1,900,000 Shares
Common Stock
MGi2, INC.
(a Delaware corporation)
UNDERWRITING AGREEMENT
April ___, 2000
Capital West Securities, Inc.
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▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
MGi2, Inc., a Delaware corporation (the "Company"), hereby confirms its
agreement with Capital West Securities, Inc. ("Capital West") and additional
underwriters for whom Capital West is acting as managing underwriter (along with
Capital West, each an "Underwriter and, collectively, the "Underwriters") as
follows.
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell 1,900,000
shares (the "Firm Shares") of its authorized and unissued common stock, $.01 par
value (the "Common Stock"), to the Underwriters. The Company also proposes to
grant to the Underwriters an option to acquire an additional 285,000 shares of
common stock (the "Option Shares") for the purpose of covering over-allotments
in connection with the sale of the Firm Shares as provided in paragraph 8
hereof. Prior to the execution hereof, the Company has granted to Capital West a
warrant to acquire an additional 190,000 shares of Common Stock (the "Warrant
Shares") pursuant to the terms of a Warrant Agreement, dated March 28, 2000, by
and between the Company and Capital West ("Warrant Agreement"). As used in this
Agreement, the term "Shares" includes the Firm Shares, the Option Shares, the
Warrant Shares, and, if the Company has filed or is required pursuant to the
terms hereof to file a registration statement pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Securities Act") registering additional
shares of Common Stock, such additional shares of Common Stock.
2. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS OF THE COMPANY. The Company
represents and warrants to, and agrees with, each Underwriter, as follows:
2.1 REGISTRATION STATEMENT. A registration statement on Form N-2
(File No. 333-95905 with respect to the Shares, including a
prospectus subject to completion, has been carefully and
accurately prepared by the Company in conformity with the
requirements of the Securities Act and the applicable rules
and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under
the Securities Act and the Investment Company Act of 1940, as
amended (the
"Investment Company Act") (the Securities Act and the
Investment Company Act are collectively, the "Acts"), and such
registration statement has been filed with the Commission.
Such amendments to such registration statement and such
amended prospectuses subject to completion, as may have been
required prior to the date hereof have been similarly prepared
and filed with the Commission. The Company will file such
additional amendments to such registration statement and such
amended prospectuses subject to completion, as may hereafter
be required. Copies of the Registration Statement and any
amendments and of each related prospectus subject to
completion have been delivered to the Company.
2.1.1 REGISTRATION STATEMENT DEFINED. The term
"Registration Statement" as used in this Agreement
means the registration statement described in
paragraph 2.1 above including financial statements,
schedules and exhibits, in the form in which it
became or becomes, as the case may be, effective
(including, if the Company omitted information from
the registration statement pursuant to Rule 430A(a)
of the Rules and Regulations, the information deemed
to be a part of the registration statement at the
time it became effective pursuant to Rule 430A(b) of
the Rules and Regulations) and, in the event of any
amendment thereto after the effective date of such
registration statement, shall also mean (from and
after the effectiveness of such amendment) such
registration statement as so amended. If the Company
has filed or is required pursuant to the terms hereof
to file a registration statement pursuant to Rule
462(b) under the Securities Act registering
additional shares of Common Stock (a "Rule 462(b)
Registration Statement"), then, unless otherwise
specified, any reference herein to the term
"Registration Statement" shall be deemed to include
such Rule 462(b) Registration Statement.
2.1.2 PROSPECTUS DEFINED. The term "Prospectus" as used in
this Agreement means the prospectus relating to the
Shares as included in the Registration Statement at
the time it becomes effective (including, if the
Company omitted information from the Registration
Statement pursuant to Rule 430A(a) of the Rules and
Regulations, the information deemed to be a part of
the Registration Statement at the time it became
effective pursuant to Rule 430A(b) of the Rules and
Regulations). Notwithstanding the foregoing sentence,
if any revised prospectus is provided to the
Underwriters by the Company for use in connection
with the offering of the Shares that differs from the
Prospectus on file with the Commission at the time
the Registration Statement became or becomes, as the
case may be, effective (whether or not such revised
prospectus is required to be filed with the
Commission pursuant to Rule 424(b) of the Rules and
Regulations), the term "Prospectus" will refer to
such revised prospectus from and after the time it is
first provided to the Underwriters for such use.
2.2 462(b) REGISTRATION STATEMENT. If requested by Capital West,
the Company shall file a Rule 462(b) Registration Statement
with the Commission registering shares of Common Stock in
compliance with Rule 462(b) by 5:30 P.M., New York City time,
on the date of this Agreement and to pay to the Commission the
filing fee for such
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Rule 462(b) Registration Statement at the time of the filing
thereof or to give irrevocable instructions for the payment of
such fee pursuant to Rule 111(b) under the Securities Act.
2.3 CERTAIN AMENDMENTS. If the Registration Statement has been
declared effective under the Acts by the Commission, the
Company will prepare and promptly file with the Commission the
information omitted from the Registration Statement pursuant
to Rule 430A(a) of the Rules and Regulations or as part of a
post-effective amendment to the Registration Statement
(including a final form of Prospectus). If the Registration
Statement has not been declared effective under the Acts by
the Commission, the Company will prepare and promptly file a
further amendment to the Registration Statement, including a
final form of Prospectus.
2.4 PRELIMINARY PROSPECTUS. The Commission has not issued any
order preventing or suspending the use of any preliminary
prospectus or instituted proceedings for that purpose, and
each such preliminary prospectus has conformed in all material
respects to the requirements of the Acts and the Rules and
Regulations.
2.5 COMPLIANCE WITH THE ACTS. Each preliminary prospectus, as of
its date, has not included any untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, or necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading. If the Company is required to file
a Rule 462(b) Registration Statement after the effectiveness
of this Agreement, such Rule 462(b) Registration Statement and
any amendments thereto, when they become effective (a) will
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading and
(b) will comply in all material respects with the Acts. At the
time the Registration Statement became or becomes, as the case
may be, effective and at all times subsequent thereto up, to
and on the Closing Date (as defined in paragraph 3.3 hereof)
and on any later date on which Option Shares are to be
purchased, (i) the Registration Statement and the Prospectus,
and any amendments or supplements thereto, contained and will
contain all material information required to be included
therein by the Acts and the Rules and Regulations and will in
all material respects conform to the requirements of the Act
and the Rules and Regulations, and (ii) neither the
Registration Statement nor the Prospectus, nor any amendments
or supplements thereto, will include any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading.
2.6 COMPLIANCE WITH EXCHANGE ACT. The Company has, at its expense,
carefully and accurately prepared, in conformity with the
requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), a Form 8-A registration
statement ("Form 8-A"), and such Form 8-A has been filed with
the Commission in order for the Company to be a reporting
person under the Exchange Act. The Company is in compliance
with the requirements of the Exchange Act, and all rules and
regulations promulgated thereunder, and neither the Company
nor any of its employees, directors,
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stockholders, or affiliates (as defined by the Rules and
Regulations) of any of the foregoing) have taken or will take,
directly or indirectly, any action designed to, or which has
constituted or which might be expected to cause or result in,
under the Exchange Act, or otherwise, stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
2.7 ORGANIZATION. The Company and its Subsidiary (as such term is
defined in Rule 405 under the Securities Act), ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & Company, Inc., a Texas corporation ("MGCO"), have
been duly incorporated and are validly existing as
corporations in good standing under the laws of the
jurisdiction of their respective organization, with full
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Registration Statement. Each of the Company and its Subsidiary
are duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure
to be so qualified or to be in good standing would not have a
material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business
prospects of the Company and its Subsidiaries considered as a
whole.
2.8 ABILITY TO CONDUCT BUSINESS. The Company and its Subsidiaries
are in possession of, and operating in compliance with, all
authorizations, licenses, certificates, consents, orders and
permits from state, federal, foreign and other regulatory
authorities which are material to the conduct of its business,
all of which are valid and in full force and effect. Neither
the Company nor any of its Subsidiaries is in violation of its
charter or bylaws or in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any material indenture, mortgage, deed
of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, or any material lease,
contract, joint venture, or other agreement or instrument to
which it is a party or by which its property is bound or in
violation of any law, order, rule, regulation, writ,
injunction, judgment or decree of any government, governmental
agency or body or court, domestic or foreign, except such
failures to comply as would not, individually or in the
aggregate, have a material adverse effect on the Company and
its Subsidiaries considered as a whole. The disclosures in the
Registration Statement concerning the effects of federal,
state and local regulation on the business of the Company and
its Subsidiary, as currently conducted and as contemplated,
are correct in all material respects and do not omit to state
a material fact.
2.9 AUTHORITY. The Company has full legal right, power and
authority to enter into this Agreement and to perform the
transactions contemplated hereby. This Agreement and the
Warrant Agreement have been duly authorized, executed and
delivered by the Company and are valid and binding agreements
on the part of the Company, enforceable in accordance with
their respective terms, except as rights to indemnification
and contribution hereunder and thereunder may be limited by
applicable law and except as the enforcement hereof and
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws
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relating to or affecting creditors' rights generally, or by
general equitable principles. The performance of this
Agreement and the Warrant Agreement and the consummation of
the transactions herein and therein contemplated will not
result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (a) any material
indenture, mortgage, deed of trust, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness,
or any material lease, contract, joint venture or other
agreement or instrument to which the Company is a party or by
which the property of the Company is bound including any
licenses from third parties, or (b) the charter and bylaws of
the Company or its Subsidiaries, or (c) any law, order, rule,
regulation, writ, injunction, judgment or decree of any
government or governmental agency or body or court, domestic
or foreign, having jurisdiction over the Company or its
Subsidiaries or over the properties of the Company or its
Subsidiary, except for breaches, violations or defaults that
individually or in the aggregate, would not have a material
adverse effect on the Company. No consent, approval,
authorization or order of any court or governmental agency or
body is required for the consummation of the transactions in
this Agreement or the Warrant Agreement contemplated, except
such as may be required under the Acts, the Exchange Act, or
under state or other securities or Blue Sky laws, all of which
requirements have been satisfied in all material respects.
