BEST EFFORTS UNDERWRITING AGREEMENT
TRANSITION AUTO FINANCE II
This UNDERWRITING AGREEMENT made and entered into this _____ day of
_____________, 1998, by and between Transition Auto Finance II, Inc., a Texas
corporation, whose address is 0000 Xxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000, (the "Company"), Transition Leasing Management, Inc., a Texas
corporation, ("Transition Leasing"), the parent company of Transition Auto
Finance, Inc., and Great Nation Investment Corporation, a Texas corporation,
whose address is 0000 X Xxxx Xxxxxx, Xxxxxxxx, Xxxxx 00000 (the
"Underwriter").
Recitals
1. The Company desires to offer and sell up to $10,000,000 in 11%
Redeemable Secured Notes to the public through the Underwriter.
2. The offering and sale will be made pursuant to a registration
statement and prospectus hereinafter referred to.
3. The Underwriter is willing to assist the Company in connection with
the proposed issuance and sale of these securities on a best efforts basis on
the terms and conditions herein contained.
Agreement
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants, agreements, undertakings, representations, and warranties herein
contained, the Company and the Underwriter agree as follows:
I. Representations and Warranties
The Company represents and warrants to, and agrees with the Underwriter that:
1. The Company is a corporation duly organized and validly existing as
a corporation in good standing under the laws of the State of Texas.
2. The Company shall issue consistent with the terms and conditions of
the Registration Statement (defined below) up to $10,000,000.00 in 11%
Redeemable Secured Notes ("the Notes"). The Notes shall:
(a) Bear interest at the rate of 11% per annum;
(b) Pay interest monthly in arrears on the fifteenth (15th) day of
the month of each successive calendar month (except as provided
in the prospectus); and
1
(c) Pay principal at maturity on the fourth anniversary of the
issuance of the First Note.
3. The Notes will be issued pursuant to the terms and conditions of a
Trust Indenture entered into between the Company and Trust Management, Inc.
("Trustee"), as Indenture Trustee.
4. There will be delivered to the counsel to the Underwriter, upon
request at any time prior to the Delivery Date (defined below), certified
copies of the Articles of Incorporation and the bylaws of the Company,
together with all amendments, if any, certified copies of whatever
resolutions the counsel may request, and copies of all material contracts to
which the Company is a party. There will also be made available to the
counsel for inspection minutes of all meetings of incorporators, directors
and stockholders of the Company from the date of incorporation of the Company
to the Delivery Date.
5. The Company has no subsidiaries, except as set forth in the
Prospectus (defined below).
6. A Registration Statement on the appropriate form as prescribed by
the Securities and Exchange Commission (the "Commission"), together with a
related Prospectus with respect to the Notes, has been filed with the
Commission under the Securities Act of 1933, as amended, (the "Act"). The
Company will use its best efforts to cause the Registration Statement and the
Prospectus to become effective as soon as possible after the filing. As used
in this Agreement, the term "Registration Statement" refers to and means the
Registration Statement and any and all amendments to the Registration
Statement, including exhibits and financial statements, when the Registration
Statement becomes effective and, in the event of any amendments after the
effective date of the Registration Statement, the Registration Statement as
so amended; and the term "Prospectus" refers to and means the related
Prospectus in final form, and in the event of any amendment or supplement to
the Prospectus after the effective date of the Registration Statement, also
refers to and means the Prospectus as so amended or supplemented.
7. The Notes shall also be registered or qualified for sale with the
state regulatory agencies of any and all states where the Securities shall be
offered.
8. All expenses of registration and qualification shall be paid by the
Company.
9. Notwithstanding the above, to the extent possible, the Effective
Date of the offering shall be at a date mutually agreed to by the Company and
the Underwriter, subject to the requirements of applicable law.
2
10. The purchase price of the Notes shall be in minimum denominations
of $1,000.00 and integral multiples thereof with a minimum purchase amount of
$5,000.00 (or $2,000.00 for Individual Retirement Accounts).
11. When the Registration Statement becomes effective, it and the
accompanying Prospectus will comply in all material respects with the
requirements of the Act and with the rules and regulations of the Commission
promulgated under the Act; provided, however, the Company makes no
representations or warranties as to information contained or omitted from the
Registration Statement or the Prospectus in reliance upon written information
furnished to the Company by the Underwriter specifically for inclusion in the
Registration Statement or the Prospectus.
12. The Company has the requisite corporate power and authority to
enter into this Underwriting Agreement.
13. The financial statements to be filed with the Registration
Statement will reflect all material liabilities of the Company on a
consolidated basis, contingent or otherwise, and will include adequate
reserves for all federal and state tax liabilities incurred to their
respective dates.
14. All of the Notes to be sold under and pursuant to this Agreement,
when issued and delivered, will be validly issued and enforceable in
accordance with their terms and conditions and free and clear of all claims
and encumbrances, except as described in the Indenture.
