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Exhibit 1.3
BEST EFFORTS UNDERWRITING AGREEMENT
PAWNMART, INC.
This UNDERWRITING AGREEMENT made and entered into this _____ day of
_____________, 1999, by and between PawnMart, Inc., a Delaware corporation,
whose address is ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, (the
"Company") and ▇▇▇▇▇▇ Capital, Ltd., a Texas Limited Partnership, whose address
is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the
"Underwriter").
Recitals
1. The Company desires to offer and sell up to $10,000,000 in 12%
Subordinated Notes due December 31, 2004 to the public through the Underwriter
and participating broker-dealers.
2. The offering and sale will be made pursuant to a registration
statement and prospectus hereinafter referred to.
3. The Underwriter is willing to assist the Company in connection with
the proposed issuance and sale of these securities on a best efforts basis on
the terms and conditions herein contained.
Agreement
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants, agreements, undertakings, representations, and warranties herein
contained, the Company and the Underwriter agree as follows:
I. Representations and Warranties
The Company represents and warrants to, and agrees with the Underwriter that:
1. The Company is a corporation duly organized and validly existing as
a corporation in good standing under the laws of the State of Delaware.
2. The Company shall issue consistent with the terms and conditions of
the Registration Statement (defined below) up to $10,000,000.00 in 12%
Subordinated Notes due December 31, 2004 ("the Notes") and up to 600,000 Series
A Redeemable Common Stock Purchase Warrants. The Notes shall:
(a) Bear interest at the rate of 12% per annum;
(b) Pay interest monthly on the fifteenth of each month beginning with
the second full calendar month after issuance; and
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(c) Pay principal at maturity on December 31, 2004.
3. The Notes will be issued pursuant to the terms and conditions of a
Trust Indenture entered into between the Company and Trust Management, Inc., a
Texas trust company ("Trustee"), as Indenture Trustee.
4. There will be delivered to the counsel to the Underwriter, upon
request at any time prior to the Delivery Date (defined below), certified copies
of the Certificate of Incorporation and the bylaws of the Company, together with
all amendments, if any, certified copies of whatever resolutions the counsel may
request, and copies of all material contracts to which the Company is a party.
There will also be made available to the counsel for inspection minutes of all
meetings of incorporators, directors and stockholders of the Company from the
date of incorporation of the Company to the Delivery Date.
5. A Registration Statement on the appropriate form as prescribed by
the Securities and Exchange Commission (the "Commission"), together with a
related Prospectus with respect to the Notes, has been filed with the Commission
under the Securities Act of 1933, as amended, (the "Act"). The Company will use
its best efforts to cause the Registration Statement and the Prospectus to
become effective as soon as possible after the filing. As used in this
Agreement, the term "Registration Statement" refers to and means the
Registration Statement and any and all amendments to the Registration Statement,
including exhibits and financial statements, when the Registration Statement
becomes effective and, in the event of any amendments after the effective date
of the Registration Statement, the Registration Statement as so amended; and the
term "Prospectus" refers to and means the related Prospectus in final form, and
in the event of any amendment or supplement to the Prospectus after the
effective date of the Registration Statement, also refers to and means the
Prospectus as so amended or supplemented.
6. The Notes shall also be registered or qualified for sale with the
state regulatory agencies of any and all states where the Securities shall be
offered.
7. All expenses of registration and qualification shall be paid by the
Company.
8. Notwithstanding the above, to the extent possible, the Effective
Date of the offering shall be at a date mutually agreed to by the Company and
the Underwriter, subject to the requirements of applicable law.
9. The purchase price of the Notes shall be in minimum denominations of
$1,000.00 and integral multiples thereof with a minimum purchase amount of
$5,000.00 (or $1,000.00 for Individual Retirement Accounts).
10. When the Registration Statement becomes effective, it and the
accompanying Prospectus will comply in all material respects with the
requirements of the Act and with the rules and regulations of the Commission
promulgated under the Act; provided, however, the Company makes
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no representations or warranties as to information contained or omitted from the
Registration Statement or the Prospectus in reliance upon written information
furnished to the Company by the Underwriter specifically for inclusion in the
Registration Statement or the Prospectus.
11. The Company has the requisite corporate power and authority to
enter into this Underwriting Agreement.
12. The consolidated financial statements to be filed with the
Registration Statement will reflect all material liabilities of the Company on a
consolidated basis, contingent or otherwise, and will include adequate reserves
for all federal and state tax liabilities incurred to their respective dates.
13. All of the Notes to be sold under and pursuant to this Agreement,
when issued and delivered, will be validly issued and enforceable in accordance
with their terms and conditions and free and clear of all claims and
encumbrances, except as described in the Indenture.
