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EXHIBIT 1.1
PAWNMART, INC.
1,200,000 SHARES OF COMMON STOCK
1,200,000 SERIES A REDEEMABLE COMMON STOCK PURCHASE WARRANTS
1,200,000 SERIES B REDEEMABLE COMMON STOCK PURCHASE WARRANTS
(AND 2,400,000 SHARES OF COMMON STOCK ISSUABLE UNDER THE WARRANTS)
UNDERWRITING AGREEMENT
Dallas, Texas
_______________, 1998
First London Securities Corporation
As Representative of the Several
Underwriters named in Schedule A
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Gentlemen:
PawnMart, Inc. (the "Company"), on the basis of the representations,
warranties, covenants and conditions contained herein, hereby proposes to issue
and sell to such Underwriters as named in Schedule A (the "Underwriters") to
this Underwriting Agreement (the "Agreement"), for whom First London Securities
Corporation ("First London") is acting as the Representative (the
"Representative"), pursuant to the terms of this Agreement, on a "firm
commitment" basis, 1,200,000 shares of Common Stock (the "Shares") at $5.00 per
Share, 1,200,000 Series A Redeemable Common Stock Purchase Warrants at $.125
per warrant (the "Series A Warrants") and 1,200,000 Series B Redeemable Common
Stock Purchase Warrants at $.0625 per warrant (the "Series B Warrants" and
together with the Series A Warrants, the "Warrants") (each such price the
"Initial Public Offering Price"). The Shares and the Warrants are collectively
referred to as the "Securities." Each Series A Warrant is exercisable to
purchase one share of Common Stock (the "Common Stock") at 120% of the Initial
Public Offering Price per Share at any time during the period between
_______________, 1998 and _______________, 2003 and each Series B Warrant is
exercisable to purchase one share of Common Stock at 120% of the Initial Public
Offering Price per Share at any time during the period between _______________,
1998 and ______________, 2004. The date upon which the Securities and Exchange
Commission ("Commission") shall declare the registration statement of the
Company effective shall be the "Effective Date." The Warrants are subject to
redemption under certain circumstances. In addition, the Company proposes to
grant to the Underwriters (or, at the option of the Representative, to the
Representative, individually) the option referred to in Section 2(b) to
purchase all or any part of an aggregate of 180,000 additional
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Shares, 180,000 additional Series A Warrants and/or 180,000 additional Series B
Warrants (the "Option Securities").
You have advised the Company that you and the other Underwriters
desire to purchase, severally, the Securities, and that you have been
authorized by the Underwriters to execute this Agreement on their behalf. The
Company confirms the agreements made by it with respect to the purchase of the
Securities by the several Underwriters on whose behalf you are signing this
Agreement, as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with each of the
Underwriters as of the Effective Date (as defined above), the date of this
Agreement, the Closing Date (as hereinafter defined) and the Option Closing
Date (as hereinafter defined) that:
(a) A registration statement (File No. 333-38597) on Form SB-2
relating to the public offering of the Securities, including a preliminary form
of the prospectus, copies of which have heretofore been delivered to you, 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 Commission thereunder, and has been filed
with the Commission under the Act. The Company has prepared in the same manner
and proposes to file, prior to the Effective Date of such registration
statement, an additional amendment or amendments to such registration
statement, including a final form of Prospectus, copies of which shall be
delivered to you. "Preliminary Prospectus" shall mean each prospectus filed
pursuant to the Rules and Regulations under the Act prior to the Effective
Date. The registration statement (including all financial schedules and
exhibits) as amended at the time it becomes effective and the final prospectus
included therein are respectively referred to as the "Registration Statement"
and the "Prospectus," except that (i) if the prospectus first filed by the
Company pursuant to Rule 424(b) of the Rules and Regulations shall differ from
said prospectus as then amended, the term "Prospectus" shall mean the
prospectus first filed pursuant to Rule 424(b), and (ii) if such registration
statement or prospectus is amended or such prospectus is supplemented, after
the effective date of such registration statement and prior to the Option
Closing Date (as hereinafter defined), the terms "Registration Statement" and
"Prospectus" shall include such registration statement and prospectus as so
amended, and the term "Prospectus" shall include the prospectus as so
supplemented, or both, as the case may be.
(b) At the Effective Date and at all times subsequent thereto up
to the Option Closing Date, if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriters or any selected dealers: (i) the Registration Statement and
Prospectus will in all respects conform to the requirements of the Act and the
Rules and Regulations; and (ii) neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
statements therein, in light of the circumstances under which they are made,
not misleading; provided, however, that the Company makes no representations,
warranties or agreement as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by the
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Underwriters specifically for use in the preparation thereof. It is understood
that the statements set forth in the Prospectus with respect to stabilization,
under the heading "Underwriting" and regarding the identity of counsel to the
Underwriters under the heading "Legal Matters" constitute the only information
furnished in writing by the Underwriters for inclusion in the Prospectus.
(c) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus and is duly
qualified to do business as a foreign corporation and is in good standing in
all other jurisdictions in which the nature of its business or the character or
location of its properties requires such qualification, except where failure to
so qualify will not materially affect the Company's business, properties or
financial condition.
(d) The authorized, issued and outstanding securities of the
Company as of the date of the Prospectus is as set forth in the Prospectus
under "Capitalization;" all of the issued and outstanding securities of the
Company has been, or will be when issued as set forth in the Prospectus, duly
authorized, validly issued and fully paid and non-assessable; the issuances
and sales of all such securities complied in all material respects with
applicable federal and state securities laws; the holders thereof have no
rights of rescission against the Company with respect thereto, and are not
subject to personal liability by reason of being such holders; none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company; 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 securities of the Company have
been granted or entered into by the Company; and all of the securities of the
Company, issued and to be issued as set forth in the Registration Statement,
conform to all statements relating thereto contained in the Registration
Statement and Prospectus.
(e) The Shares are duly authorized, and when issued, delivered and
paid for pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights of any security
holder of the Company. Neither the filing of the Registration Statement nor
the offering or sale of the Securities as contemplated in this Agreement gives
rise to any rights, other than those which have been waived or satisfied, for
or relating to the registration of any securities of the Company, except as
described in the Registration Statement and Prospectus.
The Warrants have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreements pursuant to which such Warrants are to be
issued (the "Warrant Agreements"), which will be substantially in the form
filed as exhibits to the Registration Statement. The shares of Common Stock
issuable upon exercise of the Warrants have been reserved for issuance and when
issued in accordance with the terms of the Warrants and Warrant Agreements,
will be duly and validly authorized, validly issued, fully paid and
non-assessable, free of preemptive rights and no personal liability will attach
to the ownership thereof. The Warrant exercise periods and the Warrant
exercise prices may not be changed or revised by the Company without the prior
written consent of First London. The Warrant Agreements have been
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duly authorized and, when executed and delivered pursuant to this Agreement
will constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms.
Each of the Common Stock Representative Warrants, the Series A Warrant
Representative Warrants, the Series B Warrant Representative Warrants and the
Underlying Warrants (each of which is defined in the Representative's Warrant
Agreements described in Section 12 herein and all of which shall be
collectively referred to as the "Representative's Warrants"), has been duly
authorized and, when issued, delivered and paid for pursuant to the
Representative's Warrant Agreements, will have been duly authorized, issued and
delivered and will constitute valid and legally binding instruments of the
Company enforceable in accordance with their terms and entitled to the benefits
provided by the Representative's Warrant Agreements. The shares of Common
Stock issuable upon exercise of each of the Common Stock Representative
Warrants and the Underlying Warrants have been reserved for issuance and when
issued in accordance with the terms of the Common Stock Representative Warrants
and the Underlying Warrants, will be duly and validly authorized, validly
issued, fully paid and non-assessable, free of preemptive rights and no
personal liability will attach to the ownership thereof. The exercise period
and the exercise price for each of the Common Stock Representative Warrants,
the Series A Warrant Representative Warrants, the Series B Warrant
Representative Warrants and the Underlying Warrants may not be changed or
revised by the Company without the prior written consent of First London.
(f) This Agreement, the Warrant Agreements and the
Representative's Warrant Agreements have been duly and validly authorized,
executed and delivered by the Company, and assuming due execution of this
Agreement by the other party hereto, constitute valid and binding obligations
of the Company enforceable against the Company in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally. The Company has full power and
lawful authority to authorize, issue and sell the Securities to be sold by it
hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any third party or any governmental
authority is required in connection with such authorization, execution and
delivery or with the authorization, issuance and sale of the Securities or the
securities to be issued pursuant to the Representative's Warrant Agreements,
except such as may be required under the Act or state securities laws, or as
otherwise have been obtained.
(g) Except as described in the Prospectus, the Company is not in
material violation, breach of or default under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach of, or constitute a
material default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the property or assets of the Company or any
of the terms or provisions of any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the property or assets of
the Company is subject, nor will such action result in any material violation
of the provisions of the certificate of incorporation or bylaws as amended of
the Company, or any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental body
having jurisdiction over the Company .
