EXHIBIT 1.1
PEACH AUTO PAINTING AND COLLISION, INC.
1,500,000 Shares of Common Stock
UNDERWRITING AGREEMENT
, 1997
Xxxxxx & Associates, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Peach Auto Painting and Collision, Inc., a Delaware
corporation (the "Company"), hereby confirms its agreement with Xxxxxx &
Associates, Inc. ("you" or the "Underwriter"), as follows:
1. Description of the Securities.
The Company proposes to issue and sell to the Underwriter
1,500,000 shares (the "Shares") of common stock, $.01 par value per share
("Common Stock" or the "Securities"), of the Company. The Company proposes to
grant to the Underwriter an option to purchase up to 225,000 additional shares
of Common Stock (the "Additional Securities"). The offering of Securities and
Additional Securities contemplated hereby may sometimes be referred to as the
"Offering."
The Company will sell to the Underwriter, for nominal
consideration, warrants to purchase up to 150,000 shares of Common Stock at a
price equal to $9.60 per share (the "Underwriter's Warrants"). The Underwriter's
Warrants and the shares of Common Stock underlying the Underwriter's Warrants
are hereinafter referred to collectively as the "Underwriter's Securities." The
Underwriter's Warrants shall be non-exercisable and non-transferable (other than
to officers and partners of the Underwriter and to members of the selling group
and their officers or partners) for a period of 12 months following the
Effective Date. Thereafter, the Underwriter's Warrants shall be exercisable and
transferable for a period of four years (provided such transfer is in accordance
with the Securities Act and any other applicable securities laws). If the
Underwriter's Warrants are not exercised during their term, they shall, by their
terms, automatically expire. The Underwriter's Securities shall be registered
for sale to the public and shall be included in the Registration Statement filed
in connection with the Offering.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Underwriter that:
(a) The Company has filed with the Securities and
Exchange Commission (the "Commission"), a registration statement,
and one or more amendments thereto, on Form SB-2 (File No. 333-
), including in each such registration statement and each such
amendment any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Securities under the Securities Act of 1933 (the "Act"). The
Company will, if required, file a further amendment to said registration
statement in the form to be delivered to you and will not, before the
registration statement becomes effective, file any other amendment thereto to
which you shall have reasonably objected in writing after having been furnished
with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time such
registration statement becomes effective (including the prospectus, financial
statements, exhibits and all other documents, as amended, filed as a part
thereof), is hereinafter called the "Registration Statement," and the
prospectus, in the form filed with the Commission pursuant to Rule 424(b) of the
General Rules and Regulations of the Commission under the Act (the
"Regulations") or, if no such filing is made, the definitive prospectus used in
the Offering, is hereinafter called the "Prospectus." The Company has delivered
to you copies of each Preliminary Prospectus as filed with the Commission and
has consented to the use of such copies for purposes permitted by the Act.
(b) The Commission has not issued any orders
preventing or suspending the use of any Preliminary Prospectus, and, as of the
date filed with the Commission, each Preliminary Prospectus conformed in all
material respects with the requirements of the Act and did not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein and necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements or omissions
made in reliance upon and in conformity with written information furnished to
the Company by or on your behalf for use in such Preliminary Prospectus and
except that this representation and warranty does not apply to statements or
omissions that have been cured in a subsequent preliminary prospectus or in the
Prospectus.
(c) When the Registration Statement becomes
effective under the Act and at all times subsequent thereto to and including the
Closing Date (hereinafter defined) and the Option Closing Date (hereinafter
defined) and for such longer periods as a Prospectus is required to be delivered
in connection with the
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sale of the Securities by the Underwriter, the Registration Statement and
Prospectus, and any amendment thereof or supplement thereto, will contain all
material statements which are required to be stated therein in accordance with
the Act and the Regulations, and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with written
information furnished to the Company by you for use in the Registration
Statement or Prospectus, or in any amendment thereof or supplement thereto. It
is understood that the statements set forth in the Prospectus with respect to
(i) the amounts of the selling concession and reallowance; (ii) the identity of
counsel to the Underwriter under the heading "Legal Matters"; (iii) the
statements with respect to the public offering of the Securities set forth under
the heading "Underwriting," including the information concerning the National
Association of Securities Dealers, Inc. ("NASD") affiliation of the Underwriter;
and (iv) the stabilization legend in the Prospectus constitute the only
information supplied by you for use in the Registration Statement or Prospectus.
(d) The Company is, and at the Closing Date and the
Option Closing Date will be, a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Peach Warehouse &
Distribution, Inc., a Georgia corporation ("Peach"), will merge with and into
the Company as of the Closing Date. Neither the Company nor Peach has any
subsidiaries. Each of the Company and Peach is duly qualified 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 requires such
qualification, except those jurisdictions in which the failure to so qualify
would not have a material adverse effect on the business or operations of the
Company and its subsidiaries, taken as a whole ("Material Adverse Effect"). Each
of the Company and Peach has all requisite corporate powers and authority, and
all necessary authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental regulatory officials and bodies to own or
lease its properties and conduct its business as described in the Prospectus
except where the failure to have any such authorizations, approvals, orders,
licenses, certificates or permits would not have a Material Adverse Effect, and
each of the Company and Peach is doing business and has been doing business
during the period described in the Registration Statement in compliance with all
such material authorizations, approvals, orders, licenses, certificates and
permits and all material
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federal, state and local laws, rules and regulations concerning the business in
which the Company or Peach is engaged, except where the failure to comply with
any such authorizations, approvals, orders, licenses, certificates or permits or
any such laws, rules or regulations would not have a Material Adverse Effect.
The disclosures in the Registration Statement concerning the effects of federal,
state and local regulation on the Company's and Peach's business as currently
conducted and as contemplated are correct in all material respects and do not
omit to state a material fact required to be stated therein in light of the
circumstances under which such disclosures were made. The Company has all
corporate power and authority to enter into this Agreement and carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained or will have been
obtained prior to the Closing Date.
(e) This Agreement has been duly and validly
authorized and executed by the Company. The Securities and the Underwriter's
Securities have been duly authorized (and, in the case of the Shares, have been
duly reserved for issuance) and, when issued and paid for in accordance with
this Agreement (and, in the case of the Underwriter's Warrants, upon exercise of
such Warrants and payment to the Company of the exercise price therefor pursuant
to the terms thereof), all of such Shares will be validly issued, fully paid and
non-assessable; the Securities, Additional Securities and Underwriter's
Securities are not and will not be subject to the preemptive rights of any
stockholder of the Company and conform and at all times up to and including
their issuance will conform in all material respects to all statements with
regard thereto contained in the Registration Statement and Prospectus; and all
corporate action required to be taken for the authorization, issuance and sale
of the Securities, the Additional Securities and Underwriter's Securities has
been taken, and this Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, to issue and sell, upon
exercise in accordance with the terms thereof, the number and kind of securities
called for thereby.
(f) The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof will not
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or by-laws, in each
case as amended, of the Company or of any evidence of indebtedness, lease,
contract or other agreement or instrument to which the Company or Peach is a
party or by which the Company or Peach or any of its properties is bound, or
under any applicable law, rule, regulation, judgment, order or decree of any
government, professional advisory body, administrative agency or court, domestic
or foreign, having jurisdiction over the Company or Peach or their respective
properties, in each case except for any breach, violation or default that would
not have a Material Adverse Effect, or result in
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the creation or imposition of any material lien, charge or encumbrance upon any
of the properties or assets of the Company or Peach; and no consent, approval,
authorization or order of any court or governmental or other regulatory agency
or body is required for the consummation by the Company of the transactions on
its part herein contemplated, except such as may be required under the Act or
under state securities or blue sky laws or under the rules and regulations of
the NASD, and except where the breach, violation or failure to obtain such
consent, approval, authorization or order would not have a Material Adverse
Effect.