15. The certified public accountants who will certify to the financial
statements to be filed with the Commission as a part of the Registration
Statement and to the financial statements incorporated in the Prospectus, and
who, as experts, may certify or review other information of a financial or
accounting nature contained in the Registration Statement and the Prospectus,
will be independent certified public accountants as required by the Act and
the rules and regulations promulgated under the Act.
16. The Company will deliver to the Underwriter financial statements as
of March 31, 1998. The Company represents that such financial statements will
fairly present in all material respects the financial condition of the
Company, computed in accordance with generally accepted accounting principles
applied on a consistent basis and the rules and regulations of the Commission
relating to financial statements.
17. The Company will furnish the Underwriter, at least one day before
the filing of the Registration Statement, with the financial statements
included in the Registration Statement and prepared in accordance with the
rules and regulations of the Commission. Such financial statements will
fairly present the
3
position of the Company in all material respects on the dates shown and will
reflect all material liabilities of the Company, contingent or otherwise.
18. The certificate or certificates that the Company is required to
furnish to the Underwriter pursuant to the provisions of paragraphs 8, 9 and
10 of Article VIII of this Agreement will be true and correct.
19. All of the foregoing representations, warranties and agreements
shall survive delivery of, and payment for, all of the securities covered by
this Agreement.
II. Retention of the Underwriter
Based upon the foregoing representations, warranties and agreements, and
subject to the terms and conditions herein contained:
1. The Company hereby retains the Underwriter as its agent to sell for
its account the Notes. The Underwriter shall use their best efforts as
agent, promptly following the receipt of written notice of the effective date
of the Registration Statement, to sell the Notes subject to the terms,
provisions and conditions set forth below. There is no assurance that any or
all of the Notes to be offered by the Company will be sold, and the
Underwriter is under no obligation to purchase or take down any of the Notes
on its own behalf or on behalf of others.
2. Underwriter acknowledges that the Company may limit its acceptance
of subscriptions in any manner it deems prudent in order to provide for the
timely use of subscriber funds and may reject any subscriptions for any
reason, and Underwriter agrees that any such rejection of a subscription
obtained by the Underwriter or by the Underwriting Group shall be deemed not
to be a sale made by the Underwriter or by the Underwriting Group.
Underwriter further acknowledges that (i) all subscription funds will be
deposited in escrow and if the minimum amount of Notes is not subscribed on
or before the Offering Termination Date (as defined in the Prospectus), the
offering will be terminated and the escrowed funds, plus any interest earned
thereon, will be promptly returned to the investors by the escrow agent; (ii)
upon the subscription of the minimum amount of the Notes, the escrowed funds
will be released to the Company; (iii) any subsequent subscription funds with
respect to the sale of additional Notes will be deposited in an account
maintained by the Underwriter and be immediately available for use by the
Company upon the Company's request; (iv) all Subscriber's checks shall be
made payable to the Underwriter; and (v) shall be deposited with the escrow
agent in accordance with applicable NASD regulations. Subscriber's funds
will be held in escrow and invested in compliance with SEC Rule 15c2-4.
Until the minimum amount of Notes is subscribed, all subscriber's checks will
be transmitted directly
4
to the escrow agent by noon of the next business day after receipt by
Underwriter.
3. As its compensation, the Underwriter shall receive a commission of
eight percent (8.5%) of the full amount of all Notes sold by the Underwriter
(including the Underwriting Group, as hereinafter defined) and for which
payment is made to the Company. Such amount is comprised of a 6% sales
commission and a 2.5% due diligence fee.
4. The Underwriter may associate with themselves whatever other
underwriters they may desire. The Underwriter may offer the Notes through
registered securities dealers selected by them and to pay such dealers out of
the commissions received by the Underwriter whatever compensation the
Underwriter may determine. The Underwriter, such other underwriters and such
securities dealers shall be collectively referred to herein as the
"Underwriting Group".
5. In addition to the compensation set forth above, the Underwriter
shall also receive common stock in Transition Leasing as follows: the
Underwriter shall receive shares of common stock equal to 3.558% of the
outstanding stock of Transition Leasing in the event the Underwriter sells at
least $7,117,000 in Notes. In the event that less than $7,117,000 in Notes
are sold by the Underwriter, then the Underwriter shall receive a percentage
of the outstanding common stock of Transition Leasing equal to the product of
.03558 and the fraction, the numerator of which is the principal amount of
the Notes actually sold by the Underwriting Group and the denominator is
$7,117,000.
Pursuant to paragraph 5 of Article II of that certain Best Efforts
Underwriter's Agreement between Transition Auto Finance, Inc., a Texas
corporation, Transition Leasing and the Underwriter dated December 17, 1996
("the December 17, 1996 Agreement"), as additional compensation for the sale
of the Notes which were the subject of the December 17, 1996 Agreement, the
Underwriter was to receive as much as 5% of the outstanding common stock of
Transition Leasing, all as more particularly set forth in said paragraph 5 of
Article II of the December 17, 1996 Agreement. Pursuant to the December 17,
1996 Agreement, the Underwriter sold $2,883,000 of Notes and therefore earned
1.442% of the outstanding common stock of Transition Leasing.
