1
DRAFT
EXHIBIT 1
One Million (1,000,000) Shares of Class A Common Stock and
One Million (1,000,000) Redeemable Common Stock Purchase Warrants
of
XXXXXXXXX MOBILE FUEL, INC.
UNDERWRITING AGREEMENT
Atlanta, Georgia
______________, 1996
ARGENT SECURITIES, INC.
0000 Xxxxxxxxx Xxxx, X.X.
Suite 450
Atlanta, Georgia 30326
Gentlemen:
Xxxxxxxxx Mobile Fuel, Inc., a Florida corporation (the "Company"),
confirms its agreement with Argent Securities, Inc. ("Argent"), and each of the
other underwriters named in Schedule I hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom Argent is acting as
representative (in such capacity, Argent shall hereinafter be referred to as
the "Representative"), with respect to the sale by the Company and the Selling
Shareholder listed on Schedule III, and the purchase by the Underwriters,
acting severally and not jointly, of One Million (1,000,000) shares (the
"Shares") of the Company's common stock, par value $.01 per share (the "Common
Stock"), and One Million (1,000,000) Redeemable Common Stock Purchase Warrants
(the "Redeemable Warrants"), each of which Redeemable Warrants entitles the
holder thereof to purchase one share of Common Stock at an exercise price of
$______ per share pursuant to a warrant agreement (the "Warrant Agreement")
between the Company and the warrant agent, set forth in Schedule II, and with
respect to the grant by the Company and the Selling Shareholder to the
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of 150,000 (75,000 by the
Company and 75,000 by the Selling Shareholder) additional Shares and Warrants
for the purpose of covering over-allotments, if any. The aforesaid 1,000,000
Shares and 1,000,000 Redeemable Warrants (the "Securities") and together with
all or any part of the Shares and Redeemable Warrants subject to the option
described in Section 2(b) hereof (the "Option Securities") are hereinafter
collectively referred to as the "Securities." The Company also proposes to
issue and sell to the Underwriters, an option (the "Common Stock and Warrant
Purchase Option") pursuant to the Underwriters' Common Stock and Warrant
Purchase Option Agreement (the "Underwriters'
Page 1
2
Purchase Option Agreement") for the purchase of an aggregate of 100,000
Shares (the "Underwriters' Shares") and 100,000 Common Stock Purchase Warrants
(the "Underwriters' Warrants"). The shares of Common Stock issuable upon
exercise of the Redeemable Warrants and the Underwriters' Warrants are
hereinafter sometimes referred to as the "Warrant Shares." The Shares, the
Redeemable Warrants, the Common Stock and Warrant Purchase Option, Underwriters'
Shares, Underwriters' Warrants, and the Warrant Shares are more fully described
in the Registration Statement (as defined in Subsection 1(a) hereof) and the
Prospectus (as defined in Subsection 1(a) hereof) referred to below. Unless the
context otherwise requires, all references to the "Company" shall include all
subsidiaries and entities to be acquired by the Company on or prior to the
Closing Date (as defined in Subsection 2(c) hereof) referred to below and
identified in the Prospectus, as if separately stated herein. All
representations, warranties and opinions of counsel shall cover such
subsidiaries and entities.
1. Representations and Warranties of the Company. The Company (and the
Selling Shareholder as recited herein) represents and warrants to and agrees
with each of the Underwriters as of the date hereof, and as of the Closing Date
and any Option Closing Date, (as defined in Subsection 2 (c) hereof), if any,
as follows:
(a) The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, and an amendment or amendments thereto,
on Form SB-2 (No. ________) including any related preliminary prospectus
("Preliminary Prospectus"), for the registration of the Securities under the
Securities Act of 1933, as amended (the "Act"), which registration statement
and any amendment or amendments have been prepared by the Company in conformity
with the requirements of the Act and the rules and regulations of the
Commission under the Act. The Company will promptly file a further amendment
to said registration statement in the form heretofore delivered to the
Underwriters and will not, before the registration statement becomes effective,
file any other amendment thereto unless the Underwriters shall have consented
thereto after having been furnished with a copy thereof. Except as the context
may otherwise require, such registration statement, as amended, on file with
the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits and all
other documents filed as a part thereof and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations), is hereinafter called the "Registration Statement" and the form
of prospectus in the form first filed with the commission pursuant to Rule
424(b) of the Rules and Regulations, is hereinafter called the "Prospectus."
For purposes hereof, "Rules and Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any Preliminary Prospectus, the
Registration Statement or Prospectus or any part thereof and no proceedings for
a stop order have been instituted or are pending or, to the best knowledge of
the Company, threatened. Each of the Preliminary Prospectus,
Page 2
3
the Registration Statement and Prospectus at the time of filing thereof
conformed in all material respects with the requirements of the Act and the
Rules and Regulations, and neither the Preliminary Prospectus, the Registration
Statement or Prospectus at the time of filing thereof contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with written information furnished
to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date and each Option Closing Date and
during such longer period as the Prospectus may be required to be delivered in
connection with sales by the Underwriters or a dealer, the Registration
Statement and the Prospectus will contain all material statements which are
required to be stated therein in compliance with the Act and the Rules and
Regulations, and will in all material respects conform to the requirements of
the Act and the Rules and Regulations; neither the Registration Statement, nor
any amendment thereto, at the time the Registration Statement or such amendment
is declared effective under the Act, will 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 not misleading, and the Prospectus
at the time the Registration Statement becomes effective, at the Closing Date
and at any Option Closing Date, will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
does not apply to statements made or statements omitted in reliance upon and in
conformity with information supplied to the Company in writing by or on behalf
of the Underwriters expressly for use in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is now, and at the Closing Date and
any Option Closing Date will be, validly existing as a corporation in good
standing under the laws of the State of Florida. The Company does not own,
directly or indirectly, an interest in any corporation, partnership, trust,
joint venture or other business entity; provided, that the foregoing shall not
be applicable to the investment of the net proceeds from the sale of the
Securities in short-term, low-risk investments as set forth under "Use of
Proceeds" in the Prospectus. The Company is duly qualified and licensed and in
good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of its properties or the character of its operations
require such qualification or licensing, except where the failure to so qualify
would not have a material effect on the Company. The Company has all requisite
power and authority (corporate and other), and has obtained any and all
necessary material applications, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and conduct
its business as described in the Prospectus; the Company is and has been
Page 3
4
doing business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all material federal, state,
local and foreign laws, rules and regulations; and the Company has not received
any notice of proceedings relating to the revocation or modification of any
such authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, would materially and adversely affect the
condition, financial or otherwise, or the earnings, business affairs, position,
prospects, value, operation, properties, business or results of operation of
the Company. The disclosures in the Registration Statement concerning the
effects of federal, state, local, and foreign laws, rules and regulations on
the Company's business as currently conducted and as contemplated are correct
in all material respects and do not omit to state a material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and will
have the adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth therein, and
the Company is not a party to or bound by any instrument, agreement or other
arrangement providing for the Company to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement and as
otherwise described in the Prospectus. The Shares, Redeemable Warrants, the
Option Securities, Underwriters Shares, the Underwriter's Warrants, and the
Warrant Shares and all other securities issued or issuable by the Company
conform or, when issued and paid for, will conform in all respects to all
statements with respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company and of the
Selling Shareholder have been duly authorized and validly issued and are fully
paid and non-assessable; the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company, or similar
contractual rights granted by the Company. No lien, pledge encumbrance or
other restriction exists with respect to the Shares being offered by the
Selling Shareholder. The Firm Securities, the Option Securities, the
Underwriters' Shares, and the Underwriter's Warrants to be issued and sold by
the Company and the Selling Shareholder hereunder, and the Warrant Shares
issuable upon exercise of the Redeemable Warrants and the Underwriter's
Warrants and payment therefor, are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly
authorized and, when issued, paid for and delivered in accordance with the
terms hereof and thereof, will be validly issued, fully paid and non-assessable
and will conform to the descriptions thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely as such holders;
all corporate action required to be taken for the authorization, issue and sale
of the Securities, the Option Securities, the Underwriters' Shares, and the
Underwriter's Warrants, and the Warrant Shares has been duly and validly taken;
and the certificates representing the Firm Securities, the Underwriter's
Warrants, and the Warrant Shares will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof of the Firm Securities to be
sold by the Company and the Selling Shareholder hereunder, the Underwriters
will acquire good and marketable title to such Firm
Page 4
5
Securities free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever.
(f) The financial statements of the Company, together with the related
notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for
the respective periods to which they apply; and such financial statements have
been prepared in conformity with generally accepted accounting principles and
the Rules and Regulations, consistently applied throughout the periods
involved. There has been no material adverse change or development involving a
prospective change in the condition, financial or otherwise, or in the
earnings, business affairs, position, prospects, value, operation, properties,
business, or results of operation of the Company, whether or not arising in the
ordinary course of business, since the dates of the financial statements
included in the Registration Statement and the Prospectus and the outstanding
debt, the property, both tangible and intangible, and the business of the
Company, conforms in all material respects to the descriptions thereof
contained in the Registration Statement and in the Prospectus.
