EXHIBIT 1.1
1,000,000 Units
Starlight Entertainment, Inc.
Each Unit Consisting of
One Share of Common Stock and
One Redeemable Common Stock Purchase Warrant
______________, 1998
UNDERWRITING AGREEMENT
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TEJAS SECURITIES GROUP, INC.
As Representative of the Several Underwriters
1250 Capital of Xxxxx Xxx. Xxxxx
Xxxxxxxx Xxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Dear Sirs:
Starlight Entertainment, Inc., a Colorado corporation (together with its
subsidiaries, the "Company"), proposes to sell to you and the other underwriters
named in Schedule I hereto (collectively, the "Underwriters"), for whom Tejas
Securities Group, Inc. is acting as managing underwriter and representative (the
"Representative"), in the respective amounts set forth opposite each
Underwriter's name in Schedule I hereto, an aggregate of 1,000,000 units (the
"Units"), each consisting of one share of the Company's Common Stock, no par
value (the "Common Stock"), and one redeemable common stock purchase warrant
(the "Warrants"), which entitles the holder thereof to purchase one share of
Common Stock at a price of $_______ per share. The Units, together with (a) the
shares of Common Stock and Warrants comprising the Units and (b) the shares of
Common Stock issuable upon exercise of the Warrants are collectively referred to
herein as the "Underwritten Securities". The Company also proposes to grant to
the Underwriters the Underwriters' Option (described in Section 2(b) hereof) to
purchase up to an aggregate of 150,000 additional Units solely to cover over-
allotments in the sale of the Underwritten Securities (such additional Units,
together with (a) the shares of Common Stock and Warrants comprising such
additional Units and (b) the shares of Common Stock issuable upon exercise of
the Warrants, are collectively referred to herein as the "Option Securities");
and to issue to the Representative the Representative's Warrants (described in
Section 7 hereof) to purchase 100,000 additional Units, which additional Units
are identical to the Units described above (individually, the Representative's
Warrants and additional Units, together with (a) the shares of Common Stock and
Warrants comprising such additional Units and (b) the shares of Common Stock
issuable upon exercise of such Warrants, are collectively referred to herein as
the "Representative's Securities"). The Underwritten Securities, the Option
Securities and the Representative's Securities are collectively referred to
herein as the "Securities."
The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "Effective Date" shall mean each date that the
Registration Statement (as defined below) and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean the
date and time that this Agreement is executed and delivered by the parties
hereto. The term "Preliminary Prospectus" shall mean any preliminary prospectus
referred to in Section 1(a) below with respect to the offering of the
Securities, and any preliminary prospectus included in the Registration
Statement on the Effective Date that omits Rule 430A Information (as defined
below). Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the most recent Preliminary Prospectus which predates or
coincides with the Execution Time. "Prospectus" shall mean the final prospectus
with respect to the offering of the Securities that contains the Rule 430A
Information. "Registration Statement" shall mean (a) the registration statement
referred to in Section 1(a) below, including Exhibits and Financial Statements,
in the form in which it has or shall become effective, (b) in the event any
post-effective amendment thereto becomes effective prior to the Closing Date (as
defined in Section 3(a) hereof) or any settlement date pursuant to Section 3(b)
hereof, such
registration statement as so amended on such date, and (c) in the event of the
filing of any abbreviated registration statement increasing the size of the
offering (a "Rule 462 Registration Statement"), pursuant to Rule 462(b) (as
defined below), which registration statement became effective upon filing the
Rule 462 Registration Statement. Such term shall include Rule 430A Information
(as defined below) deemed to be included therein at the Effective Date as
provided by Rule 430A. "Rule 424," "Rule 462(b)" and "Rule 430A" refer to such
rules promulgated under the Securities Act of 1933, as amended (the "Act").
"Rule 430A Information" means information with respect to the Securities and the
offering thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A.
1. Representations and Warranties of the Company.
(I) The Company represents and warrants to, and agrees with, each
Underwriter that:
(a) The Company meets the requirements for the use of Form SB-2 under
the Act and has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a related preliminary
prospectus ("Preliminary Prospectus"), on Form SB-2 (Commission File No.
333-57561) (the "Registration Statement") for the registration under the
Act of the Securities. The Company may have filed one or more amendments
thereto, including related Preliminary Prospectuses, each of which has
previously been furnished to you. The Company will next file with the
Commission either prior to effectiveness of such Registration Statement, a
further amendment thereto (including the form of Prospectus) or, after
effectiveness of such Registration Statement, a Prospectus in accordance
with Rules 430A and 424(b)(1) or (4). As filed, such amendment and form of
Prospectus, or such Prospectus, shall include all Rule 430A Information
and, except to the extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectus)
as the Company has advised you in writing, prior to the Execution Time,
will be included or made therein.
(b) The Preliminary Prospectus, at the time of filing, conformed in
all material respects with the applicable requirements of the Act and the
rules and regulations thereunder and did not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading. If the Effective Date is prior to or simultaneous with the
Execution Time, (i) on the Effective Date, the Registration Statement
conformed in all material respects to the requirements of the Act and the
rules and regulations thereunder and did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading, and (ii) at the Execution Time, the Registration Statement
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b), the Registration Statement and the Prospectus will conform, in all
material respects to the requirements of the Act and the rules and
regulations thereunder, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit, to
state a material fact required to be stated therein or necessary in order
to make the statements therein (and, in the case of the Prospectus, in the
light of the circumstances under which they were made) not misleading. If
the Effective Date is subsequent to the Execution Time, on the Effective
Date, the Registration Statement and the Prospectus will conform in all
material respects to the requirements of the Act and the rules and
regulations thereunder, and neither of such documents will contain any
untrue statement of any material fact or will omit to state any material
fact required to be stated therein or necessary to make the statements
therein (and, in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading. The two preceding
sentences do not apply to statements in or omissions from the Registration
Statement or the Prospectus (or any supplements thereto) based upon and in
conformity with information furnished in writing to the Company by or on
behalf of any Underwriter through the Representative specifically for use
in connection with the preparation of the Registration Statement or the
Prospectus (or any supplements thereto).
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(c) The Company does not own or control, directly or indirectly, any
shares of capital stock or equity interests in any corporation,
partnership, association or other entity, except as set forth in the
Prospectus.
(d) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction in which
it is chartered or organized, with full corporate power and corporate
authority to own its properties and conduct its business as described in
the Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in
which it conducts its business or owns property and in which the failure,
individually or in the aggregate, to be so qualified would have a material
adverse effect on the properties, assets, operations, business, condition
(financial or otherwise) or prospects of the Company ("Material Adverse
Effect"). The Company has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all government regulatory
officials and bodies, to own its properties and conduct its business as
described in the Prospectus except where the absence of any such
authorization, approval, order, license, certificate or permit would not
have a Material Adverse Effect.
(e) The Company does not own any shares of capital stock or any other
securities of any corporation or any equity interest in any firm,
partnership, association or other entity other than as described in the
Registration Statement and ownership interests that would not have a
Material Adverse Effect.
