, the Prospectus or any supplement
thereto contains an untrue statement of fact which, in your judgment, is
material, or omits to state a fact which, in your judgment, is material and is
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(b) Xxxxxx & Bird LLP, counsel for the Underwriters, shall have furnished
to you their written opinion, dated such Delivery Date, with respect to the
incorporation of the Company, the validity of the Shares being issued at such
Delivery Date, the Registration Statement, the Prospectus, and other related
matters as you may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them to pass
upon such matters;
(c) Nelson, Mullins, Xxxxx & Scarborough L.L.P., as counsel for the
Company, shall have furnished to you their written opinion, dated such Delivery
Date, in form reasonably satisfactory to you, to the effect that:
(i) The Company is a corporation in good standing under the laws of
the State of Georgia, with corporate power under such laws to own, lease
and operate its properties and conduct its business as described in the
Prospectus. The Company is qualified to
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transact business as a foreign corporation in all states in which it is
required to be so qualified, except where the failure to be so qualified
would not have a material adverse effect on the business, financial
condition or results of operations of the Company;
(ii) The Company has authorized and issued capital stock as set
forth in the Prospectus;
(iii) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable; and none of the outstanding shares of capital stock were
issued in violation of the preemptive rights of any shareholder of the
Company;
(iv) The Company Shares have been duly authorized for issuance and
sale to the Underwriters pursuant to this Agreement and, when issued and
delivered by the Company against payment of the consideration set forth
herein, will be validly issued, fully paid and nonassessable and no holder
thereof will be subject to personal liability by reason of being such a
holder; and the Company Shares are not subject to the preemptive rights of
any shareholder of the Company;
(v) Upon issuance and delivery of the Company Shares to or for the
account of the Underwriters and payment therefor as provided herein
(assuming the Underwriters are purchasing such Company Shares in good faith
and without notice of any adverse claim), the Underwriters will receive
good and marketable title to the Company Shares, free and clear of all
liens, pledges, charges, encumbrances, equities, claims, security
interests, restrictions, shareholders agreements and voting trusts
whatsoever;
(vi) The Shares conform in all material respects as to legal matters
to the description thereof in the Prospectus under the caption "Description
of Capital Stock;"
(vii) The form of certificate evidencing the Shares complies in all
material respects with all applicable statutory requirements, any
applicable requirements of the Charter and Bylaws of the Company and the
requirements of the Nasdaq Stock Market's National Market;
(viii) To the knowledge of such counsel, all sales of the Company's
securities prior to the date hereof were at all relevant times duly
registered under the Act or exempt from the registration requirements of
the Act, or if such securities were not registered or exempt in compliance
with the Act, any private rights of action for rescission or damages
arising from the failure to register any such securities are time barred by
applicable statutes of limitations or equitable principles, including
laches;
(ix) To the knowledge of such counsel, neither the filing of the
Registration Statement nor the offer or sale of the Shares as contemplated
thereby gives rise to any rights for or related to the registration of any
shares of Common Stock or any other
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securities of the Company which have not been waived by the holder or
holders thereof prior to the date of this Agreement;
(x) The Company has duly authorized the execution and delivery of
this Agreement and the performance by the Company hereunder and has duly
executed and delivered this Agreement, and assuming the due authorization,
execution and delivery of this Agreement by the other parties hereto, this
Agreement is enforceable against the Company, except to the extent that (a)
enforceability may be limited by applicable bankruptcy, insolvency,
liquidation, reorganization, moratorium and other laws relating to or
affecting the rights and remedies of creditors generally, (b) the remedy of
specific performance and other forms of equitable relief may be subject to
certain defenses and to the discretion of the court before which a
proceeding may be brought, and (c) the enforcement of rights to indemnity
and contribution under this Agreement may be limited by federal and state
securities laws or principles of public policy underlying such laws;
(xi) The execution and delivery by the Company of this Agreement did
not, and the performance by the Company hereunder, the consummation by the
Company of the transactions contemplated hereby, the issuance and sale of
the Company Shares by the Company pursuant hereto and the compliance by the
Company with all of the provisions hereof will not (with or without the
giving of notice or the passage of time or both), result in any violation
by the Company of the Charter or Bylaws of the Company or any breach of or
default under any indenture, mortgage, deed of trust, loan agreement, lease
or other written agreement or instrument to which the Company is a party or
by which it or any of its properties or assets is bound except for any such
breach or default which would not have a material adverse effect on the
business, financial condition or results of operations of the Company, and,
to the knowledge of such counsel, will not result in any creation or
imposition of a contractual lien or security interest in, on or against any
property or assets of the Company or violate in any material respect any
existing federal or state constitution, statute, regulation, rule, order or
law (assuming compliance with all applicable state securities or "blue sky"
laws, as to which such counsel need express no opinion), or any judicial or
administrative decree, writ, judgment or order to which, to the knowledge
of such counsel, the Company or any of its properties or assets is subject;
(xii) No consent, approval, authorization or other action by, or
filing with, any governmental authority of the United States or the State
of Georgia is required on the part of the Company for the performance by
the Company of this Agreement and the offering, issuance and sale of the
Shares, except such as have been obtained under the Act and the Exchange
Act and the rules and regulations of the Commission thereunder and such as
may be required under state securities or "blue sky" laws in connection
with the offer, sale and distribution of the Shares by the Underwriters (as
to which such counsel need express no opinion);
(xiii) The Registration Statement and each amendment or supplement to
the Registration Statement and the Prospectus, as of their respective