14. The certified public accountants who will certify to the financial
statements to be filed with the Commission as a part of the Registration
Statement and to the financial statements incorporated in the Prospectus, and
who, as experts, may certify or review other information of a financial or
accounting nature contained in the Registration Statement and the Prospectus,
will be independent certified public accountants as required by the Act and the
rules and regulations promulgated under the Act.
15. The Company will deliver to the Underwriter audited consolidated
financial statements as of January 31, 1998 and unaudited consolidated financial
statements as of October 31, 1998. The Company represents that such financial
statements will fairly present in all material respects the financial condition
of the Company, computed in accordance with generally accepted accounting
principles applied on a consistent basis and the rules and regulations of the
Commission relating to financial statements.
16. The Company will furnish the Underwriter, at least one day before
the filing of the Registration Statement, with the consolidated financial
statements included in the Registration Statement and prepared in accordance
with the rules and regulations of the Commission. Such consolidated financial
statements will fairly present the position of the Company in all material
respects on the dates shown and will reflect all material liabilities of the
Company, contingent or otherwise.
17. The certificate or certificates that the Company is required to
furnish to the Underwriter pursuant to the provisions of paragraphs 8, 9 and 10
of Article VIII of this Agreement will be true and correct.
18. All of the foregoing representations, warranties and agreements
shall survive delivery of, and payment for, all of the securities covered by
this Agreement.
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II. Retention of the Underwriter
Based upon the foregoing representations, warranties and agreements,
and subject to the terms and conditions herein contained:
1. The Company hereby retains the Underwriter as its agent to sell for
its account the Notes. The Underwriter shall use their best efforts as agent,
promptly following the receipt of written notice of the effective date of the
Registration Statement, to sell the Notes subject to the terms, provisions and
conditions set forth below. There is no assurance that any or all of the Notes
to be offered by the Company will be sold, and the Underwriter is under no
obligation to purchase or take down any of the Notes on its own behalf or on
behalf of others.
2. Underwriter acknowledges that the Company may limit its acceptance
of subscriptions in any manner it deems prudent in order to provide for the
timely use of subscriber funds and may reject any subscriptions for any reason,
and Underwriter agrees that any such rejection of a subscription obtained by the
Underwriter or by the Underwriting Group (as hereinafter defined) shall be
deemed not to be a sale made by the Underwriter or by the Underwriting Group.
Underwriter further acknowledges that (i) all subscription funds will be held in
escrow and if the minimum amount of Notes is not subscribed on or before June
30, 1999 (as defined in the Prospectus), the offering will be terminated and the
escrowed funds, plus any interest earned thereon, will be promptly returned to
the investors by the escrow agent; (ii) upon the subscription of the minimum
amount of the Notes, the escrowed funds will be released to the Company; (iii)
any subsequent subscription funds with respect to the sale of additional Notes
will continue to be deposited in the escrow account and be immediately available
for use by the Company upon the Company's request; (iv) all Subscriber's checks
shall be made payable to the Company's escrow agent, Norwest Bank Texas, N.A.;
and (v) shall be deposited with the escrow agent in accordance with applicable
NASD regulations. Subscriber's funds will be held in escrow and invested in
compliance with SEC Rule 15c2-4. All subscriber's checks will be transmitted
directly to the escrow agent by noon of the next business day after receipt by
Underwriter.
3. As its compensation, the Underwriter shall receive a commission of
eleven percent (11%) of the full amount of all Notes sold by the Underwriter
(including the Underwriting Group) and for which payment is made to the Company.
Such amount is comprised of a 6% sales commission, a 3% non-accountable expense
allowance and a 2% due diligence fee.
4. The Underwriter may associate with themselves whatever other
underwriters they may desire. The Underwriter may offer the Notes through
registered securities dealers selected by them and to pay such dealers out of
the commissions received by the Underwriter whatever compensation the
Underwriter may determine. The Underwriter, such other underwriters and such
securities dealers shall be collectively referred to herein as the "Underwriting
Group".
5. In addition to the compensation set forth above, the Underwriter
shall also receive, for each $1,000.00 in principal amount of Notes sold to the
public, 60 warrants ("Underwriter's
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Warrants") to purchase 60 Series A Redeemable Common Stock Purchase Warrants
(the "Underlying Warrants") exercisable to purchase one share of Common Stock
(the "Underlying Warrant Share"). The Underwriter will distribute up to 40 of
such Underwriter's Warrants to other members of the Underwriting Group as
additional compensation.