(f) The Company's equity capitalization is as set forth in the
Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; all
outstanding shares of Common Stock (including, without limitation, the
shares of Common Stock underlying (i) the Units to be sold by the Company
hereunder, (ii) the Warrants, and (iii) the Representative's Warrants) have
been duly and validly authorized and issued and are fully paid and
nonassessable, and the certificates therefor are in valid and sufficient
form; there are, and, on the Effective Date, the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), there will be, no other
classes of stock outstanding except Common Stock; all outstanding options
to purchase shares of Common Stock have been duly and validly authorized
and issued; except as described in the Registration Statement, there are,
and, on the Closing Date (and any settlement date pursuant to Section 3(b)
hereof), there will be, no options, warrant or rights to acquire, or debt
instruments convertible into or exchangeable for, or other agreements or
understandings to which the Company is a party, outstanding or in
existence, entitling any person to purchase or otherwise acquire shares of
capital stock of the Company; the issuance and sale of the Securities have
been duly and validly authorized and, when issued and delivered and paid
for, the Securities will be fully paid and nonassessable and free from
preemptive rights, and will conform in all respects to the description
thereof contained in the Prospectus; the Warrants and Representative's
Warrants will, when issued, constitute valid and binding obligations of the
Company enforceable in accordance with their terms and the Company has
reserved a sufficient number of shares of Common Stock for issuance upon
exercise thereunder; the Securities will, when issued, possess the rights,
privileges and characteristics as described in the Prospectus; and the
certificates for the Securities are in valid and sufficient form. Each
offer and sale of securities of the Company referred to in Item 26 of Part
II of the Registration Statement was effected in compliance with the Act
and the rules and regulations thereunder.
(g) The Securities (other than the Representative's Warrants) have
been approved for listing on the Pacific Stock Exchange ("PSE"), upon
official notice of issuance.
(h) Other than as described in the Prospectus, there is no pending or,
to the best knowledge of the Company, threatened action, suit or proceeding
before any court or governmental agency, authority or body, domestic or
foreign, or any arbitrator involving the Company of a character required to
be disclosed in the Registration Statement or the Prospectus. There is no
contract or other document of a character required to be described in the
Registration Statement or Prospectus or to be filed as an exhibit that is
not described or filed as required.
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(i) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as rights of indemnity and contribution hereunder may be limited by
public policy and except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of equity.
(j) The Company has full corporate power and corporate authority to
enter into and perform its obligations under this Agreement and to issue,
sell and deliver the Securities in the manner provided in this Agreement.
The Company has taken all necessary corporate action to authorize the
execution and delivery of, and the performance of its obligations under,
this Agreement.
(k) Neither the offering, issuance and sale of the Securities, nor the
consummation of any other of the transactions contemplated herein, nor the
fulfillment of the terms hereof, will conflict with or result in a breach
or violation of, or constitute a default under, or result in the imposition
of a lien on any properties of the Company or an acceleration of
indebtedness pursuant to, the Articles of Incorporation or bylaws of the
Company, as currently in effect, or any of the terms of any indenture or
other agreement or instrument to which the Company is a party or by which
the Company or any of its properties are bound, or any law, order,
judgment, decree, rule or regulation applicable to the Company of any
court, regulatory body, administrative agency, governmental body, stock
exchange or arbitrator having jurisdiction over the Company. The Company is
not in violation of its Articles of Incorporation or bylaws, as currently
in effect, or, except as described in the Prospectus, in breach of or
default under any of the terms of any indenture or other agreement or
instrument to which it is a party or by which it or its properties are
bound, which breach or default would, individually or in the aggregate,
have a Material Adverse Effect.
(l) Except as disclosed in the Prospectus, no person has the right,
contractual or otherwise, to cause the Company to issue to it any shares of
capital stock in consequence of the issue and sale of the Securities, nor
does any person have preemptive rights, or rights of first refusal or other
rights to purchase any of the Securities. Except as referred to in the
Prospectus, no person holds a right to require or participate in a
registration under the Act of Common Stock, Preferred Stock or any other
equity securities of the Company.
(m) The Company has not (i) taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to cause or result in,
under the Exchange Act, or otherwise, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Securities (other than those actions permitted by applicable law) or
(ii) effected any sales of shares of securities that are required to be
disclosed in response to Item 26 of Part II of the Registration Statement
(other than transactions disclosed in the Registration Statement or the
Prospectus).
(n) No consent, approval, authorization or order of, or declaration or
filing with, any court or governmental agency or body is required to be
obtained or filed by or on behalf of the Company in connection with the
transactions contemplated herein, except such as may have been obtained or
made for registration of the Securities under the Act, and such as may be
required under the Blue Sky laws of any jurisdiction in connection with the
purchase and distribution of the Securities by the Underwriters.
(o) The accountants who have certified the Financial Statements filed
or to be filed with the Commission as part of the Registration Statement
are independent accountants as required by the Act.
(p) No stop order preventing or suspending the use of any Preliminary
Prospectus has been issued, and no proceedings for that purpose are pending
or, to the best knowledge of the Company, threatened or contemplated by the
Commission; no stop order suspending the sale of the Securities in any
jurisdiction has been issued and no proceedings for that purpose have been
instituted or, to the best knowledge of the Company, threatened or are
contemplated; and any request of the Commission for additional information
(to be included in the Registration Statement or the Prospectus or
otherwise) has been complied with.
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(q) The Company has not sustained, since January 1, 1998 any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, and, since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, there have not been any changes in the capital stock or
long-term debt of the Company, or any material adverse change, or a
development known to the Company that could reasonably be expected to cause
or result in a material adverse change, in the general affairs, management,
financial position, stockholders' equity, results of operations or
prospects of the Company, otherwise than as set forth in the Prospectus.
Except as set forth in the Prospectus, there exists no present condition or
state of facts or circumstances known to the Company involving its
customers which the Company can now reasonably foresee would have a
Material Adverse Effect or which would result in a termination or
cancellation of any agreement with any customer whose purchases,
individually or in the aggregate, are material to the business of the
Company, or which would result in any material decrease in sales to any
such customer or purchases from any supplier, or which would prevent the
Company from conducting its business as described in the Prospectus in
essentially the same manner in which it has heretofore been conducted.
(r) The Financial Statements and the related notes of the Company's
subsidiaries, included in the Registration Statement and the Prospectus
present fairly the financial position, results of operations, cash flow and
changes in shareholders' equity of the Company at the dates and for the
periods indicated, subject in the case of the Financial Statements for
interim periods, to normal and recurring year-end adjustments. The
unaudited pro forma combined condensed statements of the Company present
fairly the financial position and the results of operations at the dates
and for the periods indicated. Such Financial Statements and the unaudited
pro forma combined financial information of the Company were prepared in
conformity with the Commission's rules and regulations and in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved. The financial information of the Company
set forth in the Prospectus under the captions "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" fairly present, on the basis stated in the Prospectus, the
information included therein.
(s) The Company owns or possesses, or has the right to use pursuant to
licenses, sublicenses, agreements, permissions or otherwise, adequate
patents, copyrights, trade names, trademarks, service marks, licenses and
other intellectual property rights necessary to carry on its business as
described in the Prospectus, and, except as set forth in the Prospectus,
the Company has not received any notice of either (i) default under any of
the foregoing or (ii) infringement of or conflict with asserted rights of
others with respect to, or challenge to the validity of, any of the
foregoing which, in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could have a Material Adverse Effect, and the
Company knows of no fact which could reasonably be anticipated to serve as
the basis for any such notice.
(t) Subject to such exceptions as are not likely to result in a
Material Adverse Effect, (A) the Company owns all properties and assets
described in the Registration Statement and the Prospectus as being owned
by it and (B) the Company has good title to all properties and assets owned
by it, free and clear of all liens, charges, encumbrances and restrictions,
except as otherwise disclosed in the Prospectus and except for (i) liens
for taxes not yet due, (ii) mortgages and liens securing debt reflected on
the Financial Statements included in the Prospectus, (iii) materialmen's,
workmen's, vendor's and other similar liens incurred in the ordinary course
of business that are not delinquent, individually or in the aggregate, and
do not have a Material Adverse Effect on the value of such properties or
assets of the Company, or on the use of such properties or assets by the
Company, in its respective business, and (iv) any other liens that,
individually or in the aggregate, are not likely to result in a Material
Adverse Effect. All leases to which the Company is a party and which are
material to the conduct of the business of the Company are valid and
binding and no material default by the Company has occurred and is
continuing thereunder; and the Company enjoys peaceful and undisturbed
possession under all such material leases to which it is a party as lessee.