Except as disclosed in the Prospectus and except for
restrictions which arise in the ordinary course under the
Investment Company Act (none of which are expected by the
Company to have a material adverse effect on the Company), to
the best of our knowledge after due inquiry, there are no
restrictions, limitations or regulations which materially and
adversely affect the ability of the Company to conduct its
business as described in the Prospectus.
2.10 INVESTMENT COMPANY ACT. Subject to the matters for which the
Company is seeking SEC approval or relief all of which are
described in the Prospectus, the operations of the Company and
its Subsidiaries are in compliance in all material respects
with the provisions of the Investment Company Act applicable
to business development companies and the rules and
regulations of the Commission thereunder, except as will not
result, individually or in the aggregate, in a material
adverse effect on the Company and its Subsidiaries, taken as a
whole. The Company is currently organized and operated in
conformance with the requirements of the Investment Company
Act applicable to business development companies, except as
otherwise described in the Prospectus.
2.11 BUSINESS DEVELOPMENT COMPANY. The Company has elected to be
regulated as a business development company under the
Investment Company Act and has not withdrawn that election,
and the Commission has not ordered that such election be
withdrawn nor to the best of the Company's knowledge have
proceedings to effectuate such withdrawal been initiated or
threatened by the Commission. All required action has or will
have been taken by the Company under the Acts, the Exchange
Act, and the Rules and Regulations thereof to make the public
offering and consummate the sale of the Shares as provided in
this Agreement.
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2.12 LITIGATION. Except as disclosed in the Registration Statement
or the Prospectus, there is no action, suit or proceeding
before or by any court or governmental agency or body,
domestic or foreign, now pending or threatened, against or
affecting the Company or its Subsidiaries which (a) is
required to be disclosed in the Registration Statement or the
Prospectus or which might result in any material adverse
change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the
Company and its Subsidiary considered as one enterprise, or
which might materially and adversely affect the properties or
assets thereof; or (b) which might be expected to materially
and adversely affect the consummation of the transactions
contemplated by this Agreement. All pending legal or
governmental proceedings to which the Company or any of its
Subsidiaries is a party or of which any of their respective
properties or assets is the subject which are not described in
the Registration Statement, including ordinary routine
litigation incidental to the Company's business, could not
reasonably be expected to result in a material adverse change
in the condition, financial or otherwise, or the earnings,
business affairs or business properties of the Company and its
Subsidiaries considered as one enterprise.
2.13 CONTRACTS. There are no contracts or documents of the Company
or its Subsidiaries which are required to be described in the
Registration Statement or the Prospectus, or to be filed as
exhibits thereto, by the Act or by the Rules and Regulations
which have not been accurately described in all material
respects and filed as exhibits to the Registration Statement.
The contracts so described in the Prospectus are in full force
and effect on the date hereof. Neither the Company nor any of
its Subsidiaries is in material breach of or material default
under, and, to the Company's knowledge, no other party is in
material breach of or material default under, any of such
contracts.
2.14 CAPITAL STOCK. All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are
fully paid and nonassessable, have been issued in compliance
with all federal, state and foreign securities laws, were not
issued in violation of, or subject to, any preemptive rights
or other rights to subscribe for or purchase securities (other
than such preemptive rights or other rights to subscribe for
or purchase securities as were fully complied with or
expressly waived or with respect to the violation of which the
right to make claim is barred by the applicable statute of
limitations). The authorized and outstanding capital stock of
the Company conforms in all material respects to the
statements relating thereto contained in the Registration
Statement and the Prospectus (and such statements correctly
state the substance of the instruments defining the
capitalization of the Company). Except as set forth in the
Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or
other rights to convert any obligation into, any shares of
capital stock of the Company, have been granted or entered
into by the Company, as the case may be, with respect to any
of the Company's securities.
2.15 AUTHORIZATION OF SHARES. The Shares to be purchased from the
Company hereunder have been duly authorized for issuance and
sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor
in accordance with the terms of this Agreement, will be duly
and validly issued and fully paid and nonassessable. The
Warrant Shares have been duly authorized for
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issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company
against payment therefor in accordance with the terms of the
Warrant Agreement and the warrant to be granted to the
Underwriters under the Warrant Agreement (the "Underwriters'
Warrant"), will be duly and validly issued and fully paid and
nonassessable. No preemptive right, co-sale right,
registration right, right of first refusal or other similar
right of stockholders exists with respect to any of the Shares
or the Warrant Shares, or the issuance and sale thereof other
than those that have been expressly waived prior to the date
hereof and those that will automatically expire upon the
consummation of the transactions contemplated on the Closing
Date. No further approval or authorization of any stockholder,
the Board of Directors or others is required for the issuance
and sale or transfer of the Shares except as may be required
under the Act, the Exchange Act or under state or other
securities or Blue Sky laws. Except as disclosed in or
contemplated by the Prospectus and the financial statements of
the Company (including the notes thereto) included in the
Prospectus, the Company has no outstanding options to
purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or
sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the
Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately
and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights. The
shares of Common Stock reserved for issuance upon exercise of
the Company's outstanding options and warrants have been duly
and validly authorized and are sufficient in number to meet
the exercise requirements of such options and warrants.
2.16 FINANCIAL STATEMENTS. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, which has examined
the financial statements (together with related schedules and
notes) of the Company filed with the Commission as a part of
the Registration Statement and which are included in the
Prospectus, are independent accountants within the meaning of
the Act and the Rules and Regulations. The audited financial
statements of the Company, together with the related
schedules and notes, and the unaudited financial information,
forming part of the Registration Statement and Prospectus,
fairly present the financial position and the results of
operations of the Company at the respective dates and for
the respective periods to which they apply. All audited
financial statements, together with the related schedules
and notes, and the unaudited financial information, filed
with the Commission as part of the Registration Statement,
have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the
periods involved except as may be otherwise stated therein.
The selected and summary financial data included in the
Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with
the audited financial statements presented therein. No
other financial statements or schedules are required to be
included in the Registration Statement.
2.17 NO ADVERSE MATERIAL CHANGE. Since the respective dates as of
which information is given in the Registration Statement and
the Prospectus, except as otherwise stated
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therein (a) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company, whether
or not arising in the ordinary course of business; (b) there
have been no transactions entered into by the Company other
than those in the ordinary course of business, which are
material with respect to the Company; (c) there has been no
obligation that is material to the Company, direct or
contingent, incurred by the Company or any Subsidiary, except
obligations incurred in the ordinary course of business; (d)
there has been no change in the capital stock of the Company;
(e) there has been no change in the outstanding indebtedness
of the Company which is material to the Company; (f) there has
been no dividend or distribution of any kind declared, paid or
made by the Company on behalf of any class of its respective
capital stock; or (g) there has been no change in any federal,
state, foreign or other laws, rules, or regulations (or
interpretations thereof) applicable to the business of the
Company that would have a material adverse effect on the
Company, and, to the knowledge of the Company, no such change
is pending other than as described in the Prospectus.
2.18 PROPERTY; VALIDITY OF AGREEMENTS. Except as described in the
Prospectus, (a) the Company and its Subsidiaries have good and
marketable title to all properties and assets described in the
Prospectus as owned by them, free and clear of all liens,
charges, encumbrances or restrictions of any kind or those not
material, individually or in the aggregate, to the business of
the Company and its Subsidiaries considered as a whole; (b)
the agreements to which the Company is a party described in
the Prospectus are valid agreements, enforceable by the
Company, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally or
by general equitable principles; and (c) the Company has valid
and enforceable leases for the properties described in the
Prospectus as leased by it except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable
principles.
2.19 TAX RETURNS; PAYMENTS. All federal, state, local and foreign
tax returns required to be filed by the Company or its
Subsidiaries in any jurisdiction have been filed. All material
taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due
from the Company or any of its Subsidiaries have been paid
other than those being contested in good faith and for which
adequate reserves have been provided or those currently
payable without penalty or interest. Adequate charges,
accruals and reserves have been provided for in the financial
statements referred to in paragraph 2.16 above in respect of
all federal, state, local and foreign taxes for all periods as
to which the tax liability of the Company or any of its
Subsidiaries has not been finally determined or remains open
to examination by applicable taxing authorities.
2.20 LABOR MATTERS. No labor dispute with the employees of the
Company or any of its Subsidiaries exists or is imminent. The
Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal
suppliers, manufacturers, contractors or customers which might
be expected to result in any
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material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business
prospects of the Company and its Subsidiaries considered as
one enterprise. No collective bargaining agreement exists with
any of the Company's employees and, to the Company's
knowledge, no such agreement is imminent.
2.21 INTELLECTUAL PROPERTY. The Company and its Subsidiaries own or
possess, or can acquire on reasonable terms, the patents,
patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names
presently employed by them in connection with the business now
operated by them. Neither the Company nor any of its
Subsidiaries has received any notice or is otherwise aware of
any infringement of or conflict with asserted rights of others
with respect to any patent or proprietary rights or of any
facts or circumstances which would render any patent and
proprietary rights invalid or inadequate to protect the
interest of the Company or any of its Subsidiaries therein,
and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or
inadequacy singly or in the aggregate, would result in any
material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business
prospects of the Company and any of its Subsidiaries
considered as one enterprise.
2.22 COMPLIANCE WITH LAWS. The Company and its Subsidiaries are in
compliance in all material respects with all applicable laws,
statutes, ordinances, rules or regulations, the enforcement of
which, individually or in the aggregate, would be reasonably
expected to have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its Subsidiaries
considered as one enterprise.
2.23 AMEX LISTING. The Common Stock has been approved for listing
on the American Stock Exchange, Inc., subject to official
notice of issuance.
2.24 OFFERING MATERIALS. The Company has not distributed and will
not distribute prior to the Closing Date or on any date on
which Option Shares are to be purchased, as the case may be,
any offering material in connection with the offering and sale
of the Shares other than the Prospectus, the Registration
Statement and other materials permitted by the Acts.