effective or issue dates
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(other than the financial statements and the notes thereto and the related
schedules and other financial and statistical data included therein or
omitted therefrom and the section therein captioned "Underwriting," as to
all of which such counsel need express no opinion), complied as to form in
all material respects with the applicable requirements of the Act and the
rules and regulations of the Commission thereunder. All required filings
pursuant to Rules 424 and 430A have been made in the manner and within the
time period required;
(xiv) To the knowledge of such counsel, there is no litigation or
governmental proceeding pending or overtly threatened by a written
communication against the Company, or to which the Company or any of its
properties or assets is subject, that is required to be described in the
Prospectus but is not described as required;
(xv) Such counsel has reviewed all contracts and other documents
referred to in the Registration Statement and the Prospectus, and the
summaries of and other disclosures regarding such contracts and other
documents included in the Registration Statement and the Prospectus fairly
present the information required to be disclosed with respect thereto; and,
to the knowledge of such counsel, there are no additional contracts or
other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as required;
(xvi) All descriptions in the Registration Statement and the
Prospectus of statutes, regulations or legal or governmental proceedings
are fair summaries thereof and fairly present the information required to
be shown with respect to such matters;
(xvii) The Registration Statement has been declared effective under
the Act, and, to the knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued under the
Act and no proceedings for that purpose have been instituted or are pending
or threatened by the Commission;
(xviii) The Shares have been authorized for quotation on the Nasdaq
Stock Market's National Market, subject to notice of issuance; and the
Common Stock has been registered under the Exchange Act; and
(xix) The Company is not, and will not be as a result of the
consummation of the transactions contemplated by this Agreement, an
"investment company" or an entity "controlled" by an "investment company"
within the meaning of the 1940 Act;
In addition, such counsel shall state it has reviewed certain
corporate records and other documents of the Company and the Selling
Shareholders and has participated in conferences with officers and other
representatives of the Company, the Selling Shareholders and their
representatives, the Company's independent public accountants, and your
representatives and your counsel at which the contents of the Registration
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Statement and the Prospectus were discussed and revised. Such counsel shall
state that although it has not independently verified, is not passing upon
and does not assume any responsibility for the accuracy, completeness or
fairness of the information and statements contained in the Registration
Statement and the Prospectus, other than as mentioned in paragraphs (xv)
and (xvi) above, on the basis of the foregoing, no facts have come to such
counsel's attention that lead such counsel to believe that the Registration
Statement or any amendment thereto, at the time such Registration Statement
or any such amendment became effective, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or that
the Prospectus or any amendment or supplement thereto, at the time the
Prospectus was issued, at the time any such amended or supplemented
prospectus was issued or on the date such opinion is issued, included or
includes any untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that such counsel need not express any belief regarding
the financial statements and notes thereto and the related schedules and
other financial and statistical data contained in or omitted from the
Registration Statement or the Prospectus or any amendment or supplement
thereto.
Such opinion may be furnished subject to such stated assumptions,
limitations and qualifications as shall be acceptable to Xxxxxx & Bird LLP,
counsel for the Underwriters.
(d) With respect to the Selling Shareholder Shares and, if the Underwriters
shall exercise the election to purchase Optional Shares from the Option Selling
Shareholders pursuant to Section 2 of this Agreement, the Optional Shares,
counsel for the respective Selling Shareholders (which shall be reasonably
acceptable in each case to you and your counsel) shall have furnished to
you their written opinions, dated the First Delivery Date or the Second Delivery
Date, as appropriate, in form and substance satisfactory to you, to the effect
that:
(i) The Shares being sold by such Selling Shareholder have been duly
authorized and validly issued and are fully paid and nonassessable; no
holder thereof is or will be subject to personal liability by reason of
being such a holder; and none of such shares of Common Stock were issued in
violation of the preemptive rights of any shareholder of the Company;
(ii) Such Selling Shareholder has duly executed and delivered each of
this Agreement and the Custody Agreement, and assuming the execution and
delivery of this Agreement and the Custody Agreement by the other parties
hereto and thereto, each of this Agreement and the Custody Agreement is
enforceable against such Selling Shareholder except to the extent that (a)
enforceability may be limited by applicable bankruptcy, insolvency,
liquidation, reorganization, moratorium and other laws relating to or
affecting the rights and remedies of creditors generally, (b) the remedy of
specific performance and other forms of equitable relief may be subject to
certain defenses and to the discretion of the court before which a
proceeding may be brought, and (c) the
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enforcement of rights to indemnity and contribution under this Agreement
may be limited by federal and state securities laws or principles of public
policy underlying such laws;
(iii) The execution and delivery by such Selling Shareholder of this
Agreement and the Custody Agreement did not, and the performance by such
Selling Shareholder under such agreements, the consummation by such Selling
Shareholder of the transactions contemplated hereby, the sale of the Shares
being sold by such Selling Shareholder pursuant hereto and the compliance
by such Selling Shareholder with all of the provisions hereof will not, to
the knowledge of such counsel (with or without the giving of notice or the
passage of time or both), result in any breach of or default under any
indenture, mortgage, deed of trust, loan agreement, lease or other written
agreement or instrument known to such counsel and to which such Selling
Shareholder is a party or by which it or any of its properties or assets is
bound, and, to the knowledge of such counsel, did not and will not result
in any creation or imposition of a contractual lien or security interest