(u) The books, records and accounts of the Company accurately and
fairly reflect, in reasonable detail, the transactions in and dispositions
of the assets of the Company. The system of internal accounting controls
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maintained by the Company is sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(v) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company has not incurred any liabilities
or obligations, direct or contingent, or entered into any transactions, in
each case, which are likely to result in a Material Adverse Effect, and
there has not been any payment of or declaration to pay any dividends or
any other distribution with respect to the shares of the capital stock of
the Company.
(w) The Company has obtained and delivered to the Representative the
written agreements, substantially in the form attached hereto as Exhibit B,
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of the principal shareholders of the Company restricting dispositions of
equity securities of the Company.
(x) The Company is in compliance in all material respects with all
applicable laws, rules and regulations, including, without limitation,
employment and employment practices, immigration, terms and conditions of
employment, health and safety of workers, customs and wages and hours, and
is not engaged in any unfair labor practice. No property of the Company has
been seized by any governmental agency or authority as a result of any
violation by the Company or any independent contractor of the Company of
any provisions of law. There is no pending unfair labor practice complaint
or charge filed with any governmental agency against the Company. There is
no labor strike, material dispute, slow down or work stoppage actually
pending or, to the best knowledge of the Company, threatened against or
affecting the Company; no grievance or arbitration arising out of or under
any collective bargaining agreements is pending against the Company no
collective bargaining agreement which is binding on the Company restricts
the Company from relocating or closing any of its operations and none of
the Company has experienced any work stoppage or other labor dispute at any
time.
(y) The Company has accurately, properly and timely (giving effect to
any valid extensions of time) filed all federal, state, local and foreign
tax returns (including all schedules thereto) that are required to be
filed, and has paid all taxes and assessments shown thereon. Any and all
tax deficiencies asserted or assessed against the Company by the Internal
Revenue Service ("IRS") or any other foreign or domestic taxing authority
have been paid or finally settled with no remaining amounts owed. Neither
the IRS nor any other foreign or domestic taxing authority has examined any
tax returns of the Company nor has the IRS or any foreign or domestic
taxing authority asserted a position which conflicts with any tax position
taken by the Company. The charges, accruals and reserves shown in the
Financial Statements included in the Prospectus in respect of taxes for all
fiscal periods to date are adequate, and nothing has occurred subsequent to
the date of such Financial Statements that makes such charges, accruals or
reserves inadequate. The Company is not aware of any proposal (whether oral
or written) by any taxing authority to adjust any tax return filed by the
Company.
(z) Except as set forth in the Prospectus, there are no outstanding
loans, advances or guaranties of indebtedness by the Company to or for the
benefit of its affiliates, or any of its officers or directors, or any of
the members of the families of any of them, which are required to be
disclosed in the Registration Statement or the Prospectus.
(aa) The Company is not an investment company subject to registration
under the Investment Company Act of 1940, as amended.
(bb) Except as set forth in the Prospectus, the Company has insurance
of the types and in the amounts that it reasonably believes is adequate for
its business, including, but not limited to, casualty and general liability
insurance covering all real and personal property owned or leased by the
Company, as applicable, against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against.
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(cc) The Company has not at any time (i) made any contributions to any
candidate for political office, or failed to disclose fully any such
contribution, in violation of law; (ii) made any payment to any state,
federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or allowed by all applicable laws; or (iii) violated, nor is it in
violation of, any provision of the Foreign Corrupt Practices Act of 1977.
(dd) The preparation and the filing of the Registration Statement with
the Commission have been duly authorized by and on behalf of the Company,
and the Registration Statement has been duly executed pursuant to such
authorization by and on behalf of the Company.
(ee) All documents delivered or to be delivered by the Company or any
of its directors or officers to the Underwriters, the Commission or any
state securities law administrator in connection with the issuance and sale
of the Securities were, on the dates on which they were delivered, and will
be, on the dates on which they are to be delivered, true, complete and
correct in all material respects.
(ff) With such exceptions as are not likely to result in a Material
Adverse Effect, the Company is in compliance with all Federal, state,
foreign and local laws and regulations relating to pollution or protection
of human health or the environment ("Environmental Laws"), there are no
circumstances that may prevent or interfere with such compliance other than
as set forth in the Prospectus, and the Company has not received any notice
or other communication alleging a currently pending violation of any
Environmental Laws. With such exceptions as are not likely to result in a
Material Adverse Effect, other than as set forth in the Prospectus, there
are no past or present actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the release, emission,
discharge or disposal of any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products, that may result in the
imposition of liability on the Company or any claim against the Company or,
to the Company's best knowledge, against any person or entity whose
liability for any claim the Company has or may have assumed either
contractually or by operation of law, and the Company has not received any
notice or other communication concerning any such claim against the Company
or such person or entity.
(gg) Except as described in the Prospectus, the Company does not
maintain, nor does any other person maintain on behalf of the Company, any
retirement, pension (whether deferred or non-deferred, defined contribution
or defined benefit) or money purchase plan or trust. There are no unfunded
liabilities of the Company with respect to any such plans or trusts that
are not accrued or otherwise reserved for on the Financial Statements.
(hh) Any certificates signed by an officer of the Company and
delivered to the Representative or the Underwriters or to counsel for the
Underwriters shall also be deemed a representation and warranty of the
Company to the Underwriters as to the matters covered thereby. Any
certificate delivered by the Company to its counsel for purposes of
enabling such counsel to render the opinions referred to in Section 6(b)
will also be furnished to the Representative and counsel for the
Underwriters and shall be deemed to be additional representations and
warranties by the Company to the Underwriters as to the matters covered
thereby.
2. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to issue and
sell to the Underwriters an aggregate of 1,000,000 Units. Each of the
Underwriters agrees, severally and not jointly, to purchase from the Company the
number of Units set forth opposite its name in Schedule I hereto. The purchase
price per Unit to be paid by the several Underwriters to the Company shall be
$______ per Unit. No value shall be attributable to the Warrants.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option (the "Underwriters' Option") to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of 150,000 Units at the same
purchase price for use solely in covering any over-allotments made by the
Representative for the account of the Underwriters in the sale and distribution
of the
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Underwritten Securities. The Underwriters' Option may be exercised in whole or
in part at any time on or before the 45th day after the Effective Date upon
written or telegraphic notice by the Representative to the Company setting forth
the number of Units which the several Underwriters are electing to purchase
pursuant to the Underwriters' Option and the settlement date. Delivery of
certificates for such Units by the Company and payment therefor to the Company
shall be made as provided in Section 3 hereof. The number of Units purchased by
each Underwriter pursuant to the Underwriters' Option shall be determined by
multiplying the number of Units to be sold by the Company pursuant to the
Underwriters' Option, as exercised, by a fraction, the numerator of which is the
number of Units to be purchased by such Underwriter as set forth opposite its
name in Schedule I and the denominator of which is the total number of Units to
be purchased by all of the Underwriters as set forth on Schedule I (subject to
such adjustments to eliminate any fractional Unit purchases as the
Representative in its discretion may make).