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(h) Subject to the qualifications stated in the Prospectus, the
Company has good and marketable title to all properties and assets described in
the Prospectus as owned by each of them, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially significant or
important in relation to its business; all of the material leases and subleases
under which the Company is the lessor or sublessor of properties or assets or
under which the Company holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, the Company is not in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by anyone, adverse to rights of the
Company as lessor, sublessor, lessee, or sublessee under any of the leases or
subleases mentioned above, or affecting or questioning the right of the Company
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus;
and the Company owns or leases all such properties described in the Prospectus
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.
(i) KPMG Peat Marwick LLP, which has examined the financial
statements, together with the related schedules and notes, for the Company and
any subsidiary of it for the periods therein stated, which have been filed with
the Commission as a part of the Registration Statement, which are included in
the Prospectus, are with respect to the Company independent accountants within
the meaning of the Act and the Rules and Regulations.
(j) The financial statements, together with the related notes and
schedules forming a part of the Registration Statement and the Prospectus,
fairly present the financial position and the results of operations of the
Company at the respective dates and for the respective periods to which they
apply; and all audited financial statements, together with the related notes
and schedules, and the unaudited financial information of the Company have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except as may be otherwise
stated therein. The selected and summary financial and statistical data
included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the audited financial
statements presented therein. No other financial statements or schedules are
required to be included in the Registration Statement. The Company's internal
accounting controls and procedures are sufficient to cause the Company to
prepare financial statements which comply in all material respects with
generally accepted accounting principles applied on a basis which is consistent
during the periods involved. During the preceding five year period, nothing
has been brought to the attention of the Company's management that would result
in any reportable condition relating to the Company's internal accounting
procedures, weaknesses or controls.
(k) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and the Prospectus and to and including
the Option Closing Date, except as set forth in or contemplated by the
Registration Statement and the Prospectus, (i) the Company has not incurred and
will not have incurred any material liabilities or obligations, direct or
contingent, and has not entered into and will not have entered into any
material transactions other than in the ordinary course of business and/or as
contemplated in the Registration Statement and the Prospectus; (ii) the Company
has not and will not have paid or declared any dividends or have
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made any other distribution on its capital stock; (iii) there has not been any
change in the capital stock of, or any incurrence of long-term debt by, the
Company; (iv) the Company has not issued any options, warrants or other rights
to purchase the capital stock of the Company; and (v) there has not been and
will not have been any material adverse change in the business, financial
condition or results of operations of the Company, or in the book value of the
assets of the Company, arising for any reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company, threatened, any material action, suit,
proceeding, inquiry, arbitration or investigation against the Company, or any
of the officers or directors of the Company, or any material action, suit,
proceeding, inquiry, arbitration, or investigation, which might result in any
material adverse change in the condition (financial or other), business
prospects, net worth, or properties of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid all taxes shown as due thereon; and there is no tax deficiency which
has been or to the knowledge of the Company might be asserted against the
Company that has not been provided for in the financial statements.
(n) Except as set forth in the Prospectus, the Company has
material licenses, permits and other governmental authorizations currently
required for the conduct of its business or the ownership of its property as
described in the Prospectus and is in all material respects in compliance
therewith and owns or possesses adequate right to use all material patents,
patent applications, trademarks, service marks, trade-names, trademark
registrations, service xxxx registrations, copyrights, and licenses necessary
for the conduct of such business and has not received any notice of conflict,
with the asserted rights of others in respect thereof. To the best of the
Company's knowledge, none of the activities or business of the Company are in
violation of, or cause the Company to violate, any law, rule, regulation or
order of the United States, any state, county or locality, or of any agency or
body of the United States or of any state, county or locality, the violation of
which would have a material adverse impact upon the condition (financial or
otherwise), business, property, prospective results of operations, or net worth
of the Company.
(o) The Company has not, directly or indirectly, at any time (i)
made any contributions to any candidate for political office, or failed to
disclose fully any such contribution, in violation of law or (ii) made any
payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or other
taxes (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction), if any, that are required to be paid in
connection with the sale and transfer of the Securities to the several
Underwriters will have been fully paid or provided for by the Company and all
laws imposing such taxes will have been fully complied with.
(q) All contracts and other documents which are required to be
described in or filed as exhibits to the Registration Statement have been so
described and/or filed.
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(r) Except as described in the Registration Statement and
Prospectus, no holders of Common Stock or of any other securities of the
Company have the right to include such Common Stock or other securities in the
Registration Statement and Prospectus.
(s) Except as set forth in or contemplated by the Registration
Statement and the Prospectus, the Company has no any material contingent
liabilities.
(t) The Company has no equity interest in any corporation, limited
liability company, partnership, joint venture, trust or other entity and has
not entered into any binding agreements to obtain any such equity interest.
(u) The Commission has not issued an order preventing or
suspending the use of any Preliminary Prospectus with respect to the offer and
sale of the Securities and each Preliminary Prospectus, as of its date, has
conformed fully in all material respects with the requirements of the Act and
the Rules and Regulations and did not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading.
(v) The Company, nor, to the Company's knowledge, any of its
officers, directors, employees or Stockholders, has taken or will 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 any of the securities of the
Company.
(w) Item 26 of Part II of the Registration Statement accurately
discloses all unregistered securities sold by the Company within the three year
period prior to the date as of which information is presented in the
Registration Statement. All of such securities were sold in transactions which
were exempt from the registration provisions of the Act and not in violation of
Section 5 thereof.
(x) Other than as set forth in the Prospectus, the Company has not
entered into any agreement pursuant to which any person is entitled, either
directly or indirectly, to compensation from the Company for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Underwriters against any losses, claims,
damages or liabilities, joint or several, which shall include, but not be
limited to, all costs to defend against any such claim, so long as such claim
arises out of agreements made or allegedly made by the Company.
(y) Based upon written representations received by the Company, no
officer, director or 5% or greater stockholder of the Company has any direct
or indirect affiliation or association with any member of the National
Association of Securities Dealers, Inc. ("NASD"), except as disclosed to the
Representative in writing, and no beneficial owner of the Company's
unregistered securities has any direct or indirect affiliation or association
with any NASD member except as disclosed to the Representative in writing. The
Company will advise the Representative and the NASD if any 5% or greater
stockholder of the Company is or becomes an affiliate or associated person of
an NASD member participating in the distribution.
(z) The Company is in compliance in all material respects with all
federal, state and local laws and regulations respecting the employment of its
employees and employment practices, terms
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and conditions of employment and wages and hours relating thereto. There are no
pending investigations involving the Company by the U.S. Department of Labor,
or any other governmental agency responsible for the enforcement of such
federal, state or local laws and regulations. There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or to the knowledge of the Company, threatened against or
involving the Company, any predecessor entity. No question concerning
representation 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.
(aa) The Company does not maintain, sponsor or contribute to, nor
is it required to contribute to, any program or arrangement that is an
"employee pension benefit plan" an "employee benefit plan," or a
"multi-employer plan" as such terms are defined in Sections 3(2), 3(3) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company has not maintained or
contributed to a "defined benefit plan," as defined in Section 3(35) of ERISA.
(bb) Based upon written representations received from the officers
and directors of the Company, except as disclosed in the Prospectus, during the
past five years, none of the officers or directors of the Company have been:
(i) The subject of a petition under the federal
bankruptcy laws or any state insolvency law filed by or against them,
or by a receiver, fiscal agent or similar officer appointed by a court
for their business or property, or any partnership in which any of
them was a general partner at or within two years before the time of
such filing, or any corporation or business association of which any
of them was an executive officer at or within two years before the
time of such filing;
(ii) Convicted in a criminal proceeding or a named subject
of a pending criminal proceeding (excluding traffic violations and
other minor offenses);
(iii) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining any of them from,
or otherwise limiting, any of the following activities:
(A) acting as a futures commission merchant,
introducing broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant, any
other person regulated by the Commodity Futures Trading
Commission, or an associated person of any of the foregoing,
or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee
of any investment company, bank, savings and loan association
or insurance company, or engaging in or continuing any conduct
or practice in connection with any such activity;
(B) engaging in any type of business practice; or
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(C) engaging in any activity in connection with
the purchase or sale of any security or commodity or in
connection with any violation of federal or state securities
law or federal commodity laws.
(iv) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or state
authority barring, suspending or otherwise limiting for more than 60
days either of their right to engage in any activity described in
paragraph (3)(i) above, or be associated with persons engaged in any
such activity;
(v) Found by any court of competent jurisdiction in a
civil action or by the Commission to have violated any federal or
state securities law, and the judgment in such civil action or finding
by the Commission has not been subsequently reversed, suspended or
vacated; or
(vi) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated
any federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated.
(cc) Based upon written representations received from the officers
and directors of the Company, each of the officers and directors of the Company
has reviewed the sections in the Prospectus relating to their biographical data
and equity ownership position in the Company, and all information contained
therein is true and accurate.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement and upon
the basis of the representations, warranties and agreements herein contained,
the Company hereby agrees to issue and sell to the Underwriters an aggregate of
1,200,000 Shares at $4.50 per Share, 1,200,000 Series A Warrants at $.1125 per
warrant and 1,200,000 Series B Warrants at $.0562 per warrant, (the Initial
Public Offering Price less 10%), at the place and time hereinafter specified,
in accordance with the number of Shares and/or Warrants set forth opposite the
names of the Underwriters in Schedule A attached hereto plus any additional
Securities which such Underwriters may become obligated to purchase pursuant to
the provisions of Section 9 hereof. The Securities shall consist of 1,200,000
Shares, 1,200,000 Series A Warrants and 1,200,000 Series B Warrants to be
purchased from the Company, and the price at which the Underwriters shall sell
the Securities to the public shall be $5.00 per Share, $.125 per Series A
Warrant and $.0625 per Series B Warrant.
