EXHIBIT 1.1
HOMETOWN AUTO RETAILERS, INC.
AND
XXXXXXX INVESTMENT COMPANY, INC.
___________________
UNDERWRITING AGREEMENT
Dated July _______, 1998
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2,000,000 Shares of Class A Common Stock
HOMETOWN AUTO RETAILERS, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
July ______, 1998
Xxxxxxx Investment Company, Inc.
As Representative of the
Several Underwriters
c/x Xxxxxxx Investment Company, Inc.
000 X.X. Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Gentlemen:
Hometown Auto Retailers, Inc., a Delaware corporation (the "Company"),
proposes to sell to Xxxxxxx Investment Company, Inc. and the several
underwriters (the "Underwriters") named in Schedule A hereto for whom you are
acting as the Representative ("you" or the "Representative") an aggregate of Two
Million (2,000,000) shares of Class A Common Stock, par value $0.001 per share,
of the Company (the "Common Stock"). The shares to be so purchased from the
Company by the Underwriters (the "Firm Shares") are set forth opposite their
names in Schedule A hereto. The Company also proposes to grant to the
Representative an option to purchase up to Three Hundred Thousand 300,000
additional shares of its Class A Common Stock (the "Option Shares") as set forth
below.
As the Representative, you have advised the Company that: (a) you are
authorized to enter into this Agreement for yourself as Representative and on
behalf of the several Underwriters; and (b) the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm
Shares set forth opposite their respective names in Schedule A. The Firm Shares
and the Option Shares (to the extent that the aforementioned option is
exercised) are herein collectively called the "Shares".
In consideration of the mutual agreements contained herein and of the
interests of
the parties in the transactions contemplated hereby, the parties hereto agree as
follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(a) The Company represents and warrants to, and agrees with, each of the
Underwriters as of the date hereof, and as of the Closing Date (as hereinafter
defined) and the Option Closing Date (as hereinafter defined), if any, as
follows:
(i) A registration statement on Form S-1 (File No. 333-52763) with
respect to the Class A Common Stock has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the Rules and Regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder and
has been filed with the Commission. Copies of such registration statement,
including any amendments thereto, the preliminary prospectuses (meeting the
requirements of the Rules and Regulations) contained therein and the
exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. The Company
will not file any other amendment to the registration statement unless a
draft of the proposed filing shall have first been furnished to the
Representative, and shall not thereafter file any such amendment until the
Representative shall have approved such filing. Such registration
statement, as amended, on file with the Commission at the time the
registration statement becomes effective, which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained
in the Prospectus referred to below, is hereinafter referred to as the
"Registration Statement" and the "Prospectus" shall hereinafter mean (a)
the form of prospectus first filed with the Commission pursuant to Rule
424(b), or (b) the last preliminary prospectus included in the Registration
Statement filed prior to the time it becomes effective or filed pursuant to
Rule 424(a) under the Act that is delivered by the Company to the
Underwriters for delivery to purchasers of the Shares, together with the
term sheet or abbreviated term sheet filed with the Commission pursuant to
Rule 424(b)(7) under the Act. Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus."
(ii) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
Except as described in the Prospectus, the Company does not own any
interest in any corporation or other business entity that has any material
assets, liabilities or operations. The Company or its applicable
subsidiary, as the case may be, is duly qualified to transact business in
all jurisdictions in which the conduct of its business requires such
qualification. The Company or its applicable subsidiary, as
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the case may be, is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations require such
qualification or licensing. The Company or its applicable subsidiary, as
the case may be, has all requisite power and authority (corporate and
other), and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without
limitation, state and/or other regulatory authorities and those having
jurisdiction over environmental or similar matters), to own or lease its
properties and conduct its business as described in the Prospectus; the
Company or its applicable subsidiary, as the case may be, is and has been
doing business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all federal,
state, local and foreign laws, rules and regulations; and neither the
Company nor any subsidiary has received any notice of proceedings relating
to the revocation or modification of any such authorization, approval,
order, license, certificate, franchise, or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would adversely affect the condition, financial or otherwise, or the
earnings, position, prospects, value, operation, properties, business or
results of operations of the Company or any subsidiary. The disclosures in
the Registration Statement concerning the effects of federal, state, local,
and foreign laws, rules and regulations on each of the Company's and any
subsidiary's businesses as currently conducted and as contemplated are
correct in all respects and do not omit to state a material fact necessary
to make the statements contained therein not misleading in light of the
circumstances in which they were made.
(iii) The outstanding shares of Class A and Class B Common Stock of
the Company have been duly authorized and validly issued and are fully paid
and non-assessable and have been issued and sold by the Company in
compliance in all material respects with applicable Federal and state
securities laws; the shares issuable upon exercise of the Representative's
Warrants (as defined in Paragraph (f) of Section 2 hereof) and the Option
Shares that may be sold by the Company have been duly authorized and when
issued and paid for as contemplated herein will be validly issued, fully
paid and non-assessable; and no preemptive rights of stockholders exist
with respect to any of the Shares or the issue and sale thereof. Neither
the filing of the Registration Statement, nor the offering or sale of the
Shares as contemplated by this Agreement gives rise to any rights, other
than those which have been waived or satisfied, for or relating to the
registration of any other shares of Common Stock under the Act.
(iv) The information set forth under the caption "Capitalization"
in the Prospectus is true, correct and complete as to the matters
customarily covered under such a caption. All of the Shares conform to the
description thereof
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contained in the Registration Statement. The form of certificates for the
Shares conforms to the corporate law of the State of Delaware. Except as
disclosed in the Prospectus, there are no outstanding rights, options or
warrants for the purchase of any securities of the Company, and the Company
is not a party to any agreement pursuant to which any person has the right
to purchase any securities of the Company. Effective immediately following
the Closing Date (hereinafter defined) there will be no person holding any
anti-dilution rights with respect to the securities of the Company other
than the holder(s) of the Representative's Warrants and the holders of
options issued pursuant to the Company's Stock Option Plan.
(v) Except as disclosed in the Registration Statement, the Company
has not (i) issued any capital stock or any options, warrants, convertible
securities or other rights to purchase its capital stock, (ii) increased
its long-term or short-term debt, or (iii) declared or paid any dividends
on its capital stock.
