Gen-Net Lease Income Trust, Inc.
Minimum of 300,000 shares
And a Maximum of 2,500,000 shares
of Common Stock
Revised Draft
5/14/02
Best Efforts Placement Agent Agreement
, 2002
Investors Capital Corporation
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs:
Gen-Net Lease Income Trust, Inc. (the "Company"), proposes to issue and
sell to the public a minimum of 300,000 shares and a maximum of 2,500,000 shares
of common stock of the Company referred to as the ("Securities"). The Company
hereby confirms the arrangement made by it with respect to the designation of
Investors Capital Corporation ("ICC") as the Exclusive Managing
Underwriter ("Underwriter") to offer to the public the Securities and to use its
`best efforts' with regard thereto. This is not a firm commitment underwriting
and ICC is not obligated to purchase any of the Securities from the Company.
1. Filing of Registration Statement with S.E.C. and Definitions. A
Registration Statement and Prospectus on Form S-11 (File No. 333-72404)
with respect to the Securities has been carefully and accurately prepared
by the Company in conformity with the requirements of the Securities Act of
1933, as amended (the "Act"), and the published rules and regulations (the
"Rules and Regulations") thereunder or under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Such registration statement,
including the prospectus, Part II, and all financial schedules and exhibits
thereto, as amended at the time when it shall become effective, is herein
referred to as the "Registration Statement," and any prospectus included as
part of the Registration Statement on file with the Securities and Exchange
Commission ("Commission") that discloses all the information that was
omitted from the prospectus on any effective date pursuant to Rule 430A of
the Rules and Regulations with any changes contained in any prospectus
filed with the Commission by the Company with the Underwriters consent
after the effective date of the Registration Statement, is herein referred
to as the "Final Prospectus." The prospectus included as part of the
Registration Statement of the Company and in any amendments thereto prior
to the effective date of the Registration Statement is referred to herein
as a "Preliminary Prospectus."
2. Commission, Delivery, and Sale of the Securities
(a) Subject to the terms and conditions of this Agreement, and on the basis
of the representations, warranties, and agreements herein contained, the
Underwriter agrees to offer and sell the Securities at a public offering price
of $10.00 per share on a `Best Efforts' basis with a requirement that a minimum
of $3,000,000 of said securities be `sold' within 60 days from the effective
date of the registration statement and if the minimum is sold within the meaning
of 1934 Act Rules 10b-9 and 15c2-4, then the offering may continue as to the
unsold balance of shares for the period stated in the Prospectus. From the gross
proceeds the Company will pay the Underwriter a gross commission of 7.25% to be
deducted therefrom; in addition the Underwriter will be further compensated as
described in Section 4(g) herein, the underwriter's additional expenses. In
furtherance of its obligation under this Agreement, the Underwriter shall
conduct appropriate and ongoing due diligence, run the books of the offering,
enter into selling group arrangements with other participating broker/dealers,
assist in road shows and road show preparations where appropriate, supervise the
escrow agent and escrow account, and other such matters pertaining to the
offering that are consistent with the foregoing.
(b) Delivery of the Securities against payment of the purchase price,
pursuant to the required Escrow Agreement, shall take place at the offices of
ICC, within three (3) business days after the receipt of the minimum funds and
subsequent distributions of proceeds from the offering (the initial and
subsequent distributions), or such other location as the parties may agree.
The Company will make the certificates for the shares of Common Stock
hereunder available to the Underwriter for inspection and packaging at least two
(2) full business days prior to the initial distribution date. The certificates
shall be in such names and denominations as the Underwriter may request to the
Company in writing at least four (4) full business days prior to any
distribution date.
For all purposes herein, the term "Closing Date" shall mean that date on
which the Commission declares the Registration Statement to be effective, or
such other date as is mutually agreed upon in writing by the Company and the
Underwriter.
3. Representations and Warranties of the Company.
(a) The Company represents and warrants to you as follows:
(i) The Company has prepared and filed with the Commission a registration
statement, and an amendment or amendments thereto, on Form S-11 (No. 333-72404),
including any related Preliminary Prospectus for the registration of the
Securities, which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
Rules and Regulations. The Company will promptly file a further amendment to
said registration statement in the form heretofore delivered to the Underwriter
and will not file any other amendment thereto to which the Underwriter shall
have objected verbally or in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the preliminary prospectus, financial
statements, any schedules, exhibits and all other documents filed as a part
thereof or that may be incorporated therein (including, but not limited to those
documents or information incorporated by reference therein) and all information
deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule
430(A) of the Rules and Regulations), is hereinafter called the "Registration
Statement," and the form of prospectus in the form as filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations, is hereinafter called the
"Final Prospectus."
(ii) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any Prospectus or the Registration
Statement and no proceeding for an order suspending the effectiveness of any
prospectus or the Registration Statement or any of the Company's securities has
been instituted or is pending or threatened. Each such Prospectus and/or any
supplement thereto has conformed in all material respects with the requirements
of the Act and the Rules and Regulations and on its date did not include any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading, in light of the circumstances
under which they were made; and when the Prospectus and any supplements thereto
becomes legally effective and for twenty-five (25) days subsequent thereto (i)
the Prospectus and/or any supplement thereto will contain all statements which
are required to be stated therein by the Act and Rules and Regulations, and (ii)
the Prospectus and/or any supplement thereto will not 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 not misleading, in
light of the circumstances under which they were made; provided, however, that
no representations, warranties or agreements are made hereunder as to
information contained in or omitted from the Prospectus in reliance upon, and in
conformity with, the written information furnished to the Company by you.
(iii) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its incorporation,
with full power and authority (corporate and other) to own its properties and
conduct its businesses as described in the Prospectus and is duly qualified to
do business as a foreign corporation in good standing in all other jurisdictions
in which the nature of its business or the character or location of its
properties requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the business, properties or
operations of the Company as a whole.
2
(iv) The Company has full legal right, power and authority to authorize,
issue, deliver and sell the Securities, to enter into this "Best Efforts"
Agreement, and to consummate the transaction provided for in such agreement, and
such agreement has been duly and properly authorized, and on the Closing Date
will be duly and properly executed and delivered by the Company. This Agreement
constitutes and on the Closing Date will then constitute a valid and binding
agreement of the Company enforceable in accordance with their respective terms,
(except as the enforceability thereof may be limited by bankruptcy or other
similar laws affecting the rights of creditors generally or by general equitable
principles, and except as the enforcement of indemnification provisions may be
limited by federal or state securities laws.