in, on or against any property or assets of such Selling Shareholder or
violate in any material respect any existing federal or state constitution,
statute, regulation, rule, order or law (assuming compliance with all
applicable state securities or "blue sky" laws, as to which such counsel
need express no opinion), or any judicial or administrative decree, writ,
judgment or order to which, to the knowledge of such counsel, such Selling
Shareholder or any of its properties or assets is subject;
(iv) To the knowledge of such counsel, no consent, approval,
authorization or other action by, or filing with, any federal or state
governmental authority is required on the part of such Selling Shareholder
for the performance by such Selling Shareholder of this Agreement or the
Custody Agreement and the offering and sale of the Shares being sold by
such Selling Shareholder, except such as have been obtained under the Act
and the Exchange Act and the rules and regulations of the Commission
thereunder and such as may be required under state securities or "blue sky"
laws in connection with the offer, sale and distribution of the such Shares
by the Underwriters (as to which such counsel need express no opinion); and
(v) Such Selling Shareholder is the sole registered owner of the
Optional Shares to be sold by such Selling Shareholder, and upon delivery
of such Optional Shares to or for the account of the Underwriters against
payment therefor as provided herein (assuming the Underwriters are
purchasing such Shares in good faith and without notice of any adverse
claim), the Underwriters will have acquired all of the rights of the
Selling Shareholder in the Shares sold by him or it free of any adverse
claim, any lien in favor of the Company and any restrictions on transfer
imposed by the Company.
Such opinion may be furnished subject to such stated assumptions,
limitations and qualifications as shall be acceptable to Xxxxxx & Bird LLP,
counsel for the Underwriters.
(e) At each Delivery Date, Xxxxxx Xxxxxxxx LLP shall have furnished to you
a letter or letters, dated the respective date of delivery thereof, in form and
substance reasonably
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24
satisfactory to you, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and other financial information relating to
the Company contained in the Registration Statement and the Prospectus;
(f) (i) The Company shall not have sustained, since the date of the latest
audited financial statements included in the Prospectus, 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, and (ii) since the respective dates as of which
information is given in the Prospectus, there shall not have been any change in
the outstanding capital stock or long-term debt of the Company or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, shareholders' 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 your reasonable judgment 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 at such Delivery Date on the terms and in the
manner contemplated by the Prospectus;
(g) On or prior to the Delivery Date On or after the date hereof there
shall not have occurred any of the following: (i) trading in securities of the
Company shall have been suspended; (ii) a suspension or material limitation in
trading in securities generally on the New York Stock Exchange or the Nasdaq
Stock Market's National Market; (iii) a general moratorium on commercial banking
activities in New York, Virginia or Georgia declared by either federal or New
York, Virginia or Georgia authorities; (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the United States
of a national emergency or war, if any such event specified in this clause (iv)
would have such a materially adverse effect, in your reasonable judgment, as to
make it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Delivery Date on the terms and in
the manner contemplated in the Prospectus; or (v) such a material adverse change
in general economic, political, financial or international conditions affecting
financial markets in the United States having a material adverse impact on
trading prices of securities in general as, in your reasonable judgment, makes
it inadvisable to proceed with the payment for and delivery of the Shares;
(h) The Company shall have furnished to you copies of agreements between
the directors and executive officers of the Company and certain shareholders
of the Company, in form and content reasonably satisfactory to you, pursuant to
which such persons agree that for a period beginning on the date of the
Prospectus and ending 180 days thereafter, they will not, except pursuant to
this Agreement, directly or indirectly (i) make, agree to or cause any offer,
sale (including short sale), loan, pledge, or other disposition of, or grant any
options, rights or warrants to purchase with respect to, or otherwise transfer
or reduce any risk of ownership of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
Common Stock or other capital stock of the Company or (ii) enter into any swap
or other arrangement that transfers all or a portion of the economic
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25
consequences associated with the ownership of the Common Stock (regardless of
whether any of the transactions described in clause (i) or (ii) is to be settled
by the delivery of Common Stock, or such other securities, in cash or
otherwise), or make any demand for or exercise any right with respect to the
registration of Common Stock or any securities convertible into or exchangeable
or exercisable for Common Stock, without the prior written consent of Wheat
First Securities, Inc., which shall not be unreasonably withheld, conditioned or
delayed; provided, however, that nothing contained therein shall prohibit (x)
the exercise of stock options or other purchases of Common Stock under stock
option plans or other incentive compensation arrangements for employees or
directors previously approved by the Company's Board of Directors or (y) the
gift, pledge or assignment of any such securities without the prior consent of
Wheat First Securities, Inc. if the donee, pledgee or assignee agrees, in
writing delivered to Wheat First Securities, Inc. within five days after such
gift, pledge or assignment, to be bound by the terms of such agreement; and
(i) The Company and the Selling Shareholders shall have furnished or caused
to be furnished to you at such Delivery Date certificates of officers of the
Company and the Selling Shareholders, as applicable, reasonably satisfactory to
you as to the accuracy of the respective representations and warranties of the
Company and the Selling Shareholders, as applicable, herein at and as of such
Delivery Date, as to the performance by the Company and the Selling
Shareholders, as applicable, of all of their obligations hereunder to be
performed at or prior to such Delivery Date, as to the matters set forth in
subsections (a) and (f) of this Section and as to such other matters as you may
reasonably request.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and, if any Optional Shares are sold to the Underwriters
pursuant to this Agreement, Selling Shareholders Xxxx X. Xxxxxxx, Xxxxx X.