(vi) Neither the Commission nor, to the best of the Company's
knowledge, any state regulatory authority, has issued any order preventing
or suspending the use of any Preliminary Prospectus, Registration Statement
or Prospectus or any part thereof relating to the proposed offering of the
Shares nor have any proceedings been instituted for that purpose. No
proceedings for a stop order suspending the effectiveness of the
Registration Statement or any of the Company's securities have been
instituted or are pending or threatened. Each of the Preliminary
Prospectus, the Registration Statement and Prospectus at the time of filing
thereof contains all statements which are required to be stated therein and
which conform to the requirements of the Act and the Rules and Regulations.
None of the Preliminary Prospectus, the Registration Statement and
Prospectus, nor any amendments thereto, contain or will contain, any untrue
statement of a material fact, nor omit or will omit, to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted
from the Preliminary Prospectus, the Registration Statement or Prospectus,
or any such amendment or supplement, 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
preparation thereof.
(vii) The financial statements of the Company, together with related
notes and schedules as set forth in the Registration Statement and the
Prospectus, comply in all material respects with the requirements of the
Act and, fairly present the financial position and the results of
operations and cash flows of the Company as of the indicated dates and for
the indicated periods. Such financial statements and related schedules
have been prepared in accordance with the Rules and
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Regulations and with generally accepted accounting principles, consistently
applied through the periods involved, except as disclosed therein, and all
adjustments necessary for a fair presentation of results for such periods
have been made. The summary financial and statistical data of the Company
included in the Registration Statement present fairly the information shown
therein and such data has been compiled on a basis consistent with the
financial statements presented therein and the books and records of the
Company. Such financial statements have been examined by Xxxxxx Xxxxxxxx
LLP, who are independent certified public accountants within the meaning of
the Act and the Rules and Regulations. The pro forma financial statements
and other pro forma financial information (including the notes thereto)
included in the Registration Statement and the Prospectus, (i) present
fairly, in all material respects, the information shown therein, (ii) have
been prepared, in all material respects, in accordance with the applicable
requirements of Rule 11.02 of Regulation S-X promulgated under the Exchange
Act, (iii) have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, and (iv) have
been properly compiled on the bases described therein, and the assumptions
used in the preparation of the pro forma financial statements and other pro
forma financial information and included in the Registration Statement and
the Prospectus are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein. There has been no adverse change or development involving a
prospective change in the condition, financial or otherwise, or in the
earnings, position, prospects, value, operation, properties, business, or
results of operation of the Company whether or not arising in the ordinary
course of business, since the date of the financial statements included in
the Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the businesses of the Company
conform in all respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. Financial information
(including, without limitation, any pro forma financial information) set
forth in the Prospectus under the headings "Prospectus Summary -- Summary
Pro Forma Financial Data," "Selected Financial Data," "Capitalization," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" fairly present, on the basis stated in the Prospectus, the
information set forth therein, and have been derived from or compiled on a
basis consistent with that of the audited financial statements included in
the Prospectus; and, in the case of pro forma financial information, if
any, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein. The amounts shown as accrued for
current and deferred income and other taxes in such financial statements
are sufficient for the payment of all accrued and unpaid federal, state,
local and foreign income taxes, interest, penalties, assessments or
deficiencies applicable to the Company, whether disputed or not, for the
applicable period then ended and periods prior thereto; adequate allowance
for doubtful accounts has been provided for unindemnified losses due to the
operations of the Company; and the statements of
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income do not contain any items of special or nonrecurring income not
earned in the ordinary course of business, except as specified in the notes
thereto.
(viii) Xxxxxx Xxxxxxxx LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and
the Rules and Regulations.
(ix) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company before any
court or administrative agency or otherwise which if determined adversely
to the Company might result in any material adverse change in the earnings,
business, management, properties assets, rights, operations, condition
(financial or otherwise) or prospects of the Company or to prevent the
consummation of the transactions contemplated hereby.
(x) The Company or applicable subsidiary, as the case may be, has
good and marketable title to all of the properties and assets reflected in
the financial statements (or as described in the Registration Statement as
owned by it), subject to no lien, mortgage, pledge, charge or encumbrance
of any kind except those reflected in such financial statements (or as
described in the Registration Statement) or which are not material in
amount. The Company or an applicable subsidiary, as the case may be,
occupies its leased properties under valid and binding leases conforming in
all material respects to the description thereof set forth in the
Registration Statement.
(xi) The Company has filed all federal, state, local and foreign
income tax returns which have been required to be filed and has paid all
taxes indicated by said returns to be due and all assessments received by
it to the extent that such taxes have become due and are not being
contested in good faith. All tax liabilities have been adequately provided
for in the financial statements of the Company.
(xii) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has
not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company, whether or not occurring in the
ordinary course of business, and there has not been any material
transaction entered into or any material transaction that is probable of
being entered into by the Company, other than transactions in the
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ordinary course of business and changes and transactions described in the
Registration Statement, as it may be amended or supplemented. The Company
has no material contingent obligations which are not disclosed in the
Company's financial statements included in the Registration Statement or
elsewhere in the Prospectus which are included in the Registration
Statement.
(xiii) The Company is not, nor, with the giving of notice or lapse of
time or both, will not be, in violation of or in default under its
Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), or by-laws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by
which it, or any of its properties, is bound and which default is material
in respect of the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the
Company. The execution and delivery of this Agreement and the consummation
of the transactions contemplated herein will not conflict with or result in
a breach of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company is a party, or of the Certificate of
Incorporation or by-laws of the Company or any order, rule or regulation
applicable to the Company of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(xiv) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions
herein contemplated (except such additional steps as may be required by the
Commission, the National Association of Securities Dealers, Inc. (the
"NASD") or such additional steps as may be necessary to qualify the Shares
for public offering by the Underwriters under state securities or Blue Sky
laws) has been obtained or made and is in full force and effect.
(xv) The Company or any applicable subsidiary, as the case may be,
holds or has licensed all material patents, patent rights, trademarks,
trade names, copyrights, trade secrets and licenses of any of the foregoing
(collectively, the "Intellectual Property Rights"), that are necessary for
the conduct of its business as conducted and as proposed to be conducted in
accordance with the description contained in the Prospectus; there is no
claim pending or, to the knowledge of the Company, threatened against it
alleging any infringement of Intellectual Property Rights, nor does the
Company know of any basis for any such claim. The Company knows of no
material infringement by others of Intellectual Property Rights owned by or
licensed to the Company.