Delivery of the Securities against payment therefor shall take place
at the offices of First London Securities Corporation, 0000 Xxxxx Xxxxxx,
Xxxxxx, Xxxxx 00000 (or at such other place as may be designated by the
Representative) at 10:00 a.m., Eastern Time, on such date after the Effective
Date as the Representative shall designate, but not later than ten business
days (holidays excepted) following the first date that any of the Securities
are released to you, such time and date of payment and delivery for the
Securities being herein called the "Closing Date."
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(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants the "Option" to the Underwriters
(or, at the option of the Representative, to the Representative, individually)
to purchase all or any part of an aggregate of an additional 180,000 Shares,
180,000 Series A Warrants and/or 180,000 Series B Warrants at the same price
per Share and Warrant as the Underwriters shall pay for the Securities being
sold pursuant to the provisions of subsection (a) of this Section 2 (such
additional Securities being referred to herein as the "Option Securities").
This Option may be exercised within 45 days after the Effective Date upon
notice by the Underwriters (or the Representative, individually) to the Company
advising as to the amount of Option Securities as to which the Option is being
exercised, the names and denominations in which the certificates for such
Option Securities are to be registered and the time and date when such
certificates are to be delivered. Such time and date shall be determined by
the Underwriters (or the Representative, individually) but shall not be later
than ten full business days after the exercise of the Option, nor in any event
prior to the Closing Date, and such time and date is referred to herein as the
"Option Closing Date." Delivery of the Option Securities against payment
therefor shall take place at the offices of First London Securities
Corporation. The Option granted hereunder may be exercised only to cover
over-allotments in the sale by the Underwriters of the Securities referred to
in subsection (a) above. In the event the Company declares or pays a dividend
or distribution on its Common Stock, whether in the form of cash, shares of
Common Stock or any other consideration, prior to the Option Closing Date, such
dividend or distribution shall also be paid on the Option Securities on the
Option Closing Date.
(c) The Company will make the certificates for the Securities to
be sold hereunder available to you for inspection at least two full business
days prior to the Closing Date and the Option Closing Date, respectively, at
the offices of First London, and such certificates shall be registered in such
names and denominations as you may request. Time shall be of the essence and
delivery at the time and place specified in this Agreement is a further
condition to the obligations of the Company to each Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriters hereunder will be delivered by the Company to you
for the accounts of the several Underwriters against payment of the respective
purchase prices by the several Underwriters, by certified or bank cashier's
checks in New York Clearing House funds, payable to the order of the Company or
by wire transfer in New York Clearing House funds.
In addition, in the event the Underwriters (or the Representative,
individually) exercise the Option to purchase from the Company all or any
portion of the Option Securities pursuant to the provisions of subsection (b)
above, payment for such Securities shall be made payable in New York Clearing
House funds at the offices of First London Securities Corporation, or by wire
transfer, at the time and date of delivery of such Securities as required by
the provisions of subsection (b) above, against receipt of the certificates for
such Securities by the Representative for the respective accounts of the
several Underwriters registered in such names and in such denominations as the
Representative may request.
It is understood that the Representative, individually and not as
Representative of the several Underwriters, may (but shall not be obligated to)
make any and all payments required pursuant to
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this Section 2 on behalf of any Underwriters whose check or checks shall not
have been received by the Representative at the time of delivery of the
Securities to be purchased by such Underwriter or Underwriters. Any such
payment by the Representative shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder. It is also
understood that the Representative individually, rather than all of the
Underwriters, may (but shall not be obligated to) purchase the Option
Securities referred to in subsection (b) of this Section 2, but only to cover
over-allotments.
It is understood that the several Underwriters propose to offer the
Securities to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement is declared effective by the Commission.
3. Covenants of the Company. The Company covenants and agrees
with the several Underwriters that:
(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you and will not at
any time, whether before or after the Effective Date, file any amendment to the
Registration Statement or supplement to the Prospectus of which you shall not
previously been advised and furnished with a copy or to which you or your
counsel shall have objected in writing, acting reasonably, or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to
the later of (i) the completion by the Underwriters of the distribution of the
Securities as contemplated hereby; or (ii) 25 days after the date on which the
Registration Statement shall have become or been declared effective, the
Company will prepare and file with the Commission, promptly upon your request,
any amendments or supplements to the Registration Statement or Prospectus which
may be necessary or advisable in connection with the distribution of the
Securities and as mutually agreed to by the Company and the Representative.
After the Effective Date and as soon as the Company is advised
thereof, the Company will advise you, and confirm the advice in writing, of the
receipt of any comments of the Commission, of the effectiveness of any post-
effective amendment to the Registration Statement, of the filing of any
supplement to the Prospectus or any amended Prospectus, of any request made by
the Commission for amendment of the Registration Statement or for supplementing
of the Prospectus or for additional information with respect thereto, of the
issuance by the Commission or any state or regulatory body of any stop order or
other order suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such
purposes, and will use its best efforts to prevent the issuance of any such
order, and, if issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus and Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriters and the selected dealers to use the
Prospectus in connection with the sale of the Securities for such period as in
the opinion of counsel to the Underwriters the use thereof is required to
comply with the applicable provisions of the Act and the Rules and Regulations.
In case of the happening, at any time within such period
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as a Prospectus is required under the Act to be delivered in connection with
sales by the Underwriters or the selected dealers, of any event of which the
Company has knowledge and which materially affects the Company or the
Securities, or which in the opinion of counsel for the Company or counsel for
the Underwriters, should be set forth in an amendment to the Registration
Statement or a supplement to the Prospectus, in order to make the statements
therein not then misleading, in light of the circumstances existing at the time
the Prospectus is required to be delivered to a purchaser of the Securities, or
in case it shall be necessary to amend or supplement the Prospectus to comply
with law or with the Act and the Rules and Regulations, the Company will notify
you promptly and forthwith prepare and furnish to you copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as you may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which
they are made, not misleading. The preparation and furnishing of any such
amendment or supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to the
Underwriters.
The Company will comply with the Act, the Rules and Regulations
thereunder, the Securities Exchange Act of 1934 (the "1934 Act"), and the rules
and regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will qualify to register the Securities for sale
under the securities or "blue sky" laws of such jurisdictions as the
Representative may designate and will make such applications and furnish such
information as may be required for that purpose and to comply with such laws,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities or to execute a general consent to service of process
in any jurisdiction in any action other than one arising out of the offering or
sale of the Securities. The Company will, from time to time, prepare and file
such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriters may reasonably
request.
(c) If the sale of the Securities provided for herein is not
consummated, the Company shall pay all costs and expenses incident to the
performance of the Company's obligations hereunder, including, but not limited
to, all such expenses itemized in Section 8 hereof, and the out-of-pocket
expenses up to $35,000 of the Representative and expenses up to $35,000 of the
counsel to the Representative, if the offering for any reason is terminated.
For the purposes of this sub-paragraph, the Representative shall be deemed to
have assumed such expenses when they are billed or incurred, regardless of
whether such expenses have been paid. The Representative shall not be
responsible for any expenses of the Company or others, or for any charges or
claims relative to the proposed public offering whether or not consummated.
(d) The Company will deliver to you at or before the Closing Date
two signed copies of the Registration Statement, including all financial
statements and exhibits filed therewith, and of each amendment or supplement
thereto. The Company will deliver to or upon the order of the several
Underwriters, from time to time until the Effective Date of the Registration
Statement, as many copies of any Preliminary Prospectus filed with the
Commission prior to the Effective Date of the Registration Statement as the
Underwriters may reasonably request. The Company will
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deliver to the Underwriters on the Effective Date of the Registration Statement
and thereafter for so long as a Prospectus is required to be delivered under
the Act, from time to time, as many copies of the Prospectus, in final form, or
as thereafter amended or supplemented as the several Underwriters may from time
to time reasonably request.
(e) For so long as the Company is a reporting company under either
Section 12 or 15 of the 1934 Act, the Company, at its expense, will furnish to
the Representative during the period ending five years from the Effective Date,
(i) as soon as practicable after the end of each fiscal year, a balance sheet
of the Company and any of its subsidiaries as at the end of such fiscal year,
together with statements of income, surplus and cash flow of the Company and
any subsidiaries for such fiscal year, all in reasonable detail and accompanied
by a copy of the certificate or report thereon of independent accountants; (ii)
as soon as they are available, a copy of all reports (financial or other)
mailed to security holders; (iii) as soon as they are available, a copy of all
non-confidential documents, including annual reports, periodic reports and
financial statements, furnished to or filed with the Commission under the Act
and the 1934 Act; (iv) copies of each press release, news item and article with
respect to the Company's affairs released by the Company; and (v) such other
information as you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
Stockholders generally.