Xxxxxx, Xxxxx X. Xxxxxxx, G. Xxxx Xxxxx and FLAG Financial Corporation, jointly
and severally, will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will promptly reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating, preparing to defend or defending, or appearing as a
third-party witness in connection with, any such action or claim; provided,
however, that the Company and such Selling Shareholders shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by the Underwriters through you expressly for use therein; provided,
further, that the foregoing
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indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities.
(b) Subject to subsection (f) of this Section, each Selling Shareholder
other than those named in the first sentence of Section 8(a) above will
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which the Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
promptly reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating, preparing to
defend or defending, or appearing as a third-party witness in connection with,
any such action or claim; provided, however, that any such Selling Shareholder
shall only be liable in his or its capacity as a Selling Shareholder pursuant to
this Section 8(b) to the extent that any statements in or omissions or alleged
omissions to state in the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto are based upon written
information furnished to the Company by such Selling Shareholder in his or its
capacity as such specifically for use therein or to the extent that any such
Selling Shareholder in his or its capacity as such has failed to bring to the
attention of the Underwriters anything that has come to the attention of such
Selling Shareholder to cause such Selling Shareholder to believe that there is
any untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Prospectus, the Registration Statement, the Prospectus or any
amendment or supplement thereto or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and provided, further, that such Selling
Shareholder shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by the Underwriters through you expressly
for use therein; and provided, further, that the foregoing indemnity agreement
with respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased Shares, or any person controlling such Underwriter, if a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation
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27
of the sale of the Shares to such person, and if the Prospectus (as so amended
or supplemented) would have cured the defect giving rise to such losses, claims,
damages or liabilities.
(c) Each Underwriter will indemnify and hold harmless the Company and the
Selling Shareholders against any losses, claims, damages or liabilities to which
the Company or the Selling Shareholders may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through you expressly for use therein; and will reimburse the
Company and the Selling Shareholders for any legal or other expenses reasonably
incurred by the Company and the Selling Shareholders in connection with
investigating, preparing to defend or defending, or appearing as a third-party
witness in connection with, any such action or claim. The Company and the
Selling Shareholders acknowledge that the statements set forth under the heading
"Underwriting" in the Preliminary Prospectus and the Prospectus constitute the
only information furnished in writing by or on behalf of the several
Underwriters for inclusion in the Preliminary Prospectus or the Prospectus, and
you, as the Representatives, confirm that such statements are correct.
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have been advised by
counsel that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. It is understood that the indemnifying party shall, in
connection with any such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys together with appropriate local counsel at any time
for all indemnified parties.
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Upon receipt of notice from the indemnifying party to such indemnified party of
its election so to appoint counsel to defend such action and approval by the
indemnified party of such counsel, the indemnifying party will not be liable for
any settlement entered into without its consent and will not be liable to such
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence, (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party; and except that, if clause (i) or (iii) is
applicable, such liability shall be only in respect of the counsel referred to
in such clause (i) or (iii). Notwithstanding the immediately preceding sentence
and the first sentence of this paragraph, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement.
(e) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Selling Shareholders (to
the extent applicable) on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (d) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Selling Shareholders (to the extent applicable) on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholders (to the extent applicable) on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (after deducting the total underwriting discount, but before
deducting expenses) received by the Company and the Selling Shareholders (to the
extent applicable) bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged
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29
omission to state a material fact relates to information supplied by the Company
or the Selling Shareholder on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, the Selling
Shareholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (e) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above in this subsection (e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Underwriter shall 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 were offered to the
public exceeds the amount of damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations under this subsection (e) are several in proportion to
their respective underwriting obligations and not joint.
(f) The liability of each Selling Shareholder under this Section 8 shall be
limited to an amount equal to the initial public offering price less the
underwriting discount of any Shares sold by such Selling Shareholder to the
Underwriters.