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(xvi) The Company or an applicable subsidiary, as the case may be,
holds all material licenses, certificates, permits, orders or other similar
authorizations granted or issued by any governmental agency (collectively
the "Government Permits") required to conduct its business. No proceeding
to revoke, limit or otherwise materially change any Government Permit has
been commenced or, to the Company's knowledge, is threatened against the
Company.
(xvii) The Company, to its knowledge, is in compliance with all laws,
rules, regulations, orders of any court or administrative agency, operating
licenses or other requirements imposed by any governmental body applicable
to it, except as in the aggregate do not have and will not in the future
have a material adverse effect upon the operations, business, properties or
assets of the Company, including, to its knowledge and without limitation,
all applicable laws, rules, regulations, licenses or other governmental
standards relating to the sale of new and used cars and light trucks and
replacement parts and provision of maintenance, repair services and related
financing, insurance and service contracts by the Company; and the conduct
of the business of the Company, as described in the Prospectus, will not
cause the Company to be in violation of any such requirements.
(xviii) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as
exhibits to the Registration Statement to which the Company is a party or
by which it may be bound or to which any of its assets, properties or
businesses may be subject, have been duly and validly authorized, executed
and delivered by the Company and constitute the legal, valid and binding
agreements of the Company enforceable against the Company, in accordance
with their respective terms. The descriptions in the Registration
Statement of agreements, contracts and other documents are accurate and
fairly present the information required to be shown with respect thereto by
Form S-1, and there are no contracts or other documents which are required
by the Act or the Rules and Regulations to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be
copies.
(xix) Neither the Company, nor any of its affiliates, has taken or
intends to take, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected
to constitute, the stabilization or manipulation of the price of the shares
of Common Stock to facilitate the sale or resale of the Shares.
(xx) The Company is not an "investment company" within the meaning
8
of such term under the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules and regulations of the Commission thereunder.
(xxi) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that: (A) transactions are
executed in accordance with management's general or specific authorization;
(B) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (C) access to assets
is permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(xxii) The Company or an applicable subsidiary, as the case may be,
carries, or is covered by, insurance in such amounts and covering such
risks as is adequate for the conduct of its business and the value of its
properties and as is customary for companies engaged in similar industries.
(xxiii) The Company has generally enjoyed a satisfactory employer-
employee relationship with its employees and, to its knowledge, is in
compliance with all federal, state, local, and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. There are no pending, or to the knowledge
of the Company, threatened investigations involving the Company by the U.S.
Department of Labor, or any other foreign or domestic governmental agency
responsible for the enforcement of such federal, state, local, or foreign
laws and regulations. There are no pending, or to the knowledge of the
Company, threatened unfair labor practice charges or complaints against the
Company before the National Labor Relations Board. There are no pending,
or to the knowledge of the Company, threatened strikes, picketing,
boycotts, disputes, slowdowns or stoppages against or involving the
Company, or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company, and
no collective bargaining agreement or modification thereof is currently
being negotiated by the Company. No grievance or arbitration proceeding is
pending under any expired or existing collective bargaining agreements of
the Company. No labor dispute with the employees of the Company exists,
or, to its knowledge, is imminent.
(xxiv) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred
9
with respect to any "pension plan" (as defined in ERISA) for which the
Company would have any liability; the Company has not incurred and does not
expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412
or 4971 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified
in all material respects and nothing has occurred, whether by action or by
failure to act, which would cause the loss of such qualification.
(xxv) The Representative's Warrants have been duly authorized for
issuance to the Representative and will, when issued, possess rights,
privileges and characteristics as represented in the most recent form of
Representative's Warrants filed as an exhibit to the Registration
Statement; the securities to be issued upon exercise of the
Representative's Warrants, when issued and delivered against payment
therefor in accordance with the terms of the Representative's Warrants,
will be duly and validly issued, fully paid, non-assessable and free of
preemptive rights, and all corporate action required to be taken for the
authorization and issuance of the Representative's Warrants, and the
securities to be issued upon their exercise, have been validly and
sufficiently taken.
(xxvi) The Company has caused each officer and director and each
person who owns, beneficially or of record, 5% or more of the Common Stock
outstanding immediately prior to this offering to furnish to the
Representative, on or prior to the date of this Agreement, a letter or
letters, in form and substance satisfactory to the Underwriters ("Lockup
Agreements"), pursuant to which each such person shall agree: (A) not to
offer to sell, sell, contract to sell, sell short or otherwise dispose of,
any shares of Common Stock or other capital stock of the Company, or any
other securities convertible, exchangeable or exercisable for shares or
derivatives of Common Stock owned by such person, or request the
registration for the offer or sale of any of the foregoing (or as to which
such person has the right to direct the disposition of) for a period of
three hundred and sixty five days after the effective date of the
Registration Statement, directly or indirectly, except with the prior
written consent of the Representative; and (B) if such consent is provided,
to give prior written notice to the Representative of any offers to sell,
sales, contracts to sell, short sales or other dispositions by any such
person of Common Stock pursuant to Rule 144 under the Act or any similar
provisions enacted subsequent to the date of this Agreement, for a period
of ninety (90) days after the effective date of the Registration Statement.
(xxvii) The Company has not at any time during the last five years:
(A) made any unlawful contribution to any candidate for foreign office, or
failed to
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disclose fully any contribution in violation of law, or (B) made any
payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
(xxviii) Except as disclosed in the Prospectus, neither the Company
nor any of its officers, directors or affiliates have caused any person,
other than the Underwriters, to be entitled to reimbursement or
compensation of any kind, including, without limitation, any compensation
that would be includable as underwriter compensation under the NASD's
Conduct Rules with respect to the offering of the Shares, as a result of
the consummation of such offering based on any activity of such person as a
finder, agent, broker, investment adviser or other financial service
provider.
(xxix) The Common Stock has been approved for inclusion, subject to
official notice of issuance in the NASDAQ National Market
2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) On the basis of the representations, warranties and covenants herein
contained, and subject to the conditions herein set forth, the Company agrees to
sell 2,000,000 Firm Shares to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $_________ per share, the
number of Firm Shares set forth opposite the name of each underwriter in
Schedule A hereof, subject to adjustment in certain circumstances in accordance
with Section 9 hereof.