(g) Xxxxxx Xxxxxxxx, LLP, whose report is filed with the Commission as a
part of the Registration Statement, is an independent certified public
accountant as required by the Act and the Rules and Regulations.
(h) The Company (i) has paid all federal, state, local, and foreign taxes
for which it is liable, including, but not limited to, withholding taxes and
taxes payable under Chapters 21 through 24 of the Internal Revenue Code of 1986
(the "Code"), (ii) has furnished all tax and information returns it is required
to furnish pursuant to the Code, and has established adequate reserves for such
taxes which are not due and payable, and (iii) does not have knowledge of any
tax deficiency or claims outstanding, proposed or assessed against it.
(i) The Company maintains insurance, which is in full force and effect, of
the types and in the amounts which it reasonably believes to be for its
business, including, but not limited to, personal and product liability
insurance covering all personal and real property owned or leased by the
Company against fire, theft, damage and all risks customarily insured against.
j) There is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, pending (to the knowledge of the Company) or threatened against (or
circumstances known to the Company that may give rise to the same), or
involving the properties or business of the Company which: (i) questions the
validity of the capital stock of the Company or this Agreement or of any action
taken or to be taken by the Company pursuant to or in connection with this
Agreement; (ii) is required to be disclosed in the Registration Statement which
is not so disclosed (and such proceedings as are summarized in the
Registration Statement are accurately summarized in all respects); or (iii)
might materially affect the condition, financial or
Page 5
6
otherwise, or the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company.
(k) The Company has full legal right, power and authority to enter into
this Agreement, the Underwriters' Purchase Option Agreement and the Warrant
Agreement and to consummate the transactions provided for in such agreements;
and this Agreement, the Underwriters' Purchase Option Agreement and the Warrant
Agreement have each been duly and properly authorized, executed and delivered
by the Company. Each of this Agreement, the Underwriters' Purchase Option
Agreement and the Warrant Agreement, constitutes a legal, valid and binding
agreement of the Company, subject to due authorization, execution and delivery
by the Representative and/or the Underwriters, enforceable against the Company
in accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law). Neither the Company's execution or delivery of this Agreement, the
Underwriters' Purchase Option Agreement, and the Warrant Agreement, its
performance hereunder and thereunder, its consummation of the transactions
contemplated herein and therein, nor the conduct of its business as described
in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest
defect or other restriction or equity of any kind whatsoever upon any property
or assets (tangible or intangible) of the Company pursuant to the terms of: (i)
the Articles of Incorporation or By-Laws of the Company; (ii) any material
license, contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement
or instrument to which the Company is a party or by which the Company is bound
or to which any of its properties or assets (tangible or intangible) is or may
be subject; or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of its
activities or properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Firm Securities pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement
and the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with (i) the Underwriters' purchase and distribution of the
Firm Securities to be sold by the Company hereunder; or (ii) the issuance and
delivery of the Underwriters' Purchase Option, the Underwriters' Shares, the
Underwriter's Warrants, the Redeemable Warrants or the Warrant Shares.
Page 6
7
(m) All executed agreements or copies of executed agreements filed as
exhibits to the Registration Statement to which the Company is a party or by
which the Company may be bound or to which any of its assets, properties or
businesses may be subject have been duly and validly authorized, executed and
delivered by the Company, and constitute the legal, valid and binding
agreements of the Company, enforceable against it in accordance with its
respective terms. The descriptions contained in the Registration Statement of
contracts and other documents are accurate in all material respects and fairly
present the information required to be shown with respect thereto by the Act
and the Rules and Regulations and there are no material contracts or other
documents which are required by the Act or the Rules and Regulations to be
described in the Registration Statement or filed as exhibits to the
Registration Statement which are not described or filed as required, and the
exhibits which have been filed are complete and correct copies of the documents
of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not: (i) issued
any securities or incurred any liability or obligation, direct or contingent,
for borrowed money in any material amount; (ii) entered into any transaction
other than in the ordinary course of business; (iii) declared or paid any
dividend or made any other distribution on or in respect of its capital stock;
or (iv) made any changes in capital stock, material changes in debt (long or
short term) or liabilities other than in the ordinary course of business,
material changes in or affecting the general affairs, management, financial
operations, stockholders equity or results of operations of the Company.
(o) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, no default exists in the due
performance and observance of any material term, covenant or condition of any
license, contract, indenture, mortgage, installment sales agreement, lease,
deed of trust, voting trust agreement, stockholders agreement, note, loan or
credit agreement, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other agreement or instrument to which the Company
is a party or by which the Company may be bound or to which any of the property
or assets (tangible or intangible) of the Company is subject or affected.
(p) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance in all material respects
with all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours.
(q) Since its inception, the Company has not incurred any liability
arising under or as a result of the application of the provisions of the Act.
Page 7
8
(r) Subsequent to the respective dates as of which information is set forth
in the Registration Statement and Prospectus, and except as may otherwise be
indicated or contemplated herein or therein, the Company does not presently
maintain, sponsor or contribute to, and never has maintained, sponsored or
contributed to, any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan" or a "multi-employer plan" as such
terms are defined in Sections 3(2), 3(l) and 3(37) respectively of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans").
The Company does not maintain or contribute, now or at any time previously, to
a defined benefit plan, as defined in Section 3(35) of ERISA.
(s) The Company is not in violation in any material respect of any domestic
or foreign laws, ordinances or governmental rules or regulations to which it is
subject.
(t) No holders of any securities of the Company or of any options, warrants
or other convertible or exchangeable securities of the Company exercisable for
or convertible or exchangeable for securities of the Company have the right to
include any securities issued by the Company in the Registration Statement or
any registration statement to be filed by the Company within twelve (12) months
of the date hereof or to require the Company to file a registration statement
under the Act during such twelve (12) month period, except such registration
rights as have been waived or disclosed in the Prospectus.
(u) Neither the Company, nor, to the Company's best knowledge, any of its
employees, directors, stockholders or affiliates (within the meaning of the
Rules and Regulations) has taken, directly or indirectly, any action designed
to 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 or otherwise.
(v) Except as described in the Prospectus, to the best of the Company's
knowledge, none of the patents, patent applications, trademarks, service marks,
trade names and copyrights, or licenses and rights to the foregoing presently
owned or held by the Company is in dispute or are in any conflict with the
right of any other person or entity within the Company's current area of
operations nor has the Company received notice of any of the foregoing. To the
best of the Company's knowledge, the Company: (i) owns or has the right to use,
free and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions or equities of any kind whatsoever,
all patents, trademarks, service marks, trade names and copyrights, technology
and licenses and rights with respect to the foregoing, used in the conduct of
its business as now conducted or proposed to be conducted without infringing
upon or otherwise acting adversely to the right or claimed right of any person,
corporation or other entity under or with respect to any of the foregoing; and
(ii) except as set forth in the Prospectus, is not obligated or under any
liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, copyright, know-how,
Page 8
9
technology or other intangible asset, with respect to the use thereof or in
connection with the conduct of its business or otherwise.
(w) Except as described in the Prospectus, to the best of the Company's
knowledge, the Company owns and has the unrestricted right to use all material
trade secrets, trademarks, trade names, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein "Intellectual
Property") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by the
Company, free and clear of and without violating any right, lien, or claim of
others, including without limitation, former employers of its employees;
provided, however, that the possibility exists that other persons or entities,
completely independently of the Company, or employees or agents, could have
developed trade secrets or items of technical information similar or identical
to those of the Company.
(x) The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all the Intellectual Property material to
its operations.
(y) The Company has good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property owned or leased
by it free and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects, or other restrictions or equities of any kind
whatsoever, other than those referred to in the Prospectus and liens for taxes
or assessments not yet due and payable.
(aa) The Company has obtained such duly executed legally binding and
enforceable agreements as required by the Representative pursuant to which each
of the Company, its officers and directors and any person or entity deemed to
be an affiliate of the Company (pursuant to the Rules and Regulations) has
agreed not to, directly or indirectly, offer to sell, sell, grant any option
for the sale of, assign, transfer, pledge, hypothecate or otherwise encumber
any of their shares of Common Stock or other securities of the Company (either
pursuant to Rule 144 of the Rules and Regulations or otherwise) or dispose of
any beneficial interest therein for certain periods of up to 24 months
following the effective date of the Registration Statement without the
prior written consent of the Representative. The Company will cause the
Transfer Agent, as defined below, to mark an appropriate legend on the face of
stock certificates representing all of such shares of Common Stock and other
securities of the Company.
(bb) Except as disclosed in the Prospectus, the Company has not incurred
any liability and there are no arrangements or understandings for services in
the nature of a finder's or origination fee with respect to the sale of the
Securities or any other arrangements, agreements, understandings, payments or
issuances with respect to the Company or any of its officers, directors,
employees or affiliates that may adversely affect the Underwriters'
compensation, as determined by the NASD.