(g) The Company will make generally available to its Stockholders
and to the registered holders of its Warrants and deliver to you as soon as it
is practicable, but in no event later than the first day of the sixteenth full
calendar month following the Effective Date, an earnings statement (which need
not be audited) covering a period of at least twelve consecutive months
beginning with the Effective Date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the
necessary action to become a reporting company under Section 12 of the 1934
Act, and the Company will make all filings required to, and will have obtained
approval for, the listing of the Shares and Warrants on The Nasdaq SmallCap
Market, the Boston Stock Exchange or a listing on a national market, and will
use its best efforts to maintain such listing for at least five years from the
date of this Agreement.
(i) For such period as the Securities are registered under the
1934 Act, the Company will hold an annual meeting of Stockholders for the
election of directors within 180 days after the end of each of the Company's
fiscal years and, within 150 days after the end of each of the Company's fiscal
years will provide the Company's Stockholders with the audited financial
statements of the Company as of the end of the fiscal year just completed prior
thereto. Such financial statements shall be those required by Rule 14a-3 under
the 1934 Act and shall be included in an annual report pursuant to the
requirements of such Rule.
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption
"Use of Proceeds" in the Prospectus, and will file
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such reports with the Commission with respect to the sale of the Securities and
the application of the proceeds therefrom as may be required by Sections 12, 13
and/or 15 of the 1934 Act and pursuant to Rule 463 under the Act.
(k) The Company will, promptly upon your request, prepare and file
with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action,
which in the reasonable opinion of counsel to the Underwriters and the Company
may be reasonably necessary or advisable in connection with the distribution of
the Securities and will use its best efforts to cause the same to become
effective as promptly as possible.
(l) On the Closing Date the Company shall execute and deliver to
you the Representative's Warrant Agreements. The Representative's Warrant
Agreements and Warrant Certificates will be substantially in the form of the
Representative's Warrant Agreements and Warrant Certificates filed as an
exhibit to the Registration Statement.
(m) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued securities which are issuable
upon exercise of the warrants issuable pursuant to the Representative's Warrant
Agreements outstanding from time to time.
(n) Each beneficial owner of the Company's securities (including
Warrants, Options and Common Stock of the Company), as of the Effective Date,
shall agree in writing, in a form satisfactory to the Representative and
Nasdaq, not to sell, transfer or otherwise dispose of any of such securities or
underlying securities (except in a transaction other than on the open market
with a transferee who agrees to be bound by this provision) during the period
of time, commencing on the Effective Date, stated for each such beneficial
owner on Schedule B (the "lock-up period"), or any longer period required by
any state or required by Nasdaq as a condition to listing on The Nasdaq
SmallCap Market, without the prior written consent of First London and Nasdaq.
Without the prior written consent of Nasdaq, the Company shall not, directly or
indirectly, release any individual from his lock-up agreement or effect the
transfer on its books of any shares sold in contravention of a lock-up
agreement. Any of such securities that are originally registered in a name of
a original beneficial owner and are subsequently registered under a different
name will be subject to such original beneficial owner's lock-up period. Sales
of the Company's securities by officers and/or directors of the Company prior
to the expiration of their respective lock-up periods shall be effected through
the Representative.
(o) The Company shall pay to the Representative upon the exercise
or redemption of the Warrants a fee equal to 5% of the gross proceeds received
by the Company from the exercise of the Warrants and 5% of the aggregate
redemption price for the Warrants redeemed. Such fee will be paid to the
Representative or their designees no sooner than 12 months after the Effective
Date. Additionally, the Representative or its designees must be designated in
writing by the Warrant holder as having solicited the Warrant in order to
receive the fee and such fee shall not be paid with respect to Warrants held in
a discretionary account without the prior written approval of such exercise by
the discretionary account holder.
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(p) Prior to the Closing Date, the Company shall at its own
expense, undertake to list the Securities in the appropriate recognized
securities manual or manuals published by Standard & Poor's Corporation and
such other manuals as the Representative may designate, such listings to
contain the information required by such manuals and the Uniform Securities
Act. The Company hereby agrees to use its best efforts to maintain such listing
for a period of not less than five years unless the Securities otherwise
qualify for a secondary market trading exemption. The Company shall take such
action as may be reasonably requested by the Representative to obtain a
secondary market trading exemption in such states as may be reasonably
requested by the Representative.
(q) During the one year period commencing on the Effective Date,
the Company will not, without the prior written consent of First London, offer,
sell, contract to sell, grant options or warrants to purchase or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock except for securities issued in
connection with an acquisition or merger by the Company or upon the issuance of
Common Stock upon the exercise of the Warrants.
(r) Prior to the Closing Date, the Company will not issue,
directly or indirectly, without the prior consent of First London, any press
release or other communication or hold any press conference with respect to the
Company or its activities or the offering of the Securities other than routine
customary advertising of the Company's products and services, and except as
required by any applicable law or the directives of any relevant regulatory
authority in any relevant jurisdiction.
(s) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the
financial statements to be included in any registration statement or similar
disclosure document to be filed by the Company hereunder, or any amendment or
supplement thereto. For a period of five years from the Effective 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 fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
quarterly report and the filing of quarterly financial information to
Stockholders.
(t) The Company shall retain Continental Stock Transfer & Trust
Company as the transfer agent for the securities of the Company, or such other
transfer agent as First London may agree to in writing. In addition, the
Company shall direct such transfer agent to furnish the Representative with
daily transfer sheets as to each of the Company's securities as prepared by the
Company's transfer agent and copies of lists of Stockholders and warrantholders
as reasonably requested by the Representative, for a five year period
commencing from the Closing Date.
(u) The Company shall cause the Depository Trust Company, or such
other depository of the Company's securities, to deliver a "special security
position report" to the Representative on a daily and weekly basis at the
expense of the Company, for a five year period from the Effective Date.
(v) Following the Effective Date, the Company shall, at its sole
cost and expense, prepare and file such Blue Sky applications with such
jurisdictions as the Representative shall designate and the Company may
reasonably agree.
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(w) On the Effective Date and for a period of three years
thereafter, the Company's Board of Directors shall consist of a minimum of five
persons, two of whom shall be independent and not otherwise affiliated with the
Company or associated with any of the Company's affiliates.
(x) For such period as any Warrants are outstanding, the Company
shall use its best efforts to cause post- effective amendments to the
Registration Statement or a new Registration Statement to become effective in
compliance with the Act and without any lapse of time between the effectiveness
of any such post-effective amendments and cause a copy of each Prospectus, as
then amended, to be delivered to each holder of record of a Warrant and to
furnish to each of the Underwriters and each dealer as many copies of each such
Prospectus as such Underwriter or such dealer may reasonably request. Such
post-effective amendments or new Registration Statements shall also register
the Representative's Warrant and all the securities underlying the
Representative's Warrant. The Company shall not call for redemption of any of
the Warrants unless a Registration Statement covering the securities underlying
the Warrants or Representative's Warrant has been declared effective by the
Commission and remains current at least until the date fixed for redemption.
In addition, the Warrants or Representative's Warrant shall not be redeemable
during the first year after the Effective Date without the written consent of
First London.
(y) Until such time as the securities of the Company are listed or
quoted on either the New York Stock Exchange, Nasdaq National Market or the
American Stock Exchange, the Company shall engage the Company's legal counsel
to deliver to the Representative a written opinion detailing those states in
which the Shares and Warrants of the Company may be traded in non-issuer
transactions under the Blue Sky laws of the fifty states ("Secondary Market
Trading Opinion"). The initial Secondary Market Trading opinion shall be
delivered to the Representative on the Effective Date, and the Company shall
continue to update such opinion and deliver same to the Representative on a
timely basis, but in any event at the beginning of each fiscal year, for a five
year period, if requested.
4. Conditions of Underwriters, Obligations. The obligations of
the several Underwriters to purchase and pay for the Securities which they have
agreed to purchase hereunder from the Company are subject, as of the date
hereof and as of the Closing Date and the Option Closing Date, as the case may
be, to the continuing accuracy of, and compliance with, the representations and
warranties of the Company herein, to the accuracy of statements of officers of
the Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) (i) The Registration Statement shall have become
effective not later than 5:00 p.m., Eastern Time, on the date of this
Agreement, or at such later time or on such later date as you may agree to in
writing; (ii) at or prior to the Closing Date or Option Closing Date, as the
case may be, no stop order suspending the effectiveness of the Registration
Statement shall have been issued by the Commission and no proceeding for that
purpose shall have been initiated or pending, or shall be threatened, or to the
knowledge of the Company, contemplated by the Commission; (iii) no stop order
suspending the effectiveness of the qualification or registration of the
Securities under the securities or "blue sky" laws of any jurisdiction (whether
or not a jurisdiction which you shall have specified) shall be threatened or to
the knowledge of the Company contemplated by the authorities of any such
jurisdiction or shall have been issued and in effect; (iv) any request for
additional
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information on the part of the Commission or any such authorities shall have
been complied with to the satisfaction of the Commission and any such
authorities, and to the satisfaction of counsel to the Underwriters; and (v)
after the date hereof no amendment or supplement to the Registration Statement
or the Prospectus shall have been filed unless a copy thereof was first
submitted to the Underwriters and the Underwriters did not object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus, (i)
there shall not have been any material change in the capital stock or other
securities of the Company or any material adverse change in the long-term debt
of the Company except as set forth in or contemplated by the Registration
Statement, (ii) there shall not have been any material adverse change in the
general affairs, business, properties, condition (financial or otherwise),
management, or results of operations of the Company, whether or not arising
from transactions in the ordinary course of business, in each case other than
as set forth in or contemplated by the Registration Statement or Prospectus;
(iii) the Company shall not have sustained any material interference with its
business or properties from fire, explosion, flood or other casualty, whether
or not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree, which is not set
forth in the Registration Statement and Prospectus; and (iv) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all material respects
conform to the requirements thereof, and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto shall 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
circumstance under which they are made, not misleading.
