1,200,000 SHARES
HORIZON PHARMACIES, INC.
(A Texas Corporation)
(Par Value $0.01 Per Share)
UNDERWRITING AGREEMENT
May ___, 1997
CAPITAL WEST SECURITIES, INC.
000 X. Xxxxxxxx
16th Floor, Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Ladies/Gentlemen:
HORIZON Pharmacies, Inc., a Texas corporation (the "Company"),
hereby confirms its agreement with Capital West Securities, Inc. ("Capital
West") as representative of the several underwriters named in Schedule A
hereto (herein collectively called the "Underwriters") as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
1,200,000 shares (the "Firm Shares") of its authorized and unissued common
stock, par value $0.01 per share (the "Common Stock") to the Underwriters
upon the terms and subject to the conditions set forth herein. The Company
also proposes to grant to the Underwriters an option to purchase, for the
sole purpose of covering over-allotments in connection with the sale of Firm
Shares, an aggregate of up to 180,000 additional shares ("Option Shares") of
Common Stock upon the terms and subject to the conditions set forth herein
and as provided in Section 7 hereof. As used in this Agreement, the term
"Shares" shall include the Firm Shares and the Option Shares. All shares of
Common Stock of the Company, including the Shares, are hereinafter referred
to as "Common Stock."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
Unless otherwise indicated or the context otherwise requires, references to
the "Company" in this Section 2 are references to HORIZON Pharmacies, Inc., a
Texas corporation. The Company represents and warrants to and agrees with
the Underwriters, as follows:
(a) A registration statement on Form SB-2 (File No. 333-25257)
with respect to the Shares, including a prospectus subject to completion, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act and has been filed with the
Commission; such amendments to such registration statement and such amended
prospectuses subject to completion, as may have been required prior to the
date hereof have been similarly prepared and filed with the Commission; and
the Company will file such additional amendments to such registration
statement and such amended prospectuses subject to completion, as may
hereafter be required. The Company meets the requirements for use of a
Registration Statement on Form SB-2. Copies of such registration statement
and any amendments and of each related prospectus subject to completion have
been delivered to you.
If the registration statement has been declared effective under
the Act by the Commission, the Company will prepare and promptly file with
the Commission the information omitted from the registration statement
pursuant to Rule 430A(a) of the Rules and Regulations or as part of a
post-effective amendment to the registration statement (including a final
form of prospectus). If the registration statement has not been declared
effective under the Act by the Commission, the Company will prepare and
promptly file a further amendment to the registration statement, including a
final form of prospectus. The term "Registration Statement" as used in this
Agreement shall mean such registration statement, including financial
statements, schedules and exhibits, in the form in which it became or
becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) of the
Rules and Regulations, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule
430A(b) of the Rules and Regulations) and, in the event of any amendment
thereto after the effective date of such registration statement, shall also
mean (from and after the effectiveness of such amendment) such registration
statement as so amended. The term "Prospectus" as used in this Agreement
shall mean the prospectus relating to the Shares as included in such
Registration Statement at the time it becomes effective (including, if the
Company omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part of
the Registration Statement at the time it became effective pursuant to Rule
430A(b) of the Rules and Regulations), except that if any revised prospectus
shall be provided to the Underwriters by the Company for use in connection
with the offering of the Shares that differs from the Prospectus on file with
the Commission at the time the Registration Statement became or becomes, as
the case may be, effective (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b)(3) of the
Rules and Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the Underwriters
for such use.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings
for that purpose, and each such Preliminary Prospectus has conformed in all
material respects to the requirements of the Act and the Rules and
Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and at the
time the Registration Statement became or becomes, as the case may be,
effective and at all times subsequent thereto up, to and on the Closing Date
(hereinafter defined) and on any later date on which Option Shares are to be
purchased, (i) the Registration Statement
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and the Prospectus, and any amendments or supplements thereto, contained and
will contain all material information required to be included therein by 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, and (ii)
neither the Registration Statement nor the Prospectus, nor any amendments or
supplements thereto, will include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that none of the
representations and warranties contained in this subparagraph shall apply to
information contained in or omitted from the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon, and in
conformity with, written information furnished to the Company by any
Underwriter specifically for inclusion therein.
(c) Each contract, agreement, instrument, lease, license or
other item required to be described in the Registration Statement or the
Prospectuses or filed as an exhibit to the Registration Statement has been so
described or filed, as the case may be.
(d) Each of the Company and its Subsidiary (as such term is
defined in Rule 405 under the Act) has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its organization, with full corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Registration Statement; each of the Company and its Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the ownership or leasing of its properties or the
conduct of its business requires such qualification except where the failure
to be so qualified or to be in good standing would not have a material
adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its Subsidiary
considered as a whole; each of the Company and its Subsidiary is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, Federal and other
regulatory authorities which are material to the conduct of its business, all
of which are valid and in full force and effect; neither the Company nor its
Subsidiary is in violation of its charter or bylaws or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any material indenture, mortgage, deed of trust, loan
agreement, bond, debenture, note agreement or other evidence of indebtedness,
or any material lease, contract, joint venture, or other agreement or
instrument to which it is a party or by which its property is bound or in
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any government, governmental agency or body or court, domestic or
foreign, of which it has knowledge except such failures to comply as would
not, individually or in the aggregate, have a material adverse effect on the
Company and its Subsidiary considered as a whole.
(e) The Company has full legal right, power and authority to
enter into this Agreement and to perform the transactions contemplated
hereby. This Agreement and the Warrant Agreement (the "Warrant Agreement") by
and between the Company and the Underwriters have been duly authorized,
executed and delivered by the Company and are valid and binding agreements on
the part of the Company, enforceable in accordance with their respective
terms, except as rights to indemnification and contribution hereunder may be
limited
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by applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally, or by
general equitable principles; the performance of this Agreement and the
Warrant Agreement and the consummation of the transactions herein and therein
contemplated will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (i) any material indenture,
mortgage, deed of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, or any material lease, contract, joint
venture or other agreement or instrument to which the Company is a party or
by which the property of the Company is bound including any licenses from
third parties, or (ii) the Certificate of Incorporation and Bylaws of the
Company, or (iii) any law, order, rule, regulation, writ, injunction,
judgment or decree of any government or governmental agency or body or court,
domestic or foreign, having jurisdiction over the Company or over the
properties of the Company, except for breaches, violations or defaults that
individually or in the aggregate, would not have a material adverse effect on
the Company; and no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions herein contemplated, except such as may be required under the
Act, the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), or under state or other securities or Blue Sky laws, all of which
requirements have been satisfied in all material respects.
(f) Except as disclosed in the Registration Statement or the
Prospectus, there is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or its
Subsidiary which (i) is required to be disclosed in the Registration
Statement or the Prospectus or which might result in any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its Subsidiary considered as
one enterprise, or which might materially and adversely affect the properties
or assets thereof; or (ii) which might be expected to materially and
adversely affect the consummation of the transactions contemplated by this
Agreement; all pending legal or governmental proceedings to which the Company
or its Subsidiary is a party or of which any of their respective properties
or assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the Company's
business, could not reasonably be expected to result in a material adverse
change in the condition, financial or otherwise, or the earnings, business
affairs or business properties of the Company and its Subsidiary considered
as one enterprise; and there are no contracts or documents of the Company or
its Subsidiary which are required to be described in the Registration
Statement or the Prospectus, or to be filed as exhibits thereto, by the Act
or by the Rules and Regulations which have not been accurately described in
all material respects and filed as exhibits to the Registration Statement.
To the best of the Company's knowledge, the contracts so described in the
Prospectus are in full force and effect on the date hereof, and neither the
Company nor its Subsidiary is in breach of or default under, and to the
Company's knowledge, no other party is in material breach of or material
default under, any of such contracts.