(g) Subsequent to the date hereof, and prior to the
Closing Date and the Option Closing Date, except as otherwise described in or
contemplated by the Prospectus, neither the Company nor Peach will issue or
acquire any equity securities.
(h) The consolidated financial statements and notes
thereto included in the Registration Statement and the Prospectus fairly present
the consolidated financial position and the results of operations of the Company
and Peach at the respective dates and for the respective periods to which they
apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved.
(i) Except as set forth in the Registration
Statement, neither the Company nor Peach is, and at the Closing Date and at the
Option Closing Date neither the Company nor Peach will be, in violation or
breach of, or default in, the due performance and observance of any term,
covenant or condition of any indenture, mortgage, deed of trust, note, loan or
credit agreement, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other agreement or instrument to which the Company or
Peach is a party or by which the Company or Peach may be bound or to which any
of the property or assets of the Company or Peach is subject, which violations,
breaches, default or defaults, singularly or in the aggregate, would have a
Material Adverse Effect. Neither the Company nor Peach has and at the Closing
Date or Option Closing Date neither the Company nor Peach will have taken any
action in violation of the provisions of the Certificate of Incorporation or
by-laws, in each case as amended, of the Company or Peach, as the case may be,
or any statute or any order, rule or regulation of any court or regulatory
authority or governmental body having jurisdiction over or application to either
the Company or Peach or its business or properties, except for any violations
that, singularly or in the aggregate, would not have a Material Adverse Effect.
(j) The Company and Peach have, and at the Closing
Date and at the Option Closing Date will have, good and marketable title to all
properties and assets described in the Prospectus as owned by them, free and
clear of all liens, charges, encumbrances,
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claims, security interests, restrictions and defects of any material nature
whatsoever, except such as are described or referred to in the Prospectus and
liens for taxes not yet due and payable or such as in the aggregate will not
have a Material Adverse Effect. All of the material leases and subleases under
which the Company or Peach is the lessor or sublessor of properties or assets or
under which the Company or Peach holds properties or assets as lessee as
described in the Prospectus are, and will on the Closing Date and the Option
Closing Date be, in full force and effect, and except as described in the
Prospectus, each of the Company and Peach is not and will not be in default in
respect of any of the terms or provisions of any of such leases or subleases
(except for defaults which would not have a Material Adverse Effect), and no
claim has been asserted by anyone adverse to rights of the Company or Peach as
lessor, sublessor, lessee or sublessee under any of the leases or subleases
mentioned above, or affecting or questioning the right of the Company or Peach
to continue possession of the leased or subleased premises or assets under any
such lease or sublease, except as described or referred to in the Prospectus or
such as in the aggregate would not have a Material Adverse Effect, and the
Company and Peach (including through wholly owned subsidiaries) owns or leases
all such properties as are necessary to its operations as now conducted and,
except as otherwise stated in the Prospectus, as proposed to be conducted as set
forth in the Prospectus (except where the failure to own or lease such
properties would not have a Material Adverse Effect).
(k) The authorized, issued and outstanding capital
stock of the Company as of the date referenced in the Prospectus is, and the
authorized, issued and outstanding capital stock of the Company on the Closing
Date will be, as set forth in the Prospectus under "Capitalization" (in each
case based on the assumptions set forth therein and except that issuance and
sale of the Additional Securities will not be reflected therein); the shares of
issued and outstanding capital stock of the Company set forth thereunder have
been (or as of the Closing Date will be) duly authorized and validly issued and
are (or as of the Closing Date will be) fully paid and non-assessable; except as
set forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company have
been granted or entered into by the Company; and the Common Stock and all such
options and warrants conform in all material respects, to all statements
relating thereto contained in the Registration Statement and Prospectus.
(l) Except as described in the Prospectus, neither
the Company nor Peach owns or controls any capital stock or securities of, or
has any proprietary interest in, or otherwise participates in any other
corporation, partnership, joint venture, firm, association or business
organization (other than those direct or indirect subsidiaries of the Company
disclosed in Exhibit 22 to
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the Registration Statement); provided, however, that this provision shall not be
applicable to the investment, if any, of the net proceeds from the sale of the
Securities sold by the Company or other funds thereof in interest-bearing
savings accounts, certificates of deposit, money market accounts, United States
government obligations or other short-term obligations.
(m) Ernst & Young LLP, who have reported on the
financial statements of the Company which have been filed with the Commission as
a part of the Registration Statement, are independent accountants with respect
to the Company as required by the Act and the Regulations.
(n) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and except as
may otherwise be indicated or contemplated herein or therein, neither the
Company nor Peach has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money; or (ii) entered into any
transaction other than in the ordinary course of business; or (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; provided, however, that this provision shall not be applicable to any
transaction between or among the Company and its subsidiaries.
(o) There is no litigation or governmental
proceeding pending or to the knowledge of the Company or Peach threatened
against, or involving the properties or business of the Company or Peach which
might have a Material Adverse Effect, except as referred to in the Prospectus.
Further, except as referred to in the Prospectus, there are no pending actions,
suits or proceedings related to environmental matters or related to
discrimination on the basis of age, sex, religion or race, nor is the Company or
Peach charged with or, to its knowledge, under investigation with respect to any
violation of any statutes or regulations of any regulatory authority having
jurisdiction over its business or operations, which violations might have a
Material Adverse Effect, and no labor disturbances by the employees of the
Company or Peach exist or, to the knowledge of the Company or Peach, have been
threatened.
(p) Each of the Company and Peach has, and at the
Closing Date and at the Option Closing Date will have, filed all necessary
federal, state and foreign income and franchise tax returns or has requested
extensions thereof (except in any case where the failure so to file would not
have a Material Adverse Effect), and has paid all taxes which it believes in
good faith were required to be paid by it except for any such taxes that
currently, or on the Closing Date or Option Closing Date, as the case may be,
are being contested in good faith or as described in the Prospectus.
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(q) Neither the Company nor Peach has at any time
(i) made any contribution to any candidate for political office, or failed to
disclose fully any such contribution, in violation of law, or (ii) made any
payment to any state, federal, foreign governmental or professional regulatory
agency, officer or official or other person charged with similar public,
quasi-public or professional regulatory duties, other than payments or
contributions required or allowed by applicable law.
(r) Except as set forth in the Registration
Statement, to the knowledge of the Company or Peach, neither the Company or
Peach nor any officer, director, employee or agent of the Company or Peach has
made any payment or transfer of any funds or assets of the Company or Peach or
conferred any personal benefit by use of the Company's or Peach's assets or
received any funds, assets or personal benefit in violation of any law, rule or
regulation, which is required to be stated in the Registration Statement or
necessary to make the statements therein not misleading.
(s) On the Closing Date and on the Option Closing
Date, all transfer or other taxes, if any (other than income tax), which are
required to be paid, and are due and payable, in connection with the sale and
transfer of the Securities by the Company to the Underwriter will have been
fully paid or provided for by the Company as the case may be, and all laws
imposing such taxes will have been fully complied with in all material respects.
(t) There are no contracts or other documents of
the Company or Peach which are of a character required to be described in the
Registration Statement or Prospectus or filed as exhibits to the Registration
Statement which have not been so described or filed.
(v) The Company and Peach maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or specified
authorizations; (2) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; and (3) access to assets
is permitted only in accordance with management's general or specific
authorizations.
(w) Except as set forth in the Prospectus, no
holder of any securities of the Company has the right (which has not been
effectively waived or terminated) to require registration of any securities
because of the filing or effectiveness of the Registration Statement.