3. Delivery and Payment.
(a) If the Underwriters' Option described in Section 2(b) hereof is
exercised on or before the third business day prior to the Closing Date (as
defined below), delivery of the certificates for the Common Stock and Warrants
comprising the Units described in Sections 2(a) and 2(b) hereof shall be made by
the Company through the facilities of the Depository Trust Company ("DTC"), and
payment therefor shall be made at _____ a.m. ________ time, on
__________________, 1998 or such later date (not later than _______________,
1998) as the Representative shall designate, which date and time may be
postponed by agreement among the Representative and the Company or as provided
in Section 9 hereof (such date, time of delivery and payment for such Securities
being herein called the "Closing Date"). Delivery of the certificates for such
Securities to be purchased on the Closing Date shall be made as provided in the
preceding sentence for the respective accounts of the several Underwriters
against payment by the several Underwriters through Tejas Securities Group, Inc.
of the aggregate purchase price of such Underwritten Securities by wire transfer
in same day funds. Certificates for such Underwritten Securities shall be
registered in such names and in such denominations as the Representative may
request not less than one full business day in advance of the Closing Date. The
Company agrees to have the certificates for the Underwritten Securities to be
purchased on the Closing Date available at the office of the DTC, not later than
_______ a.m. Dallas, Texas time at least one business day prior to the Closing
Date.
(b) If the Underwriters' Option is exercised after the third business day
prior to the Closing Date, (i) delivery of the certificates for the Units
described in Section 2(a) hereof and payment therefor will be governed by the
provisions of Section 3(a) hereof and (ii) the Company will deliver (at the
expense of the Company) on the date specified by the Representative (which shall
not be less than one nor more than five business days after exercise of the
Underwriters' Option), certificates for the Common Stock and Warrants comprising
the Units described in Section 2(b) hereof in such names and denominations as
the Representative shall have requested against payment at the office of Tejas
Securities Group, Inc. of the purchase price by wire transfer in same day funds.
If settlement for such Securities occurs after the Closing Date, the Company
will deliver to the Representative on the settlement date for such Securities,
and the obligation of the Underwriters to purchase such Securities shall be
conditions upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof. The Company agrees to have the
certificates for the Securities to be purchased after the Closing Date available
at the office of the DTC, not later than _______ a.m. Dallas, Texas time at
least one business day prior to the settlement date.
4. Offering by Underwriters. It is understood that the several Underwriters
propose to offer the Securities for sale to the public as set forth in the
Prospectus.
5. Agreements. The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the Execution Time, to
become effective as promptly as possible. If the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the Prospectus
is otherwise required under Rule 424(b), the Company will file the Prospectus,
properly completed, pursuant to Rule 424(b) within the time period prescribed
and will provide evidence satisfactory to the Representative of such timely
filing. The Company will promptly advise the Representative (i) when the
Registration Statement shall have become effective, (ii) when any post-effective
8
amendment thereto shall have become effective, (iii) of any request by the
Commission for any amendment or supplement of the Registration Statement or the
Prospectus or for any additional information with respect thereto, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the receipt by the Company of any notification with
respect to the institution or threatening of any proceeding for that purpose and
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose. The Company
will use its best efforts to prevent the issuance of any such stop order or
suspension and, if issued, to obtain as soon as possible the withdrawal thereof.
The Company will not file any amendment to the Registration Statement or
supplement to the Prospectus without the prior consent of the Representative.
The Company will prepare and file with the Commission, promptly upon your
request, any amendment to the Registration Statement or supplement to the
Prospectus that you reasonably determine to be necessary or advisable in
connection with the distribution of the Securities by you, and will use its best
efforts to cause the same to become effective as promptly as possible.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it otherwise shall be necessary to supplement the
Prospectus to comply with the Act or the rules or regulations thereunder, the
Company will promptly prepare and file with the Commission, subject to Section
5(a) hereof, a supplement that will correct such statement or omission or a
supplement that will effect such compliance.
(c) As soon as practicable (but not later than eighteen months after the
effective date of the Registration Statement), the Company will make generally
available to its security holders and to the Representative an earnings
statement or statements (which need not be audited) of the Company covering a
period of at least twelve months after the Effective Date (but in no event
commencing later than 90 days after such date), which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder.
(d) The Company will furnish to each of you and counsel for the
Underwriters, without charge, one signed copy of the Registration Statement and
any amendments thereto (including exhibits thereto) and to each other
Underwriter a conformed copy of the Registration Statement and any amendments
thereto (without exhibits thereto) and, so long as delivery of a prospectus by
an Underwriter or dealer may be required by the Act, as many copies of the
Prospectus and each Preliminary Prospectus and any supplements thereto as the
Representative may reasonably request.
(e) The Company will take all actions necessary for the registration or
qualification of the Securities for sale under the laws of such jurisdictions
within the United States and its territories as the Representative may
designate, will maintain such qualifications in effect so long as required for
the distribution of the Securities and will pay the fee of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with its
review of the offering, provided that the Company shall not be required to
qualify as a foreign corporation or to consent to service of process under the
laws of any such jurisdiction (except service of process with respect to the
offering and sale of the Securities). Without limiting the foregoing, the
Company will use its best efforts to register or qualify the shares of Common
Stock underlying the Warrants in any jurisdiction where the registered holders
of 5% or more of such Warrants reside, and will use its best efforts to keep
such registrations or qualifications in effect during the term of the Warrants.
(f) The Company will apply the net proceeds from the offering received by
it in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(g) The Company will (i) cause the Securities (other than the
Representative's Warrants) to be listed on PSE and (ii) comply with all
registration, filing and reporting requirements of the Exchange Act, and PSE
which may from time to time be applicable to the Company.
(h) During the five-year period commencing on the date hereof, the Company
will furnish to its shareholders, as soon as practicable after the end of each
respective period, annual reports (including financial statements audited by
independent certified public accountants) and unaudited quarterly reports of
earnings and will furnish to you and, upon request, to the other Underwriters
hereunder (i) concurrent with furnishing such quarterly reports to its
shareholders,
9
statements of income and other information of the Company for such quarter in
the form furnished to the Company's shareholders; (ii) concurrent with
furnishing such annual reports to its shareholders, a balance sheet of the
Company as at the end of such fiscal year, together with statements of income
and surplus and of cash flow of the Company for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report thereon
of its independent certified public accountants; (iii) as soon as they are
available, copies of all reports and financial statements furnished to or filed
with the Commission, the NASD, PSE or any other securities exchange on which any
of the Company's securities may be listed; (iv) every press release and every
material news item or article in respect of the Company or its affairs which was
released or prepared by the Company; and (v) any additional information of a
public nature concerning the Company or its business that you may reasonably
request. During such five-year period, if the Company shall have active
subsidiaries, the foregoing financial statements shall be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries are
consolidated, and shall be accompanied by similar financial statements for any
significant subsidiary that is not so consolidated.
(i) The Company will maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar (which may be the same
entity as the transfer agent) for the Securities.
(j) The Company will not, for a period of 365 days following the Effective
Date, without the prior written consent of the Representative, offer, sell,
contract to sell (including, without limitation, any short sale), transfer,
assign, pledge, encumber, hypothecate or grant any option to purchase or
otherwise dispose of, any capital stock, or any options, rights or warrants to
purchase any capital stock of the Company, or any securities or indebtedness
convertible into or exchangeable for shares of capital stock of the Company,
except for (i) sales of Securities as contemplated by this Agreement and (ii)
sales of Common Stock upon the exercise of the Warrants or outstanding options
described in the Prospectus.
(k) The Company has reserved and shall continue to reserve a sufficient
number of shares of Common Stock for issuance upon exercise of the
Representative's Warrants and the Warrants.
(l) If the Company elects to rely on Rule 462(b), the Company shall file a
Rule 462(b) Registration Statement with the Commission in compliance with Rule
462(b) by 10:00 p.m., Washington D.C. time, on the date of this Agreement, and
the Company shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act.