2.25 PROHIBITED PAYMENTS. The Company has not at any time during
the last five years (a) made any unlawful contribution to any
candidate for foreign office, or failed to disclose fully any
contribution in violation of law, or (b) made any payment to
any foreign, federal or state governmental officer or
official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
2.26 SELLING PRACTICES. The Company has not taken and will not
take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in
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stabilization or manipulation of the price of the Common Stock
to facilitate the sale or resale of the Shares. The Company
has not effected any sales of securities required to be
disclosed in Form N-2 under the Acts, other than as disclosed
in the Registration Statement.
2.27 LOCK-UP AGREEMENTS. The Company has agreed in writing not to
offer to sell, sell short, pledge, hypothecate or otherwise
sell or dispose of any shares of Common Stock of the Company,
or to issue any option or warrants to purchase any shares of
Common Stock of the Company or any securities convertible into
or exchangeable for shares of Common Stock without the prior
written consent of Capital West, for a period expiring one
hundred-eighty (180) days after the effective date of the
Registration Statement, except (a) the Company may grant
options under the Company's 2000 Stock Plan pursuant to its
terms and as described in the Prospectus, (b) the Company may
issue Option Shares pursuant to the over-allotment option as
described in paragraph 8 hereof, and (c) the Company may issue
Warrant Shares pursuant to the Warrant Agreement. Each officer
and director of the Company, each member of the advisory board
of the Company, and the Other Stockholders (as defined below)
have agreed in writing not to offer to sell, contract to sell,
sell short, or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of Common Stock of
the Company, any options or warrants to purchase any shares of
Common Stock of the Company, or any securities convertible
into or exchangeable for shares of the Common Stock owned
directly by such person or with respect to which such person
has the power of disposition without the prior written consent
of Capital West, for a period expiring three years after the
effective date of the Registration Statement, except after the
expiration of one year from the effective date of the
Registration Statement (a) each officer, director, and each
Other Stockholder may sell or otherwise dispose of up to 10%
of the shares of Common Stock owned by such person or
entity,(b) if the market price per share of Common Stock is at
least two times the initial public offering price per share of
Common Stock for a period of 20 consecutive trading days at
any time after such year, then each officer, director, and
each other stockholder may dispose of any or all shares of
Common Stock owned by such person or entity subject to
applicable securities laws, and (c) the lock-up agreement will
terminate with respect to each non-employee director of the
Company and each member of the advisory board of the Company.
For purposes of this Agreement, the term "Other Stockholders"
means ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇▇ Family Limited
Partnership, and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
2.28 ENVIRONMENTAL COMPLIANCE. Except as described in the
Registration Statement, (a) neither the Company nor any of its
Subsidiaries is in violation of any federal, state, local or
foreign laws or regulations relating to pollution or
protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Environmental
Materials") or to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Environmental Materials (collectively, the "Environmental
Laws"), except
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such violations as would not, singly or in the aggregate, have
a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business
prospects of the Company and its Subsidiary considered as one
enterprise, and (b) there are no events or circumstances that
could form the basis of an order for clean-up or remediation,
or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company
or its Subsidiaries relating to any Environmental Materials or
the violation of any Environmental Laws, which, singly or in
the aggregate, could reasonably be expected to have a material
adverse effect on the condition, financial or otherwise, or
the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise.
2.29 INTERNAL CONTROLS. The Company and its Subsidiaries maintain a
system of internal accounting controls sufficient to provide
reasonable assurances that (a) transactions are executed in
accordance with management's general or specific
authorizations; (b) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles as in effect in the
United States and to maintain asset accountability; (c) access
to assets is permitted only in accordance with management's
general or specific authorization; and (d) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with
respect to any differences.
2.30 TRANSACTIONS WITH AFFILIATES. There are no outstanding loans,
advances (except normal advances for business expenses in the
ordinary course of business) or guarantees of indebtedness by
the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families
of any of them, except as disclosed in the Registration
Statement and the Prospectus. Neither the Company nor any
employee or agent of the Company has made any payment or
transfer of any funds or assets of the Company or conferred
any personal benefit by use of the Company's assets, or
received any funds, assets or personal benefit in violation of
any law, rule or regulation.
2.31 TRANSFER TAXES. On the Closing Date and upon delivery of the
Option Shares, as applicable, all transfer and other taxes
(other than income taxes) that are required to be paid in
connection with the sale and transfer of the Shares to the
Underwriters will have been paid by the Company.
2.32 ERISA COMPLIANCE. The Company does not currently have, and has
never had, any pension plan subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations
thereunder and/or the equivalent of such legislation in Canada
("ERISA"). No "reportable event" (as defined in ERISA) has
occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability. The
Company has not incurred, and does not expect to incur,
liability under (a) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (b)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published
interpretations thereunder (the "Code"). Each "pension plan"
for which the Company would have any liability that is
intended to be
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qualified under Section 401(a) of the Code is so qualified in
all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of
such qualification.
2.33 OFFICER'S CERTIFICATES. Any certificate signed by any officer
of the Company and delivered to the Underwriters or to counsel
for the Underwriters shall be deemed a representation and
warranty by the Company to each Underwriter as to the matters
covered thereby.
3. PURCHASE, SALE, AND DELIVERY OF SHARES. On the basis of the representations
and warranties contained in this Agreement and subject to the terms and
conditions herein set forth, at the Closing Date (as defined below) the Company
agrees to sell to each Underwriter, severally, and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company,
respectively, at a purchase price per share of $________ [PURCHASE PRICE =
OFFERING PRICE - 9%] per Share, the number of Shares set forth in Schedule "1"
hereto (subject to adjustment as provided in paragraph 11) ("Purchased Shares"):
3.1 DELIVERY OF CERTIFICATES. On the Closing Date the Company will
deliver to the Underwriters definitive certificates for the
Purchased Shares to be purchased by the Underwriters pursuant
to this paragraph 3 upon payment of the purchase price
therefor by the several Underwriters. The certificates for the
Purchased Shares to be so delivered will be made available to
Capital West at the offices of Capital West Securities, Inc.,
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Capital West Offices") or at such
other place as shall be agreed upon by the Underwriters and
the Company. The certificates for the Purchased Shares to be
so delivered will be made available to Capital West at the
Capital West Offices or at such other location as Capital West
may reasonably request for checking at least one business day
prior to the Closing Date and will be in such names and
denominations as Capital West may request. If the Underwriters
so elect, delivery of the Purchased Shares may be made by
credit through full fast transfer to the accounts at
Depository Trust Company designated by the Underwriters.
3.2 PAYMENT OF PURCHASE PRICE. The purchase price for the
Purchased Shares to be purchased by the Underwriters pursuant
to this paragraph 3 will be payable by certified or official
bank check in next day funds, payable to the order of the
Company. It is understood that Capital West, individually and
not as representative of the several Underwriters, may (but
shall not be obligated to) make payment of the purchase price
on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by Capital West prior to
the Closing Date for the Purchased Shares to be purchased by
such Underwriter or Underwriters. Any such payment by Capital
West shall not relieve any such Underwriter or Underwriters of
any of its or their obligations hereunder.
3.3 CLOSING DATE. Delivery of the definitive certificates by the
Company and payment of the purchase price of the Underwriter
will occur at the Capital West Offices or at such other place
as shall be agreed upon by the Underwriters and the Company,
at 9:30 a.m. (Oklahoma City time) on the fourth business day
following the effective date of
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the Registration Statement (or at such time and date to which
payments and delivery shall have been postponed pursuant to
paragraph 11), such time and date of payment and delivery
being herein called the "Closing Date."
3.4 OFFERING. After the Registration Statement becomes effective,
the several Underwriters intend to offer the Purchased Shares
to the public as set forth in the Prospectus.
3.5 INFORMATION PROVIDED BY UNDERWRITERS. The information set
forth in the last paragraph on the front cover page (insofar
as such information relates to the Underwriters) and under
"Underwriting" in any preliminary prospectus and in the final
form of Prospectus filed pursuant to Rule 424(b) constitutes
the only information furnished by the Underwriters to the
Company for inclusion in any preliminary prospectus, the
Prospectus or the Registration Statement. Capital West, on
behalf of the respective Underwriters, represents and warrants
to the Company that the statements made therein do not include
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make such statements, in the light of the circumstances in
which they were made, not misleading.
4. FURTHER COVENANTS OF THE COMPANY. The Company covenants with each of
Underwriters as follows:
4.1 EFFECTIVE REGISTRATION STATEMENT. The Company will cause the
Registration Statement and any amendment thereof, if not
effective at the time and date that this Agreement is executed
and delivered by the parties hereto, to become effective as
promptly as possible (other than any Rule 462(b) Registration
Statement to be filed by the Company, which if filed after the
effectiveness of this Agreement will become effective no later
than 4:30 p.m., Houston, Texas time, on the date of this
Agreement). The Company will notify Capital West, promptly
after it shall receive notice thereof, of the time when (a)
the Registration Statement or any subsequent amendment to the
Registration Statement has become effective or (b) any
supplement to the Prospectus has been filed, and (c) if the
Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, when the
Rule 462(b) Registration Statement has become effective.
4.2 ADDITIONAL INFORMATION. If the Company omitted information
from the Registration Statement at the time it was originally
declared effective in reliance upon Rule 430A(a) of the Rules
and Regulations, the Company will provide evidence
satisfactory to Capital West that the Prospectus contains such
information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1)
or (4) of Rule 424(b) of the Rules and Regulations or as part
of a post-effective amendment to such Registration Statement
as originally declared effective which is declared effective
by the Commission. If for any reason the filing of the final
form of Prospectus is required under Rule 424(b)(3) of the
Rules and Regulations, the Company will provide evidence
satisfactory to Capital West that the Prospectus contains such
information and has been filed with the Commission within the
time period prescribed. The Company will notify Capital West
promptly of any
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request by the Commission for the amending or supplementing of
the Registration Statement or Prospectus or for additional
information.