(x) The Company has not taken and at the Closing
Date will not have taken, directly or indirectly, any action
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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 Common Stock to facilitate the sale or resale of such securities.
(y) To the Company's knowledge, there are no claims
for services in the nature of a finder's origination fee with respect to the
sale of the Securities hereunder, except as set forth in the Prospectus.
(z) No right of first refusal exists with respect
to any sale of securities by the Company.
(aa) No statement, representation, warranty or
covenant made by the Company in this Agreement or made in any certificate or
document required by this Agreement to be delivered to the Underwriter was, when
made, or as of the Closing Date or as of the Option Closing Date will be
materially inaccurate, untrue or incorrect.
3. Covenants of the Company.
The Company covenants and agrees with the Underwriter that:
(a) It will deliver to the Underwriter, without
charge, two conformed copies of each Registration Statement and of each
amendment or supplement thereto, including all financial statements and
exhibits.
(b) The Company has delivered to the Underwriter,
and each of the Selected Dealers (as hereinafter defined) without charge, as
many copies as have been reasonably requested of each Preliminary Prospectus
heretofore filed with the Commission in accordance with and pursuant to the
Commission's Rule 430 under the Act and will deliver to the Underwriter and to
others whose names and addresses are furnished by the Underwriter or a Selected
Dealer, without charge, on the Effective Date, and thereafter from time to time
during such reasonable period as you may request if, in the reasonable opinion
of counsel for the Underwriter, the Prospectus is required by law to be
delivered in connection with sales by the Underwriter or a dealer, as many
copies of the Prospectus (and, in the event of any amendment of or supplement to
the Prospectus, of such amended or supplemented Prospectus) as the Underwriter
may reasonably request for the purposes contemplated by the Act. The Company
will take all necessary actions to furnish to whomever directed by the
Underwriter, when and as requested by the Underwriter, all necessary documents,
exhibits, information, applications, instruments and papers as may be reasonably
required in order to permit or facilitate the sale of the Securities.
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(c) The Company has authorized the Underwriter to
use, and make available for use by prospective dealers, the Preliminary
Prospectus, and authorizes the Underwriter, all dealers selected by you in
connection with the distribution of the Securities (the "Selected Dealers") to
be purchased by the Underwriter and all dealers to whom any of such Securities
may be sold by the Underwriter or by any Selected Dealer, to use the Prospectus,
as from time to time amended or supplemented, in connection with the sale of the
Securities in accordance with the applicable provisions of the Act, the
applicable Regulations and applicable state law, until completion of the
distribution of the Securities and for such longer period as you may reasonably
request if the Prospectus is required under the Act, the applicable Regulations
or applicable state law to be delivered in connection with sales of the
Securities by the Underwriter or the Selected Dealers.
(d) The Company will use its best efforts to cause
the Registration Statement to become effective and will notify the Underwriter
immediately, and confirm the notice in writing: (i) when the Registration
Statement or any post-effective amendment thereto becomes effective; (ii) of the
receipt of any comments from the Commission regarding the Registration Statement
or of the receipt of any stop order or of the initiation, or to the best of the
Company's knowledge, the threatening, of any proceedings for that purpose; (iii)
the suspension of the qualification of the Securities and the Underwriter's
Warrants, or underlying securities, for offering or sale in any jurisdiction or
of the initiating, or to the best of the Company's knowledge the threatening, of
any proceeding for that purpose; and (iv) of the receipt of any comments from
the Commission. If the Commission shall enter a stop order at any time, the
Company will make every reasonable effort to obtain the lifting of such order as
promptly as practicable.
(e) During the time when a prospectus relating to
the Securities is required to be delivered under the Act, the Company will use
its best efforts to comply with all requirements imposed upon it by the Act and
the Securities Exchange Act of 1934 (the "Exchange Act"), as now and hereafter
amended and by the Regulations, as from time to time in force, as necessary to
permit the continuance of sales of or dealings in the Securities in accordance
with the provisions hereof and the Prospectus and the Company shall use its best
efforts to keep the Registration Statement effective so long as a Prospectus is
required to be delivered in connection with the sale of the Securities or
Additional Securities by the Underwriter or by dealers effecting transactions
therein in connection with the initial public offering thereof. If at any time
when a prospectus relating to the Securities is required to be delivered under
the Act, any event shall have occurred as a result of which, in the reasonable
opinion of counsel for the Company or counsel for the Underwriter, the
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Prospectus as then amended or supplemented (or the prospectus contained in a new
registration statement filed by the Company pursuant to Paragraph 3(q)),
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, or
if, in the reasonable opinion of either such counsel, it is necessary at any
time to amend the Prospectus (or the prospectus contained in such new
registration statement) to comply with the Act, the Company will notify you
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act and will furnish to you
copies thereof.
(f) The Company will endeavor in good faith, in
cooperation with you, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws or blue sky laws of such jurisdictions as you may reasonably designate;
provided, however, that in connection therewith 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 or to make any changes in its capital
structure or certificate of incorporation or in any other material aspects of
its business or to enter into any material agreement with any Blue Sky
commissioner.
(g) The Company will make generally available
(within the meaning of Section 11(a) of the Act and the Regulations) to its
security holders, as soon as practicable, but in no event later than the first
day of the eighteenth full calendar month following the Effective Date, an
earnings statement of the Company, which will be in reasonable detail but which
need not be audited, covering a period of at least twelve months beginning after
the Effective Date, which earnings statements shall satisfy the requirements of
Section 11(a) of the Act and the Regulations as then in effect. The Company may
discharge this obligation in accordance with Rule 158 of the Regulations.
(h) During the period of five years commencing on
the Effective Date (unless the Company shall no longer have a class of equity
securities registered under Section 12(b) or 12(g) of the Exchange Act), the
Company will furnish to its stockholders an annual report (including financial
statements audited by its independent public accountants), in accordance with
Rule 14a-3 under the Exchange Act, and, at its expense, furnish to the
Underwriter (i) within 90 days after the end of each fiscal year of the Company,
a consolidated balance sheet of the Company and its consolidated subsidiaries
and a separate balance sheet of each subsidiary of the Company the accounts of
which are not included in such consolidated balance sheet as of the end of such
fiscal year, and consolidated statements of operations, stockholder's equity and
cash flows of the Company and its consolidated subsidiaries and
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separate statements of operations, stockholder's equity and cash flows of each
of the subsidiaries of the Company the accounts of which are not included in
such consolidated statements, for the fiscal year then ended all in reasonable
detail and all certified by independent accountants (within the meaning of the
Act and the Regulations), (ii) within 45 days after the end of each of the first
three fiscal quarters of each fiscal year, similar balance sheets as of the end
of such fiscal quarter and similar statements of operations, stockholder's
equity and cash flows for the fiscal quarter then ended, all in reasonable
detail, and subject to year end adjustment, all certified by the Company's
principal financial officer or the Company's principal accounting officer as
having been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, (iii) as soon as available, each report furnished
to or filed with the Commission or any securities exchange and each report and
financial statement furnished to the Company's stockholders generally, and (iv)
as soon as available, such other material as the Underwriter may from time to
time reasonably request regarding the financial condition and operations of the
Company; provided, however, that the Underwriter shall use such other material
only in connection with its activities as Underwriter hereunder and shall
otherwise keep such other material confidential.
(i) For a period of eighteen months from the
Closing Date, the Company, at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit), the
Company's financial statements for each of the first three quarters prior to the
announcement of quarterly financial information, the filing of the Company's
10-Q quarterly report and the mailing, if any, of quarterly financial
information to stockholders.
