EXHIBIT 1.17
UNDERWRITING AGREEMENT
CLUCKCORP INTERNATIONAL, INC.
500,000 Shares of ______%
Convertible Redeemable Preferred Stock
(Liquidation Preference $10.00 per Preferred Security)
January 27, 1997
GLOBAL EQUITIES GROUP, INC.
As Representative of the several
Underwriters named in Schedule 1
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
CluckCorp International, Inc. a Texas corporation proposes to sell an
aggregate of 500,000 shares (the "Firm Stock") of the Company's Series A
Redeemable Convertible Preferred Stock par value $1.00 per share (the "Preferred
Stock"). In addition, the Company proposes to grant to the Underwriters named in
Schedule 1 hereto (the "Underwriters") an option to purchase up to an additional
75,000 shares of Preferred Stock on the terms and for the purposes set forth in
Section 2 (the "Option Stock"). The Firm Stock and the Option Stock, if
purchased, are hereinafter collectively called the "Stock." This is to confirm
the agreement concerning the purchase of the Stock from the Company by the
Underwriters named in Schedule 1 hereto (the "Underwriters") in the amounts set
forth opposite their respective names.
1. Representations, Warranties and Agreements of the Company and the
Principal Stockholder. The Company and ▇▇▇ Investment Company (the "Principal
Stockholder"), jointly and severally, represent, warrant and agree that:
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(a) A registration statement on Form SB-2 (No. 33_______), and an
amendment thereto, with respect to the Stock have (i) been prepared by the
Company in conformity with the requirements of the Securities Act of 1933
(the "Securities Act") and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, (ii) been filed with the Commission under the Securities Act
and (iii) become effective under the Securities Act; and a second
registration statement on Form SB-2 with respect to the Stock (i) may also
be prepared by the Company in conformity with the requirements of the
Securities Act and the Rule and Regulations and (ii) if to be so prepared,
will be filed with the Commission under the Securities Act pursuant to Rule
462(b) of the Rules and Regulations on the date hereof. Copies of the first
such registration statement and the amendment to such registration
statement, together with the form of any such second registration
statement, have been delivered by the Company to you as the representative
(the "Representative") of the Underwriters. As used in this Agreement,
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"Effective Time" means (i) with respect to the first such registration
statement, the date and the time as of which such registration statement,
or the most recent post-effective amendment thereto, if any, was declared
effective by the Commission and (ii) with respect to any second
registration statement, the date and time as of which such second
registration statement is filed with the Commission, and "Effective Times"
is the collective reference to both Effective Times; "Effective Date" means
(i) with respect to the first such registration statement, the date of the
Effective Time of such registration statement and (ii) with respect to any
second registration statement, the date of the Effective Time, and
"Effective Dates" is collective reference to both Effective Dates;
"Preliminary Prospectus" means such prospectus included in any such
registration statement, or amendments thereof, before it became effective
under the Securities Act and any prospectus filed with the Commission by
the Company with the consent of the Representative pursuant to Rule 424(a)
of the Rules and Regulations; "Primary Registration Statement" means the
first registration statement referred to in this Section 1(a), as amended
as its Effective Time, "Rule 462(b) Registration Statement" means the
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second registration Statement, if any, referred to in this Section 1(a), as
filed with the Commission, and "Registration Statements means both the
Primary Registration Statement and any Rule 462(b) Registration Statement,
including in each case all information contained in the final prospectus
filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations in accordance with Section 6(a) hereof and deemed to be a part
of the Registration Statement pursuant to paragraph (b) of Rule 430A of the
Rules and Regulations; and "Prospectus" means such final prospectus, as
first filed with the Commission pursuant to paragraph (1) or (4) of Rule
424(b) of the Rules and Regulations. The Commission has not issued any
order preventing or suspending these of any Preliminary Prospectus.
(b) The Primary Registration Statement conforms (and the Rule 462(b)
Registration Statement, if any, the Prospectus and any further amendments
or supplements to the Registration Statements or the Prospectus, when they
become effective or are filed with the Commission, as the case may be, will
conform) in all respects to the requirements of the Securities Act and the
Rules and Regulations and do not and will not, as of the applicable
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effective date (as to the Registration Statements and any amendment
thereto) and as of the applicable filing date (as to the Prospectus and any
amendment or supplement thereto) contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that no
representation or warranty is made as to information contained in or
omitted from the Registration Statements or the Prospectus in reliance upon
and in conformity with written information furnished to the Company through
the Representative by or on behalf of any Underwriter specifically for
inclusion therein.
(c) The Company and each of its subsidiaries (as defined in Section
15) have been duly incorporated and are validly existing as corporations in
good standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good standing
as foreign corporations in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification, and have all power and authority
necessary to own or hold their respective properties and to conduct the
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businesses in which they are engaged; and one of the subsidiaries of the
Company is a "significant subsidiary", as such term is defined in Rule 405
of the Rules and Regulations.
(d) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, and fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable and (except for directors' qualifying
shares) are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims.
(e) The unissued shares of the Stock to be issued and sold by the
Company to the Underwriters hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as provided herein
will be duly and validly issued, fully paid and non-assessable; and the
Stock will conform to the description thereof contained in the Prospectus.
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(f) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the company or
any of is subsidiaries is bound or to which any of the properties or assets
of the Company or any of its subsidiaries is subject, nor will such actions
result in any violation of the provisions of the charter or by-laws of the
Company or any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties or
assets; and except for the registration of the Stock under the Securities
Act and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable
state securities laws in connection with the purchase and distribution of
the Stock by the Underwriters, no consent, approval, authorization or order
or, or filing or registration with, any such court or governmental agency
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or body is required for the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby.
(g) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statements or in any
securities being registered pursuant to any other registration statement
filed by the Company under the Securities Act.
(h) The Company has not sold or issued any shares of Common or
Preferred Stock during the six-month period preceding the date of the
Prospectus, including any sales pursuant to Rule 144A, or Regulations D or
S of, the Securities Act.