(m) For the five year period from the Closing Date, the Company will
nominate for election as a director a person designated by the Representative,
and during such time as the Representative shall not have exercised such right,
the Representative shall have the right to designate an observer, who shall be
entitled to attend all meetings of the Board of Directors and receive all
correspondence and communications sent by the Company to the members of the
Board of Directors.
6. Conditions to the Obligations of the Underwriters. The obligations of the
Underwriters to purchase the Units described in Sections 2(a) and 2(b) hereof
shall be subject to (i) the accuracy of the representations and warranties on
the part of the Company contained herein as of the Execution Time, the Closing
Date and (in the case of any Units delivered after the Closing Date, any
settlement date pursuant to Section 3(b) hereof), (ii) the accuracy of the
statements of the Company made in any certificates delivered pursuant to the
provisions hereof, (iii) the performance by the Company of its obligations
hereunder, and (iv) the following additional conditions:
(a) The Registration Statement shall have become effective (or, if a post-
effective amendment is required to be filed pursuant to Rule 430A under the Act,
such post-effective amendment shall become effective) not later than 5:00 p.m.
Eastern Standard Time, on the execution date hereof or at such later date and
time as the Representative may approve in writing and, at the Closing Date (and
any settlement date pursuant to Section 3(b) hereof), no stop order suspending
the effectiveness of the Registration Statement or any qualification in any
jurisdiction shall have been issued and no proceedings for that purpose shall
have been initiated or, to the best knowledge of the Company, threatened by the
Commission.
10
(b) The Company shall have furnished to the Representative the opinion of
Xxxx, Dill, Carr, Xxxxxxxxxx & Xxxxxxxxx, counsel for the Company, addressed to
the Underwriters and dated the Closing Date (and any settlement date pursuant to
Section 3(b) hereof), or other evidence satisfactory to the Representative to
the effect that:
(i) The Registration Statement has become effective under the Act; any
required filing of the Prospectus or any supplements thereto pursuant to
Rule 424(b) has been made in the manner and within the time period required
by Rule 424(b); to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement or any
qualification in any jurisdiction has been issued and no proceedings for
that purpose have been instituted or threatened; any request from the
Commission for additional information has been complied with; the
Registration Statement and the Prospectus (and any supplements thereto)
comply as to form in all material respects with the applicable requirements
of the Act and the rules and regulations thereunder (except that such
counsel need express no opinion with respect to the Financial Statements
and schedules included in the Registration Statement and Prospectus).
(ii) The Company does not own or control, directly or indirectly, any
shares of capital stock or equity interests in any corporation,
partnership, association or other entity, except as set forth in the
Prospectus.
(iii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction in
which it is chartered or organized, with full corporate power and corporate
authority to own its properties and conduct its business as described in
the Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in
which it conducts its business or owns property and in which the failure,
individually or in the aggregate, to be so qualified would have a Material
Adverse Effect. The Company has all necessary and material authorizations,
approvals, orders, licenses, certificates and permits of and from all
government regulatory officials and bodies, to own its properties and
conduct its business as described in the Prospectus, except where failure
to obtain such authorizations, approvals, orders, licenses, certificates or
permits would not have a Material Adverse Effect.
(iv) The Company has an authorized share capitalization as set forth
in the Prospectus; the capital stock of the Company conforms in all
material respects to the description thereof contained in the Prospectus;
all outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable and the
certificates therefor are in valid and sufficient form in accordance with
applicable state law; there are no other classes of stock outstanding
except Common Stock; all outstanding options to purchase shares of Common
Stock have been duly and validly authorized and issued; except as described
in the Prospectus, there are no options, warrants or rights to acquire, or
debt instruments convertible into or exchangeable for, or other agreements
or understandings to which the Company is a party, outstanding or in
existence, entitling any person to purchase or otherwise acquire any shares
of capital stock of the Company; the issuance and sale of the Securities
have been duly and validly authorized and, when issued and delivered and
paid for, the Securities will be fully paid and nonassessable and free from
preemptive rights, and will conform in all respects to the description
thereof contained in the Prospectus; the Warrants and the Representative's
Warrants constitute valid and binding obligations of the Company
enforceable in accordance with their terms and the Company has reserved a
sufficient number of shares of Common Stock for issuance upon exercise
thereof; the Warrants and the Representative's Warrants possess the rights,
privileges and characteristics as represented in the forms filed as
exhibits to the Registration Statement and as described in the Prospectus;
the Securities (other than the Representative's Warrants) have been
approved for listing on PSE upon notice of issuance thereof; the
certificates for the Securities are in valid and sufficient form. Each
offer and sale of securities of the Company described in Item 26 of Part II
of the Registration Statement was effected in compliance with the Act and
the rules and regulations thereunder.
11
(v) Other than as described in the Prospectus, there is no pending
or, to the best knowledge of such counsel after reasonable investigation,
threatened action, suit or proceeding before any court or governmental
agency, authority or body, domestic or foreign, or any arbitrator involving
the Company of a character required to be disclosed in the Registration
Statement or the Prospectus that is not adequately disclosed in the
Prospectus, and, to the best knowledge of such counsel, there is no
contract or other document of a character required to be described in the
Registration Statement or the Prospectus, or to be filed as an exhibit,
which is not described or filed as required.
(vi) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes the legal, valid and binding agreement and
obligation of the Company enforceable against it in accordance with its
terms (subject to standard bankruptcy and equitable remedy exceptions, and
limitations under the Act as to the enforceability of indemnification
provisions).
(vii) The Company has full corporate power and corporate authority to
enter into and perform its obligations under this Agreement and to issue,
sell and deliver the Securities in the manner provided in this Agreement;
and the Company has taken all necessary corporate action to authorize the
execution and delivery of, and the performance of its obligations under,
this Agreement.
(viii) Neither the offering, issue and sale of the Securities nor the
consummation of any other of the transactions contemplated herein, nor the
fulfillment of the terms hereof, will conflict with or result in a breach
or violation of, or constitute a default under, or result in the imposition
of a lien on any properties of the Company, or an acceleration of
indebtedness pursuant to, the Articles of Incorporation (or other charter
document) or bylaws of the Company, or any of the terms of any indenture or
other agreement or instrument to which the Company is a party or by which
its properties are bound, or any law, order, judgment, decree, rule or
regulation applicable to the Company of any court, regulatory body,
administrative agency, governmental body, stock exchange or arbitrator
having jurisdiction over the Company. The Company is not in violation of
its Articles of Incorporation or bylaws or, to the best knowledge of such
counsel after reasonable investigation, in breach of or default under any
of the terms of any indenture or other agreement or instrument to which it
is a party or by which it or its properties are bound, which breach or
default would, individually or in the aggregate, have a Material Adverse
Effect.
(ix) Except as disclosed in the Prospectus, no person has the right,
contractual or otherwise, to cause the Company to issue to it any shares of
capital stock in consequence of the issue and sale of the Securities to be
sold by the Company hereunder nor does any person have preemptive rights,
or rights of first refusal or other rights to purchase any of the
Securities. Except as referred to in the Prospectus, no person holds a
right to require or participate in a registration under the Act of Common
Stock or any other equity securities of the Company.
(x) No consent, approval, authorization or order of, or declaration
or filing with, any court or governmental agency or body is required to be
obtained or filed by or on behalf of the Company in connection with the
transactions contemplated herein, except such as may have been obtained or
made and registration of the Securities under the Act, and such as may be
required under the Blue Sky laws of any jurisdiction.
(xi) To the best knowledge of such counsel after reasonable
investigation, the Company is not in violation of or default under any
judgment, ruling, decree or order or any statute, rule or regulation of any
court or other United States governmental agency or body, including any
applicable laws respecting employment, immigration and wages and hours, in
each case, where such violation or default could have a Material Adverse
Effect. The Company is not involved in any labor dispute, nor, to the best
knowledge of such counsel, is any labor dispute threatened.