Page 9
10
(cc) The Firm Securities have been approved for quotation on the Nasdaq
SmallCap Market of the Nasdaq Stock Market, Inc., subject to official notice of
issuance.
(dd) Neither the Company nor any of its respective officers, employees,
agents or any other person acting on behalf of the Company, has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business)
to any customer, supplier, employee or agent of a customer or supplier, or
official or employee of any governmental agency (domestic or foreign) or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who was, is, or
may be in a position to help or hinder the business of the Company (or assist
the Company in connection with any actual or proposed transaction) which: (a)
might subject the Company, or any other such person to any damage or penalty in
any civil, criminal or governmental litigation or proceeding (domestic or
foreign); (b) if not given in the past, might have had a materially adverse
effect on the assets, business or operations of the Company; or (c) if not
continued in the future, might adversely affect the assets, business,
operations or prospects of the Company. The Company's internal accounting
controls are sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act 1977, as amended.
(ee) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any such
person or entity or the Company, has or has had, either directly or indirectly,
(i) an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, except with respect to the beneficial ownership of not more
than 1% of the outstanding shares of capital stock of any publicly-held entity;
or (ii) a beneficial interest in any contract or agreement to which the Company
is a party or by which it may be bound or affected. Except as set forth in the
Prospectus under "Certain Transactions," there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company, and
any officer, director, or principal stockholder of the Company, or any
affiliate or associate of any such person or entity.
(ff) Any certificate signed by any officer of the Company and delivered to
the Underwriters or to the Underwriters' Counsel shall be deemed a
representation and warranty by the Company to the Underwriters as to the
matters covered thereby.
(gg) The Company has entered into an employment agreement with Xxxxxxx X.
Xxxxxxxxx as described in the Prospectus. Unless waived by the Representative,
the Company shall use its reasonable efforts at reasonable cost to maintain a
key-man life insurance policy in the amount of not less than $1,000,000 on the
life of Xx. Xxxxxxxxx, which policy shall be owned by the Company and shall
name the Company as the sole beneficiary thereunder.
Page 10
11
(hh) No securities of the Company have been sold by the Company within the
three years prior to the date hereof, except as disclosed in Part II of the
Registration Statement.
(ii) The minute books of the Company have been made available to
Underwriter's Counsel and contain a complete summary of all meetings and
actions of the Board of Directors and Shareholders of the Company since the
date of its incorporation.
2. Purchase, Sale and Delivery of the Securities and Agreement to Issue
Underwriters' Unit Purchase Option.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company and the Selling Shareholder agrees to sell to each
Underwriter, and each Underwriter, severally and not jointly, agree to purchase
from the Company and the Selling Shareholder at the price per share and the
price per warrant set forth below, that proportion of the number of common
stock and warrants set forth in Schedule I opposite the name of such
Underwriter that such number of common stock and warrants bears to the total
number of Units, subject to such adjustment as the Underwriters in their
discretion shall make to eliminate any sales or purchases of fractional
Securities, plus any additional numbers of shares and warrants which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 11 hereof.
(b) In addition, on the basis of the representations, warranties, covenants
and agreements, herein contained, but subject to the terms and conditions herein
set forth, the Company and Selling Shareholder hereby grant an option to the
Underwriters, severally and not jointly, to purchase up to an additional 75,000
Shares each and from the Company and 150,000 Redeemable Warrants at the prices
set forth below. The option granted hereby will expire 45 days after the date
of this Agreement, and may be exercised in whole or in part from time to time
only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Firm Securities upon
notice by the Representative to the Company and the Selling Shareholder setting
forth the number of Option Securities as to which the Underwriters are then
exercising the option and the time and date of payment and delivery for such
Option Securities. The Underwriter shall purchase the first 75,000 Shares
from the Selling Shareholder and thereafter, any remaining Option Securities
shall be purchased from the Company. Any such time and date of delivery shall
be determined by the Underwriters, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Date, as defined in paragraph (c) below, unless otherwise agreed to
between the Representative and the Company. In the event such option is
exercised, each of the Underwriters, acting severally and not jointly, shall
purchase such number of Option Securities then being purchased which shall have
been allocated to such Underwriter by the Representative, and which such
Underwriter shall have agreed to purchase, subject in each case to such
adjustments as the Underwriters in their discretion shall make to eliminate any
sales or purchases of fractional Securities. Nothing herein contained shall
obligate the Underwriters to make any over-allotments. No Option Securities
shall be delivered unless the Firm Securities shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
Page 11
12
(c) Payment of the purchase price for, and delivery of certificates for,
the Firm Securities shall be made at the offices of counsel to the
Representative in Atlanta, Georgia, or at such other place as shall be agreed
upon by the Underwriters and the Company. Such delivery and payment shall be
made at 10:00 a.m. (_________ time) on ____________, 1996 or at such other time
and date as shall be designated by the Representative but not less than three
(3) nor more than five (5) business days after the effective date of the
Registration Statement (such time and date of payment and delivery being
hereafter called "Closing Date"). In addition, in the event that any or all of
the Option Securities are purchased by the Underwriters, payment of the
purchase price for, and delivery of certificates for such Option Securities
shall be made at the above-mentioned office or at such other place and at such
time (such time and date of payment and delivery being hereinafter called
"Option Closing Date") as shall be agreed upon by the Representative and the
Company on each Option Closing Date as specified in the notice from the
Representative to the Company. Delivery of the certificates for the Firm
Securities and the Option Securities, if any, shall be made to the Underwriters
against payment by the Underwriters of the purchase price for the Firm
Securities and the Option Securities, if any, to the order of the Company as
the case may be by certified check in New York Clearing House funds or, at the
election of the Representative, all or a portion of the funds may be paid by
Bank wire transfer of funds or by the Representative's commercial check.
Certificates for the Firm Securities and the Option Securities, if any, shall
be in definitive, fully registered form, shall bear no restrictive legends and
shall be in such denominations and registered in such names as the Underwriters
may request in writing at least two (2) business days prior to Closing Date or
the relevant Option Closing Date, as the case may be. The certificates for the
Firm Securities and the Option Securities, if any, shall be made available to
the Underwriters at the above-mentioned office or such other place as the
Underwriters may designate for inspection, checking and packaging no later than
9:30 a.m. on the last business day prior to Closing Date or the relevant Option
Closing Date, as the case may be.
The purchase price of the Common Stock and Warrants to be paid by each of
the Underwriters, severally and not jointly, to the Company and the Selling
Shareholder for the Units purchased under Clauses (a) and (b) above will be
$_____ per share and $______ per warrant (which price is net of the
Underwriters' discount and commissions). Neither the Company nor the Selling
Shareholder shall be obligated to sell any Securities hereunder unless all Firm
Securities to be sold by the Company and the Selling Shareholder are purchased
hereunder. The Company and the Selling Shareholder each agree to issue and
sell 75,000 shares of the Common Stock and Warrants to the Underwriters in
accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriters, the Underwriters' Purchase Option at a purchase price of $_____,
which Purchase Option shall entitle the holders thereof to purchase an
aggregate of _______ Shares and Warrants. The Underwriter's Purchase Option
shall be exercisable for a period of four (4) years commencing one (1) year
from the closing date of the Registration Statement at an initial exercise
price equal to one hundred twenty percent (120%) of the initial public offering
price of the Shares and Warrants. The Underwriter's
Page 12
13
Purchase Option Agreement and form of Purchase Option Certificate shall be
substantially in the form filed as an Exhibit to the Registration Statement.
Payment for the Underwriters' Purchase Option shall be made on Closing Date.
The Company has reserved and shall continue to reserve a sufficient number of
Shares for issuance upon exercise of the Underwriters' Purchase Option and the
Underwriters' Warrants contained in the Underwriters' Purchase Option.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective and as the Representative deems advisable, but in
no event more than three (3) business days after such effective date, the
Underwriters shall make a public offering of the securities (other than to
residents of or in any jurisdiction in which qualification of the Securities is
required and has not become effective) at the price and upon the other terms
set forth in the Prospectus. The Underwriters may allow such concessions and
discounts upon sales to other dealers as set forth in the Prospectus. The
Underwriters may from time to time increase or decrease the public offering
price after distribution of the Securities has been completed to such extent as
the Underwriters, in their sole discretion deem advisable.