(i) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements included in the
Prospectus, any material loss or interference with its business from fire,
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explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
such date, there has not been any change in the capital stock or long-term
debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse change,
in or affecting the general affairs, management, financial position,
stockholders, equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus.
(j) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statements or
included in the Prospectus present fairly the financial condition and
results of operations of the entities purported to be shown thereby, at the
dates and for the periods indicated, and have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
(k) Akin, Doherty, ▇▇▇▇▇ & ▇▇▇▇▇, P.C. who have certified certain
financial statements of the Company, whose report appears in the Prospectus
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and who have delivered the initial letter referred to in Section 7(e)
hereof, are independent public accountants as required by the Securities
Act and the Rules and Regulations.
(l) There are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or of which any property
or asset of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, might have
a material adverse effect on the consolidated financial position,
stockholders' equity, rules of operations, business or prospects of the
Company and its subsidiaries; and to the best of the Company's knowledge,
no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(m) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to either of the
Registration Statements by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed as
exhibits to the either of the Registration Statements or incorporated
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therein by reference as permitted by the Rules and Regulations.
(n) The warrants (the "Underwriters' Warrants") to be issued to the
Representative hereunder will be, when issued, duly and validly authorized
and executed by the Company and will constitute valid and binding
obligations of the Company, legally enforceable in accordance with their
terms, and the Company will have duly authorized, reserved and set aside
the shares of its Preferred Stock issuable upon exercise of the
Underwriters' Warrants and such stock, when issued and paid for upon
exercise of the Underwriters' Warrants in accordance with the provisions
thereof, will be duly and validly registered, authorized and issued,
fully-paid and non-assessable.
(o) The Company represents that no person has acted as a finder in
connection with the transactions contemplated herein except as set forth in
the registration statement. The Company will indemnify the Underwriters
with respect to any claim for finder's fees in connection herewith. Except
as set forth in the registration statement, the Company further represents
that it has no management or financial consulting agreements with any
person and that, except as set forth in the Registration statement and in
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the Prospectus or otherwise disclosed to the Representative in writing
prior to the date hereof, no promoter, officer, director, consultant or
shareholder of the Company is directly or indirectly, affiliated or
associated with an NASD member broker-dealer.
2. Purchase of the Stock by the Underwriters. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell 500,000 shares of the
Firm Stock severally and not jointly, to the several underwriters and each of
the Underwriters, severally and not jointly, agrees to purchase the number of
shares of the Firm Stock set opposite that Underwriter's name in Schedule 1
hereto. Each Underwriter shall be obligated to purchase from the Company that
number of shares of the Firm Stock which represents the same proportion of the
number of shares of the Firm Stock to be sold by the Company, as the number of
shares of the Firm Stock set forth opposite the name of such Underwriter in
Schedule 1 represents of the total number of shares of the Firm Stock to be
purchased by all of the Underwriters pursuant to this Agreement. The respective
purchase obligations of the Underwriters with respect to the Firm Stock shall be
rounded among the Underwriters to void fractional shares, as the Representative
may determine.
In addition, the Company grants to the Underwriters an option to purchase
up to 75,000 shares of Option Stock. Such option is granted solely for the
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purpose of covering over-allotments in the sale of Firm Stock and is exercisable
as provided in Section 4 hereof. Shares of Option Stock shall be purchased
severally for the account of the Underwriters in proportion to the number of
shares of Firm Stock set opposite the name of such Underwriters in Schedule 1
hereto. The respective purchase obligations of each Underwriters with respect to
the Option Stock shall be adjusted by the Representative so that no Underwriter
shall be obligated to purchase Option Stock other than 100 share amounts. The
price of both the Firm Stock and any Option Stock shall be $9.00 per share which
represents the public offering price of $10.00 per share less an underwriting
discount of ten percent. All or any portion of such discount may be reallowed by
you for sale through licensed securities dealers who are members in good
standing of the NASD. Notwithstanding anything contained herein to the contrary,
Global individually and not as Representative, may purchase all or any part of
the Option Stock and is not obligated to offer the Option Stock to the other
Underwriters.
The Company is not obligated to deliver any of the Stock to be delivered on
the First Delivery Date or the Second Delivery Date (as hereinafter defined), as
the case may be, except upon payment for all the Stock to be purchased on such
Delivery Date as provided herein.
3. Offering of Stock by the Underwriters. Upon authorization by the
Representative of the release of the Firm Stock, the several Underwriters
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proposed to offer the Firm Stock for sale upon the terms and conditions set
forth in the Prospectus; provided, however, that no Stock registered pursuant to
the Rule 462(b) Registration Statement, if any, shall be offered prior to the
Effective Time thereof.
4. Delivery of and Payment for the Stock. Delivery of and payment for the
Firm Stock shall be made at the office of counsel for the Representative, Mound,
Cotton & ▇▇▇▇▇▇, at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00
A.M., New York City time, on the third full business day following the date of
this Agreement or at such other date or place as shall be determined by
agreement between the Representative and the Company. This date and time are
sometimes referred to as the "First Delivery Date." On the First Delivery Date,
the Company shall deliver or cause to be delivered certificates representing the
Firm Stock to the Representative for the account of each Underwriter against
payment to or upon the order of the Company of the purchase price by bank wire,
certified or official bank check or checks payable in New York Clearing House
(same-day) funds. In making payment to the Company, the Representative may first
deduct all sums due to it for the balance of the non-accountable expense
allowance and under the Financial Consulting Agreement entered into between the
Company and Representative in November 1996. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is further
condition of the obligation of each Underwriter hereunder. On the First Delivery
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Date, the Company shall deliver in respect of the Firm Stock one certificate
evidencing all of the shares of such series of securities being sold on the
First Delivery Date registered in the name of _____________________, as nominee
for The Depository Trust Company ("DTC"). Interests in the Firm Stock will be
represented by book entries on the records of DTC as the Underwriters may
request not less than two full business days in advance of the First Delivery
Date. For the purpose of expediting the checking and packaging of the
certificates for the Firm Stock, the Company and the Selling Stockholders shall
make the certificates representing the Firm Stock available for inspection by
the Representative in New York, New York, not later than 2:00 P.M., New York
City time, on the business day prior to the First Delivery Date.
