Exhibit 1.1
1,100,000 Units
Aarica Holdings, Inc.
Each Unit Consisting of One Share of Common Stock and
One Redeemable Common Stock Purchase Warrant
_________, 2001
UNDERWRITING AGREEMENT
RUSHMORE SECURITIES CORPORATION
As Representative of the Several Underwriters
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Dear Sirs:
Aarica Holdings, Inc., a Texas corporation (the "Company"), proposes to
sell to you and the other underwriters named in Schedule I hereto (collectively,
the "Underwriters"), for whom Rushmore Securities Corporation is acting as
managing underwriter and representative (the "Representative"), in the
respective amounts set forth opposite each Underwriter's name in Schedule I
hereto, an aggregate of 1,100,000 units (the "Units"), each consisting of one
share of the Company's Common Stock, $0.01 par value (the "Common Stock"), and
one redeemable common stock purchase warrant (the "Warrants"). The Units,
together with (a) the shares of Common Stock and Warrants comprising the Units
and (b) the shares of Common Stock issuable upon exercise of the Warrants are
collectively referred to as the "Underwritten Securities". Certain selling
shareholders propose to grant to the Underwriters the Underwriters' Option
(described in Section 3(b) hereof) to purchase up to an aggregate of 165,000
additional Units solely to cover over-allotments in the sale of the Underwritten
Securities (such additional Units, together with (a) the shares of Common Stock
and Warrants comprising such additional Units and (b) the shares of Common Stock
issuable upon exercise of the Warrants, are collectively referred to herein as
the "Option Securities"). The Company also proposes to issue to the
Representative the Representative's Warrants to purchase up to an aggregate of
100,000 additional Units (individually, the Representative's Warrants and such
additional Units, together with (a) the shares of Common Stock and Warrants
comprising such additional Units and (b) the shares of Common Stock issuable
upon exercise of such Warrants, are collectively referred to herein as the
"Representative's Securities"). The Representative's Warrants shall be issued
pursuant to the Representative's Warrant Agreement in the form of Exhibit A
attached hereto and shall be exercisable, in whole or in part, for a period of
four years commencing one year from the date of the Prospectus, at 120% of the
initial public offering price of the Units. The Underwritten Securities, the
Option Securities and the Representatives' Securities are collectively referred
to herein as the "Securities."
The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "Effective Date" shall mean each date that the
Registration Statement (as defined below) and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean the
date and time that this Agreement is executed and delivered by the parties
hereto. The term "Preliminary Prospectus" shall mean any preliminary prospectus
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referred to in Section 1(a) below with respect to the offering of the
Securities, and any preliminary prospectus included in the Registration
Statement on the Effective Date that omits Rule 430A Information (as defined
below). Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the most recent Preliminary Prospectus which predates or
coincides with the Execution Time. "Prospectus" shall mean the final prospectus
with respect to the offering of the Securities that contains the Rule 430A
Information. "Registration Statement" shall mean (a) the registration statement
referred to in Section 1(a) below, including Exhibits and Financial Statements,
in the form in which it has or shall become effective, (b) in the event any
post-effective amendment thereto becomes effective prior to the Closing Date (as
defined in Section 4(a) hereof) or any settlement date pursuant to Section 4(b)
hereof, such registration statement as so amended on such date, and (c) in the
event of the filing of any abbreviated registration statement increasing the
size of the offering (a "Rule 462 Registration Statement"), pursuant to Rule
462(b) (as defined below), which registration statement became effective upon
filing the Rule 462 Registration Statement. Such term shall include Rule 430A
Information (as defined below) deemed to be included therein at the Effective
Date as provided by Rule 430A. "Rule 424," "Rule 462(b)" and "Rule 430A" refer
to such rules promulgated under the Securities Act of 1933, as amended (the
"Act"). "Rule 430A Information" means information with respect to the Securities
and the offering thereof permitted to be omitted from the Registration Statement
when it becomes effective pursuant to Rule 430A.
1. 1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, each Underwriter that:
(a) The Company meets the requirements for the use of Form SB-2 under
the Act and has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a related preliminary
prospectus ("Preliminary Prospectus"), on Form SB-2 (Commission File No.
333-43794) (the "Registration Statement") for the registration of the
Securities under the Act. The Company may have filed one or more amendments
thereto, including related Preliminary Prospectuses, each of which has
previously been furnished to you. The Company will next file with the
Commission either prior to effectiveness of such Registration Statement, a
further amendment thereto (including the form of Prospectus) or, after
effectiveness of such Registration Statement, a Prospectus in accordance
with Rules 430A and 424(b)(1) or (4). As filed, such amendment and form of
Prospectus, or such Prospectus, shall include all Rule 430A Information
and, except to the extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectus)
as the Company has advised you in writing, prior to the Execution Time,
will be included or made therein.
(b) The Preliminary Prospectus at the time of filing thereof,
conformed in all material respects with the applicable requirements of the
Act and the rules and regulations thereunder and did not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein not
misleading. If the Effective Date is prior to or simultaneous with the
Execution Time, (i) on the Effective Date, the Registration Statement
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conformed in all material respects to the requirements of the Act and the
rules and regulations thereunder and did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading, and (ii) at the Execution Time, the Registration Statement
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b), the Registration Statement and the Prospectus will conform, in all
material respects to the requirements of the Act and the rules and
regulations thereunder, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit, to
state a material fact required to be stated therein or necessary in order
to make the statements therein (and, in the case of the Prospectus, in the
light of the circumstances under which they were made) not misleading. If
the Effective Date is subsequent to the Execution Time, on the Effective
Date, the Registration Statement and the Prospectus will conform in all
material respects to the requirements of the Act and the rules and
regulations thereunder, and neither of such documents will contain any
untrue statement of any material fact or will omit to state any material
fact required to be stated therein or necessary to make the statements
therein (and, in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading. The two preceding
sentences do not apply to statements in or omissions from the Registration
Statement or the Prospectus (or any supplements thereto) based upon and in
conformity with information furnished in writing to the Company by or on
behalf of any Underwriter through the Representative specifically for use
in connection with the preparation of the Registration Statement or the
Prospectus (or any supplements thereto).
(c) The Company does not own or control, directly or indirectly, any
shares of capital stock or equity interests in any corporation,
partnership, association or other entity, except as set forth in the
Prospectus.
(d) The Company and each of its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which each company is chartered or
organized, with full corporate power and corporate authority to own their
respective properties and conduct their respective businesses as described
in the Prospectus, and the Company and each of its subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction in which each company conducts its
respective business or owns property and in which the failure, individually
or in the aggregate, to be so qualified would have a material adverse
effect on the properties, assets, operations, business, condition
(financial or otherwise) or prospects of the Company ("Material Adverse
Effect"). The Company and each of its subsidiaries has all necessary
authorizations, approvals, orders, licenses, certificates and permits of
and from all government regulatory officials and bodies, to own their
respective properties and conduct their respective businesses as described
in the Prospectus except where the absence of any such authorization,
approval, order, license, certificate or permit would not have a Material
Adverse Effect.
(e) The Company does not own any shares of capital stock or any other
securities of any corporation or any equity interest in any firm,
partnership, association or other entity other than as described in the
Registration Statement.
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(f) The Company's equity capitalization is as set forth in the
Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; all
outstanding shares of Common Stock (including, without limitation, the
shares of Common Stock underlying (i) the Units to be sold by the Company
hereunder, (ii) the Warrants, and (iii) the Representative's Warrants) have
been duly and validly authorized and issued and are fully paid and
nonassessable, and the certificates therefor are in valid and sufficient
form; there are, and, on the Effective Date, the Closing Date (and any
settlement date pursuant to Section 4(b) hereof), there will be, no other
classes of stock outstanding except Common Stock; all outstanding options
to purchase shares of Common Stock have been duly and validly authorized
and issued; except as described in the Registration Statement, there are,
and, on the Closing Date (and any settlement date pursuant to Section 4(b)
hereof), there will be, no options, warrants or rights to acquire, or debt
instruments convertible into or exchangeable for, or other agreements or
understandings to which the Company is a party, outstanding or in
existence, entitling any person to purchase or otherwise acquire shares of
capital stock of the Company; the issuance and sale of the Securities have
been duly and validly authorized and, when issued and delivered and paid
for, the Securities will be fully paid and nonassessable and free from
preemptive rights, and will conform in all respects to the description
thereof contained in the Prospectus; the Representative's Warrants will,
when issued, constitute valid and binding obligations of the Company
enforceable in accordance with their terms and the Company has reserved a
sufficient number of shares of Common Stock for issuance upon exercise
thereunder; the Securities will, when issued, possess the rights,
privileges and characteristics as described in the Prospectus; and the
certificates for the Securities are in valid and sufficient form. Each
offer and sale of securities of the Company referred to in Item 26 of Part
II of the Registration Statement was effected in compliance with the Act
and the rules and regulations thereunder.