(j) Prior to the Closing Date or the Option Closing
Date (if any), the Company will not, directly or indirectly, without your prior
written consent, which shall not be unreasonably withheld or delayed, issue any
press release or other public announcement or hold any press conference with
respect to the Company or its activities with respect to the Offering (other
than trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's operations).
(k) The Company will deliver to you prior to
filing, any amendment or supplement to the Registration Statement or Prospectus
proposed to be filed after the Effective Date and will not file any such
amendment or supplement to which you shall reasonably object after being
furnished such copy.
(l) During the period of 120 days commencing on the
date hereof, the Company will not at any time take, directly or
indirectly, any action designed to, or which will constitute or
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which might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Securities to facilitate the sale or resale of
any of the Securities.
(m) The Company will apply the net proceeds from
the Offering received by it substantially in the manner set forth
under "Use of Proceeds" in the Prospectus.
(n) Counsel for the Company, the Company's
accountants, and the officers and directors of the Company will, respectively,
furnish the opinions, the letters and the certificates referred to in
subsections of Paragraph 9 hereof, and, if the Company shall file any amendment
to the Registration Statement relating to the offering of the Securities or any
amendment or supplement to the Prospectus relating to the offering of the
Securities subsequent to the Effective Date, such counsel, such accountants, and
such officers and directors, respectively, will, at the time of such filing or
at such subsequent time as you shall specify, so long as Securities being
registered by such amendment or supplement are being underwritten by the
Underwriter, furnish to you such opinions, letters and certificates, each dated
the date of its delivery, of the same nature as the opinions, the letters and
the certificates referred to in said Paragraph 9, as you may reasonably request,
or, if any such opinion or letter or certificate cannot be furnished by reason
of the fact that such counsel or such accountants or any such officer or
director believes that the same would be inaccurate, such counsel or such
accountants or such officer or director will furnish an accurate opinion or
letter or certificate with respect to the same subject matter.
(o) The Company will comply in all material
respects with all of the provisions of any undertakings contained
in the Registration Statement.
(p) The Company will reserve and keep available for
issuance that maximum number of its authorized but unissued shares of Common
Stock which are issuable upon exercise of the Underwriter's Warrants outstanding
from time to time.
(q) For a period of five years from the Closing
Date, the Company shall continue to employ the services of a firm of independent
certified public accountants reasonably acceptable to the Underwriter in
connection with the preparation of the financial statements to be included in
any registration statement to be filed by the Company hereunder, or any
amendment or supplement thereto. During the same period, the Company shall
employ the services of a law firm(s) reasonably acceptable to the Underwriter in
connection with all legal work of the Company, including the preparation of a
registration statement to be filed by the Company hereunder, or any amendment or
supplement thereto.
13
(r) The Company will effect the merger of Peach,
with and into the Company concurrently with the Closing of the
Offering.
(s) The Company agrees that it will, upon the
Effective Date, for a period of no less than two years, engage a designee of the
Underwriter as an advisor (the "Advisor") to its Board of Directors where such
Advisor shall attend meetings of the Board, receive all notices and other
correspondence and communications sent by the Company to members of its Board of
Directors and receive compensation equal to the entitlement of other non-officer
Directors. In addition, such Advisor shall be entitled to receive reimbursement
for all reasonable costs incurred in attending such meetings including, but not
limited to (if reasonably required in connection with any meeting held outside
the New York City metropolitan area), food, lodging and transportation. The
Company further agrees that, during said two year period, it shall schedule no
less than four (4) formal and "in person" meetings of its Board of Directors in
each such year and such meetings shall be held quarterly each year and advance
notice of such meetings identical to the notice given to directors shall be
given to the Advisor. Further, during such two year period, the Company shall
give notice to the Underwriter with respect to any proposed acquisitions,
mergers, reorganizations or other similar transactions. In lieu of the
Underwriter's right to designate an Advisor, the Underwriter shall have the
right during such two-year period, in its sole discretion, to designate one
person for election as a Director of the Company and the Company will utilize
its best efforts to obtain the election of such person who shall be entitled to
receive the same compensation, expense reimbursements and other benefits set
forth above.
The Company agrees to indemnify and hold the
Underwriter and such Advisor or Director harmless against any and all claims,
actions, damages, costs and expenses, and judgments arising solely out of the
attendance and participation of your designee at any such meeting described
herein. In the event the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, it agrees, if
possible, to include the Underwriter's designee as an insured under such policy.
(v) Upon the Closing Date, the Company shall have
entered into an agreement with the Underwriter in form reasonably satisfactory
to the Underwriter (the "Consulting Agreement"), pursuant to which the
Underwriter will be retained as a management and financial consultant for a
two-year period commencing as of the Closing Date, and will be paid a fee of
$25,000 per year for a term of two years, all of which ($50,000) shall be paid
upon the Closing Date.
14
(w) The Common Stock shall be quoted on either the
Nasdaq SmallCap Market, Boston Stock Exchange and Pacific Stock Exchange or The
Nasdaq National Market System ("Nasdaq"), not later than the Closing Date.
Thereafter, (unless the Company is acquired) the Company will effect and use its
best efforts to maintain such listing or cause such securities to be listed on a
national securities exchange or in a comparable inter-dealer quotation system
for at least five years from the date of this Agreement.
(x) The Company will apply for listing in Standard
and Poors Corporation Reports or Moodys OTC Guide and shall use its best efforts
to have the Company included in such publications for at least five years from
the Closing Date (unless the Common Stock is listed on the New York Stock
Exchange or the American Stock Exchange or unless the Company shall no longer
have a class of equity securities registered under Section 12(b) or 12(g) of the
Exchange Act).
(y) The Company has obtained from each person who
is currently an officer or director of the Company or a stockholder, warrant
holder or option holder of the Company, a written agreement, in form and
substance reasonably satisfactory to you and your counsel, to the effect that
such person shall not offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, without your prior written consent (or pursuant to such
other agreement with respect to the sale of capital stock as may be required by
state "Blue Sky" laws in order to qualify the Offering in any such State), any
shares of the Common Stock owned by such person or any securities convertible
into, or exchangeable for, or warrants to purchase or acquire, shares of Common
Stock, for a period of eighteen months from the Effective Date. For a period of
eighteen from the Effective Date, the Company shall not issue any shares of
Common Stock or preferred stock or any warrants, options or other rights to
purchase Common Stock or preferred stock without the consent of the Underwriter,
except for (i) the Securities and the Additional Securities, (ii) the
Underwriter's Securities, or (iii) options to purchase up to 700,000 shares of
Common Stock pursuant to the Company's stock option plan and shares of Common
Stock issuable upon the exercise of such options. Notwithstanding the foregoing,
the Company may issue any securities in a registered public offering which
provides gross proceeds to the Company of at least $12,000,000.
(z) The Company will use its best efforts to
obtain, as soon after the Closing Date as is reasonably possible, liability
insurance covering its officers and directors.
(aa) The Company agrees that it will employ the
services of a financial public relations firm reasonably acceptable to the
Underwriter for a period of at least twelve months following the Effective Date.
15
4. Sale, Purchase and Delivery of Securities; Closing
Date; Public Offering.
(a) On the basis of the warranties, representations
and agreements herein contained, and subject to the satisfaction of all the
terms and conditions of this Agreement, the Company agrees to issue and sell to
the Underwriter, and the Underwriter agrees to purchase from the Company, the
Securities at a price of $8.00 per share of Common Stock, less an underwriting
discount of 8.875% of the price for such Common Stock. The Underwriter may allow
a concession not exceeding $. per share of Common Stock to Selected Dealers who
are members of the NASD, and to certain foreign dealers, and such dealers may
reallow to NASD members and to certain foreign dealers a concession not
exceeding $. per share of Common Stock.