(b) The Company agrees to have the Firm Shares available for inspection,
checking and packaging by the Representative in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
(c) Payment for the Firm Shares to be sold hereunder is to be made in New York
Clearing House funds and, at the option of the Representative by certified or
bank cashier's checks drawn to the order of the Company in accordance with its
interests or bank wire to an account specified by the Company against either
uncertificated or certificated delivery of the Firm Shares (which delivery, if
certificated, shall take place in such location in New York City as may be
specified by the Representative) to the Representative for the several accounts
of the Underwriters. Such payment is to be made at the offices of Xxxxxxxxx
Xxxxxxx Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx, at 7:00 a.m., Portland, Oregon time, on
the third business day after the date of this Agreement or at such other time
and date not later than five business days thereafter as the Representative and
the Company shall agree, such time and date being herein referred to as the
"Closing
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Date." (As used herein, "business day" means a day on which both the New York
Stock Exchange is open for trading and on which banks in New York are open for
business and not permitted by law or executive order to be closed.) Except to
the extent uncertificated Firm Shares are delivered at closing, the certificates
for the Firm Shares will be delivered in such denominations and in such
registrations as the Representative shall request in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representative at least one business day prior to the
Closing Date.
(d) On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Company hereby
grants an option to the Representative to purchase from the Company all or any
part of the Option Shares at a price of $ per share. The option
granted hereby may be exercised in whole or in part by giving written notice:
(i) at any time before the Closing Date and (ii) only once thereafter within
thirty (30) days after the date of this Agreement, by the Representative to the
Company setting forth the number of Option Shares as to which the Representative
is exercising the option, the names and denominations in which the Option Shares
are to be registered and the time and date at which certificates representing
the Option Shares are to be delivered. The time and date at which certificates
for Option Shares are to be delivered shall be determined by the Representative
but shall not be earlier than three nor later than ten business days after the
exercise of such option nor in any event prior to the Closing Date (such time
and date being herein referred to as the "Option Closing Date"). If the date of
exercise of the option is three or more days before the Closing Date, the notice
of exercise shall set the Closing Date as the Option Closing Date. The option
with respect to the Option Shares granted hereunder may be exercised only to
cover over-allotments in the sale of the Firm Shares by the Underwriters. The
Representative may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Shares shall be made
on the Option Closing Date in New York Clearing House funds and, at the option
of the Representative, by certified or bank cashier's check drawn to the order
of the Company or by bank wire to an account specified by the Company against
delivery of certificates therefor at such location in New York, New York as may
be specified by the Representative.
(e) In addition to the sums payable to the Representative as provided
elsewhere herein, the Representative shall be entitled to receive at the
closing, for itself alone and not as representative of the Underwriters, as
additional compensation for its services, purchase warrants (the
"Representative's Warrants") for the purchase of up to 200,000 shares of Class A
Common Stock of the Company at a price of $______ per share, upon the terms and
subject to adjustment as described in the form of Representative's Warrant filed
as an exhibit to the Registration Statement.
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3. OFFERING BY THE UNDERWRITERS.
The several Underwriters agree to make a public offering of the Firm Shares
as soon as the Representative deems it advisable to do so. The Firm Shares are
to be initially offered to the public at the initial public offering price set
forth on the cover of the Prospectus. The Representative may from time to time
thereafter change the public offering price and other selling terms. To the
extent, if at all, that any Option Shares are purchased pursuant to Section 2
hereof, the Representative will offer them to the public on the foregoing terms.
The Representative may enter into one or more agreements as the Representative,
in its sole discretion, deems advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
It is further understood that the Representative will act as representative
of the Underwriters in the offering and sale of the Firm Shares in accordance
with an Agreement Among Underwriters and Selected Dealer's Agreement entered
into by the Representative and the several other Underwriters.
4. COVENANTS OF THE COMPANY.
(a) The Company covenants and agrees with the several Underwriters that:
(i) The Company shall: (A) use its best efforts to cause the
Registration Statement to become effective as promptly as practicable, or,
if the procedure in Rule 430A of the Rules and Regulations is followed, to
prepare and timely file with the Commission under Rule 424(b) of the Rules
and Regulations a Prospectus in a form approved by the Representative
containing information previously omitted at the time of effectiveness of
the Registration Statement in reliance on Rule 430A of the Rules and
Regulations, and (B) not file any amendment to the Registration Statement
or supplement to the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy or to which the
Representative shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.
(ii) The Company shall advise the Representative promptly and
confirm the notice in writing: (A) when the Registration Statement or any
post-effective amendment thereto shall have become effective, (B) of
receipt of any comments from the Commission, (C) of any request of the
Commission for amendment of the Registration Statement or for supplement to
the Prospectus or for any additional information, and (D) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution
of any proceedings for that purpose. The
13
Company will use its best efforts to prevent the issuance of any such stop
order preventing or suspending the use of the Prospectus and to obtain as
soon as possible the lifting thereof, if any is issued.
(iii) The Company shall cooperate with the Representative in
endeavoring to qualify the Shares for sale under the securities laws of
such jurisdictions as the Representative may reasonably have designated in
writing and will make such applications, file such documents, and furnish
such information as may be reasonably required for that purpose, provided
that the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction
where it is not now so qualified or required to file such a consent. The
Company will, from time to time, prepare and file such statements, reports,
and other documents as are or may be required to continue such
qualifications in effect for so long a period as the Representatives may
reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary
Prospectus as the Representative may reasonably request. The Company will
deliver to, or upon the order of, the Representative during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representative may reasonably request. The Company will deliver to the
Representative at or before the Closing Date, three signed copies of the
Registration Statement and all amendments thereto including one set of all
exhibits filed therewith, and will deliver to the Representative such
number of copies of the Registration Statement (including such number of
copies of the exhibits filed therewith that may reasonably be requested),
and of all amendments thereto, as the Representative may reasonably
request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission
thereunder, so as to permit the completion of the distribution of the
Shares as contemplated in this Agreement and the Prospectus. If during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of the Underwriters,
it becomes necessary to amend or supplement the Prospectus in order to make
the statements therein, in light of the circumstances existing at the time
the Prospectus is delivered to a purchaser, not misleading, or if it is
necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
14
Prospectus so that the Prospectus as so amended or supplemented will not,
in light of the circumstances when it is so delivered, be misleading, or so
that the Prospectus will comply with the law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later
than 15 months after the effective date of the Registration Statement, an
earnings statement (which need not be audited) in reasonable detail,
covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement, which earnings statement
shall satisfy the requirements of the Act and Rule 158 of the Rules and
Regulations and will advise you in writing when such statement has been so
made available.