6. The Company may terminate this Agreement in the event that the
Underwriting Group is unable to sell at least:
Days After Effective Date Cumulative Gross Proceeds
------------------------- -------------------------
30 $ 250,000
60 $ 500,000
90 $ 800,000
120 $1,150,000
150 $1,550,000
180 $2,000,000
210 $2,500,000
240 $3,100,000
270 $3,600,000
300 $4,100,000
330 $4,600,000
360 $5,000,000
7. Underwriter represents that it is appropriately registered as a
broker-dealer with the Commission and in all states in which it conducts or will
conduct business in connection with this offering and is a member in good
standing of the National Association of Securities Dealers, Inc. Underwriter
also agrees not to solicit subscriptions for the Notes that will result in a
violation of the securities laws of the United States, or of any state, or any
rule or regulation thereunder, or of any rules of the NASD or any securities
exchange.
8. Underwriter represents that there is not now pending or threatened
against the Underwriter any action or proceeding of which Underwriter has been
advised, either in any court of competent jurisdiction, before the Commission or
any state securities commission concerning activities as a broker or dealer, nor
has the Underwriter been named as a "cause" in any such action or proceeding.
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9. In the event any action or proceeding of the type referred to in
paragraph 8 above shall be instituted or threatened against the Underwriter at
any time, or in the event there shall be filed by or against the Underwriter in
any court pursuant to any federal, state, local or municipal statute a petition
in bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee of assets, or the Underwriter makes an assignment for the
benefit of creditors, the Company shall have the right to terminate this
Agreement.
10. Upon request, the Company will inform the Underwriter as to the
states in which the Company has been advised by counsel that the Notes have been
qualified for sale under the respective state securities laws, but the Company
does not assume any responsibility or obligation as to the Underwriter's right
to sell the Notes in any state. Underwriter understands and agrees that under no
circumstances will Underwriter engage in any activities hereunder in any
jurisdiction (a) in which the company has not informed the Underwriter that the
Notes are qualified for sale under the applicable securities laws, or (b) in
which the Underwriter may not lawfully so engage.
11. Underwriter confirms that its commitment to use its best efforts to
solicit subscriptions for the Notes will not result in a violation of the
securities laws of the United States, including but not limited to the Act or
any rule or regulation thereunder, or the securities laws of any state in which
the Underwriter will conduct business and the rules and regulations thereunder,
or of any rules of any securities exchange to which the Underwriter is subject
or of any restriction imposed upon the Underwriter by the NASD or any such
exchange or governmental authority and agrees to indemnify the Company, its
shareholders, directors, officers, employees or agents for any and all damages,
liabilities and costs (including reasonable attorneys' fees and expenses)
resulting from the same.
12. Underwriter represents that in connection with the offering:
A. Underwriter will comply in all respect with the provisions of this
Agreement.
B. Underwriter shall use its best efforts to obtain the approval of the
NASD pursuant to Article III, Section 44 of the Rules of Fair Practice
of the NASD with respect to the compensation arrangements set forth
herein.
C. Underwriter will comply with any applicable limitations on the
manner of offering as required by the Act, applicable state securities
laws, and the NASD;
D. Prior to making any sale, Underwriter will have reasonable grounds
to believe, after making reasonable inquiry, that each subscriber meets
the requirements of the Act, the NASD and applicable state securities
laws as to the suitability of the investment for such subscriber.
E. Except as otherwise disclosed to the Company, no owner, partner,
director or officer of Underwriter has within the last five years been
subject to any of the following administrative or judicial actions (by
the commission or any state securities commission):
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1. Registration Stop Order (Issuance of Securities);
2. Securities related felony conviction;
3. Securities related administrative order;
4. Any administrative order involving fraud or deceit;
5. Securities related injunction;
F. Underwriter has no current effective administrative order revoking a
securities exemption; and
G. Underwriter has not been suspended, censured or expelled by the
NASD.
Underwriter agrees to indemnify and hold the Company, its shareholders,
officers, directors, employees, and agent harmless from any liabilities and
costs (including reasonable attorneys' fees and expenses) associated with claims
arising or alleged to arise out of a breach of the foregoing representations.
13. Underwriter and any members of the Underwriting Group do hereby
undertake to comply with Sections 8, 24, 25 and 36 of Article III of the NASD
Rules of Fair Practice. Furthermore, any and all Selling Group Agreement or
Selected Dealer Agreement shall provide that any member of the Underwriting
Group shall agree to comply with said sections of Article III of the NASD Rules
of Fair Practice.