The parties agree that the sale of such $2,883,000 of Notes under the
December 17, 1996 Agreement shall be credited against the shares of
Transition Leasing to be issued pursuant to this Agreement so that the total
shares of common stock of Transition Leasing which can be earned by the
Underwriter pursuant to this Agreement, after adjustment for the shares
earned pursuant to the December 17, 1996 Agreement, shall be 3.558% of all
issued and outstanding Transition Leasing common stock.
Any stock in Transition Leasing to which the Underwriter shall be
entitled shall be issued to the Underwriter, free and clear of
5
any liens or encumbrances, within 30 days of termination of the offering.
6. The Company may terminate this Agreement in the event that the
Underwriting Group is unable to sell at least $750,000.00 of the Notes within
45 days of the Effective Date and at least $250,000.00 of the Notes each
calendar month after the month in which the 45th day after the Effective Date
occurs.
7. Underwriter represents that it is appropriately registered as a
broker-dealer with the Commission and in all states in which it conducts or
will conduct business in connection with this offering and is a member in
good standing of the National Association of Securities Dealers, Inc.
Underwriter also agrees not to solicit subscriptions for the Notes that will
result in a violation of the securities laws of the United States, or of any
state, or any rule or regulation thereunder, or of any rules of the NASD or
any securities exchange.
8. Underwriter represents that there is not now pending or threatened
against the Underwriter any action or proceeding of which Underwriter has
been advised, either in any court of competent jurisdiction, before the
Commission or any state securities commission concerning activities as a
broker or dealer, nor has the Underwriter been named as a "cause" in any such
action or proceeding.
9. In the event any action or proceeding of the type referred to in
paragraph 8 above shall be instituted or threatened against the Underwriter
at any time, or in the event there shall be filed by or against the
Underwriter in any court pursuant to any federal, state, local or municipal
statute a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of assets, or the Underwriter makes
an assignment for the benefit of creditors, the Company shall have the right
to terminate this Agreement.
10. Upon request, the Company will inform the Underwriter as to the
states in which the Company has been advised by counsel that the Notes have
been qualified for sale under the respective state securities laws, but the
Company does not assume any responsibility or obligation as to the
Underwriter's right to sell the Notes in any state. Underwriter understands
and agrees that under no circumstances will Underwriter engage in any
activities hereunder in any jurisdiction (a) in which the company has not
informed the Underwriter that the Notes are qualified for sale under the
applicable securities laws, or (b) in which the Underwriter may not lawfully
so engage.
11. Underwriter confirms that its commitment to use its best efforts to
solicit subscriptions for the Notes will not result in a violation of the
securities laws of the United States, including
6
but not limited to the Act or any rule or regulation thereunder, or the
securities laws of any state in which the Underwriter will conduct business
and the rules and regulations thereunder, or of any rules of any securities
exchange to which the Underwriter is subject or of any restriction imposed
upon the Underwriter by the NASD or any such exchange or governmental
authority and agrees to indemnify the Company, its shareholders, directors,
officers, employees or agents for any and all damages, liabilities and costs
(including reasonable attorneys' fees and expenses) resulting from the same.
12. Underwriter represents that in connection with the offering:
A. Underwriter will comply in all respect with the provisions of
this Agreement.
B. Underwriter shall use its best efforts to obtain the approval of
the NASD pursuant to Article III, Section 44 of the Rules of Fair
Practice of the NASD with respect to the compensation
arrangements set forth herein.
C. Underwriter will comply with any applicable limitations on the
manner of offering as required by the Act, applicable state
securities laws, and the NASD;
D. Prior to making any sale, Underwriter will have reasonable
grounds to believe, after making reasonable inquiry, that each
subscriber meets the requirements of the Act, the NASD and
applicable state securities laws as to the suitability of the
investment for such subscriber.
E. Except as otherwise disclosed to the Company, no owner, partner,
director or officer of Underwriter has within the last five years
been subject to any of the following administrative or judicial
actions (by the commission or any state securities commission):
1. Registration Stop Order (Issuance of Securities);
2. Securities related felony conviction;
3. Securities related administrative order;
4. Any administrative order involving fraud or deceit;
7
5. Securities related injunction;
F. Underwriter has no current effective administrative order
revoking a securities exemption; and
G. Underwriter has not been suspended, censured or expelled by the
NASD.
Underwriter agrees to indemnify and hold the Company, its shareholders,
officers, directors, employees, and agent harmless from any liabilities and
costs (including reasonable attorneys' fees and expenses) associated with claims
arising or alleged to arise out of a breach of the foregoing representations.