4.3 AMENDMENTS AND SUPPLEMENTS. Promptly upon Capital West's
request, the Company will prepare and file with the Commission
any amendments or supplements to the Registration Statement or
Prospectus which, in the opinion of counsel for the several
Underwriters, may be necessary or advisable in connection with
the distribution of the Shares by the Underwriters. The
Company will promptly prepare and file with the Commission,
and promptly notify Capital West of the filing of, any
amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or
omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Acts, any event
shall have occurred as a result of which the Prospectus or any
other prospectus relating to the Shares as then in effect
would include any untrue statement of a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If
any Underwriter is required to deliver a prospectus nine
months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, the
Company will prepare promptly upon request, but at the expense
of such Underwriter, such amendment or amendments to the
Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act. The Company will file no
amendment or supplement to the Registration Statement or
Prospectus which shall not previously have been submitted to
Capital West a reasonable time prior to the proposed filing
thereof or to which Capital West shall reasonably object in
writing, subject, however, to compliance with the Acts, the
Rules and Regulations thereunder and the provisions of this
Agreement.
4.4 STOP ORDERS. The Company will advise Capital West, promptly
after it shall receive notice or obtain knowledge thereof of
the issuance of any stop order by the Commission suspending
the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose. The
Company will promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued.
4.5 BLUE SKY QUALIFICATION. The Company will use its best efforts
to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as Capital West may
designate and to continue such qualifications in effect for so
long as may be required for purposes of the distribution of
the Shares. Notwithstanding the foregoing, the Company will
not be required to submit to the general jurisdiction of any
State. In each jurisdiction in which the Shares shall have
been qualified as above provided, the Company will make and
file such statements and reports in each year as are or may be
reasonably required by the laws of such jurisdiction.
4.6 COPIES OF REGISTRATION STATEMENT AND PROSPECTUS. The Company
will furnish Capital West, as soon as available, copies of the
Registration Statement (three of which will be signed and
which will include all exhibits), each preliminary prospectus,
the Prospectus and any amendments or supplements to such
documents, including any
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prospectus prepared to permit compliance with Section 10(a)(3)
of the Act, all in such quantities as Capital West may from
time to time reasonably request.
4.7 EARNINGS STATEMENT. The Company will make generally available
to its stockholders as soon as practicable, but in any event
not later than the 45th day following the end of the fiscal
quarter first occurring after the first anniversary of the
effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the
Act and covering a 12-month period beginning after the
effective date of the Registration Statement.
4.8 REPORTS TO STOCKHOLDERS AND UNDERWRITERS. The Company will
furnish to its stockholders, as soon as practicable after the
end of each respective period, annual reports (including
consolidated financial statements audited by independent
certified public accountants) and unaudited consolidated
quarterly reports of operations for each of the first three
quarters of the fiscal year. For a period of five years after
the effective date of the Registration Statement, the Company
will furnish to the several Underwriters hereunder, upon
request (a) concurrently with furnishing such annual and
quarterly reports to its stockholders, consolidated statements
of operations of the Company for each of the first three
quarters in the form furnished to the Company's stockholders;
(b) concurrently with furnishing to its stockholders, a
consolidated balance sheet of the Company as of the end of
such fiscal year, together with consolidated statements of
operations, of stockholders' equity, and of cash flows of the
Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent accountants; (c)
as soon as they are available, copies of all reports and
financial statements furnished to or filed with the
Commission, any securities exchange or the National
Association of Securities Dealers, Inc. ("NASD"); (d) every
material press release and every material news item or article
in respect of the Company or its affairs which was released or
prepared by the Company (excluding, in each case customary
product-related press releases and articles); and (e) any
additional information of a public nature concerning the
Company, or its business which Capital West may reasonably
request. For a period of five years from the date of the
Registration Statement, the Company will furnish to Capital
West and, upon request, to each of the other Underwriters, as
soon as available, a copy of each report of the Company mailed
to holders of the Common Stock or publicly filed with the
Commission or any automated quotation system or national
securities exchange on which any class of securities of the
Company is listed. The Company will in a timely manner file
reports with the Commission pursuant to and as required by the
Exchange Act. As long as the Company is a business development
company under the Investment Company Act, the Company will
file, in a timely manner, all reports with the Commission
pursuant to, and as required by, the Investment Company Act.
4.9 PROCEEDS. The Company will apply the net proceeds from the
sale of the Shares being sold by it in the manner set forth
under the caption "Use of Proceeds" in the Prospectus.
-15-
4.10 TRANSFER AGENT AND REGISTRAR. The Company will maintain a
transfer agent and, if necessary under the jurisdiction of
incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock.
4.11 EXPENSES OF UNDERWRITERS. If the transactions contemplated
hereby are not consummated by reason of any failure, refusal
or inability on the part of the Company to perform any
agreement on its part to be performed hereunder or to fulfill
any condition of the Underwriters' obligations hereunder, or
if this Agreement is terminated under paragraphs 11 or 12, the
Company will reimburse the several Underwriters for all
out-of-pocket accountable expenses (including reasonable fees
and disbursements of counsel for the several Underwriters)
actually incurred by the Underwriters in investigating,
preparing to market or marketing the Shares.
4.12 CERTAIN PRESS RELEASES. If at any time during the 90-day
period after the Registration Statement becomes effective, any
rumor, publication or event relating to or affecting the
Company shall occur as a result of which in Capital West's
opinion the market price of the Common Stock has been or is
likely to be materially affected (regardless of whether such
rumor, publication or event necessitates a supplement to or
amendment of the Prospectus), the Company will, after written
notice from Capital West advising the Company to the effect
set forth above, forthwith prepare, consult with Capital West
concerning the substance of, and disseminate a press release
or other public statement, reasonably satisfactory to Capital
West, responding to or commenting on such rumor, publication
or event.
4.13 NO REGISTRATION OF PLAN SHARES. During a period of 30 days
from the effective date of the Registration Statement, the
Company will not file a registration statement registering
shares under any employee benefit plan.
4.14 UNDERTAKINGS. The Company will comply with all provisions of
all undertakings contained in the Registration Statement.
5. This Paragraph Intentionally Left Blank.
6. EXPENSES.
6.1 PAYMENT. The Company agrees with each Underwriter that the
Company will pay and bear all costs and expenses in connection
with (a) the preparation, printing, filing and mailing of the
Registration Statement and prospectus in its preliminary and
final forms and any amendments thereto; (b) listing the
Company's Common Stock, including the Shares with the American
Stock Exchange, Inc. or the NASDAQ National Market System or
Small Cap Market; (c) the printing and mailing of this
Agreement and related documents; (d) the issuance, transfer
and delivery of the Shares; (e) the qualification, if
required, of the Shares under securities laws of those states
in which the Company and Capital West agree to offer the
Shares, including the costs of printing and mailing the "Blue
Sky" surveys and the disbursement and fees of counsel to the
Underwriters retained to qualify the Shares in the various
states and to prepare "Blue Sky" surveys if necessary; and (f)
the Company's travel in connection with
-16-
informational meetings for the brokerage community and
institutional investors. The Company shall reimburse Capital
West for all reasonable fees, expenses and costs (including
but not limited to, Capital West's counsel) incurred by
Capital West relating to qualifying the Shares under the
various state Blue Sky statutes.
6.2 EXPENSE ALLOWANCE. Capital West shall receive from the
Company, for itself and not as representative of the
Underwriters, a nonaccountable expense allowance equal to 2
1/2% of the aggregate public offering price of Shares sold to
the Underwriters in connection with the offering, reduced by
any amounts advanced by the Company to Capital West pursuant
to the terms of the Letter of Understanding dated December 22,
1999. The Company shall pay to Capital West the balance of the
nonaccountable expense allowance on the Closing Date.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the Underwriters
to purchase and pay for Shares as provided herein shall be subject to the
accuracy, as of the date hereof and the Closing Date and any later date on which
Option Shares are to be purchased (the "Option Closing Date"), as the case may
be, of the representations and warranties of the Company herein, to the
performance by the Company of its obligations hereunder, and to the following
additional conditions:
7.1 EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
shall have become effective under the Acts not later than 4:30
p.m., Houston, Texas time on the date hereof, or with the
consent of the Underwriters, at a later time and date, not
later, however, than 4:30 p.m., Houston, Texas time on the
first business day following the date hereof, or at such later
time and date as may be approved by a majority in interest of
the Underwriters. No stop order suspending the effectiveness
of the Registration Statement shall have been issued under
either of the Acts or proceedings therefor initiated or
threatened by the Commission and any request on the part of
the Commission for additional information (to be included in
the Registration Statement or the Prospectus or otherwise)
shall have been complied with to the reasonable satisfaction
of counsel to the Underwriters. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of
the Shares and any price-related information previously
omitted from the effective Registration Statement pursuant to
such Rule 430A shall have been transmitted to the Commission
for filing pursuant to Rule 424(b) of the Rules and
Regulations within the prescribed time period, and prior to
the Closing Date the Company shall have provided evidence
satisfactory to the Underwriters of such timely filing, or a
post-effective amendment providing such information shall have
been promptly filed and declared effective in accordance with
the requirements of Rule 430A of the Rules and Regulations.
7.2 BLUE SKY QUALIFICATION. Qualification under the securities
laws of such states as Capital West may deem necessary to the
success of the underwriting of the issue and sale of the
Shares upon the terms and conditions set forth in this
Agreement or contemplated by this Agreement and containing no
provisions unacceptable to Capital West will have been
secured, and no stop order (or the equivalent thereof) will be
in effect denying or suspending effectiveness of such
qualification, nor will any stop order proceedings (or the
equivalent thereof) with respect thereto be instituted or
pending or threatened under such laws.
-17-
7.3 DOCUMENTS; PROCEEDINGS. At the Closing Date and the Option
Closing Date, if any, (a) counsel for the Underwriters shall
have been furnished with such documents and opinions as they
may require for the purpose of enabling them to pass upon the
issuance and sale of the Shares as contemplated herein and
related proceedings or in order to evidence the accuracy of
any of the representations and warranties, or the fulfillment
of any of the conditions, herein contained; and (b) all
proceedings taken by the Company in connection with the
issuance and sale of the Shares as herein contemplated shall
be satisfactory in form and substance to the Underwriters and
counsel for the Underwriters.