(g) The Securities (other than the Representative's Warrants) have
been approved for listing on the Boston Stock Exchange ("BSE"), upon
official notice of issuance.
(h) Other than as described in the Prospectus, there is no pending or,
to the best knowledge of the Company, threatened action, suit or proceeding
before any court or governmental agency, authority or body, domestic or
foreign, or any arbitrator involving the Company of a character required to
be disclosed in the Registration Statement or the Prospectus. There is no
contract or other document of a character required to be described in the
Registration Statement or Prospectus or to be filed as an exhibit that is
not described or filed as required.
(i) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as rights of indemnity and contribution hereunder may be limited by
public policy and except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of equity.
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(j) The Company has full corporate power and corporate authority to
enter into and perform its obligations under this Agreement and to issue,
sell and deliver the Securities in the manner provided in this Agreement.
The Company has taken all necessary corporate action to authorize the
execution and delivery of, and the performance of its obligations under,
this Agreement.
(k) Neither the offering, issuance and sale of the Securities, nor the
consummation of any other of the transactions contemplated herein, nor the
fulfillment of the terms hereof, will conflict with or result in a breach
or violation of, or constitute a default under, or result in the imposition
of a lien on any properties of the Company or an acceleration of
indebtedness pursuant to, the Articles of Incorporation or Bylaws of the
Company, as currently in effect, or any of the terms of any indenture or
other agreement or instrument to which the Company is a party or by which
the Company or any of its properties are bound, or any law, order,
judgment, decree, rule or regulation applicable to the Company of any
court, regulatory body, administrative agency, governmental body, stock
exchange or arbitrator having jurisdiction over the Company. The Company is
not in violation of its Articles of Incorporation or Bylaws, as currently
in effect, or, except as described in the Prospectus, in breach of or
default under any of the terms of any indenture or other agreement or
instrument to which it is a party or by which it or its properties are
bound, which breach or default would, individually or in the aggregate,
have a Material Adverse Effect.
(l) Except as disclosed in the Prospectus, no person has the right,
contractual or otherwise, to cause the Company to issue to it any shares of
capital stock in consequence of the issue and sale of the Securities, nor
does any person have preemptive rights, or rights of first refusal or other
rights to purchase any of the Securities. Except as referred to in the
Prospectus, no person holds a right to require or participate in a
registration under the Act of Common Stock, Preferred Stock or any other
equity securities of the Company.
(m) The Company has not (i) taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to cause or result in,
under the Exchange Act, or otherwise, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Securities (other than those actions permitted by applicable law) or
(ii) effected any sales of shares of securities that are required to be
disclosed in response to Item 26 of Part II of the Registration Statement
(other than transactions disclosed in the Registration Statement or the
Prospectus).
(n) No consent, approval, authorization or order of, or declaration or
filing with, any court or governmental agency or body is required to be
obtained or filed by or on behalf of the Company in connection with the
transactions contemplated herein, except such as may have been obtained or
made for registration of the Securities under the Act, and such as may be
required under the Blue Sky laws of any jurisdiction in connection with the
purchase and distribution of the Securities by the Underwriters.
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(o) The accountants who have certified the Financial Statements filed
or to be filed with the Commission as part of the Registration Statement
are independent accountants as required by the Act.
(p) No stop order preventing or suspending the use of any Preliminary
Prospectus has been issued, and no proceedings for that purpose are pending
or, to the best knowledge of the Company, threatened or contemplated by the
Commission; no stop order suspending the sale of the Securities in any
jurisdiction has been issued and no proceedings for that purpose have been
instituted or, to the best knowledge of the Company, threatened or are
contemplated; and any request of the Commission for additional information
(to be included in the Registration Statement or the Prospectus or
otherwise) has been complied with.
(q) The Company has not sustained, since January 1, 2000, any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, and, since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, there have not been any changes in the capital stock or
long-term debt of the Company, or any material adverse change, or a
development known to the Company that could reasonably be expected to cause
or result in a material adverse change, in the general affairs, management,
financial position, stockholders' equity, results of operations or
prospects of the Company, otherwise than as set forth in the Prospectus.
Except as set forth in the Prospectus, there exists no present condition or
state of facts or circumstances known to the Company involving its
customers which the Company can now reasonably foresee would have a
Material Adverse Effect or which would result in a termination or
cancellation of any agreement with any customer whose purchases,
individually or in the aggregate, are material to the business of the
Company, or which would result in any material decrease in sales to any
such customer or purchases from any supplier, or which would prevent the
Company from conducting its business as described in the Prospectus in
essentially the same manner in which it has heretofore been conducted.
(r) The Financial Statements and the related notes of the Company,
included in the Registration Statement and the Prospectus present fairly
the consolidated financial position, consolidated results of operations,
consolidated cash flow and consolidated changes in shareholders' equity of
the Company at the dates and for the periods indicated, subject in the case
of the Financial Statements for interim periods, to normal and recurring
year-end adjustments. The unaudited pro forma combined condensed statements
of the Company present fairly the consolidated financial position and the
consolidated results of operations at the dates and for the periods
indicated. Such Financial Statements and the unaudited pro forma combined
financial information of the Company were prepared in conformity with the
Commission's rules and regulations and in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
(s) The Company owns or possesses, or has the right to use pursuant to
licenses, sublicenses, agreements, permissions or otherwise, adequate
patents, copyrights, trade names, trademarks, service marks, licenses and
other intellectual property rights necessary to carry on its business as
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described in the Prospectus, and, except as set forth in the Prospectus,
the Company has not received any notice of either (i) default under any of
the foregoing or (ii) infringement of or conflict with asserted rights of
others with respect to, or challenge to the validity of, any of the
foregoing which, in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could have a Material Adverse Effect, and the
Company knows of no fact which could reasonably be anticipated to serve as
the basis for any such notice.
(t) Subject to such exceptions as are not likely to result in a
Material Adverse Effect, (A) the Company owns all properties and assets
described in the Registration Statement and the Prospectus as being owned
by it and (B) the Company has good title to all properties and assets owned
by it, free and clear of all liens, charges, encumbrances and restrictions,
except as otherwise disclosed in the Prospectus and except for (i) liens
for taxes not yet due, (ii) mortgages and liens securing debt reflected on
the Financial Statements included in the Prospectus, (iii) materialmen's,
workmen's, vendor's and other similar liens incurred in the ordinary course
of business that are not delinquent, individually or in the aggregate, and
do not have a Material Adverse Effect on the value of such properties or
assets of the Company, or on the use of such properties or assets by the
Company, in its respective business, and (iv) any other liens that,
individually or in the aggregate, are not likely to result in a Material
Adverse Effect. All leases to which the Company is a party and which are
material to the conduct of the business of the Company are valid and
binding and no material default by the Company has occurred and is
continuing thereunder; and the Company enjoys peaceful and undisturbed
possession under all such material leases to which it is a party as lessee.
(u) The books, records and accounts of the Company accurately and
fairly reflect, in reasonable detail, the transactions in and dispositions
of the assets of the Company. The system of internal accounting controls
maintained by the Company is sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(v) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company has not incurred any liabilities
or obligations, direct or contingent, or entered into any transactions, in
each case, which are likely to result in a Material Adverse Effect, and
there has not been any payment of or declaration to pay any dividends or
any other distribution with respect to the shares of the capital stock of
the Company.
(w) The Company is in compliance in all material respects with all
applicable laws, rules and regulations, including, without limitation,
employment and employment practices, immigration, terms and conditions of
employment, health and safety of workers, customs and wages and hours, and
is not engaged in any unfair labor practice. No property of the Company has
7
been seized by any governmental agency or authority as a result of any
violation by the Company or any independent contractor of the Company of
any provisions of law. There is no pending unfair labor practice complaint
or charge filed with any governmental agency against the Company. There is
no labor strike, material dispute, slow down or work stoppage actually
pending or, to the best knowledge of the Company, threatened against or
affecting the Company; no grievance or arbitration arising out of or under
any collective bargaining agreements is pending against the Company; no
collective bargaining agreement which is binding on the Company restricts
the Company from relocating or closing any of its operations; and none of
the Company has experienced any work stoppage or other labor dispute at any
time.