13. Underwriter and any members of the Underwriting Group do hereby
undertake to comply with Sections 8, 24, 25 and 36 of Article III of the NASD
Rules of Fair Practice. Furthermore, any and all Selling Group Agreement or
Selected Dealer Agreement shall provide that any member of the Underwriting
Group shall agree to comply with said sections of Article III of the NASD Rules
of Fair Practice.
III. Further Agreements of the Company
The Company agrees, at its expense and without expense to the Underwriter, as
follows:
1. To give and to continue to give and supply whatever financial
statements and other information that may be required by the Commission or the
proper public bodies in the states in which the Notes may be qualified.
2. As soon as the Company is informed, to advise the Underwriter and to
confirm the advice in writing:
(a) When the Registration Statement becomes effective;
(b) When any amendment to the Registration Statement filed subsequent
to the effective date of the Registration Statement becomes
effective;
(c) Of any request of the Commission for amendments to the
Registration Statement or the related Prospectus, or for
additional information;
(d) Of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of the
initiation of any proceeding for that purpose;
(e) Of any material adverse change in its financial position or
operating condition and of any
8
development materially affecting the Company or rendering untrue
or misleading any material statement in the Registration
Statement or the Prospectus.
3. To make every reasonable effort to prevent the issuance of any stop
order suspending the effectiveness of the Registration Statement, and, if a
stop order is entered at any time, to use its best efforts to obtain
withdrawal of the order at the earliest possible moment.
4. To deliver to the Underwriter, without charge, (a) prior to the
effective date of the Registration Statement, copies of each preliminary
prospectus filed with the Commission bearing in red ink the statement
required by the rules of the Commission, (b) on and from time to time after
the effective date of the Registration Statement, copies of the Prospectus
and of any amended or supplemented Prospectus, and (c) as soon as they are
available and from time to time after they are available, copies of each
Prospectus prepared for the purpose of permitting compliance with Section 10
of the Act and of any amended or supplemented Prospectus. The number of
copies to be delivered in each case shall be the number the Underwriter may
reasonably request.
5. To furnish, without cost, to the Underwriter one executed copy of
the Registration Statement, including all exhibits and amendments, and a
reasonable number of copies of the Registration Statement and amendments.
6. For the period after the effective date of the Registration
Statement during which the Prospectus is required by law to be used, but not
after the Delivery Date, except in accordance with Article XII hereof, if any
change occurs so that the Prospectus includes an untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements in the Prospectus, in the light of the circumstances under
which they are made, not misleading, forthwith to prepare and furnish to the
Underwriter, without cost, supplements to the Prospectus or an amended
Prospectus correcting the untrue statement or supplying the omission.
7. If revision of the Prospectus pursuant to the provisions of Section
10 of the Act becomes necessary, to review the Prospectus, to file copies of
the Prospectus with the Commission, and to furnish copies of the revised
Prospectus to the Underwriter in whatever reasonable quantity they request.
8. To use its best efforts to cause the Notes to be qualified for sale
on terms consistent with those stated in the effective Registration Statement
under the Blue Sky laws in whatever states may be agreed upon.
9
9. Until the Delivery Date hereunder or the earlier termination hereof,
except with the approval of the Underwriter, not to:
(a) Undertake or authorize any change in its capital structure or
authorize or issue or permit any public offering of any shares of
capital stock or additional Notes, except as provided in this
Agreement;
(b) Authorize, create, issue, or sell any funded obligations, notes
or other evidences of indebtedness, except in the ordinary course
of business and maturing not more than nine months from the date
of this Agreement and except as provided in this Agreement; or
(c) Consolidate or merge with or into any other corporation or create
any mortgage or lien upon any of its properties or assets except
in the ordinary course of its business and except as provided in
this Agreement.
10. To provide to Underwriter any reasonable additional information or
documentation deemed by the Underwriter to be necessary in the performance of
the Underwriter's due diligence.
11. To provide Underwriter:
(i) at least twenty-four (24) hours prior to dissemination to
Noteholders, a facsimile of any letter, notice or other similar
communication, provided that the foregoing in no way obligates
the Company to await Great Nation approval of such letter, notice
or similar communication prior to dissemination, and
(ii) from time to time, access to review operations and such other
public information concerning the Company as Underwriter may
reasonably request.
IV. Indemnity Provisions
1. The Company shall indemnify, defend and hold the Underwriter
(including any underwriter, dealer or securities dealer associated with the
Underwriter), and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act, free and harmless from and against any and all
losses, claims, demands, liabilities, and expenses (including reasonable legal
or other expense incurred by each Underwriter and controlling person in
connection with defending any claims or liabilities, whether or not resulting in
any liability to the Underwriter (or to any
10
controlling person), which the Underwriter or controlling person may incur
under the Act or at common law or otherwise, but only to the extent that the
losses, claims, demands, liabilities, and expenses arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or in the Prospectus, or in any
amendment or amendments to the Registration Statement or the Prospectus, or
in any application or other papers executed by any underwriter or dealer with
the written approval of the Company for filing in any state or states in
order to qualify the securities covered by this Agreement under the
securities laws of those state (the "Blue Sky Application"), or arise out of
or are based upon any omission or alleged omission to state in these
documents a material fact required to be stated in them or necessary to make
the statements in them not misleading, provided, however, that this indemnity
agreement shall not apply to any losses, claims, demands, liabilities, or
expenses arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus or in any amendment or amendments to them or in any Blue Sky
Application, or arising out of or based upon the omission or alleged omission
to state in these documents a material fact required to be stated in them or
necessary to make the statements in them not misleading, which statement or
omission was made in reliance upon information furnished to the Company by
the Underwriter in writing expressly for use in the Registration Statement or
the Prospectus or in any amendment or amendments to them, or was made by the
Underwriter in a Blue Sky Application not in reliance upon information
furnished by the Company.