(v) Except as disclosed in the Prospectus, the Company is not in violation
of its respective certificate or articles of incorporation or bylaws or in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any material bond, debenture, note or other
evidence of indebtedness or in any material contract, indenture, mortgage, loan
agreement, lease, joint venture, partnership or other agreement or instrument to
which the Company is a party or by which it may be bound or is not in material
violation of any law, order, rule, regulation, writ, injunction or decree of any
governmental instrumentality or court, domestic or foreign; and the execution
and delivery of this Agreement and the consummation of the transactions
contemplated therein and in the Prospectus and compliance with the terms of each
such agreement will not conflict with, or result in a material breach of any of
the terms, conditions or provisions of, or constitute a material default under,
or result in the imposition of any material lien, charge or encumbrance upon any
of the property or assets of the Company pursuant to, any material bond,
debenture, note or other evidence of indebtedness or any material contract,
indenture, mortgage, loan agreement, lease, joint venture, partnership or other
agreement or instrument to which the Company is a party nor will such action
result in the material violation by the Company of any of the provisions of its
respective certificate or articles of incorporation or bylaws or any law, order,
rule, regulation, writ, injunction, decree of any government, governmental
instrumentality or court, domestic or foreign, except where such violation will
not have a material adverse effect on the financial condition of the Company.
(vi) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus and the Company will have the adjusted
capitalization set forth therein on the Closing Date; provided that the Company
may issue additional shares to the extent disclosed in the Final Prospectus; all
of the shares of issued and outstanding capital stock of the Company set forth
therein have been duly authorized, validly issued and are fully paid and
nonassessable; the holders thereof do not have any rights of rescission with
respect thereto and are not subject to personal liability for any obligations of
the Company by reason of being stockholders under the laws of the State in which
the Company is incorporated; none of such outstanding capital stock is subject
to or was issued in violation of any preemptive or similar rights of any
stockholder of the Company; and such capital stock (including the Securities,)
conforms in all material respects to all statements relating thereto contained
in the Prospectus.
(vii) The Company is not a party to or bound by any instrument, agreement
or other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement or as described
in the Prospectus. The Securities are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and will conform in all
material respects to the respective descriptions thereof contained in the
Prospectus; except for payment of the applicable purchase price payable upon
exercise of the options or warrants, as the case may be the holders thereof will
not be subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the Securities has
been duly and validly taken; and the certificates representing the Securities
will conform with all legal requirements therefor. Upon the issuance and
delivery pursuant to the terms hereof of the Securities sold by the Company
hereunder, the purchasers will acquire good and marketable title to such
Securities free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction of any kind whatsoever other than
restrictions as may be imposed under the securities laws.
(viii) The Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described or referred
to in the Prospectus or which are not materially significant or important in
relation to its business or which have been incurred in the ordinary course of
business or for taxes not yet due and payable and except for a security interest
granted to the Company's lender; except as described in the Prospectus all of
the leases and subleases under which the Company holds properties or assets as
lessee or sublessee as described in the Prospectus are in full force and effect,
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and the Company is not in material default in respect of any of the terms or
provisions of any of such leases or subleases, and no claim has been asserted to
the Company by anyone adverse to the Company's rights as lessor, sublessor,
lessee or sublessee under any of the leases or subleases mentioned above or
affecting or questioning the Company's right to the continued possession of the
leased or subleased premises or assets under any such lease or sublease; and the
Company owns or leases all such properties as are necessary to its operations as
now conducted and as contemplated to be conducted, except as otherwise stated in
the Prospectus.
(ix) The financial statements, together with related notes, set forth in
the Prospectus fairly present in all material respects the financial position
and results of operations of the Company at the respective dates and for the
respective periods to which they apply. Said statements and related notes have
been prepared in accordance with generally accepted accounting principles
applied on a basis which is consistent in all material respects during the
periods involved but any stub period has not been audited by an independent
accounting firm. There has been no material adverse change or material
development involving a prospective change in the condition, financial or
otherwise, or in the prospects, value, operation, properties, business or
results of operations of the Company whether or not arising in the ordinary
course of business, since the date of the financial statements included in the
Registration Statement and the Prospectus.
(x) Subsequent to the respective dates as of which information is given in
the Prospectus as it may be amended or supplemented, and except as described in
the Prospectus, the Company has not, directly or indirectly, incurred any
liabilities or obligations, direct or contingent, not in the ordinary course of
business or entered into any transactions not in the ordinary course of
business, which are material to the business of the Company as a whole and there
has not been any change in the capital stock of, or any incurrence of long term
debts by, the Company or any issuance of options, warrants or rights to purchase
the capital stock of the Company or declaration or payment of any dividend on
the capital stock of the Company or any material adverse change in the condition
(financial or other), net worth or results of operations of the Company as a
whole and the Company has not become a party to, any material litigation whether
or not in the ordinary course of business.
(xi) To the knowledge of the Company, except as disclosed in the Prospectus
there is no pending or threatened, action, suit or proceeding to which the
Company is a party before or by any court or governmental agency or body, which
might result in any material adverse change in the condition (financial or
other), business or prospects of the Company as a whole or might materially and
adversely affect the properties or assets of the Company as a whole nor are
there any actions, suits or proceedings against the Company related to
environmental matters or related to discrimination on the basis of age, sex,
religion or race which might be expected to materially and adversely affect the
conduct of the business, property, operations, financial condition or earnings
of the Company as a whole; and no labor disturbance by the employees of the
Company individually exists or is, to the knowledge of the Company, imminent
which might be expected to materially and adversely affect the conduct of the
business, property, operations, financial condition or earnings of the Company
as a whole.
(xii) Except as may be disclosed in the Prospectus, the Company has
properly prepared and filed all necessary federal, state, local and foreign
income and franchise tax returns, has paid all taxes shown as due thereon, has
established adequate reserves for such taxes which are not yet due and payable,
and does not have any tax deficiency or claims outstanding, proposed or assessed
against it.