12
(xii) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(xiii) The preparation and the filing of the Registration Statement
with the Commission have been duly authorized by and on behalf of the
Company, and the Registration Statement has been duly executed pursuant to
such authorization by and on behalf of the Company.
(xiv) the Company owns or possesses, or has the right to use pursuant
to licenses, sublicenses, agreements, permissions or otherwise, adequate
patents, copyrights, trade names, trademarks, service marks, licenses and
other intellectual property rights necessary to carry on its business as
described in the Prospectus, and, except as set forth in the Prospectus,
neither such counsel nor, to the knowledge of such counsel, the Company has
received any notice of either (i) default under any of the foregoing or
(ii) infringement of or conflict with asserted rights of others with
respect to, or challenge to the validity of, any of the foregoing which, in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, could have a Material Adverse Effect, and counsel knows of no
facts which could reasonably be anticipated to serve as the basis for any
such notice.
In addition, such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants of the Company and
representatives of the Underwriters at which the contents of the Registration
Statement and Prospectus were discussed and, although such counsel is not
passing upon and does not assume responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration Statement or
Prospectus (except as and to the extent stated in subparagraphs (i) and (v)
above), on the basis of the foregoing and on such counsel's participation in the
preparation of the Registration Statement and the Prospectus, nothing has come
to the attention of such counsel that causes such counsel to believe that the
Registration Statement, at the Effective Date and at the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), contained or contains any
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, at the date of such Prospectus or at the
Closing Date (or any settlement date pursuant to Section 3(b) hereof), contained
or contains any untrue statement of a material fact or omitted or omits to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
comment with respect to the Financial Statements and schedules and other
financial or statistical data derived therefrom included in the Registration
Statement or Prospectus).
References to the Prospectus in this Section 6(b) shall include any
supplements thereto.
(c) The Representative shall have received from Xxxxx, Xxxxxx & Xxxxxx LLP,
counsel for the Underwriters, an opinion dated the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), with respect to the issuance
and sale of the Securities, and with respect to the Registration Statement, the
Prospectus and other related matters as the Representative may reasonably
require, and the Company shall have furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(d) The Company shall have furnished to the Representative a certificate of
the Company, signed by its Chief Executive Officer and its Chief Financial
Officer, dated the Closing Date (and any settlement date pursuant to Section
3(b) hereof), to the effect that each has carefully examined the Registration
Statement, the Prospectus (and any supplements thereto) and this Agreement, and,
after due inquiry, that:
(i) As of the Closing Date (and any settlement date pursuant to
Section 3(b) hereof), the statements made in the Registration Statement and
the Prospectus are true and correct and the Registration Statement and the
Prospectus do not contain any untrue statement of a material fact or omit
to state any 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.
13
(ii) No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities under the
securities or Blue Sky laws of any jurisdiction is in effect and no
proceeding for such purpose is pending before or, to the knowledge of such
officers, threatened or contemplated by the Commission or the authorities
of any such jurisdiction; and any request for additional information with
respect to the Registration Statement or the Prospectus on the part of the
staff of the Commission or any such authorities brought to the attention of
such officers has been complied with to the satisfaction of the staff of
the Commission or such authorities.
(iii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
change in the capital stock or long-term debt of the Company, except as set
forth in or contemplated by the Registration Statement and the Prospectus,
(y) there has not been any material adverse change in the general affairs,
business, prospects, properties, management, results of operations or
condition (financial or otherwise) of the Company, whether or not arising
from transactions in the ordinary course of business, in each case, other
than as set forth in or contemplated by the Registration Statement and the
Prospectus, and (z) the Company has not sustained any material interference
with its business or properties from fire, explosion, flood or other
casualty, whether or not covered by insurance, or from any labor dispute or
any court or legislative or other governmental action, order or decree,
which is not set forth in the Registration Statement and the Prospectus.
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has been no litigation
instituted against the Company, any of its respective officers or
directors, or, to the best knowledge of such officers, any affiliate or
promoter of the Company, and since such dates there has been no proceeding
instituted or, to the best knowledge of such officers, threatened against
the Company, any of its officers or directors, or, to the best knowledge of
such officers, any affiliate or promoter of the Company, before any
federal, state or county court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, in which litigation
or proceeding an unfavorable ruling, decision or finding could have a
Material Adverse Effect.
(v) Each of the representations and warranties of the Company in this
Agreement is true and correct in all material respects on and as of the
Execution Time and the Closing Date (and any settlement date pursuant to
Section 3(b) hereof) with the same effect as if made on and as of the
Closing Date (and any settlement date pursuant to Section 3(b) hereof).
(vi) Each of the covenants required in this Agreement to be performed
by the Company on or prior to the Closing Date (and any settlement date
pursuant to Section 3(b) hereof) has been duly, timely and fully performed,
and each condition required herein to be complied with by the Company on or
prior to the Closing Date (and any settlement date pursuant to Section 3(b)
hereof) has been duly, timely and fully complied with.
(e) At the Execution Time and on the Closing Date (and any settlement date
pursuant to Section 3(b) hereof), Xxxxxxxx & Company, P.C. shall have furnished
to the Representative letters, dated as of such dates, in form and substance
satisfactory to the Representative, confirming that they are independent
accountants within the meaning of the Act and the applicable rules and
regulations thereunder and stating in effect that:
(i) In their opinion, the audited Financial Statements of Cinema Saver
Theatre Corporation and Pitchers!, Inc. for the two fiscal years ended
December 31, 1997, and the notes to the Financial Statements for those
periods included in the Registration Statement and the Prospectus, comply
in all material respects with generally accepted accounting principles and
the applicable accounting requirements of the Act and the applicable rules
and regulations thereunder.
[(ii) On the basis of a reading of the latest unaudited Financial
Statements made available by the Company, carrying out certain specified
procedures (but not an examination in accordance with generally accepted
auditing standards), a reading of the minutes of the meetings of the
shareholders, directors and committees of the Company, and inquiries of
certain officials of the Company who have responsibility for financial and
accounting matters of the Company, nothing came to their attention that
caused them to believe that: (i) the unaudited consolidated Financial
Statements of the Company for the six months ended June 30, 1998, and the
notes to the Financial Statements and the Financial Statement Schedules for
the period then ended included in the Registration Statement and Prospectus
do not comply in all material respects with generally accepted accounting
principles or the applicable accounting requirements of the Act and the
applicable rules and regulations thereunder; and (ii) with respect to the
period subsequent to June 30, 1998, at a specified date
14
not more than five business days prior to the date of the letter, (y) there
were any changes in the long-term debt or capital stock of the Company, or
decreases in net current assets, net assets or stockholders' equity of the
Company as compared with the amounts shown on the June 30, 1998 balance
sheet included in the Registration Statement and the Prospectus, or (z)
there were any decreases in reserves, sales, net income or income from
operations, of the Company, as compared with the amounts shown in the
corresponding period of the preceding year, except for changes or decreases
which the Registration Statement discloses have occurred or may occur and
except for changes or decreases, set forth in such letter, in which case
(A) the letter shall be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is not deemed necessary by
the Representative and (B) such changes or decreases and the explanation
thereof shall be acceptable to the Representative, in its sole discretion.]
(iii) They have performed certain other specified procedures as a
result of which they determined that all information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
the Company) set forth in the Registration Statement and the Prospectus and
specified by you prior to the Execution Time, agrees with the accounting
records of the Company.