2. The foregoing indemnity of the Company in favor of the Underwriter
shall not be deemed to protect the Underwriter against any liability to the
Company or its noteholders to which the Underwriter would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties, or by reason of their reckless disregard of
their obligations and duties under this Agreement.
3. The Underwriter shall give the Company an opportunity to
participate in the defense or preparation of the defense of any action
brought against the Underwriter or controlling person of the Underwriter to
enforce any claim or liability, and the Company may so participate. The
Company's agreement under the foregoing indemnity is expressly conditioned
upon notice of any action being sent by the Underwriter or controlling
person, as the case may be, to the Company, by letter or facsimile (addressed
as provided herein), promptly after the commencement of the action against
the Underwriter or controlling person. Such notice must either be accompanied
by copies of papers served or filed in connection with the action or by a
statement of the nature of the action to the extent known to the Underwriter.
Failure to notify the Company within a reasonable time of an action shall
relieve the Company of
11
its respective liabilities under the foregoing indemnity, but failure to
notify the Company shall not relieve the Company from any liability that the
Company may have to the Underwriter or controlling person other than on
account of the indemnity agreement contained in this Article IV.
4. The Underwriter likewise shall indemnify, defend and hold harmless
the Company against any and all losses, claims, expenses, and liabilities to
which it may become subject arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus, or in any amendment or amendments to the
Registration Statement or the Prospectus, or in any Blue Sky Application, or
arising out of or based upon the omission or alleged omission to state in
these documents a material fact required to be stated in them or necessary to
make the statements in them not misleading, resulting from the use of written
information furnished to the Company by the Underwriter expressly for use in
the preparation of the Registration Statement or the Prospectus, or in any
amendment or amendments to the Registration Statement or the Prospectus, or
in any Blue Sky Application.
5. The Company shall give the Underwriter an opportunity to
participate in the defense or preparation of the defense of any action
brought against the Company to enforce any claim or liability, and the
Underwriter shall have the right so to participate. The agreement of the
Underwriter under the foregoing indemnity is expressly conditioned upon
notice of any action being sent by the Company to the Underwriter, by letter
or by facsimile (addressed as provided in this Agreement), promptly after the
commencement of the action against the Company. The notice must either be
accompanied by copies of papers served or filed in connection with the action
or by a statement of the nature of the action to the extent known to the
Company. Failure to notify the Underwriter of any action shall relieve the
Underwriter of its liability under the foregoing indemnity, but failure to
notify the Underwriter shall not relieve the Underwriter from any liability
which the Underwriter may have to the Company or its stockholders otherwise
than on account of the indemnity agreement contained in this Article IV.
6. The provisions of this Article IV shall not in any way prejudice
any right or rights that the Underwriter may have against the Company, or
that the Company may have against the Underwriter, under any statute other
than the Act, at common law or otherwise.
7. The indemnity agreements contained in this Article IV shall survive
the Delivery Date and shall inure to the benefit of successors of the Company
and successors of the Underwriter, and shall be valid irrespective of any
investigation made by or on behalf of the Underwriter or the Company.
12
V. Payment of Expenses
The Company shall, at its own expense and without expense to the
Underwriter, pay all costs and expenses incident to this Agreement,
including, but without limitation, all expenses in connection with the
preparation, printing and filing of the Registration Statement and the
Prospectus as well as all amendments to them together with all exhibits; pay
all filing fees and costs, original issue taxes, trustee's fees, charges, or
disbursements connected with the issue and delivery of the Notes; and pay all
reasonable expenses incurred in connection with the qualification of the
Notes under the securities or blue sky laws of the states previously referred
to.
VI. Public Offering
1. The Underwriter shall make a public offering on a best efforts
basis of the Notes covered hereby as soon after the effective date of the
Registration Statement as is advisable in accordance with and as set forth in
the Registration Statement. The public offering may be made either in the
open market or through securities dealers (acting as principals) selected by
the Underwriter, or partly in each manner, as determined by the Underwriter
in their sole discretion. The Underwriter may pay these dealers out of the
commissions received by the Underwriter for the Notes sold by the dealers
whatever compensation the Underwriter and such dealers may determine.