4. Covenants of the Company. The Company covenants and agrees with each
of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective
date of the Registration Statement, file any amendment to the Registration
Statement or supplement to the Prospectus or file any document under the
Exchange Act (i) before termination of the offering of the Securities by the
Underwriters, which the Underwriters shall not previously have been advised and
furnished with a copy, or (ii) to which the Underwriters shall have objected or
(iii) which is not in compliance with the Act, the Exchange Act or the Rules
and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Underwriters and confirm by notice in writing: (i) when
the Registration Statement, as amended, becomes effective, if the provisions of
Rule 430A promulgated under the Act will be relied upon, when the Prospectus
has been filed in accordance with said Rule 430A and when any post-effective
amendment to the Registration Statement becomes effective; (ii) of the issuance
by the commission of any stop order or of the initiation, or the threatening of
any proceeding, suspending the effectiveness of the Registration Statement or
any order preventing or suspending the use of the Preliminary Prospectus or the
Prospectus, or any amendment or supplement thereto, or the institution or
proceeding for that purpose; (iii) of the issuance by any state securities
commission of any proceedings for the suspension of the qualification of the
Securities for offering or sale in any jurisdiction or of the initiation, or
the threatening, of any proceeding for that purpose; (iv) of the receipt of any
comments from the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities commission or regulatory authority
Page 13
14
shall enter a stop order or suspend such qualification at any time, the Company
will make every effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriters) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Underwriters pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
(d) The Company will give the Underwriters notice of its intention to file
or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), will furnish the Underwriters with copies of any such amendment
or supplement a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file any such prospectus to which the
Underwriters or Xxxxxxx & Xxxxxxxxxx ("Underwriters' Counsel"), shall
reasonably object.
(e) The Company shall cooperate in good faith with the Underwriters, and
Underwriters' Counsel, at or prior to the time the Registration Statement
becomes effective, in endeavoring to qualify the Firm Securities for offering
and sale under the securities laws of such jurisdictions as the Underwriters
may reasonably designate, and shall cooperate with the Underwriters and
Underwriters' Counsel in the making of such applications, and filing such
documents and shall furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to: (i) qualify
as a foreign corporation or file a general consent to service of process in any
such jurisdiction; or (ii) qualify or "blue sky" in any state which requires a
lock-up of inside securities for a period greater than five (5) years. In each
jurisdiction where such qualification shall be effected, the Company will,
unless the Underwriters agree that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be delivered under
the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel
Page 14
15
for the Company or Underwriters' Counsel, the Prospectus, as then amended
or supplemented, includes an untrue statement of a material fact or omits 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, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
reasonably satisfactory to Underwriters' Counsel, and the Company will furnish
to the Underwriters a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than 45 days after
the end of the 12-month period commencing on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriters, an earnings
statement which will be in such form and detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least 12 consecutive months after the
effective date of the Registration Statement.
(h) During a period of five (5) years after the date hereof and provided
that the Company is required to file reports with the Commission under Section
12 of the Exchange Act, the Company will provide the Representative's director
Designee or Attendee, as defined herein, copies of the below described
documents prior to release where applicable and will furnish to its
stockholders and to the Underwriter as soon as practicable, annual reports
(including financial statements audited by independent public accountants):
(i) as soon as they are available, copies of all reports (financial or
other) mailed to stockholders;
(ii) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, the NASD or any
securities exchange;
(iii) every press release and every material news item or article of
interest to the financial community in respect of the Company and any future
subsidiaries or their affairs which was released or prepared by the Company;
(iv) any additional information of a public nature concerning the Company
and any future subsidiaries or their respective businesses which the
Underwriters may reasonably request;
Page 15
16
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4 received or
filed by the Company from time to time.
During such five-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and
will be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(i) For as long as the Company is required to file reports with the
Commission under Section 12 of the Exchange Act, the Company will maintain a
Transfer Agent and a Warrant Agent, which may be the same entity, and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer and Warrant Agent) for its Units,
Class A Common Stock and Redeemable Warrants.
(j) The Company will furnish to the Underwriters or pursuant to the
Underwriters' direction, without charge, at such place as the Underwriters may
designate, copies of each Preliminary Prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto (two of which copies
will be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any
prospectus prepared after the effective date of the Registration Statement, in
each case as soon as available and in such quantities as the Underwriters may
reasonably request.
(k) Neither the Company, nor its officers or directors, nor affiliates of
any of them (within the meaning of the Rules and Regulations) will take,
directly or indirectly, any action designed to, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any securities of the Company.
(1) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the provisions, set forth under "Use
of Proceeds" in the Prospectus. No portion of the net proceeds will be used
directly or indirectly to acquire any securities issued by the Company.
(m) The Company shall timely file all such reports, forms or other
documents as may be required (including but not limited to a Form SR as may be
required pursuant to Rule 463 under the Act) from time to time, under the Act,
the Exchange Act, and the Rules and Regulations, and all such reports, forms
and documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(n) The Company shall furnish to the Underwriters as early as practicable
prior to each of the date hereof, the Closing Date and each Option Closing
Date, if any, but no later than two (2) full business days prior thereto, a
copy of the latest available unaudited consolidated interim financial
statements of the Company (which in no event shall be as of a date more than
forty-five (45)
Page 16
17
days prior to the date of the Registration Statement) which have been read by
the Company's inde-pendent public accountants, as stated in their letters to be
furnished pursuant to Section 6(k) hereof.
(o) For a period of five (5) years from the Closing Date (or such earlier
date if the Representative has exercised the Underwriters' Purchase Option
Agreement), the Company shall furnish to the Underwriters at the Company's sole
expense, (i) daily consolidated transfer sheets relating to the Securities upon
the Representative's reasonable request; (ii) a list of holders of Securities
upon the Representative's reasonable request; (iii) a list of, if any, the
securities positions of participants in the Depository Trust Company upon the
Representative's reasonable request.
(p) For a period of five (5) years after the effective date of the
Registration Statement (or such earlier date if the Representative has exercised
the Underwriting Purchase Option Agreement), the Company shall use its best
efforts to cause one (1) individual (the "Designee") selected by the
Representative to be elected to the Board of Directors of the Company (the
"Board"), if requested by the Representative. Alternatively, the Representative
shall be entitled to appoint an individual who shall be permitted to attend all
meetings of the Board (the "Attendee") and to receive all notices and other
correspondence and communications sent by the Company to members of the Board.
Upon election to the Board, the Designee shall be entitled to call special
meetings of the Board and to serve on the Audit and Compensation Committees.
The Designee may be removed by the Board only for "justifiable cause" as that
term is defined in the Employment Contract between the Company and Xxxxxxx
Xxxxxxxxx. The number of Board members may be increased from time to time up to
five (5) members. Any Nominee for directorship (including re-election to
another term) shall be approved by the Representative prior to his or her
election. The Company shall reimburse the Representative's Designee or
Attendee for his or her out-of-pocket expenses reasonably incurred and
authorized in advance by the Company in connection with his or her attendance of
the Board meetings and a fee of $1,000 per month. The Designee or Attendee
shall also be entitled to participate in any Stock Option Plans of the Company
for non-employees. To the extent permitted by law, the Company agrees to
indemnify and hold the Designee (as a director or Attendee) and the
Representative harmless against any and all claims, actions, awards and
judgements arising out of his or her service as a director or Attendee and in
the event the Company maintains a liability insurance policy affording coverage
for the action of its officer and directors, to include such Designee and the
Representative as an insured under such policy.
(q) For a period equal to the lesser of (i) five (5) years from the date
hereof, or (ii) the sale to the public of the Warrant Shares, the Company will
not take any action or actions which may prevent or disqualify the Company's
use of Forms S-1 or, if applicable, S-2 and S-3 (or other appropriate form) for
the registration under the Act of the Warrant Shares.
(r) For a period of five (5) years from the date hereof, the Company shall
use its best efforts at its cost and expense to maintain the listing of the
Firm Securities on the Nasdaq SmallCap Market or NASDAQ National Market System
if the Company meets all of the necessary qualifications.
Page 17
18
(s) On or before the effective date of the Registration Statement, the
Company shall retain or make arrangements to retain a financial public
relations firm reasonably satisfactory to the Representative which shall be
continuously engaged from such engagement date to a date 24 months from the
effective date of the Registration Statement. Upon the expiration of such two
(2) year period, such engagement shall continue until the expiration of any
lock-up period provided for in the Lock-Up Agreements of Xx. Xxxxxxx Xxxxxxxxx
subject to the Company's right to terminate any such firm with the consent of
the Underwriter's director Designee or Attendee. Further, the Company shall
engage for a period of two years at least three firms (one of which shall be
the Representative and one of which shall be Standard & Poor's Stock Reports
Professional Edition) which are reasonably acceptable to the Representative to
provide industry research and advice to the Company. Upon the expiration of
such two-year period, such engagement shall continue until the expiration of
any lock-up period provided hereunder, subject
to the Company's right to terminate any such firm with the consent of the
Underwriters' director designee.
(t) The Company shall (i) file a Form 8-A with the Commission providing
for the registration under the Exchange Act of the Securities and (ii) promptly
take all necessary and appropriate actions to be included in Standard and
Poor's Corporation Descriptions and/or Xxxxx'x OTC Manual and to continue such
inclusion for a period of not less than five (5) years, as soon as practicable,
but in no event more than five (5) business days' after the effective date of
the Registration Statement.