7.4 NO MATERIAL ADVERSE CHANGE. There shall not have been, since
the date or since the respective dates as of which information
is given in the Registration Statement and the Prospectus, any
change in the condition (financial or otherwise), earnings,
operations, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business
which, in Capital West's sole judgment, is material and
adverse and that makes it, in Capital West's sole judgment,
impracticable or inadvisable to proceed with the public
offering of the Shares as contemplated by the Prospectus.
7.5 OFFICER'S CERTIFICATE. The Underwriters shall have received a
certificate of the President or Vice President of the Company
and of the chief financial or chief accounting officer of the
Company, dated as of the Closing Date, to the effect that (a)
there has been no material adverse change as described in
paragraph 7.4 above; (b) the representations and warranties in
paragraph 2 hereof are true and correct with the same force
and effect as though expressly made at and as of the Closing
Date; (c) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Date; and (d) no stop
order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been initiated or threatened by the Commission or any
blue sky jurisdiction.
7.6 DELIVERIES. At the Closing Date, the Underwriters shall have
received:
7.6.1 OPINION OF COMPANY COUNSEL. The opinion,
dated as of the Closing Date of ▇▇▇▇▇▇▇ &
▇▇▇▇▇ L.L.P. and/or ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, L.L.P., counsel for the Company, in
form and substance satisfactory to counsel
for the Underwriters, to the following
effect:
(a) The Company has been duly incorporated and
is validly existing as a corporation in good
standing under the laws of the State of
Delaware;
(b) The Company has corporate power and
authority to own, lease and operate its
properties and to conduct its business as
described in the Registration Statement and
the Prospectus and to enter into and perform
its obligations under this Agreement, the
Warrant Agreement, and any Lock-up Agreement
between any Underwriter and the
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Company, and to issue, sell and deliver to
the Underwriters the Firm Shares, the Option
Shares, and the Warrant Shares, as the case
may be, to be issued and sold by it
hereunder or pursuant to the Warrant
Agreement;
(c) The Company is duly qualified to do business
as a foreign corporation and is in good
standing in specified jurisdictions where
such qualification is required as a result
of the location of its properties or nature
of its business makes qualification
necessary, except where failure to qualify
as a foreign corporation would not have a
material adverse effect on the Company;
(d) At the Closing Date, after giving effect to
the sale of the Purchased Shares, the
authorized capital stock of the Company is
as set forth in the Prospectus under the
caption "Capitalization" as of the dates
stated therein; the issued and outstanding
shares of Common Stock have been duly
authorized and validly issued and are fully
paid and nonassessable and have not been
issued in violation of any preemptive right
contained in the charter or bylaws of the
Company or, to our knowledge after due
inquiry, any co-sale right, registration
right, right of first refusal or other
similar right (other than such preemptive
rights or other rights to subscribe for or
purchase securities as were fully complied
with or expressly waived or with respect to
the violation of which the right to make a
claim is barred by the applicable statute of
limitation);
(e) The Firm Shares and the Option Shares have
been duly and validly authorized for
issuance and sale to the Underwriters
pursuant to this Agreement and, when issued
and delivered by the Company pursuant to
this Agreement against payment therefor in
accordance with the terms hereof, will be
validly issued, fully paid and
nonassessable, and will not be issued in
violation of any preemptive right under the
charter or bylaws of the Company or, to our
knowledge after due inquiry, any co-sale
right, right of first refusal or other
similar right. The stockholders of the
Company do not have any preemptive rights
under the charter or bylaws of the Company
to purchase any of the Shares and, to our
knowledge, after due inquiry, there are no
contractual preemptive rights in favor of
the stockholders of the Company to purchase
the Shares.
(f) The Warrant Shares reserved for issuance
upon the exercise of the Warrant Agreement
have been duly and validly authorized and
are sufficient in number to meet the
exercise requirements thereof, and such
Warrant Shares, when issued upon exercise,
will be duly and validly issued, fully paid
(assuming exercise in accordance with the
Warrant Agreement and receipt by the Company
of the exercise price thereof) and
nonassessable;
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(g) The shares of Common Stock reserved for
issuance upon the exercise of the Company's
outstanding options have been duly and
validly authorized and are sufficient in
number to meet the exercise requirements of
such options, and such shares of Common
Stock, when issued upon exercise, will be
duly and validly issued, fully paid
(assuming exercise in accordance with the
governing instruments therefor and receipt
by the Company of the exercise price
thereof) and nonassessable;
(h) The issuance of the Warrant Shares to be
purchased under the Warrant Agreement, and
the shared to be purchased pursuant to the
Company's outstanding options are not
subject to any preemptive right under the
charter or bylaws of the Company, and, to
our knowledge after due inquiry, no co-sale
right, right of first refusal, or any other
similar rights arising by operation of law
or otherwise;
(i) Each Subsidiary of the Company, including
MGCO has been duly incorporated and is
validly existing as a corporation and is in
good standing under the laws of the
jurisdiction of its incorporation, has full
corporate power and authority to own, lease
and operate its properties and to conduct
its business as described in the
Registration Statement, and is duly
qualified as a foreign corporation to
transact business and is in good standing in
every jurisdiction in which, to our
knowledge after due inquiry, the
Subsidiary's business requires such
qualification; all of the issued and
outstanding capital stock of each such
Subsidiary have been duly authorized and
validly issued, is fully paid and
nonassessable and is, to our knowledge after
due inquiry, owned by the Company.
(j) This Agreement and the Warrant Agreement
have been duly authorized by all necessary
corporate action on the part of the Company
and have been duly executed and delivered by
the Company and, assuming due authorization,
execution and delivery by the Underwriters,
are valid and binding agreements of the
Company, except insofar as indemnification
and contribution provisions may be limited
by applicable law or equitable principles,
and except as enforceability may be limited
by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting
creditors' rights generally or any general
equitable principles;
(k) The Registration Statement has been declared
effective under the Acts, and the related
Form 8-A has been declared effective under
the Exchange Act; any required filing of the
Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time
period required by Rule 424(b) and no stop
order suspending the effectiveness of the
Registration Statement has been issued under
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either of the Acts or proceedings therefor
have been initiated or are pending or
threatened by the Commission;
(l) The Registration Statement, Prospectus and
each amendment or supplement to the
Registration Statement and Prospectus, as of
their respective effective or issue dates
(other than the financial statements and
supporting schedules included therein, as to
which no opinion need be rendered) complied
as to form in all material respects with the
requirements of the Acts and the applicable
Rules and Regulations;
(m) The terms and provisions of the capital
stock of the Company conform in all material
respects to the description thereof
contained in the Prospectus under the
caption "Description of Capital Stock;"
(n) To their knowledge after due inquiry, there
are no outstanding options, warrants,
convertible securities, or other rights to
acquire from the Company any capital stock,
except as described in the Registration
Statement;
(o) Except as set forth in the Prospectus, there
is not, to their knowledge after due
inquiry, pending or threatened any action,
suit, proceeding, inquiry or investigation,
to which the Company or any of its
Subsidiaries is a party, or to which the
property of the Company or its Subsidiaries
is subject, before or brought by any court
or government agency or body, which might
reasonably be expected to result in any
material adverse change in the condition,
financial or otherwise, or in the earnings,
business affairs or business prospects of
the Company and each of its Subsidiaries
considered as one enterprise, or which might
reasonably be expected to materially and
adversely affect the properties or assets
thereof or the consummation of this
Agreement or the performance by the Company
of its obligations hereunder;
(p) The information in the Prospectus under the
captions "Risk Factors," We are subject to
government regulation because of our status
as a business development company, "-The
securities in which we invest are generally
illiquid and we may not be able to sell our
investments," "-transactions with affiliates
may be limited," "Business-Governmental
Regulation," "Investment Company Act
Regulations," "Management-2000 Stock Plan,"
"Shares Eligible for Resale," and
"Description of Capital Stock" in the
Prospectus to the extent that such items
constitute matter of law, summaries of legal
matters, descriptions of statutes, licenses,
rules or regulations, documents or
proceedings, or legal conclusions, has been
reviewed by such counsel and is correct in
all material respects;
(q) Except as specified in the Prospectus, no
authorization, approval, consent or order of
any court or governmental authority or
agency
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(other than under the Acts or the
Rules and Regulations, which have been
obtained, or as may be required under the
securities or blue sky laws of the various
states) is required in connection with the
due authorization, execution and delivery of
this Agreement and the Warrant Agreement or
for the offering, issuance or sale of the
Shares to the Underwriters; the execution,
delivery and performance of this Agreement
and the Warrant Agreement and the
consummation of the transactions
contemplated herein and therein and
compliance by the Company with its
obligations hereunder and thereunder will
not, whether with or without the giving of
notice or lapse of time or both, conflict
with or constitute a breach or violation of,
or default under, or result in the creation
or imposition of any lien, charge or
encumbrance upon any property or assets of
the Company or its Subsidiary pursuant to,
any material contract, indenture, mortgage,
loan agreement, note, lease or other
instrument listed as an exhibit to the
Registration Statement nor will such action
result in any violation of the provisions of
the charter or bylaws of the Company, or any
applicable U.S. federal or state law,
administrative regulation or court decree
applicable to the Company or its Subsidiary;
(r) With the exception of the Warrant Agreement,
to our knowledge after due inquiry, no
holder of any security of the Company has
any right to require registration of any
shares of Common Stock or any other security
of the Company;
(s) The shares of capital stock of the Company
outstanding prior to the issuance of the
Purchased Shares have been duly authorized,
validly issued, fully paid and nonassessable
and such shares conform to the description
confirmed in the Prospectus under the
heading "Description of Capital Stock." The
issuance of shares of capital stock pursuant
to the Exchange (as defined in Section 7.15
hereof) does not require registration under
the Securities Act of 1933, as amended;
(t) To their knowledge after due inquiry, except
as described in the Prospectus, no person,
corporation, trust, partnership, association
or other entity has the right to include
and/or register any securities of the
Company in the Registration Statement,
require the Company to file any registration
statement or, if filed, to include any
security in such registration statement;
(u) The Company has elected to be regulated as a
business development company under the
provisions of the Investment Company Act
applicable to business development
companies, and the Commission has not
ordered that such election be withdrawn nor
to such counsel's knowledge have proceedings
to effectuate such withdrawal been initiated
or threatened by the Commission;
-22-
(v) Nothing has come to our attention which
leads us to believe that the Company is not
in compliance in any material respect with
the Investment Company Act as a business
development company;
(w) All actions under the Investment Company
Act, the Securities Act and the Exchange Act
necessary to execute and consummate this
Agreement, the Warrant Agreement, the public
offering contemplated by this Agreement and
sale of Shares pursuant to this Agreement
and the Warrant Agreement have been taken as
of the Closing Date; and
(x) The provisions of the Certificate of
Incorporation and Bylaws of the Company
comply as to form in all material respects
with the Investment Company Act and the
rules and regulations thereunder.