(iv) On the basis of a reading of the unaudited pro forma combined
condensed balance sheet as of December 31, 1997 and the related unaudited
pro forma combined statements of operations for the years ended as of
December 31, 1997 and 1996, and the summary selected unaudited pro forma
financial information as of June 30, 1998 and December 31, 1997, for the
six months ended June 30, 1998 and 1997 and for the years ended December
31, 1997 and 1996, nothing came to their attention that caused them to
believe that the above described pro forma balance sheet and statements of
income had not been properly compiled on the pro forma bases described in
the notes thereto.
The Representative shall also have also received from Xxxxxxxx &
Company, P.C., a letter stating that the Company's system of internal accounting
controls taken as a whole are sufficient to meet the broad objectives of
internal accounting control insofar as those objectives pertain to the
prevention or detection of errors or irregularities in amounts that would be
material to the Financial Statements of the Company.
References to the Prospectus in this Section 6(f) shall include any
supplements thereto.
(f) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall not have been (i) any
changes or decreases from that specified in the letters referred to in Section
6(f) hereof or (ii) any change, or any development involving a prospective
change, in or affecting the properties, assets, results of operations, business,
capitalization, net worth, prospects, general affairs or condition (financial or
otherwise) of the Company, the effect of which is, in the sole judgment of the
Representative, so material and adverse as to make it impractical or inadvisable
to proceed with the public offering or delivery of the Securities as
contemplated by the Registration Statement and the Prospectus.
(g) On or prior to the Effective Date, the Securities shall have been
approved for listing on PSE.
(h) The Company shall not have sustained any uninsured substantial loss as
a result of fire, flood, accident or other calamity.
15
(i) The Company shall have furnished to the Representative a certificate of
the Secretary of the Company certifying as to certain information and other
matters as the Representative may reasonably request.
(j) The Company shall have furnished to the Representative such further
information, certificates and documents as the Representative may reasonably
request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in any respect when and as provided in this Agreement, or if any of
the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all respects reasonably satisfactory in form and substance to
the Representative and its counsel, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date (or any settlement date, pursuant to Section 3(b) hereof), by the
Representative. Notice of such cancellation shall be given to the Company in
writing or by telephone, facsimile or telegraph confirmed in writing.
7. Fees and Expenses and the Representative's Warrants. The Company agrees to
pay or cause to be paid and issue the following:
(a) the fees, disbursements and expenses of its own counsel and counsel for
the Company and accountants in connection with the registration of the
Securities under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus, any Prospectus, and any drafts thereof, and amendments and
supplements thereto, and the mailing and delivery of copies thereof to the
Underwriters and dealers;
(b) all expenses in connection with the qualification of the Securities for
offering under state securities laws, including the fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky Memorandum;
(c) all filing and other fees in connection with filing with the NASD, and
complying with applicable review requirements thereof;
(d) the cost of preparing and printing certificates for the Securities;
(e) all expenses, taxes, fees and commissions, including, without
limitation, any and all fixed transfer duties sellers' and buyers' stamp taxes
or duties on the purchase and sale of the Securities and stock exchange
brokerage and transaction levies with respect to the purchase and, if
applicable, the sale of the Securities (the latter to the extent paid and not
reimbursed) (i) incident to the sale and delivery by the Company of the
Securities to the Underwriters and (ii) incident to the sale and delivery of the
Securities by the Underwriters to the initial purchasers thereof;
(f) the costs and charges of any transfer agent and registrar;
(g) the fees and expenses in connection with qualification of the
Securities for listing on the PSE;
(h) a nonaccountable expense allowance of 2.0% of the proceeds derived from
the offering (including the Units described in Section 2(b) hereof) payable to
the Representative;
(i) a solicitation fee to the Representative equal to 5.0% of the aggregate
proceeds received by the Company as a result of the solicitation of the exercise
of the Warrants, provided that no fee shall be payable (i) within one year after
the date of this prospectus, (ii) if the market price of the Common Stock is
lower than the exercise price of the Warrants, (iii) if the Warrants are held in
a discretionary account at the time of exercise, unless prior written approval
of the exercise of such Warrants is received from the beneficial owner of the
Warrants, or (iv) if the exercise of the Warrants is not solicited by the
Representative unless the beneficial owner of such Warrants states in writing
that the exercise was solicited by the Representative and designates in writing
the Representative to receive the solicitation fee with respect to the exercise
of such Warrants; and
(j) all other costs and expenses incident to the performance of the
Company's obligations hereunder which are not otherwise specifically provided
for in this Section 7.
(k) in addition to the sums payable to the Representative provided
elsewhere herein and in addition to the Underwriters' Option, the Representative
shall be entitled to receive on the Closing Date, as partial compensation for
its services, warrants (the "Representative's Warrants") for the purchase of an
additional 100,000 Units. The Representative's Warrants shall be issued pursuant
to the Representative's Warrant Agreement in the form of Exhibit A attached
---------
hereto and shall be exercisable, in whole or in part, for a period of four years
commencing one year from the date of the Prospectus, at 120% of the initial
public offering price of the Units. The Representative's Warrants, including the
Warrants issuable upon exercise thereof, shall be non-transferable for one year
from the date of issuance of the Representative's Warrants, except for (i)
transfers to officers or partners of the Representative, (ii) in connection with
a merger, consolidation or reorganization of the Representative, or (iii)
transfers occurring by operation of law. The terms of the Units subject to the
Representative's Warrants shall be the same as the Units sold to the public.
Without limiting in any respect the foregoing obligations of the Company,
which obligations shall survive any termination of this Agreement, if the sale
of the Securities provided for herein is not consummated because any condition
to the obligations of the Underwriters set forth in Section 6 hereof is not
satisfied, because of any termination pursuant to Section 10 hereof, or because
of any refusal, inability or failure on the part of the Company or the Company
to perform any agreement herein or comply with any provision hereof to be
performed or complied with by
16
the Company or the Company other than by reason of a default by any of the
Underwriters, the Company agrees to reimburse the Underwriters, upon demand, for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Securities to the extent the amounts paid pursuant to
Section 7(h) hereof are insufficient therefor.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person who controls any Underwriter within the meaning of the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in (i) Section 1(I) of
this Agreement, the Registration Statement, any Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or (ii) any
application or other document, or any amendment or supplement thereto, executed
by the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the Securities under
the securities or Blue Sky laws thereof or filed with the Commission or any
securities association or securities exchange, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representative
specifically for use in the Registration Statement or Prospectus; provided
further, that with respect to any untrue statement or omission, or any alleged
untrue statement or omission, made in any Preliminary Prospectus, the indemnity
agreement contained in this subsection (a) shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling any such Underwriter)
from whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Securities concerned to the extent that such untrue
statement or omission, or alleged untrue statement or omission, has been
corrected in the Prospectus and the failure to deliver the Prospectus was not a
result of the Company's failure to comply with its obligations under Section
5(d) hereof. The indemnity agreement will be in addition to any liability which
the Company may otherwise have. The Company will not, without the prior written
consent of each Underwriter, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
Underwriter or any person who controls
17
such Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act is a party to such claim, action, suit or proceeding), unless
the settlement or compromise or consent includes an unconditional release of
such Underwriter and each such controlling person from all liability arising out
of such claim, action, suit or proceeding, satisfactory in form and substance to
the Representative.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its directors, each of the Company's officers who signs the
Registration Statement, and each person who controls the Company or the Company,
as the case may be, within the meaning of the Act or the Exchange Act to the
same extent as the foregoing indemnity from the Company or the Company to each
Underwriter, but only with reference to written information relating to such
Underwriter furnished to the Company by or on behalf of such Underwriter through
the Representative specifically for use in the Registration Statement or
Prospectus. The Company acknowledges that the corporate names of the
Underwriters, the stabilization legend on page 2 and the information under the
heading "Underwriting" in the Prospectus and in any Preliminary Prospectus
constitute the only information furnished in writing by or on behalf of the
several Underwriters. The obligations of each Underwriter under this subsection
(b) shall be in addition to any liability which the Underwriters may otherwise
have.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, suit or proceeding, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all expenses; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party, unless such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. All such
expenses shall be paid by the indemnifying party as incurred by an indemnified
party. Any such indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party has agreed to pay such fees and expenses
or (ii) the indemnifying party shall have failed promptly after notice by such
indemnified party to assume the defense of such action or proceeding and employ
counsel reasonably satisfactory to the indemnified party in any such action,
suit or proceeding or (iii) the named parties in any such action or proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to such
indemnified party which are different from or additional to those available to
the indemnifying party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action or proceeding on behalf of the
indemnified party or parties, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for all such indemnified parties, which firm shall be designated in writing
to the indemnifying party). Any such fees and expenses payable by the
indemnifying party shall be paid to or on behalf of the indemnified party
entitled thereto as incurred. An indemnifying party shall not be liable for any
settlement of any action or claim effected without its consent, which consent
shall not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 8(a) or 8(b)
is applicable in accordance with its terms but is for any reason held by a court
to be unavailable from the indemnifying party on grounds of policy or otherwise,
the Company, the Company and the Underwriters shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same) to which
the Company, the Company and one or more of the Underwriters may be subject in
such proportion so that the Underwriters are responsible in the aggregate for
that portion represented by the total underwriting compensation in respect of
the Securities bears to the public offering price appearing thereon and the
Company is responsible for the balance; provided, however, that (i) in no case
shall any Underwriter (except as may be provided in the Agreement Among
Underwriters relating to the offering of the Securities) be responsible for any
amount in excess of the total underwriting compensation applicable to the
Securities to be purchased by such Underwriter hereunder and (ii) 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
18
of such fraudulent misrepresentation. For purposes of this Section 8, each
person who controls an Underwriter within the meaning of the Act shall have the
same rights to contribution as such Underwriter, and each person who controls
the Company or the Company within the meaning of the Act, each officer of the
Company who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company, subject
in each case to clause (ii) of this Section 8(d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section
8(d), notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any other obligation it or
they may have hereunder or otherwise.