(x) Except as set forth below in this paragraph, the Company has
accurately, properly and timely (giving effect to any valid extensions of
time) filed all federal, state, local and foreign tax returns (including
all schedules thereto) that are required to be filed, and has paid all
taxes and assessments shown thereon. Any and all tax deficiencies asserted
or assessed against the Company by the Internal Revenue Service ("IRS") or
any other foreign or domestic taxing authority have been paid or finally
settled with no remaining amounts owed. Neither the IRS nor any other
foreign or domestic taxing authority has examined any tax returns of the
Company nor has the IRS or any foreign or domestic taxing authority
asserted a position which conflicts with any tax position taken by the
Company. The charges, accruals and reserves shown in the Financial
Statements included in the Prospectus in respect of taxes for all fiscal
periods to date are adequate, and nothing has occurred subsequent to the
date of such Financial Statements that makes such charges, accruals or
reserves inadequate. The Company is not aware of any proposal (whether oral
or written) by any taxing authority to adjust any tax return filed by the
Company.
(y) With such exceptions as are not likely to result in a Material
Adverse Effect, the Company is in compliance with all federal, state,
foreign and local laws and regulations relating to pollution or protection
of human health or the environment ("Environmental Laws"), there are no
circumstances that may prevent or interfere with such compliance other than
as set forth in the Prospectus, and the Company has not received any notice
or other communication alleging a currently pending violation of any
Environmental Laws. With such exceptions as are not likely to result in a
Material Adverse Effect, other than as set forth in the Prospectus, there
are no past or present actions, activities, circumstances, conditions,
events or incidents including, without limitation, the release, emission,
discharge or disposal of any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products, that may result in the
imposition of liability on the Company or any claim against the Company or,
to the Company's best knowledge, against any person or entity whose
liability for any claim the Company has or may have assumed either
contractually or by operation of law, and the Company has not received any
notice or other communication concerning any such claim against the Company
or such person or entity.
(z) Except as set forth in the Prospectus, there are no outstanding
loans, advances or guaranties of indebtedness by the Company to or for the
benefit of its affiliates, or any of its officers or directors, or any of
the members of the families of any of them, which are required to be
disclosed in the Registration Statement or the Prospectus.
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(aa) The Company is not an investment company subject to registration
under the Investment Company Act of 1940, as amended.
(bb) Except as set forth in the Prospectus, the Company has insurance
of the types and in the amounts that it reasonably believes is adequate for
its business including, but not limited to, casualty and general liability
insurance covering all real and personal property owned or leased by the
Company, as applicable, against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against.
(cc) The Company has not at any time (i) made any contributions to any
candidate for political office, or failed to disclose fully any such
contribution, in violation of law; (ii) made any payment to any state,
federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or allowed by all applicable laws; or (iii) violated, nor is it in
violation of, any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
(dd) The preparation and the filing of the Registration Statement with
the Commission have been duly authorized by and on behalf of the Company,
and the Registration Statement has been duly executed pursuant to such
authorization by and on behalf of the Company.
(ee) All documents delivered or to be delivered by the Company or any
of its directors or officers to the Underwriters, the Commission or any
state securities law administrator in connection with the issuance and sale
of the Securities were, on the dates on which they were delivered, and will
be, on the dates on which they are to be delivered, true, complete and
correct in all material respects.
(ff) Except as described in the Prospectus, the Company does not
maintain, nor does any other person maintain on behalf of the Company, any
retirement, pension (whether deferred or non-deferred, defined contribution
or defined benefit) or money purchase plan or trust. There are no unfunded
liabilities of the Company with respect to any such plans or trusts that
are not accrued or otherwise reserved for on the Financial Statements.
(gg) Any certificates signed by an officer of the Company and
delivered to the Representative or the Underwriters or to counsel for the
Underwriters shall also be deemed a representation and warranty of the
Company to the Underwriters as to the matters covered thereby. Any
certificate delivered by the Company to its counsel for purposes of
enabling such counsel to render the opinions referred to in Section 7(b)
will also be furnished to the Representative and counsel for the
Underwriters and shall be deemed to be additional representations and
warranties by the Company to the Underwriters as to the matters covered
thereby.
(hh) The Company has obtained and delivered to the Representative the
written agreements, substantially in the form attached hereto as Exhibit B,
of the principal shareholders of the Company restricting dispositions of
equity securities of the Company.
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(ii) The Company is in compliance with the Foreign Corrupt Practices
Act, as amended, in all material respects.
2. Representations, Warranties and Covenants of the Selling Shareholders.
Each of the Selling Shareholders jointly and severally represents and warrants
to, and agrees with, each of the Underwriters and the Company that:
(a) All consents, approvals, authorizations and orders necessary for
the execution and delivery by such Selling Shareholder of this Agreement,
the Power of Attorney (the "Power of Attorney") and the Custody Agreement
(the "Custody Agreement") hereinafter referred to, and for the sale and
delivery of the Shares to be sold by such Selling Shareholder hereunder,
have been obtained; and such Selling Shareholder has full right, power and
authority to enter into this Agreement, the Power of Attorney and the
Custody Agreement and to sell, assign, transfer and deliver the Shares to
be sold by such Selling Shareholder hereunder;
(b) The sale of the Shares to be sold by such Selling Shareholder
hereunder and the compliance by such Selling Shareholder with all of the
provisions of this Agreement, the Power of Attorney and the Custody
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which such Selling Shareholder is a
party or by which such Selling Shareholder is bound or to which any of the
property or assets of such Selling Shareholder is subject, or any statute
or order, rule or regulation of any court or governmental agency or body
having jurisdiction over such Selling Shareholder or the property of such
Selling Shareholder;
(c) Such Selling Shareholder has good and valid title to the Shares to
be sold by such Selling Shareholder hereunder, free and clear of all liens,
encumbrances, equities or adverse claims; and, upon delivery of such Shares
and payment thereof pursuant hereto, good and valid title to such Shares,
free and clear of all liens, encumbrances, equities or adverse claims, will
pass to the several Underwriters;
(d) Such Selling Shareholder has not taken and will not take, directly
or indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares; and
(e) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Shareholder expressly for use therein, such Preliminary Prospectus
and the Registration Statement did, and the Prospectus and any further
amendments or supplements to the Registration Statement and the Prospectus
will, when they become effective or are filed with the Commission, as the
case may be, conform, in all material respects, to the requirements of the
Act, and the rules and regulations of the Commission thereunder, and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading.
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(f) Certificates in negotiable form representing all of the Shares to
be sold by each Selling Shareholder have been placed in custody under a
Custody Agreement, in the form furnished to you, duly executed and
delivered by such Selling Shareholder to Xxxxxxx X. Xxxxx, as custodian (
the "Custodian"), and that each Selling Shareholder has duly executed and
delivered a Power of Attorney, in the form furnished to you, appointing
____________ and ____________, such Selling Shareholder's attorneys-in-fact
(the "Attorneys-in-Fact"), with authority to execute and deliver this
Agreement on behalf of such Selling Shareholder, to determine the purchase
price to be paid by the Underwriters to the Selling Shareholders as
provided herein, to authorize the delivery of the Shares to be sold by such
Selling Shareholder hereunder and otherwise to act on behalf of such
Selling Shareholder in connection with the transactions contemplated by
this Agreement and the Custody Agreement.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act
of 1982 with respect to the transactions herein contemplated, each of the
Selling Shareholders agrees to deliver to you, prior to or at the First
Time of Delivery (as hereinafter defined), a properly completed and
executed United States Treasury Department Form W-9 (or Form W-8 if
applicable, or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
Each of the Selling Shareholders specifically agrees, jointly and
severally, that the Shares represented by the certificate held in custody
for such Selling Shareholder under the Custody Agreement are subject to the
interests of the Underwriters hereunder and that the arrangements made by
such Selling Shareholder for such custody, and the appointment by such
Selling Shareholder of the Attorneys-in-Fact by the Power of Attorney, are
to that extent irrevocable. Each of the Selling Shareholders specifically
agrees, severally and not jointly, that the obligations of the Selling
Shareholders hereunder shall not be terminated by operation of law, whether
by the death or incapacity of any individual Selling Shareholder or, in the
case of an estate or trust, by the death or incapacity of any executor or
trustee or the termination of such estate or trust, or in the case of a
partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event. If any individual
Selling Shareholder or any such executor or trustee should die or become
incapacitated, or if any such estate or trust should be terminated, or if
any such partnership or corporation should be dissolved, or if any other
such event should occur before the delivery of the Shares hereunder,
certificates representing the Shares shall be delivered by or on behalf of
the Selling Shareholders in accordance with the terms and conditions of
this Agreement and of the Custody Agreement, and actions taken by the
Attorneys-in-Fact pursuant to the Power of Attorney shall be as valid as if
such death, incapacity, termination, dissolution or other event had not
occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them shall have received notice of such death,
incapacity, termination, dissolution or other event.