(g) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all Federal and state
securities laws, were not issued in violation of or subject to
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any preemptive rights or other rights to subscribe for or purchase securities
(other than such preemptive rights or other rights to subscribe for or
purchase securities as were fully complied with or expressly waived or with
respect to the violation of which the right to make claim is barred by the
applicable statute of limitations), and the authorized and outstanding
capital stock of the Company conforms in all material respects to the
statements relating thereto contained in the Registration Statement and the
Prospectus (and such statements correctly state the substance of the
instruments defining the capitalization of the Company); the Firm Shares and
the Option Shares to be purchased from the Company hereunder have been duly
authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company against payment
therefor in accordance with the terms of this Agreement, will be duly and
validly issued and fully paid and nonassessable; the shares of Common Stock
issuable under the warrant (the "Underwriters' Warrant") to be granted to the
Underwriters under the Warrant Agreement have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in accordance
with the terms of the Warrant Agreement, will be duly and validly issued and
fully paid and nonassessable; and no preemptive right, co-sale right,
registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Firm Shares, Option Shares or
shares of Common Stock issuable under the Underwriters' Warrant or the
issuance and sale thereof other than those that have been expressly waived
prior to the date hereof and those that will automatically expire upon the
consummation of the transactions contemplated on the Closing Date. No
further approval or authorization of any stockholder, the Board of Directors
or others is required for the issuance and sale or transfer of the Shares
except as may be required under the Act, the Exchange Act or under state or
other securities or Blue Sky laws. Except as disclosed in or contemplated by
the Prospectus and the financial statements of the Company (including the
notes thereto) included in the Prospectus, the Company has no outstanding
options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its capital stock or any
such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Prospectus accurately and fairly presents the
information required to be shown with respect to such plans, arrangements,
options and rights. The shares of Common Stock reserved for issuance upon
exercise of the Company's outstanding options and warrants have been duly and
validly authorized and are sufficient in number to meet the exercise
requirements of such options.
(h) Ernst & Young LLP, which has audited the 1996 historical
financial statements of the Company filed with the Commission as a part of
the Registration Statement and which are included in the Prospectus, are
independent accountants within the meaning of the Act and the Rules and
Regulations; the audited and pro forma financial statements of the Company,
together with the notes, and the unaudited financial information, forming
part of the Registration Statement and 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 all
audited and pro forma financial statements, together with the notes, and the
unaudited and pro forma financial information, filed with the Commission as
part of the Registration Statement, have been prepared in accordance with
generally accepted accounting
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principles consistently applied throughout the periods involved except as may
be otherwise stated therein. The selected and summary financial and
statistical data included in the Registration Statement present fairly the
information shown therein and have been compiled on a basis consistent with
the audited financial statements presented therein.
Xxxxxx, Xxxxxx & Xxxxxx, P.C., which has audited the 1995 historical
financial statements of the Company; the statements of operating revenues and
direct operating expenses for Mesa Drug, Inc. - Farmington Store for the year
ended December 31, 1995 and the period from January 1, 1996 to April 26,
1996; and the combined statements of operating revenues and direct operating
expenses for True Quality Pharmacies, Inc. - Vistas for the years ended
December 31, 1995 and 1996 and the Combined Statement of Net Assets Sold as
of March 6, 1997, filed with the Commission as part of the Registration
Statement and which are included in the Prospectus, are independent
accountants within the meaning of the Act and the Rules and Regulations; the
audited financial statements of the Company, and the notes thereto, the
audited combined statements of revenues and expenses of Mesa Drugs, Inc. -
Farmington Store, and the notes thereto, the audited statements of revenues
and expenses and of Net Assets Sold of True Quality Pharmacies, Inc. - Vistas
and the notes thereto, forming part of the Registration Statement and
Prospectus, fairly represent the financial position and the results of
operations of the Company, Mesa Drugs, Inc. - Farmington Store and True
Quality Pharmacies, Inc. - Vistas and the other information purported to be
shown therein at the respective dates and for the respective periods to which
they apply; and all such audited statements filed with the Commission as part
of the Registration Statement have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved except as may be otherwise stated therein.
(i) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as otherwise
stated therein, (i) there has been no material adverse change in the
business, properties, operations, condition (financial or otherwise) or in
the earnings, business affairs or business prospects of the Company and its
Subsidiary, whether or not arising in the ordinary course of business, (ii)
there have been no transactions entered into by the Company other than those
in the ordinary course of business, which are material with respect to the
Company, (iii) there has been no obligation that is material to the Company,
direct or contingent, incurred by the Company or its Subsidiary, except
obligations incurred in the ordinary course of business, (iv) there has been
no change in the capital stock of the Company, (v) there has been no change
in the outstanding indebtedness of the Company which is material to the
Company, (vi) there has been no dividend or distribution of any kind
declared, paid or made by the Company on behalf of any class of its
respective capital stock, (vii) there has been no redemption, purchase or
acquisition or agreement to redeem, purchase or acquire shares of Common
Stock of the Company, or (viii) to the knowledge of the Company, there has
been no change in any Federal, state, or other laws, rules, or regulations
(or interpretations thereof) applicable to the business of the Company that
would have a material adverse effect on the Company, and, to the knowledge of
the Company, no such change is pending other than as described in the
Prospectus.
(j) Except as described in the Prospectus, (i) the Company and
its Subsidiary
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have good and marketable title to all properties and assets described in the
Prospectus as owned by them, free and clear of all liens, charges,
encumbrances or restrictions of any kind, except those described in the
Prospectus, or those not material, singly or in the aggregate, to the
business of the Company and its Subsidiary considered as a whole, (ii) the
agreements to which the Company is a party described in the Prospectus are
valid agreements, enforceable by the Company, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally or by
general equitable principles, and (iii) the Company has valid and enforceable
leases for the properties described in the Prospectus as leased by it except
as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(k) All Federal, state, local and foreign tax returns required
to be filed by the Company or its Subsidiary in any jurisdiction have been
filed, and all material taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges due or claimed to be due from
such entities have been paid other than those being contested in good faith
and for which adequate reserves have been provided or those currently payable
without penalty or interest; and adequate charges, accruals and reserves have
been provided for in the financial statements referred to in Section 2(g)
above in respect of all Federal, state, local and foreign taxes for all
periods as to which the tax liability of the Company or its Subsidiary has
not been finally determined or remains open to examination by applicable
taxing authorities.
(l) No labor dispute with the employees of the Company or its
Subsidiary exists or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers, contractors or
customers which might be expected to result in any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its Subsidiary considered as one
enterprise. No collective bargaining agreement exists with any of the
Company's employees and, to the Company's knowledge, no such agreement is
imminent.
(m) The Company and its Subsidiary own or possess, or can
acquire on reasonable terms, the patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names presently
employed by them in connection with the business now operated by them and
neither the Company nor its Subsidiary has received any notice or is
otherwise aware of any infringement of or conflict with asserted rights of
others with respect to any patent or proprietary rights or of any facts or
circumstances which would render any patent and proprietary rights invalid or
inadequate to protect the interest of the Company or its Subsidiary therein,
and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy singly or in the
aggregate, would result in any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its Subsidiary considered as one enterprise.
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(n) Except as set forth in the Prospectus, the Company and its
Subsidiary are in compliance in all material respects with all applicable
laws, statutes, ordinances, rules or regulations, the enforcement of which,
individually or in the aggregate, would be reasonably expected to have a
material adverse effect on the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and its
Subsidiary considered as one enterprise.
(o) The Common Stock has been approved for quotation on the
Nasdaq SmallCap Market subject to official notice of issuance.
(p) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future to conduct, its affairs in such a manner as to ensure that it will not
become an "investment company" within the meaning of the 1940 Act and such
rules and regulations.
(q) The Company has not distributed and will not distribute
prior to the Closing Date or on any date on which Option Shares are to be
purchased, as the case may be, any offering material in connection with the
offering and sale of the Shares other than the Prospectus, the Registration
Statement and other materials permitted by the Act.
(r) The Company has not at any time during the last five years
(i) made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law, or (ii) made
any payment to any Federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
(s) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares. The Company has not
effected any sales of securities required to be disclosed in Item 26 of Form
SB-2 under the Act, other than as disclosed in the Registration Statement.
(t) Each officer and director of the Company and each
beneficial owner of at least 5% of the outstanding shares of Common Stock and
options and warrants to purchase Common Stock outstanding prior to the
effective date of the Registration Statement have agreed in writing that such
persons will not, for a period expiring 24 months after the effective date of
the Registration Statement, offer to sell, contract to sell, sell short, or
otherwise sell or dispose of any shares of Common Stock of the Company, any
options or warrants to purchase any shares of Common Stock of the Company, or
any securities convertible into or exchangeable for shares of the Common
Stock owned directly by such person or with respect to which such person has
the power of disposition otherwise than (i) as a gift or gifts, provided the
donee or donees thereof agree to be bound by this restriction or (ii) with
the prior written consent of Capital West.
(u) Except as described in the Registration Statement, (i)
neither the Company nor its Subsidiary is in violation of any Federal, state,
local or foreign laws or regulations relating
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to pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Environmental Materials") or
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Environmental Materials (collectively, the
"Environmental Laws"), except such violations as would not, singly or in the
aggregate, have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its Subsidiary considered as one enterprise, and (ii) to the best
of the Company's knowledge, there are no events or circumstances that could
form the basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or
affecting the Company or its Subsidiary relating to any Environmental
Materials or the violation of any Environmental Laws, which, singly or in the
aggregate, could reasonably be expected to have a material adverse effect on
the condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its Subsidiary considered as one
enterprise.