At any time on or before the forty-fifth day after the date of this
Agreement the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representative. Such notice shall set forth
the aggregate number of shares of Option Stock as to which the option is being
exercised, the names in which the shares of Option Stock are to be registered,
the denominations in which the shares of Option Stock are to be issued and the
date and time, as determined by the Representative, when the shares of Option
Stock are to be delivered; provided, however, that this date and time shall not
be earlier than the First Delivery Date nor earlier than the second business day
after the date on which the option shall have been exercised nor later than the
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fifth business day after the date on which the option shall have been exercised.
The date and time the shares of Option Stock are delivered are sometimes
referred to as the "Second Delivery Date" and the First Delivery Date and the
Second Delivery Date are sometimes each referred to as a "Delivery Date".
Delivery of and payment for the Option Stock shall be made at the place
specified in the first sentence of the first paragraph of this Section 4 (or at
such other place as shall be determined by agreement between the Representative
and the Company) at 10:00 A.M., New York City time, on the Second Delivery Date.
On the Second Delivery Date, the Company shall deliver or cause to be delivered
the certificates representing the Option Stock to the Representative for the
account of each Underwriter against payment to or upon the order of the Company
of the purchase price by bank wire, certified or official bank check or checks
payable in New York Clearing House (same-day) funds. Time shall be of the
essence, and delivery at the time and place specified pursuant to this Agreement
is a further condition of the obligation of each Underwriter hereunder. On the
Second Delivery Date, the Company shall deliver in respect of the Option Stock
one certificate evidencing all of the shares of such series of securities being
sold on the Second Delivery Date registered in the mane of _______________as
nominee for DTC. For the purpose of expediting the checking and packaging of the
certificates for the Option Stock, the Company shall make the certificates
representing the Option Stock available for inspection by the Representative in
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, not later than 2:00 P.M., New York City time, on the
business day prior to the Second Delivery Date.
(e) At the time of making payment for the Firm stock, the Company also
hereby agrees to sell to the Representative Underwriters' Warrants to purchase
up to 50,000 shares of Preferred Stock at an aggregate purchase price of
$____________. Each Underwriters' Warrant shall entitle the owner thereof to
purchase one Preferred Stock of the Company at an exercise price of $12.00. The
Preferred Stock shall be similar in all respects to the Preferred Stock sold to
the public. Such Underwriters' Warrants are to become exercisable upon the
expiration of one year from the Effective Dte, and shall remain exercisable for
four years thereafter, such warrants may be transferred only to officers of
partners of the Underwriters and selling group members and their officers or
partners. The Underwriters' Warrants shall contain such other terms and
provisions as may be set forth in agreements with respect thereto (the
"Underwriters' Warrants Agreements") executed and delivered by the Company and
you simultaneously with the execution and delivery of this Agreement. The
Underwriters' Warrant Agreements shall provide that the exercise price and the
number and type of securities issuable upon exercise thereof shall be adjusted
upon the occurrence of certain events. As provided in the Underwriters' Warrant
Agreements, you may designate that the Underwriters' Warrants be issued in
varying amounts directly to your bona fide officers and not to you. Such
designation will be made by you only if you determine that such issuances would
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not violate the interpretations of the NASD relating to the review of corporate
financing arrangements. The holders of the Underwriters' Warrants will be
entitled to the registration rights set forth in the Underwriters' Warrant
Agreements.
5. Further Agreements of the Company. The Company agrees:
(a) To prepare the Rule 462(b) Registration Statement, if necessary,
in a form approved by the Representative and to file such Rule 462(b)
Registration Statement with the Commission on the date hereof; to prepare
the Prospectus in a form approved by the Representative and to file such
Prospectus pursuant to Rule 424(b) under the Securities Act not later than
10:00 A.M., New York City time, the day following the execution and
delivery of this Agreement; to make no further amendment or any supplement
to the Registration Statements or to the Prospectus prior to the Second
Delivery Date except as permitted herein; to advise the Representative,
promptly after it receives notice thereof, of the time when any amendment
to either Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish the Representative, promptly after it receives notice thereof,
of the issuance by the Commission of any stop order or of any order
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preventing or suspending the use of any Preliminary Prospectus or the
Prospects, of the suspension of the qualification of the Stock for offering
or sale in any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the Commission for
the amending or supplementing of the Registration Statements or the
Prospectus or for additional information; and, in the event of the issuance
of any stock order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
(b) To furnish promptly to the Representative and to counsel for the
Underwriters a signed copy of each of the Registration Statements as
originally filed with the Commission, and each amendment thereto filed with
the Commission, including all consents and exhibits filed therewith;
(c) To deliver promptly to the Representative in New York City such
number of the following documents as the Representative shall request: (i)
conformed copies of the Registration Statements as originally filed with
the Commission and each amendment thereto (in each case excluding exhibits
other than this Agreement and the computation of per share earnings) (ii)
each Preliminary Prospectus, the Prospectus (not later than 10:00 A.M., New
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York City time, of the day following the execution and delivery of this
Agreement) and any amended or supplemented Prospectus (not later than 10:00
A.M., New York City time, on the day following the date of such amendment
or supplement) prior to the expiration of nine months after the Effective
Time of the Primary Registration Statement in connection with the offering
or sale of the Stock (or any other securities relating thereto) and if at
such time any events shall have occurred as a result of which the
Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during such
same period to amend or supplement the Prospectus in order to comply with
the Securities Act, to notify the Representative and, upon its request, to
prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as the Representative may from time to time
reasonably request of an amended or supplemented Prospectus which will
correct such statement or omission or effect such compliance, and in case
any Underwriter is required to deliver a prospectus in connection with
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sales of any of the Stock at any time nine months or more after the
Effective Time of the Primary Registration Statement upon the request of
the Representative but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as the Representative may from
time to time reasonably request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Securities Act; (d) To file promptly
with the Commission any amendment to the Registration Statements or the
Prospectus or any supplement to the Prospectus that may, in the judgment of