(g) The obligations of the Company and the Selling Shareholders under this
Section 8 shall be in addition to any liability which the Company and the
Selling Shareholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company and to each person, if any, who controls the Company
within the meaning of the Act and to the Selling Shareholders.
9. DEFAULT OF UNDERWRITERS.
(a) If any Underwriter shall default in its obligation to purchase the
Shares that it has agreed to purchase hereunder at a Delivery Date, you may in
your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within 36 hours after such default
by any Underwriter you do not arrange for the purchase of such Shares, then the
Company or the Selling Shareholders, as applicable, shall be entitled to a
further period of 36 hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company or the
Selling Shareholders, as applicable, that you have so arranged for the
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30
purchase of such Shares, or the Company or the Selling Shareholders notify you
that they have so arranged for the purchase of such Shares, you or the Company
or the Selling Shareholders, as applicable, shall have the right to postpone
such Delivery Date for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion, exercised in consultation with Xxxxxx & Bird
LLP, may thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company or the
Selling Shareholders as provided in subsection (a) above, the aggregate number
of such Shares that remains unpurchased does not exceed one-eleventh of the
aggregate number of all the Shares to be purchased at such Delivery Date, then
the Company or the Selling Shareholders, as applicable, shall have the right to
require each non-defaulting Underwriter to purchase the number of Shares that
such Underwriter agreed to purchase hereunder at such Delivery Date and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares that such Underwriter agreed to purchase
hereunder at such Delivery Date) of the share of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company or the
Selling Shareholders, as applicable, as provided in subsection (a) above, the
aggregate number of such Shares that remains unpurchased exceeds one-eleventh of
the aggregate number of all the Shares to be purchased at such Delivery Date, or
if the Company or the Selling Shareholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Delivery Date, the obligation of the
Underwriters to purchase and of the Option Selling Shareholders to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriters or the Company or the Selling Shareholders, except
for the expenses to be borne by the Company and the Underwriters as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
10. DEFAULT BY THE SELLING SHAREHOLDERS.
If the Selling Shareholders shall fail to sell the number of Shares that
the Selling Shareholders are obligated to sell, the Representatives may, at
their option, by notice to the Company, either (a) require the Company to sell
and deliver the number of Shares as to which the Selling Shareholders have
defaulted or such lesser number as may be requested by the Representatives, or
(b) terminate this Agreement without liability on the part of the Underwriters
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31
or the Company, except for the provisions of Section 8 hereof and the expenses
to be paid or reimbursed by the Company pursuant to Section 6 hereof.
11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE.
The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Selling Shareholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation (or any statement as to the results thereof) made by or on behalf
of the Underwriters or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, or the
Selling Shareholders, and shall survive delivery of and payment for the Shares.
12. TERMINATION AND PAYMENT OF EXPENSES.
If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company and the Selling Shareholders shall not then be under any liability to
any Underwriter except as provided in Section 6 and Section 8 hereof; but if
this Agreement shall be terminated by the Representatives pursuant to Sections
7(g)(i) or 10 or otherwise because of any failure or refusal on the part of the
Company or the Selling Shareholders to comply with the terms in all material
respects or fulfill in all material respects any of the conditions of this
Agreement, the Company will reimburse the Underwriters through you for all
out-of-pocket expenses, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company and the Selling
Shareholders shall then be under no further liability to any Underwriter except
as provided in Section 6 and Section 8 hereof.
13. NOTICES.
In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you.
All statements, requests, notices and agreements hereunder shall be in
writing and if to the Underwriters shall be sufficient in all respects if
delivered or sent by reliable courier, first-class mail, telex or facsimile
transmission to Wheat First Securities, Inc. at Riverfront Plaza, 000 Xxxx Xxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, Attention: Corporate Finance Department, with
a copy (which shall not constitute notice) to Xxxxxx & Bird LLP, counsel for the
Underwriters; if to the Company or the Selling Shareholders shall be sufficient
in all respects if delivered or sent by reliable courier, first-class mail,
telex, or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Xxxx X. Xxxxxxx, with a copy (which shall not
constitute notice) to Nelson, Mullins, Xxxxx & Xxxxxxxxxxx L.L.P.; provided,
however, that any notice to any Underwriter pursuant to Section 8 hereof shall
be delivered or sent by reliable
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courier, first-class mail, telex or facsimile transmission to such Underwriter
at its address set forth in the Underwriters' Questionnaire, which address will
be supplied to the Company or the Selling Shareholders by you upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
14. SUCCESSORS.
This Agreement shall be binding upon, and inure solely to the benefit of,
the Underwriters, the Company and the Selling Shareholders and, to the extent
provided in Sections 8 and 11 hereof, the officers and directors of the Company
and the Selling Shareholders and each person who controls the Company or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
15. TIME OF THE ESSENCE.
Time shall be of the essence in this Agreement.
16. BUSINESS DAY.
As used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
17. APPLICABLE LAW.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Virginia.
18. CAPTIONS.
The captions included in this Agreement are included solely for convenience
of reference and shall not be deemed to be a part of this Agreement.