VII. Payments on Default
If any of the conditions, representations or warranties set forth in
Article VIII of this Agreement are not fulfilled in any material respect, or
if for any reason the Company fails to comply with the terms of this
Agreement in any material respect (other than in connection with a breach of
the Agreement by the Underwriter), and if the Underwriter elects to terminate
this Agreement pursuant to Article XI hereto, then, in addition to paying the
Company's own expenses as provided in Article V hereof, the Company shall
reimburse the Underwriter for its actual accountable out-of-pocket expenses.
VIII. Conditions Precedent to Underwriter's Obligations
The obligations hereunder of the Underwriter are conditioned upon:
1. The approval of counsel for the Underwriter of the form and content of
the Registration Statement and the Prospectus, of the organization and present
legal status of the Company or Transition Leasing, and of the legality and
validity of the Notes to be offered hereunder, which approval shall not be
unreasonably withheld.
13
2. The Company's performance in all material respects of all the
obligations required by it to be performed hereunder and the truth,
completeness and accuracy of all statements and representations in all
material respects contained herein or of any financial statements furnished
hereunder.
3. From the date hereof until the Delivery Date, and during the term
hereof, no material adverse change occurring in the properties and assets of
the Company or Transition Leasing, other than changes occurring in the
ordinary course of business.
4. No claim being made or legal action being instituted against the
Company or Transition Leasing, which if adversely determined would have a
material adverse effect on the financial condition of Transition Leasing and
the Company, taken as a whole, and no reasonable basis for a claim or an
action of this nature being discovered.
5. The Registration Statement becoming effective no later than April
15, 1998, or whatever later date that may be agreed upon, and no amendment to
the Registration Statement being filed to which the Underwriter reasonably
have objected after having received reasonable notice; and no stop order
suspending the effectiveness of the Registration Statement being issued and
no proceedings for that purpose being threatened or instituted.
6. Prior to the Delivery Date, the Company not sustaining any loss on
account of fire, flood, accident, or calamity of a character that materially
adversely affects its business or property, regardless of whether the loss is
insured; no litigation being instituted or threatened against the Company or
Transition Leasing of a character required to be disclosed in the
Registration Statement that is not disclosed and that shall materially
adversely affect the Company, its business or its property; and no
substantial adverse change occurring in the operations or financial condition
or credit of the Company or Transition Leasing or in any conditions affecting
the prospects of the business of the Company.
7. The Company having furnished to the Underwriter on the Delivery
Date an opinion or opinions of Kuperman, Orr, Xxxxx & Xxxxxx, counsel to the
Company, dated the Delivery Date and stating in effect that:
(a) The Company and its parent, Transition Leasing, have been duly
incorporated and, on the Delivery Date, are validly existing
corporation in good standing under the laws of the State of Texas
with an authorized and issued capital stock as set forth in the
Registration Statement, and the shares of the Company shown in
the Registration Statement to be issued and outstanding have been
duly and validly issued and are outstanding;
14
(b) The Company and Transition Leasing are duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration and
qualification, except where the failure so to register and
qualify does not have material adverse effect on the financial
condition of the Company.
(c) The Notes conform in all material respects to the description of
the Notes contained in the Registration Statement and the
Prospectus, subject to the qualifications set forth in those
documents, and the holders of the Notes shall be entitled to the
rights and preferences set forth in the certificates for the
Notes;
(d) The Company and Transition Leasing have the requisite corporate
power and authority to enter into and perform their respective
obligations under the Agreement. The Agreement has been duly
authorized, executed and delivered by the Company and Transition
Leasing and is a valid and binding agreement of the Company and
Transition Leasing and is enforceable against the Company and
Transition Leasing in accordance with its terms, subject to the
Underwriter obtaining the approval of the National Association of
Securities Dealers, Inc. to the compensation and other
arrangements set forth therein, except to the extent that the
rights to indemnification thereunder may be limited by federal or
state securities laws and policies embodied therein, or to the
extent that such obligations are subject to or affected or
limited by (i) applicable liquidation, conservatorship,
bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws affecting creditors' rights or in the
collection of debtors obligations generally from time to time in
effect or (ii) general principles of equity (whether
enforceability is considered in a proceeding in equity or at
law), including the qualification that the availability of the
remedy of specific performance or injunctive relief or other
equitable remedies is subject to the discretion of the court
before which any such preceding therefor may be brought and
including standards of good faith, fair dealing and
reasonableness that may be applied by a court to the exercise or
certain rights and remedies;
15
(e) The Registration Statement and the Prospectus comply as to form
in all material respects with the requirements of the Act and the
rules and regulations of the Commission under the Act (except
that no opinion need be expressed as to financial statements and
financial data). In addition, the opinion shall state, or counsel
shall advise the Underwriter by separate letter, that, although
such counsel has not passed upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the
Prospectus (except as expressly provided herein), from the facts
within its actual knowledge, nothing has come to such counsel's
attention that would cause counsel to believe that either the
Registration Statement or the Prospectus at the time such
Registration Statement becomes effective contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein in order to make the statements
stated therein not misleading; and that counsel is familiar with
all contracts referred to in the Registration Statement or the
Prospectus, such contracts that are required to be filed as
exhibits to the Registration Statement have been filed as
exhibits to the Registration Statement, the description of such
contracts is correct in all material respects, and counsel does
not know of any contracts required to be summarized or disclosed
or filed that have not been summarized or disclosed or filed; and
(f) That counsel has no knowledge or information concerning pending
or threatened litigation or any unasserted claims or assessments
by any third party, or parties, against the Company or Transition
Leasing that is not disclosed in the Registration Statement that
are required to be disclosed in the Registration Statement.