(v) The Company and its Subsidiary maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles as in effect in the United States and to
maintain asset accountability; (iii) access to bank accounts is permitted
only in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(w) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus. Neither the Company nor any employee or agent of the Company has
made any payment or transfer of any funds or assets of the Company or
conferred any personal benefit by use of the Company's assets, or received
any funds, assets or personal benefit in violation of any law, rule or
regulation.
(x) On the Closing Date and upon delivery of the Option
Shares, as applicable, all transfer and other taxes (other than income taxes)
that are required to be paid in connection with the sale and transfer of the
Shares to the Underwriters will have been paid.
(y) The Company currently has a pension plan subject to the
provisions of the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations thereunder
("ERISA"); no "reportable event" (as defined in ERISA) has occurred with
respect to such "pension plan" (as defined in ERISA) for which the Company
would have any liability, the Company has not incurred and does not expect to
incur liability under (I) Title IV of ERISA with respect to termination of,
or withdrawal from, any "pension
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plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations thereunder
(the "Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such qualification.
(z) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 517.075, Florida Statutes (Chapter
92-198, Laws of Florida) AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH
CUBA (the "Cuba Act"), and the Company further agrees that if it commences
engaging in business with the government of Cuba or with any person or
affiliate located in Cuba after the date the Registration Statement becomes
or has become effective with the Commission or the Florida Department of
Banking and Finance (the "Department"), whichever date is later, or if the
information reported or incorporated by reference in the Prospectus, if any,
concerning the Company's business in Cuba or with any person or affiliate
located in Cuba changes in any material way, the Company will provide the
Department notice of such business or change, as appropriate, in a form
acceptable to the Department.
(aa) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby.
(bb) Except as may be set forth in the Prospectus, the Company
has not incurred any liability for a fee, commission, or other compensation
on account of the employment of a broker or finder in connection with the
transactions contemplated by the Underwriting Agreement.
(cc) The Company and its Subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company
and its Subsidiary are engaged.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter,
severally and not jointly, and each Underwriter, severally and not jointly,
agrees to purchase from the Company, respectively, at a purchase price per
share of $5.00 per Share, the number of Shares set forth in SCHEDULE A hereto
(subject to adjustment as provided in Section 10).
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made
against payment of the purchase price therefor by the Underwriters by
certified or official bank check in next day funds, payable to the order of
the Company at the offices of Capital West Securities, Inc., 000 X. Xxxxxxxx,
16th Floor, Xxx Xxxxxxxxxx Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000, or at such
other place as shall be agreed upon by the Underwriters and the Company, at
9:30 a.m. on the third business day following the first day that Shares are
traded (or at such time and date to which payments and
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delivery shall have been postponed pursuant to Section 10 hereof), such time
and date of payment and delivery being herein called the "Closing Date." The
certificates for the Firm Shares to be so delivered will be made available to
you at such office or at such other location as you may reasonably request
for checking at least one business day prior to the Closing Date and will be
in such names and denominations as you may request, such request to be made
at least two business days prior to the Closing Date. If the Underwriters so
elect, delivery of the Shares may be made by credit through full fast
transfer to the accounts at Depository Trust Company designated by the
Underwriters.
It is understood that Capital West, individually and not as
representative of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by Capital
West prior to the Closing Date for the Firm Shares to be purchased by such
Underwriter or Underwriters. Any such payment by Capital West shall not
relieve any such Underwriter or Underwriters of any of its or their
obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to offer the Firm Shares to the public as set forth in
the Prospectus.
The information set forth in the last paragraph on the front
cover page (insofar as such information relates to the Underwriters) and
under "Underwriting" in any Preliminary Prospectus and in the final form of
Prospectus filed pursuant to Rule 424(b) constitutes the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement, and you, on behalf
of the Underwriters, represent and warrant to the Company that the statements
made therein do not include any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
such statements, in the light of the circumstances in which they were made,
not misleading.
4. FURTHER COVENANTS OF THE COMPANY. The Company covenants with
the several Underwriters as follows:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the
time and date that this Agreement is executed and delivered by the parties
hereto, to become effective as promptly as possible; it will notify you,
promptly after it shall receive notice thereof, of the time when the
Registration Statement or any subsequent amendment to the Registration
Statement has become effective or any supplement to the Prospectus has been
filed; if the Company omitted information from the Registration Statement at
the time it was originally declared effective in reliance upon Rule 430A(a)
of the Rules and Regulations, the Company will provide evidence satisfactory
to you that the Prospectus contains such information and has been filed,
within the time period prescribed, with the Commission pursuant to
subparagraph (1) or (4) of Rule 424(b) of the Rules and Regulations or as
part of a post-effective amendment to such Registration Statement as
originally declared effective which is declared effective by the Commission;
if for any reason the
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filing of the final form of Prospectus is required under Rule 424(b)(3) of
the Rules and Regulations, it will provide evidence satisfactory to you that
the Prospectus contains such information and has been filed with the
Commission within the time period prescribed; it will notify you promptly of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; promptly
upon your request, it will prepare and file with the Commission any
amendments or supplements to the Registration Statement or Prospectus which,
in the opinion of counsel for the several Underwriters, may be necessary or
advisable in connection with the distribution of the Shares by the
Underwriters; it will promptly prepare and file with the Commission, and
promptly notify you of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have
occurred as a result of which the Prospectus or any other prospectus relating
to the Shares as then in effect would include any untrue statement of a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; in case any
Underwriter is required to deliver a prospectus nine months or more after the
effective date of the Registration Statement in connection with the sale of
the Shares, it will prepare promptly upon request, but at the expense of such
Underwriter, such amendment or amendments to the Registration Statement and
such prospectus or prospectuses as may be necessary to permit compliance with
the requirements of Section 10(a)(3) of the Act; and it will file no
amendment or supplement to the Registration Statement or Prospectus which
shall not previously have been submitted to you a reasonable time prior to
the proposed filing thereof or to which you shall reasonably object in
writing, subject, however, to compliance with the Act, the Rules and
Regulations thereunder and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall
receive notice or obtain knowledge thereof of the issuance of any stop order
by the Commission suspending the effectiveness of the Registration Statement
or of the initiation or threat of any proceeding for that purpose; and it
will promptly use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal at the earliest possible moment if such stop
order should be issued.
(c) The Company will cooperate with the Underwriters and
Underwriters' counsel in connection with their efforts to qualify the Shares
for offering and sale under the securities laws of such jurisdictions as you
may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, except that
the Company shall not be required in connection therewith or as a condition
thereof to qualify as a foreign corporation or to execute a general consent
to service of process in any jurisdiction or to make any undertaking with
respect to the conduct of its business. In each jurisdiction in which the
Shares shall have been qualified as above provided, the Company will make and
file such statements and reports in each year as are or may be reasonably
required by the laws of such jurisdiction.
(d) The Company will furnish you, as soon as available, copies
of the Registration Statement (three of which will be signed and include all
exhibits), each Preliminary Prospectus, the Prospectus and any amendments or
supplements to such documents, including
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any prospectus prepared to permit compliance with Section 10(a)(3) of the
Act, all in such quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its
stockholders as soon as practicable, but in any event not later than the 45th
day following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited)
complying with the provisions of Section 11(a) of the Act and covering a
twelve-month period beginning after the effective date of the Registration
Statement.
(f) As long as the Company is a reporting company under the
Exchange Act, the Company will furnish to its stockholders, as soon as
practicable after the end of each respective period, annual reports
(including financial statements audited by independent certified public
accountants) and unaudited quarterly reports of operations for each of the
first three quarters of the fiscal year, and for a period of five years after
the effective date of the Registration Statement, the Company will furnish to
the several Underwriters hereunder, upon request (i) concurrently with
furnishing such reports to its stockholders, statements of operations of the
Company for each of the first three quarters in the form furnished to the
Company's stockholders; (ii) concurrently with furnishing to its
stockholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of stockholders' equity, and of
cash flows of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent accountants; (iii) as soon as
they are available, copies of all reports and financial statements furnished
to or filed with the Commission, any securities exchange or the National
Association of Securities Dealers, Inc. ("NASD"); (iv) every material press
release and every material news item or article in respect of the Company or
its affairs which was released or prepared by the Company (excluding, in each
case customary product-related press releases and articles); and (v) any
additional information of a public nature concerning the Company, or its
business which you may reasonably request. During such five-year period, if
the Company shall have active Subsidiary, the foregoing financial statements
shall be on a consolidated basis to the extent that the accounts of the
Company and its Subsidiary are consolidated, and shall be accompanied by
similar financial statements for any significant subsidiary which is not so
consolidated. For a period of five years from the date of the Registration
Statement, the Company will furnish to you and, upon request, to each of the
other Underwriters, as soon as available, a copy of each report of the
Company mailed to holders of the Common Stock or publicly filed with the
Commission or any automated quotation system or national securities exchange
on which any class of securities of the Company is listed.