(xiii) Except as may be disclosed in the Prospectus, the Company has
sufficient licenses, permits, right to use trade or service marks and other
governmental authorizations currently required for the conduct of its business
as now being conducted and as contemplated to be conducted and the Company is in
all material respects complying therewith. Except as set forth in the
Prospectus, the expiration of any such licenses, permits, or other governmental
authorizations would not materially affect the Company's operations. To its
knowledge, none of the activities or businesses of the Company are in material
violation of, or cause the Company to materially violate any law, rule,
regulations, or order of the United States, any state, county or locality, or of
any agency or body of the United States or of any state, county or locality the
violation of which would have a material adverse effect on the business
properties or financial condition of the Company taken as a whole.
(xiv) The Company has not at any time (i) made any contributions to any
candidate for political office in violation of law, or failed to disclose fully
any such contribution, or (ii) made any payment to any state, federal or
4
foreign governmental officer or official, or other person charged with similar
public or quasipublic duties, other than payments required or allowed by
applicable law.
(xv) Except as set forth in the Prospectus the Company knows of no
outstanding claims for services either in the nature of a finder's fee,
brokerage fee or otherwise with respect to this financing for which the Company
or the Underwriters may be responsible, or which may affect the Underwriters'
compensation as determined by the National Association of Securities Dealers
Regulation, Inc. ("NASD") except as otherwise disclosed in the Prospectus or
known by the Underwriters.
(xvi) The Company has its property adequately insured against loss or
damage by fire and maintains such other insurance as is customarily maintained
by companies in the same or similar business.
(xvii) Reserved
(xviii) Except as set forth in the Prospectus, no default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, installment sale agreement, lease, deed
of trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement, purchase order, or any other agreement or instrument evidencing an
obligation for borrowed money, or any other material agreement or instrument to
which the Company is a party or by which the Company may be bound or to which
the property or assets (tangible or intangible) of the Company is subject or
affected.
(xix) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and, is in substantial compliance in all
material respects with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours. To the best of the Company's knowledge, there
are no pending investigations involving the Company, by the U.S. Department of
Labor, or any other governmental agency responsible for the enforcement of such
federal, state, local, or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or to its knowledge involving the
Company, or any predecessor entity, and none has ever occurred. There is no
representation question pending respecting the employees of the Company, and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. There is no grievance or arbitration proceeding
pending or to its knowledge threatened under any expired or existing collective
bargaining agreements of the Company. No labor dispute with the employees of the
Company is pending, or, to its knowledge is imminent; and the Company is not
aware of any pending or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers or contractors which may result in any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs, position, prospects, value, operation, properties,
business or results of operations of the Company.
(xx) Except as may be set forth in the Registration Statement, the Company
does not maintain, sponsor or contribute to any program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan," or a
"multi-employer plan" as such terms are defined in Sections 3(2), 3(l) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute,
now or at any time previously, to a defined benefit plan, as defined in Section
3(35) of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Internal Revenue Code (the "Code"), which could subject the Company
to any tax penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all material reporting,
disclosure and other requirements of the Code and ERISA as they relate to any
such ERISA Plan. The Company has never completely or partially withdrawn from a
"multi-employer plan."
(xxi) None of the Company, or any of its employees, directors,
stockholders, or affiliates (within the meaning of the Rules and Regulations)
has 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 Securities.
(xxii) Except as disclosed in the Prospectus, none of the patents, patent
applications, trademarks, service marks, trade names, copyrights, and licenses
and rights to the foregoing presently owned or held by the Company, are
5
in dispute or, to the knowledge of the Company's management are in any conflict
with the right of any other person or entity. The Company (i) except as
disclosed in the Prospectus owns or has the right to use, all patents,
trademarks, service marks, trade names and copyrights, technology and licenses
and rights with respect to the foregoing, used in the conduct of its business as
now conducted or proposed to be conducted without infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing, and except as set
forth in the Prospectus or otherwise disclosed to the Underwriters in writing,
to the best knowledge of the Company's management is not obligated or under any
liability whatsoever to make any material payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service ▇▇▇▇, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(xxiii) Except as disclosed in the Prospectus the Company owns and has
adequate right to use to the best knowledge of the Company's management all
trade secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
designs, processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual property") required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company. The Company is not aware of
any such development of similar or identical trade secrets or technical
information by others. In the event the Company has valid and binding
confidentiality agreements with all of its officers, covering its intellectual
property (subject to the equitable powers of any court), such agreements have
remaining terms of at least two years from the effective date of the
Registration Statement except where the failure to have such agreements would
not materially and adversely effect the Company's business taken as a whole. The
Company has good and marketable title to, or valid and enforceable leasehold
estates in, all items of real and personal property stated in the Prospectus, to
be owned or leased by it free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects, or other restrictions or
equities of any kind whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable.
(xxiv) ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.L.L.C, whose reports are filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(xxv) The Company has agreed to execute and has caused to be duly executed
agreements pursuant to which each of the Company's officers and directors and
stockholders of the common stock outstanding and any person or entity deemed to
be an affiliate of the Company pursuant to the Rules and Regulations of the SEC,
has agreed not to, directly or indirectly, sell, assign, transfer, hypothecate,
or otherwise dispose of any shares of Common Stock or securities convertible
into, exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144 of the
Rules and Regulations or otherwise) for a period of not less than eighteen) (18)
months following such effective date of the Company.
(xxvi) Reserved
(xxvii) Except as set forth in the Prospectus or disclosed in writing to
the Underwriters (which writing specifically refers to this Section), no
officer or director of the Company, holder of 5% or more of securities of the
Company or any "affiliate" or "associate" (as these terms are defined in Rule
405 promulgated under the Rules and Regulations) of any of the foregoing persons
or entities has or has had, either directly or indirectly, (i) an interest in
any person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services, or
(ii) a beneficiary interest in any contract or agreement (other than a
subscription agreement) to which the Company is a party or by which it is or
may be bound or affected. Except as set forth in the Prospectus under "Certain
Transactions" or disclosed in writing to the Underwriters (which writing
specifically refers to this Section) there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company, and
any officer, director, principal stockholder of the Company, or any partner,
affiliate or associate of any of the foregoing persons or entities.
(xxviii) Any certificate signed by any officer of the Company, and
delivered to the Underwriter or to the Underwriters' counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriter
as to the matters covered thereby.