(vii) The Company shall: (A) deliver to its stockholders annual
reports containing financial statements audited by its independent
accountants and, for a reasonable period, not less than five years,
quarterly reports concerning unaudited financial information for each of
the first three quarters of each fiscal year, and (B) for a period of five
years from the Closing Date, deliver to the Representative copies of such
annual reports and copies of all other documents, reports and information
furnished by the Company to its stockholders or filed with any securities
exchange or the NASD pursuant to the requirements of such exchange or with
the Commission pursuant to the Act or the Exchange Act. The Company will
deliver to the Representative similar reports with respect to significant
subsidiaries, as that term is defined in the Rules and Regulations, which
are not consolidated in the Company's financial statements.
(viii) Except with the prior written consent of the Representative,
no offering, sale, short sale or other disposition of any shares of Common
Stock of the Company or other securities convertible into or exchangeable
or exercisable for shares of Class A Common Stock or derivative of Common
Stock will be made for a period of ninety (90) days after the effective
date of this Registration Statement directly or indirectly, by the Company
other than the sales of Class A Common Stock covered by this Agreement and
sales upon exercise of options outstanding, on the effective date, under
its Stock Option Plan.
(ix) The Company shall use its best efforts to list subject to
notice of issuance the Shares on the NASDAQ Stock Market and thereafter to
maintain such listing.
(x) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with
15
respect to the sale of the Shares and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.
(xi) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company or any of its subsidiaries to register as an
investment company under the 0000 Xxx.
(xii) The Company shall maintain the currency of the prospectus
forming a part of an effective registration statement, which may be the
Registration Statement filed with respect to the Class A Common Stock
issuable upon exercise of the Representative's Warrants at all times during
which any Warrant remains outstanding.
(xiii) The Company shall, if it commences to engage in any business
with the government of Cuba or with any person or affiliate located in Cuba
after the date the Registration Statement becomes or has become effective
with the Commission or with the Florida Department of Banking and Finance
(the "Department"), whichever date is later, or if the information reported
or incorporated by reference in the Prospectus, if any, concerning the
Company's business with Cuba or with any person or affiliate located in
Cuba changes in any material way, provide the Department with notice of
such business or change, as appropriate, in a form acceptable to the
Department.
(xiv) The Company shall maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock, each of which shall be reasonably satisfactory to the
Representative.
(xv) The Company shall not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably
be expected to constitute, the stabilization or manipulation of the price
of any securities of the Company.
(xvi) The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, a report as
may be required pursuant to Rule 463 of the Regulations) from time to time,
under the Act, the Exchange Act, and the Rules and Regulations, and all
such reports, forms and documents filed will comply as to form and
substance with the applicable requirements under the Act, the Exchange Act,
and the Rules and Regulations.
16
(xvii) For a period of five (5) years from the Closing Date, the
Company shall furnish to the Underwriters at the Company's sole expense:
(i) daily consolidated transfer sheets relating to the Common Stock, (ii)
the list of holders of all of the Company's securities and (iii) a Blue Sky
"Trading Survey" for secondary sales of the Company's securities prepared
by counsel to the Company.
5. COSTS AND EXPENSES.
(a) The Representative shall be entitled to receive from the Company, for
itself alone and not as Representative of the Underwriters, a nonaccountable
expense allowance equal to 1.5% of the aggregate public offering price of Shares
sold to the Underwriters in connection with the offering. The Representative
shall be entitled to withhold this allowance on the Closing Date with respect to
all Shares delivered on the Closing Date (less $25,000 heretofore advanced
against such amount that has heretofore been paid by the Company). In addition,
the Representative shall be entitled to receive from the Company reimbursement
for its accountable expenses to the extent that such expenses exceed the $25,000
heretofore advanced by the Company. If the public offering of the Shares is
consummated, all amounts paid pursuant to the immediately preceding sentence
shall be credited against the Representative's non-accountable expenses as
provided in the first sentence of this paragraph (a) of Section 5; provided,
however, that the sums so paid shall be limited to an amount that would not
increase the amount of non-accountable reimbursement otherwise payable under the
aforesaid first sentence of this paragraph. If said public offering is not
consummated due to adverse market conditions or because the proposed price is
below the range stated in the cover page of the Prospectus or due to default by
the Underwriters, the Company shall not be obligated to reimburse the
Representative for any further accountable expenses incurred in connection with
the proposed offering above $25,000. However, if said public offering is not
consummated due to any misrepresentation by the Company or the Company chooses
not to proceed, even if the Representative offers to complete the offering
within the range stated in the cover page of the Prospectus, then the Company
shall reimburse the Representative for any further accountable expenses incurred
in connection with the proposed offering in excess of $25,000. For purposes of
this paragraph, the Representative shall be deemed to have incurred expenses
when they are billed regardless of whether such expenses have been paid.
(b) In addition to the payment described in paragraph (a) of this Section
5, the Company shall pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company; the cost
of printing and delivering to, or as requested by, the Underwriters of copies of
the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Underwriters' Selling Memorandum, the Underwriters' Invitation
Letter, the NASDAQ Listing Application, the Blue Sky
17
Survey and any supplements or amendments thereto; the filing fees of the
Commission; the filing fees and expenses (including legal fees and
disbursements) incident to securing any required review by the NASD of the terms
of the sale of the Shares; the Listing Fee of the NASDAQ Stock Market; and the
expenses, including the fees and disbursements of counsel for the Underwriters,
incurred in connection with the qualification of the Shares under state
securities or Blue Sky laws. Any transfer taxes imposed on the sale of the Firm
Shares to the several Underwriters shall be paid by the Company. If this
Agreement shall not be consummated because the conditions in Section 6 hereof
are not satisfied, or because this Agreement is terminated by the Representative
pursuant to Section 11 hereof, or by reason of any failure, refusal or inability
on the part of the Company to perform any undertaking or satisfy any condition
of this Agreement or to comply with any of the terms hereof on their part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then, subject to the
expense limitations set forth in paragraph (a) of this Section 5, the Company
shall reimburse the several Underwriters for reasonable out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company shall
not in any event be liable to any of the several Underwriters for damages on
account of loss of anticipated profits from the sale by them of the Shares.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date, as
the case may be, are subject to the continuing accuracy, as of the Closing Date
or the Option Closing Date, as the case may be, of the representations and
warranties of the Company contained herein, and to the performance by the
Company of its covenants and obligations hereunder and to the following
additional conditions:
(a) The Registration Statement and all post-effective amendments thereto
shall have become effective and any and all fillings required by Rule 424 and
Rule 430A of the Rules and Regulations shall have been made, and any request of
the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representative and
complied with to its reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance of the Shares.