(g) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
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(i) The Company will file Form SR in conformity with the
requirements of the Act and the Rules and Regulations.
(j) The Company shall comply with all provisions of all
undertakings contained in the Registration Statement.
(k) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations hereunder, or if the
Company shall terminate this Agreement under Section 11(a), the Company will
reimburse the several Underwriters for all out-of-pocket accountable expenses
(including fees and disbursements of counsel for the several Underwriters)
actually incurred by the Underwriters in investigating, preparing to market
or marketing the Shares, up to an aggregate of $40,000, which amount has
already been paid and which shall be reimbursed to the Company to the extent
not actually incurred.
(l) If at any time during the 90-day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company
will, after written notice from you advising the Company to the effect set
forth above, forthwith prepare, consult with you concerning the substance of,
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication
or event.
(m) For a period of 180 days after the date of this Agreement,
without the prior written consent of Capital West, the Company shall not,
directly or indirectly, offer, sell, contract to sell, pledge, grant any
option to purchase or otherwise dispose (or announce any offer, sale,
contract of sale or other disposition of), any shares of Common Stock or any
other shares of capital stock of the Company, or any securities convertible
into or exercisable or exchangeable for, or warrants, options or rights to
purchase or acquire, shares of Common Stock or any other shares of capital
stock of the Company, or any interest in the Common Stock (including
derivative interests) other than the Company's issuance and sale of Shares in
accordance with the Underwriting Agreement, and the issuance of stock options
under, or the issuance of Common Stock upon the exercise of stock options
granted under, any stock option plan described in the Prospectuses.
(n) During a period of 90 days from the effective date of the
Registration Statement, the Company will not file a registration statement
registering shares under any employee benefit plan.
(o) On the Closing Date the Company will sell to you,
for $.001 per share of Common Stock covered by each warrant, the
Underwriters' Warrants to purchase one share of Common Stock of the
Company for each ten shares of the Company's Common Stock which
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have been sold (or purchased by the Underwriters), excluding any
over-allotment shares, as set forth in the Prospectus. The Underwriters'
Warrants shall have the terms and be in the form filed as an exhibit to the
Registration Statement. At any time during the period commencing 12 months
and ending five years after the effective date of the offering and at the
written request of the then holders of 51% of the Underwriters' Warrants and
the Common Stock of the Company issued upon the exercise of the Underwriters'
Warrants, and on one occasion, the Company will file with the Commission and
process to effectiveness a registration statement covering not less than 51%
of the shares of the Common Stock of the Company issuable and/or issued upon
the exercise of the Underwriters' Warrants. The Company must file a
registration statement only if the shares of Common Stock issuable under the
Underwriters' Warrants cannot be sold without registration under Rule 144
promulgated under the Act. The Company agrees to use its commercially
reasonable best efforts to cause the filing to become effective. The costs
of the filing of such registration statement including but not limited to,
legal (including legal fees relating to clearance in the various states,
limited however to such states as may be reasonably requested), accounting
and printing fees, shall be borne by the Company but the Company shall not be
responsible for the cost of any separate counsel to review the registration
statement on behalf of or to advise the selling stockholders and shall not be
responsible for the payment of any underwriting discount or commissions with
respect to such sale. Such registration statement shall comply with any
undertaking applicable to such shares. If the Company otherwise than upon
the request of the owners of the Underwriters' Warrants or the shares of
Common Stock issuable upon the exercise thereof files a registration
statement under the Act with respect to any of its securities at any time
(other than on Form X-0, X-0, or any other form that does not provide for
resales by selling security holders), the Company will give such persons 30
days' notice of its intention to do so, and at their written request given
within 10 days of the receipt of such notice, will include in such
registration statement such number of such Shares as they may specify, all at
no cost to them (except for underwriting discounts and the fees and expenses
of counsel to such holders). In connection with any such registration
statement covering all or a part of such shares, the Company agrees that it
will covenant with the owners of such shares with respect to such shares and
the offering thereof, in customary form substantially to the effect contained
in this Section 4. If the offering pursuant to any registration statement
provided for herein is made through Underwriters, the Company agrees to enter
into an underwriting agreement in customary form with such underwriters in
which the Company and the underwriters and each person who controls such
underwriters within the meaning of the Act grant to each other customary
reciprocal indemnities against liabilities under the Act.
(p) As long as the Company is a reporting company under the
Exchange Act, the Company will comply with the Act, the Exchange Act, the
rules and regulations of the NASD and applicable state securities or Blue Sky
laws so as to permit the continuance of sales and dealings in the Common
Stock under the Act, the Exchange Act, the rules and regulations of the NASD,
and applicable state securities or Blue Sky laws, including the filing with
the NASD and the Commission of all reports required to be filed pursuant to
the applicable provisions of the rules and regulations of the NASD, the Act,
and the Exchange Act, and will deliver to the holders of the Common Stock all
reports required to be provided to such holders pursuant to the applicable
provisions of the rules and regulations of the NASD, the Act, the Exchange
Act, and applicable state securities or Blue Sky laws.
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(q) Immediately following the later to occur of: (I) the
Option Closing Date, as defined in Section 6(h)(3), below, or (ii) 30 days
following the Closing Date, the Company shall take and complete all necessary
corporate and stockholder action that will allow Capital West to designate
one person of its choosing to serve as a member of the Board of Directors of
the Company.
5. EXPENSES.
(a) The Company agrees with each Underwriter that the Company
will pay and bear all costs and expenses of the Company incurred in
connection with (i) the preparation, printing, filing and mailing of the
Registration Statement (including financial statements, schedules and
exhibits), Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; (ii) the approval of the Common Stock for listing on the
American Stock Exchange; (iii) the printing and mailing of this Agreement,
the Preliminary Blue Sky Survey and any Supplemental Blue Sky Survey, the
Underwriters' Questionnaire and Power of Attorney and any instruments related
to any of the foregoing; (iv) the issuance, transfer and delivery of the
Shares hereunder to the Underwriters or to Depository Trust Company,
including transfer taxes, if any, and the cost of all certificates
representing the Shares and transfer agents' and registrars' fees; (v) the
fees and disbursements of counsel for the Company; (vi) all fees and other
charges of the Company's independent public accountants; (vii) the cost of
furnishing to the Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus and the Prospectus,
and any amendments or supplements to any of the foregoing; and (viii) all
costs incurred in connection with the qualification of the Shares under the
securities laws of such states as the Company, and Capital West may designate
including the fees and disbursements of counsel to the Underwriters retained
to qualify the Shares in the various states; and (ix) all other expenses
directly incurred by the Company in connection with the performance of its
obligations hereunder.
(b) Capital West shall be entitled to receive from the
Company, for itself and not as representative of the Underwriters, a
nonaccountable expense allowance equal to three percent of the aggregate
public offering price of Shares sold to the Underwriters in connection with
the Offering reduced by any amounts advanced by the Company to Capital West
pursuant to the terms of the Letter of Intent. Capital West shall be
entitled to withhold this allowance on the Closing Date.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the Underwriters to purchase and pay for Shares as provided herein shall be
subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased (the "Option Closing
Date"), as the case may be, of the representations and warranties of the
Company herein, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 p.m. on the date hereof, or with the consent of the
Underwriters, at a later time and date, not later,
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however, than 5:30 p.m. on the first business day following the date hereof,
or at such later time and date as may be approved by a majority in interest
of the Underwriters; and no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the Act or proceedings
therefor initiated or threatened by the Commission and any request on the
part of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been
complied with to the reasonable satisfaction of counsel to the Underwriters.
If the Company has elected to rely upon Rule 430A of the Rules and
Regulations, the price of the Shares 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. Qualification under the securities laws of such
states as you may deem necessary to the success of the underwriting of the
issue and sale of the Shares upon the terms and conditions set forth in this
Agreement or contemplated by this Agreement and containing no provisions
unacceptable to you will have been secured, and no stop order (or the
equivalent thereof) will be in effect denying or suspending effectiveness of
such qualification, nor will any stop order proceedings (or the equivalent
thereof) with respect thereto be instituted or pending or threatened under
such laws.