6
(xxix) Each of the minute books of the Company has been made available to
the Underwriter and contains a complete summary of all meetings and actions of
the directors and stockholders of the Company, since the time of its
incorporation and reflect all transactions referred to in such minutes
accurately in all respects.
(xxx) Reserved
(xxxi) Except and only to the extent described in the Prospectus or
disclosed in writing to the Underwriter (which writing specifically refers to
this Section), no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have the
right to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or to require
the Company to file a registration statement under the Act and no person or
entity holds any anti-dilution rights with respect to any securities of the
Company. Except as disclosed in the Prospectus, all rights so described or
disclosed have been waived or have not been triggered with respect to the
transactions contemplated by this Agreement.
(xxxii) The Company has not entered into any employment agreements with
its executive officers, except as disclosed in the Prospectus.
(xxxiii) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Securities pursuant to the
Prospectus and the Registration Statement, and the transactions contemplated
hereby and thereby, including without limitation, any waiver of any preemptive,
first refusal or other rights that any entity or person may have for the issue
and/or sale of any of the Securities, except such as have been or may be
obtained under the Act, otherwise or may be required under state securities or
blue sky laws in connection with the Underwriters' distribution of the
Securities to be sold by the Company hereunder or may be required by the Rules
of the National Association of Securities Dealer, Inc. ("NASD").
(xxxiv) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or businesses may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company, enforceable
against the Company, in accordance with their respective terms. The descriptions
in the Registration Statement of agreements, contracts and other documents are
accurate and fairly present the information required to be shown with respect
thereto by Form S-11, and there are no contracts or other documents which are
required by the Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not described or filed as
required, and the exhibits which have been filed are complete and correct copies
of the documents of which they purport to be copies.
(xxxv) Within the past five (5) years, none of the Company's independent
public accountants has brought to the attention of the Company's management any
"material weakness" as defined in the Statement of Auditing Standard No. 60 in
any of the Company's internal controls.
5. Covenants of the Company. The Company covenants and agrees with you that:
(a) The Company will reasonably cooperate in all respects in making the
Prospectus effective and will not at any time, whether before or after the
effective date, file any amendment to or supplement to the Registration
Statement of which you shall not previously have been advised and furnished with
a copy or to which you or your counsel shall have reasonably objected or which
is not in material compliance with the Act and the Rules and Regulations or
applicable state law.
As soon as the Company is advised thereof, the Company will advise you, and
confirm the advice in writing, of the receipt of any comments of the Commission
or any state securities department, when the Registration Statement becomes
effective if the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A, of the effectiveness of any posteffective amendment to the
7
Registration Statement or Prospectus, or the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the Commission or
any state securities department for amendment of the Prospectus or for
supplementing of the Prospectus or for additional information with respect
thereto, of the issuance of any stop order suspending the effectiveness of the
Prospectus or any order preventing or suspending the use of any Prospectus or
any order suspending trading in the Common Stock of the Company, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any such purposes,
and will use its best efforts to prevent the issuance of any such order and, if
issued, to obtain as soon as possible the lifting or dismissal thereof.
The Company has caused to be delivered to you copies of such Prospectus,
and the Company has consented and hereby consents to the use of such copies for
the purposes permitted by law. The Company authorizes you and the dealers to use
the Prospectus and such copies of the Prospectus in connection with the sale of
the Securities, for such period as in the opinion of your counsel and our
counsel the use thereof is required to comply with the applicable provisions of
the Act and the Rules and Regulations but not to exceed the one year limitation
period of this offering. The Company will prepare and file with the states,
promptly upon your request, any such amendments or supplements to the
Prospectus, and take any other action, as, in the opinion of your counsel, may
be necessary or advisable in connection with the initial sale of the Securities,
and will use its best efforts to cause the same to become effective as promptly
as possible.
In case of the happening, at any time within such period as a Prospectus is
required under the Act to be delivered in connection with the initial sale of
the Securities, of any event of which the Company has knowledge and which
materially affects the Company, or the securities thereof, and which should be
set forth in an amendment of or a supplement to the Prospectus in order to make
the statements therein not then misleading, in light of the circumstances
existing at the time the Prospectus is required under the Act to be delivered,
or in case it shall be necessary to amend or supplement the Prospectus to comply
with the Act, the Rules and Regulations or any other law, the Company will
forthwith prepare and furnish to you copies of such amended Prospectus or of
such supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they are made.
The preparation and furnishing of any such amendment or supplement to the
Prospectus or supplement to be attached to the Prospectus shall be without
expense to you.
The Company will to the best of its ability comply with the Act, the
Exchange Act and applicable state securities laws so as to permit the initial
offer and sales of the Securities under the Act, the Rules and Regulations, and
applicable state securities laws.
(b) If the Securities are not listed on any Exchange or on Nasdaq, the
Company will cooperate to qualify the Securities for initial sale under the
securities laws of such jurisdictions as you may designate and will make such
applications and furnish such information as may be required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities. The Company will, from time to time, prepare and file
such statements and reports as are or may be required to continue such
qualification in effect for so long as the Underwriters may reasonably request.
(c) So long as any of the Securities remain outstanding in the hands of the
public, the Company, at its expense, will annually furnish to its shareholders a
report of its operations to include financial statements audited by independent
public accountants, and will furnish to the Underwriter as soon as practicable
after the end of each fiscal year, a balance sheet of the Company as at the end
of such fiscal year, together with statements of operations, shareholders'
equity, and changes in cash flow of the Company for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report thereon
of independent public accountants.
(d) The Company will deliver to you at or before the Closing Date three
signed copies of the signature pages to the Registration Statement evidencing
electronic filing for the original filing and for any amendments. The Company
will deliver to you, from time to time until the effective date of the Final
Prospectus, as many copies of the Preliminary Prospectus as you may reasonably
request. The Company will deliver to you on the effective date of the Prospectus
and thereafter for so long as a Prospectus is required to be delivered under the
Act and the Rules and
8
Regulations as many copies of the Final Prospectus, in final form, or as
thereafter amended or supplemented, as you may from time to time reasonably
request.
(e) The Company will apply the net proceeds from the sale of the Securities
substantially in the manner set forth under "Use of Proceeds" in the Prospectus.