9. Default by an Underwriter. If any one or more Underwriters shall fail to
purchase and pay for any of the Securities agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the number of Units set forth
opposite their names in Schedule I hereto bears to the aggregate number of Units
set forth opposite the names of all the remaining Underwriters) the Units which
the defaulting Underwriter or Underwriters agreed but failed to purchase;
provided, however, that if the aggregate number of Units which the defaulting
Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of
the aggregate number of Units set forth in Schedule I hereto, the remaining
Underwriters shall have the right to purchase all, but shall not be under any
obligation to purchase any, of such Units, and if such nondefaulting
Underwriters do not purchase all of such Units, this Agreement will terminate
without liability to any non-defaulting Underwriter or the Company except as
otherwise provided in Section 7. In the event of a default by any Underwriter as
set forth in this Section 9, the Closing Date shall be postponed for such
period, not exceeding seven days, as the Representative shall determine in order
that the required changes in the Registration Statement and the Prospectus or in
any other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting Underwriter of its liability, if any, to
the Company or any nondefaulting Underwriter for damages occasioned by its
default hereunder.
10. Termination. This Agreement shall be subject to termination in the absolute
discretion of the Representative, by notice given to the Company prior to
delivery of and payment for the Securities, if prior to such time (a) a
suspension or material limitation in trading in securities generally on the New
York or Pacific Stock Exchange, the Nasdaq National Market or any relevant
over-the-counter market, the Chicago Board Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade shall have occurred, (b) a
banking moratorium shall have been declared by federal, New York or California
state authorities, (c) the United States shall have engaged in hostilities which
shall have resulted in the declaration, on or after the date hereof, of a
national emergency or war, or (d) a change in national or international
political, financial or economic conditions or national or international equity
markets or currency exchange rates shall have occurred, if the effect of any
such event specified above is, in the sole judgment of the Representative, so
material and adverse as to make it impractical or inadvisable to proceed with
the public offering or delivery of the Securities as contemplated by the
Registration Statement and the Prospectus.
11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company,
its officers and the Underwriters set forth in, referred to in, or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Notices. All communications hereunder will be in writing and effective only
on receipt, and will be mailed, delivered, telegraphed or sent by facsimile
transmission and confirmed:
19
to the Representative at:
Tejas Securities Group, Inc.
1250 Capital of Xxxxx Xxx. Xxxxx
Xxxxxxxx Xxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx, III
Facsimile: (000) 000-0000
to the Company at:
Starlight Entertainment, Inc.
00000 Xxxxx Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
13. Successors. This Agreement will inure to the benefit of and be binding upon
the parties hereto and their respective successors and the officers, directors
and controlling persons referred to in Section 8 hereof, and no other person
will have any right or obligation hereunder.
14. Counterparts. This Agreement may be signed in two or more counterparts,
each of which shall be an original, with the same effect as if the signatures
thereon and hereon were on the same instrument.
15. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the several Underwriters.
Very truly yours,
STARLIGHT ENTERTAINMENT, INC.
By:
-------------------------------------
R. Xxxxx Xxxxxxx, President
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
TEJAS SECURITIES GROUP, INC.,
For itself and as Representative of the several
Underwriters in Schedule I to this Underwriting Agreement.
By:
-------------------------------------
Xxxxxx X. Xxxxx, III
20
SCHEDULE I
Number of Units
Underwriters To Be Purchased
------------ ---------------
Tejas Securities Group, Inc.
-----------
Total <1,000,000>
===========
EXHIBIT A
FORM OF WARRANT AGREEMENT
EXHIBIT B
FORM OF LOCK-UP AGREEMENT
Tejas Securities Group, Inc.,
As Representative of the Several Underwriters
c/o Tejas Securities Group, Inc.
1250 Capital of Xxxxx Xxx. Xxxxx
Xxxxxxxx Xxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Ladies and Gentlemen:
The undersigned understands that you, as the Representative of the several
underwriters (the "Underwriters"), propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with Starlight Entertainment, Inc., a
Colorado corporation (the "Company"), providing for the initial public offering
by the Underwriters of an aggregate of 1,000,000 units (the "Units"), each
consisting of one share of the Company's Common Stock, no par value (the "Common
Stock"), and one redeemable common stock purchase warrant (the "Warrants"),
pursuant to the Company's Registration Statement on Form SB-2 (the "Registration
Statement") filed with the Securities and Exchange Commission.
In consideration of the Underwriters' agreement to purchase the Units, and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the undersigned hereby agrees that during the period beginning on
the date of this letter and ending one (1) year (the "Lock-Up Period") after the
date of the final prospectus relating to the offer and sale of the Units, the
undersigned will not, directly or indirectly, offer, sell, contract to sell,
grant any option for the sale of, pledge, or otherwise dispose of (individually,
a "Disposition") any Common Stock, or securities exercisable, convertible, or
exchangeable for or into Common Stock (collectively, the "Securities"), that the
undersigned now owns or will own in the future (beneficially or of record),
except (i) as a bona fide gift or gifts, provided the donee or donees thereof
agree in writing to be bound by this Lock-Up Agreement, or (ii) with the prior
written consent of the Representative. The foregoing restriction is expressly
agreed to preclude the holder of Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a disposition of Securities during the Lock-Up Period, even if such
Securities would be disposed of by someone other than the undersigned. Such
prohibited hedging or other transactions would include, without limitation, any
short sale or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from Securities.
Sincerely,
Date: _________ ___, 1998 ----------------------------------------------
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