19. COUNTERPARTS.
This Agreement may be executed by any one or more of the parties in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
[Signatures on the Following Page]
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If the foregoing is in accordance with your understanding, please sign and
return to us four counterparts hereof, and upon the acceptance hereof by you,
this letter and such acceptance hereof shall constitute a binding agreement
among each of the Underwriters, the Company and each of the Selling
Shareholders. It is understood that your acceptance of this Agreement on behalf
of each of the Underwriters is pursuant to the authority set forth in a form of
Agreement Among Underwriters, the form of which will be submitted to the Company
and the Selling Shareholders for examination, upon request, but without warranty
on your part as to the authority of the signers thereof.
Very truly yours,
TOWNE SERVICES, INC.
By:
---------------------------------------
Xxxx X. Xxxxxxx
Chief Executive Officer and Chairman of
the Board of Directors
SELLING SHAREHOLDERS
By:
---------------------------------------
Attorney-in-Fact
Accepted as of the date hereof
at Richmond, Virginia:
WHEAT FIRST SECURITIES, INC.
X.X. XXXXXXXX & CO.
XXXXXXXX INC.
As Representatives of the Several Underwriters
By: WHEAT FIRST SECURITIES, INC.
By:
-------------------------------------
By:
Its:
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SCHEDULE I
OPTIONAL
SHARES
TO BE PURCHASED
FIRM SHARES IF MAXIMUM
UNDERWRITER TO BE PURCHASED OPTION EXERCISED
----------- --------------- ----------------
Wheat First Securities, Inc...................................
X. X. Xxxxxxxx & Co...........................................
Xxxxxxxx Inc..................................................
Total.................................................... 4,200,000 630,000
========== =========
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SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
SHARES
NUMBER OF SHARES TO BE
SELLING SHAREHOLDER: SOLD
-------------------- ----
A. Firm Selling Shareholder
Sirrom Investments, Inc............................................... 200,000
B. Option Selling Shareholders
Xxxx X. Xxxxxxx....................................................... 100,000
Xxxxx X. Xxxxxx....................................................... 87,000
Xxxxx X. Xxxxxxx...................................................... 40,000
G. Xxxx Xxxxx......................................................... 176,500
Xxxxxx X. Xxxxx....................................................... 176,500
FLAG Financial Corporation............................................ 50,000
-------
630,000
TOTAL........................................................ 830,000
36
EXHIBIT A
THIS WARRANT AND ANY SHARES ACQUIRED FROM THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES
OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER SAID ACT AND UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR
EXEMPTIONS FROM SUCH REGISTRATION. THIS WARRANT IS NON-TRANSFERABLE AND MAY NOT
BE SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF, EXCEPT AS OTHERWISE
PERMITTED IN PARAGRAPH 8(a) HEREOF, UNLESS PREVIOUSLY CONSENTED TO BY TOWNE
SERVICES, INC.
No. ____ Right to Purchase
______ Shares of
Common Stock
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, in consideration of $500 paid in cash this date by
("Purchaser") to Towne Services, Inc., a Georgia corporation (the "Company"),
Purchaser is entitled to purchase from the Company, at any time during the
period specified in Paragraph 2 hereof, up to _________ (_______) fully paid and
non-assessable shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), at an exercise price per share of $_______ (the "Exercise
Price"). The term "Warrant Shares", as used herein, refers to the shares of
Common Stock purchasable hereunder. The Warrant Shares and the Exercise Price
are subject to adjustment as provided in Paragraphs 4 and 5 hereof.
This Warrant is subject to the following terms, provisions and conditions:
1. Manner and Exercise; Issuance of Certificates; Payment for Shares.
(a) Subject to the provisions hereof, this Warrant may be exercised by
the holder hereof, in whole or in part (any partial exercise to be in increments
of not less than one thousand (1,000) shares or any lesser remaining number of
shares subject to the Warrant), within the time period specified in Paragraph 2
hereof by the surrender of this Warrant, together with a completed Exercise
Agreement in the form attached hereto, to the Company during normal business
hours on any business day at the Company's principal office in Norcross, Georgia
(or such other office or agency of the Company as it may designate by notice to
the holder hereof), and payment to the Company in cash, by certified or official
bank check or immediately available federal funds of the Exercise Price for the
Warrant Shares specified in said Exercise Agreement. Notwithstanding the
preceding sentence, the holder, at its sole option, may elect (upon delivery to
the Company of satisfactory documentation of such election, including an opinion
of counsel if reasonably required), in lieu of the payment of the Exercise Price
in cash, check or federal funds, to receive from the Company a lesser number of
Warrant Shares having a fair market value on the date of exercise equal to the
difference between (i) the fair market value on the date of exercise of the full
number of Warrant Shares as to which exercise is being made and (ii) the
aggregate Exercise Price of the full number of Warrant Shares as to which
exercise is being made (such
37
lesser number of Warrant Shares so issuable to the holder shall be considered as
and included within the meaning of the term "Warrant Shares" for all remaining
purposes hereof).