18
(b) The Representative shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Morse, Zelnick, Rose &
Lander, LLP, counsel for the Company, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters (and stating
that it may be relied upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State Delaware and as
a foreign corporation in each jurisdictions in which its ownership or
leasing of any properties or the character of its operations requires such
qualification, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement. All outstanding shares of capital stock of every subsidiary of
the Company have been duly authorized and validly issued and are fully paid
and non-assessable.
(ii) The Company has duly authorized, issued and outstanding
capital stock as set forth under the caption "Capitalization" in the
Prospectus; the authorized shares of the Common Stock have been duly
authorized; the outstanding shares of the Company's Common Stock have been
duly authorized and validly issued and are fully paid and non-assessable
and were issued and sold by the Company in compliance in all material
respects with applicable securities laws; all of the securities of the
Company conform to the description thereof contained in the Prospectus; the
certificates for the Common Stock and Warrants of the Company, assuming
they are in the form filed with the Commission, are in due and proper form;
the shares of Common Stock to be sold by the Company pursuant to this
Agreement, including shares of Common Stock issuable upon exercise of the
Warrants, have been duly authorized and are, or in the case of the Shares
to be sold by the Company, will be validly issued, fully paid and
non-assessable when issued and paid for as contemplated by this Agreement
and the Registration Statement; no preemptive rights of stockholders exist
with respect to any of the Common Stock of the Company or the issue or sale
thereof pursuant to any applicable statute or the provisions of the
Company's Certificate of Incorporation or, to such counsel's knowledge,
pursuant to any contractual obligation; and, to such counsel's knowledge,
the Company is not a party to or bound by any instrument, agreement or
other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement and the
Representative's Warrant Agreement.
(iii) The Representative's Warrants have been authorized for
issuance to the Representative and will, when issued, possess rights,
privileges, and characteristics as represented in the most recent form of
Representative's Warrant filed as an exhibit to the Registration Statement;
the securities to be issued upon exercise of the Representative's Warrants,
when issued and delivered against
19
payment therefor in accordance with the terms of the Representative's
Warrants, will be duly and validly issued, fully paid, non-assessable and
free of preemptive rights, and all corporate action required to be taken
for the authorization and issuance of the Representative's Warrants, and
the securities to be issued upon their exercise, has been validly and
sufficiently taken.
(iv) Except as described in the Prospectus, to the knowledge of
such counsel, there are no outstanding securities of the Company
convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares of such stock; and except as described
in the Prospectus, to the knowledge of such counsel, no holder of any
securities of the Company or any other person has the right, contractual or
otherwise, which has not been satisfied or effectively waived, to cause the
Company to sell or otherwise issue to him or it, or to permit him or it to
underwrite the sale of, any Common Stock or the right to have any shares of
the Common Stock or other securities of the Company included in the
Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any shares
of Common Stock or other securities of the Company.
(v) The Registration Statement has become effective under the Act
and, to the best knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the
Act.
(vi) The Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations (except that such
counsel need not express an opinion as to the financial statements,
schedules and statistical information therein).
(vii) The statements under the captions "Shares Eligible for Future
Sale" and "Description of Capital Stock" in the Prospectus and in Items 14
and 15 of the Registration Statement, insofar as such statements constitute
a summary of documents referred to therein or matters of law, accurately
summarize in all material respects the information called for with respect
to such documents and matters.
(viii) Such counsel does not know of any contracts or documents
20
required to be filed as exhibits to the Registration Statement or described
in the Registration Statement or the Prospectus which are not so filed or
described as required, and such contracts and documents as are summarized
in the Registration Statement or the Prospectus are fairly summarized in
all material respects.
(ix) Such counsel knows of no legal or governmental proceedings
pending or threatened against the Company except as set forth in the
Prospectus.
(x) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, the Certificate of Incorporation or bylaws
of the Company, or any agreement or instrument known to such counsel to
which the Company is a party or by which, to the knowledge of such counsel,
the Company may be bound.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company and, when executed by the Representative, will be
a valid and binding agreement of the Company enforceable in accordance with
its terms except as rights to indemnity or contribution hereunder may be
limited by federal or state securities laws or public policy and except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity.
(xii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein (other than as may be required by the NASD or as
required by state securities and Blue Sky laws as to which such counsel
need not express an opinion) except such as have been obtained or made,
specifying the same.
(xiii) The Company is not, and will not become, as a result of the
transactions contemplated by this Agreement and application of the net
proceeds therefrom as described in the Prospectus, required to register as
an investment company under the 1940 Act.
In rendering such opinion, such counsel may rely as to matters governed by
the laws of states other than Delaware or Federal laws on local counsel in such
jurisdictions, and as to matters concerning automobile franchise laws, on the
opinion of Messrs. Xxxxxxxx Xxxxx & Xxxx, provided that in each case such
counsel shall state that they believe that they and the Underwriters are
justified in relying on such other counsel. In
21
addition to the matters set forth above, the opinion of Morse, Zelnick, Rose &
Lander, LLP shall also include a statement to the effect that nothing has come
to the attention of such counsel which leads them to believe that (i) the
Registration Statement, at the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) and as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any supplement
thereto, on the date it was filed pursuant to the Rules and Regulations and as
of the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, in the light of the circumstances
under which they are made, not misleading (except that such counsel need express
no view as to financial statements, schedules and statistical information
therein). With respect to such statements, Morse, Zelnick, Rose & Lander, LLP
may state that their belief is based upon the procedures set forth therein
(which procedures shall be reasonably acceptable to the Representative and
counsel for the Underwriters) but is otherwise without independent check and
verification.