(c) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company, threatened, any material action, suit,
proceeding, inquiry, arbitration or investigation against the Company, or any
of the officers or directors of the Company, or any material action, suit,
proceeding, inquiry, arbitration, or investigation, which might result in any
material adverse change in the condition (financial or other), business
prospects, net worth, or properties of the Company.
(d) Each of the representations and warranties of the Company
contained herein shall be true and correct as of this date and at the Closing
Date as if made at the Closing Date, and all covenants and agreements herein
contained to be performed on the part of the Company and all conditions herein
contained to be fulfilled or complied with by the Company at or prior to the
Closing Date and Option Closing Date shall have been duly performed, fulfilled
or complied with.
(e) At each Closing Date, you shall have received the opinion,
together with copies of such opinion for each of the other several
Underwriters, dated as of each Closing Date, from Jordaan & Xxxxxxxxxx, P. L.
L. C., counsel for the Company, in form and substance satisfactory to counsel
for the Underwriters, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority
to own its properties and conduct its business as described in the
Registration Statement and Prospectus and is duly qualified or
licensed to do business
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as a foreign corporation and is in good standing in each other
jurisdiction in which the ownership or leasing of its properties or
conduct of its business requires such qualification except for
jurisdictions in which the failure to so qualify would not have a
material adverse effect on the Company as a whole;
(ii) the authorized capitalization of the Company is as
set forth under "Capitalization" in the Prospectus; all shares of the
Company's outstanding stock and other securities requiring
authorization for issuance by the Company's Board of Directors have
been duly authorized, validly issued, are fully paid and non-
assessable and conform to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock of the Company and
other securities have not been issued in violation of the preemptive
rights of any stockholder and the stockholders of the Company do not
have any preemptive rights or, to such counsel's knowledge, other
rights to subscribe for or to purchase securities of the Company, nor,
to such counsel's knowledge, are there any restrictions upon the
voting or transfer of any of the securities of the Company, except as
disclosed in the Prospectus; the Common Stock, the Shares, the
Warrants, and the securities contained in the Representative's Warrant
Agreements conform to the respective descriptions thereof contained in
the Prospectus; the Common Stock, the Shares, the Warrants, the
Representative's Warrants, the shares of Common Stock to be issued
upon exercise of the Warrants, the Common Stock Representative
Warrants and the Underlying Warrants, have been duly authorized and,
when issued, delivered and paid for, will be duly authorized, validly
issued, fully paid, non-assessable, free of preemptive rights and no
personal liability will attach to the ownership thereof; all prior
sales by the Company of the Company's securities have been made in
compliance with or under an exemption from registration under the Act
and applicable state securities laws and no stockholders of the
Company have any rescission rights against the Company with respect to
the Company's securities; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the Warrants,
the Common Stock Representative Warrants and the Underlying Warrants,
and to the best of such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Securities as
contemplated by this Agreement gives rise to any registration rights
or other rights, other than those which have been waived or satisfied
or described in the Registration Statement;
(iii) this Agreement, the Representative's Warrant
Agreements and the Warrant Agreements have been duly and validly
authorized, executed and delivered by the Company and, assuming the
due authorization, execution and delivery of this Agreement by the
Representative, are the valid and legally binding obligations of the
Company, enforceable in accordance with their terms, except (a) as
such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws from time to
time in effect which effect creditors, rights generally; and (b) no
opinion is expressed as to the enforceability of the indemnity
provisions or the contribution provisions contained in this Agreement;
(iv) the certificates evidencing the outstanding
securities of the Company, the Shares, the Common Stock, the Warrants
and the Representative's Warrants are in valid and proper legal form;
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(v) to the best of such counsel's knowledge, except as
set forth in the Prospectus, there is not pending or threatened, any
material action, suit, proceeding, inquiry, arbitration or
investigation against the Company or any of the officers or directors
of the Company, nor any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might materially and adversely
affect the condition (financial or otherwise), business prospects, net
worth, or properties of the Company;
(vi) the execution and delivery of this Agreement, the
Representative's Warrant Agreements, and the Warrant Agreements, and
the incurrence of the obligations herein and therein set forth and the
consummation of the transactions herein or therein contemplated, will
not result in a violation of, or constitute a default under (a) the
Certificate of Incorporation or Bylaws of the Company; (b) to the best
of such counsel's knowledge, any material obligations, agreement,
covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to
which the Company is a party or by which it or any of its properties
is bound; or (c) to the best of such counsel's knowledge, any material
order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality or court, domestic or
foreign;
(vii) the Registration Statement has become effective under
the Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or
are pending before, or threatened by, the Commission; the Registration
Statement and the Prospectus (except for the financial statements and
other financial data contained therein, or omitted therefrom, as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Rules and Regulations;
(viii) no authorization, approval, consent, or license of
any governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or
delivery of the Securities by the Company, in connection with the
execution, delivery and performance of this Agreement by the Company
or in connection with the taking of any action contemplated herein, or
the issuance of the Representative's Warrants or the securities
underlying the Representative's Warrants, other than registrations or
qualifications of the securities under applicable state or foreign
securities or Blue Sky laws and registration under the Act; and
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Representative or counsel for the
Representative shall reasonably request. In rendering such opinion, such
counsel may rely upon certificates of any officer of the Company or public
officials as to matters of fact; and may rely as to all matters of law, upon
opinions of counsel satisfactory to you and counsel to the Underwriters. The
opinion of such counsel to the Company shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and that the
Representative and they are justified in relying thereon.
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Such counsel shall also include a statement to the effect that such
counsel has participated in the preparation of the Registration Statement and
the Prospectus and nothing has come to the attention of such counsel to lead
such counsel to believe that the Registration Statement or any amendment
thereto at the time it became effective contained any untrue statement of a
material fact or omitted 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 are made, not misleading or that the Prospectus
or any supplement thereto contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make statements therein, in light of the circumstances under which
they are made, not misleading (except, in the case of both the Registration
Statement and any amendment thereto and the Prospectus and any supplement
thereto, for the financial statements, notes thereto and other financial
information and statistical data contained therein, as to which such counsel
need express no opinion).
(f) You and the several Underwriters shall have received on each
Closing Date a certificate dated as of each Closing Date, signed by the Chief
Executive Officer and the Chief Financial Officer of the Company and such other
officers of the Company as the Underwriters may request, certifying that:
(i) No order suspending the effectiveness of the
Registration Statement or stop order regarding the sale of the
Securities is in effect and no proceedings for such purpose are
pending or are, to their knowledge, threatened by the Commission;
(ii) To their knowledge there is no litigation instituted
or threatened against the Company, or any officer or director of the
Company of a character required to be disclosed in the Registration
Statement which is not disclosed therein; to their knowledge there are
no contracts which are required to be summarized in the Prospectus
which are not so summarized; and to their knowledge there are no
material contracts required to be filed as exhibits to the
Registration Statement which are not so filed;
(iii) They have each carefully examined the Registration
Statement and the Prospectus and, to the best of their knowledge,
neither the Registration Statement nor the Prospectus nor any
amendment or supplement to either of the foregoing contains an untrue
statement of any material fact or omits to state any material fact
required to be stated therein or necessary to make the statement
therein, in light of the circumstances under which they are made, not
misleading; and since the Effective Date, to the best of their
knowledge, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth;
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change in the condition of the Company,
financial or otherwise, or in the results of its operations, except as
reflected in or contemplated by the Registration Statement and the
Prospectus and except as so reflected or contemplated since such date,
there has not been any material transaction entered into by the
Company;
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(v) The representations and warranties set forth in this
Agreement are true and correct in all material respects and the
Company has complied with all of its agreements herein contained;
(vi) The Company is not delinquent in the filing of any
federal, state and municipal tax return or the payment of any federal,
state or municipal taxes; they know of no proposed re-determination or
reassessment of taxes, adverse to the Company, and the Company has
paid or provided by adequate reserves for all known tax liabilities
except such delinquency that will not have a material adverse affect
on the Company;
(vii) They know of no material obligation or liability of
the Company, contingent or otherwise, not disclosed in the
Registration Statement and Prospectus;
(viii) This Agreement, the Representative's Warrant
Agreements and the Warrant Agreements, the consummation of the
transactions herein or therein contemplated, and the fulfillment of
the terms hereof or thereof, will not result in a breach by the
Company of any terms of, or constitute a default under, its
Certificate of Incorporation or Bylaws, any indenture, mortgage,
lease, deed of trust, bank loan or credit agreement or any other
material agreement or undertaking of the Company including, by way of
specification but not by way of limitation, any agreement or
instrument to which the Company is now a party or pursuant to which
the Company has acquired any right and/or obligations by succession or
otherwise;
(ix) The financial statements, together with the related
notes and schedules forming a part of the Registration Statement and
the Prospectus, fairly present the financial position and the results
of operations of the Company at the respective dates and for the
respective periods to which they apply; and all audited financial
statements, together with the related notes and schedules, and the
unaudited financial consolidated financial information of the Company
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except
as may be otherwise stated therein. The selected and summary financial
and statistical data included in the Registration Statement present
fairly the information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein.