(b) At the Closing Date and the Option Closing Date, if any,
counsel for the Underwriters shall have been furnished with such documents
and opinions as they may require for the purpose of enabling them to pass
upon the issuance and sale of the Shares as contemplated herein and related
proceedings or in order to evidence the accuracy of any of the
representations and warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection with
the issuance and sale of the Shares as herein contemplated shall be
satisfactory in form and substance to the Underwriters and counsel for the
Underwriters.
(c) There shall not have been, since the date hereof or since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, any change in the condition (financial or
otherwise), earnings, operations, business affairs or business prospects of
the Company and its Subsidiary considered as one enterprise, whether or not
arising in the ordinary course of business which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment, impracticable
or inadvisable to proceed with the public offering of the Shares as
contemplated by the Prospectus, and the Underwriters shall have received a
certificate of the President or Vice President of the Company and of the
chief financial or chief accounting officer of the Company, dated as of the
Closing Date, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties in Section 2 hereof are true
and correct with the same force and effect as though expressly made at and as
of the Closing Date, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior
to the Closing Date, and (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been initiated or threatened by the Commission or any Blue Sky
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jurisdiction.
(d) At the Closing Date the Underwriters shall have received:
(1) The opinions, dated as of the Closing Date of
Xxxxxxxx XxXxxx XxXxxxxxx XxXxx and Xxxxxx, P.C., special counsel for the
Company and Xxxxxx Xxxxxxx, counsel to the Company, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Texas.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in
the Registration Statement and the Prospectus and to enter into and perform
its obligations under this Agreement and to issue, sell and deliver to the
Underwriters the Firm Shares or the Option Shares, as the case may be, to be
issued and sold by it hereunder.
(iii) The Company is duly qualified to do business as
a foreign corporation and is in good standing in the States of Texas,
Oklahoma, Virginia, New Mexico and Wisconsin, and to the best of its
knowledge is not required to be qualified to do business as a foreign
corporation in any other jurisdiction.
(iv) At the Closing Date, after giving effect to the sale
of the Firm Shares, the authorized capital stock of the Company is as set
forth in the Prospectus under the caption "Capitalization" as of the dates
stated therein; the issued and outstanding shares of Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable and
have not been issued in violation of any preemptive right contained in the
Certificate of Incorporation or Bylaws of the Company or, to such counsel's
knowledge, any co-sale right, registration right, right of first refusal or
other similar right (other than such preemptive rights or other rights to
subscribe for or purchase securities as were fully complied with or expressly
waived or with respect to the violation of which the right to make a claim is
barred by the applicable statute of limitation).
(v) The Firm Shares and the Option Shares, as the case
may be, to be purchased from the Company hereunder have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement and,
when issued and delivered by the Company pursuant to this Agreement against
payment therefor in accordance with the terms hereof, will be validly issued
and fully paid and nonassessable, and will not be issued in violation of any
preemptive right under the Certificate of Incorporation or Bylaws of the
Company or, to such counsel's knowledge, any co-sale right, right of first
refusal or other similar right and the stockholders of the Company have no
preemptive right under the Certificate of Incorporation or Bylaws of the
Company or, to such counsel's knowledge, other rights to purchase any of the
Shares; the shares of Common Stock reserved for issuance upon the exercise of
the Underwriters' Warrants have been duly and validly authorized and are
sufficient in number to
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meet the exercise requirements thereof, and such shares of Common Stock, when
issued upon exercise, will be duly and validly issued, fully paid (assuming
exercise in accordance with the Warrant Agreement and receipt by the Company
of the exercise price thereof) and nonassessable; the stockholders of the
Company have no preemptive right under the Certificate of Incorporation or
Bylaws of the Company or, to such counsel's knowledge, other rights to
purchase any of the Shares; and the shares of Common Stock reserved for
issuance upon the exercise of the Company's outstanding options have been
duly and validly authorized and are sufficient in number to meet the exercise
requirements of such options, and such shares of Common Stock, when issued
upon exercise, will be duly and validly issued, fully paid (assuming exercise
in accordance with the governing instruments therefor and receipt by the
Company of the exercise price thereof) and nonassessable.
(vi) The issuance of the Shares to be purchased hereunder
is not subject to preemptive or other similar rights arising by operation of
law or, to the best of their knowledge and information, otherwise.
(vii) Each Subsidiary has been duly incorporated and is
validly existing as a corporation and is in good standing under the laws of
the jurisdiction of its incorporation, has full corporate power and authority
to own, lease and operate its properties and to conduct it business as
described in the Registration Statement, and is duly qualified as a foreign
corporation to transact business and is in good standing in the States of
Texas, Oklahoma, Virginia, New Mexico and Wisconsin, and to the best of its
knowledge any Subsidiary is not required to be qualified to do business as a
foreign corporation in any other jurisdiction; all of the issued and
outstanding capital stock of such Subsidiary has been duly authorized and
validly issued, is fully paid and nonassessable and, to the best of their
knowledge and information, is owned by the Company directly, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity.
(viii) This Agreement and the Warrant Agreement have been
duly authorized by all necessary corporate action on the part of the Company
and have been duly executed and delivered by the Company and assuming due
authorization, execution and delivery by the Underwriters, are valid and
binding agreements of the Company, except insofar as indemnification and
contribution provisions may be limited by applicable law or equitable
principles, and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or any general equitable principles;
(ix) The Registration Statement has been declared
effective under the Act; any required filing of the Prospectus pursuant to
Rule 424(b) has been made in the manner and within the time period required
by Rule 424(b) and, to the best of their knowledge and information, no stop
order suspending the effectiveness of the Registration Statement has been
issued under the Act or proceedings therefor have been initiated or are
pending or threatened by the Commission.
(x) The Registration Statement, Prospectus and each
amendment or
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supplement to the Registration Statement and Prospectus, as of their
respective effective or issue dates (other than the financial statements and
supporting schedules included therein, as to which no opinion need be
rendered) complied as to form in all material respects with the requirements
of the Act and the applicable Rules and Regulations.
(xi) The terms and provisions of the capital stock of the
Company conform in all material respects to the description thereof contained
in the Prospectus under the caption "Description of Securities";
(xii) The information in the Prospectus under the caption
"Description of Securities" to the extent that they constitute matters of law
or legal conclusions, has been reviewed by such counsel and accurately and
fairly summarizes in such counsel's opinion the matters described therein and
to the knowledge of such counsel, there are no outstanding options, warrants,
convertible securities, or other rights to acquire from the Company any
capital stock, except as described in the Registration Statement; in
addition, the forms of certificates evidencing the Company stock comply with
Texas law;
(xiii) To the best of their knowledge and information,
except as set forth in the Prospectus, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or
its Subsidiary is a party, or to which the property of the Company or its
Subsidiary is subject, before or brought by any court or government agency or
body, which might reasonably be expected to result in any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its Subsidiary considered as
one enterprise, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of this
Agreement or the performance by the Company of its obligations hereunder; and
all pending legal or governmental proceedings to which the Company or its
Subsidiary is a party or that affect any of their respective properties that
are not described in the Prospectus, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result in a
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiary considered as one enterprise.
(xiv) The information in the Prospectus under the
captions "Business and Properties - Legal Proceedings", " -Governmental
Regulation" and "- Properties", "Certain Transactions" and "Description of
Capital Stock" in the Prospectus and Items 24 and 26 of Part II of the
Registration Statement to the extent that such items constitute matters of
law, summaries of legal matters, documents or proceedings, or legal
conclusions, has been reviewed by them and is correct in all material
respects, and there are no legal or governmental actions, suits or
proceedings pending or threatened against the Company or its Subsidiary that
are required to be described in the Prospectus are not described as required
by the Act or the applicable Rules and Regulations.
(xv) All descriptions in the Prospectus of contracts and
other documents are accurate in all material respects; to the best of their
knowledge and information, there are no agreements, no contracts, indentures,
mortgages, loan agreements, notes, leases or other
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instrument required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto, the descriptions thereof or
references thereto are correct in all material respects, and to the best of
counsel's knowledge and information, the Company is not in default in the due
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other instrument so described, referred to or filed as
exhibits thereto.