III. Further Agreements of the Company
The Company agrees, at its expense and without expense to the
Underwriter, as follows:
1. To give and to continue to give and supply whatever consolidated
financial statements and other information that may be required by the
Commission or the proper public bodies in the states in which the Notes may be
qualified.
2. As soon as the Company is informed, to advise the Underwriter and to
confirm the advice in writing:
(a) When the Registration Statement becomes effective;
(b) When any amendment to the Registration Statement filed subsequent
to the effective date of the Registration Statement becomes effective;
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(c) Of any request of the Commission for amendments to the Registration
Statement or the related Prospectus, or for additional information;
(d) Of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the initiation of any
proceeding for that purpose;
(e) Of any material adverse change in its financial position or
operating condition and of any development materially affecting the
Company or rendering untrue or misleading any material statement in the
Registration Statement or the Prospectus.
3. To make every reasonable effort to prevent the issuance of any stop
order suspending the effectiveness of the Registration Statement, and, if a stop
order is entered at any time, to use its best efforts to obtain withdrawal of
the order at the earliest possible moment.
4. To deliver to the Underwriter, without charge, (a) prior to the
effective date of the Registration Statement, copies of each preliminary
prospectus filed with the Commission bearing in red ink the statement required
by the rules of the Commission, (b) on and from time to time after the effective
date of the Registration Statement, copies of the Prospectus and of any amended
or supplemented Prospectus, and (c) as soon as they are available and from time
to time after they are available, copies of each Prospectus prepared for the
purpose of permitting compliance with Section 10 of the Act and of any amended
or supplemented Prospectus. The number of copies to be delivered in each case
shall be the number the Underwriter may reasonably request.
5. To furnish, without cost, to the Underwriter one executed copy of
the Registration Statement, including all exhibits and amendments, and a
reasonable number of copies of the Registration Statement and amendments.
6. For the period after the effective date of the Registration
Statement during which the Prospectus is required by law to be used, but not
after the Delivery Date, except in accordance with Article XII hereof, if any
change occurs so that the Prospectus includes an untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
in the Prospectus, in the light of the circumstances under which they are made,
not misleading, forthwith to prepare and furnish to the Underwriter, without
cost, supplements to the Prospectus or an amended Prospectus correcting the
untrue statement or supplying the omission.
7. If revision of the Prospectus pursuant to the provisions of Section
10 of the Act becomes necessary, to review the Prospectus, to file copies of the
Prospectus with the Commission, and to furnish copies of the revised Prospectus
to the Underwriter in whatever reasonable quantity they request.
8. To use its best efforts to cause the Notes to be qualified for sale
on terms consistent with those stated in the effective Registration Statement
under the Blue Sky laws in whatever states may be agreed upon.
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9. Until the Delivery Date hereunder or the earlier termination hereof,
except with the approval of the Underwriter, not to:
(a) Undertake or authorize any change in its capital structure or
authorize or issue or permit any public offering of any shares of
capital stock or additional Notes, except as provided in this
Agreement;
(b) Authorize, create, issue, or sell any funded obligations, notes or
other evidences of indebtedness greater than $1,000,000, except in the
ordinary course of business and maturing not more than one year from
the date of this Agreement and except as provided in this Agreement; or
(c) Consolidate or merge with or into any other corporation or create
any mortgage or lien upon any of its properties or assets except in the
ordinary course of its business and except as provided in this
Agreement.
10. To provide to Underwriter any reasonable additional information or
documentation deemed by the Underwriter to be necessary in the performance of
the Underwriter's due diligence.
11. To provide Underwriter:
(i) at least twenty-four (24) hours prior to dissemination to
Noteholders, a facsimile of any letter, notice or other similar
communication, provided that the foregoing in no way obligates the
Company to await Underwriter approval of such letter, notice or similar
communication prior to dissemination, and
(ii) from time to time, access to review operations and such other
public information concerning the Company as Underwriter may reasonably
request.