(b) Delivery of the Securities and payment therefor
shall be made at 10:00 A.M., New York time on the Closing Date, as hereinafter
defined, at the offices of the Underwriter or such other location as may be
agreed upon by you and the Company. Delivery of certificates for the Common
Stock (in definitive form and registered in such names and in such denominations
as you shall request by written notice to the Company delivered at least four
business days' prior to the Closing Date), shall be made to you for the account
of the Underwriter against payment of the purchase price therefor by certified
or bank check payable in New York Clearing House funds to the order of the
Company. The Company will make such certificates available for inspection at
least one business day prior to the Closing Date at such place as you shall
designate.
(c) The "Closing Date" shall be , 1996,
or such other date not later than the fourth business day following the
effective date of the Registration Statement as you shall determine and advise
the Company by at least three full business days' notice.
(d) The cost of original issue tax stamps, if any,
in connection with the issuance and delivery of the Securities by the Company to
the Underwriter shall be borne by the Company. The Company will pay and hold the
Underwriter, and any subsequent holder of the Securities, harmless from any and
all liabilities with respect to or resulting from any failure or delay in paying
federal and state stamp taxes, if any, which are payable in connection with the
original issuance or sale to the Underwriter of the Securities or any portions
thereof.
(e) As soon, on or after the Effective Date, as the
Underwriter deems advisable, the Underwriter shall make a public offering of the
Securities (other than to residents of or in any jurisdiction in which
qualification of the Securities is required and has not become effective) at the
initial public offering prices
16
and upon the other terms set forth in the Prospectus. The Underwriter may from
time to time increase or decrease the public offering prices of the Securities
after the distribution thereof has been completed to such extent as the
Underwriter, in its sole discretion, deems advisable.
5. Sale, Purchase and Delivery of Additional
Securities; Option Closing Date.
(a) Upon the basis of the representations,
warranties and agreements herein contained, and subject to the satisfaction of
all the terms and conditions of this Agreement, the Company agrees to sell to
the Underwriter, and the Underwriter shall have the option (the "Option") to
purchase from the Company, the Additional Securities at the same price per
Security as set forth in Paragraph 4(a) above. Additional Securities may be
purchased solely for the purpose of covering over-allotments made in connection
with the distribution and sale of the Securities as contemplated by the
Prospectus.
(b) The Option to purchase all or part of the
Additional Securities covered thereby is exercisable by you at any time and from
time to time before the expiration of a period of 45 calendar days from the date
of the Effective Date (the "Option Period") by written notice to the Company
setting forth the number of Additional Securities for which the Option is being
exercised, the name or names in which the certificates for such Additional
Securities are to be registered and the denominations of such certificates. Upon
each exercise of the Option, the Company shall sell to the Underwriter the
aggregate number of Additional Securities specified in the notice exercising
such Option.
(c) Delivery of the Additional Securities with
respect to which Options shall have been exercised and payment therefor shall be
made at 10:00 A.M., New York time on the Option Closing Date, as hereinafter
defined, at the offices of the Underwriter or at such other locations as may be
agreed upon by you and the Company. Delivery of certificates for Additional
Securities shall be made to you for the account of the Underwriter against
payment of the purchase price therefor by certified or bank check or wire
transfer in New York Clearing House Funds to the order of the Company. The
Company will make certificates for Additional Securities to be purchased at the
Option Closing Date available for inspection at least one business day prior to
such Option Closing Date at such place as you shall designate.
(d) The "Option Closing Date" shall be the date not
later than three business days after the end of the Option Period as you shall
determine and advise the Company by at least three full business days' notice,
unless some other time is agreed upon between you and the Company.
17
(e) The obligations of the Underwriter to purchase
and pay for Additional Securities at such Option Closing Date shall be subject
to compliance as of such date with all the conditions specified in Paragraph 9
herein and the delivery to you of opinions, certificates and letters, each dated
such Option Closing Date, substantially similar in scope to those specified in
Paragraph 9 herein.
(f) The cost of original issue tax stamps, if any,
in connection with the issuance and delivery of the Additional Securities by the
Company to the Underwriter shall be borne by the Company. The Company will pay
and hold the Underwriter, and any subsequent holder of Additional Securities,
harmless from any and all liabilities with respect to or resulting from any
failure or delay in paying federal and state stamp taxes, if any, which are
payable in connection with the original issuance or sale to the Underwriter of
the Additional Securities or any portion thereof.
6. [intentionally omitted]
7. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the
Company that:
(a) The Underwriter is a member in good standing of
the NASD, and has complied with all NASD requirements concerning net capital and
compensation to be received in connection with the Offering.
(b) To the Underwriter's knowledge, there are no
claims for services in the nature of a finder's or origination fee with respect
to the sale of the Securities hereunder, which the Company is, or may become,
obligated to pay.
8. Payment of Expenses.
(a) The Company shall be responsible for and shall
bear all expenses directly and necessarily incurred in connection with the
Offering, including: (i) the preparation, printing and filing of the offering
documents and amendments thereto, including NASD, SEC and filing fees,
preliminary and final Prospectus and the printing of the Underwriting Agreement,
the Agreement Among Underwriters and the Selected Dealer's Agreement, a Blue Sky
Memorandum, material to be circulated to any underwriter by the Underwriter and
other incidental material; (ii) the mailing and distribution costs for the
preliminary and final Prospectus; (iii) the issuance and delivery of
certificates representing the Securities, including original issue and transfer
taxes, if any; (iv) the qualification of the Securities and any shares of
Company's Common Stock underlying the Securities under state securities or Blue
Sky Laws, including counsel fees of the
18
Underwriter relating thereto ($15,000 of which shall be due and payable upon the
commencement of Blue Sky filings together with appropriate state filing fees),
plus disbursements relating to, but not limited to, long-distance telephone
calls, photocopying, messengers, excess postage, overnight mail and courier
services; (v) the fees and disbursements of counsel for the Company and the
accountants for the Company; and (vi) advertising costs and expenses, including,
but not limited to, the costs and expenses in connection with the "road show,"
memorabilia and "tombstones" in publications selected by the Underwriter.
(b) In addition to the expenses to be paid and
borne by the Company referred to in Paragraph 8(a) above, the Company shall
reimburse you at closing for expenses incurred by you in connection with the
Offering (for which you need not make any accounting), in the amount of 3% of
the price to the public of the Securities and Additional Securities sold in the
Offering. This 3% non-accountable expense allowance shall cover the fees of your
legal counsel, but shall not include any expenses for which the Company is
responsible under Paragraph 8(a) above, including the reasonable fees and
disbursements of your legal counsel with respect to Blue Sky matters.
9. Conditions of Underwriter's Obligations.
The obligations of the Underwriter to consummate the
transactions contemplated by this Agreement shall be subject to the continuing
accuracy in all material respects of the representations and warranties of the
Company contained herein (except those representations and warranties that speak
as of a specific date) and the accuracy in all material respects of the
statements of the Company and its officers and directors made pursuant to the
provisions hereof, as of the date hereof and as of the Closing Date, and to the
performance by the Company in all material respects of its covenants and
agreements hereunder and to the following additional conditions:
(a) The Registration Statement shall have become
effective not later than 5:00 p.m., New York time, on the date following the
date of this Agreement, or such later date and time as shall be consented to in
writing by you and, on or prior to the Closing Date, no stop order suspending
the effectiveness of the Registration Statement and no proceedings for that
purpose shall have been instituted or to your knowledge or the knowledge of the
Company, shall be pending or contemplated by the Commission and any request on
the part of the Commission for additional information shall have been complied
with to the reasonable satisfaction of counsel to the Underwriter and after the
date hereof no amendment or supplement shall have been filed to the Registration
Statement or Prospectus without your prior consent, which shall not have been
unreasonably withheld or delayed.