(u) Following the Effective Date of the Registration Statement and for a
period of five (5) years thereafter (or such earlier date if the Representative
has exercised the Underwriters' Purchase Option Agreement), the Company shall,
at its sole cost and expense, prepare and file such blue sky trading
applications with such jurisdictions as the Representative may reasonably
request after consultation with the Company, and on the Representative's
request, furnish the Underwriters with a secondary trading survey prepared by
securities counsel to the Company.
(v) The Company shall not amend or alter any term of any written
employment agreement nor Lock-Up Agreement between the Company and any
executive officer, during the term thereof, in a manner more favorable to such
employee, without the express written consent of the Representative.
(w) Until the completion of the distribution of the Securities, the
Company shall not without the prior written consent of the Representative and
Underwriters' Counsel, which consent shall not be unreasonably withheld, issue,
directly or indirectly, any press release or other communication or hold any
press conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in the ordinary course of
the Company's business consistent with past practices with respect to the
Company's operations.
Page 18
19
(x) Commencing one (1) year from the date hereof, upon the exercise of
any Warrant, the exercise of which was solicited by the Underwriters in
accordance with the applicable rules and regulations of the NASD prevailing at
the time of such solicitation, the Company shall pay to the soliciting
Underwriter a fee of 5% of the aggregate exercise price of such Warrant (the
"Warrant Solicitation Fee") within five (5) business days of such exercise, so
long as the Underwriters provided bona fide services in exchange for the
Warrant Solicitation Fee and the Underwriters have been specifically designated
in writing by the holders of the Warrants as the broker. The Company further
agrees that it will not solicit the exercise of any Warrant other than through
the Underwriters, unless either: (i) the Underwriters cannot legally solicit
the exercise of the Warrants at the time of such solicitation; (ii) the
Representative declines, in writing, to solicit the exercise of the Warrants
within five (5) business days of such a written request by the Company; or
(iii) the Representative consents to the solicitation of the exercise of the
Warrants by the Company or another entity.
(y) The Company will use its best efforts to maintain its registration
under the Exchange Act in effect for a period of five (5) years from the
Closing Date.
(z) For a period of five (5) years commencing on the Closing Date (or
such earlier date if the Representative has exercised the Underwriters'
Purchase Option Agreement), except with the written consent of the
Underwriters, which consent shall not be unreasonably withheld, the Company
will not issue or sell, directly or indirectly, any shares of its capital
stock, or sell or grant options, or warrants or rights to purchase any shares
of its capital stock, except pursuant to (i) this Agreement, (ii) the Purchase
Option and the Underwriters' Warrants, (iii) warrants and options of the
Company heretofore issued and described in the Prospectus, and (iv) the grant
of options and the issuance of shares issued upon exercise of options issued or
to be issued under the Company's stock option plan which is described in the
Prospectus; except that, during such period, the Company may (i) issue
securities to Xx. Xxxxxxxxx pursuant to his employment agreement, (ii) issue up
to_________ shares pursuant to certain stock options as is described in the
Prospectus, and (iii) issue securities in connection with an acquisition,
merger or similar transaction, provided that such securities are not publicly
registered and the acquirer of the securities is not granted registration
rights with respect thereto which are effective prior to 24 months after the
Closing Date and until the Underwriter's Purchase Option is exercised, the
Underwriter grants its consent. Notwithstanding anything to the contrary set
forth in the prior sentence, the Company may not issue any class or series of
Preferred Stock for a period of 24 months from the Closing Date without the
unanimous vote or consent of all members of the Board of Directors of the
Company. Prior to the Closing Date, the Company will not issue any options or
warrants without the prior written consent of the Underwriters.
(aa) The Company will not file any registration statement relating to the
offer or sale of any of the Company's securities, including any registration
statement on Form S-8, during the 12 months following the Closing Date without
the Underwriters' prior written consent.
(bb) Subsequent to the dates as of which information is given in the
Registration Statement and Prospectus and prior to the Closing Dates, except as
disclosed in or contemplated by
Page 19
20
the Registration Statement and Prospectus, (i) the Company will not have
incurred any liabilities or obligations, direct or contingent, or entered into
any material transactions other than in the ordinary course of business; (ii)
there shall not have been any change in the capital stock, funded debt (other
than regular repayments of principal and interest on existing indebtedness) or
other securities of the Company, any adverse change in the condition (financial
or other), business, operations, income, net worth or properties, including any
loss or damage to the properties of the Company (whether or not such loss is
insured against), which could adversely affect the condition (financial or
other), business, operations, income, net worth or properties of
the Company; and (iii) the Company shall not pay or declare any dividend or
other distribution on its Common Stock or its other securities or redeem or
repurchase any of its Common Stock or other securities.
(cc) The Company, for a period of five (5) years following the Closing
Date (or such earlier date if the Representative has exercised the
Underwriters' Purchase Option Agreement), shall not redeem any of its
securities, and shall not pay any dividends or make any other cash distribution
in respect of its securities in excess of the amount of the Company's current
or retained earnings derived after the Closing Date without obtaining the
Underwriters' prior written consent, which consent shall not be unreasonably
withheld. The Underwriters shall either approve or disapprove such
contemplated redemption of securities or dividend payment or distribution
within five (5) business days from the date the Underwriters receive written
notice of the Company's proposal with respect thereto; a failure of the
Underwriters to respond within the five (5) business day period shall be deemed
approval of the transaction.
(dd) The Company maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance 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; (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences, and (v) all quarterly reports filed on Form
10Q shall be reviewed by the Company's accountant in accordance with SAS 71,
and (vi) no default has occurred under the terms and conditions of the
Employment Agreement of the Selling Shareholder.
(ee) The Company, for a period of five (5) years following the Closing
Date (or such earlier date if the Representative has exercised the
Underwriters' Purchase Option Agreement), shall implement the following
procedures:
(i) Sixty days prior to fiscal year end, the President will
present to the Board of Directors a business plan to be adopted by the Board of
Directors at fiscal year end. The business plan will include the following:
Page 20
21
a) monthly projections - including balance sheet, profit/loss
statement and cash flow statements with underlying assumptions
b) upon board approval, this document becomes the annual
budget
(ii) No later than the 20th day of each month, the Company will
provide the Board with comparative financial statements for the previous month
showing actual balance sheet, profit/loss and cash flow vs. budget with written
explanations for deviation in excess of $50,000 or 10% of line item presented.
(iii) Monthly Board meetings (which may be by telephone) by the 25th
of each month to include discussion of the Monthly Report and approval of any
changes to the business plan based on change of circumstances.
(iv) Implementation of a compensation committee, which will be
headed by an outside director, to make recommendations to the Board for
compensation for all outside consultants, officers and outside directors.
(v) Implementation of an audit committee which will be headed by an
outside director.
(ff) For a period of two (2) years from the Closing Date, the
Representative shall have the right of first refusal to act as the Underwriter
and Manager of any public offering of the Company's securities on such terms
and conditions similar to any other proposal received from another Underwriter.
The Representative shall notify the Company within sixty (60) days of receipt
of written notice of its election to accept or reject the underwriting.
If the Right of First Refusal is declined by the Representative and
the Representative's Purchase Option remains outstanding, the Representative, if
requested by the Company, will modify its right to approve the members of the
Board of Directors described in Section 3(p) above if the following conditions
are met:
(i) The offering is for equity securities and is for a minimum
amount of $15,000,000; and
(ii) The proposed Underwriter is approved by the Representative; and
(iii) The structure of the proposed underwriting is approved by the
Representative; and
(iv) The price of the common stock (or conversion price if preferred
stock is offered) equals or exceeds the Warrant conversion price; and
Page 21
22
(v) The offering is closed; and
(vi) The approval of the number of Board members remains at least
40% of the Board.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date and the
Option Closing Date (to the extent not paid at the Closing Date) all expenses
and fees (other than fees of Underwriters' Counsel, except as provided in (iv)
below) incident to the performance of the obligations of the Company under this
Agreement, including, without limitation: (i) the fees and expenses of
accountants and counsel for the Company; (ii) all costs and expenses incurred
in connection with the preparation, duplication, printing, filing, delivery and
mailing (including the payment of postage with respect thereto) of the
Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing and delivery of this Agreement, the Selected
Dealer Agreements, the Agreement Among Underwriters, Underwriters
Questionnaires, Powers of Attorney and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and of the Prospectus
and any amendments thereof or supplements thereto supplied to the Underwriters
in quantities as hereinabove stated; (iii) the printing, engraving, issuance
and delivery of the Firm Securities including any transfer or other taxes
payable thereon; (iv) disbursements and fees of Underwriters' Counsel in
connection with the qualification of the Securities under state or foreign
securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, which Underwriters' Counsel
blue sky fees (exclusive of filing fees and disbursements) shall not exceed
$25,000 without the consent of the Company; (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show," information meetings and presentations, and prospectus memorabilia all
of which costs and expenses shall be approved in advance by the Company; (vi)
costs and expenses in connection with due diligence investigations up to
$2,500, including, but not limited to, the fees of any independent counsel or
consultant retained; (vii) fees and expenses of the transfer agent; (viii) the
fees payable to the NASD; (ix) the fees and expenses incurred in connection
with the listing of the Securities on the Nasdaq SmallCap Market and any other
fees for application and admission to a registered Stock Exchange for which the
Underwriter requires the Company to register its Securities; and (x) fees and
expenses for any tombstone advertisements reasonably requested by the
Representative and Closing Binders. All fees and expenses payable to the
Underwriters shall be payable at the Closing Date or Option Closing Date, as
applicable.