(c) The Representative shall have received from Morse, Zelnick, Rose &
Lander, LLP its opinion that: (i) the Company has been duly organized and is
validly existing as a corporation under the laws of the State Delaware, and the
Company or its applicable subsidiary, as the case may be, has corporate power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement; the Company or its applicable
subsidiary, as the case may be, is duly qualified to transact business in all
jurisdictions in which the conduct of its business requires such qualification
or in which the failure to qualify would have a materially adverse effect upon
the business of the Company, all outstanding shares of capital stock of every
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; and (ii) the Company has authorized and
outstanding capital stock as set forth under the caption "Capitalization" in the
Prospectus; the authorized shares of the Common Stock have been duly authorized;
the outstanding shares of the Company's Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable and were issued and
sold by the Company in compliance in all material respects with applicable
securities laws; all of the securities of the Company conform to the description
thereof contained in the Prospectus; the certificates for the Common Stock and
Warrants of the Company, assuming they are in the form filed with the
Commission, are in due and proper form; the shares of Common Stock to be sold by
the Company pursuant to this Agreement, including shares of Common Stock
issuable upon exercise of the Warrants, have been duly authorized and are, or in
the case of the Shares to be sold by the Company, will be validly issued, fully
paid and non-assessable when issued and paid for as contemplated by this
Agreement and the Registration Statement; and no preemptive rights of
stockholders exist with respect to any of the Common Stock of the Company or the
issue or sale thereof pursuant to any applicable statute or the provisions of
the Company's Certificate of Incorporation or, to such
22
counsel's knowledge, pursuant to any contractual obligation. Such opinion shall
expressly state that it can be relied upon by Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxxx
Xxxxx & Xxxxxxx and by the Underwriters.
(d) The Representative shall have received from Xxxxxxxxx Traurig Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx, counsel for the Underwriters, an opinion dated the
Closing Date or the Option Closing Date, as the case may be, substantially to
the effect specified in subparagraphs (i), (v) and (vi) of paragraph (b) of
this Section 6. In addition to the matters set forth above, such opinion shall
also include a statement to the effect that nothing has come to the attention of
such counsel that has caused them to believe that: (i) the Registration
Statement, at the time it became effective under the Act (but after giving
effect to any modifications incorporated therein pursuant to Rule 430A under the
Act) and as of the Closing Date or the Option Closing Date, as the case may be,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) the Prospectus, or any supplement thereto, on the date
it was filed pursuant to the Rules and Regulations and as of the Closing Date or
the Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in light of circumstances under which they were made, not
misleading (except that such counsel need not express any view as to financial
statements, schedules and statistical information therein). With respect to
such statement, such counsel may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
(e) The Representative shall have received at or prior to the Closing Date
from Xxxxxxxxx Traurig Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx a memorandum or summary,
in form and substance satisfactory to the Representative, with respect to the
qualification for offering and sale by Underwriters of the Shares under the
state securities or Blue Sky laws of such jurisdictions as the Representative
may reasonably have designated to the Company.
(f) The Representative, on behalf of the several Underwriters, shall have
received, on the Closing Date and on the Option Closing Date, as the case may
be, a letter dated the Closing Date or the Option Closing Date, as the case may
be, in form and substance satisfactory to the Representative, of Xxxxxx Xxxxxxxx
LLP confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder and
stating that in their opinion the financial statements and schedules examined by
them and included in the Registration Statement comply in form and in all
material respects with the applicable accounting requirements of the Act and the
related published Rules and Regulations, and containing such other statements
and information as are ordinarily included in such accountants' "comfort
letters" to Underwriters with respect to the financial statements and certain
financial and statistical information contained in the Registration Statement
and Prospectus.
23
(g) The Representative shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer or Chief Operating Officer of the Company to the effect
that, as of the Closing Date or the Option Closing Date, as the case may be,
such officer represents as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been
taken or are, to the best of his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company contained in
Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules 424
or 430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and the
Prospectus and, in his opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and
Prospectus did not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not
misleading, and since the effective date of the Registration Statement no
event has occurred which should have been set forth in a supplement to or
an amendment of the Prospectus which has not been set forth in such
supplement or amendment; and
(v) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the
Company or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company
whether or not arising in the ordinary course of business.
(h) The Company shall have furnished to the Representative such further
documents confirming the representations and warranties, covenants and
conditions contained herein and related matters as the Representative may
reasonably have requested.
24
(i) The Firm Shares and the Option Shares shall have been approved for
designation upon notice of issuance on the NASDAQ National Market.
(j) The Lockup Agreements described in Section 1(a)(xxvi) shall have been
executed and delivered and shall be in full force and effect.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects reasonably satisfactory to the Representative and to Xxxxxxxxx Traurig
Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled, the obligations of the Underwriters hereunder may be
terminated by the Representative by notifying the Company of such termination in
writing or by telegram at or prior to the Closing Date or the Option Closing
Date, as the case may be. In such event, the Company and the Underwriters shall
not be under any obligation to each other (except to the extent provided in
Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and be in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities to which such Underwriter or
any such controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) 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 in light of the circumstances under which
they were made; and will reimburse each Underwriter and each such controlling
person who is a party to such action or proceeding in accordance with Section
8(c) for any legal or other expenses
25
reasonably incurred by such Underwriter or such controlling person in
investigating or defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry related to the
offering of the Shares; provided, however, that the Company will not be liable
in any such case to the extent that: (A) any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement, or omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in
reliance upon and in substantial conformity with written information furnished
to the Company by or through the Representative specifically for use in the
preparation thereof, or (B) with respect to the Preliminary Prospectus, any such
loss, claim damage or liability of such Underwriter relates to the failure of
such Underwriter to deliver a copy of the Prospectus at, or prior to, the
confirmation of the sale of the Shares to the person alleging such loss, claim,
damage or liability, where the alleged untrue statement or omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made; and will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that each Underwriter will be liable in each case to the
extent, and only to the extent, that (i) such untrue statement or alleged untrue
statement or omission or alleged omission has been made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by or through the Representative specifically for use
in the preparation thereof or, (ii) with respect to the Preliminary Prospectus,
any such loss, claim, damage or liability relates to the failure of such
Underwriter to deliver a copy of the Prospectus at, or prior to, the
confirmation of the sale of the Shares to the person alleging such loss, claim,
damage or liability, where the alleged untrue statement or omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
26
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and such
indemnified party shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party and shall pay as incurred the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel at its own
expense. Notwithstanding the foregoing, the indemnifying party shall pay as
incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event: (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the fees and expenses of more than one separate
firm for all such indemnified parties. Such firm shall be designated in writing
by the Representative in the case of parties indemnified pursuant to Section
8(a) and by the Company in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding in which
indemnification may be sought hereunder unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under Section 8(a) or
(b) above in
27
respect of any losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bears to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this paragraph (d): (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
fraudulent misrepresentation. The Underwriters' obligations in this Section
8(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against
28
whom contribution may be sought under this Section 8 hereby consents to the
jurisdiction of any court having jurisdiction over any other contributing party,
agrees that process issuing from such court may be served upon him or it by any
other contributing party and consents to the service of such process and agrees
that any other contributing party may join him or it as an additional defendant
in any such proceeding in which such other contributing party is a party.