19
(b) The Underwriter shall not have advised the
Company that the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto contains an untrue statement of a fact which, in
the Underwriter's reasonable opinion, is material, or omits to state a fact
which, in the Underwriter's reasonable opinion, is material and is required to
be stated therein or is necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) Between the time of the execution and delivery
of this Agreement and the Closing Date, there shall be no litigation instituted
against the Company or any of its officers or directors and between such dates
there shall be no proceeding instituted or, to the Company's knowledge,
threatened against the Company or any of its officers or directors before or by
any federal, state or county commission, regulatory body, administrative agency
or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding would have a Material
Adverse Effect.
(d) The representations and warranties of the
Company contained herein and in each certificate and document contemplated under
this Agreement to be delivered to you shall be true and correct in all material
respects at the Closing Date as if made at the Closing Date, and all covenants
and agreements contained herein to be performed on the part of the Company, and
all conditions contained herein to be fulfilled or complied with by the Company
at or prior to the Closing Date shall be fulfilled or complied with in all
material respects.
(e) At the Closing Date, you shall have received
the opinion of Xxxxx Xxxxx Mulliss & Xxxxx, L.L.P., counsel to the Company,
dated as of such Closing Date, addressed to the Underwriter and in form and
substance satisfactory to counsel to the Underwriter, to the effect that:
(i) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Peach is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia, each with all requisite
corporate power and authority to own its properties and to conduct its business
as described in the Registration Statement. Each of the Company and Peach is
duly qualified to do business as a foreign corporation and is in good standing
in all jurisdictions where its ownership, leasing, licensing or use of property
and assets or the conduct of its business makes such qualification necessary,
except where failure to be so qualified or in good standing will not have a
Material Adverse Effect;
(ii) The Company has all requisite corporate
power and authority to execute, deliver and perform the
20
Underwriting Agreement, the Consulting Agreement (to be entered into as of the
Closing Date), and the Underwriter's Warrants and to consummate the transactions
contemplated thereby. The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement and the Underwriter's Warrants
by the Company, the consummation by the Company of the transactions therein
contemplated and the compliance by the Company with the terms of the
Underwriting Agreement, the Consulting Agreement and the Underwriter's Warrants
have been duly authorized by all necessary corporate action, the Underwriting
Agreement has been duly executed and delivered by the Company, and each of the
Consulting Agreement and the Underwriter's Warrants will have been duly executed
and delivered by the Company as of the Closing Date. The Underwriting Agreement
is, and, as of the Closing Date each of the Consulting Agreement and the
Underwriter's Warrants will be, a valid and binding obligation of the Company,
enforceable in accordance with its terms, except insofar as enforceability of
indemnification and contribution provisions may be limited by applicable law or
policy or equitable principles, and except as enforceability may be limited by
bankruptcy, reorganization, moratorium, insolvency or other laws affecting the
enforceability of creditors' rights generally and rules of law governing
specific performance, injunctive relief and other equitable remedies.
(iii) The execution, delivery and performance
of the Underwriting Agreement, the Consulting Agreement and the Underwriter's
Warrants by the Company, and the consummation by the Company of the transactions
therein or herein contemplated will not, with or without the giving of notice or
the lapse of time, or both, (A) result in a violation of the Certificate of
Incorporation or by-laws of the Company, in each case as the same may be
amended, (B) to the best of such counsel's knowledge, result in a breach of, or
conflict with, any terms or provisions of or constitute a default under, or
result in the modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company pursuant to, any indenture, mortgage, note,
contract, commitment or other material agreement or instrument known to such
counsel to which the Company is a party or by which the Company or any of its
properties or assets are bound or affected, except where any of the foregoing
would not have a Material Adverse Effect; (C) to the best of such counsel's
knowledge, violate any existing applicable law, rule or regulation or judgment,
order or decree known to such counsel of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business, which judgment, order or decree is binding on the
Company or to which any of its business or operations is subject, except where
any such violation would not have a Material Adverse Effect; or (D) to the best
of such counsel's knowledge, have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company to own or
21
lease and operate its properties and to conduct its business or the ability of
the Company to make use thereof, in each case in the State of New York;
(iv) To the best of such counsel's knowledge,
no authorization, approval, consent, order, registration, license or permit of
any court or governmental agency or body (other than under the Act, the
Regulations and applicable state securities or Blue Sky laws) is required for
the authorization, issuance, sale and delivery of the Securities, the Additional
Securities or the Underwriter's Warrants, and the consummation by the Company of
the transactions contemplated by the Underwriting Agreement, the Consulting
Agreement or the Underwriter's Warrants;
(v) Such counsel has been advised by the staff
of the Commission that the Registration Statement was declared effective under
the Act by the Commission on , 1997; to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement has been
issued by the Commission, and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(vi) The Registration Statement and the
Prospectus, as of the Effective Date (except for the financial statements and
other financial data included therein or omitted therefrom, as to which such
counsel need express no opinion), comply as to form in all material respects
with the requirements of the Act and Regulations and, to the best of such
counsel's knowledge, the conditions for use of a registration statement on Form
SB-2 have been satisfied by the Company;
(vii) The description in the Registration
Statement and the Prospectus of statutes, regulations, contracts and other
documents have been reviewed by us, and, based upon such review, are accurate
summaries of such statutes, regulations, contracts and other documents in all
material respects and, to the best of such counsel's knowledge, there are no
material contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not so described or filed as required.
(viii) Each share of Common Stock outstanding
as of the date of the Prospectus or immediately prior to the Closing Date has
been duly authorized and validly issued and is fully paid and nonassessable. To
the best of such counsel's knowledge, none of the Common Stock outstanding as of
either such date or time has been issued in violation of the preemptive rights
of any stockholder of the Company. The authorized Common Stock conforms in all
material respects to the description thereof contained in the Registration
Statement and Prospectus. To the best of such counsel's knowledge, except as set
forth in the
22
Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise (which has not been waived or terminated), to
have such securities registered under the Act;
(ix) The issuance and sale of the Securities,
the Additional Securities and the Underwriter's Warrants have been duly
authorized and, when issued, paid for and delivered in accordance with the terms
hereof and thereof, the Securities, Additional Securities and the Underwriter's
Warrants will be validly issued, fully paid and nonassessable. Neither the
Securities nor the Additional Securities are subject to statutory preemptive
rights of any stockholder of the Company. The certificates representing the
Securities are in proper legal form;
(x) The Underwriter's Warrants constitute
valid and binding obligations of the Company, enforceable in accordance with
their respective terms, to issue and sell, upon exercise thereof and payment
pursuant to the terms thereof, the numbers and types of securities of the
Company called for thereby. All corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. The Underwriter's Warrants conform in all material respects to the
descriptions thereof contained in the Registration Statement and Prospectus;
(xi) Good title to the Securities, free and
clear of all liens, encumbrances, equities, security interests and claims
(except those that may arise from actions or inactions of the Underwriter), has
been transferred to the Underwriter, provided that the Underwriter purchased the
Securities in good faith and without notice of any such lien, encumbrance,
equity, security or claim or any other adverse claim within the meaning of the
New York Uniform Commercial Code;
(xii) Assuming that the Underwriter exercises
the Option to purchase the Additional Securities and makes payments therefor in
accordance with the terms of the Underwriting Agreement, upon issuance of the
Additional Securities to the Underwriter pursuant hereto, good title to the
Additional Securities, free and clear of any liens, encumbrances, equities,
security interests and claims (except those that may arise from actions or
inactions of the Underwriter), will have been transferred to the Underwriter,
provided that the Underwriter purchased the Additional Securities in good faith
and without notice of any such lien, encumbrance, equity, security or claim or
any other adverse claim within the meaning of the New York Uniform Commercial
Code;
(xiii) To the best of such counsel's knowledge,
other than as set forth or contemplated in the Prospectus, there
are no claims, actions, suits, proceedings, arbitrations,
23
investigations or inquiries before any governmental agency, court or tribunal,
or before any private arbitration tribunal, pending or threatened against the
Company or to which its properties or business is subject, which, individually
or in the aggregate, would have a Material Adverse Effect.