(b) If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 6, Section 10(a) or Section 12, the Company shall
reimburse and indemnify the Underwriters for all of their out-of-pocket
expenses reasonably incurred in connection with the transactions contemplated
hereby including the fees and disbursements of counsel for the
Page 22
23
Underwriters and the hourly fees and expenses of the Representative employees
and agents in accordance with the terms of the Letter Agreement between the
Company and the Representative dated______________.
(c) The Company and the Selling Shareholder further agree that, in
addition to the expenses payable pursuant to subsection (a) of this Section 5,
they will pay to the Underwriters a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds received by the Company and the
Selling Shareholder from the sale of the Firm Securities $___________ of which
has been paid to date to the Underwriters. The Company and the Selling
Shareholder will pay the remainder of the non-accountable expense allowance on
the Closing Date by direct payment to third parties for fees and expenses
including, but not limited to, fees and expenses of Underwriter's Counsel and
the balance by deduction from the proceeds of the offering contemplated herein.
In the event the Underwriters elect to exercise the over-allotment option
described in Section 2(b) hereof, the Company further agrees to pay to the
Underwriters on the Option Closing Date (by deduction from the proceeds of the
offering) a non-accountable expense allowance equal to three percent (3%) of
the gross proceeds received by the Company from the sale of the Option
Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date and
each Option Closing Date, if any, as if they had been made on and as of the
Closing Date or each Option Closing Date, as the case may be; the accuracy on
and as of the Closing Date or Option Closing Date, if any, of the statements of
officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Option
Closing Date, if any, of each of its covenants and obligations hereunder and to
the following further conditions:
(a) The Registration Statement shall have become effective not later than
5:00 P.M., _________ time, on the date of this Agreement or such later date and
time as shall be consented to in writing by the Underwriters, and, at Closing
Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission
for additional information shall have been complied with to the reasonable
satisfaction of Underwriter and Underwriters' Counsel. If the Company has
elected to rely upon Rule 430A of the Rules and Regulations, the price of the
Securities and any price-related information previously omitted from the
effective Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the Rules
and Regulations within the prescribed time period, and prior to the Closing
Date the Company shall have provided evidence satisfactory to the Underwriters
of such timely filing, or a post-effective amendment providing such information
shall have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
Page 23
24
(b) The Underwriters shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Underwriters' opinion, is material or omits to state a
fact which, in the Underwriters' opinion, is material and is required to be
stated therein or is necessary to make the statements therein not misleading,
or that the Prospectus, or any supplement thereto, contains an untrue statement
of fact which, in the Underwriters' reasonable opinion, is material, or omits
to state a fact which, in the Underwriters' reasonable opinion, is material and
is required to be stated therein or is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) On or prior to the Closing Date and each Option Closing Date, as the
case may be, the Underwriters shall have received from Underwriters' Counsel,
such opinion or opinions with respect to the organization of the Company the
validity of the Securities, the Registration Statement, the Prospectus and
other related matters as the Underwriters reasonably may request and such
counsel shall have received such papers and information as they request to
enable them to pass upon such matters.
(d) At the Closing Date and the Option Closing Date the Underwriters shall
have received the favorable opinion of Xxxxxxxxx, Xxxxxxx, Xxxxxxx, Xxxxxx,
Xxxxx & Xxxxxxx, P.A., counsel to the Company, dated the Closing Date, or
Option Closing Date, as the case may be, addressed to the Underwriter and in
form and substance satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company: (A) has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Florida with full
corporate power and authority to own and operate its properties and to carry on
its business as set forth in the Registration Statement and Prospectus; (B) to
the best of our knowledge, the Company is duly licensed or qualified as a
foreign corporation in all jurisdictions in which by reason of maintaining an
office in such jurisdiction or by owning or leasing real property in such
jurisdiction it is required to be so licensed or qualified except where failure
to be so qualified or licensed would have no material adverse effect; and (C)
to the best of our knowledge, the Company has not received any notice of
proceedings relating to the revocation or modification of any such license or
qualification.
(ii) The Registration Statement, each Preliminary Prospectus that has been
circulated and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements, schedules and other financial and
statistical data included therein, as to which no opinion need be rendered)
comply as to form in all material respects with the requirements of the Act and
Regulations and the conditions for use of a registration statement on Form SB-2
have been satisfied by the Company. 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 for the Company
and representatives of the Underwriters at which the contents of the
Registration Statement, the Prospectus and related matters were discussed and,
although such counsel
Page 24
25
is not passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus, on the basis of the foregoing, no facts have come to
the attention of such counsel which lead them to believe that either the
Registration Statement or any amendment thereto at the time such Registration
Statement or amendment became effective or the Prospectus as of the date of
such opinion contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or to make the statements
therein in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and schedules and other financial and
statistical data included in the Registration Statement or Prospectus or with
respect to statements or omissions made therein in reliance upon information
furnished in writing to the Company on behalf of any Underwriter expressly
for use in the Registration Statement or the Prospectus).
(iii) To the best of such counsel's knowledge, except as described in the
Prospectus, the Company does not own an interest of a character required to be
disclosed in the Registration Statement in any corporation, partnership, joint
venture, trust or other business entity;
(iv) To the best of such counsel's knowledge, the Company has a duly
authorized, issued and outstanding capitalization as set forth in the
Prospectus as of the date indicated therein, under "Capitalization." The
Shares, Redeemable Warrants, the Purchase Option, the Underwriters' Warrants,
and the Warrant Shares conform in all material respects to all statements with
respect thereto contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; the holders thereof,
to counsel's best knowledge, are not subject to personal liability by reason of
being such holders, and none of such securities were issued in violation of the
preemptive rights of any holder of any security of the Company. The Securities
to be sold by the Company hereunder, the Purchase Option to be sold by the
Company and the Selling Shareholder under the Underwriter's Purchase Option
Agreement and Underwriters' Warrant and the Warrant Shares are not, to the best
of such counsel's knowledge, subject to any preemptive or other similar rights
of any stockholder, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable and conform to the description thereof contained in the
Prospectus; that the holders of the Common Stock shall not be personally liable
for the payment of the Company's debts solely by reason of being such holders
except as they may be liable by reason of their own conduct or acts; and that
the certificates representing the Shares, Redeemable Warrants, Purchase Option,
the Underwriters' Shares, and the Underwriters' Warrants are in due and proper
legal form.
(v) The issuance of the Shares, Redeemable Warrants and the Warrant Shares
have been duly authorized and when issued and paid for in accordance with this
Agreement and the Warrant Agreement, respectively, will be validly issued,
fully paid and non-assessable securities of the Company. The holders of the
Securities when issued and paid for, will not be subject to personal liability
by reason of being such holders. The Securities are not and will not be
subject
Page 25
26
to the preemptive or similar contractual rights of any shareholder of the
Company. All corporate action required to be taken for the authorization,
issuance and sale of the Securities has been duly and validly taken. The
certificates representing the Shares and Redeemable Warrants are in due and
proper form. Upon delivery of the Shares to the Underwriters against payment
therefor as provided for in this Agreement, the Underwriters (assuming they are
bona fide purchasers within the meaning of the Uniform Commercial Code) will
acquire good title to the shares and warrants, free and clear of all liens,
encumbrances, equities, security interests and claims.
(vi) The Registration Statement is effective under the Act, and, if
applicable, filing of all pricing information has been timely made in the
appropriate form under Rule 430A, and, to the best of such counsel's knowledge,
no stop order suspending the effectiveness of the Registration Statement has
been issued and to the best of such counsel's knowledge, no proceedings for
that purpose have been instituted or are pending or threatened or contemplated
under the Act.
(vii) To the best of such counsel's knowledge, (A) there are no material
contracts or other documents required to be described in the Registration
Statement and the Prospectus and filed as exhibits to the Registration
Statement other than those described in the Registration Statement and the
Prospectus and filed as exhibits thereto, and (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be shown by Form SB-2
and the Rules and Regulations.
(viii) This Agreement, the Underwriters Purchase Option Agreement, the
Warrant Agreement, and the Financial Consulting Agreement have each been duly
and validly authorized, executed and delivered by the Company, and assuming
that it is a valid and binding agreement of the Underwriters, so as the case
may be, constitutes a legal, valid and binding agreement of the Company
enforceable as against the Company in accordance with its respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law or pursuant to
public policy).