IV. Indemnity Provisions
1. The Company shall indemnify, defend and hold the Underwriter
(including any underwriter, dealer or securities dealer associated with the
Underwriter), and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act, free and harmless from and against any and all
losses, claims, demands, liabilities, and expenses (including reasonable legal
or other expense incurred by each Underwriter and controlling person in
connection with defending any claims or liabilities, whether or not resulting in
any liability to the Underwriter (or to any controlling person), which the
Underwriter or controlling person may incur under the Act or at common law or
otherwise, but only to the extent that the losses, claims, demands, liabilities,
and expenses arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
in the Prospectus, or in any amendment or amendments to the Registration
Statement or the Prospectus, or in any application or other papers executed by
any underwriter or dealer with the written approval of the Company for filing in
any
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state or states in order to qualify the securities covered by this Agreement
under the securities laws of those state (the "Blue Sky Application"), or arise
out of or are based upon any omission or alleged omission to state in these
documents a material fact required to be stated in them or necessary to make the
statements in them not misleading, provided, however, that this indemnity
agreement shall not apply to any losses, claims, demands, liabilities, or
expenses arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus or in any amendment or amendments to them or in any Blue Sky
Application, or arising out of or based upon the omission or alleged omission to
state in these documents a material fact required to be stated in them or
necessary to make the statements in them not misleading, which statement or
omission was made in reliance upon information furnished to the Company by the
Underwriter in writing expressly for use in the Registration Statement or the
Prospectus or in any amendment or amendments to them, or was made by the
Underwriter in a Blue Sky Application not in reliance upon information furnished
by the Company.
2. The foregoing indemnity of the Company in favor of the Underwriter
shall not be deemed to protect the Underwriter against any liability to the
Company or its Noteholders to which the Underwriter would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of their duties, or by reason of their reckless disregard of their
obligations and duties under this Agreement.
3. The Underwriter shall give the Company an opportunity to participate
in the defense or preparation of the defense of any action brought against the
Underwriter or controlling person of the Underwriter to enforce any claim or
liability, and the Company may so participate. The Company's agreement under the
foregoing indemnity is expressly conditioned upon notice of any action being
sent by the Underwriter or controlling person, as the case may be, to the
Company, by letter or facsimile (addressed as provided herein), promptly after
the commencement of the action against the Underwriter or controlling person.
Such notice must either be accompanied by copies of papers served or filed in
connection with the action or by a statement of the nature of the action to the
extent known to the Underwriter. Failure to notify the Company within a
reasonable time of an action shall relieve the Company of its respective
liabilities under the foregoing indemnity, but failure to notify the Company
shall not relieve the Company from any liability that the Company may have to
the Underwriter or controlling person other than on account of the indemnity
agreement contained in this Article IV.
4. The Underwriter likewise shall indemnify, defend and hold harmless
the Company against any and all losses, claims, expenses, and liabilities to
which it may become subject arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus, or in any amendment or amendments to the
Registration Statement or the Prospectus, or in any Blue Sky Application, or
arising out of or based upon the omission or alleged omission to state in these
documents a material fact required to be stated in them or necessary to make the
statements in them not misleading, resulting from the use of written information
furnished to the Company by the Underwriter expressly for use in the
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preparation of the Registration Statement or the Prospectus, or in any amendment
or amendments to the Registration Statement or the Prospectus, or in any Blue
Sky Application.
5. The Company shall give the Underwriter an opportunity to participate
in the defense or preparation of the defense of any action brought against the
Company to enforce any claim or liability, and the Underwriter shall have the
right so to participate. The agreement of the Underwriter under the foregoing
indemnity is expressly conditioned upon notice of any action being sent by the
Company to the Underwriter, by letter or by facsimile (addressed as provided in
this Agreement), promptly after the commencement of the action against the
Company. The notice must either be accompanied by copies of papers served or
filed in connection with the action or by a statement of the nature of the
action to the extent known to the Company. Failure to notify the Underwriter of
any action shall relieve the Underwriter of its liability under the foregoing
indemnity, but failure to notify the Underwriter shall not relieve the
Underwriter from any liability which the Underwriter may have to the Company or
its stockholders otherwise than on account of the indemnity agreement contained
in this Article IV.
6. The provisions of this Article IV shall not in any way prejudice any
right or rights that the Underwriter may have against the Company, or that the
Company may have against the Underwriter, under any statute other than the Act,
at common law or otherwise.
7. The indemnity agreements contained in this Article IV shall survive
the Delivery Date and shall inure to the benefit of successors of the Company
and successors of the Underwriter, and shall be valid irrespective of any
investigation made by or on behalf of the Underwriter or the Company.
V. Payment of Expenses
The Company shall, at its own expense and without expense to the
Underwriter, pay all costs and expenses incident to this Agreement (except for
the Underwriter's legal fees), including, but without limitation, all expenses
in connection with the preparation, printing and filing of the Registration
Statement and the Prospectus as well as all amendments to them together with all
exhibits; pay all filing fees and costs, original issue taxes, trustee's fees,
charges, or disbursements connected with the issue and delivery of the Notes;
and pay all reasonable expenses incurred in connection with the qualification of
the Notes under the securities or blue sky laws of the states previously
referred to.