11
3. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to
issue and sell to the Underwriters an aggregate of 1,100,000 Units. Each of
the Underwriters agrees, severally and not jointly, to purchase from the
Company the number of Units set forth opposite its name in Schedule I
hereto. The purchase price to be paid by the several Underwriters to the
Company shall be $_______ per Unit. No value shall be attributable to the
Warrants.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, Xxxxx Xxxxxx and
Continental Capital and Equity Corporation (the "Selling Shareholders")
hereby grant an option (the "Underwriters' Option") to the several
Underwriters to purchase, severally and not jointly, up to an aggregate of
165,000 Units (____ Units and ____ Units, respectively), at the same
purchase price per Unit for use solely in covering any over-allotments made
by the Representative for the account of the Underwriters in the sale and
distribution of the Underwritten Securities. The Underwriters' Option may
be exercised in whole or in part at any time on or before the 45th day
after the Effective Date upon written or telegraphic notice by the
Representative to the Selling Shareholders setting forth the number of
Units which the several Underwriters elect to purchase pursuant to the
Underwriters' Option. Delivery of certificates for such Option Securities
by the Selling Shareholders and payment therefor to the Selling
Shareholders shall be made as provided in Section 4 hereof. The number of
Units purchased by each Underwriter pursuant to the Underwriters' Option
shall be determined by multiplying the number of Units to be sold by the
Selling Shareholders pursuant to the Underwriters' Option, as exercised, by
a fraction, the numerator of which is the number of Units to be purchased
by such Underwriter as set forth opposite its name in Schedule I and the
denominator of which is the total number of Units to be purchased by all of
the Underwriters as set forth on Schedule I (subject to such adjustments to
eliminate any fractional Unit purchases as the Representative in its
discretion may make).
4
4. Delivery and Payment.
(a) If the Underwriters' Option described in Section 3(b) hereof is
exercised on or before the third business day prior to the Closing Date (as
defined below), delivery of the certificates for the Shares described in
Sections 3(a) and 32(b) hereof shall be made by the Company through the
facilities of the Depository Trust Company ("DTC"), and payment therefor,
shall be made at the office of the Representative at 9:00 a.m. Dallas,
Texas, time, on ____________, ____ or such later date (but not later than
____________, ____) as the Representative shall designate, which date and
time may be postponed by agreement among the Representative and the Company
or as provided in Section 10 hereof (such date, time of delivery and
payment for such Securities being herein called the ("Closing Date").
Delivery of the certificates for such Securities to be purchased on the
Closing Date shall be made as provided in the preceding sentence for the
respective accounts of the several Underwriters against payment by the
several Underwriters through the Representative of the aggregate purchase
price of such Securities being sold by the Company, to or upon the order of
the Company, by wire transfer. Certificates for such Securities shall be
registered in such names and in such denominations as the Representative
may request not less than one full business day in advance of the Closing
Date. The Company agrees to have the certificates for the Securities to be
purchased on the Closing Date available at the office of the DTC, not later
than 9:00 a.m. Dallas, Texas, time, at least one business day prior to the
Closing Date.
(b) If the Underwriters' Option is exercised after the third business
day prior to the Closing Date, (i) delivery of the certificates for the
Shares described in Section 3(a) hereof and payment therefor will be
governed by the provisions of Section 4(a) hereof and (ii) the Selling
Shareholders will deliver (at the expense of the Selling Shareholders) on
the date specified by the Representative (which shall not be less than one
nor more than five business days after exercise of the Underwriters'
Option), certificates for the Shares described in Section 3(b) hereof in
such names and denominations as the Representative shall have requested
against payment at the office of the Representative of the purchase price
therefor, to or upon the order of the Selling Shareholders, by wire
transfer. If settlement for such Securities occurs after the Closing Date,
the Company will deliver to the Representative on the settlement date for
such Securities, and the obligation of the Underwriters to purchase such
Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions,
certificates and letters delivered on the Closing Date pursuant to Section
7 hereof. The Company agrees to have the certificates for the Securities to
be purchased after the Closing Date available at the office of the DTC not
later than 9:00 a.m. Dallas, Texas, time at least one business day prior to
the settlement date.
5. Offering by Underwriters.
It is understood that the several Underwriters propose to offer the Securities
for sale to the public as set forth in the Prospectus.
13
6. Agreements.
The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the Execution
Time, to become effective as promptly as possible. If the Registration
Statement has become or becomes effective pursuant to Rule 430A, or filing
of the Prospectus is otherwise required under Rule 424(b), the Company will
file the Prospectus, properly completed, pursuant to Rule 424(b) within the
time period prescribed and will provide evidence satisfactory to the
Representative of such timely filing. The Company will promptly advise the
Representative (i) when the Registration Statement shall have become
effective, (ii) when any post-effective amendment thereto shall have become
effective, (iii) of any request by the Commission for any amendment or
supplement of the Registration Statement or the Prospectus or for any
additional information with respect thereto, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of the receipt by the Company of any notification
with respect to the institution or threatening of any proceeding for that
purpose and (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company will use its best efforts to prevent the issuance
of any such stop order or suspension and, if issued, to obtain as soon as
possible the withdrawal thereof. The Company will not file any amendment to
the Registration Statement or supplement to the Prospectus without the
prior consent of the Representative. The Company will prepare and file with
the Commission, promptly upon your request, any amendment to the
Registration Statement or supplement to the Prospectus that you reasonably
determine to be necessary or advisable in connection with the distribution
of the Securities by you, and will use its best efforts to cause the same
to become effective as promptly as possible.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading or, if it otherwise shall be necessary
to supplement the Prospectus to comply with the Act or the rules or
regulations thereunder, the Company will promptly prepare and file with the
Commission, subject to Section 6(a) hereof, a supplement that will correct
such statement or omission or a supplement that will effect such
compliance.
(c) As soon as practicable (but not later than eighteen months after
the effective date of the Registration Statement), the Company will make
generally available to its security holders and to the Representative an
earnings statement or statements (which need not be audited) of the Company
covering a period of at least twelve months after the Effective Date (but
in no event commencing later than 120 days after such date), which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 promulgated
thereunder.
(d) The Company will furnish to each of you and counsel for the
Underwriters, without charge, one signed copy of the Registration Statement
and any amendments thereto (including exhibits thereto) and to each other
Underwriter a conformed copy of the Registration Statement and any
amendments thereto (without exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, as many
copies of the Prospectus and each Preliminary Prospectus and any
supplements thereto as the Representative may reasonably request.
14
(e) The Company will take all actions necessary for the registration
or qualification of the Securities for sale under the laws of such
jurisdictions within the United States and its territories as the
Representative may designate, will maintain such qualifications in effect
so long as required for the distribution of the Securities and will pay the
fee of the National Association of Securities Dealers, Inc. (the "NASD") in
connection with its review of the offering, provided that the Company shall
not be required to qualify as a foreign corporation or to consent to
service of process under the laws of any such jurisdiction (except service
of process with respect to the offering and sale of the Securities).
Without limiting the foregoing, the Company will use its best efforts to
register or qualify the shares of Common Stock underlying the Warrants in
any jurisdiction where the registered holders of 5% or more of such
Warrants reside, and will use its best efforts to keep such registrations
or qualifications in effect during the term of the Warrants.
(f) The Company will apply the net proceeds from the offering received
by it in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(g) The Company will (i) cause the Securities (other than the
Representative's Warrants) to be listed or quoted on the BSE and (ii)
comply with all registration, filing and reporting requirements of the
Exchange Act and the BSE which may from time to time be applicable to the
Company.