No portion of the proceeds shall be used, directly or indirectly, to acquire any
securities issued by the Company, without the prior written consent of the
Underwriters.
(f) As soon as it is practicable, but in any event not later than the first
(lst) day of the fifteenth (15th) full calendar month following the effective
date of the Registration Statement, the Company will make available to its
security holders and the Underwriter an earnings statement (which need not be
audited) covering a period of at least twelve (12) consecutive months beginning
after the effective date of the Registration Statement, which shall satisfy the
requirements of Section 11(a) of the Act and Rule 158(a) of the Rules and
Regulations.
(g) Non-Accountable Expense Allowance and other Costs and Expenses.
The Company shall pay to the Underwriters at each distribution date, and to
be deducted from the purchase price for the Securities, an amount equal to seven
and one-quarter percent (7.25%) of the total proceeds received by the Company
from the sale of the Securities at such distribution date, less in the case of
the initial distribution, the sum of $50,000 previously paid by the Company. The
7.25% amount includes 1.50% to the Managing Underwriter, .25% to the Managing
Underwriter for Due Diligence, 0.50% payment to broker-dealers and a selling
concession of 5%. If the sale of the Securities by the Underwriter is not
consummated for any reason not attributable to the Underwriter, or if (i) the
Company withdraws the Registration Statement from the Commission or does not
proceed with the public offering, or (ii) the representations in Section 3
hereof are not correct or the covenants cannot be complied with, or (iii) there
has been a materially adverse change in the condition, prospects or obligations
of the Company or a materially adverse change in stock market conditions from
current conditions, all as determined by the Underwriters, then the Company
shall reimburse the Underwriters for their out of pocket expenses including
without limitation its legal fees and disbursements all on an accountable basis
but not to exceed $75,000 and if any excess remains, such excess will be
returned to the Company. However, in the event any unaccounted for portion of
the $50,000 advanced to the Underwriter for non-accountable expenses remains,
the Underwriter will reimburse the Company for any remaining amount.
Costs and Expenses.
Subject to the provisions above the Company will pay all costs and expenses
incident to the performance of this Agreement by the Company including, but not
limited to, the fees and expenses of counsel to the Company and of the Company's
accountants; the costs and expenses incident to the preparation, printing,
filing and distribution under the Act of the Registration Statement and
Prospectus (including the fee of the Commission, any securities exchange and the
NASD in connection with the filing required by the NASD relating to the offering
of the Securities contemplated hereby); all expenses, including fees of counsel,
which shall be due and payable in connection with the qualification of the
Securities under the state securities or blue sky laws; the cost of furnishing
to you copies of the Prospectus, this Agreement, the cost of printing the
certificates representing the Securities and of preparing and photocopying the
Underwriting Agreement, the cost of three underwriter's bound volumes, any
advertising costs and expenses, including but not limited to the Company's
expenses on "road show" information meetings and presentations, prospectus
memorabilia, issue and transfer taxes, if any. The Company will also pay all
costs and expenses incident to the furnishing of any amended Prospectus of or
any supplement to be attached to the Prospectus.
(h) Reserved
(i) During a date five years after the date hereof, the Company will file
Form 8-K where required and, as soon as practicable deliver to the Underwriters:
(1) as soon as they are available, copies of all reports (financial or
other) mailed to shareholders;
(2) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, the NASD or any
securities exchange;
9
(3) however, every press release and every material news item or
article of interest to the financial community in respect of the Company or
its affairs which was prepared and released by or on behalf of the Company
to be delivered only to the underwriters not the shareholder unless the
Company deems otherwise; and
(4) any additional information of a public nature concerning the
Company (and any future subsidiaries) or its businesses which the
Underwriters may reasonably request.
During such five-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(j) The Company will name itself as the Transfer Agent and, if necessary
under the jurisdiction of incorporation of the Company, it shall name a
Registrar (which may be the same entity as the Transfer Agent) for the
Securities.
(k) The Company will furnish to the Underwriter or on the Underwriters'
order, without charge, at such place as the Underwriter may designate, copies of
each Preliminary Prospectus, the Final Prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto (two of which copies
will be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriters may request.
(l) Neither the Company nor any of its officers, directors, stockholders or
any of its affiliates will take, directly or indirectly, any action designed to,
or which might in the future reasonably be expected to cause or result in
stabilization or manipulation of the price of any of the Company's securities.
(m) Reserved
(n) Reserved
(o) As soon as practicable, after the effective date of the Registration
Statement file a Form 8-A with the Commission providing for the registration
under the Exchange Act of the Securities.
(p) Until the completion of the distribution of the Securities, the Company
shall not without the prior written consent of the Underwriter and its counsel
which consent shall not be unreasonably withheld or delayed, issue, directly or
indirectly, any press release or other communication or hold any press
conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in the ordinary course of
the Company's business consistent with past practices with respect to the
Company's operations.
(q) Reserved
(t) Reserved
(u) The Company subject to its approval, agrees for a period of two years
after the Closing Date, that the Underwriter may designate one person at its
discretion to attend board meetings as an observer which approval shall not
unreasonably be withheld.
6. Covenants of the Underwriter. The Underwriter covenants and agrees with the
Company that:
(a) the Underwriter will immediately notify the Company in the event that
the Underwriter is notified by the Commission or any state securities department
of any request made by the Commission or any state securities department of the
issuance of any stop order suspending the effectiveness of the Prospectus or any
order preventing or suspending the use of any Prospectus or any order suspending
trading in the Common Stock of the Company, or of the suspension of the
qualification of the securities for offering in any jurisdiction, or of the
institution of any proceedings for any such purposes, and the Underwriter will
use its
10
best efforts to prevent the issuance of any such order, and, if issued, will
assist in the obtaining as soon as possible the lifting or dismissal thereof
(b) the Underwriter and its selling personnel are fully licensed to sell
the Company's securities in all jurisdictions where offers and/or sales are made
by such persons.