VI. Public Offering
1. The Underwriter shall make a public offering on a best efforts basis
of the Notes covered hereby as soon after the effective date of the Registration
Statement as is advisable in accordance with and as set forth in the
Registration Statement. The public offering may be made either in the
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open market or through securities dealers (acting as principals) selected by the
Underwriter, or partly in each manner, as determined by the Underwriter in their
sole discretion. The Underwriter may pay these dealers out of the commissions
received by the Underwriter for the Notes sold by the dealers whatever
compensation the Underwriter and such dealers may determine.
VII. Payments on Default
If any of the conditions, representations or warranties set forth in
Article VIII of this Agreement are not fulfilled in any material respect, or if
for any reason the Company fails to comply with the terms of this Agreement in
any material respect (other than in connection with a breach of the Agreement by
the Underwriter), and if the Underwriter elects to terminate this Agreement
pursuant to Article XI hereto, then, in addition to paying the Company's own
expenses as provided in Article V hereof, the Company shall reimburse the
Underwriter for its actual accountable out-of-pocket expenses.
VIII. Conditions Precedent to Underwriter's Obligations
The obligations hereunder of the Underwriter are conditioned upon:
1. The approval of counsel for the Underwriter of the form and content
of the Registration Statement and the Prospectus, of the organization and
present legal status of the Company, and of the legality and validity of the
Notes to be offered hereunder, which approval shall not be unreasonably
withheld.
2. The Company's performance in all material respects of all the
obligations required by it to be performed hereunder and the truth, completeness
and accuracy of all statements and representations in all material respects
contained herein or of any consolidated financial statements furnished
hereunder.
3. From the date hereof until the Delivery Date, and during the term
hereof, no material adverse change occurring in the properties and assets of the
Company, other than changes occurring in the ordinary course of business.
4. No claim being made or legal action being instituted against the
Company, which if adversely determined would have a material adverse effect on
the financial condition of the Company, taken as a whole, and no reasonable
basis for a claim or an action of this nature being discovered.
5. The Registration Statement becoming effective no later than June 30,
1999, or whatever later date that may be agreed upon, and no amendment to the
Registration Statement being filed to which the Underwriter reasonably have
objected after having received reasonable notice; and no stop order suspending
the effectiveness of the Registration Statement being issued and no proceedings
for that purpose being threatened or instituted.
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6. Prior to the Delivery Date, the Company not sustaining any loss on
account of fire, flood, accident, or calamity of a character that materially
adversely affects its business or property, regardless of whether the loss is
insured; no litigation being instituted or threatened against the Company of a
character required to be disclosed in the Registration Statement that is not
disclosed and that shall materially adversely affect the Company, its business
or its property; and no substantial adverse change occurring in the operations
or financial condition or credit of the Company or in any conditions affecting
the prospects of the business of the Company.
7. The Company having furnished to the Underwriter on the Delivery Date
an opinion or opinions of Jordaan & ▇▇▇▇▇▇▇▇▇▇, PLLC, counsel to the Company,
dated the Delivery Date and stating in effect that:
(a) The Company has been duly incorporated and, on the Delivery Date,
is validly existing corporation in good standing under the laws of the
State of Delaware with an authorized and issued capital stock as set
forth in the Registration Statement, and the shares of the Company
shown in the Registration Statement to be issued and outstanding have
been duly and validly issued and are outstanding;
(b) The Company is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where
the nature of its properties or the conduct of its business requires
such registration and qualification, except where the failure so to
register and qualify does not have material adverse effect on the
financial condition of the Company.
(c) The Notes conform in all material respects to the description of
the Notes contained in the Registration Statement and the Prospectus,
subject to the qualifications set forth in those documents, and the
holders of the Notes shall be entitled to the rights and preferences
set forth in the certificates for the Notes;
(d) The Company has the requisite corporate power and authority to
enter into and perform their respective obligations under the
Agreement. The Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company and is enforceable against the Company in accordance with its
terms, subject to the Underwriter obtaining the approval of the
National Association of Securities Dealers, Inc. to the compensation
and other arrangements set forth therein, except to the extent that the
rights to indemnification thereunder may be limited by federal or state
securities laws and policies embodied therein, or to the extent that
such obligations are subject to or affected or limited by (i)
applicable liquidation, conservatorship, bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws
affecting creditors' rights or in the collection of debtors obligations
generally from time to time in effect or (ii) general principles of
equity (whether enforceability is considered in a proceeding in equity
or at law), including the qualification that the availability of the
remedy of specific performance or injunctive relief or other equitable
remedies is subject to the discretion of the court before which any
such preceding therefor may be brought and including standards of good
faith, fair
BEST EFFORTS UNDERWRITING AGREEMENT - Page 13
14
dealing and reasonableness that may be applied by a court to the
exercise or certain rights and remedies;
(e) The Registration Statement and the Prospectus comply as to form in
all material respects with the requirements of the Act and the rules
and regulations of the Commission under the Act (except that no opinion
need be expressed as to financial statements and financial data); and
(f) That counsel has no knowledge or information concerning pending or
threatened litigation or any unasserted claims or assessments by any
third party, or parties, against the Company that is not disclosed in
the Registration Statement that are required to be disclosed in the
Registration Statement.