In rendering such opinion, such counsel may rely as
to matters of fact (but not as to legal conclusions),
to the extent they deem proper, on certificates of
responsible officers of the Company and public
officials. Such opinion shall not state that it is to
be governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other
document relating to legal opinions.
In rendering such opinions, such counsel will be
entitled to assume that the consideration paid by
Capital West for the Firm Shares, Option Shares and
Warrant Shares represent fair market value.
In giving its opinion required by this paragraph
7.6.1, ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., shall additionally
state that nothing has come to their attention that
would lead them to believe that the Registration
Statement, at the time it became effective, contained
an untrue statement of a material fact or omitted to
state a material fact required to be stated therein
or necessary to make the statements therein not
misleading or that the Prospectus, at the effective
date of the Registration Statement (unless the term
"Prospectus" refers to a prospectus which has been
provided to the Underwriters by the Company for use
in connection with the offering of the Shares which
differs from the Prospectus declared effective by the
Commission, in which case at the time it is first
provided to the Underwriters for such use) or at the
Closing Date, included an untrue statement of a
material fact or omitted to state a material fact
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made, not misleading. Such opinion may state that
such counsel does not assume any responsibility for
the accuracy, completeness or fairness of the
statements contained in the Registration Statement
and the Prospectus except as otherwise expressly
provided in such opinion, and such counsel need
express no opinion or belief as to the financial
statements, schedules, and other financial or
statistical data included in the Registration
Statement or Prospectus.
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The opinion issued by ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
L.L.P. shall provide that such opinion may be relied
upon by ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation.
7.6.2 LOCK-UP AGREEMENTS. The Underwriters shall have
obtained duly executed and delivered "lock-up"
letters from the Company, each of the Company's
officers, directors, advisory board members, and the
Other Stockholders whereby each such person agrees
not to sell, issue, pledge, hypothecate or otherwise
transfer, any of such person's shares of Common Stock
in the market as described in paragraph 2.27 of this
Agreement, which "lock-up" letters are legal, valid
and binding obligations of the parties thereto,
enforceable against each such party and any
subsequent holder of the securities subject thereto
in accordance with its terms.
7.6.3 OPINION OF UNDERWRITERS' COUNSEL. The opinion, dated
as of Closing Date, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A
Professional Corporation, counsel for the
Underwriters, in form and substance satisfactory to
Capital West, with respect to the sufficiency of all
such corporate proceedings and other legal matters
relating to this Agreement and the transactions
contemplated hereby as Capital West may reasonably
require, and the Company shall have furnished to such
counsel such papers, opinions and information as they
request to enable them to pass upon such matters.
7.7 AUDITORS' FIRST LETTER. At the time of the execution of this
Agreement, the Underwriters shall have received from ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP a letter dated such date, in form and substance
satisfactory to the Underwriters, to the following effect.
(a) They are independent public accountants with respect
to the Company and each of its Subsidiaries within
the meaning of the Act and the Rules and Regulations;
(b) It is their opinion that the balance sheet of the
Company and the financial statements of MGCO included
in the Registration Statement and covered by their
opinion therein comply as to form in all material
respects with the applicable accounting requirements
of the Acts and the Rules and Regulations;
(c) Based upon limited procedures set forth in detail in
such letter, nothing has come to their attention
which causes them to believe that, at a specified
date not more than three days prior to the date of
this Agreement, (i) the audited balance sheet of the
Company and the audited financial statements of MGCO
included in the Registration Statement do not comply
as to form in all material respects with the
applicable accounting requirements of the Acts and
the Rules and Regulations or is not presented in
conformity with generally accepted accounting
principles applied on a basis substantially
consistent with that of the other audited financial
statements included in the Registration Statement; or
(ii) at a specified date not more than three days
prior to the date of this Agreement, there has been
any change in the capital stock of the
-24-
Company and MGCO or any increase in the combined long
term debt of the Company and MGCO or any decrease in
combined net current assets or net assets as compared
with the amounts shown in the audited balance sheet
of the Company, dated April 19, 2000, or in the
audited Statements of Financial Condition of MGCO,
dated January 14, 2000, both of which are included in
the Registration Statement, or, during the period
from January 1, 2000 to a specified date not more
than three days prior to the date of this Agreement,
there were any decreases, as compared with the
corresponding period in the preceding year, in
combined revenues, net income or net income per share
of MGCO except in all instances for changes,
increases or decreases which the Registration
Statement and the Prospectus disclose have occurred
or may occur; and
(d) In addition to the examination referred to in their
opinion and the limited procedures referred to in
clause (c) above, they have carried out certain
specified procedures, not constituting an audit, with
respect to certain amounts, percentages and financial
information which are included in the Registration
Statement and Prospectus and which are specified by
the Underwriters, and have found such amounts,
percentages and financial information to be in
agreement with the relevant accounting, financial and
other records of the Company and MGCO identified in
such letter;
7.8 AUDITORS' SECOND LETTER. At the Closing Date, the Underwriters
shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP a letter, dated
as of the Closing Date, to the effect that they reaffirm the
statements made in the letter furnished pursuant to paragraph
7.7, except that the specified date referred to shall be a
date not more than three days prior to the Closing Date and,
if the Company has elected to rely on Rule 430A of the
Securities Act Regulations, to the further effect that they
have carried out procedures as specified in paragraph 7.7 with
respect to certain amounts, percentages and financial
information specified by the Underwriters and deemed to be a
part of the Registration Statement pursuant to Rule 430(A)(b)
and have found such amounts, percentages and financial
information to be in agreement with the records specified in
such paragraph 7.7.
7.9 AMEX LISTING. At the Closing Date, the Common Stock shall have
been approved for listing on the American Stock Exchange,
Inc., subject to official notice of issuance.
7.10 EXERCISE OF OPTION. If the Underwriters exercise their option
provided in paragraph 8 hereof to purchase all or any portion
of the Option Shares, the representations and warranties of
the Company contained herein and the statements in any
certificates furnished by the Company hereunder shall be true
and correct as of the Option Closing Date and, at the Option
Closing Date, the Underwriters shall have received:
7.10.1 OFFICERS CERTIFICATES. A certificate, dated the
Option Closing Date, of the President or a Vice
President of the Company and of the Chief Financial
or Chief Accounting Officer of the Company confirming
that the certificate
-25-
delivered at the Closing Date pursuant to
paragraph 7.5 hereof remains true and correct as of
the Option Closing Date (except that all references
in such Section to "Closing Date" shall be deemed
to refer to the "Option Closing Date").
7.10.2 OPINION OF COMPANY COUNSEL. The opinions of ▇▇▇▇▇▇▇ &
▇▇▇▇▇ L.L.P., counsel for the Company, in form and
substance satisfactory to counsel for the
Underwriters, dated the Option Closing Date, relating
to the Option Shares and otherwise to the same effect
as the opinion required by paragraph 7.6.1 hereof
(except that all references in such paragraph to
"Closing Date" shall be deemed to refer to the
"Option Closing Date").
7.10.3 OPINION OF UNDERWRITERS' COUNSEL. The opinion of
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation, counsel
for the Underwriters, dated the Option Closing Date,
relating to the Option Shares to be purchased on the
Option Closing Date and otherwise to the same effect
as the opinion required by paragraph 7.6.3 hereof
(except that all references in such paragraph to
"Closing Date" shall be deemed to refer to the
"Option Closing Date").
7.10.4 AUDITORS LETTER. A letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
in form and substance satisfactory to the
Underwriters and dated the Option Closing Date,
substantially the same in form and substance as the
letter furnished to the Underwriters pursuant to
paragraph 7.7 hereof, except that the "specified
date" in the letter furnished pursuant to this
paragraph 7.10.4 shall be a date not more than three
days prior to the Option Closing Date.
7.11 WARRANT AGREEMENT. The Company and Capital West shall have
entered into the Warrant Agreement, and the Company shall have
sold to Capital West the warrants contained in the Warrant
Agreement which shall be in the form attached as an exhibit to
the Warrant Agreement.
7.12 462(b) REGISTRATION STATEMENT. If the Company is required to
file a Rule 462(b) Registration Statement after the
effectiveness of this Agreement, such Rule 462(b) Registration
Statement shall have become effective by 4:30 P.M., Houston,
Texas time, on the date of this Agreement.
7.13 NO STOP ORDER. No stop order suspending the effectiveness of
the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or
shall be pending before or contemplated by the Commission.
7.14 NASD. The National Association of Securities Dealers, Inc.,
(a) upon review of the of the terms of the public offering of
the Shares, shall not have objected to the fairness and
reasonableness of the underwriting terms and arrangements as
proposed in the Agreement or in any related underwriting
agreement, and (b) shall have approved in writing the change
of ownership of MGCO resulting in MGCO becoming a wholly owned
subsidiary of the Company.
-26-
7.15 SUBSIDIARIES. The Company shall have acquired all of the
issued and outstanding capital stock and all rights in, or to
acquire, the capital stock of MGCO in a transaction qualifying
for non-recognition treatment under Section 351 of the Code
and in a manner as described in the Prospectus (the
"Exchange").