8. The Company having furnished to the Underwriter on the Delivery Date a
certificate or certificates verified by the President or a Vice President and by
the Treasurer of the Company, certifying that:
(a) The respective signers of the certificate or certificates have
examined the answers to each item of the Registration Statement
and the information contained in the Prospectus, and, to the best
of their knowledge, information and belief, those answers and
that information, as of the effective date of the Registration
Statement, were true and
16
correct and did not omit to state any material fact required
to be stated or necessary in order to make the statements not
misleading; and since the effective date of the Registration
Statement no event has occurred that should have been set
forth in an amendment to the Registration Statement or in a
supplement or amendment to the Prospectus that has not been so
set forth in an amendment or supplement;
(b) The respective signers of the certificate or certificates do not
know of any litigation or proceeding instituted or threatened
against the Company of a character required to be disclosed in
the Registration Statement that is not disclosed in the
Registration Statement;
(c) The respective signers of the certificate or certificates do not
know of any contract or arrangement that is required to be
summarized or disclosed in the Registration Statement or filed as
an exhibit to the Registration Statement that has not been
summarized or disclosed or filed;
(d) To the best of their knowledge, information and belief, the
respective signers know of no substantial adverse change in the
general affairs of the Company, or in the financial position of
the Company during the period from the date of the latest
financial statements contained in the Registration Statement to
the Delivery Date, except for the changes disclosed or indicated
in the Registration Statement; and
(e) To the best of their knowledge, information and belief (i) the
representations and warranties contained in Article I of this
Agreement are true and correct at the Delivery Date; (ii) no stop
order suspending the effectiveness of the Registration Statement
has been issued prior to the Delivery Date and no proceedings for
that purpose, prior to that date, has been initiated or
threatened by the Commission; (iii) every reasonable request by
the Commission for additional information to be included in the
Registration Statement or the Prospectus or otherwise has or will
be complied with; (iv) prior to the Delivery Date, the Company
has not sustained a loss on account of fire, flood, accident, or
calamity of a character that materially adversely affects its
property or business.
17
9. The Company having furnished to the Underwriter copies of the
Articles of Incorporation and of each amendment to the Articles of
Incorporation, if any, of the Company, which are officially certified by a
proper state official; one copy of the bylaws of the Company certified by the
Secretary or an Assistant Secretary of the Company as being currently in
effect; and a certificate of good standing issued by the proper state
official or officials of each state in which the Company transacts business.
10. The Underwriter, on the Delivery Date, having received a
certificate or letter from the Company's accountants addressed to the
Company, dated not more than three days prior to the Delivery Date,
confirming that the accountants are independent certified public accountants
within the meaning of the Act, and the rules and regulations of the
Commission, and certifying to the effect that the financial statements
audited by them and included in the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations of the Commission, and
that, in their opinion, on the basis of the representations from certain
officials of the Company who have responsibility for financial and accounting
matters, nothing has come to their attention that caused them to believe that
there was any substantial adverse changes in the capitalization of the
Company or the financial position or net worth of the Company, except as
disclosed or indicated in the Registration Statement, and decreases in the
capital stock and surplus accounts of the Company from that shown in the
Registration Statement or the Prospectus.
11. The Company having furnished to the Underwriter whatever
certificates, in addition to those specifically mentioned in this Agreement,
that the Underwriter may request as to the accuracy, on the Date of Delivery,
of the representations and warranties of the Company in this Agreement, as to
the performance by the Company of its obligations under this Agreement, and
as to the other concurrent or precedent conditions to the obligations of the
Underwriter under this Agreement.
All of the opinions, letters, evidence, and certificates mentioned above
or elsewhere in this Agreement shall be deemed to be in full compliance with
the provisions hereof only if they are in form satisfactory to counsel to the
Underwriter.
In the event of the failure of any of the above conditions in any
material respect, the Underwriter may be relieved of any and all obligations
hereunder or may waive this right and demand full performance hereunder.
IX. Delivery Date
The Delivery Date, as referred to in this Agreement, shall be a date
agreed upon by the Company and the Underwriter and failing
18
agreement, then the Delivery Date shall be the Effective Date of the offering
of the Notes.