In addition, such counsel shall state that
during the course of the preparation of the Registration Statement and the
Prospectus, such counsel participated in conferences with officers of the
Company, and, while such counsel are not passing upon, has not verified or
independently investigated, and does not assume any responsibility for the
accuracy, completeness or fairness of the statements or documents contained in
the Registration Statement or the Prospectus, during the course of such
preparation and the foregoing conferences, no facts came to such counsel's
attention which caused such counsel to believe that (A) the Registration
Statement (except as to the financial statements and other financial data
contained therein, as to which such counsel need express no opinion), as of the
Effective Date, contained any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which such counsel need express no opinion), as of its
date, contained any untrue statement or a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
In rendering such opinions, such counsel may
limit their opinions to matters governed by the federal laws of the United
States, the laws of the State of [ ] and the general corporation laws of the
State of Delaware, and may rely as to matters of fact, to the extent they deem
proper, on certificates and written statements of officers of the Company and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to counsel to the Underwriter.
(f) On or prior to the Closing Date, counsel for
the Underwriter shall have been furnished such documents, certificates and
opinions as they may reasonably require for the purpose of enabling them to
review the matters referred to in subparagraph (e) of this Paragraph 9, or in
order to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(g) Prior to the Closing Date:
24
(i) There shall have been no material adverse
change in the condition or prospects or the business activities, financial or
otherwise, of the Company from the latest dates as of which such condition is
set forth in the Registration Statement and Prospectus;
(ii) There shall have been no transaction,
outside the ordinary course of business, entered into by the Company from the
latest date as of which the financial condition of the Company is set forth in
the Registration Statement and Prospectus which is material to the Company,
which is (x) required to be disclosed in the Prospectus or Registration
Statement and is not so disclosed, and (y) likely to have a Material Adverse
Effect;
(iii) The Company shall not be in default under
any material provision of any instrument relating to any outstanding
indebtedness, except as described in the Prospectus and except such as will not
have a Material Adverse Effect;
(iv) No material amount of the assets of the
Company shall have been pledged, mortgaged or otherwise encumbered, except as
set forth in the Registration Statement and Prospectus;
(v) No action, suit or proceeding, at law or
in equity, shall have been pending or to its knowledge threatened against the
Company or affecting any of its properties or businesses before or by any court
or federal or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding would have a Material Adverse Effect,
except as set forth in the Registration Statement and Prospectus;
(vi) No stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated or,
to the Company's knowledge, threatened by the Commission; and
(vii) Each of the representations and
warranties of the Company contained in this Agreement and in each certificate
and document contemplated under this Agreement to be delivered to you was, when
originally made and is at the time such certificate is dated, true and correct
in all material respects.
(h) Concurrently with the execution and delivery of
this Agreement and at the Closing Date, you shall have received a certificate of
the Company signed by the Chief Executive Officer of the Company and the
principal financial officer of the Company, dated as of the Closing Date, to the
effect that the conditions set forth in subparagraph (g) above have been
satisfied in all material respects and that, as of the Closing Date, the
representations and warranties of the Company set forth in Paragraph 2 herein
are true and correct, as if made on and as of the Closing Date, in all material
respects. Any certificate signed by any officer of the Company and delivered to
you or to counsel for the Underwriter
25
shall be deemed a representation and warranty by the Company to the
Underwriter as to the statements made therein.
(i) At the time this Agreement is executed, and at
the Closing Date, you shall have received a letter, addressed to the Underwriter
and in form and substance reasonably satisfactory in all material respects to
you and counsel for the Underwriter, from Ernst & Young LLP dated as of the date
of this Agreement and as of the Closing Date, substantially in the form of
Exhibit A hereto.
(j) All proceedings taken in connection with the
authorization, issuance or sale of the Securities, Additional Securities and the
Underwriter's Securities as herein contemplated shall be reasonably satisfactory
in form and substance to you and to counsel to the Underwriter, and the
Underwriter shall have received from such counsel an opinion, dated as the
Closing Date with respect to such of these proceedings as you may reasonably
require.
(l) The obligation of the Underwriter to purchase
Additional Securities hereunder is subject to the accuracy of the
representations and warranties of the Company contained herein on and as of the
Option Closing Date in all material respects and to the satisfaction on and as
of the Option Closing Date of the conditions set forth herein in all material
respects.
(m) On the Closing Date there shall have been duly
tendered to you for your account the appropriate number of shares of Common
Stock constituting the Securities.
10. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriter, each of its
agents and counsel and each person, if any, who controls the Underwriter
("controlling person") within the meaning of either Section 15 of the Act or
Section 20 of the Exchange Act, against any and all losses, liabilities, claims,
damages, actions and expenses or liability, joint or several, whatsoever
(including but not limited to any and all expense whatsoever reasonably incurred
in investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever), joint or several, to which it or such
controlling persons may become subject under the Act, the Exchange Act or under
any other statute or at common law or otherwise, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any Preliminary Prospectus or the Prospectus (as
from time to time amended and supplemented); in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
the shares issuable upon exercise of the Underwriter's Warrants; or in any
application
26
or other document or written communication (in this Paragraph 10 collectively
called "application") executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to qualify the
Securities, Additional Securities, Underwriter's Warrants and Underwriter's
Securities under the securities laws thereof or filed with the Commission or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in light of the circumstances under which they were made),
unless such statement or omission was made in reliance upon or in conformity
with written information furnished to the Company with respect to the
Underwriter by or on behalf of the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any application, as the case may be.
Notwithstanding the foregoing, the Company shall have no liability under this
Paragraph 10(a) if any such untrue statement or omission made in a Preliminary
Prospectus, is corrected in the Prospectus and the Underwriter failed to deliver
to the person or persons alleging the liability upon which indemnification is
being sought, at or prior to the written confirmation of such sale, a copy of
the Prospectus. This indemnity will be in addition to any liability which the
Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold
harmless the Company and each of the officers and directors of the Company who
have signed the Registration Statement, each of its agents and counsel, and each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the Underwriter in Paragraph 10(a), but
only with respect to any untrue statement or alleged untrue statement of any
material fact contained in or any omission or alleged omission to state a
material fact required to be stated in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereof or
necessary to make the statements therein not misleading or in any application
made in reliance upon, and in conformity with, written information furnished to
the Company by you expressly for use in the preparation of such Preliminary
Prospectus, the Registration Statement or Prospectus with respect to the
Underwriter or directly relating to the transactions effected or to be effected
by the Underwriter in connection with the Offering. This indemnity agreement
will be in addition to any liability which the Underwriter may otherwise have.