If any condition specified in this paragraph 7 is not fulfilled when
and as required to be fulfilled, this Agreement may be terminated by
Capital West by notice to the Company at any time at or prior to
Closing Date, and such termination shall be without liability of any
party to any other party except as provided in paragraph 4 and except
that paragraphs 4.11 and 9 shall survive any such termination and
remain in full force and effect.
8. OPTION SHARES.
8.1 GRANT OF OPTION. On the basis of the representations and
warranties herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants to the
Underwriters, for the purpose of covering over-allotments in
connection with the distribution and sale of the Shares only,
a non-transferable option (the "Option") to purchase up to an
aggregate 285,000 Option Shares at the purchase price per
share for the Firm Shares set forth in paragraph 3 hereof less
the expense allowance provided in paragraph 6.2 hereof.
8.2 EXERCISE OF OPTION. The Option may be exercised by Capital
West on behalf of the several Underwriters on one occasion in
whole or in part during the period of 45 days from and after
the date on which the Shares are initially offered to the
public, by giving notice to the Company. At the discretion of
Capital West, the number of Option Shares to be purchased by
each Underwriter upon the exercise of the Option will be the
same proportion of the total number of Option Shares to be
purchased by the several Underwriters pursuant to the exercise
of the Option as the number of Firm Shares purchased by such
Underwriter (set forth in Schedule "1" hereto) bears to the
total number of Firm Shares purchased by the several
Underwriters (set forth in Schedule "1" hereto), adjusted by
the Underwriters in such manner as to avoid fractional shares.
8.3 CERTIFICATES FOR OPTION SHARES. Delivery of definitive
certificates for the Option Shares to be purchased by the
Underwriters pursuant to the exercise of the option granted by
this paragraph 8 will be made against payment of the purchase
price therefor by the Underwriters by certified or official
bank check or checks drawn in same day funds, payable to the
order of the Company. Such delivery and payment shall take
place at the offices of Capital West, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at such other place as
may be agreed upon between the Underwriters and the Company on
the Closing Date, if written notice of the exercise of such
option is received by the Company not later than three full
business days prior to the Closing Date. The certificates for
the Options Shares so to be delivered will be made available
to Capital West at such office or other location including,
without limitation, in Oklahoma City, as Capital West may
reasonably request for checking at least two full business
days prior to the date of payment and delivery and will be in
such names and denominations as Capital West may request, such
request to be made
-27-
at least three full days prior to such date of payment and
delivery. If Capital West so elects, delivery of the Shares
may be made by credit through full fast transfer to the
accounts at Depository Trust Company by the Underwriters. It
is understood that Capital West, individually, and not as the
representative of the Underwriters, may (but shall not be
obligated to) make payment of the purchase price on behalf of
any Underwriter or Underwriters whose check or checks shall
not have been received by Capital West prior to the date of
payment and delivery for the Option Shares to be purchased by
such Underwriter or Underwriters. Any such payment by Capital
West shall not relieve any Underwriters of any of its or their
obligations hereunder.
8.4 CONDITIONS PRECEDENT. Upon exercise of any option provided for
in paragraph 8.1 hereof, the obligations of the Underwriters
to purchase such Option Shares will be subject (as of the date
hereof and as of the date of payment for such Option Shares)
to the accuracy of and compliance with the representations and
warranties of the Company herein, to the accuracy of the
statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the
Company of their respective obligations hereunder, and to the
condition that all proceedings taken at or prior to the
payment date in connection with the sale and transfer of such
Option Shares must be satisfactory in form and substance to
Capital West and to Underwriters' counsel, and Capital West
shall have been furnished with all such documents,
certificates and opinions as Capital West may reasonably
request in order to evidence the accuracy and completeness of
any of the representations, warranties or statements, the
performance of any of the covenants of the Company or the
compliance with any of the conditions herein contained.
9. INDEMNIFICATION AND CONTRIBUTION.
9.1 INDEMNIFICATION OF UNDERWRITERS. The Company agrees to
indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, as
incurred, to which such Underwriter may become subject under
the Acts or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or
are based upon (a) any breach of any representation, warranty,
agreement or covenant of the Company herein contained, or (b)
any untrue statement or alleged untrue statement made by the
Company in paragraph 2 hereof, or (c) any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus, the
Prospectus or any amendment or supplement thereto, or in any
blue sky application or other document executed by the Company
specifically for that purpose or based upon written
information furnished by the Company filed in any state or
other jurisdiction in order to qualify any or all of the
Shares under the securities laws thereof (any such
application, documents or information being hereinafter called
a "Blue Sky Application"), or (d) the omission or alleged
omission to state in the Registration Statement or any
amendment thereto a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or the omission or alleged omission to state in
any preliminary prospectus, the Prospectus or any supplement
thereto or in any Blue Sky Application a material fact
required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
-28-
which they were made, not misleading. The Company will
reimburse each Underwriter on a monthly basis for any legal or
other reasonable expenses as incurred by such Underwriter in
connection with investigating or defending against or
appearing as a third-party witness in connection with any such
loss, claim, damage, liability or action, notwithstanding the
possibility that payments for such expenses might later be
held to be improper, in which case the person receiving them
shall promptly refund them. Notwithstanding the foregoing, the
Company will not be liable in any such case to the extent, but
only to the extent, that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission
made in the Registration Statement, such preliminary
prospectus or the Prospectus, or any amendment or supplement,
in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Underwriter
specifically for use in the preparation thereof and, provided
further, that the indemnity agreement provided in this
paragraph 9.1 with respect to any preliminary prospectus shall
not inure to the benefit of any Underwriter from whom the
person asserting any losses, claims, charges, liabilities or
litigation based upon any untrue statement or alleged untrue
statement of material fact or omission or alleged omission to
state therein a material fact purchased Shares, if a copy of
the Prospectus in which such untrue statement or alleged
untrue statement or omission or alleged omission was corrected
has not been sent or given to such person within the time
required by the Act and the Rules and Regulations thereunder,
unless such failure is the result of noncompliance by the
Company with paragraph 4.5 hereof.
9.2 INDEMNIFICATION OF COMPANY. Subject to the limitations
contained in this paragraph 9.2, each Underwriter severally,
but not jointly, shall indemnify and hold harmless the Company
against any losses, claims, damages or liabilities, as
incurred, to which the Company may become subject, under the
Acts or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon (a) any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration
Statement, preliminary prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) in any Blue Sky
Application, or (c) the omission or alleged omission to state
in the Registration Statement or any amendment thereto a
material fact required to be stated therein or necessary to
make the statements therein not misleading, or the omission or
alleged omission to state in any preliminary prospectus, the
Prospectus or any supplement thereto or in any Blue Sky
Application a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
Underwriters, severally, but not jointly, will reimburse any
legal or other expenses reasonably incurred by the Company in
connection with investigation or defending against any such
loss, claim, damage, liability or action. Notwithstanding the
foregoing, such indemnification by each Underwriter shall be
available in each such case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement
or omission or alleged omission in the Registration Statement,
preliminary prospectus, the Prospectus or any amendment or
supplement thereto, or in any Blue Sky Application was made in
reliance upon and in conformity with written information
furnished to the Company through the
-29-
Underwriters by or on behalf of such Underwriter specifically
for use in the preparation thereof.
9.3 INDEMNIFICATION PROCEDURE. Promptly after receipt by an
indemnified party under paragraph 9.1 or 9.2 above 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 under such subsection,
notify the indemnifying party in writing of the claim or the
commencement of that action; 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
such subsection. 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 reasonably
satisfactory to the indemnified party; provided, however, if
the defendants in any such action include both the indemnified
parties and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties
which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. After
notice from the indemnifying party to the indemnified party of
its election to assume the defense of such claim or action,
the indemnifying party shall not be liable to the indemnified
party under such subsection for any legal or other expenses
subsequently incurred by the indemnified party in connection
with the defense thereof unless (a) the indemnified party
shall have employed separate counsel in accordance with the
proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (together with
appropriate local counsel) approved by the indemnifying party,
representing all the indemnified parties under paragraph 9.1
and 9.2 hereof who are parties to such action), (b) the
indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of
commencement of the action, or (c) the indemnifying party has
authorized the employment of counsel for the indemnified party
at the expense of the indemnifying party.
9.4 CONTRIBUTION. In order to provide for just and equitable
contribution in any action in which a claim for
indemnification is made pursuant to this paragraph 9 for which
it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that this paragraph 9
provides for indemnification in such case, all the parties
hereto shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that the
Underwriters are responsible pro rata for the portion
represented by the percentage that the underwriting discount
bears to the initial public offering price, and the Company is
responsible for the remaining portion; provided,
-30-
however, that (a) no Underwriter shall be required to
contribute any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter, and
(b) no person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to
a contribution from any person who is not guilty of such
fraudulent misrepresentation. This subparagraph 9.4 shall not
be operative as to any Underwriter to the extent that the
Company has received indemnity under this paragraph 9.
9.5 AFFILIATES. The obligations of the Company under this
paragraph 9 shall be in addition to any liability which the
Company may otherwise have, and shall extend, upon the same
terms and conditions, to each officer and director of each
Underwriter and to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations
of the Underwriters under this paragraph 9 shall be in
addition to any liability that the respective Underwriters may
otherwise have, and shall extend, upon the same terms and
conditions, to each director of the Company (including any
person who, with his consent, is named in the Registration
Statement as about to become a director of the Company), to
each officer of the Company who has signed the Registration
Statement and to each person, if any, who controls the Company
within the meaning of the Securities Act, in either case,
whether or not such person is a party to any action or
proceeding.
9.6 ACKNOWLEDGMENT. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who
were represented by counsel during the negotiations regarding
the provisions hereof including without limitation the
provisions of this paragraph 9, and are fully informed
regarding said provisions. They further acknowledge that the
provisions of this paragraph 9 fairly allocate the risks in
light of the ability of the parties to investigate the Company
and its business in order to assure that adequate disclosure
is made in the Registration Statement and Prospectus as
required by the Act and the Exchange Act. The parties are
advised that federal or state public policy, as interpreted by
the courts in certain jurisdictions, may be contrary to
certain of the provisions of this paragraph 9, and the parties
hereto hereby expressly waive and relinquish any right or
ability to assert such public policy as a defense to a claim
under this paragraph 9 and further agree not to attempt to
assert any such defense.