Since the respective dates of such financial statements, there have
been no material adverse change in the condition or general affairs of
the Company, financial or otherwise, other than as referred to in the
Prospectus;
(x) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
except as may otherwise be indicated therein, the Company has not,
prior to the Closing Date, either (i) issued any securities or
incurred any material liability or obligation, direct or contingent,
for borrowed money, or (ii) entered into any material transaction
other than in the ordinary course of business. The Company has not
declared, paid or made any dividend or distribution of any kind on its
capital stock;
(xi) Based upon written representation from the officers
and directors of the Company they have reviewed the sections in the
Prospectus relating to their biographical
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data and equity ownership position in the Company, and all information
contained therein is true and accurate; and
(xii) Based upon written representation from the officers
and directors of the Company except as disclosed in the Prospectus,
during the past five years, the officers and directors of the Company
have not been:
(A) Subject of a petition under the federal
bankruptcy laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which any of them was a general partner
at or within two years before the time of such filing, or any
corporation or business association of which any of them was
an executive officer at or within two years before the time of
such filing;
(B) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(C) The subject of any order, judgment, or decree
not subsequently reversed, suspended or vacated, of any court
of competent jurisdiction, permanently or temporarily
enjoining either of them from, or otherwise limiting, any of
the following activities:
(1) acting as a futures commission
merchant, introducing broker, commodity trading
advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person
regulated by the Commodity Futures Trading
Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated
person, director or employee of any investment
company, bank, savings and loan association or
insurance company, or engaging in or continuing any
conduct or practice in connection with any such
activity;
(2) engaging in any type of business
practice; or
(3) engaging in any activity in
connection with the purchase or sale of any security
or commodity or in connection with any violation of
federal or state securities law or federal commodity
laws.
(D) The subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated of any federal
or state authority barring, suspending or otherwise limiting
for more than 60 days any of their right to engage in any
activity described in paragraph (3) (i) above, or be
associated with persons engaged in any such activity;
(E) Found by any court of competent jurisdiction
in a civil action or by the Commission to have violated any
federal or state securities law, and the
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judgment in such civil action or finding by the Commission has
not been subsequently reversed, suspended or vacated; or
(F) Found by a court of competent jurisdiction in
a civil action or by the Commodity Futures Trading Commission
to have violated any federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed,
suspended or vacated.
(g) The Underwriters shall have received from KPMG Peat Marwick
LLP, independent auditors to the Company, certificates or letters, one dated
and delivered on the date hereof and one dated and delivered on the Closing
Date, in form and substance satisfactory to the Underwriters, stating, that:
(i) They are independent certified public accountants
with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) The financial statements and the schedules included
in the Registration Statement and the Prospectus were examined by them
and, in their opinion, comply as to form in all material respects with
the applicable accounting requirements of the Act, the Rules and
Regulations and instructions of the Commission with respect to
Registration Statements on Form SB-2;
(iii) On the basis of inquiries and procedures conducted by
them (not constituting an examination in accordance with generally
accepted auditing standards), including a reading of the latest
available unaudited interim financial statements or other financial
information of the Company (with an indication of the date of the
latest available unaudited interim financial statements), inquiries of
officers of the Company who have responsibility for financial and
accounting matters, review of minutes of all meetings of the
stockholders and the Board of Directors of the Company and other
specified inquiries and procedures, nothing has come to their
attention as a result of the foregoing inquiries and procedures that
causes them to believe that:
(A) During the period from (and including) the
date of the financial statements in the Registration Statement
and the Prospectus to a specified date not more than five days
prior to the date of such letters, there has been any change
in the Common Stock, long-term debt or other securities of the
Company (except as specifically contemplated in the
Registration Statement and Prospectus) or any material
decreases in net current assets, net assets, stockholder's
equity, working capital or in any other item appearing in the
Company's financial statements as to which the Underwriters
may request advice, in each case as compared with amounts
shown in the balance sheet as of the date of the financial
statement in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or will occur;
(B) During the period from (and including) the
date of the financial statements in the Registration Statement
and the Prospectus to such specified date
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there was any material decrease in revenues or in the total or
per share amounts of income or loss before extraordinary items
or net income or loss, or any other material change in such
other items appearing in the Company's financial statements as
to which the Underwriters may request advice, in each case as
compared with the corresponding period in the preceding year,
except in each case for increases, changes or decreases which
the Prospectus discloses have occurred or will occur;
(iv) They have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the
general accounting records, including work sheets, of the Company and
excluding any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be in
agreement.
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriters. Any changes, increases or decreases
in the items set forth in such letters which, in the judgment of the several
Underwriters, are materially adverse with respect to the financial position or
results of operations of the Company shall be deemed to constitute a failure of
the Company to comply with the conditions of the obligations to the several
Underwriters hereunder.
(h) Upon exercise of the Option provided for in Section 2(b)
hereof, the obligation of the several Underwriters (or, at its option, the
Representative, individually) to purchase and pay for the Option Securities
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at
the Option Closing Date, and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings for
that purpose shall have been instituted or shall be pending, or, to
the knowledge of the Company, shall be contemplated by the Commission,
and any reasonable request on the part of the Commission for
additional information shall have been complied with to the
satisfaction of counsel to the Underwriters.
(ii) At the Option Closing Date, there shall have been
delivered to you the signed opinion from Jordaan & Xxxxxxxxxx,
P.L.L.C., counsel for the Company, dated as of the Option Closing
Date, in form and substance satisfactory to counsel to the
Underwriters, which opinion shall be substantially the same in scope
and substance as the opinion furnished to you at the Closing Date
pursuant to Section 4 (e) hereof, except that such opinion, where
appropriate, shall cover the Option Securities.
(iii) At the Option Closing Date, there shall have been
delivered to you a certificate of the Chief Executive Officer and
Chief Financial Officer of the Company, dated the Option Closing Date,
in form and substance satisfactory to counsel to the Underwriters,
substantially the same in scope and substance as the certificate
furnished to you at the Closing Date pursuant to Section 4(f) hereof.
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(iv) At the Option Closing Date, there shall have been
delivered to you a letter in form and substance satisfactory to you
from KPMG Peat Marwick LLP., independent auditors to the Company,
dated the Option Closing Date and addressed to the several
Underwriters confirming the information in their letter referred to in
Section 4(g) hereof and stating that nothing has come to their
attention during the period from the ending date of their review
referred to in said letter to a date not more than five business days
prior to the Option Closing Date, which would require any change in
said letter if it were required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the Option
Securities shall be satisfactory in form and substance to the
Underwriters, and the Underwriters and counsel to the Underwriters
shall have been furnished with all such documents, certificates, and
opinions as you may request in connection with this transaction in
order to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company or its
compliance with any of the covenants or conditions contained herein.
(i) No action shall have been taken by the Commission or the NASD,
the effect of which would make it improper, at any time prior to the Closing
Date, for members of the NASD to execute transactions (as principal or agent)
in the Securities and no proceedings for the taking of such action shall have
been instituted or shall be pending, or, to the knowledge of the several
Underwriters or the Company, shall be contemplated by the Commission or the
NASD. The Company represents that at the date hereof it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD. The
Company shall advise the Representative of any NASD affiliations of any of its
officers, directors, or Stockholders or their affiliates in accordance with
paragraph 1(y) of this Agreement.
(j) At the date of this Agreement, you shall have received from
counsel to the Company, dated as of the date hereof, in form and substance
satisfactory to counsel for the Underwriter, a written Secondary Market Trading
Opinion detailing those states in which the Shares and Warrants may be traded
in non-issuer transactions under the Blue Sky laws of the 50 states after the
Effective Date, in accordance with Section 3(y) of this Agreement.
(k) The authorization and issuance of the Securities and delivery
thereof, the Registration Statement, the Prospectus, and all corporate
proceedings incident thereto shall be satisfactory in all respects to counsel
for the several Underwriters, and such counsel shall be furnished with such
documents, certificates and opinions as they may reasonably request to enable
them to pass upon the matters referred to in this subparagraph.
(l) Prior to the Effective Date, the Representative shall have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Representative, as described in the Registration Statement.
(m) If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement and all
obligations of the several Underwriters
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under this Agreement may be canceled at, or at any time prior to, the Closing
Date and/or the Option Closing Date by the Representative and/or the
Underwriters notifying the Company of such cancellation in writing or by
telegram at or prior to the applicable Closing Date. Any such cancellation
shall be without liability of the several Underwriters to the Company.