7. Conditions of the Underwriters' Obligations. The obligation of the
Underwriter to offer and sell the Securities is subject to the accuracy in all
material respects (as of the date hereof, and as of the Closing Date) of and
compliance in all material respects with the representations and warranties of
the Company to the performance by it of its agreement and obligations hereunder
and to the following additional conditions:
(a) The Registration Statement shall have become effective as and when
cleared by the Commission, and you shall have received notice thereof, on or
prior to any closing date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that or
similar purpose shall have been instituted or shall be pending, or, to your
knowledge or to the knowledge of the Company, shall be contemplated by the
Commission; any request on the part of the Commission for additional information
shall have been complied with to the reasonable satisfaction of counsel to the
Underwriters; and qualification, under the securities laws of such states as you
may designate, of the issue and sale of the Securities upon the terms and
conditions herein set forth or contemplated and containing no provision
unacceptable to you shall have been secured, and no stop order shall be in
effect denying or suspending effectiveness of such qualification nor shall any
stop order proceedings with respect thereto be instituted or pending or
threatened under such law.
(b) On the Closing Date and, with respect to the letter referred to in
subparagraph (iv), as of the date hereof, you shall have received:
(i) the opinion, together with such number of signed or photostatic copies
of such opinion as you may reasonably request, addressed to you by ▇▇▇▇▇ ▇.
▇▇▇▇, P.C., Michigan counsel for the Company, in form and substance reasonably
satisfactory to the Underwriters and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., counsel to the
Underwriter, dated as of the closing date, to the effect that:
(A) The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the jurisdiction in which it is
incorporated and has all necessary corporate power and authority to carry on its
business as described in the Prospectus.
(B) The Company is qualified to do business in Michigan.
(C) To the knowledge of counsel based solely on counsel's representation of
the Company, the Company had authorized and outstanding capital stock as set
forth in the Prospectus under the heading "Capitalization" as of the date set
forth therein, and all of such issued and outstanding shares of capital stock
have been duly and validly authorized and issued, and to the knowledge of such
counsel are fully paid and nonassessable, and to the knowledge of such counsel
no stockholder of the Company is entitled to any preemptive rights to subscribe
for, or purchase shares of the capital stock and to the knowledge of such
counsel none of such securities were issued in violation of the preemptive
rights of any holders of any securities of the Company.
(D) To the knowledge of counsel based solely on counsel's representation of
the Company, the Company is not a party to or bound by any instrument, agreement
or other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement, and except as
described in the Prospectus. The Common Stock conforms in all material respects
to the respective descriptions thereof contained in the Prospectus. The
outstanding shares of Common Stock, upon issuance and delivery and payment
therefore in the manner described herein, will be, duly authorized, validly
issued, fully paid and nonassessable. There are no preemptive or other rights to
subscribe for or to purchase, or any restriction upon the voting or transfer of,
any shares of Common Stock pursuant to the Company's articles of incorporation,
by-laws, other governing documents or any agreement or other instrument known to
such counsel to which the Company is a party or by which it is bound.
11
(E) The certificates representing the Securities conform with all legal
requirements therefore, has been duly authorized and reserved for issuance and
when issued and delivered i will be duly and validly issued, fully paid and
nonassessable.
Such opinion shall be updated and supplemented in the event of a material
change in any one or more of the foregoing. Such opinion shall also cover such
other matters incident to the transactions contemplated hereby and the offering
Prospectus as you or counsel to the Underwriter shall reasonably request. In
rendering such opinion, to the extent deemed reasonable by them, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact of which the maker of such certificate has knowledge.
(ii) the opinion, together with such number of signed or photostatic copies
of such opinion as the Underwriter may reasonably request, addressed to the
Underwriter by Lieben, Whitted, Houghton, Slowiaczek & ▇▇▇▇▇▇▇▇, P.C., L.L.O.,
counsel to the Company, in form and substance reasonably satisfactory to the
Underwriter and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., counsel to the Underwriter, dated as
of the Closing Date, to the effect that:
(A) To the knowledge of counsel based solely on counsel's representation of
the Company, the Company has the full corporate power and authority to enter
into this Agreement and to consummate the transactions provided for therein and
such Agreement has been duly and validly authorized, executed and delivered by
the Company. This Agreement, assuming due authorization, execution and delivery
by each other party thereto, constitutes a legal, valid and binding agreement of
the Company and provided that no opinion need be given as to the enforceability
of any indemnification or contribution provisions, and none of the Company's
execution or delivery of this Agreement, its performance hereunder or
thereunder, its consummation of the transactions contemplated herein or therein,
or the conduct of its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, conflicts with or results
in any material breach or violation of any of the terms or provisions of, or
constitutes a material default under, or result in the creation or imposition of
any material lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of (A) the
articles of incorporation or by-laws of the Company, (B) any material license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note, loan or credit agreement or any other agreement
or instrument to which the Company is a party or by which it is or may be bound,
or (C) any statute, judgment, decree, order, rule or regulation applicable to
the Company, whether domestic or foreign.
(B) To the knowledge of counsel based solely on counsel's representation of
the Company, the Company is not a party to or bound by any instrument, agreement
or other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement, and except as
described in the Prospectus. The Common Stock conforms in all material respects
to the respective descriptions thereof contained in the Prospectus. The
outstanding shares of Common Stock, upon issuance and delivery and payment
therefore in the manner described herein, will be, duly authorized, validly
issued, fully paid and nonassessable. There are no preemptive or other rights to
subscribe for or to purchase, or any restriction upon the voting or transfer of,
any shares of Common Stock pursuant to the Company's articles of incorporation,
by-laws, other governing documents or any agreement or other instrument known to
such counsel to which the Company is a party or by which it is bound.
(C) To the knowledge of counsel based solely on counsel's representation of
the Company, there are no claims, suits or other legal proceedings pending or
threatened against the Company in any court or before or by any governmental
body which might materially affect the business of the Company or the financial
condition of the Company as a whole, except as set forth in the Prospectus.
(D) To the knowledge of counsel based solely on counsel's representation of
the Company, there are no legal or governmental proceedings, actions,
arbitrations, investigations, inquiries or the like pending or threatened
against the Company of a character required to be disclosed in the Prospectus
which have not been so disclosed, questions the validity of the capital stock of
the Company or this Agreement or might adversely affect the condition, financial
or
12
otherwise, or the prospects of the Company or which could adversely affect the
Company's ability to perform any of its obligations under this Agreement.
(E) To the knowledge of counsel based solely on counsel's representation of
the Company, no consent, approval, order or authorization from any regulatory
board, agency or instrumentality having jurisdiction over the Company, or its
properties (other than registration under the Act or qualification under state
or foreign securities law or approval by the NASD) is required for the valid
authorization, issuance, sale and delivery of the Securities.