the Company or the Representative, be required by the Securities Act or
requested by the Commission; (e) Prior to filing with the Commission any
(i) amendment to either of the Registration Statements or supplement to the
Prospectus or (ii) any Prospectus pursuant to Rule 424 of the Rules and
Regulations, to furnish a copy thereof to the Representative and counsel
for the Underwriters and obtain the consent of the Representative to the
filing: (f) As soon as practicable after the Effective Date of the Primary
Registration Statement, to make generally available to the Company's
security holders and to deliver to the Representative an earnings statement
of the Company and its subsidiaries (which need not be audited) complying
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with Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158); (g) For a period of
five years following the Effective Date of the Primary Registration
Statement, to furnish to the Representative copies of all materials
furnished by the Company to its shareholders and all public reports and all
reports and financial statements furnished by the Company to the principal
national securities exchange upon which the Common or Preferred Stock may
be listed pursuant to requirements of or agreements with such exchange or
to the Commission pursuant to the Exchange Act or any rule or regulation of
the Commission thereunder; (h) Promptly from time to time to take such
action as the Representative may reasonably request to qualify the Stock
for offering and sale under the securities laws of such jurisdictions as
the Representative may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Stock; (i) For
a period of two years from the date of the Prospectus, not to offer for
sale, sell or otherwise dispose of (or enter into any transaction which is
designed to, or could be expected to, result in the disposition or purchase
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by any person of), directly or indirectly, any shares of Common Stock
(other than the Stock and shares issued pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans existing
on the date hereof or pursuant to currently outstanding options, warrants
or rights), or sell or grant options, rights or warrants with respect to
any shares of Common Stock (other than the grant of options pursuant to
option plans existing on the date hereof), without the prior written
consent of the Representative; and to cause each officer and director of
the Company to furnish to the Representative, prior to the First Delivery
Date, a letter or letters, in form and substance satisfactory to counsel
for the Underwriters, pursuant to which each person shall agree not to
offer for sale, sell or otherwise dispose of (or enter into any transaction
which is designed to, or could be expected to, result in the disposition or
purchase by any person of), directly or indirectly, any shares of Common
Stock for a period of two years from the date of the Prospectus, without
the prior written consent of the Representative; (j) Prior to filing with
the Commission any reports on Form SR pursuant to Rule 463 of the Rules and
Regulations, to furnish a copy thereof to the counsel for the Underwriters
and receive and consider its comments thereon, and to deliver promptly to
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the Representative a signed copy of each report on Form SR filed by it with
the Commission; (k) To apply the net proceeds from the sale of the Stock
being sold by the Company as set forth in the Prospectus; and (l) To take
such steps as shall be necessary to ensure that neither the Company nor any
subsidiary shall become an "investment company" within the meaning of such
term under the Investment Company Act of 1940 and the rules and regulations
of the Commission thereunder. (m) For a period of five years from the
Effective Date of the Registration Statement, the Representative shall have
the right to designate one person as a member to the Board of Directors of
the Company, who shall be invited to and have the right to attend every
meeting of the Board of Directors together with the right to vote. Such
member will be reimbursed for expenses, including travel, and receive
compensation in the same amount as any other member of the Board of
Directors and will be indemnified by the Company against any claims arising
out of his participation at meetings of the Board of Directors. During such
period, the Company will hold at least four meetings per year of its Board
of Directors. (n) Until such time as the securities of the Company are
listed on the New York Stock Exchange or the American Stock Exchange (not
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including The Emerging Growth Company List) but in no event more than three
years from the Effective Date, the Company shall retain a company
reasonably acceptable to the Representative, to prepare a post registration
blue sky market survey for the Representative for distribution to market
makers. Such survey shall be provided to the Representative monthly with
the first survey delivered to it as soon as practicable after the
completion of the public offering. The cost of the first year's survey will
not exceed $5,000. In lieu of the foregoing, the Company may cause its
legal counsel to provide the Representative with a survey to be updated at
least monthly. (o) The Company will use its best efforts to obtain
liability insurance at reasonable costs insuring its directors and officers
against any liabilities asserted against them in connection with the
preparation for and the closing of the public offering which is the subject
of this Agreement and the initial public offering which transpired in July
1996. (p) The Company, for a period of at least three years following the
public offering, shall retain the services of a financial public relations
firm(s) reasonably satisfactory to the Representative, said agreement(s) to
commence no later than 90 days after the Closing of the public offering.
During this time period, the Company and its officers and directors will
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not hold discussions with any member of the news media, issue news releases
or permit other publicity about the Company concerning financial
information or the occurrence of material events without the approval of
the Company's counsel and for the period from the date hereof and ending at
the end of the period for which a prospectus must be delivered, the Company
will obtain the approval of the Underwriters' counsel concerning all of the
above matters. During such period, the Company will deliver to the
Representative all press releases in advance to your Investment Banking
Department (Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇) and once released, final copies of
such news releases or other publicity, in any medium, related to the
Company will be delivered to you.
6. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statements and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statements as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
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this Agreement; (d) the costs of reproducing and distributing this Agreement;
(e) the costs of distributing the terms of agreement relating to the
organization of the underwriting syndicate and selling group to the members
thereof by mail, telex or other means of communication; (f) the costs of
delivering and distributing the Custody Agreements and the Powers of Attorney,
if any; (g) the filing fees incident to securing any required review by the
National Association of Securities Dealers, Inc. of the terms of sale of the
Stock; (h) the fees and expenses of qualifying the Stock under the securities
laws of the several jurisdictions as provided in Section 5(h) and of preparing,
printing and distributing a Blue Sky Memorandum (including related fees and
expenses of counsel to the Underwriters). Further, the Company shall be
responsible for all legal fees and expenses incurred with regard to the post
registration Blue Sky Market Survey and qualification process; and (i) all other
costs and expenses incident to the performance of the obligations of the
Company.