8. The Company having furnished to the Underwriter on the Delivery Date
a certificate or certificates verified by the President or a Vice President and
by the Treasurer of the Company, certifying that:
(a) The respective signers of the certificate or certificates have
examined the answers to each item of the Registration Statement and the
information contained in the Prospectus, and, to the best of their
knowledge, information and belief, those answers and that information,
as of the effective date of the Registration Statement, were true and
correct and did not omit to state any material fact required to be
stated or necessary in order to make the statements not misleading; and
since the effective date of the Registration Statement no event has
occurred that should have been set forth in an amendment to the
Registration Statement or in a supplement or amendment to the
Prospectus that has not been so set forth in an amendment or
supplement;
(b) The respective signers of the certificate or certificates do not
know of any litigation or proceeding instituted or threatened against
the Company of a character required to be disclosed in the Registration
Statement that is not disclosed in the Registration Statement;
(c) The respective signers of the certificate or certificates do not
know of any contract or arrangement that is required to be summarized
or disclosed in the Registration Statement or filed as an exhibit to
the Registration Statement that has not been summarized or disclosed or
filed;
(d) To the best of their knowledge, information and belief, the
respective signers know of no substantial adverse change in the general
affairs of the Company, or in the financial position of the Company
during the period from the date of the latest financial statements
contained in the Registration Statement to the Delivery Date, except
for the changes disclosed or indicated in the Registration Statement;
and
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15
(e) To the best of their knowledge, information and belief (i) the
representations and warranties contained in Article I of this Agreement
are true and correct at the Delivery Date; (ii) no stop order
suspending the effectiveness of the Registration Statement has been
issued prior to the Delivery Date and no proceedings for that purpose,
prior to that date, has been initiated or threatened by the Commission;
(iii) every reasonable request by the Commission for additional
information to be included in the Registration Statement or the
Prospectus or otherwise has or will be complied with; (iv) prior to the
Delivery Date, the Company has not sustained a loss on account of fire,
flood, accident, or calamity of a character that materially adversely
affects its property or business.
9. The Company having furnished to the Underwriter copies of the
Certificate of Incorporation and of each amendment to the Certificate of
Incorporation, if any, of the Company, which are officially certified by a
proper state official; one copy of the bylaws of the Company certified by the
Secretary or an Assistant Secretary of the Company as being currently in effect;
and a certificate of good standing issued by the proper state official or
officials of each state in which the Company transacts business.
10. The Company having furnished to the Underwriter whatever
certificates, in addition to those specifically mentioned in this Agreement,
that the Underwriter may request as to the accuracy, on the Date of Delivery, of
the representations and warranties of the Company in this Agreement, as to the
performance by the Company of its obligations under this Agreement, and as to
the other concurrent or precedent conditions to the obligations of the
Underwriter under this Agreement.
All of the opinions, letters, evidence, and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in full compliance
with the provisions hereof only if they are in form satisfactory to counsel to
the Underwriter.
In the event of the failure of any of the above conditions in any
material respect, the Underwriter may be relieved of any and all obligations
hereunder or may waive this right and demand full performance hereunder.
IX. Delivery Date
The Delivery Date, as referred to in this Agreement, shall be a date
agreed upon by the Company and the Underwriter and failing agreement, then the
Delivery Date shall be the Effective Date of the offering of the Notes.
1. The representations and warranties in this Agreement shall survive
the Delivery Date and shall continue in full force and effect regardless of any
investigation made by the party relying upon any representation or warranty.
2. This Agreement shall inure to the benefit of, and be binding upon,
the Company and the Underwriter (including specifically any dealer that the
Underwriter associates with pursuant hereto),
BEST EFFORTS UNDERWRITING AGREEMENT - Page 15
16
and their successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person other than the persons
mentioned in the preceding sentence any legal or equitable right, remedy or
claim under or with respect hereto, or any provisions contained herein. This
agreement and all of its conditions and provisions are for the sole and
exclusive benefit of the foregoing persons and for the benefit of no other
person, except that the warranties, indemnities and agreements of the Company
contained herein also shall be for the benefit of any persons, if any, who
control the Underwriter within the meaning of Section 15 of the Act, and except
that the indemnification by the Underwriter shall be for the benefit of the
directors of the Company and the officers of the Company who have signed the
Registration Statement.