(F) To the knowledge of counsel based solely on counsel's representation of
the Company, the Registration Statement and any amendment or supplement (when
such documents became effective with the Commission) (other than the financial
statements including the notes thereto and supporting schedules and other
financial and statistical information derived therefrom, and the prior
performance information, as to which counsel need express no comment) does not
contain any 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.
Such opinion shall be updated and supplemented in the event of a material
change in any one or more of the foregoing. Such opinion shall also cover such
other matters incident to the transactions contemplated hereby and the offering
Prospectus as you or counsel to the Underwriter shall reasonably request. In
rendering such opinion, to the extent deemed reasonable by them, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact of which the maker of such certificate has knowledge.
(iii) a certificate, signed by the Chief Executive Officer and the
Principal Financial or Accounting Officer of the Company dated the Closing Date
and subsequent closing dates, if any, to the effect that with regard to the
Company, each of the conditions set forth in Section Seven has been satisfied.
(iv) a letter, addressed to the Underwriters and in form and substance
reasonably satisfactory to the Underwriter in all respects (including the nature
of the changes or decreases, if any, referred to in clause (D) below), from
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.L.L.C., and as to clause (D) below from ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇, CPAs, dated, respectively, as of the effective date of the
Registration Statement and as of the Closing Date:
(A) Confirming that they are independent public accountants with respect to
the Company and its consolidated subsidiaries, if any, within the meaning of the
Act and the applicable published Rules and Regulations.
(B) Stating that, in their opinion, the financial statements, related notes
and schedules of the Company and its consolidated subsidiaries, if any, included
in the Registration Statement examined by them comply as to form in all material
respects with the applicable accounting requirements of the Act and the
published Rules and Regulations thereunder.
(C) Stating that, with respect to the period from December 31, 2001 to a
specified date ("specified date") not earlier than five (5) business days prior
to the date of such letter, they have read the minutes of meetings of the
stockholders and board of directors (and various committees thereof) of the
Company and its consolidated subsidiaries, if any, for the period from December
31, 2001 through the specified date, and made inquiries of officers of the
Company and its consolidated subsidiaries, if any, responsible for financial and
accounting matters and, especially as to whether there was any decrease in
sales, income before extraordinary items or net income as compared with the
corresponding period in the preceding year; or any change in the capital stock
of the Company or any change in the long term debt or any increase in the
short-term bank borrowings or any decrease in net current assets or net assets
of the Company or of any of its consolidated subsidiaries, if any, and further
stating that while such procedures and inquiries do not constitute an
examination made in accordance with generally accepted auditing standards,
nothing came to their attention which caused them to believe that during the
period from June 30, 2000, through the specified date there were any decreases
as compared with the corresponding period in the preceding year in sales, income
before extraordinary items or net income; or any change in the capital stock of
the Company or consolidated subsidiary, if any, or any change in the long term
debt or any increase in the short-term bank borrowings (other than any increase
in short-term bank borrowings in the ordinary course of business) of the Company
or any consolidated subsidiary, if any, or any decrease in the net current
assets or net assets of the Company or any consolidated subsidiary, if any; and
13
(D) Stating that they have carried out certain specified procedures
(specifically set forth in such letter or letters) as specified by the
Underwriter (after consultations with ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇ P.L.L.C. relating to
such procedures), not constituting an audit, with respect to certain tables,
statistics and other financial data in the Prospectus specified by the
Underwriter and such financial data not included in the Prospectus but from
which information in the Prospectus is derived, and which have been obtained
from the general accounting records of the Company or consolidated subsidiaries,
if any, or from such accounting records by analysis or computation, and having
compared such financial data with the accounting records of the Company or the
consolidated subsidiaries, if any, stating that they have found such financial
data to agree with the accounting records of the Company.
(c) At the Closing Date, (i) the representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects with the same effect as if made on and as of such closing date; (ii)
the Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations and in all material respects conform to the
requirements thereof, and neither the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary, in light of the
circumstances under which they were made, in order to make the statements
therein not misleading; (iii) there shall have been since the respective dates
as of which information is given no material adverse change in the business,
properties or condition (financial or otherwise), results of operations, capital
stock, long-term debt or general affairs of the Company from that set forth in
the Prospectus, except changes which the Prospectus indicates might occur after
the effective date of the Prospectus, and the Company shall not have incurred
any material liabilities or material obligations, direct or contingent, or
entered into any material transaction, contract or agreement not in the ordinary
course of business other than as referred to in the Prospectus and which would
be required to be set forth in the Prospectus; and (iv) except as set forth in
the Prospectus, no action, suit or proceeding at law or in equity shall be
pending or threatened against the Company which would be required to be set
forth in the Prospectus, and no proceedings shall be pending or threatened
against the Company or any subsidiary before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company.
(e) Reserved
(f) Reserved
(g) Reserved.
If any condition to the Underwriters obligations hereunder to be fulfilled
prior to or at the Closing Date is not so fulfilled, the Underwriter may
terminate this Agreement or, if the Underwriter so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
8. Conditions of the Company's Obligations. The obligation of the Company to
sell and deliver the Securities is subject to the following:
(a) The provisions regarding the effective date, as described in
Section 10.
(b) At the Closing Date and any subsequent distribution date, no stop
order suspending the effectiveness of the Prospectus shall have been
issued under the Act or any proceedings therefor initiated or
threatened by the Commission or by any state securities department.
9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
its employees and each person, if any, who controls you within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or several
(which shall, for any purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), to which
each Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or
14
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission made in the
Prospectus, or such amendment or supplement to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
which is in reliance upon and in conformity with written information furnished
by the Company to you specifically for use in the preparation thereof, and
provided further that the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of you with respect to any person asserting any
such loss, claim, damage or liability who has purchased the Securities which are
the subject thereof if you or any participants failed to send or give a copy of
the Prospectus to such person at or prior to the written confirmation of the
sale of such Securities to such person and except that, with respect to any
untrue statement or omission or any alleged untrue statement or omission, made
in any Pre-Effective Prospectus, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Underwriter (or to any
person controlling any such underwriter) from whom the person asserting any such
loss, claim, damage or liability purchased the securities concerned to the
extent that such untrue statement or omission, or alleged untrue statement or
omission, has been corrected in a later Pre-Effective Prospectus or in the Final
Prospectus unless the Underwriter circulated a later Pre-Effective Prospectus or
the Final Prospectus to such person.