(ix) Neither the execution or delivery by the Company of this Agreement,
the Underwriter's Purchase Option Agreement, and the Warrant Agreement, nor its
performance hereunder or thereunder, nor its consummation of the transactions
contemplated herein or therein, nor the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto, nor the issuance of the securities conflicts with or will conflict
with or results or will result in any breach or violation of any of the terms
or provisions of, or constitutes or will constitute a material default under,
or result in the creation or imposition of any material lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or
Page 26
27
equity of any kind whatsoever upon any property or assets (tangible or
intangible) of the Company pursuant to the terms of (A) the Articles of
Incorporation of the Company, (B) to the best knowledge of such counsel, any
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or instrument
that is material to the Company and (i) to which the Company is a party or by
which it may be bound or (ii) to which its properties or assets (tangible or
intangible) is or may be subject, or (iii) any indebtedness, or (C) to the best
knowledge of such counsel, and except to the extent it would not have a
material adverse effect on the Company, any statute, judgment, decree, order,
rule or regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body,
having jurisdiction over the Company or any of its respective activities or
properties.
(x) No consent, approval, authorization or order, and no filing with, any
court, regulatory body, government agency or other body, (other than such as
may be required under state securities laws, as to which no opinion need be
rendered) is required in connection with the issuance by the Company of the
Securities pursuant to the Prospectus and the Registration Statement, the
performance of this Agreement, the Underwriters' Purchase Option Agreement, the
Financial Consulting Agreement and the Warrant Agreement by the Company, and
the taking of any action by the Company contemplated hereby or thereby, which
has not been obtained.
(xi) Except as described in the Prospectus, to the best knowledge of such
counsel, the Company is not in breach of, or in default under, any material
term or provision of any indenture, mortgage, installment sale agreement, deed
of trust, lease, voting trust agreement, stockholders' agreement, note, loan or
credit agreement or any other agreement or instrument evidencing an obligation
for borrowed money, or any other agreement or instrument to which the Company
is a party or by which the Company may be bound or to which any of the property
or assets (tangible or intangible) of the Company is subject or affected; and
the Company is not in violation of any material term or provision of its
Articles of Incorporation or in violation of any material franchise, license,
permit, judgment, decree, order, statute, rule or regulation material to the
Company business.
(xii) The statements in the Prospectus under the headings "BUSINESS,"
"MANAGEMENT," "PRINCIPAL SHAREHOLDERS AND SELLING SHAREHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF SECURITIES," and "SHARES AVAILABLE FOR FUTURE
SALE" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects.
(xiii) To the best of such counsel's knowledge, except as described in the
Prospectus, no person, corporation, trust, partnership, association or other
entity holding securities of the Company has the contractual right to include
and/or register any securities of the Company in the Registration Statement,
require the Company to file any registration statement or, if filed, to include
any security in such registration statement for eighteen months from the date
hereof.
Page 27
28
(xiv) After the public offering, the Securities will be eligible for
listing on the Nasdaq SmallCap Market.
In rendering such opinion such counsel may rely, (A) as to matters
involving the application of laws other than the laws of the United States, the
corporate laws of Florida and jurisdictions in which they are admitted, to the
extent such counsel deems proper and to the extent specified in such opinion,
if at all, upon an opinion or opinions (in form and in substance reasonably
satisfactory to Underwriters' Counsel) of other counsel reasonably acceptable
to Underwriters' Counsel, familiar with the applicable laws, and (B) as to
matters of fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company; provided, that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel if requested. The opinion of such counsel
for the Company shall state that the opinion of any such other counsel is in
form satisfactory to such counsel and, in their opinion, the Underwriters and
they are justified in relying thereon.
(e) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of counsel to the Company, each dated the Option
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel confirming as of Option Closing Date the
statements made by such firm, in their opinion, delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the Option Closing Date,
Underwriters' Counsel shall have been furnished such documents, certificates
and opinions as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in subsection (c) of this Section
6, or in order to evidence the accuracy, completeness or satisfaction of any of
the representations, warranties or conditions herein contained.
(g) Prior to the Closing Date and each Option Closing Date, if any: (i)
there shall have been no material adverse change nor development involving a
prospective change in the condition, financial or otherwise, prospects or the
business activities of the Company, whether or not in the ordinary course of
business, from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the
Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company; (iii) the Company shall not be in material
default under any provision of any instrument relating to any outstanding
indebtedness; (iv) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement
and Prospectus; (v) no action, suit or proceeding, at law or in equity, shall
have been pending or to its knowledge threatened against the Company, or
affecting any of its properties or businesses before or by any court or
federal, state or foreign commission, board or other
Page 28
29
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus; and (vi) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
(h) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that:
(i) The representations and warranties of the Company in this Agreement
are true and correct, as if made on and as of the Closing Date or the Option
Closing Date, as the case may be, and the Company has complied with all
agreements and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to such Closing
Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or are pending or, to the best of each of such person's knowledge,
are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and information
required to be included therein, and none of the Registration Statement, the
Prospectus nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and neither the
Preliminary Prospectus nor any supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and except as otherwise
contemplated therein: (A) the Company has not incurred up to and including the
Closing Date or the Option Closing Date as the case may be, other than in the
ordinary course of its business, any material liabilities or obligations,
direct or contingent; (B) the Company has not paid or declared any dividends or
other distributions on its capital stock; (C) the Company has not entered into
any transactions not in the ordinary course of business; (D) there has not been
any change in the capital stock or any increase in long-term debt or any
increase in the short-term borrowings (other than any increase in the short
term borrowings in the ordinary course of business) of the Company; (E) the
Company has not sustained any material loss or damage to its property or
assets, whether or not insured; (F) there is no litigation which is
Page 29
30
pending or threatened against the Company which is required to be set forth in
an amended or supplemented Prospectus which has not been set forth;
(v) Neither the Company nor any of its officers or affiliates shall
have taken, and the Company, its officers and affiliates will not take,
directly or indirectly, any action designed to, or which might reasonably be
expected to, cause or result in the stabilization or manipulation of the price
of the Company's securities to facilitate the sale or resale of the Shares.
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at the date of
such certificate.
(i) By the Closing Date, the Underwriters shall have received clearance
from NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Representative shall
have received a letter, dated such date, addressed to the Representative in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriters, from Xxxxxx Xxxxxxxx, LLP:
(i) confirming that they are independent public accountants with
respect to the Company within the meaning of the Act and the applicable Rules
and Regulations;
(ii) stating that it is their opinion that the combined financial
statements and supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations thereunder and
that the Underwriters may rely upon the opinion of Xxxxxx Xxxxxxxx, LLP with
respect to the financial statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited review which included a
reading of the latest available unaudited interim combined financial statements
of the Company (with an indication of the date of the latest available
unaudited interim combined financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
combined financial statements and supporting schedules of the Company included
in the Registration Statement do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited combined financial statements of the Company included in the
Registration
Page 30
31
Statement, or (B) at a specified date not more than five (5) days prior to the
effective date of the Registration Statement, there has been any change in the
capital stock or long-term debt of the Company, or any decrease in the
stockholders' equity or net current assets or net assets of the Company as
compared with amounts shown in the financial statements included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease, and (C) during the period from July 31,
1996 to a specified date not more than five (5) days prior to the Registration
Statement, there was any decrease in net revenues, net earnings or increase in
net earnings per common share of the Company, in each case as compared with the
corresponding period beginning July 31, 1996 other than as set forth in or
contemplated by the Registration Statement, or, if there was any such decrease,
setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five (5) days prior to the
date of the Registration Statement, the amount of liabilities of the Company
(including a breakdown of commercial paper and notes payable to banks);
(v) stating that they have compared specific dollar amounts, numbers of
Securities, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures did not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement; and
(vi) stating that they have not during the immediately preceding one
(1) year period brought to the attention of the Company's management any
"weakness," as defined in Statement of Auditing Standard No. 60 "Communication
of Internal Control Structure Related Matters Noted in an Audit," in the
Company's internal controls;
(vii) stating that they have in addition carried out certain specified
procedures, not constituting an audit, with respect to certain pro forma
financial information which is included in the Registration Statement and the
Prospectus and that nothing has come to their attention as a result of such
procedures that caused them to believe such unaudited pro forma financial
information does not comply in form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or that the
pro forma adjustments have not been properly applied to the historical amounts
in the compilation of that information, and;
(viii) statements as to such other matters incident to the transaction
contemplated hereby as the Underwriters may reasonably request.
Page 31
32
(k) At the Closing Date and each Option Closing Date, the Underwriters
shall have received from Xxxxxx Xxxxxxxx, LLP, a letter, dated as of the
Closing Date, or Option Closing Date, as the case may be, to the effect that
they reaffirm that statements made in the letter furnished pursuant to
Subsection (j) of this Section, except that the specified date referred to
shall be a date not more than five days prior to the Closing Date and, if the
Company has elected to rely on Rule 430A of the Rules and Regulations, to the
further effect that they have carried out procedures as specified in clause
(iii) of subsection (j) of this Section with respect to certain amounts,
percentages and financial information as specified by the Underwriters and
deemed to be a part of the Registration Statement pursuant to Rule 430A(b) and
have found such amounts, percentages and financial information to be in
agreement with the records specified in such clause (iii).