(b) Warrant Shares purchased by the holder hereof shall be deemed to
be issued to the holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered, the
completed Exercise Agreement (and other documentation reasonably request by the
Company) delivered, and payment made for such shares as aforesaid. Certificates
for the Warrant Shares so purchased, representing the aggregate number of shares
specified in said Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of said holder unless
otherwise specified by the holder in the Exercise Agreement. In case of an
exercise in part only, the Company will deliver to the holder a new Warrant of
like tenor in the name of the holder evidencing the right to purchase the number
of Warrant Shares as to which this Warrant has not been exercised.
2. Period of Exercise. This Warrant is exercisable at any time on or
after one (1) year from date of issuance, and before 5:00 p.m. Norcross,
Georgia, local time on fifth (5th) anniversary of date of issuance.
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance,
be validly issued, fully paid and non-assessable and free from all taxes,
liens and charges created or through the Company with respect to the issue
thereof.
(b) Reservation of Shares. During the period within which this Warrant
may be exercised, the Company will at all times have authorized, and
reserved for the purpose of issue upon exercise of this Warrant, a
sufficient number of shares of Common Stock to provide for the exercise of
this Warrant.
4. Protection Against Dilution. The number of shares of Common Stock
purchasable pursuant to the exercise of the rights under this Warrant and the
Exercise Price shall be adjusted as hereinafter set forth
(a) Stock Dividends, Subdivisions, Reclassifications, Etc. In case at
any time or from time to time after the date hereof the Company shall:
(i) take a record of the holders of its issued and outstanding
Common Stock for the purpose of entitling them to receive a
dividend payable in, or other distribution of, Common Stock,
or
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
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38
then, and in each such case, the Exercise Price shall be adjusted to that
price determined by multiplying the Exercise Price in effect immediately
prior to such event by a fraction (i) the numerator of which shall be the
total number of outstanding shares of Common Stock immediately prior to
such event, and (ii) the denominator of which shall be the total number of
outstanding shares of Common Stock immediately after such event.
(b) Adjustment of Number of Shares Purchasable. Upon each adjustment
in the Exercise Price pursuant to Paragraph 4(a) above, such number of
shares of Common Stock purchasable hereunder shall be adjusted by
multiplying the number of shares of Common Stock by a fraction, (i) the
numerator of which shall be the Exercise Price immediately prior to such
adjustment and (ii) the denominator of which shall be the Exercise Price in
effect upon such adjustment.
(c) Other Reclassifications. In case the Company reclassifies its
capital structure in a manner not covered by Paragraph 4(a) and (b) hereof,
an appropriate adjustment shall be made by the Company in its reasonable
discretion to the Exercise Price and number of Warrant Shares.
5. Adjustment for Reorganization, Consolidation, Merger, Etc.
(a) Prior to the expiration date of this Warrant, the Company shall
not consolidate with or merge into another corporation, or convey all or
substantially all of its assets to any other corporation or corporations,
whether affiliated or unaffiliated (any such corporation being included
within the meaning of the term "successor corporation"), or agree to so
consolidate, merge or convey assets unless and until, prior to consummation
of such consolidation, merger or conveyance, the successor corporation
thereto shall assume, by written instrument executed and mailed to the
holder of this Warrant, at such time, the obligation to issue and deliver
to such holder such shares of stock, securities or property as, in
accordance with the provisions of paragraph 5(b) below, such holder shall
be entitled to purchase or receive upon its exercise of this Warrant and
payment of the Exercise Price.
(b) In case any capital reorganization or reclassification of the
Common Stock of the Company (or any other corporation the stock or other
securities of which are at the time receivable on the exercise of this
Warrant) after the date of execution of this Warrant or in case, after such
date, the Company (or any such other corporation) shall consolidate with or
merge into another corporation, then and in each such case the holder of
this Warrant, upon its exercise of this Warrant and payment of the Exercise
Price, at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu
of the Common Stock of the Company (or such other corporation) the
proportionate share of all stock, securities or other property issued, paid
or delivered for or on all of the Common Stock of the Company (or such
other corporation) as is allocable to the shares of Common Stock then
called for by this Warrant, as if such holder had exercised this Warrant
immediately prior thereto, all subject to further adjustment as provided in
Paragraph 4 and 5 hereof.
6. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof.
- 3 -
39
7. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
8. Transfer, Exchange and Replacement of Warrant.
(a) Warrant Transfer Provisions. PRIOR TO TWO (2) YEARS FROM DATE OF
ISSUANCE, THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT TO AFFILIATES OF THE HOLDER, UNLESS
PREVIOUSLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
CONSENTED TO IN WRITING BY THE COMPANY AFTER CONSULTATION WITH COUNSEL, AND
NO SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OTHER DISPOSITION OF THIS
WARRANT PRIOR TO SUCH DATE, EXCEPT TO AFFILIATES OF THE HOLDER, SHALL BE
VALID OR EFFECTIVE UNLESS PREVIOUSLY REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR CONSENTED TO IN WRITING BY THE COMPANY. For purposes
hereof, "Affiliates" shall man any officers, employees or partners, as
applicable, of the holder or any entity or person owning 100% of the
capital stock or other ownership interest of the holder of which the holder
owns 100% of the capital stock or other ownership interest. Any transfer of
this Warrant, if previously consented to by the Company, is registrable at
the office or agency of the Company referred to in Paragraph 8(d) below by
the holder hereof in person or by his duly authorized attorney, upon
surrender of this Warrant properly endorsed.