(b) Each Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers, each person, if any, who controls the
Company within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees) to which the Company or any such director, officer or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission was made in the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by you specifically for use in the preparation thereof and from and
against any and all losses caused by an untrue statement or alleged untrue
statement of a material fact contained in the Prospectus (if used within the
Applicable Period and as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, if the person
asserting such losses purchased Securities from such Underwriter and a copy of
the Final Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Securities
to such person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability. This
indemnity will be in addition to any liability which any Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party, similarly notified, to assume the
defense thereof, subject to the provisions herein stated, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that, if the indemnified party is you or a person who controls you, the fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in writing
by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both you or such controlling person
and the indemnifying party and you or such controlling person
15
shall have been advised by such counsel that there is a conflict of interest
which would prevent counsel for the indemnifying party from representing the
indemnifying party and you or such controlling person (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of you or such controlling person, it being understood, however, that
the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
or which are consolidated into the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for you and all such
controlling persons, which firm shall be designated in writing by you). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnified party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnified party.
10. Contribution. In order to provide for just and equitable contribution
under the Act in any case in which (i) the indemnifying party makes a claim for
indemnification pursuant to Section 7 hereof but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of the
Underwriters, then the Company and the Underwriters in the aggregate shall
contribute to the aggregate losses, claims, damages, or liabilities to which
they may be subject (which shall, for all purposes of this Agreement, include,
but not be limited to, all costs of defense and investigation and all attorneys'
fees) in either such case (after contribution from others) in such proportions
that the Underwriters are responsible in the aggregate for that portion of such
losses, claims, damages or liabilities determined by multiplying the total
amount of such losses, claims, damages or liabilities times the difference
between the public offering price and the commission to the Underwriter and
dividing the product thereof by the public offering price, and the Company, if
applicable, shall be responsible for that portion of such losses, claims,
damages or liabilities times the commission to the Underwriters and dividing the
product thereof by the public offering price; provided, however, that the
Underwriters shall not be required to so contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by the Underwriters
hereunder if such allocation is not permitted by applicable law, then the
relative fault of the Company and the Underwriters in connection with the
statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 12(2) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The foregoing contribution agreement shall in no
way affect the contribution liabilities of any person having liability under
Section 12 of the Act other than the Company and the Underwriter. As used in
this paragraph, the term "Underwriters" includes any person who controls the
Underwriters within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this paragraph is not permitted by law, then any
Underwriter and each person who controls any Underwriter shall be entitled to
contribution from the Company, to the full extent permitted by law.
11. Effective Date. This Agreement shall become effective at 10:00 a.m. New
York time on the next full business day following the effective date of the
Registration Statement, or at such other time after the effective date of the
Prospectus as you in your discretion shall first commence the public offering of
any of the Securities covered thereby, provided, however, that at all times the
provisions of Sections 7, 8, 9 and 11 shall be effective.
12. Termination.
a. This Agreement, may be terminated at any time prior to completion
of the offering period by you if in your judgment it is impracticable to offer
for sale or to enforce contracts made by you for the sale of the Securities
agreed to be sold hereunder by reason of (i) the Company as a whole having
sustained a material loss, whether or not insured, by reason of fire,
earthquake, flood, accident or other calamity, or from any labor dispute or
court or government action, order or decree, (ii) trading in securities of the
Company having been suspended by a state securities administrator or by the
Commission, (iii) material governmental restrictions having been imposed on
trading in securities generally (not in force and effect on the date hereof) or
trading on the New York Stock Exchange, American Stock Exchange, or in the
over-the-counter market shall have been suspended, (iv) a banking moratorium
having been declared by federal or New York State authorities, (v) an outbreak
or escalation of hostilities or other national or international calamity having
occurred, (vi) the passage by the Congress of the United States or by any state
legislative body, of any act or
16
measure, or the adoption of any orders, rules or regulations by any governmental
body or any authoritative accounting institute or board, or any governmental
executive, which is believed likely by you to have a material impact on the
business, financial condition or financial statements of the Company; or (vii)
any material adverse change having occurred, since the respective dates as of
which information is given in the Prospectus, in the condition, financial or
otherwise, of the Company as a whole, whether or not arising in the ordinary
course of business.; if you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10 or in
Section 9, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
b. This Agreement may be terminated by the Company if the offering
does not break escrow within 60 days following the Closing Date by subscribing
at least 300,000 shares of the Securities or within 120 days of the Closing Date
if the maximum amount of 2,500,000 shares of the Securities are not sold.
13. Representations, Warrants and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company (or its officers) and the Underwriter set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation made by or on behalf of the Underwriter, the Company, or
any of their officers or directors and will survive delivery of and payment for
the Securities.
14. Notices. All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to you, will be mailed, delivered
or telephoned and confirmed to you at Investors Capital Corporation, ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attn: President; and to the Company, to ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, President, Gen-Net Lease Income Trust, Inc., ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇.
15. Parties in Interest. This Agreement is made solely for the benefit of
the Underwriter and the Company, and their respective controlling persons,
directors and officers, and their respective successors, assigns, executors and
administrators. No other person shall acquire or have any right under or by
virtue of this Agreement.
16. Headings. The Section headings in this Agreement have been inserted as
a matter of convenience of reference and are not a part of this Agreement.
17. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Massachusetts, without giving effect to
conflict of law principles.
18. Counterparts. This Agreement may be executed in any number of
counterparts, each of which together shall constitute one and the same
instrument.
If the foregoing correctly sets forth the understanding between the Company
and you, please so indicate in the space provided below for such purpose,
whereupon this letter and your acceptance shall constitute a binding agreement
between us.
Very truly yours,
Gen-Net Lease Income Trust, Inc.
By:
-----------------------------------------
(Authorized Officer)
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
Accepted as of the date first above written:
Investors Capital Corporation
As Exclusive Managing Underwriter
17
By:
------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chairman of the Board of Directors
EXHIBIT A
SCHEDULE I
UNDERWRITERS
Underwriter
TOTAL
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