(l) On each of the Closing Date and the Option Closing Date, if any, there
shall have been duly tendered to the Underwriters for the several Underwriters'
accounts the appropriate number of Securities.
(m) No order suspending the sale of the Securities in any jurisdiction
designated by the Underwriters pursuant to subsection (e) of Section 4 hereof
shall have been issued on either the Closing Date or the Option Closing Date,
if any, and no proceedings for that purpose shall have been instituted or to
its knowledge or that of the Company shall be contemplated.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Underwriters may terminate this
Agreement or, if the Underwriters so elect, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company (and the Selling Shareholder, but such indemnity shall be
limited to the proceeds received from the sale of his shares, if any, as a
portion of the Option Securities) agrees to indemnify and hold harmless each
of the Underwriters, including specifically each person who may be substituted
for an Underwriter as provided in Section 11 hereof and each person, if any,
who controls any Underwriter ("controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all
losses, claims, damages, expenses or liabilities, joint or several (and actions
in respect thereof), whatsoever (including but not limited to any and all
expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever), as such are incurred, to which such Underwriter or such
controlling person may become subject under the Act, the Exchange Act or any
other federal or state statutory laws or regulations at common law or otherwise
or under the laws of foreign countries arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus (except that the indemnification contained in this
paragraph with respect to any preliminary prospectus shall not inure to the
benefit of the Underwriter or to the benefit of any person controlling the
Underwriter on account of any loss, claim,
Page 32
33
damage, liability or expense arising from the sale of the Firm Securities by
the Underwriter to any person if a copy of the Prospectus, as amended or
supplemented, shall not have been delivered or sent to such person within the
time required by the Act, and the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus, as amended and
supplemented, and such correction would have eliminated the loss, claim,
damage, liability or expense), the Registration Statement or the Prospectus (as
from time to time amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included securities of the Company issued or issuable upon exercise of
the Underwriters' Purchase Option; or (iii) in any application or other
document or written communication (in this Section 8 collectively called
"application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Securities
under the securities laws thereof or filed with the Commission, any state
securities commission or agency, Nasdaq Stock Market, Inc. or any other
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of the Prospectus, in the light of the
circumstances under which they were made), unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, the Selling Shareholder and
each other person, if any, who controls the Company within the meaning of
Section 20 of the Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto in any post-effective amendment, new registration statement or
prospectus, or in any blue sky application or any other such application made
in reliance upon, and in strict conformity with, written information furnished
to the Company with respect to any Underwriter by such Underwriter expressly
for use in such Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto or in any
post-effective amendment, new registration statement or prospectus, or in any
such application, provided that such written information or omissions only
pertain to disclosures in the Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
such application, provided, further, that the liability of each Underwriter to
the Company shall be limited to the amount of the net proceeds of the Offering
received by the Company. The Company acknowledges that the
Page 33
34
statements with respect to the public offering of the Firm Securities set forth
under the heading "Underwriting" and the stabilization legend and the last
paragraph of the cover page in the Prospectus have been furnished by the
Underwriters expressly for use therein and any information furnished by or on
behalf of the Underwriter filed in any jurisdiction in order to qualify the
Securities under State Securities laws or filed with the Commission, the NASD
or any securities exchange constitute the only information furnished in writing
by or on behalf of the Underwriters for inclusion in the Prospectus and the
Underwriters hereby confirm that such statements and information are true and
correct.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, suit or proceeding, such indemnified
party shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise avoided). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party or
parties of the commencement thereof, the indemnifying party or parties will be
entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing the indemnified party or parties shall have the
right to employ its or their own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnifying party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided however, that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes claim for indemnification pursuant to this
Section 7, but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the
Page 34
35
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of this Section 7 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of
any indemnified party, then each indemnifying party in lieu of indemnifying
such indemnified party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand from the offering of the Securities or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (A) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company or the Selling
Shareholder is the contributing party and the Underwriters are the indemnified
party the relative benefits received by the Company or the Selling Shareholder
on the one hand, and the Underwriters, on the other, shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Firm
Securities (before deducting expenses) bear to the total underwriting discounts
and commissions received by the Underwriters hereunder, in each case as set
forth in the table on the Cover Page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, expenses or liabilities (or actions in respect
thereof) referred to above in this subdivision (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), the Underwriters shall
not be required to contribute any amount in excess of the amount of the net
proceeds of the Offering received by the Company. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of
the Company who has 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 this subparagraph (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 to which a claim for contribution may
be made against another party or parties under this subparagraph (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 obligation it or they may have
hereunder or otherwise than under this subparagraph (d), or to the extent that
such party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any liabilities
which any indemnifying party may have at common law or otherwise.
Page 35
36
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, or any controlling person, including the Selling Shareholder and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters.
9. Effective Date.
This Agreement shall become effective at 10: 00 a.m., ________ time, on
the next full business day following the date hereof, or at such earlier time
after the Registration Statement becomes effective as the Underwriters, in
their discretion, shall release the Securities for the sale to the public,
provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Underwriters of telegrams or electronic
transmission to securities dealers releasing such Securities for offering or
the release by the Underwriters for publication of the first newspaper
advertisement which is subsequently published relating to the Securities.
10. Termination.
(a) The Underwriters shall have the right to terminate this Agreement
(i) if any calamitous domestic or international event or act or occurrence has
materially disrupted, or in the Underwriters' opinion will in the immediate
future materially disrupt general securities markets in the United States; or
(ii) if trading on the New York Stock Exchange, the American Stock Exchange,
the Nasdaq National Market, or in the over-the-counter market shall have been
suspended or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction; or (iii) if the United States shall
have become involved in a war or major hostilities; or (iv) if a banking
moratorium has been declared by a New York State or federal authority; or (v)
if a moratorium in foreign exchange trading has been declared; or (vi) if the
Company shall have sustained a material adverse loss, whether or not insured,
by reason of fire, flood, accident or other calamity that materially impairs
the investment quality of the Units; or (vii) if there shall have been such
material adverse change in the conditions or prospects of the Company,
involving a change not contemplated by the Registration Statement.
(b) Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement (including, without
limitation, pursuant to
Page 36
37
Sections 9 and 10 hereof), and whether or not this Agreement is otherwise
carried out, the provisions of Section 5 shall not be in any way affected by
such election or termination or failure to carry out the terms of this
Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination
of this Agreement under the provisions of Section 6, Section 10 or Section 12
hereof) to purchase the Securities which it or they are obligated to purchase
on such date under this Agreement (the "Defaulted Securities), the
Underwriters shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Underwriters shall not have completed such arrangements
within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all nondefaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Securities, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination
of this Agreement, the Underwriters shall have the right to postpone the
Closing Date for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing Date
or any Option Closing Date, as applicable, to sell and deliver the number of
Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Underwriters option, by notice from the Underwriters to the Company,
terminate the Underwriters' several obligations to purchase Securities from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to Section 5 and Section 7 hereof. No action taken
pursuant to this Section shall relieve the Company from liability, if any, in
respect of such default.
Page 37
38
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to
have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at Argent Securities, Inc., 0000 Xxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxx, XX 00000, with a copy to Xxxxxxx & Xxxxxxxxxx, One Buckhead Plaza,
0000 Xxxxxxxxx Xxxx, X.X., Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, Attention:
Xxxxxx X. Xxxxxxxxx, Esq. Notices to the Company shall be directed to the
Company, Xxxxxxxxx Enterprises, Inc., at 0000 X.X. 00xx Xxxxx,
Xxxx Xxxxxxxxxx, XX 00000 Attention: Xx. Xxxxxxx X. Xxxxxxxxx, with a copy to
Xxxxxxxxx, Xxxxxxx, Xxxxxxx, Xxxxxx, Xxxxx & Xxxxxxx, PA, 0000 Xxxxxxxx Xxxxxx,
Xxxxx, XX 00000, Attention: Xxxxxxx Xxxxxxx, Esquire.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and their respective
heirs and legal representatives and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect of or
by virtue of this Agreement or any provisions herein contained. No purchaser
of Securities from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia without giving
effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among us.
Very truly yours,
XXXXXXXXX MOBILE FUEL, INC.
By:_______________________________
Name:
Title:
Page 38
39
SELLING SHAREHOLDER
-------------------------------------
Xxxxxxx X. Xxxxxxxxx
CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN.
Argent Securities, Inc., as
Representative of the Several Underwriters
By:
-----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Page 39
40
SCHEDULE I
Underwriter Number of Securities
Argent Securities, Inc. ____________
Page 40
41
SCHEDULE II
Warrant Agent - American Stock Transfer and Trust Co.
Page 41
42
SCHEDULE III
SELLING SHAREHOLDER
Selling Shareholder - Xxxxxxx X. Xxxxxxxxx
Page 42