In addition, the Company will pay to the Underwriters a non-accountable
expense allowance in an amount equal to 3% of the gross proceeds derived from
the sale of the Stock, of which $50,000 has been paid and the balance of which
shall be payable at the First Delivery Date provided, however, that in the event
that no First Delivery Date shall be held, the Company in lieu of such payment
shall reimburse the Representative in full (up to a maximum of $90,000) for its
reasonable out-of-pocket expense, including, without limitation, its legal fees
-27-
and disbursements, and the Underwriters shall reimburse the Company if and to
the extent that such expenses are less than the $_____________ previously
advanced amount with respect to such expenses. The non-accountable expense
allowance shall be payable to the Underwriters based on their pro rata
participation in the offering which is _________(__%) to Global and
__________(__%) to ________.
7. Conditions of Underwriters' Obligations. The respective obligations of
the Underwriters hereunder are subject to the accuracy, when made and on each
Delivery Date, of the representations and warranties of the Company contained
herein, to the performance by the Company its respective obligations hereunder,
and to each of the following additional terms and conditions:
(a) The Rule 462(b) Registration Statement, if any, and the Prospectus
shall have been timely filed with the Commission in accordance with Section
6(a); no stop order suspending the effectiveness of either of the
Registration Statements or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and any request of the Commission for inclusion of additional
information in either of the Registration Statements or the Prospectus or
otherwise shall have been complied with.
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(b) No Underwriter shall have discovered and disclosed to the Company
on or prior to such Delivery Date that the Registration Statement either of
the Registration Statements or the Prospectus or any amendment or
supplement thereto contains any untrue statement of a fact which, in the
opinion of counsel for the Underwriters, is material or omits to state any
fact which, in the opinion of such counsel, is material and is required to
be stated therein or is necessary to make the statements therein not
misleading. (c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the Custody
Agreements, the Powers of Attorney, the Stock, the Registration Statements
and the Prospectus, and all other legal matters relating to this Agreement
and the transactions contemplated hereby shall be reasonably satisfactory
in all respects to counsel for the Underwriters and the Company shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters. (d) ▇▇▇▇ ▇.
Agron, Esq. shall have furnished to the Representative his written opinion,
as counsel to the Company, addressed to the Underwriters and dated such
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Delivery Date, in form and substance satisfactory to the Representative, to
the effect that:
(i) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are
duly qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification, and have all power and authority
necessary to own or hold their respective properties and conduct the
businesses in which they are engaged;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the shares of Stock being delivered on such
Delivery Date) have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description thereof
contained in the Prospectus; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
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authorized and issued and are fully paid, non-assessable and (except
for directors' qualifying shares) are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities or
claims;
(iii) There are no preemptive or other rights to subscribe for or
to purchase, nor any restriction upon the voting or transfer of, any
shares of the Stock pursuant to the Company's charter or by-laws or
any agreement or other instrument known to such counsel;
(iv) The Company and each of its subsidiaries have good and
marketable title in fee simple to all real property owned by them, in
each case free and clear of all liens, encumbrances and defects except
such as are described in the Prospectus or such as do not materially
affect the value of such property and do not materially interfere with
the use made and proposed to be made of such property by the Company
and its subsidiaries; and all real property and buildings held under
lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases, with such exceptions as are
not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries;
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(v) To the best of such counsel's knowledge, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or asset of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, might have a
material adverse effect on the consolidated financial position,
stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries; and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(vi) The Primary Registration Statement was declared effective
under the Securities Act as of the date and time specified in such
opinion, the Rule 462(b) Registration Statement, if any, was filed
with the Commission on the date specified therein, the Prospectus was
filed with the Commission pursuant to the subparagraph of Rule 424(b)
of the Rules and Regulations specified in such opinion on the date
specified therein and no stop order suspending the effectiveness of
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either of the Registration Statements has been issued and, to the
knowledge of such counsel, no proceeding for that purpose is pending
or threatened by the Commission;
(vii) The Registration Statements, as of their respective
Effective Dates, and the Prospectus, as of its date, and any further
amendments or supplements thereto, as of their respective dates, make
by the Company prior to such Delivery Date (other than the financial
statements and other financial data contained therein, as to which
such counsel need express no opinion) complied as to form in all
material respects with the requirements of the Securities Act and the
Rules and Regulations;
(viii) To the best of such counsel's knowledge, there are no
contracts or other documents which are required to be described in the
Prospectus or filed as exhibits to the Registration Statements by the
Securities Act or by the Rules and Regulations which have not been
described or filed as exhibits to the Registration Statements or
incorporated therein by reference as permitted by the Rules and
Regulations;
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(ix) This Agreement has been duly authorized, executed and
delivered by the Company;
(x) The issue and sale of the shares of Stock being delivered on
such Delivery Date by the Company and the compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
properties or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any of its
subsidiaries or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties or assets; and, except for the registration of the
Stock under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
-34-
under the Exchange Act and applicable state securities laws in
connection with the purchase and distribution of the Stock by the
Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby; and
(xi) To the best of such counsel's knowledge, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to the Registration Statements or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act.
In rendering such opinion, such counsel may (i) state that their opinion is
limited to matters governed by the Federal laws of the United States of America,
the laws of the State of New York and the General Corporation Law of the State
-35-
of Texas and that such counsel is not admitted in the State of Texas and (ii) in
giving the opinion referred to in Section 9(d)(iv), state that no examination of
record titles for the purpose of such opinion has been made, and that they are
relying upon a general review of the titles of the Company and its subsidiaries,
upon opinions of local counsel and abstracts, reports and policies of title
companies rendered or issued at or subsequent to the time of acquisition of such
property by the Company or its subsidiaries, upon opinions of counsel to the
lessors of such property and, in respect of matters of fact, upon certificates
or officers of the Company or its subsidiaries, provided that such counsel shall
state that they believe that both the Underwriters and they are justified in
relying upon such opinions, abstracts, reports, policies and certificates. Such
counsel shall also have furnished to the Representative a written statement,
addressed to the Underwriters and dated such Delivery Date, in form and
substance satisfactory to the Representative, to the effect that (x) such
counsel has acted as counsel to the Company on a regular basis (although the
Company is also represented by its General Counsel, has acted as counsel to the
Company in connection with previous financing transactions and has acted as
counsel to the Company in connection with the preparation of the Registration
Statements, and (y) based on the foregoing, no facts have come to the attention
of such counsel which lead them to believe that the Registration Statements, as
of their respective Effective Dates, contained any untrue statement of a
-36-
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading, or
that the Prospectus contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in order to
make the statement therein, in light of the circumstances under which they were
made, not misleading. The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Registration Statements or the Prospectus except for that statements made in the
Prospectus under the caption, "Description of Preferred Stock", insofar as such
statements relate to the Stock and concern legal matters.