(b) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of this Warrant and, in the case of any such loss, theft or destruction,
upon delivery of an indemnity agreement reasonably satisfactory in form and
amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense,
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
(c) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any permitted transfer or any replacement as
provided in this Section 8, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer
taxes) and all other expenses and charges payable in connection with the
preparation, execution and delivery of a Warrant pursuant to this Paragraph
8(c).
(d) Register. The Company shall maintain at its principal office in
Norcross, Georgia (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose
name this Warrant has been issued, as well as the name and address of each
permitted transferee, if any, and each prior owner of this Warrant, if any.
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40
(e) Exercise or Transfer Without Registration. Anything in this
Warrant to the contrary notwithstanding, if, at the time of the surrender
of this Warrant in connection with any exercise, transfer or exchange of
this Warrant, this Warrant or the Warrant Shares shall not be registered
under the Securities Act of 1933, as amended, and under applicable state
securities or blue sky laws, the Warrant Shares issuable upon any exercise
of this Warrant shall contain a legend in form and content satisfactory to
the Company, and the Company may require, as a condition of allowing such
exercise, transfer or exchange, that (i) the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the
effect that such exercise, transfer or exchange may be made without
registration under said Act and under applicable state securities or blue
sky laws and (ii) the holder or transferee execute and deliver to the
Company an investment letter in form and substance acceptable to the
Company. The holder of this Warrant, by taking and holding the same,
represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.
9. Notices. All notices, requests and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail, postage prepaid and addressed, to such holder at the address
shown for such holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such holder. All
notices, requests and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing and shall be personally
delivered, or shall be sent by certified or registered mail, postage prepaid and
addressed, to the office of the Company at 0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxx 00000, or at such other address as shall have been furnished
to the holder of this Warrant by notice from the Company. Any such notice,
request or other communication may be sent by telegram, facsimile or telex, but
shall in such case be subsequently confirmed by a writing personally delivered
or sent by certified or registered mail as provided above. All notices, requests
and other communications shall be deemed to have been given either at the time
of the delivery thereof to (or the receipt by, in the case of a telegram,
facsimile or telex) the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 10, or, if mailed, at the completion
of the third full day following the date of such mailing thereof to such
address, as the case may be.
11. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.
12. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may not be
changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party (or any predecessor in interest thereof)
against which enforcement of the same is sought.
(b) Descriptive Headings. The descriptive headings of the several
Paragraphs of this Warrant are inserted for purposes of reference only and
shall not affect the meaning or construction of any of the provisions
hereof.
- 5 -
41
(c) Successors and Assigns. This Warrant shall be binding upon any
entity succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized undersigned officer as of ______________________, 1998.
TOWNE SERVICES, INC.
By:
-------------------------------------
XXXX X. XXXXXXX
Chief Executive Officer
Attest:
By:
---------------------------
Name:
Title:
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42
FORM OF EXERCISE AGREEMENT
Dated:
-------------------------
To: Towne Services, Inc.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby exercises said Warrant with regard to _________ of the shares of
Common Stock covered by such Warrant, and makes payment herewith in full
therefor at the price per share provided by such Warrant either (i) in cash or
by certified or official bank check or by immediately available federal funds in
the amount of $________________ as provided in the first sentence of Paragraph
1(a) of the Warrant or (ii) by acceptance of a lesser number of shares of Common
Sock as provided in the second sentence of Paragraph 1(a) of the Warrant. Please
issue a certificate or certificates for the Common Stock in the name of the
undersigned and pay any cash for any fractional share to the undersigned. If
this is an exercise of the Warrant in part only, please deliver to the
undersigned a new Warrant of like tenor in the name of the undersigned
evidencing the right to purchase the number of shares of Common Stock as to
which the within Warrant is not being exercised.
If the name(s) in which the shares of Common Stock are to be issued differ
from the name of the holder set forth on the within Warrant, or if the address
to which the certificate(s) representing such shares is to be forwarded is
different from the address of the holder of the Warrant as shown on the records
of the Company, or if more than one stock certificate is to be issued with
regard to such shares, the name(s) and denominations in which the stock
certificate(s) should be issued and/or the address to which the stock
certificate(s) should be forwarded is set forth below.
Name:
----------------------------------------
Signature:
-----------------------------------
Title of Signing Officer or Agent (if any):
---------------------------------------------
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant or with the name of
the assignee appearing in the
assignment form.
43
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers all
the rights of the undersigned under the within Warrant to:
Name of Assignee Address No. of Shares
---------------- ------- -------------
, and hereby irrevocably constitutes and appoints ____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated:
-------------------------
In the presence of:
-------------------------------
Name:
----------------------------------------
Signature:
-----------------------------------
Title of Signing Officer or Agent (if any):
---------------------------------------------
Address:
-------------------------------------
-------------------------------------
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