(c) If any action is brought against any
indemnified party (the "Indemnitee") in respect of which indemnity may be sought
against another party pursuant to the foregoing (the "Indemnitor"), the
Indemnitor shall assume the defense of the action, including the employment and
fees of counsel (reasonably
27
satisfactory to the Indemnitee) and payment of expenses. Any Indemnitee shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee unless
the employment of such counsel shall have been authorized in writing by the
Indemnitor in connection with the defense of such action. If the Indemnitor
shall have employed counsel to have charge of the defense or shall previously
have assumed the defense of any such action or claim, the Indemnitor shall not
thereafter be liable to any Indemnitee in investigating, preparing or defending
any such action or claim. Each Indemnitee shall promptly notify the Indemnitor
of the commencement of any litigation or proceedings or any other action against
the Indemnitee in respect of which indemnification is to be sought.
(d) In order to provide for just and equitable
contribution under the Act in any case in which: (i) the Underwriter makes a
claim for indemnification pursuant to Paragraph 10 hereof, but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the time to appeal has expired or the last right of appeal has
been denied) that such indemnification may not be enforced in such case
notwithstanding the fact that this Paragraph 10 provides for indemnification of
such case; or (ii) contribution under the Act may be required on the part of the
Underwriter in circumstances for which indemnification is provided under this
Paragraph 10, then, and in each such case, the Company and the Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such proportion so that
the Underwriter is responsible for the portion represented by dividing the total
compensation received by the Underwriter herein or in connection with the
Offering by the total purchase price of all Securities sold in the public
offering and the Company is responsible for the remaining portion; provided,
that in any such case, no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
The foregoing contribution agreement shall in no way affect
the contribution liabilities of any persons having liability under Section 11 of
the Act other than the Company and the Underwriter. As used in this Paragraph
10, the term "Underwriter" includes any officer, director, or other person who
controls the Underwriter within the meaning of Section 15 of the Act, and the
word "Company" includes any officer, director or person who controls the Company
within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then the
Underwriter and each person who controls the Underwriter shall be entitled to
contribution from the Company to the full extent permitted by law. No
contribution shall
28
be requested with regard to the settlement of any matter from any party who did
not consent in writing to the settlement.
(e) Within fifteen (15) days after receipt by any
party to this Agreement (or its representative) of notice of the commencement of
any action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is made against another party (the "contributing party"), notify
the contributing party of the commencement thereof, but the omission so to
notify the contributing party will not relieve it from any liability it may have
to any other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against
any party, and such party notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid fifteen (15)
days, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The indemnification provisions contained in this Paragraph 11 are in
addition to any other rights or remedies which either party hereto may have with
respect to the other or hereunder.
11. Representations, Warranties, Agreements to Survive
Delivery.
The respective indemnity and contribution agreements
by the Underwriter and the Company contained in Paragraph 10 hereof, and the
covenants, representations and warranties of the Company and the Underwriter set
forth in this Agreement, shall remain operative and in full force and effect
regardless of (i) any investigation made by the Underwriter or on its behalf or
by or on behalf of any person who controls the Underwriter, or by the Company or
any controlling person of the Company or any director or any officer of the
Company, (ii) acceptance of any of the Securities and payment therefor, or (iii)
any termination of this Agreement, and shall survive the delivery of the
Securities; and any successor of the Underwriter or the Company, or of any
person who controls you or the Company or any other indemnified party, as the
case may be, shall be entitled to the benefit of such respective indemnity and
contribution agreements. The respective indemnity and contribution agreements by
the Underwriter and the Company contained in Paragraph 10 above shall be in
addition to any liability which the Underwriter and the Company may otherwise
have.
12. Effective Date of This Agreement and Termination
Thereof.
29
(a) This Agreement shall become effective at 10:00
A.M., New York time, on the first full business day following the day on which
you and the Company receive notification that the Registration Statement became
effective.
(b) This Agreement may be terminated by the
Underwriter by notifying the Company at any time on or before the Closing Date,
if any domestic or international event or act or occurrence has materially
disrupted, or in your reasonable opinion will in the immediate future materially
disrupt, securities markets in the United States; or if trading in securities
generally on the New York Stock Exchange, the American Stock Exchange, or in the
over-the-counter market in the United States shall have been suspended, or
minimum or maximum prices for trading in securities generally shall have been
fixed, or maximum ranges for prices for securities shall have been required, on
the over-the-counter market by the NASD or NASDAQ or by order of the Commission
or any other governmental authority having jurisdiction; or if a moratorium in
foreign exchange trading by major international banks or persons has been
declared in the United States; or if the Company shall have sustained a loss
material or substantial to the Company taken as a whole by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in your
reasonable opinion, make it inadvisable to proceed with the offering, sale and
delivery of the Securities; or if there shall have been a material adverse
change in the conditions of the United States securities market in general, as
in your reasonable judgment would make it inadvisable to proceed with the
offering, sale and delivery of the Securities.
(c) If you elect to terminate this Agreement as
provided in this Paragraph 12, the Company shall be notified promptly by you by
telephone or facsimile, confirmed by letter.
(d) Anything in this Agreement to the contrary
notwithstanding, if this Agreement shall terminate or shall not be carried out
within the time specified herein by reason of any failure on the part of the
Company to perform any undertaking, or to satisfy any condition of this
Agreement by it to be performed or satisfied, the sole liability of the Company
to the Underwriter, in addition to the obligations assumed by the Company
pursuant to Paragraph 8 herein, will be to reimburse the Underwriter on an
accountable basis for the following: (i) reasonable Blue Sky counsel fees and
expenses to the extent set forth in Paragraph 8(a)(iv); (ii) Blue Sky filing
fees to that same extent; and (iii) such other reasonable out-of-pocket expenses
actually incurred by the Underwriter (including the reasonable fees and
disbursements of their counsel), to the extent set forth in Paragraph 8(a), in
connection with this Agreement and the proposed offering of the Securities, but
in no event to exceed the sum of $100,000 less such amounts as shall have
already been paid pursuant to Section 8(b) or
30
otherwise. The Company shall not in any event be liable to the Underwriter for
the loss of anticipated profits from the transactions covered by this Agreement.
Anything in this Agreement to the contrary
notwithstanding, if this Agreement shall be terminated by you because you have
exercised your rights pursuant to Paragraph 12(b) above, the Company shall not
be under any liability to you except, on an accountable basis, for the portion
of the non-accountable expense allowance referred to in Paragraph 8(b) for which
expenses have actually been paid or incurred by you, and any balance will be
returned by you to the Company.
13. Notices.
All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to the Underwriter,
shall be mailed, delivered or telegraphed and confirmed to the Underwriter at
Xxxxxx & Associates, Inc., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxx X. Xxxxx, with a copy thereof to Xxxxxx X. Xxxxxxx, Esq.,
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, and, if sent to the Company, shall be mailed, delivered or
telegraphed and confirmed to the Company at 000 00xx Xxxxxx, Xxxxx X-0,
Xxxxxxxx, Xxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxxx, President, with a copy
thereof to Xxxx X. Xxxxxxx, Esq., Xxxxx Xxxxx Mulliss & Xxxxx, L.L.P., 0000 Xxx
Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxx Xxxxxxxx 00000.
14. Parties.
This Agreement shall inure solely to the benefit of and shall
be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Paragraph 10 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. No
purchaser of any of the Securities or Additional Securities from the Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
15. Construction.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York, without giving effect to
the rules governing conflict of laws, and shall supersede any agreement or
understanding, oral or in writing, express or implied, between the Company and
you relating to the sale of any of the Securities.
16. Jurisdiction and Venue.
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The Company agrees that the courts of the State of New York
shall have jurisdiction over any litigation arising from this Agreement, and
venue shall be proper in the Southern District of New York.
17. Counterparts.
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the understanding
between you and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
PEACH AUTO PAINTING AND
COLLISION, INC.
By:___________________________
Xxxxxxx X. Xxxxxxxx, Xx.
President
Accepted as of the date first above written:
XXXXXX & ASSOCIATES, INC.
By:_________________________________
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