(e) At the time this Agreement is executed, and on the First and
Second Delivery Dates you shall have received letters from Akin, Doherty,
▇▇▇▇▇ & ▇▇▇▇▇, P.C. independent public accountants for the Company
addressed to you, as Representative of the Underwriters, and dated,
respectively, as of the date of this Agreement and as of the First or
Second Delivery Date, in form and substance satisfactory to the
Representative, to the effect that:
(i) They are independent public accountants with respect to the
Company within the meaning of the Act and the applicable
published Rules and Regulations of the Commission thereunder;
-37-
(ii) Stating that in their opinion, the financial statements and
schedules of the Company included in the Registration Statement
and Prospectus and covered by their report therein comply as to
form in all material respects with the applicable accounting
requirements of the Act and the 1934 Act and the applicable
published Rules and Regulations of the Commission issued
thereunder;
(iii)On the basis of the procedures (but not an audit made in
accordance with generally accepted auditing standards) (1)
consisting of a reading of the latest available interim financial
statements of the Company (a copy of which shall be attached to
such letter), (2) a reading of the minutes of meetings and
consents of the stockholders and the Board of Directors of the
Company and the Committees of such boards subsequent to the date
of the most recent audited balance sheet of the Company and
included in the Registration Statement and the Prospectus, as set
forth in the minute books of the Company, (3) inquiries of
officers and other employees of the Company responsible for
financial and accounting matters of the Company, with respect to
-38-
transactions and events subsequent to the date of the most recent
audited balance sheet of the Company included in the Registration
Statement and the Prospectus, and other specified procedures and
inquiries to a date not more than five days prior to the date of
such letter, nothing has come to their attention that would cause
them to believe that (a) the unaudited financial statements and
schedules of the Company included in the Registration Statement
and Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
Exchange Act and the applicable published Rules and Regulations
of the Commission thereunder, or that such unaudited financial
statements are not fully presented in accordance with generally
accepted accounting principles except to the extent that certain
footnote disclosures have been omitted in accordance with
applicable rules of the Commission under the Exchange Act applied
on a basis substantially consistent with that Statement and the
Prospectus; (b) with respect to the period subsequent to the date
of the most recent balance sheet of the Company included in the
-39-
Registration Statement and the Prospectus, there were, as of the
date of the most recent available monthly financial statements of
the Company and its subsidiaries, if any, and as of a specified
date not more than five days prior to the date of such letter,
any changes in the capital or long-term indebtedness of the
Company or any decrease in the net current assets or increase in
shareholders' deficit of the Company, in each case as compared
with the amounts shown in the most recent balance sheet included
in the Registration Statement and the Prospectus, except for
changes, or decreases or increases that the Registration
Statement and the Prospectus disclose have occurred or may occur
or which are set forth in such letter; or (c) that during the
period from the date following the date of the most recent
balance sheet of the Company and its subsidiaries included in the
Registration Statement and the Prospectus to the Date of the most
recent available monthly financial statements of the Company, if
any, and to a specified date not more than five days prior to the
date of such letter, there was any decrease, as compared with the
-40-
corresponding period in the prior fiscal year, in total revenues,
or total or per share net income, except for decreases which the
Registration Statement and the Prospectus disclose have occurred
or may occur or which are set forth in such letter and (d)
stating percentages of revenues and earnings, and other financial
information pertaining to the Company set forth in the
Registration Statement and the Prospectus, which have been
specified by you prior to the date of this Agreement, to the
extent that such amounts, numbers, percentages and information
may be derived from the general accounting and financial records
of the Company or from schedules furnished by 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
specified by you (which procedures do not constitute an audit in
accordance with generally accepted auditing standards) set forth
in such letter, and found them to be in agreement.
-41-
(iv) In addition to the examination referred to in their reports
included in the Registration Statement and the Prospectus and the
limited procedures referred to in clause (iii) above, they have
carried out certain specified procedures, not constituting an
audit, with respect to certain amounts, percentages and financial
information which are under the captions "Management's Discussion
and Analysis of Financial Condition and Results of Operations,"
"Management-Executive Compensation," "Certain Transactions,"
"Selected Financial Data," "Dilution," and "Risk Factors, " as
well as such other financial information as may be specified by
the Representative, and that they have compared such amounts,
percentages and financial information with the accounting records
of the Company and have found them to be in agreement.
(f) The Company and the Representative shall be in compliance with an
agreement (the "Financial Consulting Agreement") retaining the
Representative to act as a management and financial consultant to the
Company for a one-year period commencing as of November 1996 at a fee of
$12,000 per month.
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(g) The Company shall have furnished to the Representative a
certificate, dated such Delivery Date, of its Chairman of the Board, its
President or a Vice President and its chief financial officer stating that:
(i) The representations, warranties and agreements of the Company
in Section 1 are true and correct as of such Delivery date; the
Company has complied with all its agreements contained herein; and the
conditions set forth in Sections 9(a) and 9(i) have been fulfilled;
and
(ii) They have carefully examined the Registration Statements and
the Prospectus and, in their opinion (A) the Registration Statements,
as of their respective Effective Dates, and the Prospectus, as of each
of the Effective Dates, did not include any untrue statement of a
material fact and did not omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and (B) since the Effective Date of the Primary
Registration Statement, no event has occurred which should have been
set forth in a supplement or amendment to either of the Registration
Statements or the Prospectus.