(xvi) No authorization, approval, consent or order of any
court or governmental authority or agency (other than under the Act or the
Rules and Regulations, which have been obtained, or as may be required under
the securities or Blue Sky laws of the various states) is required in
connection with the due authorization, execution and delivery of this
Agreement or for the offering, issuance or sale of the Shares to the
Underwriters; and the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein and compliance
by the Company with its obligations hereunder (other than performance of the
Company's indemnification and contribution obligations hereunder, concerning
which no opinion need be expressed) will not, whether with or without the
giving of notice or lapse of time or both, conflict with or constitute a
breach or violation of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or its Subsidiary pursuant to any material contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which the
Company or its Subsidiary is a party or by which either of them may be
bound, or to which any of the property or assets of the Company or its
Subsidiary is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or Bylaws of the Company, or
any applicable law, administrative regulation or court decree, provided,
however, no opinion need be rendered concerning state securities or Blue Sky
laws.
(xvii) To the best of such counsel's knowledge and information,
with the exception of the Underwriters' Warrants, no holder of any security
of the Company has any right to require registration of any shares of Common
Stock or any other security of the Company and, except as set forth in the
Registration Statement and Prospectus, all holders of securities of the
Company having rights to registration of such shares of Common Stock, or
other securities, because of the filing of the Registration Statement by the
Company have, with respect to the offering contemplated thereby, waived such
rights or such rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration Statement, or
have included securities in the Registration Statement pursuant to the
exercise of such rights.
(xviii) The Company is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the 1940
Act.
(xix) To the best of such counsel's knowledge and information,
neither the Company nor its Subsidiary is in violation of its charter or
by-laws.
In rendering such opinion, such counsel may rely as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the
-21-
Company and public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including
without limitation, the Legal Opinion Accord of the ABA Section of Business
Law (1991).
In giving their opinion required by subsection (d)(1) of this
Section, Xxxxxxxx XxXxxx XxXxxxxxx XxXxx and Xxxxxx, P.C. shall additionally
state that nothing has come to their attention that would lead them to
believe that the Registration Statement, at the time it became effective,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, at the effective
date of the Registration Statement (unless the term "Prospectus" refers to a
prospectus which has been provided to the Underwriters by the Company for use
in connection with the offering of the Shares which differs from the
Prospectus declared effective by the Commission, in which case at the time it
is first provided to the Underwriters for such use) or at the Closing Date,
included an untrue statement of a material fact or omitted 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. Such opinion
may state that such counsel does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus except as otherwise expressly
provided in such opinion, and such counsel need express no opinion or belief
as to the financial statements, schedules, and other financial or statistical
data included in the Registration Statement or Prospectus.
(2) The opinion, dated as of Closing Date, of Xxxxxxxxx &
Xxxxxxxx, Inc., counsel for the Underwriters, in form and substance
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the
Company shall have furnished to such counsel such papers, opinions and
information as they request to enable them to pass upon such matters.
(e) At the time of the execution of this Agreement, the
Underwriters shall have received from Ernst & Young LLP a letter dated such
date, in form and substance satisfactory to the Underwriters, to the effect
that:
(1) they are independent public accountants with respect
to the Company and its Subsidiary within the meaning of the Act and the Rules
and Regulations;
(2) it is their opinion that the consolidated balance
sheet and the related statements of income, shareholders' equity and cash
flows of the Company included in the Registration Statement and covered by
their opinion therein comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and Regulations;
(3) based upon limited procedures set forth in detail in
such letter, nothing has come to their attention which causes them to believe
that, at a specified date not more than three days prior to the date of this
Agreement, (A) the unaudited consolidated balance
-22-
sheet and the related statements of income, shareholders' equity and cash
flows of the Company and its Subsidiary 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 is not presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the
audited financial statements included in the Registration Statement, or (B)
at a specified date not more than three days prior to the date of this
Agreement, there has been any change in the capital stock of the Company or
any increase in the combined long term debt of the Company and its Subsidiary
or any decrease in combined net current assets or net assets as compared with
the amounts shown in the December 31, 1996 balance sheet included in the
Registration Statement or, during the period from December 31, 1996 to a
specified date not more than three days prior to the date of this Agreement,
there were any decreases, as compared with the corresponding period in the
preceding year, in combined revenues, net income or net income per share of
the Company and its Subsidiary, except in all instances for changes,
increases or decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur;
(4) in addition to the examination referred to in their
opinion and the limited procedures referred to in clause (3) above, they have
carried out certain specified procedures, not constituting an audit, with
respect to certain amounts, percentages and financial information which are
included in the Registration Statement and Prospectus and which are specified
by the Underwriters, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial and
other records of the Company and its Subsidiary identified in such letter; and
(5) they have compared the information in the Prospectus
under selected captions with the disclosure requirements of Regulation S-B
and on the basis of limited procedures specified in such letter nothing came
to their attention as a result of the foregoing procedures that caused them
to believe that this information does not conform in all material respects
with the disclosure requirements of Item 402 of Regulation S-B.
(f) At the Closing Date, the Underwriters shall have received
from Ernst & Young LLP a letter, dated as of the Closing Date, to the effect
that they reaffirm the statements made in the letter furnished pursuant to
subsection (e) of this Section 6, except that the specified date referred to
shall be a date not more than three days prior to the Closing Date and, if
the Company has elected to rely on Rule 430A of the 1933 Act Regulations, to
the further effect that they have carried out procedures as specified in
clause (4) of subsection (e) of this Section 6 with respect to certain
amounts, percentages and financial information specified by the Underwriters
and deemed to be a part of the Registration Statement pursuant to Rule
430(A)(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (4).
(g) At the time of the execution of this Agreement, the
Underwriters shall have received from Xxxxxx, Xxxxxx & Xxxxxx, P.C. a letter
dated such date, in form and substance satisfactory to the Underwriters, to
the effect that:
-23-
(1) they are independent public accountants with respect
to the Company and its Subsidiary within the meaning of the Act and the Rules
and Regulations;
(2) it is their opinion that the statements of income,
shareholder's equity and cash flows for the Company; the statement of
operating revenues and direct operating expenses for Mesa Drug, Inc. -
Farmington Store; and the combined statements of operating revenues and
direct operating expenses and combined statement of net assets sold for True
Quality Pharmacies, Inc. -Vistas included in the Registration Statement and
covered by their opinion therein complies as to form in all material respects
with the applicable accounting requirements of the Act and the Rules and
Regulations;
(3) based upon limited procedures set forth in detail in
such letter, nothing has come to their attention which causes them to believe
that, at a specified date not more than three days prior to the date of this
Agreement, there were any decreases, as compared with the corresponding
period in the preceding year, in combined revenues, net income or net income
per share of the Company and its Subsidiary, except in all instances for
changes, increases or decreases which the Registration Statement and the
Prospectus disclose have occurred or may occur;
(4) in addition to the examination referred to in their
opinion and the limited procedures referred to in clause (3) above, they have
carried out certain specified procedures, not constituting an audit, with
respect to certain amounts, percentages and financial information which are
included in the Registration Statement and Prospectus and which are specified
by the Underwriters, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial and
other records of the Company and its Subsidiary identified in such letter; and
(5) they have compared the information in the Prospectus
under selected captions with the disclosure requirements of Regulation S-B
and on the basis of limited procedures specified in such letter nothing came
to their attention as a result of the foregoing procedures that caused them
to believe that this information does not conform in all material respects
with the disclosure requirements of Item 402 of Regulation S-B.
(h) At the Closing Date, the Underwriters shall have received
from Xxxxxx, Xxxxxx & Xxxxxx, P.C. a letter, dated as of the Closing Date, to
the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (g) of this Section 6, except that the specified date
referred to shall be a date not more than three days prior to the Closing
Date and, if the Company has elected to rely on Rule 430A of the 1933 Act
Regulations, to the further effect that they have carried out procedures as
specified in clause (4) of subsection (g) of this Section 6 with respect to
certain amounts, percentages and financial information specified by the
Underwriters and deemed to be a part of the Registration Statement pursuant
to Rule 430(A)(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (4).
(i) At the Closing Date, the Common Stock shall have been
approved for
-24-
listing on the American Stock Exchange.
(j) In the event that the Underwriters exercise their option
provided in Section 7 hereof to purchase all or any portion of the Option
Shares, the representations and warranties of the Company contained herein
and the statements in any certificates furnished by the Company hereunder
shall be true and correct as of the Option Closing Date and, at the Option
Closing Date, the Underwriters shall have received:
(1) A certificate, dated the Option Closing Date,
of the President or a Vice President of the Company and of the
Chief Financial or Chief Accounting Officer of the Company
confirming that the certificate delivered at the Closing Date
pursuant to Section 5(c) hereof remains true and correct as of
the Option Closing Date (except that all references in such
Section to "Closing Date" shall be deemed to refer to the
"Option Closing Date").