(f) Any losses, claims, damages or liabilities for which an indemnified
party is entitled to indemnification or contribution under this Section 8 shall
be paid by the indemnifying party to the indemnified party as such losses,
claims, damages, or expenses are incurred. The indemnity and contribution
agreements contained in this Section 8 and the representations and warranties of
the Company set forth in this Agreement shall remain operative and in full force
and effect, regardless of: (i) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, the Company, its
directors or officers or any persons controlling the Company within the meaning
of the Act, (ii) acceptance of any Shares and payment therefor hereunder, or
(iii) any termination of this Agreement. A successor to any Underwriter, or to
the Company, its directors or officers, or any person controlling the Company,
shall be bound by and entitled to the benefits of the indemnity, contribution
and reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter shall fail to purchase and pay for the portion of the Shares which
such Underwriter has agreed to purchase and pay for on such date (otherwise than
by reason of any default on the part of the Company), the Representative shall
use its reasonable efforts to procure within 36 hours thereafter one or more of
the other Underwriters, or any others, to purchase from the Company upon the
terms set forth herein such amounts as may be agreed upon and upon the terms set
forth herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours the Representative shall not have procured such other Underwriters, or any
others, to purchase the Firm Shares or Option Shares, as the case may be, agreed
to be purchased by the defaulting Underwriter or Underwriters, then: (a) if the
aggregate number of Shares with respect to which such default shall occur does
not exceed 10% of the Firm Shares or Options Shares, as the case may be, covered
hereby, the other Underwriters shall be obligated, severally, in proportion to
the respective numbers of Firm Shares or Option Shares, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Shares or
Option Shares, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate number of Firm Shares
or Option Shares, as the case may be, with respect to which such default shall
occur equals or exceeds 10% of the Firm Shares or Option Shares, as the case may
be, covered hereby, the Company or the Representative shall
29
have the right, by written notice given as to the Firm Shares if the default
relates to the Firm Shares, or as to the Option Shares if the default relates to
the Option Shares, within the next 36-hour period to the parties to this
Agreement, to terminate this Agreement without liability on the part of the
non-defaulting Underwriters or of the Company, except for expenses to be paid by
the Company under Section 5 hereof and except to the extent provided in Section
8 hereof. In the event of a default by any Underwriter or Underwriters, as set
forth in this Section 9, the Closing Date or Option Closing Date, as the case
may be, may be postponed for such period, not exceeding seven days, as the
Representative may reasonably determine in order that the required changes in
the Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except as otherwise
provided herein, shall be mailed, delivered, telecopied or telegraphed and
confirmed as follows:
if to the Representative or the Underwriters:
Xxxxxxx Investment Company, Inc.
000 X.X. Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxxx X. X. Xxxxxxx
with a copy to:
Xxxxxxxxx Traurig Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxxxx X. Xxxxxxxxx, Esq.
if to the Company:
Hometown Auto Retailers, Inc.
000 Xxxxxxx Xxxxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx, President
30
with a copy to: Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
11. TERMINATION.
This Agreement may be terminated by the Representative by notice to the
Company as follows:
(a) at any time prior to the earlier of: (i) the time the Shares are
released by the Representative for sale by notice to the Underwriters, or (ii)
11:30 a.m. on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company or the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company, whether or not arising in the ordinary
course of business, (ii) any outbreak or escalation of hostilities or
declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or change
on the financial markets of the United States would, in the Representative's
reasonable judgment, make it impracticable to market the Shares or to enforce
contracts for the sale of the Shares, (iii) the Dow Xxxxx Industrial Average
shall have fallen by 15 percent or more from its closing price on the day
immediately preceding the date that the Registration Statement is declared
effective by the Commission, (iv) suspension of trading in securities generally
on the New York Stock Exchange or limitation on prices (other than limitations
on hours or numbers of days of trading) for securities on such Exchange, (v) the
enactment, publication, decree or other promulgation of any statute, regulation,
rule or order of any court or other governmental authority which in the
Representative's reasonable opinion materially and adversely affects the
business or operations of the Company, (vi) declaration of a banking moratorium
by United States or New York State authorities; (vii) the suspension of trading
of the Common Stock by the Commission or the NASD on the Nasdaq National Market,
or (viii) the taking of any action by any governmental body or agency in respect
of its monetary or fiscal affairs which in the Representative's reasonable
opinion has a material adverse effect on the securities markets in the United
States; or
(c) as provided in Sections 6 and 9 of this Agreement.
31
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person shall have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign or third party beneficiary merely because
of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), the legends required by Item
502(d) of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements contained in
this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of: (a) any
termination of this Agreement; (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof or by or on behalf of the Company or
its directors or officers; and (c) delivery of and payment for the Shares under
this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Oregon. All disputes relating to this Agreement shall be
adjudicated before a court located in Multnomah County, Oregon to the exclusion
of all other courts that might have jurisdiction.
[Remainder of page intentionally left blank]
32
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
Hometown Auto Retailers, Inc.
By:
---------------------------
Xxxxxx Xxxxxx
President and Chief Operating
Officer
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
XXXXXXX INVESTMENT COMPANY, INC.
As Representative of the several
Underwriters listed on Schedule A
By:
--------------------------------
Authorized Officer
33
SCHEDULE A
SCHEDULE OF UNDERWRITERS
Number of Shares
Underwriter to be Purchased(1)
----------- ------------------
Xxxxxxx Investment Company, Inc.
--------------------------------
Total 2,000,000
--------------------
(1) Subject to pro rata increase in the event that the Option Shares are
purchased as provided in Section 2(d)