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(h) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus or
(ii) since such date there shall not have been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus, the effect of which,
in any such case described in clause (i) or (ii), is, in the judgment of
the Representative, so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Stock being delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
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(i) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or
in the over-the-counter market, or trading in any securities of the Company
on any exchange or in the over-the-counter market, shall have been
suspended or minimum prices shall have been established on any such
exchange or such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a
banking moratorium shall have been declared by Federal or state
authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving
the United States or there shall have been a declaration of a national
emergency or war by the United States or (iv) there shall have occurred
such a material adverse change in general economic, political or financial
conditions (or the effect of international conditions on the financial
markets in the United States shall be such) as to make it, in the judgment
of a majority in interest of the several Underwriters, impracticable or
inadvisable to proceed with the public offering or delivery of the Stock
being delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
-45-
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
for the Underwriters.
8. Indemnification and Contribution.
(a) The Company and the Principal Stockholder, jointly and severally,
shall indemnify and hold harmless each Underwriter, its officers and
employees and each person, if any, who controls any Underwriter within the
meaning of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including,
but not limited to, any loss, claim, damage, liability or action relating
to purchases and sales of Stock), to which that Underwriter, officer,
employee or controlling person may become subject, under the Securities Act
or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any Preliminary Prospectus,
either of the Registration Statements or the Prospectus, or in any
amendment or supplement thereto, or (B) in any blue sky application or
other documents prepared or executed by the Company (or based upon any
written information furnished by the Company) specifically for the purpose
of qualifying any or all of the Stock under the securities laws of any
-46-
state or other jurisdiction (any such application, document or information
being hereinafter called a "Blue Sky Application"), (ii) the omission or
alleged omission to state in any Preliminary Prospectus, either of the
Registration Statements or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact
required to be stated therein or necessary to make the statements therein
not misleading or (iii) any act or failure to act, or any alleged act or
failure to act, by an Underwriter in connection with, or relating in any
manner to, the Stock or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clause (i) or (ii)
above, and shall reimburse each Underwriter and each such officer, employee
and controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that Underwriter, officer, employee or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that the Company and the Principal
Stockholder shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based
-47-
upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or in any such amendment or supplement, or in
any Blue Sky Application in reliance upon and in conformity with written
information furnished to the Company through the Representative by or on
behalf of any Underwriter specifically for inclusion therein; and provided
further that the Company and the Principal Stockholder shall not be liable
in the case of any matter covered by clause (iii) above to the extent that
it is determined in a final judgment by a court of competent jurisdiction
that such loss, claim, damage, liability or action resulted directly from
any such act or failure to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or wilful misconduct. The
foregoing indemnity agreement is in addition to any liability which the
Company or the Principal Stockholder may otherwise have to any Underwriter
or to any officer, employee or controlling person of that Underwriter. (c)
Each Underwriter, severally and not jointly, shall indemnify and hold
harmless the Company, its officers and employees, each of its directors and
each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which the Company or
-48-
any such director, officer or controlling person may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in
any Preliminary Prospectus, either of the Registration Statements or the
Prospectus, or in any amendment or supplement thereto, or (B) in any Blue
Sky Application or (ii) the omission or alleged omission to state in any
Preliminary Prospectus, either of the Registration Statements or the
Prospectus, or in any amendment or supplement thereto, or in any Blue Sky
Application any material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through the Representative by or on
behalf of that Underwriter specifically for inclusion therein, and shall
reimburse the Company and any such director, officer or controlling person
for any legal or other expenses reasonably incurred by the Company or any
such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such loss,
-49-
claim, damage, liability or action as such expenses are incurred. The
foregoing indemnity agreement is in addition to any liability which any
Underwriter may otherwise have to the Company or any such director, officer
or controlling person.
(d) Promptly after receipt by an indemnified party under this Section
10 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party in writing of the claim or the commencement
of that action; provided, however, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may
have under this Section 10 except to the extent it has been materially
prejudiced by such failure and, provided further, that the failure to
notify the indemnifying party shall not relieve it from any liability which
it may have to an indemnified party otherwise than under this Section 10.
If any such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it wishes,
jointly with any other similarly notified indemnifying party, to assume the
defense thereof with counsel satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election
-50-
to assume the defense of such claim or action, the indemnifying party shall
not be liable to the indemnified party under this Section 10 for any legal
or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the Representative shall have the
right to employ counsel to represent jointly the Representative and those
other Underwriters and their respective officers, employees and controlling
persons who may be subject to liability arising out of any claim in respect
of which indemnity may be sought by the Underwriters against the Company or
the Principal Stockholder under this Section 10 if, in the reasonable
judgment of the Representative, it is advisable for the Representative and
those Underwriters, officers, employees and controlling persons to be
jointly represented by separate counsel, and in that event the fees and
expenses of such separate counsel shall be paid by the Company and the
Principal Stockholder. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 10(a), 10(b) and 10(c), shall
use its best efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall (i)
without the prior written consent of the indemnified withheld), settle or
-51-
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its
written consent or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss of liability by reason of
such settlement or judgment.
(e) If the indemnification provided for in this Section 10 shall for
any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 10(a), 10(b) or 10(c) in respect to any
loss, claim, damage or liability, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid
or payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, (i) in such proportion
-52-
as shall be appropriate to reflect the relative benefits received by the
Company, the Principal Stockholder and the Selling Stockholders on the one
hand and the Underwriters on the other from the offering of the Stock or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) about but also the relative
fault of the Company and the Principal Stockholder on the one hand and the
Underwriters on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Principal Stockholder on
the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Stock purchased under this Agreement
(before deducting expenses) received by the Company and the Principal
Stockholder on the one hand, and the total underwriting discounts and
commissions received by the Underwriters with respect to the shares of the
Stock purchased under this Agreement, on the other hand, bear to the total
gross proceeds from the offering of the shares of the Stock under this
Agreement in each case as set forth in the table on the cover page of the
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Prospectus. The relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied
by the Company, the Principal Stockholder, or the Underwriters, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. For purposes
of the preceding two sentences, the net proceeds deemed to be also for the
benefit of the Principal Stockholder and information supplied by the
Company shall also be deemed to have been supplied by the Principal
Stockholder. The Company, the Principal Stockholder, and the Underwriters
agree that it would not be just and equitable if contributions pursuant to
this Section 10(e) were to be determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 10(e) shall be
deemed to include, for purposes of this Section 10(e), any legal or other
expenses reasonably incurred by such indemnified party in connection with
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investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 10(e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Stock underwritten by it and distributed to the public was
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute as provided in this Section 10(e)
are several in proportion to their respective underwriting obligations and
not joint.