5. Conditions of the Obligations of the Company. The obligation
of the Company to sell and deliver the Securities is subject to the following
conditions:
(i) The Registration Statement shall have become
effective not later than 5:00 p.m., Eastern Time, on the date of this
Agreement, or on such later time or date as the Company and the
Representative may agree in writing; and
(ii) At the Closing Date and the Option Closing Date, no
stop orders suspending the effectiveness of the Registration Statement
shall have been issued under the Act or any proceedings therefore
initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the Closing Date but are not fulfilled
after the Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Securities on exercise of the
Option provided for in Section 2(b) hereof shall be affected.
6. Indemnification. (a) The Company indemnifies and holds
harmless each Underwriter and each person, if any, who controls the Underwriter
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include but not be limited to, all reasonable costs of defense and
investigation and all attorneys' fees), to which the Underwriter or such
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (i) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(ii) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by
the Company and filed in any state or other jurisdiction in order to qualify
any or all of the Securities under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company will
not be liable in any such cases to the extent, but only to the extent, that any
such losses, claim, damages or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriters specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such Preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto. Notwithstanding the
foregoing, the Company shall have no liability under this Section if such
untrue statement or omission made in a Preliminary Prospectus is cured in the
Prospectus and the Prospectus is delivered within the time required by the Act
to the
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person or persons alleging the liability upon which indemnification is being
sought. This indemnity will be in addition to any liability which the Company
may otherwise have.
(b) Each Underwriter, severally, but not jointly, indemnifies and
holds harmless the Company, each of its directors, each nominee (if any) for
director named in the Prospectus, 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 (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and all attorneys' fees)
to which the Company or any such director, nominee, officer or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon 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 each case to the extent, but only to the extent, that such
untrue statements or alleged untrue statement or omission or alleged omission
was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by you or by any
Underwriter through you specifically for use in the preparation thereof.
Notwithstanding the foregoing, the Underwriters shall have no liability under
this Section if such untrue statement or omission made in a Preliminary
Prospectus is cured in the Prospectus and the Prospectus is not delivered to
the person or persons alleging the liability upon which indemnification is
being sought through no fault of the Underwriter. This indemnity will be in
addition to any liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify in writing the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that if the indemnified party is an Underwriter or a person who controls such
Underwriter within the meaning of the Act, the fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the employment
of such counsel has been specifically authorized in writing by the
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indemnifying party or (ii) the named parties to any such action (including any
impleaded parties) include both the Underwriter or such controlling person and
the indemnifying party and in the reasonable judgment of the Representative, it
is advisable for the Representative or such Underwriters or controlling persons
to be represented by separate counsel (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of the
Underwriter or such controlling person, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for
all such Underwriters and controlling persons, which firm shall be designated
in writing by you). No settlement of any action against an indemnified party
shall be made without the consent of the indemnifying party, which shall not be
unreasonably withheld in light of all factors of importance to such
indemnifying party.
7. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) each Underwriter makes
claim for indemnification pursuant to Section 6 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case,
notwithstanding the fact that the express provisions of Section 6 provide for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of any Underwriter, then the Company and each person who
controls the Company, in the aggregate, and any such Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (which shall, for all purposes of this Agreement, include,
but not be limited to, all reasonable costs of defense and investigation and
all reasonable attorneys, fees) in either such case (after contribution from
others) in such proportions that all such Underwriters are responsible in the
aggregate for that portion of such losses, claims, damages or liabilities
represented by the percentage that the underwriting discount per Share
appearing on the cover page of the Prospectus bears to the public offering
price appearing thereon, and the Company shall be responsible for the remaining
portion, provided, however, that (a) if such allocation is not permitted by
applicable law then the relative fault of the Company and the Underwriter and
controlling persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case of an
untrue statement of a material fact or the omission to state a material fact,
such statement or omission relates to information supplied by the Company, or
the Underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriters to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages (even if the Underwriters and their
controlling persons in the aggregate were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the first sentence of this Section; and
(b) that the contribution of each contributing Underwriter shall not be in
excess of its proportionate share (based on the ratio of the number of
Securities purchased by such Underwriter to the number of Securities purchased
by all contributing Underwriters) of the portion of such losses, claims,
damages or liabilities for which the Underwriters are responsible. No person
ultimately determined to be guilty of a
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fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not ultimately
determined to be guilty of such fraudulent misrepresentation. As used in this
paragraph, 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 Section is not permitted by law,
then the Underwriter and each person who controls the Underwriter shall be
entitled to contribution from the Company, its officers, directors and
controlling persons to the full extent permitted by law. This foregoing
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. No contribution shall be requested with regard to the settlement
of any matter from any party who did not consent to the settlement; provided,
however, that such consent shall not be unreasonably withheld in light of all
factors of importance to such party.
8. Costs and Expenses. (a) Whether or not this Agreement becomes
effective or the sale of the Securities to the Underwriters is consummated, the
Company will pay all costs and expenses incident to the performance of this
Agreement by the Company including but not limited to the fees and expenses of
the counsel to the Company or of the Company's accountants; the costs and
expenses incident to the preparation, printing, filing and distribution under
the Act of the Registration Statement (including the financial statements
therein and all amendments and exhibits thereto), Preliminary Prospectus and
the Prospectus, as amended or supplemented; the fee of the NASD in connection
with the filing required by the NASD relating to the offering of the Securities
contemplated hereby; all state filing fees, expenses and disbursements and
legal fees of counsel to the Company who shall serve as Blue Sky counsel to the
Company in connection with the filing of applications to register the
Securities under the state securities or blue sky laws; the cost of printing
and furnishing to the several Underwriters copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Selected Dealers Agreement, the Agreement Among Underwriters, Underwriters
Questionnaire, Underwriters Power of Attorney and the Blue Sky Memorandum; the
cost of printing the certificates evidencing the securities comprising the
Securities; the cost of preparing and delivering to the Underwriters and its
counsel of their bound volumes containing copies of all documents and
appropriate correspondence filed with or received from the Commission and the
NASD and all closing documents; and the fees and disbursements of the transfer
agent for the Company's securities. The Company shall pay any and all taxes
(including any original issue, transfer, franchise, capital stock or other tax
imposed by any jurisdiction) on sales to the Underwriters hereunder. The
Company will also pay all costs and expenses incident to the furnishing of any
amended Prospectus or of any supplement to be attached to the Prospectus. The
Company shall also engage the Company's counsel to provide the Representative
with a written Secondary Market Trading Opinion in accordance with paragraphs
3(y) and 4(j) of this Agreement.
(b) In addition to the foregoing expenses, the Company shall at
the Closing Date pay to the Representative a non-accountable expense allowance
equal to 3% of the gross proceeds received from the sale of the Securities, of
which an advance of $__________ has been paid to date. In the event the
over-allotment option is exercised, the Company shall pay to the Representative
at the Option Closing Date an additional amount equal to 3% of the gross
proceeds received upon exercise of the over-allotment option.
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(c) Other than as disclosed in the Registration Statement, no
person is entitled either directly or indirectly to compensation from the
Company, from the Representative or from any other person for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Representative and the other Underwriters
against any losses, claims, damages or liabilities, joint or several which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys, fees, to which the
Representative or such other Underwriter may become subject insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon the claim of any person (other than an employee of the
party claiming indemnity) or entity that he or it is entitled to a finder's fee
in connection with the proposed offering by reason of such person's or entity's
influence or prior contact with the indemnifying party.
9. Substitution of Underwriters. If any of the Underwriters
shall for any reason not permitted hereunder cancel their obligations to
purchase the Securities hereunder, or shall fail to take up and pay for the
number of Securities set forth opposite their respective names in Schedule A
hereto upon tender of such Securities in accordance with the terms hereof,
then:
(a) If the aggregate number of Securities which such Underwriter
or Underwriters agreed but failed to purchase does not exceed 10% of the total
number of Securities, the other Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the
Securities which such defaulting Underwriter or Underwriters agreed but failed
to purchase.
(b) If any Underwriter or Underwriters so default and the agreed
number of Securities with respect to which such default or defaults occurs is
more than 10% of the total number of Securities, the remaining Underwriters
shall have the right to take up and pay for (in such proportion as may be
agreed upon among them) the Securities which the defaulting Underwriter or
Underwriters agreed but failed to purchase. If such remaining Underwriters do
not, at the Closing Date, take up and pay for the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase, the time
for delivery of the Securities shall be extended to the next business day to
allow the several Underwriters the privilege of substituting within twenty-four
hours (including non-business hours) another Underwriter or Underwriters
satisfactory to the Company. If no such Underwriter or Underwriters shall have
been substituted as aforesaid, within such twenty-four period, the time of
delivery of the Securities may, at the option of the Company, be again extended
to the next following business day, if necessary, to allow the Company the
privilege of finding within twenty-four hours (including non-business hours)
another Underwriter or Underwriters to purchase the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted Underwriters to
take up the Securities of the defaulting Underwriter or Underwriters as
provided in this Section, (i) the Company or the Representative shall have the
right to postpone the time of delivery for a period of not more than seven
business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary; and (ii) the respective numbers of Securities to
be purchased by the remaining Underwriters or substituted Underwriters shall be
taken at the basis of the underwriting obligation for all purposes of this
Agreement.