(2) The opinions of Xxxxxxxx XxXxxx XxXxxxxxx XxXxx
and Xxxxxx, P.C., counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, dated
the Option Closing Date, relating to the Option Shares and
otherwise to the same effect as the opinion required by
Section 5(b)(1) hereof (except that all references in such
Section to "Closing Date" shall be deemed to refer to the
"Option Closing Date").
(3) The opinion of Xxxxxxxxx & Xxxxxxxx, Inc.,
counsel for the Underwriters, dated the Option Closing Date,
relating to the Option Shares to be purchased on the Option
Closing Date and otherwise to the same effect as the opinion
required by Section 5(b)(2) hereof (except that all references
in such Section to "Closing Date" shall be deemed to refer to
the "Option Closing Date").
(4) A letter from Ernst & Young LLP in form and
substance satisfactory to the Underwriters and dated the
Option Closing Date, substantially the same in form and
substance as the letter furnished to the Underwriters pursuant
to Section 5(e) hereof, except that the "specified date" in
the letter furnished pursuant to this Section 6(h)(4) shall be
a date not more than three days prior to the Option Closing
Date.
(5) A letter from Xxxxxx, Xxxxxx & Xxxxxx, P.C. in
form and substance satisfactory to the Underwriters and dated
the Option Closing Date, substantially the same in form and
substance as the letter furnished to the Underwriters pursuant
to Section 5(g) hereof, except that the "specified date" in
the letter furnished pursuant to this Section 6(h)(5) shall be
a date not more than three days prior to the Option Closing
Date.
(k) The Company and the Underwriters shall have entered into
the Warrant Agreement and the Company shall have sold to the Underwriters the
Underwriters' Warrants, which shall be in the form attached as an exhibit to
the Warrant Agreement.
-25-
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by Capital West by notice to the Company at any time at or prior
to Closing Date, and such termination shall be without liability of any party
to any other party except as provided in Section 4 and except that Sections
4(j) and 8 shall survive any such termination and remain in full force and
effect.
7. OPTION SHARES.
(a) On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to the several Underwriters, for the purpose of
covering over-allotments in connection with the distribution and sale of the
Firm Shares only, a non-transferable option to purchase up to an aggregate
180,000 Option Shares at the purchase price per share for the Firm Shares set
forth in Section 3 hereof. Such option may be exercised by Capital West on
behalf of the several Underwriters on one occasion in whole or in part during
the period of 30 days from and after the date on which the Firm Shares are
initially offered to the public, by giving notice to the Company. The number
of Option Shares to be purchased by each Underwriter upon the exercise of
such option shall be the same proportion of the total number of Option Shares
to be purchased by the several Underwriters pursuant to the exercise of such
option as the number of Firm Shares purchased by such Underwriter (set forth
in SCHEDULE A hereto) bears to the total number of Firm Shares purchased by
the several Underwriters (set forth in SCHEDULE A hereto), adjusted by the
Underwriters in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in same day funds, payable to the order of the Company. Such
delivery and payment shall take place at the offices of Capital West
Securities, Inc., 000 X. Xxxxxxxx, 00xx Xxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000
or at such other place as may be agreed upon between the Underwriters and the
Company on the Option Closing Date, if written notice of the exercise of such
option is received by the Company not later than three full business days
prior to the Option Closing Date.
The certificates for the Options Shares so to be delivered will
be made available to you at such office or other location including, without
limitation, in Oklahoma City, as you may reasonably request for checking at
least two full business days prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to
be made at least three full days prior to such date of payment and delivery.
If the Underwriters so elect, delivery of the Shares may be made by credit
through full fast transfer to the accounts at Depository Trust Company by the
Underwriters.
It is understood that Capital West, individually, and not as
the representative of the Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by you prior
to the date of payment and delivery for the Option Shares to be
-26-
purchased by such Underwriter or Underwriters. Any such payment by Capital
West shall not relieve any Underwriter of any of its or their obligations
hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof the obligations of the Underwriters to purchase such Option Shares
will be subject (as of the date hereof and as of the date of payment for such
Option Shares) to the accuracy of and compliance with the representations and
warranties of the Company herein, to the accuracy of the statements of the
Company and officers of the Company made pursuant to the provisions hereof,
to the performance by the Company of their respective obligations hereunder,
and to the condition that all proceedings taken at or prior to the payment
date in connection with the sale and transfer of such Option Shares shall be
satisfactory in form and substance to you and to Underwriters' counsel, and
you shall have been furnished with all such documents, certificates and
opinions as you may reasonably request in order to evidence the accuracy and
completeness of any of the representations, warranties or statements, the
performance of any of the covenants of the Company or the compliance with any
of the conditions herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, as incurred, to which such Underwriter may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any breach of
any representation, warranty, agreement or covenant of the Company herein
contained, or (ii) any untrue statement or alleged untrue statement made by
the Company in Section 2 hereof, or (iii) any untrue statement or alleged
untrue statement of a material fact contained (A) in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (B) in any blue sky application or other document
executed by the Company specifically for that purpose or based upon written
information furnished by the Company filed in any state or other jurisdiction
in order to qualify any or all of the Shares under the securities laws
thereof (any such application, documents or information being hereinafter
called a "Blue Sky Application"), or (iv) the omission or alleged omission
to state in the Registration Statement or any amendment thereto a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or the omission or alleged omission to state in any Preliminary
Prospectus, the Prospectus or any supplement thereto or in any Blue Sky
Application a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; and shall reimburse each Underwriter on a
regular basis for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action,; except that the Company shall not be liable in
any such case to the extent, but only to the extent, that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter
specifically for use in the
-27-
preparation thereof and, provided further, that the indemnity agreement
provided in this Section 8(a) with respect to any Preliminary Prospectus
shall not inure to the benefit of any Underwriter from whom the person
asserting any losses, claims, charges, liabilities or litigation based upon
any untrue statement or alleged untrue statement of material fact or omission
or alleged omission to state therein a material fact purchased Shares, if a
copy of the Prospectus in which such untrue statement or alleged untrue
statement or omission or alleged omission was corrected has not been sent or
given to such person within the time required by the Act and the Rules and
Regulations thereunder, unless such failure is the result of noncompliance by
the Company with Section 4(c) hereof.
(b) Each Underwriter severally, but not jointly, shall
indemnify and hold harmless the Company against any losses, claims, damages
or liabilities, joint or several, as incurred, to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in the Registration Statement, Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or (B) in any Blue Sky
Application, or (ii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto a material fact required to
be stated therein or necessary to make the statements therein not misleading,
or the omission or alleged omission to state in any Preliminary Prospectus,
the Prospectus or any supplement thereto or in any Blue Sky Application a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; except that such indemnification shall be available in
each such case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company through the Underwriters by or on behalf of such Underwriter
specifically for use in the preparation thereof; and shall reimburse the
Company on a regular basis any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending against any such
loss, claim, damage, liability or action, notwithstanding the possibility
that payments for such expenses might later be held to be improper, in which
case the person receiving them shall promptly refund them.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
8(a) and (b) hereof, including the amounts of any requested reimbursement
payments, the method of determining such amounts and the basis on which such
amounts shall be apportioned among the reimbursing parties, shall be settled
by arbitration conducted pursuant to the Code of Arbitration Procedure of the
National Association of Securities Dealers, Inc. In the event the party
giving written notice of its demand for arbitration does not designate in
such written notice its preferences as to the arbitration tribunal, then the
party responding to said demand or notice is authorized to do so. Any such
arbitration will be limited to the operation of the interim reimbursement
provisions contained in Sections 8(a) and (b) hereof and will not resolve the
ultimate propriety or enforceability of the obligation to indemnify for
expenses which is created by the provisions of Sections 8(a), 8(b) and 8(c).
(d) Promptly after receipt by an indemnified party under
subsection (a) or (b)
-28-
above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party
in writing of the claim or the commencement of that action; the failure to
notify the indemnifying party shall not relieve it from any liability which
it may have to an indemnified party otherwise than under such subsection. If
any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party;
provided, however, if the defendants in any such action include both the
indemnified parties and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available to
it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under such subsection for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof unless (i)
the indemnified party shall have employed separate counsel in accordance with
the proviso to the preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party, representing all the indemnified parties under Section
8(a) and 8(b) hereof who are parties to such action), (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the
indemnifying party shall have approved the terms of such settlement;
provided, however, that such consent shall not be unreasonably withheld.