(h) During the five-year period commencing on the date hereof, the
Company will furnish to its shareholders, as soon as practicable after the
end of each respective period, annual reports (including financial
statements audited by independent certified public accountants) and
unaudited quarterly reports of earnings and will furnish to you and, upon
request, to the other Underwriters hereunder (i) concurrent with furnishing
such quarterly reports to its shareholders, statements of income and other
information of the Company for such quarter in the form furnished to the
Company's shareholders; (ii) concurrent with furnishing such annual reports
to its shareholders, a balance sheet of the Company as at the end of such
fiscal year, together with statements of income and surplus and of cash
flow of the Company for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of its
independent certified public accountants; (iii) as soon as they are
available, copies of all reports and financial statements furnished to or
filed with the Commission, the NASD, the BSE or any other securities
exchange on which any of the Company's securities may be listed; (iv) every
press release and every material news item or article in respect of the
Company or its affairs which was released or prepared by the Company; and
(v) any additional information of a public nature concerning the Company or
its business that you may reasonably request. During such five-year period,
if the Company shall have active subsidiaries, the foregoing financial
statements shall be on a consolidated basis to the extent that the accounts
of the Company and its subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary
that is not so consolidated.
15
(i) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be
the same entity as the transfer agent) for the Securities.
(j) The Company will not, for a period of one (1) year following the
Effective Date, without the prior written consent of the Representative,
offer, sell, contract to sell, or otherwise dispose of, any shares of
Common Stock, or any options, rights or warrants to purchase shares of
Common Stock, or any securities convertible into or exchangeable for shares
of Common Stock, except for (i) sales of Securities as contemplated by this
Agreement, and (ii) sales of Common Stock upon the exercise of Warrants or
options issued pursuant to the Company's employee stock option plan
described in the Prospectus.
(k) The Company has reserved and shall continue to reserve a
sufficient number of shares of Common Stock for issuance upon exercise of
the Representative's Warrants.
(l) If the Company elects to rely on Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 p.m., Washington D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
(m) For the five year period from the date of the Prospectus, the
Company will nominate for election as a director a person designated by the
Representative or, at the Representative's option, to designate a person to
attend meetings of the board of directors, who shall be entitled to attend
all meetings of the Board of Directors and receive all correspondence and
communications sent by the Company to the members of the Board of
Directors. If Xxxxxx X. Xxxxx, III, a principal of Rushmore Securities
Corporation, is designated as a member of the board of directors, he will
receive an annual retainer of $5,000 and $1,000 per meeting attended,
$1,000 for chairing a committee of the board of directors, and $500 for
each committee meeting attended.
(n) The Company shall solicit the exercise of the Warrants solely
through the Representatives, at the Representative's election, and the
Company shall pay to the Representatives the compensation set forth in
Section 8 hereof for such services.
7. Conditions to the Obligations of the Underwriters.
The obligations of the Underwriters to purchase the Securities described in
Sections 3(a) and 3(b) hereof shall be subject to (i) the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and (in the case of any Securities
delivered after the Closing Date) any settlement date pursuant to Section 4(b)
hereof, (ii) the accuracy of the statements of the Company made in any
certificates delivered pursuant to the provisions hereof, (iii) the performance
by the Company of its obligations hereunder, and (iv) the following additional
conditions:
16
(a) The Registration Statement shall have become effective (or,
if a post-effective amendment is required to be filed pursuant to Rule
430A under the Act, such post-effective amendment shall become
effective) not later than 5:00 p.m. Eastern Standard Time, on the
execution date hereof or at such later date and time as the
Representative may approve in writing and, at the Closing Date (and
any settlement date pursuant to Section 4(b) hereof), no stop order
suspending the effectiveness of the Registration Statement or any
qualification in any jurisdiction shall have been issued and no
proceedings for that purpose shall have been initiated or, to the best
knowledge of the Company, threatened by the Commission.
(b) The Company shall have furnished to the Representative the
opinion of Xxxxxxx X. Xxxxx, L.L.C., counsel for the Company,
addressed to the Underwriters and dated the Closing Date (and any
settlement date pursuant to Section 4(b) hereof), or other evidence
satisfactory to the Representative to the effect that:
(i) The Registration Statement has become effective under
the Act; any required filing of the Prospectus or any supplements
thereto pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the best
knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement or any qualification
in any jurisdiction has been issued and no proceedings for that
purpose have been instituted or threatened; any request from the
Commission for additional information has been complied with; the
Registration Statement and the Prospectus (and any supplements
thereto) comply as to form in all material respects with the
applicable requirements of the Act and the rules and regulations
thereunder (except that such counsel need express no opinion with
respect to the Financial Statements and schedules included in the
Registration Statement and Prospectus).
(ii) The Company does not own or control, directly or
indirectly, any shares of capital stock or equity interests in
any corporation, partnership, association or other entity, except
as set forth in the Prospectus.
(iii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full
corporate power and corporate authority to own its properties and
conduct its business as described in the Prospectus, and is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which it conducts
its business or owns property and in which the failure,
individually or in the aggregate, to be so qualified would have a
Material Adverse Effect. The Company has all necessary and
material authorizations, approvals, orders, licenses,
certificates and permits of and from all government regulatory
officials and bodies, to own its properties and conduct its
business as described in the Prospectus, except where failure to
obtain such authorizations, approvals, orders, licenses,
certificates or permits would not have a Material Adverse Effect.
17
(iv) The Company has an authorized share capitalization as
set forth in the Prospectus; the capital stock of the Company
conforms in all material respects to the description thereof
contained in the Prospectus; all outstanding shares of Common
Stock have been duly and validly authorized and issued and are
fully paid and nonassessable and the certificates therefor are in
valid and sufficient form in accordance with applicable state
law; there are no other classes of stock outstanding except
Common Stock; all outstanding options to purchase shares of
Common Stock have been duly and validly authorized and issued;
except as described in the Prospectus, there are no options,
warrants or rights to acquire, or debt instruments convertible
into or exchangeable for, or other agreements or understandings
to which the Company is a party, outstanding or in existence,
entitling any person to purchase or otherwise acquire any shares
of capital stock of the Company; the issuance and sale of the
Securities have been duly and validly authorized and, when issued
and delivered and paid for, the Securities will be fully paid and
nonassessable and free from preemptive rights, and will conform
in all respects to the description thereof contained in the
Prospectus; the Warrants and the Representative's Warrants
constitute valid and binding obligations of the Company
enforceable in accordance with their terms and the Company has
reserved a sufficient number of shares of Common Stock for
issuance upon exercise thereof; the Warrants and the
Representative's Warrants possess the rights, privileges and
characteristics as represented in the forms filed as exhibits to
the Registration Statement and as described in the Prospectus;
the Securities (other than the Representative's Warrants) have
been approved for listing or quotation on the BSE, upon notice of
issuance thereof; the certificates for the Securities are in
valid and sufficient form. Each offer and sale of securities of
the Company described in Item 26 of Part II of the Registration
Statement was effected in compliance with the Act and the rules
and regulations thereunder.
(v) Other than as described in the Prospectus, there is no
pending or, to the best knowledge of such counsel after
reasonable investigation, threatened action, suit or proceeding
before any court or governmental agency, authority or body,
domestic or foreign, or any arbitrator involving the Company of a
character required to be disclosed in the Registration Statement
or the Prospectus that is not adequately disclosed in the
Prospectus, and, to the best knowledge of such counsel, there is
no contract or other document of a character required to be
described in the Registration Statement or the Prospectus, or to
be filed as an exhibit, which is not described or filed as
required.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and
binding agreement and obligation of the Company enforceable
against it in accordance with its terms (subject to standard
bankruptcy and equitable remedy exceptions, and limitations under
the Act as to the enforceability of indemnification provisions).
(vii) The Company has full corporate power and corporate
authority to enter into and perform its obligations under this
Agreement and to issue, sell and deliver the Securities in the
manner provided in this Agreement; and the Company has taken all
necessary corporate action to authorize the execution and
delivery of, and the performance of its obligations under, this
Agreement.
18
(viii) Neither the offering, issue and sale of the
Securities nor the consummation of any other of the transactions
contemplated herein, nor the fulfillment of the terms hereof,
will conflict with or result in a breach or violation of, or
constitute a default under, or result in the imposition of a lien
on any properties of the Company, or an acceleration of
indebtedness pursuant to the Articles of Incorporation (or other
charter document) or Bylaws of the Company, or any of the terms
of any indenture or other agreement or instrument to which the
Company is a party or by which its properties are bound, or any
law, order, judgment, decree, rule or regulation applicable to
the Company of any court, regulatory body, administrative agency,
governmental body, stock exchange or arbitrator having
jurisdiction over the Company. The Company is not in violation of
its Articles of Incorporation or Bylaws or, to the best knowledge
of such counsel after reasonable investigation, in breach of or
default under any of the terms of any indenture or other
agreement or instrument to which it is a party or by which it or
its properties are bound, which breach or default would,
individually or in the aggregate, have a Material Adverse Effect.