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If in the event of a default by one or more Underwriters and the
remaining Underwriters shall not take up and pay for all the Securities agreed
to be purchased by the defaulting Underwriters or substitute another
Underwriter or Underwriters as aforesaid, and the Company shall not find or
shall not elect to seek another Underwriter or Underwriters for such Securities
as aforesaid, then this Agreement shall terminate.
If, following exercise of the Option provided in Section 2(b) hereof,
any Underwriter or Underwriters shall for any reason not permitted hereunder
cancel their obligations to purchase Option Securities at the Option Closing
Date, or shall fail to take up and pay for the number of Option Securities,
which they become obligated to purchase at the Option Closing Date upon tender
of such Option Securities in accordance with the terms hereof, then the
remaining Underwriters or substituted Underwriters may take up and pay for the
Option Securities of the defaulting Underwriters in the manner provided in
Section 9(b) hereof. If the remaining Underwriters or substituted Underwriters
shall not take up and pay for all Option Securities, the Underwriters shall be
entitled to purchase the number of Option Securities for which there is no
default or, at their election, the option shall terminate, the exercise thereof
shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of
termination, there shall be no liability on the part of any non-defaulting
Underwriter to the Company, provided that the provisions of this Section 9
shall not in any event affect the liability of any defaulting Underwriter to
the Company arising out of such default.
10. Effective Date. The Agreement shall become effective upon its
execution except that you may, at your option, delay its effectiveness until
11:00 a.m., Eastern time, on the first full business day following the
Effective Date of the Registration Statement, or at such earlier time after the
Effective Date of the Registration Statement as you in your discretion shall
first commence the public offering by the Underwriters of any of the
Securities. The time of the public offering shall mean the time after the
effectiveness of the Registration Statement when the Securities are first
generally offered by you to the other Underwriters and the selected dealers.
This Agreement may be terminated by you at any time before it becomes effective
as provided above, except that Sections 3(c), 6, 7, 8, 13, 14, 15, 16, 17 and
18 shall remain in effect notwithstanding such termination.
11. Termination. (a) This Agreement, except for Sections 3(c), 6,
7, 8, 13, 14, 15, 16, 17, and 18 hereof, may be terminated at any time prior to
the Closing Date, and the Option referred to in Section 2(b) hereof, if
exercised, may be canceled at any time prior to the Option Closing Date, by you
if in your judgment it is impracticable to offer for sale or to enforce
contracts made by the Underwriters for the resale of the Securities agreed to
be purchased hereunder by reason of: (i) the Company having sustained a
material adverse loss, whether or not insured, by reason of fire, earthquake,
flood, accident or other calamity, or from any labor dispute or court or
government action, order or decree; (ii) trading in securities on the New York
Stock Exchange or the American Stock Exchange having been suspended or limited;
(iii) material governmental restrictions having been imposed on trading in
securities generally (not in force and effect on the date hereof); (iv) a
banking moratorium having been declared by federal or New York or Texas state
authorities; (v) an outbreak of major international hostilities or other
national or international calamity having occurred which is reasonably believed
likely by the Representative to have a material adverse
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impact on the business, financial condition or financial statements of the
Company or the market for the securities offered hereby; (vi) the passage by
the Congress of the United States or by any state legislative body of similar
impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive; (vii) any material adverse change in
the financial or securities markets beyond normal market fluctuations having
occurred since the date of this Agreement; (viii) a pending or threatened legal
or governmental proceeding or action relating generally to the Company's
business, or a notification having been received by the Company of the threat
of any such proceeding or action, which could, in the reasonable judgment of
the Representative, materially adversely affect the Company; (ix) except as
contemplated by the Prospectus, the Company is merged or consolidated into or
acquired by another company or group or there exists a binding legal commitment
for the foregoing or any other material change of ownership or control occurs;
or (x) the Company shall not have complied in all material respects with any
term, condition or provisions on its part to be performed, complied with or
fulfilled (including but not limited to those set forth in this Agreement)
within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section, the Company shall
be promptly notified by you, by telephone, telegram or facsimile, confirmed by
letter.
12. Representative's Warrant Agreements. At the Closing Date, the
Company will issue to the Representative and/or persons related to the
Representative, for an aggregate purchase price of $100, and upon the terms and
conditions set forth in the form of Representative's Warrant Agreements annexed
as an exhibit to the Registration Statement, Representative's Warrants to
purchase up to an aggregate of 120,000 Shares, 120,000 Series A Warrants and
120,000 Series B Warrants, in such denominations as the Representative shall
designate. In the event of conflict in the terms of this Agreement and the
Representative's Warrant Agreements, the language of the form of
Representative's Warrant Agreements shall control.
13. Representations, Warranties and Agreements to Survive
Delivery. The respective indemnities, agreements, representations, warranties
and other statements of the Company and its principal officers, where
appropriate, and the Underwriters set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriters, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment
for the Securities and the termination of this Agreement.
14. Notice. All communications hereunder will be in writing and,
except as otherwise expressly provided herein, will be mailed, delivered or
telegraphed and confirmed:
If to the Underwriters: First London Securities Corporation
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Copy to: Xxxxxxx X. Xxxxxxx
Xxxxxxx Xxxxxx L.L.P.
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000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
If to the Company: PawnMart, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Copy to: Jakes Jordaan
Jordaan & Xxxxxxxxxx
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
15. Parties in Interest. This Agreement herein set forth is made
solely for the benefit of the several Underwriters, the Company and, to the
extent expressed, any person controlling the Company or any of the
Underwriters, and directors of the Company, nominees for directors (if any)
named in the Prospectus, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors, assigns
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser
of the Securities, as such purchaser, from the several Underwriters. All of
the obligations of the Underwriters hereunder are several and not joint.
16. Applicable Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Texas applicable to
contracts made and to be performed entirely within the State of Texas. The
parties agree that any action brought by any party against another party in
connection with any rights or obligations arising out of this Agreement shall
be instituted properly in a federal or state court of competent jurisdiction
with venue only in the State District Court of Dallas, County, Texas or the
United States District Court for the Northern District of Texas. A party to
this Agreement named as a Defendant in any action brought in connection with
this Agreement in any court outside of the above named designated county or
district shall have the right to have the venue of said action changed to the
above designated county or district or, if necessary, have the case dismissed,
requiring the other party to re- file such action in an appropriate court in
the above designated county or federal district.
17. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counter-parts shall together constitute but one and
the same instrument.
18. Entire Agreement. This Agreement and the agreements referred
to within this Agreement constitute the entire agreement of the parties, and
supersedes all prior agreement, understanding, negotiations and discussions,
whether written or oral, of the parties hereto.
19. Representative as Underwriter. In the event the
Representative acts as the sole Underwriter in connection with the underwriting
of the securities being offered pursuant to the Registration Statement, all
references to the Representative in this Agreement shall be replaced by
reference to the "Underwriters," and (i) any consents required to be obtained
from the Representative shall be required to be obtained solely from the
Underwriters; (ii) all compensation
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to be received by the Representative shall instead be received by the
Underwriters; and (iii) the provisions of Section 9 of this Agreement shall not
apply.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding Agreement between the Company and the several Underwriters in
accordance with its terms.
Very truly yours,
PAWNMART, INC.
BY:
--------------------------------
Xxxxxx X. Xxxxxxxx, Chief
Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
FIRST LONDON SECURITIES CORPORATION
BY:
-------------------------------
Xxxxxxx X. Xxxxxxx, President
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SCHEDULE A
TO THE UNDERWRITING AGREEMENT
UNDERWRITER SHARES
----------- ------
First London Securities Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UNDERWRITER WARRANTS
----------- --------
First London Securities Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37
SCHEDULE B
TO THE UNDERWRITING AGREEMENT
LOCK-UP PERIODS
38
PawnMart, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
First London Securities Corporation
0000 Xxxxx Xxxxxx
Xxxxxx Xxxxx 00000
Gentlemen:
The undersigned understands that PawnMart, Inc., a Delaware
corporation (the "Company"), has filed a registration statement on Form SB-2
(the "Registration Statement") with the Securities and Exchange Commission for
the registration of shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), and redeemable common stock purchase warrants to be
sold to the public in an underwritten public offering (the "Public Offering").
In as much as the undersigned wishes to induce you to continue your
efforts in connection with the Public Offering, the undersigned hereby agrees
and represents to you that the undersigned will not, directly or indirectly,
offer to sell, sell, grant an option for the sale of, assign, transfer, pledge,
hypothecate or otherwise encumber or dispose of in any manner any interest in
any shares of Common Stock or securities of the Company convertible into,
exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of the Common Stock of the Company owned of record or
beneficially by the undersigned on the date hereof (collectively, the
"Securities"), including pursuant to Rule 144 under the Securities Act of 1933,
as amended, from the date hereof until one (1) year after the closing of the
Public Offering.
The undersigned acknowledges and agrees that the Company and the
underwriters of the IPO are relying on the representation and agreement of the
undersigned contained herein in filing the Registration Statement and in
consummating the IPO.
Very truly yours,
By:
----------------------
Name:
Date:
--------------------
No. of Securities held -