(e) In order to provide for just and equitable contribution in
any action in which a claim for indemnification is made pursuant to this
Section 8 for which it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the 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 this Section 8 provides for indemnification in such case, all the
parties hereto shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Underwriters are responsible pro rata for the
portion represented by the percentage that the underwriting discount bears to
the initial public offering price, and the Company is responsible for the
remaining portion; provided, however, that (i) no Underwriter shall be
required to contribute any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter, and (ii) no person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to a contribution from any person who is not
guilty of such fraudulent misrepresentation. This subsection (d) shall not
be operative as to any Underwriter to the extent that the Company has
-29-
received indemnity under this Section 8.
(f) The obligations of the Company under this Section 8 shall
be in addition to any liability which the Company may otherwise have, and
shall extend, upon the same terms and conditions, to each officer and
director of each Underwriter and to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability that
the respective Underwriters may otherwise have, and shall extend, upon the
same terms and conditions, to each director of the Company (including any
person who, with his consent, is named in the Registration Statement as about
to become a director of the Company), to each officer of the Company who has
signed the Registration Statement and to each person, if any, who controls
the Company within the meaning of the Securities Act, in either case, whether
or not such person is a party to any action or proceeding.
(g) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including without limitation the
provisions of this Section 8, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 8
fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required
by the Act and the Exchange Act. The parties are advised that Federal or
state public policy, as interpreted by the courts in certain jurisdictions,
may be contrary to certain of the provisions of this Section 8, and the
parties hereto hereby expressly waive and relinquish any right or ability to
assert such public policy as a defense to a claim under this Section 8 and
further agree not to attempt to assert any such defense.
9. Representations, Warranties and Agreements to Survive DELIVERY
. All representations, warranties, covenants and agreements of the Company
contained in this Agreement (including, without limitation, the agreements of
the Company set forth in Sections 4(i)-(n)), or contained in certificates of
officers of the Company submitted pursuant hereto, and the indemnity and
contribution agreements contained in Section 8 hereof, shall remain operative
and in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or controlling person, or by or on behalf of the
Company, or any of its officers, controlling persons or directors and shall
survive delivery of the Shares to the several Underwriters hereunder or
termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITER. If any Underwriter or
Underwriters shall fail to take up and pay for the number of Firm Shares
agreed by such Underwriter or Underwriters to be purchased hereunder upon
tender of such Firm Shares in accordance with the terms hereof, and if the
aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters so agreed but failed to purchase does not exceed 10% of the Firm
Shares, the remaining Underwriters shall be obligated, severally in
proportion to their respective commitments hereunder, to take up and pay for
the Firm Shares of such defaulting Underwriter or Underwriters.
-30-
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters
agreed but failed to take up and pay for exceeds 10% of the Firm Shares, the
remaining Underwriters shall have the right, but shall not be obligated, to
take up and pay for (in such proportions as may be agreed upon among them)
the Firm Shares which the defaulting Underwriter or Underwriters so agreed
but failed to purchase. If such remaining Underwriters do not, at the
Closing Date, take up and pay for the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase, the Closing
Date shall be postponed for twenty-four hours to allow the several
Underwriters the privilege of substituting within twenty-four hours
(including non-business hours) another underwriter or underwriters (which may
include any non-defaulting Underwriter) satisfactory to the Company. If no
such underwriter or underwriters shall have been substituted as aforesaid by
such postponed Closing Date, the Closing Date may, at the option of the
Company, be postponed for a further twenty-four hours, if necessary to allow
the Company the privilege of finding another underwriter or underwriters,
satisfactory to you, to purchase the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase. If it shall be
arranged for the remaining Underwriters or substituted underwriters to take
up the Firm Shares of the defaulting Underwriter or Underwriters as provided
in this Section, (i) the Company shall have the right to postpone the time of
delivery for a period of not more than seven full business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and
the Company agrees promptly to file any amendments to the Registration
Statement or supplements to the Prospectus which may thereby be made
necessary, and (ii) the respective number of Firm Shares to be purchased by
the remaining Underwriters and substitute underwriters shall be taken as the
basis of their underwriting obligation. If the remaining Underwriters shall
not take up and pay for all such Firm Shares so agreed to be purchased by the
defaulting Underwriter or Underwriters or substitute another underwriter or
underwriters as aforesaid and the Company shall not find or shall not elect
to seek another underwriter or underwriters for such Firm Shares as
aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section, neither the Company shall be liable to
any Underwriter (except as provided in Sections 5 and 8 hereof )nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than
for some reason permitted under this Agreement, to purchase the number of
Firm Shares agreed by such Underwriter to be purchased hereunder, which
Underwriter shall remain liable to the Company and the other Underwriters for
damages, if any, resulting from such default) be liable to the Company
(except to the extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section.
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11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the later of (i)
execution of this Agreement, or (ii) when notification of the effectiveness
of the Registration Statement has been released by the Commission.
(b) You shall have the right to terminate this Agreement by
giving notice as hereinafter specified at any time at or prior to the Closing
Date (i) if the Company shall have failed, refused or been unable, to perform
any agreement on its part to be performed, or because any other condition of
the Underwriters' obligations hereunder required to be fulfilled by the
Company is not fulfilled including, without limitation, any change in the
financial condition, earnings, operations, business, management, technical
staff, or business prospects of the Company from that set forth in the
Registration Statement or Prospectus which, in your sole judgment, is
material and adverse, or (ii) if trading on the New York Stock Exchange or
the Nasdaq Stock 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 New York Stock Exchange or the
Nasdaq Stock Market, by the New York Stock Exchange, the Nasdaq Stock Market
or by order of the Commission or any other governmental authority having
jurisdiction, or if a banking moratorium shall have been declared by Federal,
New York, Oklahoma or Texas authorities, or (iii) if on or prior to the
Closing Date, or on or prior to any later date on which Option Shares are to
be purchased, as the case may be, the Company shall have sustained a loss by
strike, fire, flood, earthquake, accident or other calamity of such character
as to interfere materially and adversely with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in
the general political or economic conditions or financial markets in the
United States as in your reasonable judgment makes it inadvisable or
impracticable to proceed with the offering, sale and delivery of the Shares,
or (v) if on or prior to the Closing Date, or on or prior to any later date
on which Option Shares are to be purchased, as the case may be, there shall
have been an outbreak or escalation of hostilities or other international or
domestic calamity, crises or material adverse change in political, financial
or economic conditions, the effect of which on the financial markets of the
United States is such as to make it in your reasonable judgment, inadvisable
to proceed with the marketing of the Shares. In the event of termination
pursuant to this Section 11(b), the Company shall remain obligated to pay
costs and expenses pursuant to Section 4(k), 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 11, you shall
promptly notify the Company by telephone or telecopy, in each case confirmed
by letter. If the Company shall elect to prevent this Agreement from
becoming effective, the Company shall promptly notify you by telephone or
telecopy, in each case, confirmed by letter.
12. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given if mailed or transmitted
by any standard form of telecommunication. Notices to the Underwriters shall
be directed to the Underwriters in care of Capital West Securities, Inc., 000
X. Xxxxxxxx, 16th Floor, Xxx Xxxxxxxxxx Xxxxxx, Xxxxxxxx
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Xxxx, Xxxxxxxx 00000, attention of Xxxxxx X. XxxXxxxxx; notices to the
Company shall be directed to it at 000 X. Xxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxx
00000, attention of Xxxx XxXxxx.
13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and their respective
executors, administrators, successors, and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person or corporation, other than the parties hereto and their respective
executors, administrators, successors, and assigns and the controlling
persons and officers and directors referred to in Section 8 hereof any legal
or equitable right, remedy or claim under or in respect of this Agreement or
any provisions herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of
the parties hereto and their respective executors, administrators,
successors, and assigns and said controlling persons and said officers and
directors, and for the benefit of no other person or corporation. No
purchaser of the Shares from any Underwriter shall be construed to be a
successor by reason merely of such purchase.
14. GOVERNING LAW. This Agreement and the Pricing Agreement shall
be governed by and construed in accordance with the laws of the State of
Oklahoma applicable to agreements made and to be performed in said State.
Specified times of day refer to Central time.
15. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will constitute an original.
* * * * * * *
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If the foregoing correctly sets forth your understanding of our
agreement, please sign in the space provided below for that purpose,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriter and the Company in accordance with its
terms.
HORIZON PHARMACIES, INC.
By:
----------------------------------------
Xxxx XxXxxx, President
CONFIRMED AND ACCEPTED, as of the date first above written:
CAPITAL WEST SECURITIES, INC.
By:
----------------------------------------
Xxxxxx X. XxXxxxxx, Chairman
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SCHEDULE A
UNDERWRITER SHARES PURCHASED
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Capital West Securities, Inc.