(ix) Except as disclosed in the Prospectus, no person has
the right, contractual or otherwise, to cause the Company to
issue to it any shares of capital stock in consequence of the
issue and sale of the Securities to be sold by the Company
hereunder nor does any person have preemptive rights, or rights
of first refusal or other rights to purchase any of the
Securities. Except as referred to in the Prospectus, no person
holds a right to require or participate in a registration under
the Act of Common Stock or any other equity securities of the
Company.
(x) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or
body is required to be obtained or filed by, or on behalf of, the
Company in connection with the transactions contemplated herein,
except such as may have been obtained or made and registration of
the Securities under the Act, and such as may be required under
the Blue Sky laws of any jurisdiction.
(xi) To the best knowledge of such counsel after reasonable
investigation, the Company is not in violation of or default
under any judgment, ruling, decree or order or any statute, rule
or regulation of any court or other United States governmental
agency or body, including any applicable laws respecting
employment, immigration and wages and hours, in each case, where
such violation or default could have a Material Adverse Effect.
The Company is not involved in any labor dispute, nor, to the
best knowledge of such counsel, is any labor dispute threatened.
(xii) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as
amended.
19
(xiii) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on
behalf of the Company, and the Registration Statement has been
duly executed pursuant to such authorization by and on behalf of
the Company.
(xiv) Except as disclosed in the Prospectus, the Company
owns or possesses, or has the right to use pursuant to, licenses,
sublicenses, agreements, permissions or otherwise, adequate
patents, copyrights, trade names, trademarks, service marks,
licenses and other intellectual property rights necessary to
carry on its business as described in the Prospectus, and, except
as set forth in the Prospectus, neither such counsel nor, to the
knowledge of such counsel, the Company has received any notice of
either (i) default under any of the foregoing or (ii)
infringement of or conflict with asserted rights of others with
respect to, or challenge to the validity of, any of the foregoing
which, in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could have a Material Adverse
Effect, and counsel knows of no facts which could reasonably be
anticipated to serve as the basis for any such notice.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the independent public accountants of the
Company and representatives of the Underwriters at which the contents of
the Registration Statement and Prospectus were discussed and, although such
counsel is not passing upon and does not assume responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or Prospectus (except as and to the extent stated in
subparagraphs (i) and (v) above), on the basis of the foregoing and on such
counsel's participation in the preparation of the Registration Statement
and the Prospectus, nothing has come to the attention of such counsel that
causes such counsel to believe that the Registration Statement, at the
Effective Date and at the Closing Date (and any settlement date pursuant to
Section 4(b) hereof), contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
or that the Prospectus, at the date of such Prospectus or at the Closing
Date (or any settlement date pursuant to Section 4(b) hereof), contained or
contains any untrue statement of a material fact or omitted or omits to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel need
express no comment with respect to the Financial Statements and schedules
and other financial or statistical data derived therefrom included in the
Registration Statement or Prospectus). References to the Prospectus in this
Section 7(b) shall include any supplements thereto.
(c) Xxxxxxx X. Xxxxx, counsel to the Selling Shareholders, as
indicated in Schedule II hereto, shall have furnished to you their written
opinion with respect to each of such selling Shareholders, dated such Time
of Delivery, in form and substance satisfactory to you, to the effect that:
(i) A Power of Attorney and a Custody Agreement have been duly
authorized, executed and delivered by each such Selling Shareholder
and constitute valid and binding agreement of such Selling Shareholder
in accordance with their terms;
20
(ii) This Agreement has been duly executed and delivered by or on
behalf of such Selling Shareholder hereunder and the compliance by
such Selling Shareholder with all of the provisions of this Agreement,
the Power of Attorney and the Custody Agreement and the consummation
of the transactions herein and therein contemplated with not (a)
conflict with the laws of the State of Tennessee or Mississippi of the
federal laws of the United States by which such Selling Shareholder is
bound, or (b) result in a breach or violation of any order, rule or
regulation known to such counsel of any court or governmental agency
or body which, to such counsel's knowledge has jurisdiction over such
Selling Shareholder or the Stock of such Selling Shareholder;
(iii) To the best of such counsel's knowledge, no consent,
approval, authorization or order of any court or governmental agency
or body is required for the consummation of the transactions
contemplated by this Agreement in connection with the Shares to be
sold by such Selling Shareholder hereunder, except such as have been
obtained under the Act and such as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of such Shares by the Underwriters; and
(iv)Title to such Shares, free of all adverse claims, has been
transferred to each of the several Underwriters who have purchased
such Shares in good faith and without notice of any such adverse claim
within the meaning of the Uniform Commercial Code.
(d) The Representative shall have received from Xxxxxxxxxxx & Xxxxxxxx
LLP, counsel for the Underwriters, an opinion dated the Closing Date (and
any settlement date pursuant to Section 4(b) hereof), with respect to the
issuance and sale of the Securities, and with respect to the Registration
Statement, the Prospectus and other related matters as the Representative
may reasonably require, and the Company shall have furnished to such
counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(e) The Company shall have furnished to the Representative a
certificate of the Company, signed by its Chief Executive Officer and its
Chief Financial Officer, dated the Closing Date (and any settlement date
pursuant to Section 4(b) hereof), to the effect that each has carefully
examined the Registration Statement, the Prospectus (and any supplements
thereto) and this Agreement, and, after due inquiry, that:
(i) As of the Closing Date (and any settlement date pursuant to
Section 4(b) hereof), the statements made in the Registration
Statement and the Prospectus are true and correct and the Registration
Statement and the Prospectus do not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
21
(ii) No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities under
the securities or Blue Sky laws of any jurisdiction is in effect and
no proceeding for such purpose is pending before or, to the knowledge
of such officers, threatened or contemplated by the Commission or the
authorities of any such jurisdiction; and any request for additional
information with respect to the Registration Statement or the
Prospectus on the part of the staff of the Commission or any such
authorities brought to the attention of such officers has been
complied with to the satisfaction of the staff of the Commission or
such authorities.
(iii) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been
any change in the capital stock or long-term debt of the Company,
except as set forth in or contemplated by the Registration Statement
and the Prospectus, (y) there has not been any material adverse change
in the general affairs, business, prospects, properties, management,
results of operations or condition (financial or otherwise) of the
Company, whether or not arising from transactions in the ordinary
course of business, in each case, other than as set forth in or
contemplated by the Registration Statement and the Prospectus, and (z)
the Company has not sustained any material interference with its
business or properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or any
court or legislative or other governmental action, order or decree,
which is not set forth in the Registration Statement and the
Prospectus.
(iv) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has been no
material litigation instituted against the Company, any of its
respective officers or directors, or, to the best knowledge of such
officers, any affiliate or promoter of the Company, and since such
dates there has been no proceeding instituted or, to the best
knowledge of such officers, threatened against the Company, any of its
officers or directors, or, to the best knowledge of such officers, any
affiliate or promoter of the Company, before any federal, state or
county court, commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, which could have a
Material Adverse Effect.
(v) Each of the representations and warranties of the Company in
this Agreement is true and correct in all material respects on and as
of the Execution Time and the Closing Date (and any settlement date
pursuant to Section 4(b) hereof) with the same effect as if made on
and as of the Closing Date (and any settlement date pursuant to
Section 4(b) hereof).
(vi) Each of the covenants required in this Agreement to be
performed by the Company on or prior to the Closing Date (and any
settlement date pursuant to Section 4(b) hereof) has been duly, timely
and fully performed, and each condition required herein to be complied
with by the Company on or prior to the Closing Date (and any
settlement date pursuant to Section 4(b) hereof) has been duly, timely
and fully complied with.
22
(f) At the Execution Time and on the Closing Date (and any settlement
date pursuant to Section 4(b) hereof), Xxxxxx Xxxxxxxx shall have furnished
to the Representative letters, dated as of such dates, in form and
substance satisfactory to the Representative, confirming that they are
independent accountants within the meaning of the Act and the applicable
rules and regulations thereunder and stating in effect that:
(i) In their opinion, the audited Financial Statements of the
Company for the fiscal years ended December 31, 1999 and 2000, and the
notes to the Financial Statements and Financial Statement schedules
for those periods included in the Registration Statement and the
Prospectus, comply in all material respects with generally accepted
accounting principles and the applicable accounting requirements of
the Act and the applicable rules and regulations thereunder.