(f) The Underwriters severally confirm that the statements with
respect to the public offering of the Stock set forth on the cover page of,
and under the caption "Underwriting" in, the Prospectus are correct and
constitute the only information furnished in writing to the Company by or
on behalf of the Underwriters specifically for inclusion in the
Registration Statements and the Prospectus.
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9. Defaulting Underwriters. If, on either Delivery Date, any Underwriter
defaults in the performance of its obligations under this Agreement, the
remaining non-defaulting Underwriters shall be obligated to purchase the Stock
which the defaulting Underwriter agreed but failed to purchase on such Delivery
Date in the respective proportions which the number of shares of the Firm Stock
set opposite the name of each remaining non-defaulting Underwriter in Schedule 1
hereto bears to the total number of shares of the Firm Stock set opposite the
names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
provided, however, that the remaining non-defaulting Underwriters shall not be
obligated to purchase any of the Stock on such Delivery Date if the total number
of shares of the Stock which the defaulting Underwriter or Underwriters agreed
but failed to purchase on such date exceeds 9.09% of the total number of shares
of the Stock to be purchased on such Delivery Date, and any remaining
non-defaulting Underwriter shall not be obligated to purchase more than 110% of
the number of shares of the Stock which it agreed to purchase on such Delivery
Date pursuant to the terms of Section 3. If the foregoing maximums are exceeded,
the remaining non-defaulting Underwriters, or those other underwriters
satisfactory to the Representative who so agree, shall have the right, but shall
not be obligated, to purchase, in such proportion as may be agreed upon among
them, all the Stock to be purchased on such Delivery Date. If the remaining
Underwriters or other underwriters satisfactory to the Representative do not
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elect to purchase the shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase on such Delivery date, this Agreement (or, with
respect to the Second Delivery Date, the obligation of the Underwriters to
purchase, and of the Company to sell, the Option Stock) shall terminate without
liability on the part of any non-defaulting Underwriter or the Company except
that the Company will continue to be liable for the payment of expenses to the
extent set forth in Section 6 and 11. As used in this Agreement, the term
"Underwriter" includes, for all purposes of this Agreement unless the content
requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to
this Section 11, purchases Firm Stock which a defaulting Underwriter agreed but
failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If other
underwriters are obligated or agree to purchase the Stock of a defaulting or
withdrawing Underwriter, either the Representative or the Company may postpone
the First Delivery Date for up to seven full business days in order to effect
any changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.
10. Termination. The obligations of the Underwriters hereunder may be
terminated by the Representative by notice given to and received by the Company
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prior to delivery of and payment for the Firm Stock if, prior to that time, any
of the events described in Sections 7(h) or 9(i) shall have occurred or if the
Underwriters shall decline to purchase the Stock for any reason permitted under
this Agreement.
11. Reimbursement of Underwriters' Expenses. If (a) the Company shall fail
to tender the Stock for delivery to the Underwriters for any reason permitted
under this Agreement, or (b) the Underwriters shall decline to purchase the
Stock for any reasons permitted under this Agreement (including the termination
of this Agreement pursuant to Section 10), the Company shall reimburse the
Underwriters for the fees and expenses of their counsel and for such other
out-of-pocket expenses as shall have been incurred by them in connection with
this Agreement and the proposed purchase of the Stock, and upon demand the
Company shall pay the full amount thereof to the Representative. If this
Agreement is terminated pursuant to Section 9 by reason of the default of one or
more Underwriters, the Company shall not be obligated to reimburse any
defaulting Underwriter on account of those expenses.
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to Global Equities Group, Inc., Five ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇;
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(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Primary Registration Statement, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chairman and
Chief Executive Officer; provided, however, that any notice to an
Underwriter pursuant to Section 8(d) shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set
forth in its acceptance telex to the Representative, which address will be
supplied to any other party hereto by the Representative upon request. Any
such statements, requests, notices or agreements shall take effect at the
time of receipt thereof. The Company and the Principal Stockholder shall be
entitled to act and rely upon any request, consent, notice or agreement
given or made on behalf of the Underwriters by the Representative.
13. Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of and be binding upon the Underwriters, the Company and the
Principal Stockholder and their respective personal representatives and
successors. This Agreement and the terms and provisions hereof are for the sole
benefit of only those persons, except that (A) the representations,
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warranties, indemnities and agreements of the Company and the Principal
Stockholder contained in this Agreement shall also be deemed to be for the
benefit of the officers and employees of each Underwriter and the person or
persons, if any, who control each Underwriter within the meaning of Section 15
of the Securities Act and (B) the indemnity agreement of the Underwriters
contained in Section 8(c) of this Agreement shall be deemed to be for the
benefit of directors, officers and employees of the Company and any person
controlling the Company within the meaning of Section 15 of the Securities Act.
Nothing in this Agreement is intended or shall be construed to given any person,
other than the persons referred to in this Section 15, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
14. Survival. The respective indemnities, representations, warrants and
agreements of the Company the Principal Stockholder, and the Underwriters
contained in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Stock and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
15. Definition of the Terms "Business Day" and "Subsidiary". For purposes
of this Agreement, (a) "business day" means any day on which the NASDAQ Stock
Market is open for trading
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and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules and
Regulations.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement among the Company, the
Principal Stockholder, and the Underwriters, please indicate your acceptance in
the space provided for the purpose below.
Very truly yours,
CLUCKCORP INTERNATIONAL, INC.
By_____________________________
President
▇▇▇ INVESTMENT COMPANY
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Accepted:
GLOBAL EQUITIES GROUP, INC.
By_____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
For itself and as Representative of the several Underwriters named in Schedule 1
hereto
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SCHEDULE 1
Number of Shares
Underwriters of Firm Stock
Global Equities Group, Inc........................................
Co- Manager
Syndicate Member A................................................
Syndicate Member B................................................
Syndicate Member C................................................
Total...........................................500,000
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