3. This Agreement sets forth the entire agreement between the parties
hereto, and no representation, warranty, understanding, or agreement not
specifically set forth herein shall be implied from this Agreement.
4. The proceeds received by the Underwriter from the sale of the Notes
shall be remitted to the Trustee(s) not later than noon of the following
business day, less the selling commission payable by the Company to the
Underwriter.
5. The Underwriter shall comply with all of the rules and regulations
of the Commission and the state regulatory agencies where the Notes shall be
offered. If at any time during the term of this Agreement, the Underwriter
should, for any reason, be disqualified or precluded from offering to the public
these Notes, then the Company shall have the option to terminate this Agreement
upon three (3) days written notice to the Underwriter, in which event this
Agreement shall be void and of no further force and effect, except that the
Underwriter shall be entitled to the commissions earned and to their accountable
out-of-pocket expenses.
Notwithstanding anything to the contrary contained in this agreement,
in the event the offering is terminated prior to its effective date or prior to
the satisfaction of all conditions for the release of funds under the terms of
the Escrow Agreement, the Underwriter shall receive no commissions hereunder and
will be reimbursed only for its actual accountable out-of-pocket expenses as
required under Rule 2710(c)(6)(b)(iv) of the NASD Rules of Fair Practice.
6. This Agreement, unless sooner terminated as herein provided, shall
continue until all Notes registered under the Registration Statement are either
sold or withdrawn by the Company from registration, whichever event first
occurs.
X. Underwriter's Right to Terminate
Notwithstanding any of the terms and provisions hereof, this Agreement
may be terminated by the Underwriter based on a material breach of this
Agreement by the Company. Underwriter shall give fifteen (15) days prior written
notice to the Company of such breach, and the Company shall have the opportunity
to cure such breach. In the event of such termination, the Underwriter shall be
entitled to any commissions to which it was entitled as of the date of
termination as well as any and all accountable out-of-pocket expenses. In the
event that the Underwriter reasonably determines that the Notes are not
marketable, notwithstanding its best efforts to sell the Notes, the Underwriter
may terminate this Agreement with thirty (30) days prior written notice.
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XI. Post-Effective Amendments
1. The Company shall prepare and file under the Act any required
post-effective amendments to the Registration Statement and related Prospectus
or new Registration Statements and new related Prospectuses.
2. If any post-effective amendments or new Registration Statements
become effective, the Company shall furnish to the Underwriter opinions by the
same counsel and to the same effect as those required by Article VIII of this
Agreement, except that such opinions shall relate to the post-effective
amendments and new Prospectuses or to the new Registration Statements and new
Prospectuses and to the Notes that are being offered. The Company further agrees
with respect to these post-effective amendments and new Prospectuses and with
respect to these new Registration Statements and new Prospectuses to observe all
of the terms and conditions of this Agreement as set forth in Article III,
subdivisions 1, 2, 3, 4, 5, 6, and 7 and Article IV.
XII. Notice
Any notice required or permitted to be given under or pursuant to this
Agreement may be given in writing by depositing the notice in the United States
mail, postage prepaid, by hand-delivery or by courier, or by facsimile,
addressed as follows:
To the Underwriter:
▇▇▇▇▇▇ Capital, Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
FAX - (▇▇▇) ▇▇▇-▇▇▇▇
To the Company:
PawnMart, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
FAX - (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer
Copy to:
Jordaan & ▇▇▇▇▇▇▇▇▇▇, PLLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Jakes Jordaan
FAX - (▇▇▇) ▇▇▇-▇▇▇▇
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Notice shall be deemed given to a party hereunder when actually
received by such party.
XIII. Miscellaneous
1. This Agreement may be modified only by writing signed by the parties
hereto.
2. This Agreement shall be governed and construed in accordance with
the laws of the state of Texas.
3. This Agreement may be signed in various counterparts, which together
shall constitute one and the same instrument.
4. For purposes of any lawsuit or other proceeding in respect to this
Agreement, the undersigned hereby submits and consents to the jurisdiction of
any court of competent jurisdiction sitting in the State of Texas, Dallas
County.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day, month and year first written above.
PawnMart, Inc.
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Executive Officer
▇▇▇▇▇▇ Capital, Ltd.
---------------------------------------
Name:
---------------------------------
Title:
---------------------------------
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