(ii) On the basis of a reading of the latest unaudited Financial
Statements made available by the Company, carrying out certain
specified procedures (but not an examination in accordance with
generally accepted auditing standards), a reading of the minutes of
the meetings of the shareholders, directors and committees of the
Company, and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the Company,
nothing came to their attention that caused them to believe that: (i)
the unaudited Financial Statements of the Company for the three (3)
months ended March 31, 2001, and the notes to the Financial Statements
and the Financial Statement Schedules for the period then ended
included in the Registration Statement and Prospectus do not comply in
all material respects with generally accepted accounting principles or
the applicable accounting requirements of the Act and the applicable
rules and regulations thereunder; and (ii) with respect to the period
subsequent to March 31, 2001, at a specified date not more than five
business days prior to the date of the letter, there were any changes
in the long-term debt or capital stock of the Company or its
subsidiaries, or decreases in net current assets, net assets or
stockholders' equity of the Company as compared with the amounts shown
on the March 31, 2001 balance sheets included in the Registration
Statement and the Prospectus, except for changes or decreases which
the Registration Statement discloses have occurred or may occur and
except for changes or decreases, set forth in such letter, in which
case (A) the letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said explanation is not
deemed necessary by the Representative and (B) such changes or
decreases and the explanation thereof shall be acceptable to the
Representative, in its sole discretion.
(iii) They have performed certain other specified procedures as a
result of which they determined that all information of an accounting,
financial or statistical nature (which is limited to accounting,
financial or statistical information derived from the general
accounting records of the Company) set forth in the Registration
Statement and the Prospectus and specified by you prior to the
Execution Time, agrees with the accounting records of the Company.
23
References to the Prospectus in this Section 7(e) shall include any supplements
thereto.
(g) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall not
have been (i) any changes or decreases from that specified in the letters
referred to in Section 7(e) hereof or (ii) any change, or any development
involving a prospective change, in or affecting the properties, assets,
results of operations, business, capitalization, net worth, prospects,
general affairs or condition (financial or otherwise) of the Company, the
effect of which is, in the sole judgment of the Representative, so material
and adverse as to make it impractical or inadvisable to proceed with the
public offering or delivery of the Securities as contemplated by the
Registration Statement and the Prospectus.
(h) On or prior to the Effective Date, the Securities (other than the
Representative's Warrants) shall have been approved for listing on the BSE,
subject to official notice of issuance.
(i) The Company shall not have sustained any uninsured substantial
loss as a result of fire, flood, accident or other calamity.
(j) The Company shall have furnished to the Representative a
certificate of the Secretary of the Company certifying as to certain
information and other matters as the Representative may reasonably request.
(k) The Company shall have furnished to the Representative such
further information, certificates and documents as the Representative may
reasonably request.
(l) The Company shall have entered into lock-up agreements with Xxxxx
Xxxxxx, Xxxx X. Xxxxx, Xxxxx Xxxxxxx, Xxxxxxx X.X. Xxxxxxxx and Xxxxxx X.
Xxxxxxx, Xx. providing that for a period of one (1) year after the
Effective Date, without the prior written consent of the Representative,
they will not sell, contract to sell, or otherwise dispose of any shares of
Common Stock, any options or warrants to purchase Common Stock, or any
securities convertible into, exercisable for or exchangeable for shares of
Common Stock with the exception of 200,000 shares of Common Stock issued in
connection with a bridge financing in the amount of $500,000, which are
subject only to a six (6) month lock-up period.
If any of the conditions specified in this Section 7 shall not have
been fulfilled in any respect when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all respects reasonably satisfactory in form and
substance to the Representative and its counsel, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any
time prior to, the Closing Date (or any settlement date, pursuant to
Section 4(b) hereof), by the Representative. Notice of such cancellation
shall be given to the Company in writing or by telephone, facsimile or
telegraph confirmed in writing.
8. Fees and Expenses and Representative's Warrants. The Company and the Selling
Shareholders agree to pay or cause to be paid and issue the following:
24
(a) the fees, disbursements and expenses of its own counsel and
counsel for the Company and the Selling Shareholders and accountants in
connection with the registration of the Securities under the Act and all
other expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus, any Prospectus, and
any drafts thereof, and amendments and supplements thereto, and the mailing
and delivery of copies thereof to the Underwriters and dealers;
(b) all expenses in connection with the qualification of the
Securities for offering under state securities laws, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with any Blue Sky memorandum;
(c) all filing and other fees in connection with filing with the NASD,
and complying with applicable review requirements thereof;
(d) the cost of preparing and printing certificates for the
Securities;
(e) all expenses, taxes, fees and commissions, including, without
limitation, any and all fixed transfer duties sellers' and buyers' stamp
taxes or duties on the purchase and sale of the Securities and stock
exchange brokerage and transaction levies with respect to the purchase and,
if applicable, the sale of the Securities (the latter to the extent paid
and not reimbursed) (i) incident to the sale and delivery by the Company of
the Securities to the Underwriters and (ii) incident to the sale and
delivery of the Securities by the Underwriters to the initial purchasers
thereof;
(f) the costs and charges of any transfer agent and registrar;
(g) the fees and expenses in connection with qualification of the
Securities (other than the Representative's Warrants) for listing on the
BSE;
(h) a nonaccountable expense allowance of 2.0% of the proceeds of the
offering (including the Option Securities described in Section 3(b) hereof)
payable to the Representative; and
(i) a solicitation fee to the Representatives equal to 5.0% of the
aggregate proceeds received by the Company as a result of the solicitation
of the exercise of the Warrants, provided that no solicitation fee shall be
payable (i) within one year after the date of the Prospectus, (ii) if the
market price of the Common Stock is lower than the exercise price of the
Warrants, (iii) if the Warrants are held in a discretionary account at the
time of the exercise, unless prior written approval of the exercise of such
Warrants is received from the beneficial owner of the Warrants, or (iv)
unless the beneficial owner of the Warrants states in writing that the
exercise was solicited by the Representatives and designates, in writing,
the Representative to receive the solicitation fee with respect to the
exercise of such Warrants;
(j) all other costs and expenses incident to the performance of the
Company's obligations hereunder which are not otherwise specifically
provided for in this Section 8.
25
Without limiting in any respect the foregoing obligations of the
Company, which obligations shall survive any termination of this Agreement,
if the sale of the Securities provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 7 hereof is not satisfied, because of any termination pursuant to
Section 11 hereof, or because of any refusal, inability or failure on the
part of the Company to perform any agreement herein or comply with any
provision hereof to be performed or complied with by the Company other than
by reason of a default by any of the Underwriters, the Company agrees to
reimburse the Underwriters, upon demand, for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have
been incurred by them in connection with the proposed purchase and sale of
the Securities to the extent the amounts paid pursuant to Section 8(h)
hereof are insufficient therefor.
9. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person who controls any Underwriter within the meaning of the Act
or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of a
material fact contained in (i) Section 1 of this Agreement, the
Registration Statement, any Preliminary Prospectus or the Prospectus, or in
any amendment thereof or supplement thereto, or (ii) any application or
other document, or any amendment or supplement thereto, executed by the
Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify the Securities under
the securities or Blue Sky laws thereof or filed with the Commission or any
securities association or securities exchange, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the Representative
specifically for use in the Registration Statement or Prospectus; provided
further, that with respect to any untrue statement or omission, or any
alleged untrue statement or omission, made in any Preliminary Prospectus,
the indemnity agreement contained in this subsection (a) shall not inure to
the benefit of any Underwriter (or to the benefit of any person controlling
any such Underwriter) from whom the person asserting any such losses,
claims, damages, liabilities or expenses purchased the Securities concerned
to the extent that such untrue statement or omission, or alleged untrue
statement or omission, has been corrected in the Prospectus and the failure
to deliver the Prospectus was not a result of the Company's failure to
comply with its obligations under Section 6(d) hereof. The indemnity
agreement will be in addition to any liability which the Company may
otherwise have. The Company will not, without the prior written consent of
26
each Underwriter, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not
such Underwriter or any person who controls such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a
party to such claim, action, suit or proceeding), unless the settlement or
compromise or consent includes an unconditional release of such Underwriter
and each such controlling person from all liability arising out of such
claim, action, suit or proceeding, satisfactory in form and substance to
the Representative.
(b) Each of the Selling Shareholders, jointly and severally, will
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal
or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses
are incurred; provided, however, that (i) the Selling Shareholders shall
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through you
expressly for use therein and (ii) in no event shall the liability of any
Selling Shareholder under this subsection (b) exceed the total gross
proceeds from the sale of Shares by such Selling Shareholder hereunder.