10. REPRESENTATIONS, WARRANTIES, AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, covenants and agreements of the Company contained
in this Agreement (including, without limitation, the agreements of the Company
set forth in paragraphs 4 and 5 hereof, or contained in certificates of officers
of the Company submitted pursuant hereto, and the indemnity and contribution
agreements contained in paragraph 9 hereof, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Company, or any of
its officers, controlling persons or directors and shall survive delivery of the
Shares to the several Underwriters hereunder or termination of this Agreement.
11. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters shall fail
to take up and pay for the number of Shares agreed by such Underwriter or
Underwriters to be purchased hereunder
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upon tender of such Shares in accordance with the terms hereof, and if the
aggregate number of Shares which such defaulting Underwriter or Underwriters
so agreed but failed to purchase does not exceed 10% of the Shares, the
remaining Underwriters shall be obligated, severally in proportion to their
respective commitments hereunder, to take up and pay for the Shares of such
defaulting Underwriter or Underwriters. If any Underwriter or Underwriters so
defaults and the aggregate number of Shares which such defaulting Underwriter
or Underwriters agreed but failed to take up and pay for exceeds 10% of the
Shares, the remaining Underwriters shall have the right, but shall not be
obligated, to take up and pay for (in such proportions as may be agreed upon
among them) the Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If such remaining Underwriters do not, at the
Closing Date, take up and pay for the Shares which the defaulting Underwriter
or Underwriters so agreed but failed to purchase, the Closing Date shall be
postponed for twenty-four hours to allow the several Underwriters the
privilege of substituting within twenty-four hours (including non-business
hours) another underwriter or underwriters (which may include any
nondefaulting Underwriter) satisfactory to the Company. If no such
underwriter or underwriters shall have been substituted as aforesaid by such
postponed Closing Date, the Closing Date may, at the option of the Company,
be postponed for a further twenty-four hours, if necessary to allow the
Company the privilege of finding another underwriter or underwriters,
satisfactory to Capital West, to purchase the Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase. If it shall be
arranged for the remaining Underwriters or substituted underwriters to take
up the Shares of the defaulting Underwriter or Underwriters as provided in
this paragraph, (a) the Company shall have the right to postpone the time of
delivery for a period of not more than seven full business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and
the Company agrees promptly to file any amendments to the Registration
Statement or supplements to the Prospectus which may thereby be made
necessary, and (b) the respective number of Shares to be purchased by the
remaining Underwriters and substitute underwriters shall be taken as the
basis of their underwriting obligation. If the remaining Underwriters shall
not take up and pay for all such Shares so agreed to be purchased by the
defaulting Underwriter or Underwriters or substitute another underwriter or
underwriters as aforesaid and the Company shall not find or shall not elect
to seek another underwriter or underwriters for such Shares as aforesaid,
then this Agreement shall terminate.
11.1 EFFECT OF TERMINATION. In the event of any termination of this
Agreement pursuant to the preceding paragraph of this
paragraph 11, neither the Company shall be liable to any
Underwriter (except as provided in paragraphs 6 and 9 hereof)
nor shall any Underwriter (other than an Underwriter who shall
have failed, otherwise than for some reason permitted under
this Agreement, to purchase the number of Shares agreed by
such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters
for damages, if any, resulting from such default) be liable to
the Company (except to the extent provided in paragraphs 6 and
9 hereof).
11.2 UNDERWRITER DEFINED. The term "Underwriter" in this Agreement
shall include any person substituted for an Underwriter under
this paragraph.
12. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
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12.1 EFFECTIVE DATE. This Agreement shall become effective at the
later of (a) execution of this Agreement, or (b) when
notification of the effectiveness of the Registration
Statement has been released by the Commission.
12.2 TERMINATION. Capital West shall have the right to terminate
this Agreement by giving notice as hereinafter specified at
any time at or prior to the Closing Date (a) if the Company
shall have failed, refused or been unable, to perform any
agreement on its part to be performed, or because any other
condition of the Underwriters' obligations hereunder required
to be fulfilled by the Company is not fulfilled including,
without limitation, any change in the financial condition,
earnings, operations, business, management, technical staff,
or business prospects of the Company from that set forth in
the Registration Statement or Prospectus which, in Capital
West's sole judgment, is material and adverse, or (b) if
trading on the American Stock Exchange or the Nasdaq Stock
Market or the Nasdaq Stock Market SmallCap shall have been
suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall
have been required on the American Stock Exchange or the
Nasdaq Stock Market or the Nasdaq Stock Market SmallCap, by
the American Stock Exchange, the Nasdaq Stock Market, or the
Nasdaq Stock Market SmallCap or by order of the Commission or
any other governmental authority having jurisdiction, or if a
banking moratorium shall have been declared by federal,
Delaware, or Oklahoma authorities, or (c) if on or prior to
the Closing Date, or on or prior to any later date on which
Option Shares are to be purchased, as the case may be, the
Company shall have sustained a loss by strike, fire, flood,
earthquake, accident or other calamity of such character as to
interfere materially and adversely with the conduct of the
business and operations of the Company regardless of whether
or not such loss shall have been insured, or (d) if there
shall have been a material adverse change in the general
political or economic conditions or financial markets in the
United States as in Capital West's reasonable judgment makes
it inadvisable or impracticable to proceed with the offering,
sale and delivery of the Shares, or (e) if on or prior to the
Closing Date, or on or prior to any later date on which Option
Shares are to be purchased, as the case may be, there shall
have been an outbreak or escalation of hostilities or other
international or domestic calamity, crises or material adverse
change in political, financial or economic conditions, the
effect of which on the financial markets of the United States
is such as to make it in Capital West's reasonable judgment,
inadvisable to proceed with the marketing of the Shares. In
the event of termination pursuant to this paragraph 12.2, the
Company shall remain obligated to pay costs and expenses
pursuant to paragraphs 4.11, 6 and 9 hereof.
12.3 NOTIFICATION. If Capital West elects to prevent this Agreement
from becoming effective or to terminate this Agreement as
provided in this paragraph 12, Capital West shall promptly
notify the Company by telephone or telecopy, in each case
confirmed by letter. If the Company shall elect to prevent
this Agreement from becoming effective, the Company shall
promptly notify Capital West by telephone or telecopy, in each
case, confirmed by letter.
13. NOTICES. All notices and other communications hereunder shall be in writing
and shall be deemed to have been given if mailed or transmitted by any standard
form of telecommunication.
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Notices to the Underwriters shall be directed to the Underwriters in care of
Capital West Securities, Inc., ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇; notices to the Company shall be
directed to it at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, attention of
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer.
14. PARTIES. This Agreement shall inure to the benefit of and be binding upon
the several Underwriters and the Company and their respective executors,
administrators, successors, and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or corporation,
other than the parties hereto and their respective executors, administrators,
successors, and assigns and the controlling persons and officers and directors
referred to in paragraph 9 hereof any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provisions herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the parties hereto and their respective executors,
administrators, successors, and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or corporation.
No purchaser of the Shares from any Underwriter shall be construed to be a
successor by reason merely of such purchase.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Oklahoma applicable to agreements made
and to be performed in said State, without regard to conflict of laws
principles. Specified times of day refer to Central Standard Time.
16. COUNTERPARTS. This Agreement may be signed in several counterparts, each of
which will constitute an original.
17. BINDING ARBITRATION. Each party to this Agreement agrees that any dispute or
controversy arising between any of the parties to this agreement, or any person
or entity in privity therewith, out of the transactions effected and
relationships created pursuant to this Agreement and each other agreement
created in connection herewith, including any dispute or controversy regarding
the formation, terms, or construction of this Agreement, regardless of kind or
character, must be resolved through binding arbitration. Each party to this
Agreement agrees to submit such dispute or controversy to arbitration before the
American Arbitration Association (the "Association") in Oklahoma City, Oklahoma,
and further agrees to be bound by the determination of an arbitration panel
consisting of three persons. If demand for arbitration is made, each party will
have the right to select one independent arbitrator. If the party upon whom the
demand for arbitration is served fails to select an arbitrator within 20 days,
then the Association may select a second arbitrator upon application by either
party. The two arbitrators shall select a third arbitrator. If the two
arbitrators fail to select a third arbitrator within 20 days, the third
arbitrator may be selected and appointed by the Association upon application by
either party. The arbitrators' decision concerning the claim, controversy or
dispute, including allocation among the parties of costs and expenses associated
with the arbitration, shall be final and binding on the parties and judgment on
the award may be entered in any court of competent jurisdiction. Any party to
this Agreement may bring an action, including a summary or expedited proceeding,
to compel arbitration of any such dispute or controversy in a court of competent
jurisdiction and, further, may seek provisional or ancillary remedies including
temporary or injunctive relief in connection with such dispute or controversy in
a court of competent jurisdiction, provided that the dispute or controversy is
ultimately resolved through binding arbitration conducted in accordance with the
terms and conditions of this section.
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18. HEADINGS. The headings herein are for purposes of reference only and shall
not limit or otherwise affect the meaning of any of the provisions hereof.
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If the foregoing correctly sets forth your understanding of our
agreement, please sign in the space provided below for that purpose, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Underwriters and the Company in accordance with its terms.
Very truly yours,
MGi2, INC.
By:
--------------------------------------
Name
------------------------------
Title
-----------------------------
CONFIRMED AND ACCEPTED, as of the date first above written:
CAPITAL WEST SECURITIES, INC.,as
Representative of the Underwriters
By:
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman
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SCHEDULE 1
ALLOCATION OF SHARES TO BE PURCHASED
UNDERWRITER NUMBER OF SHARES TO BE PURCHASED
Capital West Securities, Inc. [________________]
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
One Leadership Square
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
I-Bankers Securities, Inc. [________________]
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Westport Resources Investment Services, Inc. [________________]
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
APS Financial Corporation [________________]
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