1. The representations and warranties in this Agreement shall survive
the Delivery Date and shall continue in full force and effect regardless of
any investigation made by the party relying upon any representation or
warranty.
2. This Agreement shall inure to the benefit of, and be binding upon,
the Company and the Underwriter (including specifically any dealer that the
Underwriter associates with pursuant hereto), and their successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person other than the persons mentioned in the preceding sentence
any legal or equitable right, remedy or claim under or with respect hereto,
or any provisions contained herein. This agreement and all of its conditions
and provisions are for the sole and exclusive benefit of the foregoing
persons and for the benefit of no other person, except that the warranties,
indemnities and agreements of the Company contained herein also shall be for
the benefit of any persons, if any, who control the Underwriter within the
meaning of Section 15 of the Act, and except that the indemnification by the
Underwriter shall be for the benefit of the directors of the Company and the
officers of the Company who have signed the Registration Statement.
3. This Agreement sets forth the entire agreement between the parties
hereto, and no representation, warranty, understanding, or agreement not
specifically set forth herein shall be implied from this Agreement.
4. The proceeds received by the Underwriter from the sale of the Notes
shall be remitted to the Trustee(s) not later than noon of the following
business day, less the selling commission payable by the Company to the
Underwriter.
5. The Underwriter shall comply with all of the rules and regulations
of the Commission and the state regulatory agencies where the Notes shall be
offered. If at any time during the term of this Agreement, the Underwriter
should, for any reason, be disqualified or precluded from offering to the
public these Notes, then the Company shall have the option to terminate this
Agreement upon three (3) days written notice to the Underwriter, in which
event this Agreement shall be void and of no further force and effect, except
that the Underwriter shall be entitled to the commissions earned and to their
accountable out-of-pocket expenses.
6. This Agreement, unless sooner terminated as herein provided, shall
continue until all Notes registered under the Registration Statement are
either sold or withdrawn by the Company from registration, whichever event
first occurs.
19
X. Underwriter's Right to Terminate
Notwithstanding any of the terms and provisions hereof, this Agreement
may be terminated by the Underwriter based on a material breach of this
Agreement by the Company. Underwriter shall give fifteen (15) days prior
written notice to the Company of such breach, and the Company shall have the
opportunity to cure such breach. In the event of such termination, the
Underwriter shall be entitled to any commissions to which it was entitled as
of the date of termination as well as any and all accountable out-of-pocket
expenses. In the event that the Underwriter reasonably determines that the
Notes are not marketable, notwithstanding its best efforts to sell the Notes,
the Underwriter may terminate this Agreement with thirty (30) days prior
written notice.
XI. Post-Effective Amendments
1. The Company shall prepare and file under the Act any required
post-effective amendments to the Registration Statement and related
Prospectus or new Registration Statements and new related Prospectuses.
2. If any post-effective amendments or new Registration Statements
become effective, the Company shall furnish to the Underwriter opinions by
the same counsel and to the same effect as those required by Article VIII of
this Agreement, except that such opinions shall relate to the post-effective
amendments and new Prospectuses or to the new Registration Statements and new
Prospectuses and to the Notes that are being offered. The Company further
agrees with respect to these post-effective amendments and new Prospectuses
and with respect to these new Registration Statements and new Prospectuses to
observe all of the terms and conditions of this Agreement as set forth in
Article III, subdivisions 1, 2, 3, 4, 5, 6, and 7 and Article IV.
XII. Notice
Any notice required or permitted to be given under or pursuant to this
Agreement may be given in writing by depositing the notice in the United
States mail, postage prepaid, by hand-delivery or by courier, or by
facsimile, addressed as follows:
To the Underwriter:
Great Nation Investment Corporation
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
FAX - (000) 000-0000
To the Company:
Transition Auto Finance II, Inc.
20
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
FAX - (000) 000-0000
Attention: Xxx Xxxx, President
To Transition Leasing:
Transition Leasing Management, Inc.
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
FAX - (000) 000-0000
Attention: Xxx Xxxx, President
Copy to:
Kuperman, Orr, Xxxxx & Xxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxx
FAX - (000) 000-0000
Notice shall be deemed given to a party hereunder when actually received by
such party.
XIII. Miscellaneous
1. This Agreement may be modified only by writing signed by the parties
hereto.
2. This Agreement shall be governed and construed in accordance with the
laws of the state of Texas.
3. This Agreement may be signed in various counterparts, which together
shall constitute one and the same instrument.
4. For purposes of any lawsuit or other proceeding in respect to this
Agreement, the undersigned hereby submits and consents to the jurisdiction of
any court of competent jurisdiction sitting in the State of Texas, Dallas
County.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day, month and year first written above.
Transition Auto Finance II, Inc.
By:
-------------------------------------
Xxx Xxxx,
Its President
Great Nation Investment
21
Corporation
By:
-------------------------------------
Xxxxx Xxx Treat,
Its President
Transition Leasing Management, Inc.
By:
-------------------------------------
Xxx Xxxx,
Its President
22