(c) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of the Company's officers who
signs the Registration Statement, and each person who controls the Company,
within the meaning of the Act or the Exchange Act to the same extent as the
foregoing indemnity from the Company and the Selling Shareholders to each
Underwriter, but only with reference to written information relating to
such Underwriter furnished to the Company and the Selling Shareholders by
or on behalf of such Underwriter through the Representative specifically
for use in the Registration Statement or Prospectus. The Company and the
Selling Shareholders acknowledge that the corporate names of the
Underwriters, the stabilization legend on page 2 and the information under
the heading "Underwriting" in the Prospectus and in any Preliminary
Prospectus constitute the only information furnished in writing by or on
behalf of the several Underwriters. The obligations of each Underwriter
under this subsection (b) shall be in addition to any liability which the
Underwriters may otherwise have.
27
(d) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action, suit or proceeding, such
indemnified party will, if a claim in respect thereof is to be made against
the indemnifying party under this Section 9, notify the indemnifying party
in writing of the commencement thereof and the indemnifying party shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to the indemnified party and the payment of all expenses; but
the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party, unless such
omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. All such expenses shall be paid by the indemnifying
party as incurred by an indemnified party. Any such indemnified party shall
have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses, or (ii) the
indemnifying party shall have failed promptly after notice by such
indemnified party to assume the defense of such action or proceeding and
employ counsel reasonably satisfactory to the indemnified party in any such
action, suit or proceeding, or (iii) the named parties in any such action
or proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such indemnified party
shall have been advised by counsel that there may be one or more legal
defenses available to such indemnified party which are different from or
additional to those available to the indemnifying party (in which case, if
such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party,
the indemnifying party shall not have the right to assume the defense of
such action or proceeding on behalf of the indemnified party or parties, it
being understood, however, that the indemnifying party shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for
all such indemnified parties, which firm shall be designated in writing to
the indemnifying party). Any such fees and expenses payable by the
indemnifying party shall be paid to or on behalf of the indemnified party
entitled thereto as incurred. An indemnifying party shall not be liable for
any settlement of any action or claim effected without its consent, which
consent shall not be unreasonably withheld.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Sections 9(a) or
9b) is applicable in accordance with its terms but is for any reason held
by a court to be unavailable from the indemnifying party on grounds of
policy or otherwise, the Company and the Selling Shareholders and the
Underwriters shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) to which the Company and
the Selling Shareholders and one or more of the Underwriters may be subject
in such proportion so that the Underwriters are responsible in the
aggregate for that portion represented by the total underwriting
compensation in respect of the Securities bears to the public offering
price appearing thereon and the Company and the Selling Shareholders is
responsible for the balance; provided, however, that (i) in no case shall
any Underwriter (except as may be provided in the Agreement Among
Underwriters relating to the offering of the Securities) be responsible for
any amount in excess of the total underwriting compensation applicable to
the Securities to be purchased by such Underwriter hereunder and (ii) no
28
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 9 each person who controls an Underwriter within the meaning
of the Act shall have the same rights to contribution as such Underwriter,
and each person who controls the Company within the meaning of the Act,
each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clause (ii) of this
Section9(d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such party in respect of which a claim for contribution may be made against
another party or parties under this Section 9(d), notify such party or
parties from whom contribution may be sought, but the omission to so notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise.
10. Default by an Underwriter. If any one or more Underwriters shall fail to
purchase and pay for any of the Securities agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the number of Underwritten
Securities set forth opposite their names in Schedule I hereto bears to the
aggregate number of Underwritten Securities set forth opposite the names of all
the remaining Underwriters) the Underwritten Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase; provided, however,
that if the aggregate number of Underwritten Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of
the aggregate number of Underwritten Securities set forth in Schedule I hereto,
the remaining Underwriters shall have the right to purchase all, but shall not
be under any obligation to purchase any, of such Underwritten Securities, and if
such non-defaulting Underwriters do not purchase all of such Underwritten
Securities, this Agreement will terminate without liability to any
non-defaulting Underwriter or the Company except as otherwise provided in
Section 8. In the event of a default by any Underwriter as set forth in this
Section 10, the Closing Date shall be postponed for such period, not exceeding
seven (7) days, as the Representative shall determine in order that the required
changes in the Registration Statement and the Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company or any non-defaulting Underwriter for damages occasioned by its default
hereunder.
11. Termination. This Agreement shall be subject to termination in the absolute
discretion of the Representative, by notice given to the Company prior to
delivery of and payment for the Securities, if prior to such time (a) a
suspension or material limitation in trading in securities generally on the New
York or American Stock Exchange or the Nasdaq National Market System shall have
occurred, (b) a banking moratorium shall have been declared by federal or New
York state authorities, (c) the United States shall have engaged in hostilities
which shall have resulted in the declaration, on or after the date hereof, of a
national emergency or war, or (d) a change in national or international
political, financial or economic conditions or national or international equity
markets or currency exchange rates shall have occurred, if the effect of any
such event specified above is so material and adverse as to make it impractical
or inadvisable to proceed with the public offering or delivery of the Securities
as contemplated by the Registration Statement and the Prospectus.
29
12. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company,
its officers and the Underwriters set forth in, referred to in, or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 9 hereof,
and will survive delivery of and payment for the Securities until all applicable
statutes of limitation have expired. The provisions of Sections 8 and 9 hereof
shall survive the termination or cancellation of this Agreement.
13. Notices. All communications hereunder will be in writing and effective only
on receipt, and will be mailed, delivered, telegraphed or sent by facsimile
transmission and confirmed:
to the Representative at:
Rushmore Securities Corporation
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx, III
Facsimile No. (000) 000-0000
to the Company at:
Aarica Holdings, Inc.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxx, President
Facsimile No. (000) 000-0000
with copy to:
Xxxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxx, L.L.C.
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile No. (000) 000-0000
14. Successors. This Agreement will inure to the benefit of and be binding upon
the parties hereto and their respective successors and the officers, directors
and controlling persons referred to in Section 9 hereof, and no other person
will have any right or obligation hereunder.
30
15. Counterparts. This Agreement may be signed in two or more counterparts, each
of which shall be an original, with the same effect as if the signatures thereon
and hereon were on the same instrument.
16. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas. Venue will lie in the federal or
state courts of Dallas County, Texas.
[Remainder of page intentionally left blank.]
31
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the several Underwriters.
Very truly yours,
Aarica Holdings, Inc.
By:
Xxxxx Xxxxxx, President
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
Rushmore Securities Corporation
By:
Xxxxxx X. Xxxxx, III
For itself and the other several Underwriters in Schedule I to the foregoing
Agreement.
32
SCHEDULE I
Underwriters Number of Units
to be Purchased
Rushmore Securities Corporation
Capital West Securities
---------
Total 1,100,000
33
FORM OF LOCK-UP AGREEMENT
RUSHMORE SECURITIES CORPORATION
As Representative of the Several Underwriters
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Ladies and Gentlemen:
The undersigned understands that you, as the Representative of the several
underwriters (the "Underwriters"), propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with Aarica Holdings, Inc., a Texas
corporation (the "Company"), providing for the initial public offering (the
"Offering") by the Underwriters, of 1,100,000 Units, each consisting of one
share of Common Stock of the Company, $0.01 par value (the "Common Stock"), and
one redeemable common stock purchase warrant (the "Warrants"), pursuant to the
Company's Registration Statement on Form SB-2 (the "Registration Statement")
filed with the Securities and Exchange Commission.
In consideration of the Underwriters' Agreement to purchase the Units, and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the undersigned hereby agrees that during the period beginning on
the date of this letter and ending one (1) year (the "Lock-Up Period") after the
date of the final prospectus relating to the offer and sale of the Units, the
undersigned will not, directly or indirectly, offer, sell, contract to sell,
grant any option for the sale of, pledge, or otherwise dispose of (individually,
a "Disposition") any Common Stock, or securities exercisable, convertible, or
exchangeable for or into Common Stock (collectively, the "Securities"), that the
undersigned now owns or will own in the future (beneficially or of record),
except (i) as a bona fide gift or gifts, provided the donee or donees thereof
agree in writing to be bound by this Lock-Up Agreement, or (ii) with the prior
written consent of the Representative. The foregoing restriction is expressly
agreed to preclude the holder of Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-Up Period, even if such
Securities would be disposed of by someone other than the undersigned. Such
prohibited hedging or other transactions would include, without limitation, any
short sale or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from the Securities.
Sincerely,
Date: ___________ ____, 2001
By: ________________________
